AFAR Final Preboard

|ADVANCE FINANCIAL ACCOUNTING AND REPORTING FINAL PREBOARD EXAMINATIONS|
Numbers 1 and 2
AB Corp. has two users, Department A and Department B. The following data apply for both departments for the year:
Budgeted Overhead costs:

Fixed costs 3,700,000 Variable cost per direct labor hour 37.5
Budgeted direct labor hours:
Department A 80,000 Department B 120,000
Actual usage of direct labor hours:
Department A 60,000 Department B 80,000
AB Corp. applies overhead based on direct labor hours or uses a single overhead rate based on direct labor hours.
1. What is the amount of overhead applied to Department A?

a. 3,360,000
b. 5,950,000
c. 5,025,000
d. 3,730,000
2. What is the amount of overhead applied to Department B?

a. 5,220,000
b. 4,480,000
c. 5,466,667
d. 6,700,000
Numbers 3 and 4
AB Corp. processes two products from a single raw material, Product A and Product B. The cost of processing the two products up to
the split-off point was P102, 000. AB Corp. uses the NRV method of allocating the joint cost. The following data were ascertained for
the year:
Produced (gallons) Sales price Sales (gallons) Separable cost

Product A 12,000 P 7.00 8,500 P30, 000 Product B 10,500 P18.00 9,000 P71, 600
3. What is the joint cost allocated to Product A? (Round allocation ratio to the nearest percentage ex. 71545 = 72%)
a. 25,500
b. 54,060
c. 32,640
d. 28,560
4. What is the joint cost allocated to Product B? (Round allocation ratio to the nearest percentage ex. 71545 = 72%)
a. 69,360
b. 76,500
c. 47,940
d. 73,440
Number 5
AB Corp. processes two products from a single raw material, Product A and Product B. The cost of processing the two products up to
the split-off point was P376, 960. The following data were extracted at the split-off point:
Produced (gallons) Sales price at split-off
Product A 42,500 P6.50 Product B 59,500 P5.50
The following data were extracted after further processing:

Produced (gallons) Final sales price Separable cost per gallon
Product A 42,000 P40.00 P8.00 Product B 58,200 P24.00 P8.00
What is the approximated/estimated net realizable value of Product B at the split-off point?
a. 1,360,000
b. 931,200
c. 1,344,000
d. 952,000
Numbers 6, 7 and 8
AB Corp. is experiencing financial difficulty and about to liquidate. The following data were available:
Book value of assets:

Cash 150,000
Inventories 200,000
Land 800,000
Stockholders’ equity:
Ordinary shares 500,000
Retained earnings (deficit) (325,000)
Book value of the liabilities of AB Corp. consists of accounts payable, salaries payable, loan payable, and mortgage payable. The loan
payable in the amount of P300, 000 is secured by the inventories. The mortgage payable in the amount of P450, 000 is secured by the
land with an estimated market value of P400, 000. Total liabilities with priority were P200, 000 (including P50, 000 estimated liquidation
expenses and salaries to employees). The holder of the mortgage payable received P440, 000 at the end of liquidation.
6. What is the estimated deficiency?

a. 15,000
b. 25,000
c. 10,000
d. 5,000
7. What is the amount received by the holder of the accounts payable?

a. 60,000
b. 75,000
c. 50,000
d. 65,000
8. What is the estimated market value of the inventories?

a. 350,000
b. 200,000
c. 450,000
d. 150,000
Numbers 9, 10, 11, 12 and 13
Bacolod Manufacturing Corp. has the following cost of production data for the year:
Work-in-process beginning:
Job 03 Job 04
Direct materials 2,400 1,500
Direct labor 3,600 2,880
Applied overhead ******
Finished goods beginning:

Job 01 Job 02
Direct materials 18,000 1,500
Direct labor 24,000 2,880
Applied overhead ******
Total manufacturing cost added during the year:

Job 03 Job 04 Job 05 Job 06
Direct materials 10,920 13,200 36,000 4,800
Direct labor 14,400 16,800 42,000 7,200
Applied overhead *****
At the end of the year, Job 03, Job 04, Job 05, were completed. The predetermined overhead rate was 65% of direct labor cost. Actual
overhead at the end of the year was P33, 000.
9. What is the cost of goods manufactured at the end of the year?

a. 195,492
b. 180,900
c. 143,700
d. 180,912
10. What is the cost of goods manufactured for Job 03?

a. 105,300
b. 43,020
c. 47,172
d. 103,300

a. 47,172
b. 40,920
c. 42,300
d. 43,020

a. 8,340
b. 57,600
c. 34,680
d. 105,300
13. Assuming Job 06 was also completed, what is the cost of goods manufactured of Job 06?
a. 6,252
b. 20,580
c. 40,920
d. 16,680
14. What is the proper period for recording direct labor rate variance?
a. At the time of payment of salaries to factory workers
b. At the time of hiring of factory workers
c. At the time of rendition of services by factory workers
d. At the time of termination of employment of factory workers
Number 15
On October 1, 2020, the Muntinlupa Main Office established a sales agency in Marikina.
∙The main office sent samples of its merchandise amounting to P8, 400 and a working fund amounting to P72, 000 to be maintained
on the imprest basis.
∙The samples sent were intended to last until June 1, 2021. During the first two months of operations, the agency transmitted to the
home office sale of goods amounting to P364, 500, but the home office was not able to fill-up 25% of the said transmitted sales
orders.
∙Collections from customers amounted to P73, 941, net of 2% sales discount.
∙Payments made by the agency during October and November were as follows: annual rent of P57, 600, transportation expense
worth P5, 600 and utilities amounting to P7, 200.
∙It also purchased equipment worth P9, 000 which will be depreciated at 20% per annum. The gross profit rate on sales
agency order is 20% of gross sales.
What is the net income of the agency for the two months ended November 30, 2020?
a. 17,431
b. 28,366
c. 29,875
d. 26,866
Numbers 16, 17 and 18

The trial balance before adjustment for the Caloocan home office and Malabon branch show the following items on December 31.
Differences in the shipments account balances result from the home office policy of billing the branch at a 20% mark-up based on cost.
Home Office books Branch books

Allowance for overvaluation of Branch merchandise P756, 000 Merchandise Inventory, January 1 3,150,000
Shipments to branch ***** Sales 6,300,000
Purchases P 525,000 Expenses 378,000
Shipments from Home Office 2,016,000
The ending inventory of the branch amount to P2, 100, 000 composed of merchandise from the home office amounting to P1, 764,
000. The remaining amount from outsiders:
16. By what amount did the Allowance for Overvaluation before adjustment increased during the year?
a. 336,000
b. 756,000
c. 462,000
d. 420,000
17. In the books of the home office, what is the amount of adjustment to Income Summary – Branch account at the end of
the year?
a. 2,331,000
b. 510,996
c. 294,000
d. 462,000
18. Before closing, the Home Office Current account in the separate books of the branch is understated by what amount?
a. 2,793,000
b. 462,000
c. 336,000
d. 2,331,000
Numbers 19 and 20
Taguig Company has a branch in Makati and Pasig. The reciprocal accounts between the home office and the branches were in
agreement at the beginning of 2020. However at December 31, 2020, the following reciprocal balances are found in the home office
books: Investment in Makati, P186, 500: Investment in Pasig, P84, 000.
Data for reconciliation of the reciprocal accounts are as follows:
a. On December 29, 2020, the home office has instructed Makati to transfer P74, 000 cash to Pasig. Makati recorded this
transaction immediately. Upon receipt, Pasig has recorded this transfer at P47, 000. Taguig Company however has not yet
recorded this interbranch transaction as of end of the year.
b. Taguig has transferred goods costing P28,900 to Makati branch and paid P2,500 of shipping cost on December 16, 2020. Makati
shipped all of these goods to Pasig upon instruction of the home office on December 30, 2020. Shipping cost is P3,600 freight
collect. Had the goods were shipped directly to the Pasig, P5, 000 of freight cost should have been incurred. The interbranch
shipment was not recorded by the branches and the home office as well.
c. Makati has collected cash of P5,750 from Pasig’s customer. This transaction is not yet recorded by Pasig and Taguig Company.
d.Taguig Company has already allocated P11,000 and P9,000 of administrative expenses to Makati and Pasig respectively. The
branches are not yet notified.
e. Makati remitted P14, 300 cash to Taguig Company on December 12, 2020. The home office has failed to record the said
remittance.
f. Pasig returned goods costing P6, 850 to Taguig Company. The goods were shipped on December 19 and received on December
24 but no entries have been made in the home office books.
Compute for the following:
19. What is the unadjusted balance of Home Office Current account in the books of Makati branch?
a. 52,150
b. 87,200
c. 107,250
d. 92,950
20. What is the unadjusted balance of Home Office Current account in the books of Pasig branch?
a. 236,250
b. 122,000
c. 115,150
d. 84,850
21. How shall expenses of a nonprofit organization be presented in its statement of activities?
a. Addition to temporarily restricted net assets
b. Addition to permanently restricted net assets
c. Deduction from permanently restricted net assets
d. Deduction from unrestricted net assets
22. What is the cash account to be used by national government agencies for cash payments?
a. Cash modified disbursements system (MDS) regular
b. Cash treasury agency (TA) deposit regular
c. Cash in bank – Land Bank of the Philippines
d. Cash on hand
Numbers 23, 24, 25 and 26

On January 1, 2018, MDC Inc. entered into a long-term construction contract for the construction of a building at a contract price of
P175M. Because of changes in the design of the project, the price increased by P35M on January 1, 2020. The project was completed
on December 31, 2021. The following additional data are provided:
▪ Dependable estimates are available.
▪ Mobilization fee equivalent to 3% of original contract price must be made by the client deductible on the first billing. Billings on
the project were made 12%, 20%, 30% of the contract price, respectively, for the first three years of the project.
▪ MDC made cash collection from the customer amounting to P17.5M and P52.5M on year 2019 and 2020.
▪ The cost incurred on year 2018 was P17.5M while the estimated cost to complete at the end of 2018 was P70M.
▪ The cumulative cost incurred in 2019 was P122.5M with a 50% degree of work completed as of the end of 2019.
▪ The cost incurred on year 2020 was 35M with percentage of completion of 90% as of the end of 2020.
23. What is the excess of construction in progress over progress billings (excess of progress billings over construction in
progress) on December 31, 2018?
a. 8.75M
b. 19.25M
c. 14M
d. 10.5M
24. What is the realized gross profit (loss) for the year ended December 31, 2019?
a. (87.5M)
b. (52.5M)
c. (70M)
d. (17.5M)
25. What is the amount of construction cost presented in the Statement of Comprehensive Income in 2019?
a. 122.5M
b. 105M
c. 140M
d. 245M
26. What is the amount of account receivable to be reported by MDC on December 31, 2020?
a. 33.25M
b. 49M
c. 43.75M
d. 31.5M
27. Under PFRS 10, which financial statements must be presented by a parent corporation?
a. Separate financial statements
b. Combined financial statements
c. Consolidated financial statements
d. Condensed financial statements
28. Under PFRS 10, which of the following is not an essential element of control?
a. Power
b. Ability
c. Exposure or Right
d. Ownership of majority of voting stocks
Numbers 29 and 30
On August 1, 2020, Tea-Account Inc. granted a franchise right to a franchisee for the operation of tea shop using Tea-Account’s trade
name for a period of 10 years starting August 1, 2020. The franchisee is required to pay non-refundable initial franchise fee of P1, 960,
000 and continuing franchise fee of 4% of franchisee’s annual sales. As part of its initial service, it is the obligation of the franchiser to
train nine staff and crew of the tea shop. In addition to that, Tea-Account has the obligation to deliver 1,200 units of raw materials to the
franchisee. The standalone selling price of the right to use Tea-Account’s trade name is P1, 800, 000. The standalone selling price of
the training of nine staff and crew is P225, 000 while the stand alone selling price of the 1,200 units of raw materials is P90, 000.
On December 2, 2020, the franchisee started to operate. 800 units of raw materials were already delivered and seven staff and crew
were already trained as of December 31, 2020. The franchisee reported sales revenue amounting to P280, 000 on its first month of
operation.
29. Under IFRS 15, what is the amount of Sales Revenue to be credited by Tea-Account Inc. on December 31, 2020?
a. 55,603
b. 162,175
c. 83,404
d. 69,504
30. Under IFRS 15, what is the amount of Service Revenue to be credited by Tea-Account Inc. on December 31, 2020?
a. 162,175
b. 217,778
c. 228,978
d. 287,282
31 Which of the following costs incurred by the acquirer in relation to business combination shall be expensed as
incurred?
a. Bond issue costs of financial liability at amortized cost
b. Direct costs of business combination
c. Stock issuance costs
d. Contingent consideration
Number 32
QRS Manufacturing Company ships merchandise costing P360, 000 on consignment to XYZ Stores under a perpetual inventory
system with P37, 500 of freight prepaid. XYZ pays P22, 500 for local advertising costs that are reimbursable from QRS. By the end of
the period, XYZ has sold 2/5 of the consigned merchandise for P210, 000 cash. XYZ notifies QRS of the sales, retains 15%
commission, and remits the cash due to QRS.
Which of the following statements regarding the transactions above is TRUE?
a. XYZ will debit an expense account upon remittance to QRS.
b. QRS will debit a liability account upon receipt of the remittance from XYZ.
c. XYZ will prepare a memo entry for the P37, 500 freight charge.
d. QRS will credit an asset account in the amount of P159, 000 upon receiving the sales report.
33. Under PFRS 15, when shall an entity recognize its revenue from contract with customers?
a. When an entity enters into a contract with its customers
b. When an entity receives the consideration from its customers
c. When an entity satisfies its performance obligation to its customers
d. When an entity transfers the risk and rewards of ownership of the goods or services to its customers
34. When will the equivalent unit of production of direct materials under FIFO Process Costing be always equal to Average
Process Costing?
a. When all direct materials are added at the start of production process
b. When all direct materials are added at the end of production process
c. When all direct materials are added at the middle of production process
d. When direct materials are added uniformly throughout the production process
Number 35
An acquirer incurred the following costs in relation to the acquisition of a business:

⮚ Stock issuance costs 100,000
⮚ Direct costs of business combination 200,000
⮚ Bond issue costs 300,000
How much of the abovementioned costs shall be capitalized as goodwill arising from business combination?
a. 200,000
b. 300,000
c. 400,000
d. 0
Numbers 36 and 37
On January 1, 2021, Entity A and Entity B established a joint venture by investing P5, 000, 000 each for equal capital interest in the
arrangement. The joint venture reported the following data for the years ended 2021, 2022 and 2023:
Year Net Income / (net Loss) Dividends Declared

2021 1,000,000 200,000
2022 (12,000,000) -
2023 6,000,000 3,000,000
36. What is the investment loss to be reported by Entity A in relation to the joint venture for the year ended December 31,
2022?
a. (5,000,000)
b. (6,000,000)
c. (5,400,000)
d. (5,500,000)
37. What is the investment income to be reported by Entity B in relation to the joint venture for the year ended December 31,
2023?
a. 3,000,000
b. 2,400,000
c. 1,500,000
d. 900,000
38. Which of the following claims shall be preferred in the liquidation of general partnership?
a. Just and equitable share of industrial partner in partnership profit
b. Proportionate share of capitalist partners in partnership profit
c. Advances to partnership by managing partner
d. Capital contribution of controlling partner
39. Which of the following claims during corporate liquidation shall be settled last?
a. Book value per share of ordinary shareholders
b. Liquidation value per share of preferred stockholders
c. Redemption value of redeemable preferred shareholders
d. Claims of unsecured creditors without priority
Number 40
On January 1, 2021, Entity P acquired 80% of the common stocks of Entity S at a price of P2, 400, 000. On the said date, the fair
value of net assets of Entity S is estimated to be P3, 200, 000. The fair value of the non-controlling interest is approximated at P650,
000. It is the company policy to measure the non-controlling interest at the minimum.
What is the gain on bargain purchase to be recognized by Entity P on January 1, 2021?
a. 160,000
b. 200,000
c. 150,000
d. 210,000
Numbers 41 and 42
The following assets are translated at the end of reporting period:
Assets Historical Rate Closing Rate

Cash 10,000,000 15,000,000 Inventory 20,000,000 25,000,000 Land 30,000,000 40,000,000
41. If the entity is translating from foreign currency to functional currency, what is the amount of total assets to be presented
by the entity at the end of reporting period?
a. 60,000,000
b. 80,000,000
c. 65,000,000
d. 75,000,000
42. Assuming the entity is translating from functional currency to its presentation currency, what is the amount of total assets
to be presented by the entity at the end of reporting period?
a. 60,000,000
b. 80,000,000
c. 65,000,000
d. 75,000,000
Numbers 43 and 44
On January 1, 2021, Entity P acquired 70% of the common stocks of Entity S at a price of P7, 000, 000 when the fair value of net
assets of Entity S is approximated at P9, 500, 000. All the assets of entity S are properly valued except for a building which is
undervalued by P300, 000 with a remaining useful life of 6 years. For the year ended December 31, 2021, Entity S reported net income
of P250, 000 and declared P100, 000 dividends to its common stockholders.
43. Under Equity Method, what is the book value of Investment in Entity S to be reported by Entity P on its December 31,
2021 Statement of Financial Position?
a. 7,105,000
b. 7,000,000
c. 7,175,000
d. 7,070,000
44. If Entity P uses Cost Method, what is the income to be reported by Entity P in relation to its investment in Entity S in its
separate income statement for the year ended December 31, 2021?
a. 70,000
b. 140,000
c. 175,000
d. 75,000
45. Which of the following costs shall be classified as conversion costs?

a. Direct labor costs and direct material costs
b. Direct labor costs and factory overhead costs
c. Direct material costs and factory overhead costs
d. Direct material costs, direct labor costs and factory overhead costs
Numbers 46 and 47
On July 1, 2021, Entity P acquired 60% of common stocks of Entity S. On the said date, all assets of Entity S are properly valued
except for equipment with book value of P100, 000 and fair value of P150, 000. On July 1, 2021, the equipment has remaining useful
life of 5 years. On October 1, 2021, Entity S sold the said undervalued equipment to Entity P at a price of P120, 000. On December 31,
2021, Entity P sold the said equipment to a third party at a price of P100, 000.
46. What is the consolidated depreciation expense on the said equipment that will be reported by Entity P for the year ended
December 31, 2021?
a. 30,000
b. 15,000
c. 10,000
d. 13,500
47. What is the consolidated gain (loss) on sale of equipment to be reported by Entity for the year ended December 31, 2021?
a. (35,000)
b. 10,000
c. (8,000)
d. 15,000
48. What is the proper classification of infrastructure asset if the concession operator has right or license to charge users of
the infrastructure asset over a specific period but it does not have guaranteed right to receive cash from the grantor?
a. Property, plant and equipment
b. Investment property
c. Intangible asset
d. Financial asset
49. What is the accounting method to be used by an acquirer to treat each business combination?
a. Equity Method
b. Acquisition Method
c. Cost Method
d. Fair Value Method
Number 50
The following dividends were received by a parent entity from its investment in shares of stocks:
Cash dividend from Trading Securities 100,000 Property dividend from Associate at fair value 200,000
Property dividend from Joint Venture at fair value 300,000 Cash dividend from Subsidiary 400,000
What is the consolidated dividend income to be reported by parent entity in its consolidated income statement?
a. 500,000
b. 400,000
c. 300,000
d. 100,000
51. Which of the following transactions will increase the capital balance of a partner?
a. Share in other comprehensive loss of the partnership
b. Share in profit of the partnership
c. Drawing made during the period
d. Share in impairment loss arising from admission of a new partner
Numbers 52 and 53
On December 1, 2021, an entity acquired inventory on account at a cost of $1,000 payable on February 28, 2022. The functional
currency of the entity is Philippine Peso. The following direct exchange rates were given:
December 1, 2021 December 31, 2021 February 28, 2022

Buying Spot P50 P52 P47 Selling Spot P50 P59 P53
52. What is the foreign currency gain or (loss) to be reported by the entity for the year ended December 31, 2022?
a. (5,000) loss
b. 6,000 gain
c. (4,000) loss
d. 2,000 gain
53. What is the book value of accounts payable to be reported by the entity on December 31, 2021?
a. 59,000
b. 55,000
c. 50,000
d. 52,000
54. When translating an entity’s financial statements from its functional currency to its presentation currency, what is the
exchange rate to be used to translate income or expense accounts?
a. Closing rate
b. Average rate
c. Transaction rate
d. Rate at the end of reporting period
55. In which method of accounting of investment in subsidiary in the separate financial statements of Parent Corporation will
the dividend income from subsidiary not appear?
a. Equity method
b. Cost method
c. FAFVPL
d. FAFVOCI
Number 56
Partner A and B have profits and loss agreement with the following provisions: Salaries of P30,000 and P45,000 for A and B,
respectively; a bonus to A of 10% of net income after salaries and bonus; and interest of 10% on average capital balances of P20,000
and P35,000 for A and B, respectively. One-third of any remaining profits are allocated to A and the balance to B.
If the partnership had net income of P102, 500, how much should be allocated to partner A?
a. 41,000
b. 44,250
c. 41,167
d. 47,500
57. Which of the following transactions will result to debit to investment in branch account?
a. Reporting net loss of the branch
b. Collection by the branch of home office’s receivable
c. Return by the branch to the home office of shipped inventory
d. Payment by the home office of its own liability
58. In which of the following contract shall the resulting revenue be recognized over a period of time?
a. Long-term construction contract
b. Consignment sale contract
c. Sale or return arrangement
d. Installment sale contract
Number 59
The UST Hospital had the following cash receipts and disbursements for the year ended December 31, 2020:
Collections of Receivables 500,000 Contribution restricted by the donor to the acquisition of medical supplies 70,000 Contribution
for an establish of quasi endowment (Board-Designated) 100,000 Contribution restricted by donor to the acquisition of furniture and
fixtures 90,000 Tuition from nursing school 200,000 Interest received from investment in regular endowments 35,000 Contribution
for an establishment of term endowment 90,000 Payment of supporting expenses 150,000 Payment for the acquisition of furniture
and fixtures related to the restricted donation above. 60,000 Payment of program expenses 215,000
The interest received from regular endowment is restricted by the donor for acquisition of medical equipment.
How much is the net cash provided by operating activities?

a. 335,000
b. 375,000
c. 410,000
d. 435,000
60. Which of the following statements is true?
a. Contributed services and facilities are recognized both as asset and contributions revenue, net of expense.
b. Financial statements of not for profit organization, focuses on distinctions between current and non-current fund.
c. Unconditional pledges are recognized as receivables and contributions revenue when collected.
d. The required financial statements for nonprofit organizations include: statement of financial position, statement of
cash flows, statement of activities and specifically for Voluntary Health and Welfare Organizations – Statement of
Functional Expenses.
61. Where shall foreign currency gain or loss arising from translating foreign currency denominated elements of financial
statements to entity’s functional currency be presented?
a. Income from Continuing Operation of Profit or Loss Section of Statement of Comprehensive Income
b. Income from Continuing Operation of Profit or Loss Section of Statement of Comprehensive Income
c. Other Comprehensive Income with Reclassification Adjustment Section of Statement of Comprehensive Income
d. Other Comprehensive Income w/o Reclassification Adj. Section of Statement of Comprehensive Income
Number 62
E, R and G operate a local accounting firm as partnership. After working together for several years, they have decided to liquidate the
partnership. The partners have presented the following balance sheet;
Cash P 200,000 Loan Payable to R 100,000 R, Capital (50%) 300,000

Liabilities P400, 000 Non-cash assets 1,620,000 G, Capital (40%) 200,000
Receivable from E 80,000 E, Capital (10%) 900,000
The non-cash assets are sold for P800, 000 with P210,000 of this amount being used to pay liquidation expenses. All partners are
personally insolvent.
How much of the cash must E received?

a. 261,667
b. 128,333
c. 390,000
d. 305,000
Number 63
FAR, MAS and TAX share profits and losses from their partnership in the ratio of 35%, 45% and 20% respectively. Capital and loan
balances related to each partner are as follows:
Loan to Partner from Partnership Loan to Partnership from partner Capital

FAR 100,000 500,000
MAS 70,000 280,000
TAX 200,000 250,000
In addition to loan to partner, assets of the partnership includes cash of P110, 000, inventory of P360, 000, receivable of P260, 000
and plant and equipment of P710, 000. Partnership liabilities to non-partners amount to P180, 000.
If FAR receives already P450, 000, how much TAX receives at this point?
a. 321,155
b. 364,286
c. 450,000
d. 375,000
Number 64
On May 1, 2020, the capital accounts of S, T and C are P1, 260, 000; P787, 500 and P472, 500, respectively.
At this time, I is admitted to the firm, he purchased a 1/6 interest in the firm for P288, 750. The old partners equalized their capital
investments. Afterwards, all the partners agree to divide profits and losses equally. The new partnership closes its books June 30, 2020
reporting profit of P44, 100 for two months. Each partner made the following withdrawals: S and C P2, 625 per month while T and I,
P3, 500 per month. On June 30, 2020, I invest enough cash to increase his capital to a 1/3 interest in the partnership.
How much cash is to be invested by I?

a. 211,165.50
b. 70,000
c. 632,642.50
d. 633,762.50
Number 65
Max decided to withdraw from his partnership with Fried and Chic. Before his withdrawal, Max’ capital balance was P58, 000, while
Fried’s was P64, 000 and Chic’s was P77, 000. Also, the partnership’s total assets amounted to P450, 000, but the partners agreed
that a fixed asset was under depreciated by P15, 000. Max, Fried and Chic share profits and losses in the ration of 2:4:4, respectively.
If Max was paid P53, 200 upon his retirement, how much is the remaining partnership net assets after Max’ withdrawal?
a. 182,800
b. 197,800
c. 130,800
d. 160,800
Number 66
Partners Irish, Ivan and Irvin share profits and losses in the ratio of 4:3:3. At the end of a very unprofitable year, they decided to
liquidate the firm. The balances of their accounts on this date are:
Cash 18,000 Irish, cap 66,000

Other assets ***** Ivan, cap 74,700
Liabilities 90,000 Irvin, cap 45,000
The liabilities included a loan of P30, 000 from Irish. All the partners are personally solvent. The partners plan to sell the assets on
installment.
If Ivan received P33, 000 from the first distribution of cash, how much did Irish received at that time?
a. 40,400
b. 24,750
c. 36,000
d. 33,000
Number 67
Solly and Dante are partners who share profits and losses in the ratio of 7:3, respectively. On February 1, 2020, their respective capital
accounts were as follows: Solly P140, 000 and Dante P120, 000.
On that date they agree to admit Jam as partner with 1/3 interest in the capital and profit and losses, and upon his investment of P100,
000. The new partnership will begin with a total capital of P360, 000.
Immediately after Jam’s admission, what are the capital balance of Solly, Dante and Jam?
a. 120,000; 120,000; 120,000
b. 126,000; 114,000; 120,000
c. 126,668; 113,322; 120,000
d. 140,000; 120,000; 100,000
68. What is the proper classification of Joint Arrangement when the parties exercising joint control over arrangement
has rights to the net assets of the said arrangement?
a. Joint operation
b. Jointly controlled asset
c. Joint venture
d. Jointly controlled operation
Number 69
During 2020, Agency ABC transferred cash of P300, 000 to Agency QRS for a land beautification project. Subsequently, Agency ABC
received a report from Agency QRS about the project. What is the journal entry of Agency ABC to record the transfer of funds?
a. Debit Due from ABC P300, 000 and Credit Cash, MDS, Regular P300, 000.
b. Debit Cash-Treasury/Agency Deposit/Trust P300, 000 and Credit Cash-Collecting Officers P300, 000.
c. Debit Cash Collecting Officers P300, 000 and Credit Due to ABC P300, 000
d. Debit Cash-Treasury/Agency Deposit/Trust P300, 000 and Credit Cash-Collecting Officers P300, 000.
Number 70
An entity spent P5, 600, 000 (inclusive of VAT) in acquiring its new software package from outside party at the beginning of the year.
Such software shall be installed and used to speed up processing the entity’s operations. The useful life of the software is determined
to be 10 years and no residual value was assigned to it.
What is the journal entry to record the purchase of a software package?
a. Computer Software 5,600,000 c. Computer Software 5,600,000

Cash-MDS, Regular 5,600,000 Cash-Treasury/Agency Deposit 5,000,000
Due to BIR 600,000
b. Computer Software 5,600,000
Cash Disbursing Officer 5,250,000 d. Computer Software 5,600,000
Due to BIR 350,000 Cash-MDS, regular 5,250,000
Due to BIR 350,000
|FINANCIAL ACCOUNTING AND REPORTING|
Numbers 1, 2, 3, 4 and 5
Extreme Company is a dealer in equipment. Extreme leased equipment to Elorde Company on January 1, 2020, for an eight-year
period expiring January 1, 2028. Equal annual payments under the lease are due at the end of each year beginning December 31,
2020. The lease agreement includes a guaranteed residual value of P200, 000, an interest rate of 10% and that the asset will revert
back to Extreme on January 1, 2028. It was determined that the fair value of the asset is P3,000,000, its carrying amount is
P2,500,000 and that the present value of the lease payment at the 10% interest rate is P2,759,000. Round present value factors to 2
decimals.
Jade Company is experiencing financial difficulties with AA Bank. Jade negotiated with AA and arrived at an agreement to restructure
its note payable at the end of the current period. Jade owed the bank a note with principal amount of P4,000,000 and accrued interest
of P480,000. Based on the agreement, the bank will accept equipment with a fair value of P800,000 and a note receivable from
Jade’s customer with carrying amount of P3,000,000. It was determined that the equipment had been acquired at P1,000,000 and had
been 30% depreciated as of the current period.
Glow Company declared and distributed a 15% share dividend with fair value of P2,500,000 and par value of P2,000,000 and a 30%
share dividend with a fair value of P5,000,000 and par value of P3,500,000.
1. What is the periodic rental that Extreme should charge Elorde?

a. 517,636 c. 500,000
b. 562,852 d. 545,216
2. What amount of gross profit should Extreme recognize?

a. 500,000 c. 406,000
b. 259,000 d. 165,000
3. Under IFRS, what amount of gain on extinguishment of debt should Jade recognize?
a. 480,000 c. 780,000
b. 680,000 d. 300,000
4. If Jade uses US GAAP, what amount of gain or loss on disposal should Jade recognize?
a. 100,000 gain c. 100,000 loss
b. 200,000 loss d. 200,000 gain
5. What amount of share premium should be recognized by Glow?

a. 2,000,000 c. 500,000
b. 1,500,000 d. 0
Numbers 6, 7, 8, 9, 10 and 11
On January 1, 2020, Staple Company has granted share options to its employees with a fair value of P9,000,000. Options are
exercisable on January 1, 2022. In 2020, employees leaving during the vesting period are estimated at 4% in 2021, employees that
actually left Staple are 6%.
Santiago Company implemented a defined benefit plan for its employees on January 1, 2018. During 2018 and 2019, Santiago’s
contributions fully funded the plan. The following data are provided for 2020 and 2021:
2021 2020
Projected benefit obligation, December 31 11,250,000 10,500,000 Fair Value of Plan Assets, December 31 10,950,000
10,050,000
Santiago recognized benefit expense of P1,350,000, actual return, which is also the interest income of P502,500, benefits paid of
P250,000 and actuarial gain on its benefit obligation during 2021.
Mucho Company declared a property dividend of automobile on October 1, 2020, payable on January 15, 2021. The fair value less
cost to distribute of the machinery on October 1, 2020 is P9,000,000 while its carrying amount on such date is P7,000,000. On
December 31, 2020, the fair value less cost to distribute was P6,000,000 and P3,500,000 on January 15, 2021.
6. What amount of compensation expense should Staple recognized for the year 2021?
a. 4,320,000 c. 8,460,000
b. 4,500,000 d. 4,140,000
7. If no employees exercised the share options on January 1, 2022, Staple should

a. Credit retained earnings for P8,460,000 b. Credit other income for P8,460,000
c. Credit share premium for P8,460,000 d. Credit share premium for P9,000,000
8. What is the discount rate that Santiago applied for the year 2021?
a. 4.79% c. 4.59%
b. 5.00% d. 4.47%
9. What is the actuarial gain on the projected benefit obligation for the year 2021?
a. 750,000 c. 852,500
b. 350,000 d. 0
10. What amount should Santiago contribute in order to report an accrued benefit cost of P300,000 in its December 31, 2021
statement of financial position?
a. 647,500 c. 150,000
b. 900,000 d. 1,150,000
11. What amount of impairment loss should Mucho recognize for the year 2020?
a. 3,500,000 c. 2,500,000
b. 1,000,000 d. 2,000,000
Numbers 12, 13, 14, 15 and 16
AA Company is authorized to issue 150,000 shares of P100 par value 8% cumulative preference shares and 400,000 shares of P50
par value ordinary shares. The preference shares have a call price and liquidation price of P110 and P105 respectively. During the
year, 80,000 ordinary shares are issued to the founders of the corporation for land valued by the board of directors at P10,000,000,
5,000 preference shares are sold for cash at P120 per share and 1,000 ordinary shares to its attorneys for costs associated with
starting the company. At that time, the ordinary shares were selling at P60 per share. Also 50,000 ordinary shares were subscribed at
P70 per share. It was determined that 60% of the subscription price was already paid by the shareholders. The remaining balance is
to be collected early next year. The net income for the year is P2,500,000.
BB Company has P400,000 of 6% cumulative and fully participating preference shares and P1,600,000 of ordinary shares
outstanding, each having a par value of P10. No dividends have been declared for 2018 and 2019. On December 31, 2020, BB
declared a total dividend of P408,000 to its preference and ordinary shareholders.
After its first year of operations, CC Company recognized pretax accounting income of P11,250,000, total tax expense of P3,375,000
of which P270,000 is deferred tax expense. The entity uses straight-line depreciation for accounting purposes while accelerated
method for tax purposes. The accounting depreciation was determined to be P4,500,000 and the income tax rate effective for this
year is 30%.
12. What is total shareholder’s equity of AA Company in its financial statements?

a. 13,260,000 c. 15,260,000
b. 14,660,000 d. 16,660,000
13. What amount of book value per ordinary share should AA Company present?
a. 122.86 c. 132.39
b. 122.67 d. 132.16
14. What amount of dividends should BB Company allocate to its ordinary shareholders?
a. 96,000 c. 288,000
b. 120,000 d. 307,200
15. What amount of depreciation did CC Company record for tax purposes?
a. 3,600,000 c. 5,400,000
b. 4,500,000 d. 900,000
16. What is the taxable income of CC Company?

a. 11,250,000 c. 7,875,000
b. 12,150,000 d. 10,350,000
Numbers 17, 18, 19, 20 and 21
Magnum Company granted share options to its employees under a performance-based share option plan on January 1, 2020. The
number of share options to be granted is based on the net sales. The plan provided for share options to be awarded to the employees
on the following basis:
Net sales range Options granted
Less than P5,000,000 30,000 P5,000,000 to P7,999,999 50,000 P8,000,000 and above 80,000
Options become exercisable on December 31, 2022. The option price is P100 while the par value per share is P80. The market prices
for the years 2020, 2021, and 2022 were P180, P220 and P240 respectively. The net sales for the years 2020, 2021 and 2022 were
P3,500,000, P8,500,000 and P7,500,000 respectively. The fair value of the share options cannot be determined reliably. The options
were exercised on December 31, 2022.
On December 31, 2020, Chamber Bank has a 5-year loan receivable with a face value of P5,000,000 dated January 1, 2019 that is
due on December 31, 2023. Interest is payable annually every December 31 at 9%. The borrower made the required interest payment
on December 31, 2019 but informed the bank that interest accrued at 2020 will be paid at maturity. There is a high probability that
remaining interest payments will not be paid because of financial difficulty. The PV of 1 for 3 periods is 0.772 at 9%.
Domex Company traded machinery with a carrying amount of P2,800,000 and a fair value of P3,000,000. It received in exchange
from Ariel Company a machine with a fair value of P2,700,000 and cash of P300,000. Ariel’s machine has a carrying amount of
P2,850,000. The exchange has commercial substance.
17. What is the compensation expense that Magnum should recognize for the year 2021?
a. 800,000 c. 6,400,000
b. 5,600,000 d. 9,933,333
18. What is the compensation expense that Magnum should recognize for the year 2022?
a. 7,000,000 c. 1,000,000
b. 6,400,000 d. 600,000
19. What amount of share premium should Magnum record on December 31, 2022?
a. 7,000,000 c. 1,000,000
b. 8,000,000 d. 5,000,000
20. What amount of impairment loss should Chamber recognize in 2020?

a. 1,242,600 c. 378,666
b. 792,600 d. 0
21. What is the cost of the new machine to Domex?
a. 3,000,000 c. 2,700,000
b. 3,300,000 d. 2,500,000
Numbers 22, 23, 24, 25 and 26
Maxi Company constructed a building at a cost of P20,000,000. Average accumulated expenditures were P8,000,000, actual interest
was P1,200,000, and avoidable interest was P600,000 during the year.
Bandai Company plans to acquire an additional machine on January 1, 2020. Hasbro Company offers to provide the machine to
Bandai using either of the options listed below (each option gives Bandai the same machine and gives Hasbro the same present
value cash equivalent at 10%).
Option 1 Cash purchases of P8,000,000.

Option 2 Installment purchases requiring 15 annual payments of P1,051,790 due December 31 each year.
The useful life of this machine is 15 years and the residual value is estimated to be P500,000. Bandai uses SYD method of
depreciation.
On December 31, 2020, DD Company paid P7,000,000 to acquire all of the ordinary shares of EE Company, which became a
division of DD. In the books of EE, the net assets are recorded at P5,000,000. It was determined that the fair value of the identifiable
net assets of EE is P5,600,000. On December 31, 2021, EE Company reported current assets and noncurrent assets of P1,600,000
and P4,800,000 respectively. The noncurrent assets included the amount of goodwill. EE Company was tested for any impairment
loss. The value in use of EE Company was P3,800,000.
Riley Company incurred the following costs during 2020:
Significant modification to the formulation of a chemical product 1,600,000 Troubleshooting in connection with breakdowns during
commercial production 1,500,000 Cost of exploration of new formulas 2,000,000 Seasonal or other periodic design changes to
existing products 1,850,000 Laboratory research aimed at discovery of new technology 2,250,000
22. What is the cost of the new building to Maxi Company?

a. 21,200,000 c. 9,200,000
b. 20,600,000 d. 8,600,000
23. What is the total expense to Bandai under Option 2?
a. 3,487,291 c. 1,989,290
b. 1,909,606 d. 1,737,500
24. What is the goodwill on the acquisition of EE Company?

a. 1,400,000 c. 600,000
b. 2,000,000 d. 0
25. What amount of impairment loss is allocated to goodwill of EE Company?

a. 2,600,000 c. 2,000,000
b. 1,400,000 d. 568,750
26. What amount of research and development expense should Riley recognize?
a. 7,350,000 c. 9,200,000
b. 5,850,000 d. 7,700,000
Numbers 27, 28, 29, 30, 31 and 32
On October 1, 2020, accounts receivable in the amount of P1,000,000 were assigned to a bank by Jade Company as security for a
loan of P800,000. The bank charged a 3% commission on the accounts. The interest rate on the note is 12%. During the month, Jade
collected P300,000 on assigned accounts after deducting P50,000 of discounts. Jade wrote off a P53,000 assigned account. Jade
paid to the bank the amount collected plus one month's interest on the note. On October 31, 2020, Jade estimated that 8% of the
assigned accounts is doubtful in collection.
On June 1, 2020, Emerald Company factored P600,000 of accounts receivable with Finance Company without recourse. Finance
assessed a finance charge of 6% of the total accounts receivable factored and retained an amount equal to 2% of the total
receivables to cover sales returns and allowances. It was agreed that the factor’s holdback should always be equal to 2% of the
account receivable balance after any collection by Finance. Any amount in excess of the required balance should be returned to
Emerald. During the month, Finance collected P350,000 from Emerald’s customers.
On December 20, 2020, Mile Company purchased merchandise on credit for P3,000,000 with terms 2/10, n/30. 80% of the gross
liability was paid within the discount period. The remainder was paid on January 15, 2021. On December 31, 2020, 90% of the
merchandise had been sold and 10% remained in inventory. Mile uses the net method.
27. What is the balance of accounts receivable of Jade Company on October 31, 2020?
a. 597,000 c. 105,000
b. 647,000 d. 155,000
28. What is the doubtful account expense to be recognized by Jade Company?

a. 47,760 c. 104,760
b. 51,760 d. 100,760
29. What amount of loss on factoring should Emerald Company recognize?

a. 48,000 c. 36,000
b. 12,000 d. 41,000
30. What amount should Finance return to Emerald to satisfy the required holdback balance?
a. 12,000 c. 7,000
b. 5,000 d. 0
31. What amount of purchase discount lost should Mile recognize on December 31, 2020?
a. 12,000 c. 48,000
b. 60,000 d. 0
32. What amount of cost of goods sold should Mile recognize on December 31, 2020?
a. 2,700,000 c. 2,658,000
b. 2,646,000 d. 2,652,000
Numbers 33, 34, 35, 36 and 37

On April 15, 2020, a fire destroyed Folster Company's entire inventory. The inventory on hand as of January 1, 2020 totaled
P3,300,000. From January 1 through the time of the fire, the company made purchases of P1,366,000, incurred freight in of
P156,000, and had sales of P2,420,000. Inventory on hand per physical count was determined to be P1,500,000 which included
merchandise held on consignment of P300,000. Folster’s inventory is insured and only inventory that Folster owns can be claimed
from insurance. The gross profit rate is 30% based on sales.
On December 31, 2020, Geralt Company reported P6,000,000 of inventory based on physical count. Additional information is as
follows:
* Excluded from the physical count were goods billed to a customer, FOB Destination, on December 31, 2020. The goods had a
cost of P300,000 and had been billed at P450,000, The shipment is ready for pick-up by the delivery contractor on January 5,
2021.
* Goods were in transit from a vendor. The invoice cost was P400,000 and goods were shipped FOB seller on December 31, 2020.
* Goods sold in transit, costing P250,000 were included in the count. Freight cost of P50,000 should be paid by the customer.
* Goods out on consignment amounted to P1,000,000 excluding shipping costs of P50,000.
On January 1, 2020, Renfri Company purchased P8,000,000 face value 8% bonds for P7,250,000, The bonds pay interest annually
on December 31. Renfri’s business model for this investment is to collect contractual cash flows composed of principal and interest,
and to sell the investment in the open market. For the year 2020, Renfri recognized interest income and interest received of P870,000
and P640,000 respectively. On December 31, 2020, the bonds were quoted at 120.
33. What amount of insurance claim can Folster receive?

a. 3,128,000 c. 1,628,000
b. 1,928,000 d. 1,200,000
34. What amount of inventory should Geralt report on December 31, 2020?
a. 7,200,000 c. 7,750,000
b. 7,100,000 d. 7,500,000
35. What is the effective interest rate when the bonds were purchased by Renfri?
a. 8.8278% c. 12%
b. 10.875% d. 8%
36. What amount in OCI is recognized by Renfri for the year 2020?
a. 2,120,000 c. 2,350,000
b. 2,580,000 d. 0
37. At what amount should Renfri report the bond investment on December 31, 2020?
a. 7,250,000 c. 7,480,000
b. 7,020,000 d. 9,600,000
Numbers 38, 39, 40, 41 and 42
On January 1, 2020, Ciri Company received a grant of P7,000,000 from the Philippine government to compensate for massive losses
incurred because of a recent earthquake. The grant requires no fulfillment of certain conditions. The grant was made for the purpose
of giving immediate financial support to the entity. It will take Ciri 2 years to reconstruct its facilities.
On March 1, 2020, Yennefer Company purchased land for an office site by paying P810,000 cash. Yennefer began construction on
the office building on March 1. The following expenditures were incurred for construction:
Date Expenditures
March 1 540,000
April 1 756,000
May 1 1,350,000
June 1 2,160,000
The office was completed and ready for occupancy on July 1, 2020. To help pay for construction, P1,080,000 was borrowed on March
1, 2020 on a 9%, 3-year note payable. Other than the construction note, the only debt outstanding during 2020 was a P2,000,000,
12%, 6-year note payable dated January 1, 2020.
Data pertaining to Sol Company’s ordinary share investments for the year 2020 are as follows:
* On October 1, 2020, Sol received P500,000 liquidating dividend from A Company. Sol owns a 10% interest in A Company.
* Sol owns a 20% interest in B Company which declared a P3,000,000 cash dividend on November 15, 2020 to stockholders of
record on December 15, 2020 payable on January 15, 2021. Sol does not have ability to exercise significant influence over B
Company.
* On December 1, 2020, Sol received from C Company a dividend in kind of automobile. It has a fair value of P700,000. The
carrying amount of the asset in C’s books is P500,000. Sol owns 8% of C Company.
38. What amount of income from government grant should Ciri recognize for the year 2020?
a. 3,500,000 c. 5,000,000
b. 7,000,000 d. 0
39. What amount of capitalized borrowing cost should Yennefer recognize?

a. 281,000 b. 232,200
c. 205,200 d. 230,040
40. What amount of interest expense should Yennefer recognize for the year 2020?
a. 115,800 c. 90,960
b. 321,000 d. 40,000
41. What is the total cost of land and office building to Yennefer?
a. 5,821,200 c. 3,337,200
b. 5,616,000 d. 5,897,000
42. What amount of dividend income should Sol recognize?

a. 1,800,000 c. 1,300,000
b. 1,200,000 d. 700,000
Numbers 43, 44, 45, 46, and 47
On December 31, 2019, Mondi Company had 200,000 ordinary shares outstanding. On September 1, 2020, Mondi issued 50,000
shares of 10%, P30 par value cumulative preference shares. Each preference share is convertible into 3 ordinary shares. During
2020, Tatum declared and paid P1,500,000 ordinary cash dividends and no preference dividends. Net income for the year ended
December 31, 2020 was P5,000,000.
Presented below is the income statement of Luz Company for the end of the current year:
Sales 3,800,000 Cost of goods sold (2,250,000) Gross profit 1,550,000 Operating expenses 850,000 Income before income taxes
700,000 Income taxes 210,000 Net income 490,000
In addition, the following information related to net changes in working capital is presented: Debit Credit
Cash 120,000
Accounts receivable 150,000
Inventories 194,000 Salaries 80,0000
Accounts payable 120,000 Income tax payable 30,000
The entity also indicates that depreciation expense for the year was P167,000 and that the deferred tax liability account increased by
P19,500.
43. What amount of basic and diluted EPS respectively should Mondi report for the year 2020?
a. 16.75 and 14.00 c. 24.25 and 14.29
b. 25.00 and 20.00 d. 24.25 and 20.00
44. What amount of cash was collected by Luz Company from customers?
a. 3,800,000 c. 3,650,000
b. 3,950,000 d. 3,770,000
45. What amount of cash was paid by Luz Company to suppliers?

a. 1,936,000 c. 2,130,000
b. 2,324,000 d. 2,564,000
46. What amount of cash was paid by Luz Company for taxes?
a. 259,500 c. 190,500
b. 220,500 d. 199,500
47. What is the net cash flow provided by operating activities to be reported by Luz Company?
a. 396,500 c. 850,500
b. 730,500 d. 691,500
Numbers 48, 49 and 50

Belli Company uses the imprest system and established a petty cash fund in the amount of P80,000. Upon reviewing the items, the
fund contains P65,000 in cash and P12,000 in receipts for disbursements. Belli replenished the fund at year end.
Lulu Company, a SME, reported the following selected items during the year 2020:
Dividend received from an associate (fair value model) 550,000 Perpetual trademark, acquired on January 1 1,500,000
Government grant received, conditions not yet satisfied 2,000,000 Revaluation surplus on equipment 500,000 Increase in deferred
tax liability due to accrued income 250,000 Decrease in fair value of investment property under the FV model 600,000 Writedown
of inventory to NRV 120,000 Sales to customers 3,000,000
48. What accounts and amounts are debited when Belli Company replenished the fund?
a. Expense of P15,000 b. Cash of P15,000
c. Expense of P12,000 and cash short/over of d. Petty cash fund of P15,000
P3,000
49. What amount of total income in profit or loss should Lulu Company recognize?
a. 3,550,000 c. 3,750,000
b. 5,550,000 d. 4,050,000
50. What total amount of expense in profit or loss should Lulu Company recognize?
a. 970,000 c. 870,000
b. 1,120,000 d. 720,000
51. The term “deficit” refers to

a. An excess of current assets over current liabilities. c. A debit balance in retained earnings.
b. An excess of current liabilities over current assets. d. A loss that is reported as a prior period adjustment.
52. Which of the following expenses is subject to immediate recognition on the income statement?
a. Utilities expense for the production line of a on production equipment of a manufacturer
manufacturer c. The salary of the production foreman
b. Repairs and maintenance expense incurred d. The salary of the company president
53. Which of the following temporary differences ordinarily creates a deferred tax asset?
a. Accrued warranty costs c. Installment sales
b. Depreciation d. Prepaid insurance
54. Which type of derivative are changes in the fair value deferred and recognized as an equity adjustment?
a. Fair value hedge c. Operating hedge
b. Cash flow hedge d. Notional value hedge
55. Which of the following is correct regarding earnings per share?

a. If preference shares are outstanding, dividend declared on the preferred shares are always deducted from net income in
calculating EPS.
b. EPS can never be negative.
c. If income from continuing operations is less than zero, potentially dilutive securities are antidilutive.
d. All issues of potential ordinary shares must be included in the calculation of diluted EPS.
56. An example of an item that should be reported as a prior period adjustment is the
a. Collection of previously written off accounts receivable.
b. Payment of taxes resulting from examination of prior years' income tax returns.
c. Correction of an error in financial statements of a prior year.
d. Receipt of insurance proceeds for damage to a building sustained in a prior year.
57. Which of the following accounting theory justifies the use of historical cost method in the preparation of financial statements?
a. Conservatism c. Relevance
b. Objectivity d. Comparability
58. Under current legislation, the number of CPD units required for renewal of CPA license is
a. 120 units c. 80 units
b. 90 units d. 15 units
59. Under the Revised Conceptual Framework, financial statements of two or more entities having a parent and subsidiary
relationship are called
a. Consolidated financial statements c. Total financial statements
b. Combined financial statements d. Family-owned financial statements
60. An entity leased a new machine having an expected useful life of 12 years. The non-cancelable lease term is 10 years. The entity
is certain exercise a purchase option at the end of the non-cancelable term. The machine should be capitalized by the entity and
depreciated over
a. 9 years c. 10 years
b. 12 years d. 10 or 12 years at entity's option
61. Which of the following assets is required to be tested at least annually for impairment?
a. Machinery c. Renewable broadcast license
b. Patent d. Copyright
62. Which of the following is not a component of employee benefit expense?

a. Interest expense c. Benefit paid to retirees.
b. Interest income d. Past service cost.
63. Operating activities are

a. The principal revenue-producing activities of the entity and generally result from the transactions and other events that enter
into the determination of net income or loss.
b. The acquisition and disposal of long-term assets and other investments not included in cash equivalents.
c. The activities that result in changes in size and composition of equity capital and borrowings of the entity.
d. Cash flows arising from purchase and sale of goods in the ordinary course of business only.
64. Proceeds from the sale of investments in ordinary shares accounted for by the equity method would be classified into which of the
following sections of the cash flow statement?
a. Operating c. Financing
b. Investing d. Noncash item
65. Failure to record depreciation expense at the end of accounting period results in
a. Understated income c. Overstated expense
b. Understated assets d. Overstated assets
66. Which of the following is classified as nonmonetary?

a. Financial assets measured at fair value c. Unamortized discount on bonds payable
b. Accrued expenses d. Refundable deposits
67. Gains and losses on the purchase and resale of treasury shares may be reflected only in
a. Share premium accounts c. Income, share premium, and retained earnings
b. Share premium and retained earnings accounts accounts
d. Income and share premium accounts
68. How should an entity present equity investments using the equity method?
a. As part of “Other noncurrent assets” c. As a separate line item, under Noncurrent Assets
b. As a separate line item, under Current Assets d. As a component of Share Capital
69. Under PFRS for SME, basic debt instruments are subsequently measured at
a. Amortized cost using the effective interest method c. Fair value through profit or loss
b. Amortized cost using the straight line method d. Cost less impairment
70. Under PFRS for SME, if an entity is unable to determine the useful life of an intangible asset, the entity shall
a. Always presume the useful life to be 10 years
b. Treat the intangible asset as having an indefinite life
c. Determine the best estimate of the useful life but not exceeding 10 years
d. Write-off the asset as an expense
|TAXATION|
1. Mr. Yo filed his 2019 ITR on July 15, 2020. The BIR discovered a deficiency income tax on August 30, 2021. When should the
deficiency tax assessment be served?
a. On or before August 30, 2024 c. On or before August 30, 2031
b. On or before April 15, 2023 d. On or before July 15, 2023
2. Ms. Wa filed her 2019 ITR on March 15, 2020. On September 15, 2023, the BIR discovered a fraudulent intention to avoid the
payment of income tax because the income was understated by more than 40% of the correct amount. On April 15, 2024, the
BIR issued a deficiency income tax assessment which was received by Ms. Wa on April 30, 2024. Which of the following
statements is correct?
a. The assessment should have been made not later than April 15, 2023.
b. Ms. Wa should protest the assessment because the right of the BIR to assess has prescribed.
c. The BIR has ten (10) years to assess counted from the due date or filing of the return whichever is later.
d. Ms. Wa should protest with the CIR within 30 days from the receipt of the assessment otherwise, the assessment
becomes final and unappealable.
3. Which of the following statements is/are correct?

Statement A: Filipino citizens are taxable on all income derived from sources within the Philippines.
Statement B: Domestic corporations are taxable on all income derived from sources within and without the Philippines.
Statement C: Foreign corporations are taxable only on all income derived from sources within the Philippines
Statement D: Aliens are taxable only on all income derived from sources within the Philippines
a. Statements B, C, and D are correct are c. Statements A, B, C, and D are correct.
correct. d. Statements A and B are correct.
b. Statements A, B, and D are correct.

Statement A: Jewelry purchased by the wife during marriage using the money inherited from her mother during the marriage
is exclusive property of the wife.
Statement B: Jewelry purchased by the husband during marriage using the money inherited from his father during the
marriage belongs to husband and wife
Statement C: Jewelry inherited by the wife before marriage from her father is exclusive property of the wife.
Statement D: Jewelry inherited by the husband during marriage from his mother is exclusive property of the husband.
a. Statements A, B, C, and D are correct. c. Statements C and D are correct.
b. Statements B, C, and D are correct. d. Statement D is correct.
5. Which of the following are basic principles of a sound tax system?

a. Fiscal Adequacy, Equality or Theoretical Justice and Administrative Feasibility
b. Fiscal Adequacy, Economic Sufficiency and Administrative Feasibility
c. Administrative Justice, Theoretical Feasibility and Fiscal Sufficiency
d. Theoretical Justice, Fiscal Efficiency and Administrative Feasibility
6. Subject to limitation, on the purchase of basic and prime commodities, a senior citizen is granted a discount of
a. 5% b. 10% c. 15% d. 20%

Statement A: Dado filed his 2019 ITR (not false nor fraudulent) on March 15, 2020. The last day for the BIR to collect the tax
by judicial action, if no assessment was made is on April 15, 2023.
Statement B: Dede’s 2019 ITR was filed and the tax due paid on May 15, 2020. The last day for the BIR to send an
assessment is on April 15, 2023.
Statement C: On July 15, 2020, Dodo filed an amended return which is substantially different from the 2019 ITR which he
filed on April 10, 2020. The last day to send an assessment is April 15, 2023.
a. Statements A, B, and C are correct. c. Statements A and C are correct.
b. Statement A is correct. d. Statements B and C are correct.
8. If a taxpayer believes in good faith that the assessment against him is erroneous and doubtful but the same has become final
and unappealable, and he asks for advice, what is the best available remedy for him?
a. Apply and request for a compromise of his tax c. Protest the assessment with the CIR
liability. d. File an injunction or certiorari with the CTA.
b. Ask for the interest to be waived.
9. The concept of “situs of taxation” is based on which inherent limitation of the power of taxation?
a. Non-delegability of the power to tax c. Territorial Jurisdiction
b. International Comity d. Exemption of the government from taxation

Statement A: The power to tax includes the power to exempt.
Statement B: The power to tax includes the power to destroy.
Statement C: The power to license includes the power to tax.
Statement D: The power to tax and police power are superior to the non-impairment clause of the Constitution.
a. Statements A and C are correct. c. Statements A and B are correct.
b. Statements B and D are correct. d. Statements C and D are correct.
11. Which of the following establishments will not grant sales discounts to senior citizens on their sale of goods and/or services:
a. Funeral parlors c. Residential Condominium unit lessors
b. Cinema houses d. Restaurants and canteens
12. When one of the contracting parties on the sale of a real property is the government, what is the basis of the documentary
stamp tax to be imposed?
a. Consideration agreed upon to be paid for such property or its FMV, whichever is higher
b. Consideration agreed upon to be paid or its FMV, at the option of the government.
c. Actual consideration received.
d. Exempt for documentary stamp tax under the destination of income theory.
13. If the taxpayer refuses to submit books of accounts and records relating to the pending tax investigation by the offices of the
BIR, the BIR shall
a. Issue a final assessment based on the financial statements submitted by the taxpayer. b. Give the BIR the authority to
enter the premises of the taxpayer to obtain any available records relating to the tax investigation.
c. Issue subpoena duces tecum against the taxpayer to submit the pertinent records to the office of the BIR
d. File an action with the CTA or the regular courts to compel the taxpayer to present the necessary documentation.
14. What basic characteristic of taxation is violated if the President of the Philippines and the President of the USA entered into an
executive agreement on a loan facility to the Philippines from USA whereby there was a stipulation that interest on loans
granted by private US financial institutions in the Philippines shall not be subject to Philippine income tax laws.
a. Legislative in character c. Inherent limitation
b. Equality or Theoretical Justice d. Exception of the government from taxation
15. Three of the following statements are correct. Which is the wrong statement?
a. The province may levy an annual professional tax on each person engaged in the practice of his profession requiring
government examination at such amount and reasonable classification.
b. Every person legally authorized to practice his profession shall pay the professional tax to the province where he
practices his profession or where he maintains his principal office if he practices in several places.
c. Every person legally authorized to practice his profession shall be entitled to practice his profession in any part of the
Philippines without being subjected to any other national or local tax for the practice of such profession.
d. Every person legally authorized to practice his profession shall pay the professional tax anywhere in the Philippines
regardless of where he practices his profession or his principal office location.
For numbers 16 – 19: On February 14, 2020, Mr. and Mrs. Mar Egalo donated residential land to their daughter on account of
her wedding to be celebrated on June 12, 2020. The FMV of the land at the time of donation was Php 1.2M with an unpaid
mortgage of Php 300,000 to be assumed by their daughter. The FMV of the land at the time of marriage was Php 1.3M.
On July 30, 2020, they donated Php 500,000 to the sister of Mr. Egalo who was diagnosed with COVID 19. The donated
amount was used for the medication of Mr. Egalo’s sister.
On August 31, 2020, they sold 400,000 shares of VGS Corporation to their only son for Php 400,000. The book value per
share as per latest audited financial statement of VGS Corporation is Php 2.00 per share. The shares of stocks were acquired
three years ago for Php 100,000.
16. How much is the donor’s tax still due of Mr. Egalo on the February 14, 2020 transfer?
a. Php 40,500 b. Php 81,000 c. Php 12,000 d. Php 24,000
17. How much is the donor’s tax due of Mrs. Egalo on the July 30, 2020 transfer?
18. How much is the capital gains tax due of Mr. Egalo on the August 31, 2020 transfer?
19. How much is the donor’s tax still due of Mr. Egalo on the August 31, 2020 transfer?
a. None b. Php 12,000 c. Php 24,000 d. Php 6,000
For numbers 20 – 23: Ms. Pat Ayna, single and a non-resident alien died of COVID-19 in 2020, leaving the following properties in
favor of her parents:
Gross estate within and without the Philippines (including a family home valued Php 10M, where her parents live), 60% of which is
situated in the Philippines – Php 100M.
The estate claims the following as deductions:
Funeral expenses Php 1M
Judicial and administration expenses Php 2M
Claims against the estate Php 3M
20. How much is Pat Ayna’s gross taxable estate?

a. Php 60 M b. Php 66 M c. Php 59.5 M d. Php 49.5 M
21. How much is the deductible ordinary deductions of Pat Ayna’s estate?
a. Php 3 M b. Php 1.8 M c. Php 3.5 M d. Php 2.1 M
22. How much is the deductible special deductions of Pat Ayna’s estate?
a. Php 10.5 M b. Php 6.3 M c. Php 2.3 M d. Php 500,000
23. How much is the estate tax due of Pat Ayna’s estate?
a. Php 3.462 M b. Php 3.444 M c. Php 3.798 M d. Php 2.970 M
For numbers 24 – 27: In the course of your examination, as a revenue officer, of the audited financial statements of Bagito
Corporation which sells and leases real estate, and by virtue of a Letter of Authority duly issued by the BIR, the income statement of
Bagito Corporation on its first year of operation shows:
Revenues: Expenses:
Gain on sale of residential lots Php 600,000 Salaries and wages Php 500,000
Bank interest income 32,000 Depreciation 300,000
Dividend from Delicious Corporation 8.000 Entertainment and representation 60,000
Rental income 2,400,000 Office supplies 80,000
Total Php 3,040,000 Advertising expense 30,000
Interest expense 100,000
Taxes and licenses 230,000
Total Php 1,300,000
Net income before income tax Php 1,740,000

Less: Income tax expenses 330,000
Net income after income tax Php 1,410,000
The income tax due for the year as computed by Bagito shows:
Net income before income tax Php 1,740,000
Less:
Bank interest income 32,000
Dividend from Delicious Corporation 8,000
Gain on sale of lots 600,000 640,000
Net taxable income Php 1,100,000
Corporate income tax rate 30%
Income tax expense Php 330,000
During examination, you observed the following:

1) The balance sheet for the taxable year showed deferred rent income of Php 600,000.
2) The bank interest income is net of 20% final withholding tax.
3) Delicious Corporation is a domestic corporation
4) The gain on sale of residential lots represents gain on sale of two residential lots with selling price of Php 1,000,000 each.
5) Interest expense includes interest on late payment of tax amounting to Php 10,000.
6) Entertainment and representation expenses are duly supported by receipts and are business connected.
7) Taxes and licenses in the notes to Financial Statements showed the following:
a. Documentary stamp tax on sale of the residential lots - Php 40,000

b. Surcharge and penalties on late payment of tax - 20,000
c. Withholding tax on the sale of the lots - 120,000
d. Permits and licenses - 40,000
24. How much should be reflected as net sales and revenue in the annual income tax return of Bagito Corporation?
a. Php 3,040,000 b. Php 5,000,000 c. Php 3,000,000 d. Php 1,740,000
25. How much should be the deductible taxes and licenses?

26. How much is the deductible entertainment and representation expense?

27. How much is the basic deficiency income tax due?

For numbers 28 – 31: May Paupa, a non-VAT registered lessor of residential and commercial units has the following data for the first
and second quarters of 2019:
First Quarter Second Quarter

Gross receipts from lease of:
a. Residential units with monthly rental of:
1. Php 15,000 per unit Php 2,400,000 1,600,000
2. Php 20,000 per unit Php 1,800,000 800,000
b. Commercial units with monthly rental of:
1. Php 15,000 per unit Php 1,800,000 700,000
2. Php 20,000 per unit Php 2,800,000 1,400,000
Input Tax paid from VAT suppliers 160,000 140,000
28. How much is the business tax due for the first quarter of Ms. Paupa?
29. How much is the business tax due for the second quarter of Ms. Paupa?
30. Assuming she registered as a VAT taxpayer at the start of the second quarter, how much is the business tax due for the 2 nd
quarter of Ms. Paupa?
31. Assuming she is a VAT-registered taxpayer instead of a non-VAT registered taxpayer, how much is the business tax due of Ms.
Paupa for the first quarter?
For numbers 32 – 33: Holiday Corporation is a duly registered enterprise with the BOI, with an income tax holiday incentives for the
first four years of operations as non-pioneer. Holiday was not given an extension on its fifth year of operations. Holiday reported the
following:
Sales Php 180,000,000
Cost of Goods Manufactured and Sold 105,000,000
Operating expenses 30,000,000
Additional information are as follows:
1) All sales during the year are export sales.
2) Cost of goods manufactured and sold include imported raw materials with dutiable value of Php 2,100,000
3) Pre-computed customs duties and other charges are as follows:
a. Customs duties Php 300,000
b. Insurance 15,000
c. Arrastre charges 7,500
d. Wharfage dues 10,500
4) Cost of goods manufactured and sold includes direct labor for skilled and unskilled workers amounting to Php 15,000,000
and Php 30,000,000 respectively.
5) Included under operating expenses are expenses incurred on the importation of equipment as follows:
a. Delivery expense to warehouse after release from customs (VAT inclusive) – Php 16,800 b. Facilitation fee – Php 150,000
6) The project meets the prescribed ratio of capital equipment to number of workers set by the BOI. 7) Holiday incurred an
accumulated net operating loss on its first four years of operations as follows: a. First Year Php 3,000,000
b. Second Year Php 2,400,000
c. Third Year Php 1,200,000
d. Fourth Year Php 600,000
32. How much is the VAT due on the importation of raw materials?
a. None b. Php 292,040 c. Php 291, 960 d. Php 310,040
33. How much is the deductible direct labor cost?

a. None b. Php 45,000,000 c. Php 52,500,000 d. Php 67,500,000
For numbers 34 – 37: Lila and Nau inherited a four-storey commercial lot and building from their parents in 2018. In 2019, the
property realized rental income of Php 3,600,000, in which they shared the revenue equally. They did not register the co-ownership
with the SEC. In addition, Lila and Nau reported their personal income and expenses as follows:
Nau – Gross compensation income (inclusive of 13th month and other benefits amounting to Php 150,000) Php 1,950,000
Lila – Net income from her dry cleaning service business (net of cost and expenses of Php 900,000) Php 300,000
34. How much final withholding income tax should the co-ownership remit representing the revenue distribution to the co-owners?
a. Php 360,000 b. Php 540,000 c. Php 180,000 d. None
35. How much is the income tax due of Nau in his annual income tax return, assuming OSD is used in determining his expenses?
36. How much is the income tax due of Lila in her annual income tax return assuming OSD is used in determining her expenses?
37. When is the deadline for filing of the annual income tax return of the co-ownership for taxable year 2019?
a. April 15, 2020 b. May 15, 2020 c. October 15, 2020 d. Exempted from filing ITRs.
For numbers 38 – 41: Cure Pharmaceuticals is engaged in the business of selling drugs and medicines. The following data were
made available for the first quarter of 2019:
Revenues Php 20,000,000
Cost of services 12,000,000
Operating expenses 3,000,000
Receivables: December 31, 2018 400,000
Receivables: March 31, 2019 300,000
In addition, the following information was provided:

1) All sales for the first quarter were cash and credit card sales.
2) All sales made to senior citizens are cash sales.
3) Sales are net of senior citizens discount amounting to Php 400,000.
4) Receivables at the beginning and ending of first quarter are outstanding receivables from credit card companies.
5) The amounts of receivables are VAT inclusive.
6) Sales are inclusive of sales of medicines prescribed for diabetes, high cholesterol, and hypertension to non-senior citizens
amounting to Php 600,000.
7) Included in the operating expenses are entertainment, amusement, and recreational expenses amounting to Php 300,000.
8) Input tax credit from purchase of goods and services for the first quarter amounts to Php 600,000.
38. How much is the output tax due for the first quarter of 2019?
39. How much is the deductible creditable input tax for the first quarter of 2019?
40. How much is the income tax due for the first quarter of 2019, assuming itemized deduction was used?
41. How much is the income tax due for the first quarter of 2019, assuming OSD was used?
For numbers 42 – 44: Abaca Corporation is a domestic corporation engaged in the business of manufacturing clothing apparel. For
the fiscal year ending March 31, 2020, its income and expenses statement reported the following:
Sales Php 200,000,000
Cost of goods manufactured and sold 120,000,000
Gross income from operations Php 80,000,000
Other income 10,000,000
Total Gross Income Php 90,000,000
Operating expenses Php 30,000,000
Finance expenses 10,000,000 40,000,000
Net Income before income tax Php 50,000,000
Income tax expenses 9,000,000
Net Income after income tax Php 41,000,000
The following additional information was made available for tax reconciliation purposes:
1) The other income shows the following:
a. Interest income from bank savings deposit (net of final withholding tax)
b. Gain from sale of investment property (the property is held for lease but was not used in the primary activity of the
corporation, gross of withholding tax amounting to Php 1,800,000)
c. Rental income from investment property (gross of withholding tax)
2) The withholding tax credit from sale of clothing materials (supported Php 400,000 Php 8,000,000 Php 1,600,000 by BIR form No.
2307) Php 1,200,000 3) Operating expenses include allowance for bad debts expense amoung to Php 1,000,000 4) During the year, the
corporation has written off bad debts which are certainly uncollectible amounting to Php 600,000 5) Finance Expenses is broken down
as follows
a. Interest expense on loan from various financial institutions
b. Interest expense on loan from a majority stockholder
Income Tax expense represents quarterly income tax paid Php 6,000,000 Php 4,000,000
42. Compute Page 4, Schedule V, Item 4 of BIR Form no. 1702 – RT (net income per books should refer to net income before
income tax).
43. Compute Page 4, Schedule V, Item 9 of BIR Form no. 1702 – RT

a. Php 400,000 b. Php 9,000,000 c. Php 600,000 d. Php 1,000,000
44. Compute Page 2, Item 55 of BIR Form no. 1702 – RT

For numbers 45 – 47: Lavander A Corporation, a VAT-registered corporation is engaged in the laundry business. During the first
quarter of 2020, the following information was made available:
Receivable from customers:
January 1, 2020 March 31, 2020 Php 448,000 672,000
Creditable VAT withheld, first quarter 2020 10,000 VAT Purchases:
Capital goods, first quarter 2020 Other than Capital goods, first quarter 2020
2,400,000 600,000
Net revenue, first quarter 2020 2,000,000
The receivable balances are all income related and are inclusive of VAT. The revenues
and purchases are VAT exclusive.
The capital goods are estimated to have a useful life of 10 years.
45. Compute item 19 B of BIR Form no. 2550 Q.

46. Compute item 22 of BIR Form no. 2550 Q.

47. Compute the deferred input tax as of March 31, 2020.

For numbers 48 – 50: Paz Ado is a CPA, lawyer, who is engaged in providing legal services to her clients. She is also a licensed real
estate broker. She is registered with the BIR, and the following data are made available for the year 2020. (All amounts are gross of
withholding tax.)
1) Revenues from her profession as a CPA lawyer amounting to Php 6,000,000
2) Commissions received as a real estate broker amounting to 1,200,000
3) Cost of services amounted to 1,400,000
4) Business related expenses amounted to 800,000
5) Gain on sale of real property held for investment amounts to (selling prices is Php 1,000,000
4,000,000)
6) Wagering gain amounting to (net of wagering loss of Php 200,000) 100,000
7) Royalties from books published and sold amounts to 300,000
8) Interest income from banks amounts to 60,000
48. Compute 22 A, Page 1 of BIR Form no. 1701, assuming Ms. Ado opted to use itemized deduction in computing her income
tax.
49. Compute 17 A, Page 2 of BIR Form no. 1701, assuming Ms. Ado opted to use OSD in computing her income tax.
50. How much is the final withholding income tax of Ms. Ado assuming 2/3 of interest income from banks was realized from time
deposit with maturity of 5 years?
a. Php 114,000 b b. Php 94,000 c. Php 34,000 d. Php 274,000
51. Kat Tok’s piece of land measuring 500 sq. meters in the City of Taguig was assessed as commercial with an FMV of Php
20,000 per sq. meter. How much is the highest possible amount of annual basic real property tax can be collected from her?
52. Which of the following statements is correct?

a. Real property taxes are payable in the local treasurer’s office.
b. Local government units are empowered to collect documentary stamp tax.
c. In determining the real property tax, the FMV is equal to the assessed value divided by the assessment level.
d. When the land is located in a commercial area but the building is residential, the classification of land to determine the
FMV is residential and the assessment level is commercial.
53. On April 15, 2017, the BIR discovered a deficiency VAT equivalent to ¼ of the VAT due for the quarter ended September 2010.
If the BIR will send an assessment notice, which of the following is correct?
a. The taxpayer should protest to the CIR within 30 days from receipt, otherwise the assessment becomes final and executor.
b. The BIR must send the assessment notice on or before April 15, 2020.
c. The BIR must send the assessment notice on or before April 15, 2027
d. The tax payer can just ignore the assessment and may donate the amount involved to the BIR.
54. Dely Kwente filed her ITR for 2019 and paid the corresponding tax due of Php 100,000 on May 15, 2020. How much should
Ms. Kwente pay on May 15, 2020?
55. What is the basis of the documentary stamp tax to be imposed when one of the contracting parties on the sale of property is
the Government?
a. Consideration contracted to be paid for such realty.
b. Actual consideration
c. Consideration contracted or its FMV, whichever is higher
d. Consideration contracted or its FMV, whichever is lower.
For numbers 56 – 57: Abo Gado, a VAT-registered CPA received the following in 2019 (amounts are net of VAT, if applicable).
Salary Php 360,000
Overtime pay 40,000
Holiday pay 20,000
13th month pay 30,000
Cash payment made by clients 880,000
Retainer fee of Php 10,000 per month from clients 2,000,000
Out of pocket expenses to be reimbursed by clients 50,000
Capital gains from sale of jewelry 10,000
56. How much is Mr. Gado’s gross compensation income?

57. How much is Mr. Gado’s vatable transactions?

a. None b. Php 2,930,000 c. Php 2,880,000 d. Php 2,940,000
58. The taxable period of a taxpayer may be terminated by the BIR in any of the following, except when the taxpayer
a. Removes his property from the Philippines
b. Is retiring from business subject to tax
c. Hides or conceals his property
d. Goes to a foreign country
59. The Board of Directors of Dieya Corporation received a subpoena from the DOJ involving fraudulent tax return. Because of the
gravity of the offense, your legal advice was sought as to whose signature must appear on the withholding tax returns and
face the possibility of being criminally liable in case of fraud?
a. Pres.t and Treasurer b. Pres. and Corp. Sec. c. Treasurer and Corp. Sec. d. Chairman and Chief Accountant
60. “Oplan Kandado” may be used by the BIR against the following taxpayers, except VAT-registered persons who:
a. Understates his taxable sales by more than c. Understates his purchases by more than 30%
30% d. Fails to file his VAT returns
b. Fails to issue receipts
61. Which of the following cannot impose real property tax?

a. Province of Albay b. Municipality of Pateros c. City of Taguig d. Municipality of Taytay
62. How much is the basic real property tax and special educational fund if the following information was provided?
FMV per assessor’s office: Php 1,000,000
Land 2,000,000
Improvements
Actual use of the property Residential
Location Valenzuela City
Assessment Level 20%

Land 20%
Improvement
For numbers 63 – 64: Raya Corporation, a domestic corporation organized in 2016, had the following:
2019 2020 2021 2022
Gross Income Php 4,000,000 Php 5,000,000 Php 6,000,000 Php 7,000,000
Allowable deductions 3,800,000 4,500,000 6,100,000 6,400,000
Net income (loss) Php 200,000 Php 500,000 (Php 100,000) Php 600,000
63. The income tax payable for 2020 is:

64. The income tax payable for 2022 is

For numbers 65 – 66: The following information pertains to the business equations of a taxpayer in 2019: Gross Income:
From Business Php 2,200,000
Rent 1,500,000
Cost of Sales 1,000,000

Operating Expenses 700,000
Real properties 18,000,000
65. How much is the additional community tax, if individual?

66. How much is the additional community tax, if corporation?

67. On April 15, 2017, Delicious Corporation paid cash dividends to its stockholders, as follows:
Cash dividends paid

1) Resident Citizens Php 1,800,000
2) Resident Aliens 600,000
3) Non-resident Citizens 300,000
4) Non-resident aliens
a. Engaged in business in the Philippines – 320,000
b. Not engaged in business in the Philippines – 120,000
5) Domestic Corporations 1,400,000 6) Foreign Corporations
a. Resident – 600,000
b. Non-resident – 85,000
How much should Delicious remit to the BIR as final withholding tax on the dividends paid to its stockholders?
68. The following are tax incentives afforded to micro business enterprises, except
a. Priority to a special credit window set up specifically for the financing requirements of MBEs.
b. Exemption from the coverage of the minimum wage law, however its employees are still entitled to the same social security and
health care benefits as other employees.
c. Exemption from income tax of all income arising from the operations of the enterprises.
d. Technology transfer, production and management training, and marketing assistance programs for MBE beneficiaries.
69. Which of the following statements is correct?

a. Local taxes may be brought to the attention of the Secretary of Finance.
b. The regular courts cannot intervene in the assessment of real property taxes because this is the primary jurisdiction of
the Board of Assessors.
c. Local tax incentives and relief are granted only to new investments in the locality.
d. No injunction by regular courts will lie against real property tax collection by the local government.
70. Ms. K. Wawa bought a piece of land in Caloocan City in 2019. Thereafter she discovered that it has unpaid real property tax
for the year 2018. Is Ms. K. Wawa liable to pay the unpaid real property tax for 2018?
a. Yes, because as the new owner, it will not be registered in her name.
b. Yes, because the buyer assumes the responsibility carried from the previous owner.
c. No, because the real property tax attaches to the property. Therefore, it is the property itself which is liable.
d. No, because the real property tax attaches to the property and is chargeable against the person with actual or
beneficial use and possession of the property regardless of whether or not he is the owner.

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|ADVANCE FINANCIAL ACCOUNTING AND REPORTING FINAL PREBOARD EXAMINATIONS|

Budgeted Overhead costs:

1. What is the amount of overhead applied to Department A?

2. What is the amount of overhead applied to Department B?

Produced (gallons) Sales price Sales (gallons) Separable cost

The following data were extracted after further processing:

Book value of assets:

6. What is the estimated deficiency?

7. What is the amount received by the holder of the accounts payable?

8. What is the estimated market value of the inventories?

Numbers 9, 10, 11, 12 and 13

Finished goods beginning:

Total manufacturing cost added during the year:

9. What is the cost of goods manufactured at the end of the year?

10. What is the cost of goods manufactured for Job 03?

11. What is the cost of goods manufactured for Job 04?

12. What is the cost of goods manufactured for Job 05?

∙Collections from customers amounted to P73, 941, net of 2% sales discount.

Numbers 16, 17 and 18

Home Office books Branch books

Data for reconciliation of the reciprocal accounts are as follows:

Compute for the following:

Numbers 23, 24, 25 and 26

An acquirer incurred the following costs in relation to the acquisition of a business:

Year Net Income / (net Loss) Dividends Declared

The following assets are translated at the end of reporting period:

Assets Historical Rate Closing Rate

45. Which of the following costs shall be classified as conversion costs?

December 1, 2021 December 31, 2021 February 28, 2022

How much is the net cash provided by operating activities?

Cash P 200,000 Loan Payable to R 100,000 R, Capital (50%) 300,000

How much of the cash must E received?

Loan to Partner from Partnership Loan to Partnership from partner Capital

How much cash is to be invested by I?

Cash 18,000 Irish, cap 66,000

What is the journal entry to record the purchase of a software package?

a. Computer Software 5,600,000 c. Computer Software 5,600,000

1. What is the periodic rental that Extreme should charge Elorde?

2. What amount of gross profit should Extreme recognize?

5. What amount of share premium should be recognized by Glow?

7. If no employees exercised the share options on January 1, 2022, Staple should

Numbers 12, 13, 14, 15 and 16

12. What is total shareholder’s equity of AA Company in its financial statements?

16. What is the taxable income of CC Company?

Numbers 17, 18, 19, 20 and 21

20. What amount of impairment loss should Chamber recognize in 2020?

21. What is the cost of the new machine to Domex?

Numbers 22, 23, 24, 25 and 26

Option 1 Cash purchases of P8,000,000.

Riley Company incurred the following costs during 2020:

22. What is the cost of the new building to Maxi Company?

24. What is the goodwill on the acquisition of EE Company?

25. What amount of impairment loss is allocated to goodwill of EE Company?

Numbers 27, 28, 29, 30, 31 and 32

28. What is the doubtful account expense to be recognized by Jade Company?

29. What amount of loss on factoring should Emerald Company recognize?

Numbers 33, 34, 35, 36 and 37

* Goods out on consignment amounted to P1,000,000 excluding shipping costs of P50,000.

33. What amount of insurance claim can Folster receive?

39. What amount of capitalized borrowing cost should Yennefer recognize?

42. What amount of dividend income should Sol recognize?

Numbers 43, 44, 45, 46, and 47

45. What amount of cash was paid by Luz Company to suppliers?