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PrE 8-8
Final Exam 2022

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Question 1
1.December 31, 20X6, a building owned by Entity A was totally destroyed by fire. The building had fire insurance coverage up to ₱500,000. Other
On
pertinent information as of December 31, 20X6, follows:

Building, carrying amount                                   ₱520,000

Building, fair market value                                   550,000

Removal and clean-up costs                                  10,000

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During January 20X7, before the 20X6 financial statements were issued, Entity A received insurance proceeds of ₱500,000. On what amount should Entity A
base the determination of its loss on involuntary conversion?

Response: 530,000

Question 2
Cash flows from a public university bookstore would appear on the statement of cash flows as

Response: Cash flows from operations.

Question 3
Entity A exchanged equipment with Entity B. Pertinent data are shown below:

          Entity A       Entity B

Carrying amount 85,000 130,000

Fair value 95,000 Indeterminable

Cash paid by Entity B to Entity A   15,000

If1.
the exchange has commercial substance, how much is the initial measurement of the equipment received by Entity B?

Response: 115,000

Question 4
The initial testing costs incurred on an item of property, plant and equipment are

Response: capitalized after deducting the disposal proceeds of samples generated during testing.

Question 5
Which of the following is not one of the classifications of inventory held by a government entity?

Response: Inventory Held for Long-term Use

Question 6
Entity A exchanged equipment with Entity B. Pertinent data are shown below:

          Entity A       Entity B

Carrying amount 85,000 130,000

Fair value 95,000 Indeterminable

Cash paid by Entity B to Entity A   15,000

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If1.
the exchange has commercial substance, how much is the gain (loss) recognized by Entity B in the exchange?

Response: (50,000)

Question 7
A statement of functional expenses is required for which of the following private not-for-profit institutions? (use SFAS 117 in
answering this question)

Response: Voluntary Health and Welfare Organization

Question 8
Entity A exchanges an item of PPE with Entity B. Assuming the exchange lacks commercial substance, how should Entity A measure
the equipment received from the exchange?

Response: at the carrying amount of the asset given up, plus cash paid or minus cash received

Question 9
A private not-for-profit hospital provided P150,000 in charity care for the current year. The hospital should report this charity care as

Response: Only in the notes to the financial statements.

Question 10
Which of the following does not affect the amount of surplus or deficit that is reported in the statement of financial performance?

Response: closing of the “Cash-Treasury/Agency Deposit, Regular” account

Question 11
Which of the following is not an essential characteristic of a financial instrument?

Response: It is subsequently measured at fair value.

Question 12
The Weyman Hospital, a private, not-for-profit institution, reported the following information:
Gross patient service revenue $1,000,000
Allowance for discounts to hospital employees 20,000
Bad debt expense 40,000
Contractual adjustments 100,000
What amount should the hospital report as net patient service revenue?

Response: 880,000

Question 13
According to the PPSAS, a financial asset is recognized when

Response: an entity becomes a party to the contractual provisions of the instrument.

Question 14
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Guil College, a private not-for-profit college, received the following cash inflows:

P400,000 from students for tuition.

P200,000 from a donor who stipulated that the money be invested indefinitely and the earnings used for student scholarships.
P100,000 from a donor who stipulated that the money be spent according to the wishes of the Board of Trustees.

Which amounts of these cash flows should be shown on the cash flow statement as cash from operating activities?

Response: P500,000

Question 15
1. A uses straight-line depreciation for its property, plant, and equipment, which, stated at cost, consisted of the following:
Entity

12/31/X6                      12/31/X5

Land                                                     ₱ 25,000                      ₱ 25,000

Buildings                                                195,000                       195,000

Machinery & Equipment                          695,000                       650,000

Accumulated depreciation                        400,000                       370,000

Entity A depreciation expense for 20X6 and 20X5 was ₱55,000 and ₱50,000, respectively. What amount was debited to accumulated depreciation during
20X6 because of property, plant, and equipment retirements?

Response: 25,000

Question 16
Which of the following does not belong to Inventory for Distribution?

Response: Merchandise Inventory

Question 17
Entity A, a government entity, has an unused NCA of ₱50,000 at the end of the current year. The entry to record the reversion of
unused NCA is

Response:

Subsidy from National Government                                                            50,000

                       Cash-Modified Disbursement System (MDS), Regular                                50,000

Question 18
Which one of the following is not a required financial statement for a private voluntary health and welfare organization?

Response: Statement of Fund Balance

Question 19
The Statement of Comparison of Budget and Actual Amounts is dated

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Response: For a given reporting period

Question 20
The Johnson Hospital, a private not-for-profit hospital, received the following revenues in the current year:

Proceeds from sales of the Hospital’s flower shop                                                    P60,000

Dividends and interest revenue not restricted                                                             P20,000
Cash contributions for the renovation of the children’s ward in the Hospital      P200,000

Which of these amounts should be reported as other revenues and gains (other revenue) on the Statement of Operations?

Response: P80,000

Question 21
Relief and other welfare goods held for distribution are most likely to be classified by a government entity as

Response: Inventory Held for Distribution

Question 22
Which of the following items are classified by a government entity as Inventory Held for Consumption?

Response: Office supplies and similar materials.

Question 23
This is attached to the annual general purpose financial statements of a government entity as a cover letter.

Response: Statement of Management Responsibility for Financial Statements

Question 24
The entry to close the “Cash-Treasury/Agency Deposit, Regular” account at the end of the period is             

Response:

Question 25
Select the incorrect statement regarding impairments of investment properties

Response: Impairment losses on investment properties measured under the cost model are never reversed.

Question 26
The journal entry to record the collection of unbilled tax revenue (e.g., Travel Tax) through direct deposit in Authorized
Agent Banks is

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Response:

Question 27
Which of the following may not be included in the inventories of a government entity?

Response: equipment costing ₱55,000

Question 28
Entity A receives a donation of scientific equipment from an international body. If no condition is attached to the donation, how should
entity A account for the donation?

Response: Recognize it immediately as income measured at the equipment’s fair value at the acquisition date.

Question 29
The main purpose of the Statement of Comparison of Budget and Actual Amounts is

Response: to enhance the transparency of government’s financial reporting.

Question 30
The following are the account balances from Entity A’s statement of financial performance:
Inventory, January 1, 20x1 ................................... ₱30,000
Purchases ............................................................... 40,000
Purchase Returns and Allowances .................... 5,000
Purchase Discounts .............................................. 4,000
Freight-In ................................................................. 5,000
Inventory, December 31, 20x1 ............................. 15,000
Freight-Out ............................................................... 6,000
Given this information, the cost of sales during 20x1 is:

Response: 51,000

Question 31
Select the correct statement.

Response: Investment properties that are to be disposed of without further development are treated as investment property until they
are derecognized

Question 32
The notes to the financial statements is least likely to be expected to show which of the following information?

Response: Current and noncurrent distinctions of assets and liabilities.

Question 33
Which of the following may be capitalized as cost of property, plant and equipment?
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Response: Costs of opening a new facility

Question 34
Which of the following applies to business entities but not to government entities?

Response: Noncurrent asset held for sale classification.

Question 35
This account is credited when government entities remit collections to the National Treasury

Response: Cash-Tax Remittance Advice

Question 36
Which of the following is included in the initial cost of an item of PPE?

Response: Nonrefundable purchase taxes

Question 37
Entity A, a government entity, had the following transactions during the period:

Received Notice of Cash Allocation (NCA) amounting to ₱1,226,618.

Earned total revenue of ₱1,598,000 from billings and collections of unbilled income.
Incurred total expenses of ₱791,652.
Remitted total taxes withheld of ₱87,460 to the BIR through Tax Remittance Advice (TRA).
The “Cash-Modified Disbursement System (MDS), Regular” has an unused balance of ₱132,196 at the end of the period.

How much is the surplus (deficit) for the period?

Response: 1,988,230

Question 38
Which of the following statements is correct regarding investment properties?

Response: A building being rented out to the entity’s employees who are paying rentals at market rates is not an investment property

Question 39
Account titles in the Revised Chart of Accounts (RCA) are arranged according to this sequence

Response: Assets, Liability, Equity, Revenue, and Expenses

Question 40
Home Care, Inc., a nongovernmental voluntary health and welfare organization, received two contributions in 2003. One
contribution of P250,000 was restricted for use as general support in 2004. The other contribution of P200,000 carried no
donor restrictions. What amount should Home Care report as temporarily restricted contributions in its 2003 statement of
activities?

Response: P250,000

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Question 41
Which of the following is not an indicator of reliable measurement for an asset?

Response: Benefits can be expected on the basis of available evidence or logic.

Question 42
Which of the following statements is incorrect regarding investment property?

Response: An investment property generates, or has the ability to generate, separately identifiable cash flows from the other assets of
the entity.

Question 43
Which of the following may qualify as investment property?

Response: An agricultural land purchased for appreciation purposes

Question 44
Gerlack College, a private, not-for-profit institution, received a donation of P2,000,000 as a challenge grant. If the college raises an
additional P2,000,000 within the next two years, it may keep the donation. If it fails, the P2,000,000 must be returned to the donor.
How would the college record the receipt of the grant?

Response: Refundable advance

Question 45
The main purpose of the statement of comparison of budget and actual amounts is

Response: to enhance the transparency of financial reporting of the government.

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