Accountancy Department

College of Business and

Accountancy

Notre Dame University, Cotabato City 9600

2021 Institutional Mock CPA Board Examination

Basic FINANCIAL ACCOUNTING & REPORTING (BFAR)
GENERAL INSTRUCTIONS: The following exam is good for three (3) hours only. Select the best answer from the choices given.

1. Authoritative standards for international accounting standards for financial reporting include
A. International Financial Reporting Standards only.
B. International Financial Reporting Standards and International Accounting Standards.
C. International Financial Reporting Standards, International Accounting Standards and U.S. GAAP. D. International
Financial Reporting Standards, International Accounting Standards and any GAAP standard recognized by an organized
stock exchange.

2. The IASB's standard-setting structure includes all of the following except

A. Standing Interpretations Committee
B. Standards Advisory Council
C. Standards Comparison Committee
D. Trustees

3. Which is not part of the accounting standard setting process in the Philippines?
A. preparation and approval by a Task Force of a draft of the proposed SFAS
B. distribution of the exposure draft for comment to PICPA members, FINEX members and other interested parties
C. publication in the Official Gazette or in a newspaper of general circulation
D. approval by the Professional Regulation Commission

4. Which of the following statements regarding International Accounting Standards is not true?
A. The purpose of IASC is to reduce the diversity of practices in financial reporting among countries. B. Harmonization
of international accounting standards will provide benefits to both preparers and users of financial statements.
C. As international trade and ownership barriers are removed, the need for harmonization of international accounting
standards will decrease.
D. Since difference countries use financial statements for different purposes, some countries will likely not adopt the
international accounting standards.

5. Financial accounting can be broadly defined as the area of accounting that prepares:
A. general purpose financial statements to be used by parties internal to the business enterprise only
B. financial statements to be used by investors only
C. general purpose financial statements to be used by parties both internal and external to the business enterprise
D. financial statements to be used primarily by management

6. It implies that the older/delayed the information, the less useful.

A. Timeliness
B. Economic Entity
C. Going concern
D. Cost Principle

7. Accounting changes are often made, and the monetary impact is reflected in the financial statements of a company even
though, in theory, this may be a violation of the accounting concept of:
A. materiality
B. consistency
C. conservatism
D. objectivity

8. Which of the following situations violates the concept of faithful representation?

A. Financial statements were issued nine months late.
B. Report data on segments having the same expected risks and growth rates to analysts estimating future profits.
C. Financial statements included property with a carrying amount increases to management’s estimate of market
value.
D. Management reports to stockholders regularly refer to new projects undertaken, but the financial statements never
report project results.

9. Which condition is necessary for the recognition of an asset?

A. It is probable that future economic benefits will flow to the enterprise.
B. The cost of the asset can be measured reliably.
C. The asset is paid for.
D. It is probable that future economic benefits will flow to the enterprise and the cost of the asset can be measured
reliably.

10. ABC Company needed a new clinic building and a contractor quoted a ₱5,000,000 price to construct it. ABC believed that
it could build the warehouse for ₱4,300,000 and decided to use company employees to build it. The final construction
cost incurred by A company was ₱4,800,000 but the asset was recorded at ₱5,000,000. What principle is this violation of?
A. cost principle
B. separate entity
C. matching principle
D. conservatism
College of Business and Accountancy 2nd Semester, SY 2020-2021
11. Capital maintenance means that:
A. The owner has not taken home any of the business assets
B. The non current assets of the business are maintained in an excellent state of repair
C. All assets of the business are maintained in an excellent state of repair
D. The money capital at the end of the accounting period is the same as at the beginning

12. Only if the physical productive capacity of the enterprise at the end of a period exceeds the physical productive capacity
at the beginning of the same period, after excluding the effects of transactions with owners, this is known as: A.
financial capital maintenance.
B. conceptual physical capacity.
C. expired historical cost.
D. physical capital maintenance.

13. Adjustments are often prepared

A. after the balance sheet date but dated as of the balance sheet date.
B. after the balance sheet date and dated after the balance sheet date.
C. before the balance sheet date but dated as of the balance sheet date.
D. before the balance sheet date and dated after the balance sheet date.

14. Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent
accounting cycles?
A. To reduce the income tax liability to BIR
B. To aid management in cash-flow analysis
C. To match the costs of production with revenues as earned
D. To adhere to the accounting constraint of conservatism

15. The worksheet for ABC Co. consisted of five pairs of debit and credit columns. The peso amount of one item appeared in
both the credit column of the income statement section and the debit column of the balance sheet section. That item is
A. net income for the period.
B. beginning inventory.
C. cost of goods sold.
D. Net loss for the period.

16. At the end of 2020, ABC Company made four adjusting entries for the following items:

1. Depreciation expense, ₱25,000.

2. Expired insurance, ₱2,200 (originally recorded as prepaid insurance.)
3. Interest payable, ₱6,000.
4. Rental revenue receivable, ₱10,000.

In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may be reversed is
(are) A. Entry No. 3.
B. Entry No. 4.
C. Entry No. 3 and No. 4.
D. Entry No. 2, No. 3 and No. 4.

17. The Office Supplies account had a balance at the beginning of 2020 of ₱4,000 (before the reversing entry). Payments for
purchases of office supplies during 2020 amounted to ₱25,000 and were recorded as expense. A physical count at the
end of 2020 revealed supplies costing ₱4,750 were on hand. Reversing entries are used by this company. The required
adjusting entry at the end of 2020 will include a debit to:
A. Office Supplies Expense for ₱750.
B. Office Supplies for ₱750.
C. Office Supplies Expense for ₱24,250.
D. Office Supplies for ₱4,750.

18. During the first year of Wilkinson Co.'s operations, all purchases were recorded as assets. Store supplies in the amount of
₱19,350 were purchased. Actual year-end store supplies amounted to ₱6,450. The adjusting entry for store supplies will
A. increase net income by ₱12,900.
B. increase expenses by ₱12,900.
C. decrease store supplies by ₱6,450.
D. debit Accounts Payable for ₱6,450.

19. Big-Mouth Frog Corporation had revenues of ₱200,000, expenses of ₱120,000, and dividends of ₱30,000. When Income
Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a A. debit of
₱50,000.
B. debit of ₱80,000.
C. credit of ₱50,000.
D. credit of ₱80,000.

20. Assume a company's January 1, 2019, financial position was: Assets, ₱150,000 and Liabilities, ₱60,000. During January
2019, the company completed the following transactions: (A) paid on a note payable ₱10,000 (no interest was paid); (B)
collected an accounts receivable, ₱9,000; (C) paid an accounts payable, ₱5,000; and (D) purchased a truck, ₱5,000 cash,
and a ₱20,000 note payable from a bank. The company's January 31, 2019 financial position is
A. Assets – ₱150,000; Liabilities – ₱60,000; Shareholder’s Equity – ₱90,000
B. Assets – ₱155,000; Liabilities – ₱65,000; Shareholder’s Equity – ₱90,000
C. Assets – ₱160,000; Liabilities – ₱75,000; Shareholder’s Equity – ₱85,000
D. Assets – ₱170,000; Liabilities – ₱100,000; Shareholder’s Equity – ₱70,000

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College of Business and Accountancy 2nd Semester, SY 2020-2021

21. ABC Company has an ₱80,000 debit in its assets, a ₱36,000 credit in its liabilities, and a ₱12,000 credit in retained
 earnings. What is the balance in the contributed capital account?
A. ₱44,000 credit.
B. ₱32,000 credit.
C. ₱48,000 credit
D. ₱44,000 debit.

22. Which of the following statements concerning the debit-credit feature of the accounting equation is correct?
A. Debits are entered on the right and credits are entered on the left.
B. A debit entry will decrease a liability account and increase an asset account.
C. Stock sold to investors increases stockholders' equity and is recorded as a debit.
D. A liability account should be credited upon payment of an account payable.

23. Which of the following is true?

A. Assets increase on their right side because they are on the right side of the accounting equation. B.
Liabilities increase on their right side because they are on the right side of the accounting equation. C.
Stockholders' equity accounts increase on their left side because they are on the left side of the accounting
equation.
D. The accounting equation only has to be in balance whenever financial statements are being prepared.

24. Comprehensive income is best defined as

A. Net income excluding extraordinary gains and losses.
B. The change in net assets for the period including contributions by owners and distributions to owners.
C. Total revenues minus total expenses.
D. The change in net assets for the period excluding owner transactions.

25. Which of the following items is not classified as other comprehensive income (OCI)?
A. Extraordinary gains from extinguishment of debt.
B. Foreign currency translation adjustments.
C. Prior service cost adjustment resulting from amendment of a defined benefit pension plan.

26. Accounting entries associated with a cash dividend usually are made on the
A. record date and payment date.
B. payment date only.
C. declaration date and record date.
D. declaration date and payment date.

27. On December 15, 2019, the board of directors of ABC Corporation declared a cash dividend, payable on January 8, 2020
of ₱.80 per share on the 2,000,000 common shares outstanding. The accounting period ends December 31. Because of
this action, on December 15, 2019, ABC Corporation should
A. make no journal entry because the event had no effect on the corporation's financial position until 2020.
B. decrease retained earnings ₱1.6 million and increase contributed capital ₱1.6 million.
C. decrease retained earnings ₱1.6 million and increase liabilities by ₱1.6 million.
D. decrease cash ₱1.6 million and decrease retained earnings ₱1.6 million.

28. ABC Company's 2019 income statement reported total revenues, ₱850,000 and total expenses (including ₱40,000
depreciation) of ₱720,000. The 2019 balance sheet reported the following: accounts receivable—beginning balance,
₱50,000 and ending balance, ₱40,000; accounts payable—beginning balance, ₱22,000 and ending balance, ₱28,000.
Therefore, based only on this information, the 2019 net cash inflow from operating activities was A. ₱126,000
B. ₱166,000
C. ₱174,000
D. ₱186,000

29. Which of the following items about the statement of cash flows is correct?
A. Non-cash expenses such as depreciation are deducted from net income with the indirect method in computing cash
flows from operating activities.
B. Cash equivalents are highly liquid investments with maturities at the date of purchase of less than three months.
C. The acquisition of land by issuing bonds payable would not appear on the statement of cash flows. D. Cash paid
for interest on debt would be classified as a financing cash flow.

30. What is usually presented first in the notes to the financial statements?
A. Accumulated Other Comprehensive Income
B. Significant Accounting Policies
C. Commitments and Contingencies
D. Reconciliation of US GAAP Income to PFRS

31. Under which circumstance will preference shares qualify as cash equivalent?
A. Preference shares will never be classified as cash equivalents.
B. Preference shares will be classified as cash equivalents if they have redemption date and acquired three months
before the redemption date.
C. Preference shares will be classified as cash equivalents if they are paid cash dividends within three months.
D. Preference shares will be classified as cash equivalents if they are convertible into cash with three months.

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College of Business and Accountancy 2nd Semester, SY 2020-2021

32. On October 31, 2019, ABC, Inc. had cash accounts at three different banks. One account balance is segregated solely for
a November 15, 2023 payment into a bond sinking fund. A second account, used for branch operations, is overdrawn. The
 third account, used for regular corporate operations, has a positive balance. How should these accounts be reported in
ABC’s October 31, 2019, classified balance sheet?
A. The segregated account should be reported as a noncurrent asset, the regular account should be reported as a
current asset, and the overdraft should be reported as a current liability
B. The segregated and regular accounts should be reported as current assets, and the overdraft should be reported as a
current liability.
C. The segregated account should be reported as a noncurrent asset, and the regular account should be reported as a
current asset net of the overdraft.
D. The segregated and regular accounts should be reported as current assets net of the overdraft.

33. The cash account in Dee Company’s ledger showed a balance on December 31, 2020 of ₱2,207,500, which consisted of
the following:
Petty cash fund ₱ 12,000

Undeposited receipts, including a postdated check for ₱35,000 610,000

Cash per bank statement, with a check for ₱20,000 still outstanding 1,122,500

Bond sinking fund 425,000

Vouchers paid out of collections, not yet recorded 21,500

IOUs signed by employees, taken from collections 16,500

At what amount should cash be reported in the December 31, 2020 statement of financial
position? A. ₱1,689,500
B. ₱1,709,500
C. ₱1,744,500
D. ₱1,724,500

34. The checkbook balance of Espiritu Company on December 31, 2020 was P6,000,000. Data about certain cash items
follow:
1. Customer check amounting to ₱300,000 dated January 2, 2021 was included in the December 31, 2020
checkbook balance.

2. Another customer check for ₱750,000 deposited on December 22, 2020 was included in its checkbook balance
but returned by bank because it was marked as NSF check. The check was redeposited on December 26, 2020
and cleared two days later

3. ₱600,000 check payable to supplier dated and recorded on December 30, 2020 was mailed on January 16, 2021.

4. Petty cash fund of ₱75,000 with the following summary on December 31, 2020
A. Currency and coin - ₱7,500
B. Petty cash vouchers - ₱64,500
C. Return value of 20 cases of soft drinks - ₱3,000

5. Check of ₱64,500 was drawn on December 31, 2020 payable to petty cash.

What is the cash balance on December 31, 2020?

A. 6,372,000
B. 6,300,000
C. 6,307,500
D. 5,622,000

35. A Cash Over and Short account

A. is not generally accepted.
B. is debited when the petty cash fund proves out over.
C. is debited when the petty cash fund proves out short.
D. is a contra account to Cash.

For Questions 36-38. ABC Company received the following October 31, 2019 bank statement:
Transactions Balance

Balance, 09/30/2019 ₱ 20,800

Deposits recorded in October ₱ 40,000 60,800

Interest paid by bank 120 60,920

Checks cleared during October 38,300 22,620

NSF Check (given to ABC by a Customer) 100 22,520

Bank service charges 15 22,505

 Balance, 10/31/2019 ₱ 22,505

The cash account reflected the following for October:

CASH ACCOUNT

September 30, balance ₱ 22,900 October checks written ₱ 38,600

October cash deposits 38,000

October 31 balance ₱ 22,300

The September 30 bank reconciliation showed deposits in transit, ₱3,000 and outstanding checks, ₱900.

36. What was the amount of the deposits in transit on October 31?
A. ₱5,000
B. ₱1,500
C. ₱5,500
D. ₱1,000

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College of Business and Accountancy 2nd Semester, SY 2020-2021

37. What was the amount of outstanding checks on October 31?

A. ₱800
B. ₱200
C. ₱500
D. ₱1,200

38. What is the correct cash balance as of October 31?

A. ₱22,705
B. ₱22,305
C. ₱23,005
D. ₱23,305

39. When preparing the monthly bank reconciliation, the accountant for ABC Corporation discovered that a check correctly
written to one of ABC's suppliers for ₱159 had been incorrectly recorded in the books as ₱195. To correct the error, the
accountant prepared an adjusting entry which required a debit to
A. Cash.
B. Bad debt expense.
C. Accounts receivable.
D. Purchases.

40. When a depositor receives a bank statement indicating an "NSF check", he should
A. credit the cash account for the amount of the check.
B. record the amount as an expense of the current period.
C. credit a special receivable for the amount of the check.
D. debit sales revenue.

41. Which of the following would require the Petty Cash account to be credited?
A. the petty cash fund is short by ₱350
B. the petty cash fund is over by ₱450
C. the petty cash account is being increased
D. the petty cash account is being decreased

42. Under the imprest system, if the petty cash fund is not replenished at the end of the accounting reporting period
A. the income statement and the balance sheet will not be correct
B. liabilities will be overstated on the balance sheet
C. the cash account will be understated
D. it indicates that the petty cash fund is probably short

For Questions 43-45. Your examination of the petty cash (₱10,000) of ABC Company as of December 31, 2019 revealed the
following: (cash count date is January 3, 2020 at 5:00 pm)
Bills ₱7,750

Coins ₱245

IOU’s submitted were: Jose R. -₱ 750

Dec. 18 Andres B. - 125
Dec. 28 Apolinario M. - 500
Dec. 30

Cashed checks: check drawn by the manager ₱ 1,125

Dec. 28, 2019 check drawn by an employee 500
Dec. 28, 2019 check drawn by a customer 350
 Dec. 30, 2019 check drawn by an employee 1,250
Jan 1, 2020

The cashier informed you that owing to the lack of cash it was necessary for him to open certain payroll envelopes unclaimed
by employees and use the cash found herein. They were as follows:
Dec. 15, 2019 - Eia D. ₱ 1,250

Dec. 30, 2019 - Schenley S. 1,750

Dec. 30, 2019 - Delfina B. 650

Dec. 30, 2019 - Amiel M. 1,000

The cashier also informed you that all cash sales receipts were passed through his fund and that cash sales tickets Nos. 2059
to 2061 under dates of Dec. 30, Jan. 3 and Jan. 4 for ₱350, ₱500 and ₱545, respectively, had not yet been turned over to the
general cashier.

The petty cash vouchers found in the petty cash box were as follows
Dec. 30, 2019 Transportation ₱515

Dec. 30, 2019 Token gifts to visitors 650

Dec. 30, 2019 Freight for office supplies purchase 215

Jan. 1, 2020 Freight for mdse. purchased 125

Jan. 2, 2020 Freight for mdse. sold 575

QUESTIONS:
43. ABC Company’s cash shortage as of December 31, 2019 is:
A. ₱2,072.75
B. ₱1,370.00
C. ₱1,027.75
D. ₱327.75

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College of Business and Accountancy 2nd Semester, SY 2020-2021

44. The adjusted petty cash balance of ABC Company as of December 31, 2019 is:
A. ₱10,000
B. ₱9,625
C. ₱5,975
D. ₱4,625

45. The entry to adjust the unclaimed payroll on December 31, 2019 is:
A. Debit: Petty Cash Fund
Credit: Salaries Expense
B. Debit: Salaries Expense
Credit: Petty Cash Fund
C. Debit: Cash
Credit: Accrued Salaries
D. Debit: Accrued Salaries
Credit: Cash

46. Which of the following is NOT a category of financial assets?

A. Financial assets at fair value through profit or loss
B. Financial assets at fair value through other comprehensive income
C. Financial assets at amortized cost
D. Financial assets held for sale

47. If the financial asset is measured at fair value through profit or loss, transaction costs directly attributable to the
acquisition shall be
A. Capitalized as cost of the financial asset
B. Expensed immediately when incurred
C. Deferred and amortized over a reasonable period
D. Included as component of other comprehensive income

48. The irrevocable election to present changes in fair value in other comprehensive income is applicable only
A. Equity instrument that is NOT held for trading
B. Equity instrument that is held for trading
C. Financial asset measured at amortized cost
D. Financial asset measured at fair value
49. Gain or loss on disposal of equity investment measured at fair value through comprehensive income is recognized in
A. Profit or loss
B. Other comprehensive income
C. Retained earnings
D. Part retained earnings and part profit or loss

50. When using the allowance method of accounting for bad debts, bad debt expense should be recorded
A. as an adjusting entry at the end of the accounting period.
B. when a particular account is written off.
C. whenever the allowance for doubtful accounts has a debit balance.
D. whenever the allowance for doubtful accounts has a zero balance.

51. Bad debt expense should

A. appear on the balance sheet as a contra-asset.
B. appear on the income statement as part of selling expenses.
C. appear on the income statement as a contra-revenue.
D. not appear in the financial statements.

52. Upon completing an aging analysis of accounts receivable, the accountant for ABC Company estimated that ₱5,000 of the
current ₱98,000 of accounts receivable would be uncollectible. The allowance for doubtful accounts had a ₱400 debit
balance at year-end prior to adjustment. The amount of bad debt expense that should appear in ABC Co's income
statement for the year is
A. ₱5,000.
B. ₱5,400.
C. ₱4,600.
D. ₱0.

53. At year end, ABC Company has a balance of ₱10,000 in accounts receivable of which ₱1,000 is more than 30 days
overdue. Chief has a credit balance of ₱100 in the allowance for doubtful accounts before any year-end adjustments.
Chief estimates its bad debts losses at 1% of current accounts and 10% of accounts over thirty days. What adjustment
should Chief make to the allowance for doubtful accounts?
A. ₱120 (credit).
B. ₱100 (credit).
C. ₱90 (credit).
D. No adjustment as the current balance is correct.

54. Accrual accounting requires that the loss resulting from the failure of credit customers to pay their bills should A. not be
recorded until cash is collected from the customer in settlement of the account because that is the only sure event.
B. be estimated in the period in which sales are made but should not be recorded until the customer defaults because
of the matching principle.
C. be estimated and recorded in the period in which sales are made so that expenses are matched with revenues. D. be
recognized in the period in which the account receivable proves to be uncollectible because that is the only date when
the loss will really be known.

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College of Business and Accountancy 2nd Semester, SY 2020-2021

55. Which of the following is true when accounts receivables are factored without recourse?
A. The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the substance of
the transaction.
B. The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables.
C. The factor assumes the risk of collectability and absorbs any credit losses in collecting the receivables. D. The
financing cost (interest expense) should be recognized ratably over the collection period of the receivables.

56. Of the following conditions, which is the only one that is not required if the transfer of receivables with recourse is to be
accounted for as a sale?
A. The transferor is obligated to make a genuine effort to identify those receivables that are uncollectible.
B. The transferor surrenders control of the future economic benefits of the receivables.
C. The transferee cannot require the transferor to repurchase the receivables.
D. The transferor's obligation under the recourse provisions can be reasonably estimated.

57. Why would a company sell receivables to another company?

A. To improve the quality of its credit granting process.
B. To limit its legal liability.
C. To accelerate access to amounts collected.
D. To comply with customer agreements.

58. ABC Company assigns ₱1,500,000 of its accounts receivables as collateral for a ₱1,000,000 loan with XYZ Bank. XYZ Bank
assesses a 3% finance fee and charges interest on the note at 6%. What would be the journal entry to record this
transaction?
A. Debit Cash for ₱970,000, debit Finance Charge for ₱30,000, and credit Notes payable for ₱1,000,000. B.
Debit Cash for ₱970,000, debit Finance Charge for ₱30,000, and credit Accounts receivable for ₱1,000,000. C.
for ₱970,000, debit Finance Charge for ₱30,000, debit Due from the Bank for ₱500,000 and credit Accounts
receivable for ₱1,500,000.
D. Debit Cash for ₱910,000, debit Finance Charge for ₱90,000, and credit Notes payable for ₱1,000,000.

59. On December 01, 2020, ABC Company assigned ₱400,000 of accounts receivable to XYZ Company as a security for a loan
of ₱335,000. ABC Company was charged a 2% commission on the amount of the loan. The interest rate on the note was
10%. During December, ABC collected ₱110,000 on assigned accounts after deducting ₱380 of discounts. ABC Company
accepted returns worth ₱1,350 and wrote off assigned accounts totaling ₱2,980. What is the carrying value of the
accounts receivable assigned as of December 31, 2020?
A. ₱400,000
 B. ₱285,290
C. ₱289,620
D. ₱290,000

60. Which of the following best describes inventory?

A. They are held for resale.
B. They are tangible property.
C. They are used in the operations of the company.
D. They are held for resale and are tangible property.

61. ABC Company reported the following amounts on its 2019 income statement: Purchases, ₱100,000; Beginning inventory,
₱20,000; and Cost of goods sold, ₱110,000. Therefore, the 2019 ending inventory was
A. ₱10,000.
B. ₱25,000.
C. ₱15,000.
D. ₱27,000.

62. Goods worth ₱12,000 was shipped on account (2/10, n/30) to ABC Company on January 15, 2020 from XYZ Company The
term of the shipment was fob shipping point. XYZ Company paid freight of ₱950. On January 12, 2020, ₱2,500 worth of
merchandise was received by XYZ Co. from ABC Co. due to wrong specification. ABC Company made a partial payment
of ₱5,000. How much is the subsequent collection of XYZ Company from ABC Company assuming ABC Company paid
within the discount period?
A. ₱ 5,450
B. ₱ 5,260
C. ₱ 4,500
D. ₱ 4,410

63. The ABC COMPANY’S year-end inventory based on physical count conducted on December 31, 2020, amounted to
₱885,000. Your examination disclosed the following information”:
Included in the physical count were goods billed to customer FOB shipping point on December 31, 2020. These
goods had a cost of ₱28,000 and were billed at ₱35,000. The shipment was on ABC’S loading dock waiting to
be picked up by the common carrier.

Goods were in transit from a vendor to ABC on December 31, 2020. The invoice cost was ₱50,000 and the
goods were shipped FOB Shipping on December 29,2020.

Work in process inventory costing ₱20,000 was sent to an outside processor for plating on December 30, 2020.

Goods returned by customers and held pending inspection in the returned goods area on December 31, 2020,
were not included in the physical count. On January 8, 2021, the goods costing ₱26,000 were inspected and
returned to inventory. Credit memos totaling ₱40,000 were issued.

Goods shipped to customer FOB destination on December 26, 2020, were in transit on December 31, 2020 and
had a cost of ₱25,000. Upon notification of receipt by the customer on January 2, 2021, the company issued a
sales invoice for ₱42,000.

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College of Business and Accountancy 2nd Semester, SY 2020-2021
Goods received from a vendor on December 26, 2020, were included in the physical count. However, the related
₱60,000 vendor invoice was not included in Accounts Payable as December 31, 2020, because the Accounts
Payable copy of the receiving report was lost.

On January 3, 2021, a monthly freight bill in the amount of ₱4,000 was received. This was specifically related to
merchandise purchased on December 31, 2020. The freight charges were not included in either the inventory or
in accounts payable on December 31, 2020.

The adjusted inventory at year-end is:

A. ₱981,000
B. ₱959,000
C. ₱1,006,000
D. ₱1,010,000

64. ABC Company purchased merchandise on account for P10,000 from XYZ Company with term shipping point. The freight
cost was ₱1,500 and was paid by ABC Company. Upon the arrival of the carrier, it found out that the merchandise got
lost while in transit. The carrier company accepted the loss as their fault. How much is the subsequent collection of
XYZ Company from ABC Company?
A. ₱11,500
B. ₱10,000
C. ₱8,500
D. ₱0

65. ABC Corporation uses the periodic inventory system and the following information about their laptop computer is
available:
Date Transaction Number of Units Cost per Unit
 1/1 Beginning Inventory 100 ₱800

5/5 Purchase 200 ₱900

8/10 Purchase 300 ₱1,000

10/15 Purchase 200 ₱1,050

During the year, 750 laptop computers were sold. What was the ending inventory and cost of goods sold on 12/31 under
FIFO cost flow assumption?
A. ₱60,000 and ₱710,000
B. ₱52,500 and ₱717,500
C. ₱52,000 and ₱718,000
D. ₱60,000 and ₱717,500

66. ABC Corporation uses the periodic inventory system and the following information about their laptop computer is
available for the month of January:
Date Transaction Number of Units Cost per Unit

1/1 Beginning Inventory 3,000 ₱9.77

1/6 Purchase 2,000 ₱10.30

1/26 Purchase 2,700 ₱10.71

During the month, 2,500 laptop computers were on 1/7 and 4,300 units sold on 1/31. What was the ending inventory on
1/31 under weighted-average inventory method rounded to the nearest peso?
A. ₱9,454.
B. ₱9,213.
C. ₱9,234.
D. ₱9,324.

67. At each reporting date, inventories are measured at

A. cost
B. Lower of Cost and Net Realizable Value (LCNRV)
C. cost plus direct acquisition costs
D. fair value less cost to sell

68. The closing raw materials inventory of ABC Manufacturing Company amounted to ₱345,000 on December 31, 2019. This
total includes an item of raw material (material 4696) with a cost of ₱100,000 with an estimated net realizable value of
₱80,000. Immediately after the balance sheet date, material 4696 was applied to production and the cost of the finished
product where material 4696 was applied revealed that its net selling price exceeds the cost of producing the finished
goods. As of December 31, 2019, what amount of raw materials inventory should ABC report?
A. ₱245,000
B. ₱265,000
C. ₱325,000
D. ₱345,000

69. The following information is available for October for ABC Company.
Beginning inventory ₱150,000
Net purchases 450,000
Net sales 900,000
Percentage markup on cost 66.67%

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College of Business and Accountancy 2nd Semester, SY 2020-2021

A fire destroyed ABC’s October 31 inventory, leaving undamaged inventory with a cost of ₱9,000. Using the gross profit
method, the estimated ending inventory destroyed by fire is
A. ₱51,000
B. ₱231,000
C. ₱240,000
D. ₱300,000

70. ABC Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume the beginning
inventory at cost (retail) were ₱531,200 (₱653,800), purchases during the current year at cost (retail) were ₱2,137,200
(₱2,772,200), freight-in on these purchases totaled ₱127,800, sales during the current year totaled ₱2,604,000, and net
markups (markdowns) were ₱4,000 (₱192,600). What is the ending inventory value at cost?
A. ₱633,400.
B. ₱516,222.
C. ₱822,000.
 D. ₱493,334.

. . . END OF THE EXAMINATION. . .

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