Professional Documents
Culture Documents
1. It is the body authorized by law to promulgate rules and regulations affecting the practice
of the accountancy professions in the Philippines.
a. Philippine Institute of Certified Public Accountants
b. Board of Accountancy
c. Securities and Exchange Commission
d. Professional Regulation Commission
b. Board of Accountancy
a. Materiality c. Consistency
b. Cash basis of accounting d. Going concern
d. Going concern
4. An item cannot be recognized in the balance sheet or the income statement unless it meets
the two criteria of
Criterion 1 Criterion 2
a. Completeness Measurement reliability
b. Probable economic benefits Measurement reliability
c. Materiality Relevance to others
d. Neutrality Relevance to others
8. Information about the sources and uses of an enterprise’s cash and cash equivalents is
provided in the
a. Balance sheet c. Statement of changes in equity
b. Income statement d. Cash flow statement
d. Cash flow statement
a. P 4,334,000 c. P 4,404,000
b. P 4,384,000 d. P 4,409,000
The cash and cash equivalent to be shown on the December 31, 3016 balance sheet is
a. P 5,010,000
b. P 6,510,000
c. P 6,550,000
d. P 6,250,000
d. Reconciliation of the cash receipts and payments during the current period,
together with the beginning and ending balances of cash.
13. The bookkeeper of Sambisig Company recently prepared the following bank reconciliation
on December 31, 2016:
Total 22,200,000
Deduct: Outstanding checks 1,900,000
Note collected by bank (includes P 200,000 interest) 2,300,000 4,200,000
Balance per book 18,000,000
Sambisig has P 1,000,000 cash on hand on December 31, 2016. The amount to be
reported as cash on the balance sheet as of December 31, 2016 should be: a.
b. P 19,600,000 d. P 20,600,000
c. P 18,600,000 e. P 19,750,000
IV. Receivables
16. Hirayag Company provided the following transactions affecting accounts receivable for
the year 2016:
Cash refunds given to cash customers for sales returns and allowances 20,000
Recoveries on accounts receivable written off as uncollectible in prior periods but 80,000
not included in cash received from customers stated above
What are the balances of accounts receivable and allowance for doubtful expense on
December 31, 2016?
Accounts Receivable
Beg. bal 950,000
Credit sales *3,800,000 **3,150,000 Collections
50,000 Written off
250,000 Credit memo
a. 1,300,000
V. Inventories
17. On December 31, 2016, a storm surge damaged the warehouse of Siuala Company. The
following pertains to the data recovered.
January 1 December 31
Inventory 1,500,000
Purchases 5,500,000 Cash sales 900,000
Collections of accounts receivable 8,400,000
Accounts receivable 700,000 1,100,000 Gross profit on sales 40%
Accounts Receivable
Inventory 700,000
Beg balBeg bal. 8,800,000 1,500,000
Sales 5,500,000
8,400,000 5,820,00
1,100,000 0
(squeeze)Purchases c. 1,180,000
Collections COGS*
Ending bal
* Cost of Goods Sold = Total sales x (1-Gross Profit on sales)
= (8,800,000+900,000) x (1-.40)
= 5,820,000
18. Fradejas Company acquired an equity financial instrument for P4,000,000 on June 15,
2016. The financial instrument is classified as financial asset at fair value through other
comprehensive income. Direct acquisition cost amounted to P700,000. On December 31,
2016, the fair value of the instrument was P5,500,000 and the transaction costs that would
be incurred on the sale of the investment are estimated at P640,000. What gain should be
recognized in profit or loss for the year ended December 31, 2016?
a. P900,000
b. P800,000
c. P0
d. P200,000
c. P0
a. P540,000
Cash dividend from William Company 500,000
Cash dividend from Gonzales Company (2,000,000*.02) 40,000
540,000
VII. Property,
Plant and Equipment
21. The cost model means that the PPE are carried at cost less any accumulated
depreciation and any accumulated impairment loss.
The revaluation model means that the PPE are carried at the fair value at the date of
revaluation less any subsequent accumulated depreciation and subsequent accumulated
impairment loss
a. Both statements are false
b. Both statements are true
c. Only the first statement is true
d. Only the first statement is false.
22. On January 1, 2016, Thor Company took out a loan of P12,000,000 in order to finance
specifically the renovation of a building. The loan carried annual interest at 10%. Work
on the building, started from January 1, was substantially completed on October 31 of
the same year. The load was repaid on December 31, 2016 and P150,000 investment
income was earned in the period to October 31 on the proceeds of the loan not yet used
for the renovation. Compute for the amount of borrowing cost to be included in the cost
of the building.
a. P1,050,000
b. P1,350,000
c. P1,200,000
postdated check))
Accounts Receivable 6,800,000
Inventory 4,500,000
Deferred Tax Asset 2,500,000
Noncurrent Asset Held for Sale 3,000,000
d. P850,000
23. Coulson Company reported the following assets on December 31, 2016
24. Benedict Company provided the following data for the current year
Income from continuing operations 5,000,000
Income from discontinued operations 600,000
Unrealized gain on available for sale securities 900,000
Unrealized gain on futures contract designated as a cash flow hedge 400,000
Actuarial loss during the year fully recognized in the other comprehensive 300,000
income
Foreign translation adjustment - debit 100,000
Revaluation surplus during the year 2,500,000
26. How would cash received from the sale of shares in another company be classified in
acash flow statement?
a. Operating activities c. Financing activities
b. Investing activities d. None of the above
b. Investing activities
28. A change in accounting policy from one that is not generally acceptable to one that is
generally acceptable should be treated as
a. An error and corrected by prior-period adjustment.
b. A change in accounting policy and the cumulative effect included in the net income.
c. A change in accounting policy and prior period financial statements are related to
profit or loss.
d. A change in accounting policy and adjustments are made prospectively.
30. When converting from cash basis to accrual basis of accounting, which of the following
adjustments should be made to cash collections from customers to arrive at the accrual
bases of sales?
a. Add beginning accounts receivable
b. Subtract beginning accounts receivable
c. Subtract ending account receivable
d. Add ending accounts receivable
31. Sy Company reported sales revenue of P2,300,000 in its income statement for the year
ended December 31, 2016. Additional information are as follows:
12/31/2015 12/31/2016
Accounts receivable 2,000,000 2,600,000
Allowance for uncollectible accounts 70,000 120,000
During the year. Sy wrote off uncollectible accounts totalling P30,000. Under cash basis
of accounting, Sy would have reported 2016 sales of
a. P1,670,000 c. P1,720,000
b. P1,620,000 d. None of the above
Accounts Receivable
Beg. bal. 2,000,000
Sales 2,300,000
Write-off 30,000
Collections a. 1,670,000
Ending bal. 2,600,000
32. Ferrer Company kept its records on a cash basis. At the end of 2016, the accountant
prepared the following cash basis income statement:
Revenue 1,910,000
Expenses 809,000
Net income 1,101,000
2015 2016
Accrued revenue 91,000 73,000
Unearned revenue 66,000 108,000
Accrued expenses 49,000 65,000
Prepaid expenses 46,000 56,000
The net income on the accrual basis for 2016 should be:
a. P1,167,000
b. P1,067,000
c. P1,035,000
d. P1,103,000
Unadjusted net income 1,101,000
Decrease in accrued revenue (18,000)
Increase in unearned revenue (42,000)
*Increase in accrued expense (16,000)
**Increase in prepaid expenses 10,000
Adjusted net income
Thus, an increase in a trade current liability account is a deduction from net income of
cash basis to arrive at accrual basis net income
34. On January 1, 2016, Delos Santos Company issued 3 year bonds with face value of
P5,000,000 at 98. Additionally, the entity paid bond issue cost of P140,000. The nominal
rate is 10% and the effective rate is 12%. The interest is payable annually on December
31. The entity used the effective interest method in amortizing bond discount and issue
cost.
35. Which of the following are the essential characteristics of an intangible asset?
a. Identifiability, controlled by the enterprise, expected future economic benefits and
indefinite useful life.
b. Identifiiability, controlled by the enterprise, and indefinite useful life.
c. Identifiability, owned by the enterprise, expected economic benefits and definite
useful life.
d. Identifiability, controlled by the enterprise and expected future economic benefits
36. Which of the following are considered as research and development activity?
i. Laboratory research aimed at discovery of new knowledge
ii. Design, construction and testing of pre-production prototypes and models
iii. Routine design of tools, jigs, molds and dies. iv. Conceptual formulation and
design of product or process alternatives. a. i, ii, iii and iv
b. ii, iii and iv only
c. i, ii and iv only
d. i and iv only.
c. i, ii and iv only
Ingat Yemen company has a herd of 10 2 year old animals on January 1, 2015. One
animal aged 2.5 years was purchased on July 1, 2015 for P108, and one animal was born
on July 1, 2015. No animals were sold or disposed of during the year. The fair value less
cost of disposal per unit is as follows:
a. 1,400 c. 1,440
b. 1,320 d. 1,360
Fair value of 3 y/o animals on December (11x120) 1,320
Fair value of 0.5 y/o animal on December (1 x 80) 80
a. 1,400
2 year old animal on January 1 100
2.5 year old animal on July 1 108
New born animal on July 1 70
2 year old animal on December 31 105
2.5 year old animal on December 31 111
New born animal on December 31 72
3 year old animal on December 31 120
0.5 year old animal on December 31 80
37. What is the fair value of the biological assets on December 31?
38. What is the gain from change in fair value due to price change? a.
b. 292 d. 237
c. 222 e. 55
10 2 year old animals [(105-100) x 10] 50 1 2.5 year old animal [(111-108) x 1] 3
1 newborn on July [(72-70) x 1] 2
d. 55
39. Queen Tela Company owned an equipment costing P5,200,00 with original residual value
of P400,000. The life of the asset is 10 years and was depreciated using the straight line
method.
The equipment has a replacement cost of P8,000,000 with residual value of P200,000.
The age of the asset is 4 years.
The appraisal of the equipment showed a total revised useful life of 12 years and the entity
decided to carry the equipment at revalued amount.
Before income tax, what amount should be initially reported as revaluation surplus? a.
b. 6,680,000 d. 2,600,000
c. 1,680,000 e. 1,600,000
40. Bane Company had earnings per share of P120 for the current year, before taking any
dilutive securities into consideration. No conversion or exercise of dilutive securities took
place during the year. However, possible conversion of convertible preference shares
would have reduced earnings per share to P119. The effect of possible exercise of
ordinary share warrants would have reduced earnings per share by an additional P2. What
amount should be reported as diluted earnings per share?
a. 121 c. 117
b. 120 d. 119
Basic earnings per share 120
Effect of possible conversion of preference shares (1)
Effect of possible exercise of warrants (2)
Diluted earnings per share c. 117