CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ

STATEMENT OF COMPREHENSIVE INCOME

1. An entity reported the following data for the current year:
Net sales 9,500,000
Cost of goods sold 4,000,000
Selling expenses 1,000,000
Administrative expenses 1,200,000
Interest expense 700,000
Gain from expropriation of land 500,000
Income tax 800,000
Income from discontinued operations 600,000
Unrealized gain on equity investment at FVOCI 900,000
Unrealized loss on debt investment at FVOCI 200,000
Unrealized loss on forward contract designated as a cash flow hedge 400,000
Actuarial loss on defined benefit plan due to actuarial assumptions 300,000
Foreign translation gain 100,000
Revaluation surplus during the current year 2,500,000
1. What net amount should be recognized in other comprehensive income?
a. 2,600,000
b. 3,100,000
c. 3,400,000
d. 2,800,000
2. What net amount in OCI should be reclassified to retained earnings?
a. 3,400,000
b. 2,700,000
c. 3,700,000
d. 3,100,000
3. What amount should be reported as comprehensive income?
a. 5,500,000
b. 2,900,000
c. 5,100,000
d. 4,900,000
2. An entity reported net income of P7,400,000 for the current year. The auditor raised questions
about the following amounts that had been included in net income:
Equity in earnings of an associate – 25% interest 1,500,000
Dividend received from the associate 400,000
Unrealized loss on equity investment at FVOCI 550,000
Gain on early retirement of bonds payable 2,200,000
Debit adjustment of profit of prior year for error in underdepreciation, net of tax 750,000
Loss from fire 1,400,000
Loss on credit risk of financial liability designated at FVPL 500,000
What amount should be reported as adjusted net income?
a. 8,300,000
b. 7,800,000
c. 9,500,000
d. 8,800,000
3. On January 1, 2019, an entity purchased a machine for P7,200,000 and depreciated it by the
straight line method using an estimated useful life of eight years with no residual value. On January
1, 2021, the entity determined that the machine had a useful life of six years from the date of
acquisition with a residual value of P600,000. What is the accumulated depreciation on December
31, 2021?
a. 4,200,000
b. 3,600,000
c. 3,000,000
d. 4,600,000
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4. During 2021, an entity decided to change from the FIFO method of inventory valuation to the
weighted average method. Inventory balances under each method were:
FIFO Weighted Average
December 31, 2018 4,500,000 5,400,000
December 31, 2019 7,800,000 7,100,000
December 31, 2020 8,300,000 7,800,000
The income tax rate is 30%. What amount should be reported as the effect of this accounting
change in the statement of retained earnings for 2021?
a. 350,000 decrease
b. 350,000 increase
c. 490,000 decrease
d. 490,000 increase
5. On January 1, 2019, an entity purchased for P5,000,000 a machine with useful life of ten years and
residual value of P200,000. The machine was depreciated by the double declining balance method.
The entity changed to the straight line method on January 1, 2021 and the residual value did not
change. What is the carrying amount of the asset on December 31, 2021?
a. 2,825,000
b. 2,175,000
c. 2,625,000
d. 3,200,000

6. An entity was incorporated on January 1, 2018. In preparing the financial statements for the year
ended December 31, 2020, the entity used the following original cost and useful life for the
property, plant and equipment:
Building 15,000,000 15 years
Machinery 10,500,000 10 years
Furniture 3,500,000 7 years
On January 1, 2021, the entity determined that the remaining useful life is 10 years for the building,
7 years for the machinery and 5 years for the furniture. The entity used the straight line method of
depreciation with no residual value.
What amount should be reported as total depreciation for 2021?
a. 2,650,000
b. 3,700,000
c. 2,550,000
d. 3,500,000

7. On January1, 2021, an entity decided to decrease the estimated useful life of an existing patent
from 10 years to 8 years. The patent was purchased on January 1, 2016 for P3,000,000. The
estimated residual value is zero.
The entity decided on January 1, 2021 to change the depreciation method from an accelerated
method to the straight line method. On January , 2021, the cost of an equipment is P8,000,000 and
the accumulated depreciation is P3,400,000. The remaining useful life of the equipment on January
1, 2021 is 10 years and the residual value of the patent is P200,000.
What is the total charge against income for 2021 as a result of the accounting changes?
a. 940,000
b. 960,000
c. 627,500
d. 647,500

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