UNIVERSITY OF CALOOCAN CITY

BACHELOR OF SCIENCE IN ACCOUNTANCY

MOCK BOARD EXAMINATION 2021

FINANCIAL ACCOUNTING AND REPORTING

1. Generally accepted accounting principles

A. derive their authority from legal court proceedings.
B. have been specified in detail in the FRSC Conceptual Framework.
C. are fundamentally truths or axioms that can be derived from laws of nature.
D. derived their credibility and authority from general recognition and acceptance by the accounting profession.

2. What is a possible danger if politics plays too big a role in developing IFRS?
A. User groups become active.
B. Individuals may influence the standards.
C. The IASB delegates its authority to elected officials.
D. Financial reporting standards are not truly generally accepted.

3. The qualifications of the members of BOA include all of the following, except.
A. Must be a natural-born citizen and a resident of the Philippines.
B. Must be of good moral character and must not have been convicted of crime involving moral turpitude.
C. Must be duly registered CPA with at least ten years of work experience in any scope of practice of
accountancy.
D. Must have any pecuniary interest, directly or indirectly, in any school conferring an academic degree
necessary for admission to the practice of accountancy

4. To be relevant, an. information should have which of the following?

A. Confirmatory value C. Understandability
B. Cost and benefit D. Verifiability

5. The failure to properly record an adjusting entry to accrue an expense results in

A. Overstatement of expense and an understatement of asset.
B. Understatement of expense and an overstatement of asset.
C. Understatement of expense and an overstatement of liability.
D. Understatement of expense and an understatement of liability.

6. The statement of financial position is useful for all of the following, except
A. assessing risk C. evaluating financial flexibility
B. determining free cash flows D. evaluating liquidity

7. Christine Company reported the following current assets on December 31, 2021:
Cash, net of bank overdraft of P200.000 4,300,000
Petty cash fund (unreplenished petty cash expenses P10,000) 50,000
Accounts receivable 7,500,000
Notes receivable, including discounted note P500.000 3,000,000
Inventory, excluding goods out consignment 4,000,000
Available for sale financial asset 1,500,000
 Deferred tax asset 1,200,000
Total current assets 21,550,000
An analysis disclosed that accounts receivable comprised trade accounts of P5,000,000, net of accounts with credit
balances P 1,000,000 allowance for doubtful accounts P500,000 and selling price of P3,000,000 of goods out on
consignment with a markup of 50% on cost. It was also determined that debit balances in suppliers' accounts of
P300,000 were netted from accounts payable. What is the total amount of current assets on December 31, 2021?
A. 17,540,000 C. 18,840,000
B. 18,540,000 D. 19,040,000

8. At December 31, 2021, Mae Company was holding long-lived assets which it intended to sell. The company
appropriately recognized a loss in 2021 related to these assets. On the income statement for 2003, this loss should
be reported as
A. Extraordinary item
B. Component of income from continuing operations before income tax
C. Separate component of selling or administrative expenses, disclosed net of tax
D. Component of gain or loss from sale of discontinued operations, net of income tax

9. Loraine Company provided the following net of tax figures for the current year:
Net remeasurement loss on defined benefit plan 300.000
Unrealized gain on available for sale securities 1,500,000
Rectification adjustment for gain on sale of available for sale
securities included in net income 250.000
Share warrants outstanding 400.000
Net Income 7,700,000
What is the comprehensive income for the current year?
A. 8,650,000 C. 8,950,000
B. 8,900,000 D. 9,050,000

10. Which among the following is not considered as a cash equivalent for purposes of a cash flow statement?
A. A 90-day T-bill
B. A 60-day money market placement
C. A three-year treasury note maturing on May 30, 2021 purchased by the enterprise on April 15, 2021
D. A three-year treasury note maturing on May 30, 2021 purchased by the enterprise on January 2, 2021

11. Spencer Company reported net cash flow from operating activities for the current year at P3,000,000. The
following items are also reported in the financial statements:
Cash dividends paid on ordinary shares 200,000
Depreciation and amortization 120,000
Increase in accounts receivable 240,000
What was the net income for the current year?
A. 2,560,000 C. 2,960,000
B. 2,640,000 D. 3,120,000

12. Stockholders' equity is generally classified into which two major categories?
A. Earned capital and contributed capital.
B. Contributed capital and donated capital.
C. Appropriated capital and retained earnings.
D. Retained earnings and unappropriated capital.
13. Zinc Company reported the following information on December 31, 2021:
Ordinary share capital, P3 par 600,000
Share premium 800,000
Treasury shares, at cost 50,000
Net unrealized loss on available-for-sale securities 20,000
Retained earnings appropriately for uninsured earthquake loss 150,000
Retained earnings unappropriated 200,000
What amount should be reported as total shareholders’ equity on December 31, 2021?
A. 1,680,000 C. 1,780,000
B. 1,720,000 D. 1,820,000

14. Application of the full disclosure principle

A. Requires that the financial statements be consistent and comparable.
B. Is violated when important financial information is buried in the notes to the financial statements.
C. Is demonstrated by the use of supplementary information presenting the effects of changing prices.
D. Is theoretically" desirable but not practical because the costs of complete disclosure exceed the benefits.

15. The cash account of Riyadh Corp. on December 31, 2021 has a balance of P127,600 and it consists of the
following:
Bills and coins on hand P52,780
Petty cash including petty cash vouchers of P650 1,000
Balance in savings account with a bank closed by the BSP 36,000
Customer's check dated January 15, 2019 8,000
Credit memo from suppliers for purchases returns 6,500
Postage stamps 120
Money order 800
IOU of an employee 400
Checking account balance in Bank of P.I. 22,000
The correct cash balance on December 31, 2021 Corp. is
A. P75,130 C. P76,330
B. P75,930 D. P76,580

16. The cash account in the current asset section of the statement of financial position of Grave Buster Company
showed a balanced of P55,500. It was found to include the following items:
Petty cash fund (P100 is in the form of paid vouchers) P 500
Checking account balance in Philippine Trust Company,
per bank statement (a P2,500 check is still outstanding) 25,500
Undeposited receipts, including a post-dated check for P500 12,000
Currencies and coins awaiting deposit 5,500
Bond sinking fund - cash 10,000
Check drawn by management, returned by bank marked NSF 2,000
The correct cash balance for Grave Buster Company's statement of financial position is
A. P40,400 C. P42,900
B. P42,400 D. P43,000

17. The cashier of Goblin Inc. prepared the following bank reconciliation:
Balance per bank P28,375
Deposits in transit:
12/30/20 4,500
 12/31/20 1,525 6,025
Outstanding checks
160 11/30/20 P2,200
214 12/26/20 675
219 12/27/20 850
225 12/29/20 2,500
228 12/31/20 7,225 (13,450)
20,950
Customer note collected by bank (3,000)
Error: Check #216, written on 12/27/20 for P270 was erroneously
charged by the bank as P720; bank was notified on 1/2/21 450
Book balance P18,400
The adjusted cash balance as of December 31, 2020 is
A. P15,400 C. P21,400
B. P19,100 D. P21,850

18. The August 31 bank statement of Orlando Inc. showed a balance of P113,000. Deducted in arriving at this amount
was a customer's NSF check for P2,400 that had been returned. Orlando had received no prior notice concerning
this check. In addition to the bank statement, other records showed there were deposits in transit totaling P17,200
and that outstanding checks totaled P10,800. What is the cash balance per books at August 31 (prior to
adjustments)?
A. P115,400 C. P119,400
B. P117,000 D. P121,800

19. On January 1, 2021, the lending company made a P200,000, 8% loan. The interest is receivable at the end of each
year, with the principal amount to be received at the end of 5 years. As of December 31, 2021, the interest for the
current year has not yet been received nor recorded because the borrower is experiencing financial difficulties. The
lending company negotiated a restructuring of the loan. The payment of all of the interest based on the original
principal will be delayed until the end the 5-year loan term. In addition, the amount of principal repayment will be
dropped from P200,000 to P100,000. The prevailing interest rate for similar type of loan as of December 31, 2021
is 10%. The carrying amount of the loan as of December 31, 2022 is
A. P 67,700 C. P135,234
B. P132,300 D. P142,884

20. Ryan Norman Corporation factored P8,000,000 of accounts receivable to Vivien Girlie Corporation on October 1,
2021. Control was surrendered by Ryan Norman. Vivien Girlie accepted the receivables subject to recourse for
nonpayment. Vivien Girlie assessed a fee of 3% and retains a holdback equal to 5% of the accounts receivable. In
addition, Vivien Girlie charged 12% interest computed on weighted average time to maturity of the receivables of 40
days. Fair value of the recourse obligation is P100,000. Ryan Norman will receive and record on October 1, 2021
cash of
A. 7,235,333 C. 7,360,000
B. 7,254,795 D. 7,654,795

21. Which of the following is correct about the effective interest method of amortization?
A. Amortization of a discount decreases from period to period.
B. Amortization of a premium decreases from period to period.
C. The effective interest method applied to investments in debt securities is different from that applied to bonds
payable.
 D. The effective interest method produces a constant rate of return on the book value of the investment from
period to period.

22. On January 1, 2021, Next Corporation purchased P1,000,000 10% bonds for P927,880 (including broker's
commission of P20,000). Next has the intention to hold the bonds indefinitely. The bonds were purchased to yield
12%. Interest is payable annually every December 31. The bonds mature on December 31, 2025. On December
31, 2021 the bonds were selling at 99. How much is the carrying amount the investment in bonds on December
31, 2021?
A. P916,534 C. P961,626
B. P939,226 D. P990,000

23. On July 1, 2021, Morales Corp. acquired P4,000,000 face value of X Corporation bonds with a nominal rate of
interest of 4%. The bonds mature on July 1, 2026 and pay interest semi-annually each July 1 and January 1, with
the first interest payment due on January 1, 2022. The bonds are held to maturity. At the date of issuance the
bonds had a market rate of interest of 6%. The entity incurred transaction costs of 1% of the purchase price. On
December 31, 2021, the market value of the bonds was P3,700,000. The amount to be recognized in 2021 profit or
loss related to the bond investment is
A. Nil C. P109,764
B. P106,797 D. P142,498

The next two questions are based on the following information.

On July 1, 2021, TGV purchased 10,000 of BPO's 50,000 outstanding shares at a price of P6.00 per share. BPO
had earnings of P3,000 per month during 2019 and paid dividends of P10,000 on March 1, 2021 and P12,500 on
December 1, 2021. The market value of BPO's shares was P6.50 per share on December 31, 2021.

24. Assuming that TGV accounts for its investment in BPO as a FVPL, what would be the total effect on TGV's profit or
loss for the year ended December 31, 2021?
A. P2,500 C. P9,500
B. P4,500 D. P7,500

25. Assuming that TGV had significant influence over BPO, what would be the balance in TGV's "Investment in BPO"
account on its statement of financial position on December 31, 2021?
A. P61,100 C. P64,700
B. P62,700 D. P65,000

26. Which of the following is NOT an example of a derivative financial instrument?

A. A commercial bill contract. C. A futures contract.
B. A forward exchange contract. D. An option contract.

27. Roweena, Inc., enters into a call option contract with Jane Investment Co. on January 2, 2021. This contract gives
Roweena the option to purchase 1,000 shares of WSM stock at P100 per share. The option expires on April 30,
2021. WSM shares are trading at P100 per share on January 2, 2021, at which time Roweena pays P100 for the
call option.
Assume that the price per share of WSM stock is P120 on April 30, 2021, and that the time value of the option has
not changed. In order to settle the option contract, Roweena, Inc., would most likely
A. pay Jane Investment P20,000.
B. receive P400 from Jane Investment.
C. receive P20,000 from Jane Investment.
 D. purchase the shares of WSM at P100 per share and sell the shares at P120 per share to Jane.

28. Which is not a possible reason for an inventory’s net realizable value to fall below its costs?
A. Product obsolescence.
B. Physical deterioration of inventories.
C. An increase in the estimated costs of completion.
D. An increase in the expected replacement costs of the inventory.

29. In your review of Rian Company, you find that a physical inventory on December 31, 2021, showed merchandise
with a cost of P441,000 was on hand at that: date. You also discover the following items were all excluded from the
P441,000.
a. Merchandise of P61,000 which is held by Rian on consignment.
b. Merchandise costing P38,000 which was shipped by Rian f.o.b. destination to a customer on December 31,
2021. The customer was scheduled to receive the merchandise on January 2, 2022.
c. Merchandise costing P46/Q0G which was shipped by Rian f,o.b; shipping point to a customer on December
29, 2021. The customer was scheduled to receive the merchandise on January 2, 2022.
d. Merchandise costing P83,000 shipped by a vendor f.o.b. destination on December 30, 2021, and received by
Rian on January 4, 2022.
e. Merchandise costing P51,000 shipped by a vendor f.o.b. seller on December 31, 2021, and received by Rian
on January 5, 2022.
Based on the above information calculate the amount that should appear on the Rian's statement of financial
position at December 31, 2021, for inventory.
A. P441,000 C. P530,000
B. P479,000 D. P538,000

30. Dicer uses the conventional retail method to determine Its ending inventory at cost. Assume the beginning
inventory at cost (retail) were P130,000 (P198,000), purchases during the current year at cost (retail) were
P685,000 (P1,100,000), freight-in on these purchases totaled P43,000, sales during the current year totaled
P1,050,000, and net markups (markdowns) were P24,000 (P36,000). What is the ending inventory value at cost?
A. P153,164. C. P157,412.
B. P156,165. D. P236,000

30. On January 2, 2021, BSine Delivery Company traded with a dealer an old truck for a newer model. Data relative to
the old truck and new trucks follow:
Old truck:
Original cost P120,000
Accumulated depreciation as of Jan. 2, 2021 90,000
New truck:
List price P150,000
Cash price without trade-in 140,000
Cash paid with trade-in 127,000
The loss on trade-in of the old truck is
A. P0 C. P17,000
B. P 7,000 D. P20,000

31. Belle Co. determined after four years that the estimated useful life of its labeling machine should be 10 years rather
than 12 years. The machine originally cost P46,000 and had an estimated salvage value of P1,000. Belle uses
straight-line depreciation. What amount should Belle report as depreciation expense for the current year?
A. P3,200 C. P4,500
 B. P3,750 D. P5,000

32. Lander Company purchased new machinery on account as well as incurring the following cost:
Invoice price of the machinery 3,000,000
Cash discount not taken on the purchase 150,000
Freight on new machine 50,000
Cost of moving old machinery to a new location 20,000
Installation cost of new machine 30,000
Testing cost before new machine before new machine
was put into regular operation 40,000
Operating cost during the first month of regular use 300,000
What is the total cost of the new machinery?
A. 2,960,000 C. 3,110,000
B. 2,970,000 D. 3,270,000

33. Company C is a supplier of industrial products, in 2021, the company purchased a plot of land on the outskirts of a
major city. The land was originally acquired at a cost of P15,000,000. The area has mainly low- cost public housing
and very limited public transport facilities. The national government has plans to develop the area as an industrial
park in five years time and land is expected to greatly appreciate in value if the government proceeds with the plan.
Company C’s management has not decided what to do with the property. On December 31, 2026, the property has
a current fair value of P15,400,000.
How should the company classify the property in its December 31, 2026 statement of financial position?
A. as land at its historical cost of P15,000,000
B. as land at its current fair value of P15,400,000
C. as investment property at its current fair value of P15,400,000
D. as inventory at the lower of cost of P15,000,000 or current fair value of P15,400,000.

34. Magical Lamp Company owns a property that is let out to tenants under operating leases. The property cost
P5,000,000 on January 1, 2021 and was assessed to have 50-year useful life on that date. On December 31, 2021
its fair market value is P6,300,000.
At acquisition, Magical Lamp Company decided to adopt the measurement basis for the property that best reflects
the qualitative characteristics of faithful representation and verifiability. What amounts are recognized in the
financial statements for the year ended December 31, 2021?
A. B. C. D.
Carrying amount of property P4,900,000 P5,000,000 P6,300,000 P6,300,000
Profit or loss (P100,000) Nil P1,300,000 (P1,00,000)
Other comprehensive income Nil Nil Nil P1,400,000

35. Greedy Dragon Company adopts the fair value model for its investment properties and the revaluation model for its
property, plant and equipment. Tower A, which is being developed for use as an investment property, had a
carrying amount at July 1, 2021 of P120,000,000 and a remaining useful life of 40 years. In June 30, 2022, Greedy
Dragon Company was offered P144,000,000 for the property by an interested party. If Greedy Dragon Company
sold the property it could buy a similar sized property elsewhere for P141,000,000. Which of the following is the
correct accounting treatment of Tower A in the year ended June 30, 2022?
A. Increase the carrying amount to P141 million and recognize P21 million in profit or loss
B. Increase the carrying amount to P144 million and recognize P24 million in profit or loss
C. Increase the carrying amount to P141 million and recognize P24 million in other comprehensive income
D. Increase the carrying amount to P144 million and recognize P27 million in other comprehensive income
36. Which of the following is not considered in estimating the useful life of an intangible asset?
A. Salvage value of the asset
B. Expected usage of the asset by the enterprise
C. Stability of the industry in which the intangible asset operates
D. Level of maintenance expenditure required to obtain the future economic benefit form the asset

37. Royal Pulp Corporation is located in London but does business throughout Europe. The company builds and sells
equipment used in manufacturing pharmaceuticals. On December 31, 2021, Rosalie has trading securities valued
at P63,000; goodwill valued at P450,000; prepaid insurance valued at P36,000; patents valued at P210,000; and a
customer list valued at P390,000. On Royal Pulp Corporation’s statement of financial position at December 31,
2021, what amount should be reported as intangible assets?
A. P 660,000 C. P1,113,000
B. P1,050,000 D. P1,149,000

38. Rosalie Company is located in London but does business throughout Europe. The entity builds and sells
equipment used in manufacturing pharmaceuticals. On December 31, 2021, the entity had trading securities
P42,000, goodwill P300,000, prepaid insurance P24,000, patent P140,000, and a customer list P260,000. On
December 31, 2021, what amount should be reported as intangible assets?
A. 440,000 C. 742,000
B. 700,000 D. 766,000

39. Which of the following information shall be disclosed in relation to biological assets and agricultural produce?
A. There is no requirement in the standard to disclose separately any gains or losses.
B. Separate disclosure of the gain or loss relating to biological assets and agricultural produce.
C. The total gain or loss from biological assets, agricultural produce, and from changes in fair value less cost to
sell of biological assets.
D. The aggregate gain or loss arising on the initial recognition of biological assets and agricultural produce and
from the change in fair value less cost to sell of biological assets.

40. Armando Farms produced 50.000 kilos of tobacco for another entity which has agreed to purchase the entire
production at the prevailing market price. Recent legislation assured that the market price will not fall below P70 per
kilo during the next two years. The costs of selling and distributing the tobacco are immaterial and can be
reasonably estimated. The entity reported its inventory at expected exit value. During 2021. the entity sold and
delivered to the buyer 40.000 kilos at the market price of P70. The entity sold the remaining 10,000 kilos during
2022 at the market price of P72. What amount of revenue should be recognized in 2021?
A. 2,800,000 C. 3,500,000
B. 2,880,000 D. 3,600,000

41. Kathleen Company accounted for noncurrent assets using the cost model. On October 1, 2021, the entity classified
a noncurrent asset as held for sale. At that date, the carrying amount was P1,500,000, the fair value was estimated
at P 1,100.000 and the cost of disposal at P150,000. On December 31, 2021, the asset was sold for net proceeds
of P800,000. What amount should be included as loss on disposal?
A. 0 C. 550,000
B. 150,000 D. 700,000

42. Dante Company is preparing the financial statements for the year ended December 31, 2021. Accounts payable
amounted to P3,600,000 before any necessary year-end adjustment related to the following:
 On December 31, 2021, the entity has a P500,000 debit balance in accounts payable to a supplier, resulting
 from a P500,000 advance payment for goods to be manufactured.
 Checks in the amount of P1,000,000 were written to vendors and recorded on December 29, 2021. The
checks were mailed on January 5, 2022.
What amount should be reported as accounts payable on December 31, 2021?
A. 2,100,000 C. 4,100,000
B. 3,100,000 D. 5,100,000

43. During 2021, Mae Company experienced financial difficulties and is likely to default on a P5,000,000, 15% three-
year note dated January 1, 2019, payable to Global Bank. On December 31, 2021, the bank agreed to settle the
note and unpaid interest of P750,000 for P4,000,000 cash payable on January 31, 2022. What amount should be
reported as gain from extinguishment of debt in the 2021 income statement?
A. 0 C. 1,750,000
B. 1,000,000 D. 2,250,000

44. Jasmine Company sells appliance service contracts agreeing to repair appliances for a two-year period. The past
experience is that, of the total amount spend for repairs on service contracts, 40% is incurred evenly during the first
contract year and 60% evenly during the second contract year. Receipts from service contract sales for 2020 and
2021 are P500,000 and P600,000, respectively. Receipts from contracts are credited to unearned service contract
revenue. All sales are made evenly during the year. What amount should be reported as unearned service
contract revenue on December 31, 2021?
A. 360,000 C. 480,000
B. 470,000 D. 630,000

45. Kristine Company records stamp service revenue and provides for the cost of redemptions in the year stamps are
sold to licensees. The past experience indicates that only 80% of the stamps sold to licensees will be redeemed.
The liability for stamp redemptions was P6,000,000 on January 1, 2021. Additional information during the year is
as follows:
Stamp service revenue from stamps sold to licensees 4,000,000
Cost of redemptions for stamps sold prior to January 1, 2021 2,750,000
If all the stamps sold in 2021 were presented for redemption in 2022, the redemption cost would be P2,250,000.
What is the estimated liability on December 31, 2021?
A. 3,250,000 C. 5,500,000
B. 5,050,000 D. 7,250,000

46. Unasserted claims that are both probable of being asserted in the future and are reasonably possible to result in a
loss should
A. Be disclosed as a footnote
B. Be accrued as a deferred credit
C. Be accrued as a contingent liability
D. Not be disclosed since the claims are unasserted

47. Winter Company is being sued for illness caused to local residents as a result of negligence in permitting the
residents to be exposed to highly toxic chemicals. It is probable that the entity would lose the suit and be found
liable for a judgment costing anywhere from P1,200,000 to P6,000,000. However, the most probable cost is
P3,600,000. What should be reported in the financial statements?
A. Accrual of loss contingency P1,200,000,
B. No accrual and disclosure of loss contingency,
 C. Accrual of loss contingency P3,600,000 but no disclosure of any additional contingency.
D. Accrual of loss contingency P3,600,000 and disclosure of an additional contingency P2,400,000.

48. In 2021, Cobus Limited was sued for P1,000,000. Lawyers have advised that the obligating event has occurred, but
that the probability of making a payout is 25%, which is deemed not certain. It is expected to take at least 3 years
before the lawsuit is finalized. Cobus uses an 8% discount rate. What amount would be recorded as a liability in
2021
A. P0 C. P 250,000
B. P 198,450 D. P 314,928

49. The following statements relate to accounting for capital stock transactions. Which statement is true?
A. When a stock subscription receivable cannot be collected, the unpaid subscription balance may be written off
as bad debt expense.
B. When capital stock is subscribed at a price in excess of par value, additional paid-in capital should be recorded
when the subscribed stock is issued.
C. When a corporation is in its organizational stage, direct costs incurred to sell stock should first be debited to
additional paid-in capital arising there from, after which any excess may be debited to organization cost.
D. When preferred stock is redeemed, the accounting treatment of the difference between the redemption price
and the par value of the redeemed shares is the same as the accounting treatment of the difference between
the purchase price and par value of treasury shares which are retired.

50. At December 31, 2020, Rama Corp. had 20,000 shares of P1 par value treasury shares that had been acquired in
2020 at P12 per share. In May 2021, Rama issued 15,000 of these treasury shares at P10 per share. At
December 31, 2021, what amount should Rama show in notes to financial statements as a restriction of retained
earnings as a result of its treasury shares transactions?
A. P 5,000 C. P 90,000
B. P60,000 D. P240,000

51. The December 31, 2021, the balance sheet of TXY reflected the following:
Total assets (market value P298,000) P252,000
Total liabilities
Preference shares, P.10 cumulative, P70,000
non-participating, P2.20 liquidation preference 50,000
per share, 20,000 shares outstanding
Ordinary shares, no par, 30,000 shares outstanding 120,000
Retained earnings (no dividends were declared or paid in 2020 - 2021) 12,000
P252,000

Assume the company sold all of the assets at December 31, 2021, at market value for cash; paid off the liabilities
and distributed all of the remaining cash to the shareholders. The amount of cash per share that each common
shareholder would receive would be:
A. P4.47 C. P6.07
B. P6.00 D. P8.33

52. TUQ Company discovered errors in its ending inventory for the year ended December 31, 2020. The error was
discovered in early 2021, after the books were closed. Some inventory in the amount of P12,000 was counted
twice and inventory valued at P5,000 was excluded from the inventory count because it was in transit (with terms
FOB shipping point). The tax rate is 30%. Which of the following would be included in the correcting journal entry
 to be done in 2021?
A. Credit inventory for P12,000 C. Debit deferred income tax P1,500
B. Debit cost of goods sold P12,000 D. Debit retained earnings P4,900

53. What amount of comprehensive income should Searles Corporation report on its statement of profit or loss and
other comprehensive income given the following net of tax figures that represent changes during a period?
Remeasurement loss on defined benefit obligation (P3,000)
Unrealized gain on available-for-sale securities 15,000
Reclassification adjustment, for securities gain included in net income (2,500)
Share warrants outstanding 4,000
Net income 77,000
A. P86,500 C. P89,500
B. P89,000 D. P90,500

54. Windsor Company has outstanding both common stock and nonparticipating, non-cumulative preferred stock. The
liquidation value of the preferred is equal to its par value. The book value per share of the common stock is
unaffected by
A. A 2-for-1 split of the common stock.
B. The payment of a previously declared cash dividend on the common stock.
C. The declaration of a stock dividend on preferred payable in preferred stock when the market price of the
preferred is equal to its par value.
D. The declaration of a stock dividend on common stock payable in common stock when the market price of the
common is equal to its par value.

55. Calvin Company's capital structure was as follows:

2020 2021
Outstanding securities:
Ordinary 1,000,000 1,000,000
Convertible preference 100,000 100,000
10% convertible bonds payable P30,000,000 P30,000,000

During 2021, Calvin paid dividends of P15 per share on its preference shares. The preference shares are
convertible into 150,000 ordinary shares and the 10% bonds are convertible into 300,000 ordinary shares. Profit
for 2021 was P10,000,000. The income tax rate is 35%. The diluted earnings per share for 2021 should be
A. P7.50 C. P8.24
B. P8.04 D. P8.50

56. Compensation expense resulting from a compensatory stock option plan is generally.
A. Recognized in the period of exercise.
B. Recognized in the period of the grant.
C. Allocated over the periods of the employee's service life to retirement.
D. Allocated to the periods benefited by the employee's required service.

57 At the beginning of year 1, Dickenson Corporation grants 100 share options to each of its 200 employees. Each
grant is conditional upon the employee remaining in service over the next three years. The entity estimates that the
fair value of each option is P21. On the basis of a weighted average probability, the entity estimates that 60
employees will leave during the three-year period and therefore forfeit their rights to the share options.
Suppose that 15 employees leave during year 1. Also suppose that by the end of year 1, the entity's share price
has dropped, and the entity reprices its share options, and that the repriced share options vest at the end of year 3.
 The entity estimates that a further 35 employees will leave during years 2 and 3. During year 2, a further 10
employees leave, and the entity estimates that a further 10 employees will leave during year 3. During year 3, a
total of 8 employees leave.
The entity estimates that, at the date of repricing, the fair value of each of the original share options granted (i.e.,
before taking into account the repricing) is P10 and that the fair value of each repriced share option is P13.
The amount to be recognized as expense in year 3 is
A. P136,800 C. P150,750
B. P145,050 D. P400,800

58. During 2021, Patrisha Company constructed asset costing P4,215,000. The weighted average accumulated
expenditures during 2021 totaled P3,900,000. The entity borrowed P2,000,000 at 7.5% on January 1, 2021. Funds
not needed for construction were temporarily invested in short-term securities, and earned P59,000 in interest
revenue. In addition to the construction loan, the entity had two other notes outstanding during the year, a
P1,500,000, 10-year, 10% note payable dated October 1, 2019, and a P1,000,000, 8% note payable dated
November 2, 2020. Construction was completed on December 31, 2021. What amount should be capitalized as
borrowing cost on December 31, 2021?
A. 265,800 C. 321,000
B. 294,780 D. 324,800

59. The situation which would normally lead to a lease being as a finance lease include all the following, except
A. The lease transfers ownership of the asset to the lessee by the end of the lease term.
B. The lessee has the option to purchase the asset at a price which is expected to be sufficiently higher than the
fair value at the date the option becomes execrable.
C. The lease term is for the major part of the economic life of the asset even if title is not transferred.
D. The present value of the minimum lease payments amounts to at least substantially all of the fair value of the
leased asset at the inception of the lease.

.
Koresh Company is in the business of leasing new sophisticated equipment. As a lessor, Koresh expects a 12%
return on net investment with payments made in advance beginning January 1, 2021 and every January 1
thereafter. All leases are classified as direct financing leases. At the end of the lease term, the equipment’s
ownership is not transferred to the lessee. On January 1, 2021, equipment is leased to a lessor with the following
information.
Cost of equipment to Koresh 6,125,000
Residual value – unguaranteed 700,000
Useful life and lease term 8 years
Initial direct cost 176,400
A return of 12% is expected prior to the initial direct cost and a return of 11% is expected after the initial direct cost.
Relevant present value factors are as follows:
Present value of an annuity due at 12% for 8 periods 5.564
Present value of an annuity due at 11% for 8 periods 5.712
Present value of 1 at 12% for 8 periods .404
Present value of 1 at 11% for 8 periods .434

60. What is the gross investment in the lease?

A. 6,125,000 C. 8,400,000
B. 7,700,000 D. 9,100,000

61. On July 1,2020, Carlo Company entered into a ten-year operating lease for a warehouse facility. The annual
 minimum lease payment is P100,000. In addition to the base rent, the entity pays a monthly allocation of the
building's operating expenses, which amounted to P20,000 for the year ended June 30, 2021. In the notes to the
June 30, 2021 financial statements, what amounts of subsequent years' lease payments should be disclosed?
A. P100,000 per annum for each of the next five years and P500,000 in the aggregate.
B. P100,000 per annum for each of the next five years and P900,000 in the aggregate.
C. P120,000 per annum for each of the next five years and P600,000 in the aggregate.
D. P120,000 per annum for each of the next five years and P1,080,000 in the aggregate.

62. Under IFRS, which of the following statements is true?

A. IFRS permits netting of all deferred taxes.
B. IFRS permits deferred taxes to be classified as current.
C. IFRS permits netting of deferred taxes that relate to the same taxing authority.
D. IFRS permits deferred taxes to be classified as party current and partly noncurrent.

63. Lehman Company purchased a machine on January 2, 2021, for P2,000,000. The machine has an estimated 5-
year life with no residual value. The straight-line method of depreciation is being used for financial statement
purposes and the following accelerated depreciation amounts will be deducted for tax purposes:
2012 400,000 2015 230,000
2013 640,000 2016 230,000
2014 384,000 2017 116,000
The income tax rate is 30% for all years. What is the noncurrent deferred tax liability that should be reflected on
Lehman's statement of financial position at December 31, 2022?
A. 0 C. 67,200
B. 4,800 D. 72,000

64. Wella Company reported a prepaid benefit cost of P1,500,000 on January 1, 2021. The entity provided the
following information related to a defined benefit plan during the current year:
Current service cost 3,000,000
Actual return on plan assets 1,200,000
Interest cost 800,000
Settlement price of benefit obligation paid in advance 500,000
Present value of benefit obligations paid advance 600,000
Interest income 1,000,000
Actuarial gain on PBO 400,000
Past service cost 500,000
Benefits paid to retirees 2,500,000
Contribution to the plan 4,000,000
Projected benefit obligation, January 1 8,000,000
Fair value of plan assets – January 1 10,000,000
Asset ceiling – January 1 1,500,000
Asset ceiling – December 31 2,000,000
Discount rate 10%
What is the net remeasurement gain or loss in OCI?
A. 600,000 loss C. 150,000 gain
B. 250,000 loss D. 600,000 gain

65. PAS 34 states a presumption hat anyone reading interim financial reports will
A. have access to the records of the entity.
B. not make decisions based on the report.
 C. have access to the most recent annual report.
D. understand all Philippine Financial Reporting Standards

66. On January 15, 2021, Vancey Company paid property taxes on its factory building for the calendar year 2021 in the
amount of P560,000. In the first week of April 2021, Vancey made unanticipated major repairs to its plant
equipment at a cost of P1,400,000. These repairs will benefit operations for the remainder of the calendar year.
How should these expenses be reflected in Vancey's quarterly income, statements?
3/31/2021 6/30/2021 9/30/2021 12/31/2021
A. 140,000 606,667 606.667 606,667
B. 140,000 1,540,000 140,000 140,000
C. 490,000 490,000 490,000 490,000
D. 560,000 1,400,000 0

67. In determining whether a particular operating segment is of significant size (i.e., 10%) to warrant disclosure,
A. five tests are usually applied and all tests must be met.
B. five tests are usually applied but only one must be met.
C. three tests are usually applied and all tests must be met.
D. three tests are usually applied but only one must be met.

68. Correy Company and its divisions are engaged solely in manufacturing operations.
Segment Revenue Operating profit Assets
A 10,000,000 1,750,000 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 1,200,000 12,500,000
D 3,000,000 550,000 7,500,000
E 4,250,000 675,000 7,000,000
F 1,500,000 225,000 3,000,000
How many reportable segments does Correy have?
A. Three C. Five
B. Four D. Six

69. During the year ended December 31, 2021, Francisco Company paid interest totaling P100,000. The prepaid
interest expense is P23,500 and P18,000, respectively, on December 31, 2020 and 2021. The interest payable is
P45,000 and P53,500, respectively on December 31, 2020 and 2021. What interest expense should be reported
for 2021?
A. 86,000 C. 103,000
B. 97,000 D. 114,000

70. The following statements are based on PFRS for SMEs:

Statement I: An entity has public accountability if its debt or equity instruments are traded in a public market.
Statement II. An entity has public accountability if it is in the process of issuing debt or equity instruments for
trading in a public market.
Statement III. An entity has public accountability if it holds assets in a fiduciary capacity for a broad group of
outsides as one of its primary businesses.
A. B. C. D.
Statement I True True True True
Statement II True True False False
Statement III True False True False