ReSA Final Pre-Board Exam Review

ReSA
The Review School of Accountancy

Tel. No. 735-9807 & 734-3989
FINANCIAL ACCOUNTING & REPORTING September 27, 2021

Final Pre-Board Examination 8:00 AM to 11:00 AM
MULTIPLE CHOICE
INSTRUCTIONS: Select the correct answer for each of the following questions. Mark
only one answer for each item by shading the box corresponding to the letter of
your choice on the sheet provided. STRICTLY NO ERASURES ARE ALLOWED. Use pencil
no. 2 only.
Esprit Company keeps all its cash in checking account, An examination of

the company’s accounting records and bank statement for the month ended
December 31, 2021 revealed the following information: Cash balance per
bank statement – P846, 900; Cash balance per ledger – P852, 400.
A deposit of P95, 000 placed in bank’s night depository on December

29, 2021 does not appear on the bank statement. The bank statement
shows that on December 26, 2021, the bank collected a note for Esprit
and credited the proceeds of P93,500 to the company’s account. The
proceeds included P3,500 interest, all of which Esprit earned during
the current accounting period. Esprit has not yet recorded the
collection.
Checks outstanding on December 31, 2021 were: No. 032752 – P15,000;

No. 032758 – P4,800; No. 032767 – P7,200.
Esprit discovered that check no. 032759 written in December 2021 for
P18,300 in payment of an account had been recorded in the company’s
records as P13, 800. Included with the December 31, 2021 bank
statement was an NSF check for P25,000 that Esprit had received from
Pitt Company on account on December 20, 2021. Esprit has not yet
recorded the returned check. The bank statement shows a P1,500
service charge for December.
1. The journal entry to adjust the cash balance as of December 31, 2021
is
C a. debit to cash of P93, 500.
b. credit to cash of P31, 000.
c. net debit to cash of P62, 500.
d. net credit to cash of P62, 500.
The books of SANAOL Company showed the following balances as of December

31, 2020:
Cash on Hand – P400,000; Cash in Bank–Current Account – P1,400,000; Cash

in Bank- Peso Savings Account – P9,000,000; Cash in Bank–Unrestricted
dollar deposit – $400,000; Cash in Bank–Restricted dollar deposit –
$80,000; Treasury bills, maturing February 28, 2021, acquired December 1,
2020 – P4,680,000; Money market instrument, maturing February 28, 2021,
acquired March 1, 2020 – P2,000,000; Sinking fund – P800,000: Investment
in equity securities – P600,000.
Additional information:
• Cash on hand includes a P80,000 check payable to SANAOL Company
dated January 10, 2021.
• During December 2020, checks amounting to P240,000 and P160,000 were
drawn against the current account in payment of accounts payable.
The P240,000 check is dated January 15, 2021. The P160,000 check is
dated December 31, 2020 but was delivered to the payee only on
January 15, 2021.
ReSA: The Review School of Accountancy Page 2 of 24
• The Cash in Bank – peso savings deposit includes a compensating

balance amounting to P2,360,000 which is legally restricted.
• The Cash in Bank – dollar deposit (unrestricted) account includes
interest of $8,000 directly credited to SANAOL Company’s account.
The average exchange rate for the year of $1 to Philippine peso is
P45 while the closing rate is P40.
• 40% of the investment in equity securities were acquired on December
15, 2020 which were intended to generate short-term profits and to
be sold within 3 months. The remaining were in a form of preference
shares acquired on December 25, 2020 with mandatory redemption by
March 25, 2021.
2. How much is the Cash and Cash Equivalents to be reported in the 2020
Statement of Financial Position?
A a. P29,800,000 c. P29,680,000
b. P29,440,000 d. P30,040,000
As of December 31, 2020, the petty cash fund of KAPITPA Company with general
ledger balance of P20,000 comprises the following: Coins and currencies –
P3,400; Petty cash voucher (Gasoline for delivery equipment) – P4,000;
Petty cash voucher (Medical supplies for employees) – P2,720; IOUs
(Advances to employees) – P2,960; A sheet of paper with names of several
employees together with contribution to bereaved employees attached is a
currency of P3,200; Check – Check drawn to the order of the petty cash
custodian – P4,000; The petty cash custodian admits to have taken money
from the fund and forgot to replace it.
3. How much is the net adjustment to Petty cash fund on December 31, 2020?
B a. P9,680 c. P12,880
b. P12,600 d. P13,680
On September 1, 2021, Singapore Company discounted at the bank a customer’s

P600,000 interest-bearing note, 6-month, 10% note receivable dated May 1,
2021. The bank discounted the note at 12%.
4. How much net proceeds did Wolverine receive from this discounted note?
D a. 564,000 c. 604,800
b. 576,000 d. 617,400
SOUTHEAST Company accounts for cash discounts using the net price method.
During December 2021, SOUTHEAST Company made sales of merchandise to
various customers as follows:
December 9- Customer S; Terms: 2/10, n/30; List price is P 800,000 less

10%, 5%
December 10-Customer E; Invoice price is P 500,000; Terms: 2/10; n/30
within discount
December 26-Customer A; Invoice price is P 400,000; Terms: 2/10, n/30 period
5. If the collection was made in full from Customer S during December, how
much is the accounts receivable balance on December 31, 2021, after
appropriate adjusting entries were made?
D a. 890,000 c. 900,000
b. 882,000 d. 892,000
The balance sheet of PAMBAWI Company reported the following notes

receivable as of December 31, 2019:
Notes receivable from sale of Land P3,000,000

Notes receivable from Officers 4,000,000
Notes receivable from sale of Equipment 5,000,000
FAR – FINAL PRE-BOARD EXAMINATION (BATCH 42)

The following are transactions during 2020 and other information

pertaining to the company’s notes receivable:
a. The notes receivable from sale of land has a coupon rate of 12%
per annum. The note is payable in four equal annual installments
of P750,000 plus interest on the unpaid balance every June 1. The
initial principal and interest payments were made on June 1, 2020.
b. The notes receivable from officers is dated December 31, 2019,

with a nominal rate of 15% per annum, and is due on December 31,
2022. The 2020 interest was received on December 31, 2020.
c. The notes receivable from sale of equipment is dated January 1,

2019, has a contract rate of 10% compounded annually. The note
matures on January 1, 2021.
6. How much is the carrying value of notes receivable on December 31, 2020?
B a. 12,000,000 c. 12,300,000
b. 11,250,000 d. none of the choices
The following transactions (in summary) affecting accounts receivable of

Potassium Company occurred during the year ended December 31, 2017:
Sales (all on account, terms: 2/10, 1/15, n/60) P3,000,000
Cash received from customers 3,200,000
The cash received includes the following:
Customers paying within the 10-day discount period P1,764,000
Customers paying within the 15-day discount period 990,000
Recovery of accounts written-off 6,000
Customers paying beyond the discount period ?
Accounts receivable written-off as worthless 22,000
Credit memo for sales return 12,000
It is the company’s policy to provide for uncollectible accounts equal to

1% of sales. Accounts receivable, 1/1/17: P2,000,000; Allowance for bad
debts, 1/1/17: P10,000.
7. How much is the accounts receivable that should be presented in the

statement of financial position on December 31, 2017?
C a. 1,726,000 c. 1,702,000
b. 1,696,000 d. 1,708,000
The Elegance Manufacturing Company inventory list at December 31, 2020

shows a total of P1,760,000. Included in such list are the following
items: goods held on consignment P180,000 at cost; goods tagged awaiting
customer’s instructions for delivery (manufactured according to
customer’s specifications) P200,000 cost, unused store supplies P50,000,
and goods sold with buyback arrangement at cost of 150,000. The following
in transit goods were excluded from the list (all at cost): goods sold
FOB shipping point P40,000; goods sold FOB destination, P32,000, goods
purchased FOB shipping point P70,000, and goods purchased, FOB
destination, P90,000.
8. How much is the cost of Elegance Manufacturing Company’s inventory at

December 31, 2020?
C a. 1,282,000 c. 1,432,000
b. 1,302,000 d. 1,632,000
You were furnished the following data of Filinvest Sales Company

relative to Commodity Excel
January 1 inventory 4,000 units @ P25
Purchases: Jan. 4 3,000 units @ 26

Jan. 12 3,500 units @ 28

Jan. 25 500 units @ 26.60
Sales: Jan. 3 3,000 units @ 35
Jan. 16 3,500 units @36
Jan. 28 2,000 units @ 38
The company does not maintain perpetual inventory records and uses the
weighted average method.
9. How much is Filinvest’s cost of goods sold for the month of January?
C a. 65,750 c. 223,550
b. 222,360 d. 235,500
The December 31, 2020 inventory of Hope Company consisted of four product
categories, for which the following information is provided:
Product Number of Units Estimated SP Cost to Sell Cost per Unit
H 1,000 40 6.50 25
O 2,000 48 12 42 6
P 3,000 190 25 120
E 4,000 26 3 18
Hope’s inventory at January 1, 2020 had a total cost of P400,000 with net
realizable value of P395,000. Hope uses the allowance method and shows
separately the loss from decline in net realizable value of its
inventories.
10. How much loss shall Hope report from decline in net realizable value
of its inventories for the year 2020?
C a. Zero c. 7,000
b. 12,000 d. 17,000
You were retained by Gotesco Corporation on April 1, 2020 to estimate the

inventory destroyed in a recent fire. The company’s markup on cost is
40%. The following information is obtained from available records:
Inventory, January 1, P600,000; Gross purchases From January 1 to March
31 were P1,500,000, freight-in, P50,000, purchase returns and allowances,
P20,000. Gross sales for the same period were P2,280,000, sales returns
were P40,000, while sales discounts were P15,000. Undamaged goods before
the fire cost P100,000. Damaged goods costing P80,000 were sold for
P65,000.
11. How much is the inventory fire loss?

C a. 530,000 c. 365,000
b. 375,714 d. 350,000
On March 30, 2020, Bamboo Company purchased an equipment for P4,290,000.

This equipment has 5 years estimated useful life and P390,000 salvage
value.
12. Using sum of the year’s digit method of depreciation, how much were
the charges to income from use of this machine in 2021?
C a. P2,340,000 c. P1,105,000
b. P2,080,000 d. P780,000
Jazz Company purchased an equipment at P4,680,000 on January 1, 2019 which

will be used for a total of 10 years, no salvage value. Jazz accounted
for this equipment using the revaluation model and of which it is Jazz’s
policy to revalue the equipment every after two years. The sound values
of the assets during the three revaluation dates were P4,056,000,
P2,613,000 and P2,340,000 on December 31 2020, 2021 and 2022.

13. How much is the balance of Revaluation surplus as of December 31,

2021.
B a. P312,000 c. P234,000
b. P273,000 d. P0
Marco, Inc. purchased an equipment on January 1, 2019 for P13,000,000.

This equipment had 10 years useful life. In 2020, due to obsolescence,
Marco recognized an impairment loss of P2,600,000. On December 31, 20121
Marco determined that the fair value of the equipment had increased to
P9,750,000.
14. What amount of gain on reversal of impairment shall Marco recognize

in 2021?
B a. P2,925,000 c. P650,000
b. P2,275,000 d. P325,000
Foster purchased a land with a dilapidated building for a total purchase

price of P10,000,000. The following costs were incurred relating to the
purchase and construction: Title clearance fees, P250,000; surveying,
P100,000; cost of leveling ground P150,000, construction materials
P5,000,000; direct labor costs of construction P2,400,000, cost of tearing
down the old dilapidated building P300,000, architects’ fees P450,000,
construction permit P200,000, cost of centralized building cooling system,
1,000,000. Foster received P80,000 from the sale of salvaged materials
from the old building.
15. What is the total cost of the building?

B a. 9,050,000 c. 9,350,000
b. 9,270,000 d. 9,520,000
On April 1, 2020, the Wendy’s Catering Service (WCS) purchased three units
of baking equipment by issuing a four-year non-interest bearing P3,200,000
note. The note is payable in annual installments of P800,000 with the
first installment due on March 31, 2021. The equipment has an equivalent
cash price of P2,591,760. Effective interest on this note was computed
at 9%, which approximates Wendy’s incremental borrowing rate. Wendy paid
for P100,000 freight for this equipment and installation charges of
160,000. WCS has a constructive obligation to dismantle the equipment
at the end of its 8-year useful life at an estimated cost of P200,000.
16. What is the initial cost assigned to this baking equipment?

B a. 2,491,760 c. 3,051,760
b. 2,952,140 d. 3,660,000
The following costs are generally incurred Rupee Corporation:

Goodwill purchased in a business combination 500,000
Cost of developing website for the promotion and 150,000
advertisement of the entity’s products and services
Cost incurred in corporation’s formation & organization 230,000
Operating losses incurred in the business start-up 130,000
Initial franchise fees paid 175,000
Continuing franchise fees 50,000
Internally generated goodwill 800,000
Cost of purchasing a patent from an inventor 137,000
Cost of leasehold improvement 70,000
Legal costs incurred in successfully defending a patent 55,500
Internally generated customer list 40,000
Cost of purchasing a trademark 250,000
Computer software for a computer-controlled machine that
cannot operate without that specific software 325,500

17. How much from the above items can be recognized as intangible assets
including goodwill?
D a. 1,132,000 c. 1,172,000
b. 1,387,500 d. 1,062,000
Pataca Corporation provided the following information regarding its

Research MOP517 included in the company’s Intangible account as of
December 31, 2021:
Research MOP517 is for a research project which consists of the following

charges:
Salaries of research staff P 18,000
Patent acquired solely for the use in the project 12,000
Special equipment acquired and useful for various
Similar research activities 10,000
Patent acquired for use in several research
Projects including MOP 517 16,000
Total amount included under Intangible assets P 56,000
The equipment and patents have been found to be useful for approximately
five years. You have further discovered both patents and the equipment
were acquired at the beginning of 2021.
18. How much should be recognized as research and development expense for
the year 2021?
C a. 56,000 c. 35,200
b. 18,000 d. 0
On January 1, 2021, Pound company acquired both a License and a Trademark

in exchange for 1,000 shares of Pound, P100 par ordinary shares. The
shares are selling for P125 per share on January 1, 2021. The trademark
is worth thrice as much as the license. The license may be used for five
years while the trademark has a remaining useful life of 6 years. Pound
Company intends to renew the trademark continuously because the said
trademark is expected to contribute to net cash flows indefinitely.
19. How much is the amortization expense for the year 2021?
B a. 21,875 c. 23,958
b. 6,250 d. 0
Stockholm Incorporated started selling IPAD8 with a four-year warranty

against factory defects in 2017. Estimated warranty costs related to
pesos sales are as follows: 1% of sales in the year of sale, 2% of sales
in the year after sale, 4% of sales two years after sale and 7% of sales
three years after sale. Information relating to sales and actual warranty
expenditures for the years 2017 through 2020 is as follows:
Sales Actual warranty expenditures

2017 P 3,280,200 P 110,600
2018 4,320,500 200,480
2019 4,585,800 310,690
2020 5,320,300 400,480
20. How much is the warranty expense in 2019?
A a. 642,012 c. 310,690
b. 263,476 d. 1,084,340
21. How much is the estimated liability for warranty at December 31,
2020?
C a. 344,362 c. 1,428,702
b. 744,842 d. 146,873

On December 31, 2017, Paris Co. has P2,000,000 of short-term notes payable
due on February 14, 2018. On January 10, 2018, Paris arranged a line of
credit with France Bank which allows Paris to borrow up to P1,500,000 at
one percent above the prime rate for three years. On February 2, 2018,
Paris borrowed P1,200,000 from France Bank and used P500,000 additional
cash to liquidate P1,700,000 of the short-term notes payable.
22. The amount of the short-term notes payable that should be reported
as current liabilities on the December 31, 2017 balance sheet which
is issued on March 5, 2018 is
D a. 0 c. 500,000
b. 300,000 d. 800,000
Rome, Inc., places a coupon in each box of its product. Customers may
send in ten coupons and P3.00, and the company will send them a CD.
Sufficient CDs were purchased at P5.40 apiece. A certain number of boxes
of product were sold in 2020. It was estimated that a total of 5% of the
coupons will be redeemed. In 2020, 18,000 coupons were redeemed. At
December 31, 2020, the following adjusting entry was made to record the
estimated liability for premium outstanding:
Premium expense 10,800

Estimated liability for premium 10,800
23. Compute the number of boxes of product sold in 2020.

B a. 63,000 c. 450,000
b. 1,260,000 d. 1,008,000
Caracas Co. sells 3-year service contracts for air-conditioning units for
P 1,800 each. Sales of service contract are made evenly throughout each
year. The company estimated that 5% of repairs are done in the first
year from the date of sale, 30% in the second year and 65% in the third
year.
Service contracts sold are as follows:

2018 2019 2020
Number of service contracts sold 1,840 2,110 2,550
24. How much is the unearned service contract on January 1, 2020?

A a. 6,352,650 c. 3,608,100
b. 8,590,050 d. 10,942,650
Jun Company issued P4,000,000 of 8 ½%, 5-year bonds on April 1, 2020.

Interest payment dates are April 1 and October 1. With a 9% market rate
of interest, the bonds were sold for P3,926,000.
The following partial amortization table is presented to you.

Nominal Effective Discount Bond
Date Interest Interest Amortization Carrying value
04/01/20 3,926,000
10/01/20 170,000 176,670 6,670 3,932,670
04/01/21 170,000 176,970 6,970 3,939,640
10/01/21 170,000 177,284 7,284 3,946,924
04/01/22 170,000 177,612 7,612 3,954,536
10/01/22 170,000 177,954 7,954 3,962,490
04/01/23 170,000 178,312 8,312 3,970,802
10/01/23 170,000 178,686 8,686 3,979,488
04/01/24 170,000 179,077 9,077 3,988,565
On November 1, 2023, P2,000,000 of the bonds were retired at face value

plus accrued interest.

25. How much gain or loss should Jun Company record upon retirement of
these bonds?
Bonus a. 8,808 loss c. 3,911 gain
b. 5,359 gain d. 8,808 gain
NOTE: The correct answer (P 9,499 loss) is not found among the choices.
Canberra Company has an overdue note payable to Australia Bank of P

9,000,000 and recorded accrued interest of P 810,000. On December 31,
2021, Australia Bank agreed to the following restructuring agreement:
• Reduce the principal obligation by P 1,000,000

• Waive the P 810,000 accrued interest
• Extend the maturity date to December 31, 2021.
• Annual interest of 9% of the new principal is to be paid on December
31, 2022, December 31, 2023 and December 31, 2024.
• The prevailing market interest rate for similar debt instrument on
the date of restructuring is 10%
26. How much is the gain on debt restructuring?

A a. 2,009,032 c. 1,199,032
b. 1,809,864 d. 0
Budapest Corp. had P500,000 net income in 2020. On January 1, 2020, there
were 200,000 shares of ordinary outstanding. On April 1, 20,000 shares
were issued and on September 1, bought 30,000 shares of treasury stock.
There are 30,000 options to buy ordinary shares at P40 per share. The
market price of the ordinary shares averaged P50 during 2020. The tax
rate is 40%.
During 2020, there were 40,000 shares of cumulative preferred stock

outstanding. The preferred is P100 par, pays dividend of P3.50 per year,
and is convertible into three shares of ordinary.
Budapest issued P2,000,000 of 8% convertible bonds at face value during

2019. Each P1,000 bond is convertible into 30 shares of ordinary.
27. How much is the basic earnings per share for 2020?
B a. 1.71 c. 1.60
b. 1.76 d. 1.17
28. How much is the diluted earnings per share for 2020?
C a. 1.71 c. 1.51
b. 1.68 d. 1.76
Baghdad Corporation’s December 31, 2021 balance sheet reports the

following shareholders’ equity:
10% Cumulative Preference share capital, P100 par value per
share, 30,000 shares issued and outstanding, liquidation
value of P105 P3,000,000
Ordinary share capital, P100 par value, 60,000 shares issued 6,000,000
Share premium 500,000
Treasury Stock, (ordinary) 5,000 shares at cost 600,000
Retained Earnings 4,000,000
Subscribed ordinary share, net of P400,000 subscription
receivable 1,000,000
Revaluation surplus 700,000
Preference dividends have not been paid since last year up to the end of
2021.

29. What is the book value per share on ordinary share?

B a. 173.08 c. 166.92
b. 163.04 d. 157.25
30. What is the book value per share on preference share?

A a. 125.00 c. 120.00
b. 115.00 d. 105.00
During 2021, Lisbon Corporation disposed of Portugal Division, a major

component of its business. Lisbon realized a gain of P1,200,000, net of
taxes, on the sale of Portugal's assets. Portugal’s operating losses, net
of taxes, were P1,400,000 in 2021.
31. How should these facts be reported in Lisbon income statement for
2021?
Total Amount to be Included in
Income from Results of
Continuing Operations Discontinued Operations
C a. P1,400,000 loss P1,200,000 gain
b. 200,000 loss 0
c. 0 200,000 loss
d. 1,200,000 gain 1,400,000 loss
Hanoi Company leased machinery to Vietnam Company on July 1, 2021, for a

ten-year period expiring June 30, 2031. Equal annual payments under the
lease are P75,000 and are due on July 1 of each year. The first payment
was made on July 1, 2021. The rate of interest used by Hanoi and Vietnam
is 9%. The cash selling price of the machinery is P525,000 and the cost
of the machinery on Hanoi's accounting records was P465,000.
32. Assuming that the lease is appropriately recorded as a sale for

accounting purposes by Hanoi, what amount of interest revenue would
Hanoi record for the year ended December 31, 2021?
C a. 47,250 c. 20,250
b. 40,500 d. 0
On December 31, 2020, Seoul Company signed a 5-year non-cancelable lease

agreement to lease a storage building from Korea Company. The following
information pertains to the lease agreement:
• The agreement requires equal rental payments of P500,000 beginning
on December 31, 2020.
• The building has an estimated economic life of 12 years, with
guaranteed residual value of P100,000. Seoul depreciates similar
buildings on a straight-line method.
• At the termination of the lease, the building reverts to Korea
Company.
• The lessor’s implicit rate is 12% which is known by Seoul Company.
33. How much is the depreciation expense for the year 2021?
B a. 415,078 c. 172,949
b. 395,078 d. 164,616
Jay-ar Corp. issued 20,000 shares of P5 par common stock at P10 per share.
On December 31, 2020, Jay-ar’s retained earnings were P300,000. In March
2021, Jay-ar reacquired 5,000 shares of its common stock at P20 per share.
In June 2021, Jay-ar sold 1,000 of these shares to its corporate officers
for P25 per share. Jay-ar uses the cost method to record treasury stock.
Net income for the year ended December 31, 2021, was P60,000.

34. At December 31, 2021, determine amount to be reported as retained

earnings.
A a. P360,000 c. P375,000
b. P365,000 d. P380,000
In connection with a stock option plan for the benefit of key employees,
Ward Corp. intends to distribute treasury shares when the options are
exercised. These shares were bought in 2017 at P42 per share. On January
1, 2018, Ward granted stock options for 10,000 shares at P38 per share as
additional compensation for services to be rendered over the next three
years. The options are exercisable during a four-year period beginning
January 1, 2021, by grantees still employed by Ward. Market price of
Ward’s stock was P47 per share at the grant date. The fair value of a
similar stock option with the same terms was P12 at the grant date. No
stock options were terminated during 2018.
35. In Ward’s December 31, 2018 statement of comprehensive income,

determine the amount to be reported as compensation expense pertaining
to the options.
B a. P90,000 c. P30,000
b. P40,000 d. P0
Gerber Company started operations in 2019 with 250,000 P10 par value
ordinary shares and 9% P100 par value preference shares. This
capitalization did not change until 2020.
Gerber paid dividends amounting to P150,000, P260,000 and P540,000 at the

end of 2019, 2020 and 2021, respectively.
36. If the preference shares were cumulative and non-participating,

determine the dividend per ordinary share on 2021.
Bonus a. P1.32 c. P1.56
b. P1.44 d. P0
NOTE: “20,000 preference shares” should be given so that answer would
have been letter B or P 1.44.
On January 1, 2020, the LTP Company purchased 25,000 ordinary shares of

VSP for P5,000,000 plus 20,000 transaction costs. The securities were
acquired not for immediate trading and LTP exercised its option to take
the change in fair value through other comprehensive income. The shares
were not enough to give LTP significant influence over VSP. During the
year 2020, the following transactions occurred relating to VSP ordinary:
20% bonus issue was effected in June and P10 cash dividend was received
from VSP in September. The shares were quoted at P205 at December 31,
2020.
37. How much shall be taken to profit or loss during the year 2020 as a
result of the foregoing?
C a. 250,000 c. 300,000
b. 280,000 d. 1,430,000
On January 1, 2020, the LTP Company purchased 25,000 ordinary shares of

VSP for P5,700,000 plus 30,000 transaction costs. The securities were
acquired not for immediate trading and LTP exercised its option to take
the change in fair value through other comprehensive income. The shares
were not enough to give LTP significant influence over VSP. During the
year 2020, the following sequential transactions occurred relating to VSP
ordinary: 20% bonus issue was effected and P10 cash dividend was received.
During 2021 VSP was split 2:1, and subsequently 20,000 shares were sold

for P2,080,000 The VSP ordinary shares were quoted @ 205 and 102 at
December 31, 2020 and at December 31, 2021, respectively. The VSP has
the policy of transferring to Retained Earnings the amount of the
cumulative other comprehensive relating to shares derecognized.
38. What amount shall be presented in the statement of financial position
as cumulative unrealized gain or loss at December 31, 2021?
C a. (20,000) c. 260,000
b. 280,000 d. (940,000)
On January 1, 2020, the LTC Company purchased 25,000 of the total 100,000
outstanding ordinary shares of VSC for P4,000,000 plus 20,000 transaction
costs. The shares acquired by LTP provide it significant influence over
VSC. On this date, VSC’s statement of financial position shows total
equity balance of P15,000,000. It was determined that LTC’s inventories
were undervalued by P300,000 and some of its equipment with estimated
useful life of 5 years were undervalued by P400,000. LTC was able to
sell all of these January 1 inventories during the year 2020.
During the year 2020, VSC declared and distributed P20 cash dividend in
March and 20% bonus issue in September on its ordinary shares. It
reported profit of P3,000,000 for the year 2020. VSC’s shares were
quoted at P160 at December 31, 2020.
39. At what amount should LTC present its investment in VSC’s ordinary
shares in its statement of financial position at December 31, 2020?
C a. 4,800,000 c. 4,175,000
b. 4,306,000 d. 4,095,000
Peavy Corp.'s transactions for the year ended December 31, 2021 included
the following:
• Acquired 50% of Gant Corp.'s common stock for P180,000 cash which
was borrowed from a bank.
• Issued 5,000 shares of its preferred stock for land having a fair
value of P320,000.
• Issued 500 of its 11% debenture bonds, due 2026, for P392,000
cash.
• Purchased a patent for P220,000 cash.
• Paid P120,000 toward a bank loan.
• Sold available-for-sale securities for P796,000.
• Had a net increase in returnable customer deposits (long-term) of
P88,000.
40. Peavy’s net cash provided by investing activities for 2021 was
B a. 296,000 c. 476,000
b. 396,000 d. 616,000
The following information pertains to Kentucky Corporation defined benefit

plan for the year 2017:
Defined benefit obligation, January 1, 2017 P 2,500,000

Fair value of plan assets, January 1, 2017 2,000,000
Actual return on plan assets 300,000
Fair value of plan assets, December 31, 2017 2,100,000
Present value of additional DBO settled 175,000
Defined benefit obligation, December 31, 2017 2,400,000
Current service cost 500,000
Discount rate 10%
Benefits paid to retirees (at scheduled retirement) 620,000
Contribution made during the year 600,000

41. What amount of defined benefit cost should be reported in 2017 profit
or loss?
B a. 550,000 c. 545,000
b. 555,000 d. 450,000
42. What amount of net measurement gain/loss should be reported in 2017
other comprehensive income?
A a. 155,000 c. 150,000
b. 45,000 d. 50,000
The accountant of Honda Company presented to you the following information

in line with your 2017 audit of Honda Company’s income tax related
balances:
Pre-tax financial income P 3,000,000
Impairment loss on Machinery 50,000
Unearned rental income 350,000
Prepaid advertising expense 250,000
Interest income on time deposit 80,000
Excess tax depreciation over accounting depreciation 520,000
Installment sale which will be recognized as taxable
income upon collection 900,000
Bad debts expense using a method under accrual basis 75,000
Provision for warranty 180,000
Unrealized loss on trading securities 20,000
Impairment loss on goodwill 30,000
Income tax rate is constant at 30% for all years.
43. How much is the deferred tax asset at December 31, 2017?
B a. 501,000 c. 298,500
b. 202,500 d. 586,500
44. How much is the deferred tax liability at December 31, 2017?
A a. 501,000 c. 298,500
b. 202,500 d. 586,500
For calendar year 2017, Doha Corp. reported depreciation of P1,200,000 in

its income statement. On its 2017 income tax return, Doha reported
depreciation of P1,800,000. Doha's income statement also included P225,000
accrued warranty expense that will be deducted for tax purposes when paid.
Doha's enacted tax rates are 30% for 2017 and 2018, and 24% for 2019 and
2020. The depreciation difference and warranty expense will reverse over
the next three years as follows:
Depreciation Difference Warranty Expense

2018 P240,000 P 45,000
2019 210,000 75,000
2020 150,000 105,000
P600,000 P225,000
These were Doha's only temporary differences.
45. How much is the deferred tax asset on December 31, 2017?
B a. 158,400 c. 215,100
b. 56,700 d. 0
The Statement of Financial Position of CPA Company at the end of 2020 and
2021 follow:
2020 2021
CASH 300,000 700,000
ACCOUNTS RECEIVABLE, NET 600,000 900,000
MERCHANDISE INVENTORY 700,000 500,000

PREPAID EXPENSE 100,000 250,000

LONG-TERM INVESTMENT 200,000 0
MACHINERY AND EQUIPMENT 900,000 1,200,000
ACCUMULATED DEPRECIATION 150,000 250,000
LAND 0 700,000
ACCOUNTS PAYABLE 650,000 400,000
ACCRUED EXPENSES 120,000 200,000
CASH DIVIDENDS PAYABLE 10,000 20,000
NOTE PAYABLE-LONG-TERM - 400,000
ORDINARY SHARE, P10 PAR 1,000,000 1,500,000
SHARE PREMIUM-ORDINARY 50,000 350,000
RETAINED EARNINGS 820,000 1,250,000
TREASURY SHARES, AT COST 0 120,000
Additional information for the year 2021:

Land was acquired in exchange for 40,000 ordinary shares. Ordinary shares
were also issued for cash at par value. All machinery and equipment were
purchased for cash except for Machinery costing P400,000 that was acquired
through issuance of long-term note. Long-term investment was sold for
P140,000. There were no other transactions affecting long-term
investments. Equipment costing P 350,000 was sold for P390,000 with book
value of P280,000. There were no other transactions affecting retained
earnings other than net income of P600,000 and cash dividends declared.
Treasury shares were acquired for cash.
46. How much is the net cash provided by/used in financing activities?
B a. 60,000 c. 190,000
b. 180,000 d. 280,000
47. How much is the net cash provided by/used in investing activities?
D a. 120,000 c. 680,000
b. 140,000 d. 280,000
48. How much is the unamortized premium on bonds payable on December 31,
2021?
C a. 0 c. 46,456
b. 114,960 d. 68,504
PUNY Company’s Accounts Payable on December 31, 2020, totaled P1,000,000

before any necessary year-end adjustments relating to the following
transactions:
❑ On December 21, 2020, Berlin purchased and recorded goods with an
invoice price of P300,000, terms 2/10, n/30 from ETA Company. This
amount had not been paid as of December 31, 2020. PUNY Company is
using the net method for all purchases.
❑ Goods shipped FOB Destination on December 23, 2020 from a vendor
were lost in transit. The invoice cost of P35,000 was not recorded
as of December 31, 2020.
❑ Goods shipped FOB Shipping Point on December 26, 2020 from a vendor
were still in transit as of December 31, 2020. The invoice cost of
P150,000 was recorded on December 31, 2020.
❑ Goods purchased and recorded goods with an invoice price of P50,000
from KAH Company on December 28, 2020, terms 3/15, n/45. PUNY Company
paid its account in full on January 5, 2021.
49. How much is the total adjusted accounts payable on December 31, 2020?
A a. 1,006,000 c. 992,500
b. 1,007,500 d. 1,060,000

POOH Company is experiencing financial difficulty during 2020 and is

negotiating a trouble debt restructuring to relieve its financial stress.
POOH Company owed P500,000 plus accrued interest of P50,000 to TACCA Bank
to be paid on December 31, 2020. TACCA bank accepted an equity interest
from POOH Company in a form of 10,000 ordinary shares. The fair value of
ordinary shares is P40 per share while the par value of the ordinary
shares is P30 per share. The fair value of the liability to be settled on
December 31, 2020 was P420,000.
50. How much is the gain on debt restructuring to be reported by POOH

Company in profit or loss as a result of the restructuring?
B a. 130,000 c. Either A or B
b. 150,000 d. 100,000
Following are reconciling items in an enterprise’s bank reconciliation

statement.
1. Deposits in transit
II. Company check for P32,500 recorded in the books for P23,500
Ill. Note collected by bank in behalf of the company
IV. Deposit of another company erroneously credited by bank to the
company’s account
V. No sufficient fund check charged back by bank
VI. Company deposit for P32,500 recorded in the books for P23,500
51. Which of these adjustments would be shown as addition to the cash
balance per books in order to arrive at the correct cash balance?
D a. II, III, and VI c. II, V and VI
b. II and III d. III and VI
52. Which of the following statements concerning non-interest-bearing
notes receivable is generally a false statement?
C a. Discount on notes receivable should be deducted to arrive at
the carrying value of notes receivable
b. Amortizing the discount causes the carrying amount of the notes
receivable to gradually increase over the life of the note
c. Amortizing the premium causes the carrying amount of the notes
receivable to gradually decrease over the life of the note
d. Interest income is recognized and reported in profit or loss
53. When bonds are retired before maturity date, the difference between
the carrying value of the bonds and the retirement price is
C a. Treated as a gain and taken to profit or loss
b. Treated as a loss and taken to profit or loss
c. Treated as either gain or loss and taken to profit or loss
d. Treated as either gain or loss and taken to equity
54. The following statements are based on PAS 33 (EARNINGS PER SHARE):
Statement I: Convertible preference shares are dilutive whenever the
amount of the dividend on such shares declared for the current period
per ordinary share obtainable on conversion exceeds basic earnings
per share
Statement II: Options and warrants are dilutive when they would result
in the issue of ordinary shares for less than the average market
price of ordinary shares during the period
Statement III: Convertible debt is dilutive whenever its interest
(net of tax) per ordinary share obtainable on conversion exceeds
basic earnings per share
B a. Only statement I is false
b. Only statement II is true
c. Only statement III is false
d. All of the statements are true.

55. Which of the following items would appear in the post-closing trial
balance?
D a. Distribution cost
b. Increase in the fair value of trading securities
c. Loss from write-down of inventory to net realizable value
d. Cumulative balance of unrealized gain on Investment at FVOCI
56. Which of the following is a valid statement regarding “non-current
assets held for sale”?
D a. A gain may be recognized if the fair value less cost to sell
exceeded the carrying value of the asset
b. No further loss is taken up after the asset was classified as
held for sale
c. The asset is always reclassified back to property plant and
equipment if it is not sold within a period of 12 months after
the balance sheet date
d. Depreciation ceases while the asset is being held for sale
57. Which of the following is incorrect about bonds sold at a discount?

D a. The carrying amount of the bond increases each year
b. The discount on bonds payable account decreases each year
c. At maturity, the face value and carrying amount of the bonds
will be equal
d. The balance of the bonds payable account increases each year
58. For a sales-type lease,

C a. the sales price includes the present value of the unguaranteed
residual value.
b. the present value of the guaranteed residual value is deducted
to determine the cost of goods sold.
c. the gross profit will be the same whether the residual value
is guaranteed or unguaranteed.
d. none of these.
59. Which of the following will result in a deferred tax asset?

I. Development costs have been capitalized for accounting
purposes, but were deducted in determining taxable profit in the
period in which they were incurred.
II. The tax base for a machine is greater than the carrying amount
in the financial statements at the end of the reporting period.
B a. I only c. Both I and II
b. II only d. Neither I nor II
60. Which of the following is a component of amount to be recognized in

profit or loss under a defined benefit plan?
Statement I: Interest on the effect of asset ceiling
Statement II: The difference between the actual return on plan asset
and interest income on plant asset
Statement III: Any settlement loss or settlement gain.
Statement IV: Past service cost
C a. I and IV c. I, III and IV
b. II and III d. I, II ,III and IV
61. Which of the following requires an adjustment to the opening balance

of retained earnings in the earliest period of the comparative financial
statements presented?
D a. A change in the estimated useful life of machinery
b. A change in the expected residual value of a property
c. A change from straight-line to declining balance depreciation
d. A change from First-In, First-Out (FIFO) to weighted average
inventory cost flow assumption

62. Under PFRS 8, which of the following is not a criterion used to determine
reportable segments?
B a. Segment assets
b. Segment liabilities
c. Segment sales
d. Segment operating profit or loss
63. An overstatement in reported profit may result from failure to record
A a. An accrued expense
b. A contingent liability
c. Amortization of premium on bonds payable
d. Dividends in arrears on outstanding preference share
64. Which of the following is true about the preparation of statement of

comprehensive income?
C a. Income from operation includes finance cost
b. Income from continuing operation plus income from discontinued
operation equals total comprehensive income already
c. Income tax related to discontinued operation shall not be
disclosed on the face of income statement
d. Other comprehensive income shall be disclosed on the face of
income statement after tax
65. Which of the following shall NOT be presented as Property, Plant and
Equipment?
B a. A living plant used in the production or supply of agricultural
produce with a remote likelihood of being sold as agricultural
produce
b. Land held for lease providing the entity with significant
rental revenue
c. Equipment used in the production process
d. Owner-occupied building
66. How shall an investor consider dividends in its computation of its

share in profit from the associate if the latter has outstanding non-
cumulative preference shares?
D a. Disregard any preference dividends declared by the investee.
b. Deduct from the associate’s profit the total dividends declared
on both preference and ordinary shares.
c. Deduct from the associate’s profit the annual dividend
requirement on the preference shares.
d. Deduct from the associate’s profit the dividends on the
preference shares declared during the period.
67. An item of property, plant and equipment acquired In an exchange

transaction where the configuration of the asset received is
significantly different from the configuration of the asset given up,
shall be initially recorded at
A a. Fair value of the non-cash asset given up, plus cash paid or
minus cash received.
b. Fair value of the item of property, plant and equipment
received, plus cash paid or minus cash received.
c. Carrying value of the asset given up.
d. Amount established by the Board of Directors.
68. Government grants related to depreciable assets are
C a. Recognized as income when the grants are received.
b. Recognized as income at the end of the useful life of the asset
received.
c. Recognized as income over the periods and on the same basis as
depreciation for that asset.
d. Not recognized.

69. The account title “Inventories” as shown on an entities financial

statements include
A a. Goods sold with a buyback arrangement
b. Goods held on consignment
c. Unused supplies for administrative purposes
d. Goods in transit, purchased FOB buyer
70. In the cash flow statement, alternatively interest received and
dividend received may be classified as cash flow from
B a. Operating activities c. Financing activities
b. Investing activities d. Revenue activities
- END -
SOLUTIONS to FAR FINAL PRE-BOARD EXAMINATION

ESPRIT COMPANY
BOOK BANK
UNADJUSTED CASH BALANCE 852,400 846,900
DIT 95,000
CM 93,500
OC (15,000 + 4,800 + 7,200) -27,000
BOOK ERROR (18,300 -13,800) -4,500
DM (25,000 + 1,500) -26,500
ADJUSTED CASH BALANCE 914,900 914,900
ADJUSTED CASH BALANCE PER BOOK 914,900

UNADJUSTED CASH BALANCE PER BOOK -852,400
1. C
NET DEBIT ADJUSTMENT 62,500
SANAOL COMPANY
CASH ON HAND (400,000 - 80,000) 320,000
CASH IN BANK - CURRENT ACCOUNT (1,400,000 + 240,000 + 160,000) 1,800,000
CASH IN BANK - PESO SAVINGS ACCOUNT (9,000,000 - 2,360,000) 6,640,000
CASH IN BANK - UNRESTRICTED DOLLAR DEPOSIT ($400,000 x P40) 16,000,000
TREASURY BILLS 4,680,000
INVESTMENT IN PREFERENCE SHARES (60% x 600,000) 360,000
CORRECT CASH AND CASH EQUIVALENTS,12/31/20 29,800,000 2. A
KAPITPA COMPANY
GASOLINE FOR DELIVERY EQUIPMENT 4,000
MEDICAL SUPPLIES FOR EMPLOYEES 2,720
ADVANCES TO EMPLOYEES 2,960
SHORTAGE (20,000 - 3,400 - 4,000 - 2,720 - 2,960 - 4,000) 2,920
NET ADJUSTMENT TO PCF, 12/31/20 12,600 3. B
SINGAPORE COMPANY
MATURITY VALUE = 600,000 + (600,000 x .10 x 6/12) 630,000
DISCOUNT (630,000 x 12% x 2/12) -12,600
PROCEEDS 617,400 4. D
SOUTHEAST COMPANY
CUSTOMER S 0
CUSTOMER E (500,000 x 98% + 10,000) 500,000
CUSTOMER A (400,000 x 98%) 392,000
AR BALANCE, 12/31/21 892,000 5. D

PAMBAWI COMPANY
NOTES RECEIVABLE FROM SALE OF LAND (3,000,000 - 750,000) 2,250,000
NOTES RECEIVABLE FROM OFFICERS 4,000,000
NOTES RECEIVABLE FROM SALE OF EQUIPMENT 5,000,000
CV OF NOTES RECEIVABLE, 12/31/20 11,250,000 6. B
POTASSIUM COMPANY
ACCOUNTS RECEIVABLE
1,764,000 +
36,000 =
1/1/17 - 2,000,000 1,800,000
990,000 +
10,000 =
3,000,000 1,000,000
6,000 6,000
440,000
22,000
12,000
12/31/17 - 1,726,000
ALLOWANCE FOR BAD DEBTS

1/1/17 - 10,000
22,000 6,000
1% x 3,000,000
= 30,000
12/31/17 -
24,000
ACCOUNTS RECEIVABLE, 12/31/17 1,726,000

ALLOWANCE FOR BAD DEBTS, 12/31/17 -24,000
AR TO BE PRESENTED IN THE SFP, 12/31/17 1,702,000 7. C
ELEGANCE COMPANY
UNADJUSTED INVENTORY BALANCE, 12/31/20 1,760,000
GOODS HELD ON CONSIGNMENT -180,000
GOODS MANUFACTURED ACCDG. TO CUSTOMERS' SPECIFICATION -200,000
UNUSED STORE SUPPLIES -50,000
GOODS SOLD UNDER FOB DESTINATION 32,000
GOODS PURCHASED UNDER FOB SHIPPING POINT 70,000
ADJUSTED INVENTORY BALANCE, 12/31/20 1,432,000 8. C
FILINVEST COMPANY
1/1 = 4,000 @ 25 100,000
1/4 = 3,000 @ 26 78,000
1/12 = 3,500 @ 28 98,000
1/25 = 500 @ 26.60 13,300
TGAS 289,300
WAUC = P289,300 / 11,000 units = P26.30 per unit
COST OF ENDING INVENTORY ( P26.30 x 2,500 units ) 65,750
TGAS 289,300
ENDING INVENTORY -65,750
COST OF GOODS SOLD 223,550 9. C

HOPE COMPANY
LOWER OF COST
COST ; NRV OR NRV
H - 25,000 ; 33,500 25,000
O - 84,000 ; 72,000 72,000
P - 360,000 ; 495,000 360,000
E - 72,000 ; 92,000 72,000
INVENTORY, 12/31/20 ( NRV ) 529,000
INVENTORY, 12/31/20 ( COST) -541,000
ALLOWANCE, 12/31/20 -12,000
ALLOWANCE, 1/1/20 ( 400,000 - 395,000 ) 5,000
LOSS FOR THE YEAR 2020 -7,000 10. C
GOTESCO CORPORATION
Beginning Inventory 600,000
Net purchases ( 1,500,000 + 50,000 - 20,000 ) 1,530,000
TGAS 2,130,000
COGS ( 2,280,000 - 40,000 / 1.40 ) -1,600,000
Estimated Ending Inventory 530,000
Damaged inventories -65,000
Undamaged inventories at cost -100,000
Estimated Inventory loss 365,000 11. C
BAMBOO COMPANY
SYD OF 5 YEARS = ( 5 x 6 ) / 2 15
DEPRECIATION EXPENSE - 2020 ( 4,290,000 - 390,000 x 5/15 x 9 /12 ) 975,000
DEPRECIATION EXPENSE - 2021

4,290,000 - 390,000 x 5/15 x 3/12 325,000
4,290,000 - 390,000 x 4/15 x 9/12 780,000
TOTAL AMOUNT CHARGED AGAINST INCOME IN 2021 1,105,000 12. C
JAZZ COMPANY
SOUND VALUE, 12/31/20 4,056,000
CARRYING VALUE BEFORE REVALUATION, 12/31/20 ( 4,680,000 x 8 /10 ) -3,744,000
REVALUATION SURPLUS, 12/31/20 312,000
REALIZED/TRANSFER TO RE IN 2021 ( 312,000 / 8 ) -39,000
REVALUATION SURPLUS, 12/31/21 273,000 13. B
MARCO INC.
CARRYING VALUE WITHOUT IMPAIRMENT,12/31/21 ( 13,000,000 x 7/10 ) 9,100,000
CARRYING VALUE WITH IMPAIRMENT,12/31/21 ( 7,800,000 x 7/8 ) -6,825,000
GAIN ON REVERSAL - 2021 2,275,000 14. B
CV BEFORE IMPAIRMENT, 12/31/20 ( 13,000,000 x 8/10 ) 10,400,000

IMPAIRMENT LOSS, 12/31/20 -2,600,000
CV WITH IMPAIRMENT, 12/31/20 7,800,000
FOSTER COMPANY
CONSTRUCTION MATERIALS 5,000,000
DIRECT LABOR COST 2,400,000
COST OF TEARING DOWN THE OLD BUILDING 300,000
SALE OF SALVAGED MATERIALS -80,000
ARCHITECTS FEES 450,000
CONSTRUCTION PERMIT 200,000
COST OF CENTRALIZED BUILDING COOLING SYSTEM 1,000,000
TOTAL COST OF THE BUILDING 9,270,000 15. B

WENDY'S CATERING SERVICE

CASH PRICE EQUIVALENT OF EQUIPMENT 2,591,760
FREIGHT 100,000
INSTALLATION 160,000
ESTIMATED DISMANTLING COST ( 200,000 x .5019 ) 100,380
INTIAL COST OF EQUIPMENT 2,952,140 16. B
RUPEE CORPORATION
GOODWILL PURCHASED IN A BUSINESS COMBINATION 500,000
INITIAL FRANCHISE FEES 175,000
COST OF PURCHASING A PATENT 137,000
COST OF PURCHASING A TRADEMARK 250,000
TOTAL INTANGIBLE ASSETS INCLUDING GOODWILL 1,062,000 17. D
PATACA CORPORATION
SALARIES OF RESEARCH STAFF 18,000
PATENT ACQUIRED SOLELY FOR THE USE IN THE PROJECT 12,000
DEPRECIATION OF EQUIPMENT ( 10,000 / 5 ) 2,000
AMORTIZATION OF PATENT ( 16,000 / 5 ) 3,200
TOTAL RESEARCH AND DEVELOPMENT EXPENSE IN 2021 35,200 18. C
POUND COMPANY
AMORTIZATION EXPENSE - 2021
LICENSE ( 31,250 / 5 ) 6,250
TRADEMARK ( INDEFINITE LIFE ) 0
TOTAL 6,250 19. B
NOTE: INITIAL COST OF LICENSE AND TRADEMARK

LICENSE - 1/4 x 125,000 = 31,250
TRADEMARK - 3/4 x 125,000 = 93,750
STOCKHOLM INCORPORATED
Q1: WARRANTY EXPENSE IN 2019 ( 14% x P4,585,800 ) 642,012 20. A
CUMULATIVE WARRANTY LIABILITY, 12/31/20 ( 17,506,800 x 14% ) 2,450,952

CUMULATIVE ACTUAL WARRANTY EXPENDITURES, 12/31/20 -1,022,250
Q2: WARRANTY LIABILITY, 12/31/20 1,428,702 21. C
PARIS COMPANY
SHORT-TERM NOTES PAYABLE 2,000,000
PORTION OF NOTES PAYABLE REFINANCED ON A LONG-TERM BASIS -1,200,000
SHORT-TERM NOTES PAYABLE REPORTED AS CURRENT ON DECEMBER 31, 2017 800,000 22. D
ROME INCORPORATED
NUMBER OF COUPONS TO BE REDEEMED IN FUTURE PERIODS ( 10,800 / P2.40
x 10 ) 45,000
NUMBER OF COUPONS REDEEMED IN CURRENT PERIOD 18,000
NUMBER OF COUPONS TO BE REDEEMED ( CURRENT PERIOD & FUTURE PERIODS
) 63,000
NUMBER OF BOXES SOLD IN 2020 ( 63,000 COUPONS / 5% ) 1,260,000 23. B
CARACAS COMPANY
SALE OF SERVICE CONTRACT - 2018 ( 1,840 x P1,800 ) 3,312,000
SALE OF SERVICE CONTRACT - 2019 ( 2,110 x P1,800 ) 3,798,000
2018: 3,312,000 x ( 15% + 65% ) 2,649,600
2019: 3,798,000 x ( 2.5% + 30% + 65% ) 3,703,050
UNEARNED SERVICE CONTRACT REVENUE, 12/31/19 6,352,650 24. A

NOTE: Unearned Service Contract Revenue balance on 12/31/19 will serve as the
beginning balance on January 1, 2020
JUN COMPANY
CV OF BONDS PAYABLE, 10/01/23 3,979,488
AMORTIZATION OF DISCOUNT FOR 1 MONTH (9,077 x 1/6) 1,513
RETIREMENT PRICE, 11/01/23 2,000,000

CV OF BONDS PAYABLE RETIRED, 11/01/23 (3,981,001 x 2M/4M) -1,990,501
LOSS ON RETIREMENT 9,499 25. Bonus
CANBERRA COMPANY
CV OF NOTES PAYABLE, 12/31/21 ( 9,000,000 + 810,000) 9,810,000
PV OF FUTURE CASH OUTFLOWS (based on original ER of 9%) -8,000,136
DIFFERENCE ( with substantial modification ) - 18.45% 1,809,864
Present value of new principal = 8,000,000 x .7722 6,177,600

Present value of new interest = 720,000 x 2.5313 1,822,536
PV OF FUTURE CASH OUTFLOWS (based on original ER of 9%) 8,000,136
Present value of new principal = 8,000,000 x .7513 6,010,400

Present value of new interest = 720,000 x 2.4869 1,790,568
PV OF FUTURE CASH OUTFLOWS (based on new ER of 10%) 7,800,968
CV OF NOTES PAYABLE, 12/31/21 ( 9,000,000 + 810,000) 9,810,000

PV OF FUTURE CASH OUTFLOWS (based on new ER of 10%) -7,800,968
GAIN ON DEBT RESTRUCTURING 2,009,032 26. A
BUDAPEST CORPORATION
BEGINNING BALANCE ( 200,000 x 12/12) 200,000
ISSUANCE OF SHARES ON 4/1 ( 20,000 x 9/12 ) 15,000
PURCHASE OF TS ON 9/1 ( 30,000 x 4/12 ) -10,000
WEIGHTED AVERAGE NO. OF ORDINARY SHARES OUTSTANDING 205,000
Q1: BEPS = 500,000 - ( 3.50 x 40,000 shares ) / 205,000 shares 1.76 27. B
EARNINGS PER
INCREMENTAL
Numerator / Denominator SHARE
OPTIONS 0 / ( 50 - 40 )/50 x 30,000 sh. = 6,000 0 - rank 1
CONVERTIBLE PREFERENCE 140,000 / 120,000 shares 1.17 - rank 2
CONVERTIBLE BONDS 96,000 / 60,000 shares 1.60 - rank 3
DILUTED
EARNINGS PER
SHARE
Rank 1 = 500,000 - 140,000 / 205,000 + 6,000 1.71
Rank 2 = 500,000 / 205,000 + 6,000 + 120,000 1.51
Rank 3 = 500,000 + 96,000 / 205,000 + 6,000 + 120,000 + 60,000 1.52
Q2: DEPS ( LOWEST AMOUNT ) 1.51 28. C
BAGHDAD CORPORATION
PREFERENCE SHARE 3,000,000
ORDINARY SHARE 6,000,000
SHARE PREMIUM 500,000
TREASURY SHARE -600,000
RETAINED EARNINGS 4,000,000
SUBSCRIBED ORDINARY SHARE ( 1,000,000 + 400,000 ) ; 14,000 shares 1,400,000

REVALUATION SURPLUS 700,000
TOTAL SHAREHOLDERS' EQUITY 15,000,000
PREFERENCE SHARE AT PAR ( 30,000 shares x P100 ) -3,000,000
PREFERENCE SHARE LIQUIDATION PREMIUM ( 30,000 shares x P5 ) -150,000
PREFERENCE SHARE DIVIDENDS ( P100 x 10% x 30,000 shares x 2 years ) -600,000
BALANCE OF SHE TO ORDINARY SHAREHOLDERS 11,250,000
Q1: BPS - ORDINARY [( 11,250,000 / (60,000 + 14,000 - 5,000 )] 163.04 29. B
Q2: BPS - PREFERENCE ( 3,000,000 + 150,000 + 600,000) / 30,000 125.00 30. A
LISBON CORPORATION
INCOME FROM CONTINUING OPERATION 0
INCOME FROM DISCONTINUED OPERATION (1,200,000 - 1,400,000) 200,000 LOSS 31. C
HANOI COMPANY
CASH SELLING PRICE / PV OF MINIMUM LEASE PAYMENTS 525,000
PAYMENT OF RENT IN ADVANCE ON JULY 1, 2021 -75,000
FINANCE LEASE RECEIVABLE BALANCE, 7/1/21 450,000
INTEREST REVENUE - 2021 ( 450,000 x 9% x 6/12 ) 20,250 32. C
SEOUL COMPANY
RIGHT OF USE ASSET ( 500,000 x 4.0373 ) + ( 100,000 x .5674 ) 2,075,390
DEPRECIATION EXPENSE - 2021 (2,075,390 - 100,000 / 5 years) 395,078 33. B
JAY-AR CORPORATION
RETAINED EARNINGS, 12/31/20 300,000
NET INCOME 60,000
RETAINED EARNINGS, 12/31/21 360,000 34. A
WARD CORPORATION
COMPENSATION EXPENSE - 2018 (10,000 x P12 / 3 years) 40,000 35. B
GERBER COMPANY
TOTAL DIVIDENDS - 2021 540,000
PREFERENCE DIVIDEND - CURRENT YEAR (20,000 shares x P100 x 9%) -180,000
BALANCE OF DIVIDENDS TO ORDINARY SHAREHOLDERS 360,000
DIVIDEND PER ORDINARY SHARE (P 360,000 / 250,000 shares) 1.44 36. Bonus
NOTE: INFORMATION MISSING IN THE PROBLEM = 20,000 PREFERENCE SHARES
LTP COMPANY
ORDINARY SHARES PURCHASED, 1/1/20 25,000
BONUS ISSUE ( 20% ) 5,000
ORDINARY SHARES BALANCE BEFORE CASH DIVIDEND 30,000
CASH DIVIDEND INCOME TAKEN TO P/L (30,000 shares x P10 per share) 300,000 37. C
NOTE: Since the investments were designated as FVOCI, UG/UL should be taken to OCI and
Transaction cost should be capitalized
LTP COMPANY
ORDINARY SHARES PURCHASED, 1/1/20 25,000
BONUS ISSUE ( 20% ) 5,000
ORDINARY SHARES BALANCE BEFORE 2 FOR 1 SHARE SPLIT 30,000
2 FOR 1 SHARE SPLIT x 2
ORDINARY SHARES BALANCE BEFORE SALE 60,000
SHARES SOLD -20,000

ORDINARY SHARES BALANCE, 12/31/21 40,000
FAIR VALUE, 12/31/21 ( 40,000 x P 102 per share ) 4,080,000

ORIGINAL COST (40,000 / 60,000) x (5,700,000 + 30,000) -3,820,000
CUMULATIVE UG/UL, 12/31/21 260,000 38. C
LTC COMPANY
INITIAL INVESTMENT (4,000,000 + 20,000) 4,020,000
SHARE IN ADJUSTED NET INCOME 655,000
CASH DIVIDEND (25,000 shares x P20 per share) -500,000
CV OF INVESTMENT IN ASSOCIATE, 12/31/20 4,175,000 39. C
SHARE IN UNADJUSTED NET INCOME (25% x 3,000,000) 750,000

AMORTIZATION OF EXCESS - INVENTORIES [ 25% x (300,000 x 100% )] -75,000
AMORTIZATION OF EXCESS - EQUIPMENT [ 25% x (400,000 / 5 x 12/12 )] -20,000
SHARE IN ADJUSTED NET INCOME 655,000
PEAVY CORPORATION
ACQUISITION OF INVESTMENT (COMMON STOCK) -180,000
PURCHASED OF PATENT -220,000
SALE OF INVESTMENT (AFS) 796,000
NET CASH PROVIDED BY INVESTING ACTIVITIES 396,000 40. B
KENTUCKY CORPORATION
CURRENT SERVICE COST 500,000
INTEREST ON DBO ( 10% x 2,500,000 ) 250,000
SETTLEMENT LOSS ( 180,000 - 175,000 ) 5,000
INTEREST ON FVPA ( 10% x 2,000,000 ) -200,000
Q1: DEFINED BENEFIT COST TAKEN TO PROFIT OR LOSS 555,000 41. B
FVPA, 1/1/17 2,000,000

CONTRIBUTION TO THE PLAN 600,000
ACTUAL RETURN ON PLAN ASSETS 300,000
BENEFITS PAID TO RETIREES (at scheduled retirement) -620,000
SETTLEMENT PRICE - SQUEEZED -180,000
FVPA, 12/31/17 2,100,000
DBO, 1/1/17 2,500,000
CURRENT SERVICE COST 500,000
INTEREST ON DBO (10% x 2,500,000) 250,000
BENEFITS PAID TO RETIREES (at scheduled retirement) -620,000
PRESENT VALUE OF ADDITIONAL DBO SETTLED -175,000
DBO, 12/31/17 BEFORE REMEASUREMENT 2,455,000
REMEASUREMENT GAIN TAKEN TO OCI -55,000
DBO, 12/31/17 AFTER REMEASUREMENT 2,400,000
REMEASUREMENT GAIN TAKEN TO OCI - DBO 55,000
REMEASUREMENT GAIN TAKEN TO OCI - FVPA (300,000 - 200,000) 100,000
Q2: TOTAL REMEASUREMENT GAIN TAKEN TO OCI 155,000 42. A
HONDA COMPANY
IMPAIRMENT LOSS ON MACHINERY 50,000
UNEARNED RENTAL INCOME 350,000
BAD DEBTS EXPENSE UNDER ACCRUAL BASIS 75,000
PROVISION FOR WARRANTY 180,000
UNREALIZED LOSS ON TRADING SECURITIES 20,000
TOTAL FUTURE DEDUCTIBLE AMOUNT 675,000
TAX RATE 0.30
Q1: DEFERRED TAX ASSET, 12/31/17 202,500 43. B

PREPAID ADVERTISING EXPENSE 250,000

EXCESS TAX DEPRECIATION EXPENSE 520,000
INSTALLMENT SALE 900,000
TOTAL FUTURE TAXABLE AMOUNT 1,670,000
TAX RATE 0.30
Q2: DEFERRED TAX LIABILITY, 12/31/17 501,000 44. A
DOHA CORPORATION
WARRANTY EXPENSE ( FTALE )
2018: 45,000 x 30% 13,500
2019: 75,000 x 24% 18,000
2019: 105,000 x 24% 25,200
DEFERRED TAX ASSET,12/31/17 56,700 45. B
NOTE: EXCESS TAX DEPRECIATION EXPENSE ( FDAAB )
CPA COMPANY
PURCHASED OF TREASURY SHARES -120,000
SALE OF ORDINARY SHARES [( 1,500,000 - 1,000,000 ) - 400,000 ] 100,000
CASH DIVIDENDS PAID ( 10,000 + 170,000 - 20,000 ) -160,000
Q1: NET CASH USED IN FINANCING ACTIVITIES -180,000 46. B
NOTE: CASH DIVIDENDS DECLARED ( 820,000 + 600,000 - 1,250,000 ) 170,000
SALE OF LONG-TERM INVESTMENT 140,000

SALE OF EQUIPMENT 390,000
PURCHASED OF MACHINERY AND EQUIPMENT FOR CASH ( 650,000 - 400,000 ) -250,000
Q2: NET CASH PROVIDED BY INVESTING ACTIVITIES 280,000 47. D
MACHINERY AND EQUIPMENT, 2020 900,000

PURCHASED ( SQUEEZED ) 650,000
SOLD -350,000
MACHINERY AND EQUIPMENT, 2021 1,200,000
PAGODKANABA COMPANY
PV OF FACE VALUE ( 2,000,000 x 2.49 ) 4,980,000
PV OF INTEREST - yr. 1 ( 720,000 x .91 ) 655,200
ISSUE PRICE, 1/1/20 6,213,600

( 6,213,600 x 1.10 - 2,720,000 x 1.10 - 2,480,000 )
FACE VALUE OF BONDS PAYABLE, 12/31/21 -2,000,000
UNAMORTIZED PREMIUM ON BONDS PAYABLE, 12/31/21 46,456 48. C
PUNY COMPANY
UNADJUSTED ACCOUNTS PAYABLE BALANCE 1,000,000
PURCHASE DISCOUNT FORFEITED ( 300,000 x 2% ) 6,000
ADJUSTED ACCOUNTS PAYABLE BALANCE 1,006,000 49. A
POOH COMPANY
CV OF LIABILITY ( 500,000 + 50,000 ) 550,000
FV OF SHARES ISSUED ( 10,000 shares x P40 per share ) -400,000
GAIN ON DEBT RESTRUCTURING 150,000 50. B

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ReSA Final Pre-Board Exam Review

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ReSA

The Review School of Accountancy

FINANCIAL ACCOUNTING & REPORTING September 27, 2021

Esprit Company keeps all its cash in checking account, An examination of

A deposit of P95, 000 placed in bank’s night depository on December

Checks outstanding on December 31, 2021 were: No. 032752 – P15,000;

The books of SANAOL Company showed the following balances as of December

Cash on Hand – P400,000; Cash in Bank–Current Account – P1,400,000; Cash

• The Cash in Bank – peso savings deposit includes a compensating

On September 1, 2021, Singapore Company discounted at the bank a customer’s

December 9- Customer S; Terms: 2/10, n/30; List price is P 800,000 less

The balance sheet of PAMBAWI Company reported the following notes

Notes receivable from sale of Land P3,000,000

FAR – FINAL PRE-BOARD EXAMINATION (BATCH 42)

The following are transactions during 2020 and other information

b. The notes receivable from officers is dated December 31, 2019,

c. The notes receivable from sale of equipment is dated January 1,

The following transactions (in summary) affecting accounts receivable of

It is the company’s policy to provide for uncollectible accounts equal to

7. How much is the accounts receivable that should be presented in the

The Elegance Manufacturing Company inventory list at December 31, 2020

8. How much is the cost of Elegance Manufacturing Company’s inventory at

You were furnished the following data of Filinvest Sales Company

FAR – FINAL PRE-BOARD EXAMINATION (BATCH 42)

Jan. 12 3,500 units @ 28

You were retained by Gotesco Corporation on April 1, 2020 to estimate the

11. How much is the inventory fire loss?

On March 30, 2020, Bamboo Company purchased an equipment for P4,290,000.

Jazz Company purchased an equipment at P4,680,000 on January 1, 2019 which

FAR – FINAL PRE-BOARD EXAMINATION (BATCH 42)

13. How much is the balance of Revaluation surplus as of December 31,

Marco, Inc. purchased an equipment on January 1, 2019 for P13,000,000.

14. What amount of gain on reversal of impairment shall Marco recognize

Foster purchased a land with a dilapidated building for a total purchase

15. What is the total cost of the building?

16. What is the initial cost assigned to this baking equipment?

The following costs are generally incurred Rupee Corporation:

FAR – FINAL PRE-BOARD EXAMINATION (BATCH 42)

Pataca Corporation provided the following information regarding its

Research MOP517 is for a research project which consists of the following

On January 1, 2021, Pound company acquired both a License and a Trademark

Stockholm Incorporated started selling IPAD8 with a four-year warranty

Sales Actual warranty expenditures

FAR – FINAL PRE-BOARD EXAMINATION (BATCH 42)

Premium expense 10,800

23. Compute the number of boxes of product sold in 2020.

Service contracts sold are as follows:

24. How much is the unearned service contract on January 1, 2020?

Jun Company issued P4,000,000 of 8 ½%, 5-year bonds on April 1, 2020.

The following partial amortization table is presented to you.

On November 1, 2023, P2,000,000 of the bonds were retired at face value

FAR – FINAL PRE-BOARD EXAMINATION (BATCH 42)

Canberra Company has an overdue note payable to Australia Bank of P

• Reduce the principal obligation by P 1,000,000

26. How much is the gain on debt restructuring?

During 2020, there were 40,000 shares of cumulative preferred stock

Budapest issued P2,000,000 of 8% convertible bonds at face value during

Baghdad Corporation’s December 31, 2021 balance sheet reports the

FAR – FINAL PRE-BOARD EXAMINATION (BATCH 42)

29. What is the book value per share on ordinary share?

30. What is the book value per share on preference share?

During 2021, Lisbon Corporation disposed of Portugal Division, a major

Hanoi Company leased machinery to Vietnam Company on July 1, 2021, for a