AEC 102 – PRE-FINAL EXAM

TEST I – THEORIES
1. Which best describes the statement of PFRS compliance as indicated by PAS1?
a. Explicit only
b. Unreserved only
c. Explicit and reserved.
d. Explicit and unreserved.

2. Presenting trade and other receivables after the related allowances is best related to
which measurement base?
a. Fulfillment value
b. Historical cost
c. Current cost
d. Fair value

3. Which best denotes what is meant by useful information as stated in the Conceptual
Framework?
a. Faithfully represented or relevant
b. Faithfully represented and relevant
c. Neither faithfully represented nor relevant
d. Comparable but not faithfully represented and not relevant

4. Which of the following is/are sub-ingredients of relevance?

a. Predictive value
b. Confirmatory value
c. Both
d. Neither

5. To which of the following would users base their decisions? S1: Prospects of net cash
inflow based on current resources, claims, and changes. S2: Management’s stewardship
of resources based on effective and efficient management of resources
a. S1 only
b. S2 only
c. S1 and S2
d. Neither
6. Which shall prevail In case of a conflict. S1: A PFRS; S2: The Conceptual Framework
a. S1 only
b. S2 only
c. S1 and S2
d. Neither

7. When is an exposure draft related to a new pronouncement issued based on the IASB’s
due process?
a. Agenda Consultation
b. Research Program
c. Standard-Setting Program
d. Maintenance Program

8. Which is the process of including or capturing an element in the financial statements?

a. Recognition
b. Derecognition
c. Presentation
d. Disclosure

9. Which best describes prudence? S1: When in doubt, understate income and asset and
overstate expense and liability. S2: Exercise of caution when making judgements under
conditions of uncertainty.
a. S1 only
b. S2 only
c. S1 and S2
d. Neither

10. Which is a reporting entity? S1: An entity that is required to prepare financial
statements. S2: An entity that chooses to prepare financial statements, even though not
required
a. S1 only
b. S2 only
c. S1 or S2
d. Neither

11. A case in point, there is an inconsistency between the recognition of liabilities related to
levies based on IFRIC 21 and The Conceptual Framework. In this case, the Conceptual
Framework shall prevail.
12. Evaluate these statements: S1: Entities are expected to continue operations in the
foreseeable future; S2: Revenue is measured when the performance obligation is
satisfied. Which of these is/are the underlying assumptions mentioned by the conceptual
framework?
a. S1 only
b. S2 only
c. S1 and S2
d. Neither

13. Which is (are) an example(s) of income, regardless where taken? (1) Gain from fair
value changes of FVOCI investments. (2) Gain from fair value changes of FVPL
investments.
a. S1 only
b. S2 only
c. S1 and S2
d. either
14. Which is true about equity? S1: Residual interest in asset after deducting liabilities. S2:
Presented in the SFP according to classification.
a. S1 only
b. S2 only
c. S1 and S2
d. Neither

15. To which is amortized cost best related?

a. Historical cost
b. Current cost
c. Fulfillment value
d. Value in use

16. Which is included in comprehensive income: I. gain on sale PPE, II. FV changes related
to FVOCI equity investment.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

17. Which is included in profit or loss: I. gain on sale PPE, II. FV changes related to FVOCI
equity investment.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
 18. Which is included in other comprehensive income: I. gain on sale PPE, II. FV changes
related to FVPL investments.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

19. Which approach to computing profit looks at the individual events rather than the
incremental (changes) amounts?
a. Capital Maintenance
b. Net Worth
c. Economist’s view
d. Transaction

20. Which is the first step in the model proposed by IFRS 5

a. Performance obligation identification
b. Transaction price determination
c. Contract identification
d. Revenue recognition

TEST II – PROBLEM SOLVING

ABC Company reported net income of P3,000,000 for the current year. Changes in certain
account as follows:

Equipment 250,000 increase

Accumulated depreciation 400,000 increase
Note payable 300,000 increase

• During the year ABC Company sold equipment costing P250,000 with accumulated
depreciation of P120,000 for a gain of P50,000.
• In December of the current year, ABC Company purchased equipment costing
P500,000 with P200,000 cash and a 12% note payable of P300,000.
• Depreciation expense during the year, P520,000.

21. In the statement of cash flows, what amount should be reported as net cash used in
investing activities?
a. 20,000
b. 70,000
c. 320,000
d. None of the choices
 22. In the statement of cash flows, what amount should be reported as net cash provided by
operating activities?
a. 3,470,000
b. 3,770,000
c. 3,520,000
d. None of the choices

23. How much is the proceeds from the sale of equipment? (Input your answer e. g.
250,000)

The accounts below were taken from the unadjusted trial balance of Magic Company at
December 31, 2020:

Cash 124,000
FVPL at cost 87,000
Note receivable 92,000
Trade accounts receivable 122,000
Allowance for uncollectible accounts 6,000
Employees’ income tax withheld 4,000
Unearned rent revenue 6,500
Notes payable 150,000
Trade accounts payable 75,000
Merchandise inventory 136,000
Bonds payable 250,000
Stock dividends payable 15,000
Income tax payable 28,000
Prepaid insurance 143,000

An analysis of the above accounts disclosed the following:

a. Bank overdraft of P13,000 was deducted from cash balance. The account which
resulted to an overdraft is not within the same bank.
b. Trade accounts receivable was net of customers’ deposit of P7,000.
c. Merchandise worth P15,000 received December 30, 2020 was included in the inventory
but was not recorded as a purchase.
d. Accounts payable was net of accounts with debit balance of P12,000.
e. A bank loan of P30,000 due December 31, 2022 was included in the note payable
balance.
f. Bonds payable which was issued on June 1, 2020 will mature in five annual installments
beginning June 1, 2021 plus interest on the outstanding principal at 12%. No accrual of
interest has been recorded at the end of the year.
g. FVPL securities has a market value of P90,000 at December 31, 2020.
h. Prepaid insurance includes cash surrender value of the company president’s life
insurance amount to P110,000. (Input your answer e. g. 50,000)

24. What is the correct balance of current assets as of December 31, 2020?
a. 623,000
b. 620,000
c. 611,000
d. None of the choices

25. What is the correct balance of current liabilities as of December 31, 2020?
a. 363,000
b. 348,000
c. 335,000
d. None of the choices

26. What is the correct balance of non-current liabilities as of December 31, 2020?
a. 230,000
b. 280,000
c. 200,000
d. None of the choices

27. Tekno Company’s total assets increased by 100,000 during the year. Total liabilities, on
the other hand, increased by 150,000. Owners withdrew 20,000 during the year. How
much is profit or loss for the year?
a. Loss 50,000
b. Profit 50,000
c. Loss 30,000
d. Profit 30,000

28. Logi Company’s net purchases is P1,000,000. Beginning and ending inventory are
P100,000 and P200,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000. Depreciation expense is P100,000 with 60%
related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Assume income taxes of 30%. There are four questions related to this
problem, preserve your solution in good form. How much cost of sales to be presented in
the function of expense SCI?
a. 900,000
b. 1,100,000
c. 630,000
d. 770,00
e. None of the above
29. Logi Company’s net purchases is P1,000,000. Beginning and ending inventory are
P100,000 and P200,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000. Depreciation expense is P100,000 with 60%
related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Assume income taxes of 30%. There are four questions related to this
problem, preserve your solution in good form. How much is the cost of sales to be
presented in the nature of expense SCI?
a. 900,000
b. 1,100,000
c. 630,000
d. 770,00
e. None of the choices

30. Logi Company’s net purchases is P1,000,000. Beginning and ending inventory are
P100,000 and P200,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000. Depreciation expense is P100,000 with 60%
related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Assume income taxes of 30%. There are four questions related to this
problem, preserve your solution in good form. How much is gross profit to be presented
in the function of expense SCI?
a. 900,000
b. 850,000
c. 1,120,000
d. 980,000

31. Logi Company’s net purchases is P1,000,000. Beginning and ending inventory are
P100,000 and P200,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000. Depreciation expense is P100,000 with 60%
related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Assume income taxes of 30%. There are four questions related to this
problem, preserve your solution in good form. How much is profit for the period?
a. 1,180,000
b. 570,000
c. 171,000
d. 399,000

32. Thar Company’s net purchases is P1,000,000. Beginning and ending inventory are
P100,000 and P200,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000, respectively. Depreciation expense is P100,000
with 60% related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Increase in revaluation surplus for the period is P100,000. Unrealized
holdings loss for the period related to FVOCI debt investment is P10,000. Assume
 income taxes of 30% and assume that OCI components are subject to income tax.
There are four questions related to this problem, preserve your solution in good form.
How much is total selling expenses under the function of expense presentation in the
P/L section?
a. 160,000
b. 112,000
c. 120,000
d. 84,000

33. Thar Company’s net purchases is P1,000,000. Beginning and ending inventory are
P100,000 and P200,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000, respectively. Depreciation expense is P100,000
with 60% related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Increase in revaluation surplus for the period is P100,000. Unrealized
holdings loss for the period related to FVOCI debt investment is P10,000. Assume
income taxes of 30% and assume that the OCI components are subject to income tax.
There are four questions related to this problem, preserve your solution in good form.
How much is total administrative expenses under the function of expense presentation in
the P/L section?
a. 160,000
b. 112,000
c. 120,000
d. 84,000

34. Thar Company’s net purchases is P1,000,000. Beginning and ending inventory are
P100,000 and P200,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000, respectively. Depreciation expense is P100,000
with 60% related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Increase in revaluation surplus for the period is P100,000. Unrealized
holdings loss for the period related to FVOCI debt investment is P10,000. Assume
income taxes of 30% and assume that the OCI components are subject to income tax.
There are four questions related to this problem, preserve your solution in good form.
How much is the total other comprehensive income?
a. 110,000
b. 77,000
c. 90,000
d. 63,000

35. Thar Company’s net purchases is P1,000,000. Beginning and ending inventory are
P100,000 and P200,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000, respectively. Depreciation expense is P100,000
with 60% related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Increase in revaluation surplus for the period is P100,000. Unrealized
holdings loss for the period related to FVOCI debt investment is P10,000. Assume
 income taxes of 30% and assume that the OCI components are subject to income tax.
There are four questions related to this problem, preserve your solution in good form.
How much is total comprehensive income?
a. 63,000
b. 399,000
c. 660,000
d. 462,000

36. Thorn Company’s net purchases is P1,000,000. Beginning and ending inventory are
P150,000 and P260,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000, respectively. Depreciation expense is P100,000
with 60% related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Freight out (delivery expense) is P15,000. Assume income taxes of 30%.
There are four questions related to this problem, preserve your solution in good form.
How much is profit for the period?
a. 860,000
b. 395,500
c. 169,500
d. 602,000
e. None of the choices

37. Thorn Company’s net purchases is P1,000,000. Beginning and ending inventory are
P150,000 and P260,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000, respectively. Depreciation expense is P100,000
with 60% related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Freight out (delivery expense) is P15,000. Assume income taxes of 30%.
There are four questions related to this problem, preserve your solution in good form.
How much is total comprehensive income for the period?
a. 860,000
b. 395,500
c. 169,500
d. 602,000
e. None of the choices

38. Thorn Company’s net purchases is P1,000,000. Beginning and ending inventory are
P150,000 and P260,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000, respectively. Depreciation expense is P100,000
with 60% related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Freight out (delivery expense) is P15,000. Assume income taxes of 30%.
There are four questions related to this problem, preserve your solution in good form.
How much is total selling expenses?
a. 160,000
b. 175,000
c. 120,000
 d. 295,000

39. Thorn Company’s net purchases is P1,000,000. Beginning and ending inventory are
P150,000 and P260,000, respectively. Salaries and wages for sales and headquarter
employees are P100,00 and P80,000, respectively. Depreciation expense is P100,000
with 60% related to the selling space while the rest pertains to the headquarters. Sales is
P1,750,000. Freight out (delivery expense) is P15,000. Assume income taxes of 30%.
There are four questions related to this problem, preserve your solution in good form.
How much is total administrative expenses?
a. 160,000
b. 175,000
c. 120,000
d. 295,000

40. River Company’s profit for the period amounted to P100,000 as presented in the SCI.
Unrealized holdings gains for the period related to FVOCI debt investment increased by
P10,000. Revaluation surplus decreased by 100,000. Assume income taxes of 30% and
assume that the OCI components are subject to income tax. There are three questions
related to this problem, preserve your solution in good form. How much is other
comprehensive income that cannot be reclassified to profit or loss presented as a single
line time in the OCI section?
a. 63,000 loss
b. 63,000 income
c. 70,000 loss
d. 70,000 income