FAR Pre-Week Part 1

No. 125 Brgy.
San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
FINANCIAL ACCOUNTING AND REPORTING May Exam 2023
Preweek Quizzer #1
1. Mitch Corporation’s trial balance contained the following account balances on

December 31, 2023:
Accumulated Depreciation-Equipment 800,000

Investment in derivatives 900,000
Prepaid Insurance 100,000
Cash 300,000
Inventory of Merchandise 900,000
Equipment and Furniture 2,500,000
Patent 650,000
Accounts Receivable (net) 550,000
Land Held for Future Business Site 750,000
Noncurrent asset classified as held for sale 500,000
Deferred tax asset 200,000
What is the total current assets in Mitch's December 31, 2023, statement of financial
position?
a. 3,250,000
b. 3,500,000
c. 2,750,000
d. 4,000,000
2. After the issuance of its 2023 financial statements, Mara Company discovered a
computational error of P500,000 as an overstatement in the calculation of its
December 31, 2022, inventory. The error resulted in a P500,000 understatement in
the cost of goods sold for the year ended December 31, 2022. In October 2023, Mara
paid the amount of P800,000 in settlement of litigation instituted against it during 2022,
no accrual was made for this obligation in 2022 because it was to be only a possible
obligation at the time the 2022 financial statements were issued. Ignore income tax,
in the 2023 financial statements, what is the adjustment to the January 1, 2023
retained earnings balance?
a. 500,000 credit
b. 500,000 debit
c. 300,000 debit
d. 1,300,000 debit
3. Roman Company’s earnings for the year and transactions occurred during 2023:
Net income 5,000,000

Gain on debt restructuring 2,000,000
Foreign currency translation reserve – debit 2,300,000
Contra equity reserve – credit 1,500,000
Revaluation increment on land 1,800,000
Dividends to preference share holders 1,000,000
What should Roman report as comprehensive income?

a. 6,000,000
b. 7,000,000
c. 8,000,000
d. 5,000,000
1|P a g e TSIY/ATANG/JSaripada/JBugatan
No. 125 Brgy. San Sebastian
Mobile : 0927 283 8234
Telephone : (043) 723 8412
4. Smiley Company prepares quarterly interim financial reports. The company sells it
products through sales agents who are paid a fixed monthly salary and a commission
of 5% that is paid at year-end. Sales for the first quarter were P20,000,000. However,
in the second quarter, the employee’s union negotiated that agent’s commissions be
increased to 10% and be applied as of the beginning of the current year. Sales in the
second quarter were P25,000,000. What would be the sales commission expense of
Smiley Company charged in the second quarter’s interim financial statements?
a. 1,000,000
c. 2,000,000
b. 3,500,000
d. 2,500,000
5. George Company operates in the fast-food industry and incurs costs unevenly
throughout the financial year. Advertising costs of P3,000,000 were incurred on March
1, 2023, and staff bonuses are paid at year-end based on sales. Staff bonuses are
expected to be around P30,000,000 for the year. Of that sum, P6,000,000 relate to
the period ending March 31, 2023. What cost should be included in the company’s
quarterly financial report to March 31, 2023?
a. Advertising cost of P3,000,000 and staff bonuses of P7,500,000
b. Advertising cost of P750,000 and staff bonuses of P7,500,000
c. Advertising cost of P750,000 and staff bonuses of P30,000,000
d. Advertising cost of P3,000,000 and staff bonuses of P6,000,000
6. Moody Company has two divisions, North and South. Both qualify as business
components. In 2023, the firm decided to dispose of the assets and liabilities of
Division South. It is probable that the disposal will be completed early next year. The
revenue and expenses of Moody Company for 2023 and 2022 are as follows:
2023 2022
Sales – North 6,200,000 5,000,000
Total nontax expenses – North 4,800,000 4,200,000
Sales – South 4,500,000 5,300,000
Total nontax expenses - South 5,000,000 4,500,000
During the latter part of 2023, Moody disposed of a portion of South Division and
recognized a pretax loss of P3,000,000 on the disposal. The income tax rate for Moody
Company is 25%. What is the loss on discontinued operations in 2023?
a. 3,000,000
c. 1,950,000
b. 3,500,000
d. 2,625,000
7. Ramon Company, a major winery, begins construction of a new facility in Mindanao.

Following is some of the costs incurred in connection with the start-up activities of the
new facility:
Production equipment 4,500,000

Travel costs of salaried employees 2,000,000
License fees 300,000
Training of local employees for production
and maintenance operations 3,000,000
Advertising costs 1,000,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
What portion of these expenditures is classified as organization costs?

a. 5,000,000
b. 6,000,000
c. 5,300,000
d. 6,300,000
8. Butler Corporation and its divisions are engaged solely in manufacturing. The following
data pertain to the industries in which operations were conducted for the year ended
December 31, 2023:
Division Operating Profit (Loss)

A 30,000,000
B 10,000,000
C (8,000,000)
D (2,000,000)
E 5,000,000
What is the minimum profit to be considered as a reportable segment?

a. 1,000,000
b. 4,500,000
c. 3,500,000
d. 5,500,000
On December 31, 2022, Harbor. Company provided the following data:
Cash in bank 3,000,000

Time deposit-30 days 1,000,000
Money market placement due on June 30, 2,000,000
2023
Saving deposit 500,000
Sinking fund for bond payable due June 30, 1,500,000
2024
Petty cash fund 50,000
 The cash in bank included NSF customer check of P200,000

 Check of P250,000 in payment of accounts payable was dated and recorded on
December 31, 2022, but mailed to creditors on January 15, 2023.
 Check of P100,000 dated January 31, 2023, in payment of accounts payable was
recorded and mailed December 31, 2022.
 The reporting period is the calendar year. The cash receipts journal was held open
until January 15, 2023, during which time an amount of P450,000 was collected from
customers and recorded on December 31,2022.
9. What is the total cash?

a. 3,700,000
b. 3,350,000
c. 3,250,000
d. 4,750,000
10.What is the total cash equivalents?

a. 3,000,000
b. 2,000,000
c. 1,000,000
d. 2,500,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Park Company kept all cash in a checking account. An examination of the accounting
records and bank statement for the month of June revealed the following information:
 The cash balance per book on June 30 is P8,500,000.

 The cash balance per bank statement on June 30 is P8,200,000.
 A deposit of P1,000,000 that was placed in the bank's night depository on June 30
does not appear on the bank statement.
 The bank statement showed on June 30, the bank collected note for Park
Company and credited the proceeds of P950,000 net of collection change of
P50,000 to the entity's account.
 Checks outstanding on June 30 amounted to P300,000 including certified check
of P100,000.
 Park Company discovered that a check written in June for P200,000 in payment.
of an account payable had been recorded as P20,000.
 Included with the June bank statement was NSF check for P250,000 that Park
Company had received from a customer on June 26.
 The bank statement showed a P20,000 service charge for June.
11.What is the adjusted balance of cash?

a. 8,700,000
b. 9,000,000
c. 8,900,000
d. 9,200,000
12.What is the net adjustment in the books for cash?

a. 500,000 debit
b. 500,000 credit
c. 420,000 debit
d. 520,000 credit
Waterfront Company records sales return during the year as a credit to accounts
receivable.
However, at the end of the accounting period, the entity estimates the probable sales
return and records the same by means of an allowance account.
The following transactions occurred in summary form:
1. Sale of merchandise on account, 4,000,000

2/10, n /30
2. Collection within the discount period 1,470,000
3. Collection beyond the discount period 1,000,000
4. Sales return granted 100,000
5. Sales return estimated at the end of the 20,000
year
13.What is the net sales?

a. 3,900,000
b. 3,850,000
c. 3,800,000
d. 3,880,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
14.What is the NRV of the accounts receivable?

a. 1,410,000
b. 1,400,000
c. 1,380,000
d. 1,420,000
On June 15, 2022, Romelia Company sold 100 air conditioning units. The list selling price
is 50,000 per unit with a trade discount of 10%. All of sales are subject to terms 2/10,
n30. The entity used the gross method of accounting for accounts receivable.
15.What is the total invoice price?

a. 4,500,000
b. 5,000,000
c. 4,410,000
d. 4,900,000
16.What is the collection if Romelia collects on June 25, 2022?

a. 4,410,000
b. 4,500,000
c. 5,000,000
d. 4,900,000
On January 1, 2022, Holy Company sold an equipment costing P500,000 which had a
carrying amount of P360,000, receiving a P125,000 down payment and, as additional
consideration, a P400,000 noninterest bearing notes due on January 1, 2025.
There was no established exchange price for the equipment, and the note had no, ready
market value. The prevailing rate of interest for a note of this type on January 1, 2022
was 12%. The present value of 1 at 12% for three periods is 0.7118.
17.What is the gain on sale?

a. 175,000
b. 150,000
c. 49,720
d. 88,920
18.What is the 2022 interest income?

a. 34,166
b. 48,000
c. 36,155
d. 35,621
At the beginning of current year, Ulysses Company reported that the allowance for
doubtful accounts has a credit balance of P170,000.
 Bad debt recoveries and bad debts written off in the current year were P30,000
and P235,000, respectively.
 The allowance account had been previously calculated as a percentage of net
sales.
 It was decided however to provide for doubtful accounts commencing with the
year-end adjusting entry on the basis of an analysis of the age of the accounts
receivable.
 The following schedule was prepared.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Account Percent
receivable collectible
Not yet due 1,700,000 100
1-30 days past due 1,200,000 95
31-60 days past due 100,000 75
61-90 days past due 150,000 50
Over 90 days past 120,000 0
due
19.What is the required allowance under aging method?

a. 110,000
b. 280,000
c. 245,000
d. 315,000
20.What is the doubtful accounts expense?

a. 315,000
b. 245,000
c. 280,000
d. 110,000
21.What is the NRV of the accounts receivable?

a. 2,990,000
b. 2,955,000
c. 3,160,000
d. 3,025,000
Gullible Company is a dealer in equipment. On December 31, 2022, the entity sold an
equipment in exchange for a noninterest bearing note requiring five annual payments of
P500,000. The first payment was made on December 31, 2023. The market interest for
similar notes was 8%. The relevant present value factors are:
PV of 1 at 8% for 5 periods .68

PV of an ordinary annuity of 1 at 8% for 5 periods 3.99
22.What is the carrying amount of the note receivable on December 31, 2022?
a. 2,500,000
b. 1,995,000
c. 1,700,000
d. 2,154,600

a. 200,000
b. 160,000
c. 132,368
d. 159,600
24.What is the current notes receivable on December 31, 2023?

a. 397,043
b. 500,000
c. 422,135
d. 367,632
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Spirit Company provided the following transactions:
May 1 Spirit Company assigned P800,000 of accounts receivable to a

bank in consideration for a loan.
A cash advance of 80% less service charge of P20,000 was made

by the latter.
It was agreed that interest of 2% per month is to be made and that

the assignor continues to make the collections. The entity signed a
promissory note for the loan.
May 5 The entity issued a credit memo to a customer for returned

merchandise, P30,000. The account is one of the assigned
accounts.
May 10 Collections of P500,000 of the assigned accounts were made, less
2% discount.
June 1 Remitted the collections to the bank plus 2% interest for one month.
June 7 Assigned accounts of P10,000 proved to be worthless.
June 30 Collections of P200,000 for the accounts assigned were made.
July 1 Final settlement was made with the bank. Spirit Company
accordingly remitted the total amount due the bank to pay off the
loan plus interest charge.
25.What is the balance of the note on June 1?

a. 316,000
b. 152,800
c. 162,800
d. 150,000
26.What is the balance of the accounts receivable assigned after the write off?
a. 270,000
b. 290,000
c. 245,000
d. 260,000
27.What is the final settlement amount including interest?

a. 166,056
b. 153,000
c. 155,856
d. 322,320
On August 31, 2022, Sunflower Company discounted with recourse a customer's note at
the bank at discount rate of 15%. The note was received from the customer on August
1, 2022, term 90 days, had a face amount of P5,000,000, and carried an interest rate of
12%. The customer paid the note to the bank on October 30, 2022, the date of maturity.
28.What is the proceeds from discounting?

a. 5,150,000
b. 4,377,500
c. 5,128,750
d. 5,021,250
Mobile : 0927 283 8234
Telephone : (043) 723 8412
29.What is the loss on discounting?

a. 50,000
b. 21,250
c. 28,750
d. 77,500
On January 1,2022, Bloom Company sold land with carrying amount of P1,500,000 in
exchange for a 9-month, 10% note with face value of P2,000,000. The 10% rate properly
reflects the time value of money for this type of note.
On April 1,2022, the entity discounted the note with recourse. The bank discount rate is
12%. The discounting transaction is accounted for as a conditional sale with a contingent
liability.
On October 1, 2022, the maker dishonored the note receivable. The entity paid the bank
the maturity value of the note plus protest fee of P10,000.
On December 31, 2022, the entity collected the dishonored note receivable in full plus
12% annual interest on the total amount due.
30.What is the proceeds from discounting?

a. 2,150,000
b. 2,129,000
c. 2,021,000
d. 2,050,000
31.What is the amount collected from the customer on December 31, 2022?
a. 2,224,800
b. 2,214,500
c. 2,408,000
d. 2,150,000
Amir Company revealed the following purchase transactions occurred during the last few
days of the fiscal year, which ends December 31, and in the first few days after that date.
Unadjusted balances on December 31, 2023 of inventory and accounts payable were
6,000,000 and 2,500,000, respectively.
1. An invoice for P50,000, FOB shipping point, was received and recorded
on December 27. The shipment was received in satisfactory condition
on January 2. The merchandise was not included in the inventory.
2. An invoice for P75,000, FOB destination, was received and recorded
on December 28. The shipment was received in satisfactory condition
on January 3. The merchandise was not included in the inventory.
3. An invoice for P30,000, FOB shipping point, was received and recorded
on January 4. The invoice showed that the goods had been shipped on
December 28 and the receiving report indicates that the goods had
been received on January 4. The merchandise was excluded from
inventory.
4. An invoice for P90,000, FOB shipping point, was received on December
15. The receiving report indicates that the goods were received on
December 18 but across the face of the report is the notation
“merchandise not of the same quality as ordered - returned for credit,
December 19”. The invoice was not recorded, and the merchandise
was included in the inventory.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
5. An invoice for P140,000, FOB destination, was received and recorded

on January 4. The receiving report indicates that the goods were
received on December 29. The merchandise was included in inventory.
32.What is the adjusted inventory on December 31, 2023?

a. 6,130,000
b. 6,220,000
c. 6,100,000
d. 5,990,000
33.What is the adjusted accounts payable on December 31, 2023?

a. 2,595,000
b. 2,455,000
c. 2,425,000
d. 2,670,000
Prague Company made two different schedules of gross income for the quarter ended
September 30:
Schedule 1 Schedule 2
Sales (P100 per unit) 2,800,000 2,800,000
Cost of goods sold 1,169,000 1,157,500
The computation of cost of goods sold in each schedule is based on the following data:
Units Unit cost Total cost

Beginning inventory-July 1 10,000 40.00 400,000
Purchase-July 25 8,000 42.00 336,000
Purchase-August 25 5,000 41.30 206,500
Purchase-September 5 7,000 43.00 301,000
Purchase-September 25 12,000 42.50 510,000
Available for sale 42,000 1,753,500
34.What cost flow method was used for schedule 1?

a. FIFO
b. LIFO
c. Weighted Average
d. Moving Average
35.What cost flow method was used for schedule 2?

a. Moving Average
b. FIFO
c. Weighted Average
d. LIFO
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Jacket Company which used the periodic inventory system provided the following
transactions for June:
Purchases Sales
1 3,000 at 300 June 3 2,500 at 500
4 7,500 at 304 9 6,500 at 500
8 4,000 at 320 11 3,000 at 550
13 6,000 at 325 23 6,000 at 550
21 3,500 at 330 27 4,500 at 600
30 2,500 at 313
36.How much is the ending inventory using FIFO?

a. 1,260,000
b. 1,252,000
c. 1,277,500
d. 1,320,000
37.How much is the ending inventory using average?

a. 1,252,000
b. 1,277,500
c. 1,260,000
d. 1,320,000
Lockett Company provided the following inventory data at the end of first year of
operations:
Cost NRV
Skis 2,200,000 2,500,000
Boots 1,700,000 1,500,000
Ski equipment 700,000 800,000
38.What is the loss on inventory writedown under the allowance method?

a. 200,000
b. 400,000
c. 800,000
d. 0
White Company carried four items in inventory. The following per-unit data relate to
these items at the end of first year of operations:
Normal
Units Cost Sales Price Selling Cost
Profit
Category 1
A 25,000 105 130 15 20
B 20,000 85 90 10 10
Category 2
C 40,000 50 45 5 5
D 30,000 65 75 15 10
10 | P a g e TSIY/ATANG/JSaripada/JBugatan
Mobile : 0927 283 8234
Telephone : (043) 723 8412
39.What is the carrying amount of inventory if LCNRV is applied to each individual

inventory?
a. 8,275,000
b. 7,875,000
c. 7,625,000
d. 8,800,000
40. What is the carrying amount of inventory if LCNRV is applied to each inventory
category?
a. 8,425,000
b. 7,625,000
c. 7,875,000
d. 7,725,000
41. What is the carrying amount of inventory if LCNRV is applied to the inventory in
aggregate?
a. 7,875,000
b. 7,625,000
c. 7,725,000
d. 8,275,000
42.Riley Company has a' recent gross profit history of 25% of cost. The following data
are available from the accounting records for the three months ended March 31:
Inventory - January.1 650,000

Purchases 3,200,000
Net sales 4,500,000
Purchase return 75,000
Freight in 50,000
Using the gross profit method, what amount should be reported as cost of inventory
on March 31?
a. 450,000
b. 425,000
c. 225,000
d. 250,000
43.Jason Company provided the following information for the current year:
Beginning inventory 650,000

Purchases 2,300,000
Purchase returns 80,000
Freight in 60,000
Sales 3,400,000
Sales returns 20,000
At year-end, a physical inventory revealed that the ending inventory was only
P420,000. The gross profit on sales has remained constant at 30% of cost. The entity
suspects that some inventory may have been pilfered by one of the employees. What
amount should be reported as cost of missing inventory at year-end?
Mobile : 0927 283 8234
Telephone : (043) 723 8412
a. 105,000
b. 330,000
c. 90,000
d. 144,000
44. Huff Company provided the following information for the current year:
Cost Retail
Beginning inventory 750,000 1,000,000
Purchases 4,150,000 5,800,000
Additional markup - 200,000
Available for sale 4,900,000 7,000,000
Sales for the year totaled P5,500,000. Markdown amounted to P100,000. Under the
lower of average cost or NRV approach in applying the retail method, what amount
should be reported as cost of inventory?
a. 420,000
b. 450,000
c. 994,000
d. 980,000
45.Lettterman Company used the average cost retail inventory method.
Cost Retail
Beginning inventory 1,650,000 2,200,000
Net purchases 3,725,000 4,950,000
Departmental transfer-credit 200,000 300,000
Net markup 150,000
Normal inventory shortage – sales
100,000
price
Employee discounts 200,000
Sales, including sales of P400,000
of items that were marked down
4,000,000
from 500,000.
What amount should be reported as cost of ending inventory?

a. 1.950,000
b. 2,600,000
c. 1,924,000
d. 2,250,000
Boyle Company purchased equity securities during 2021 to be held as investments. The
cost and market value of the investments are:
Cost Market
December 31,2021
Trading securities 2,000,000 2,500,000
Securities not held for trading 3,000,000 2,900,000
December 31,2022
Trading securities 2,000,000 2,200,000
Securities not held for trading 3,000,000 3,200,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
The securities not held for trading are measured at fair value through other
comprehensive income by irrevocable election.
46.How much was recognized in 2022 profit or loss?

a. 500,000 gain
b. 300,000 loss
c. 200,000 gain
d. 0
47.How much was recognized in 2022 comprehensive income?

a. 300,000 gain
b. 200,000 gain
c. 300,000 loss
d. 200,000 loss
Hannibal Company acquired the following equity securities:
December 31, 2021 Cost Market

Moon Company 200,000 120,000
Star Company 400,000 280,000
Sun Company 600,000 650,000
December 31, 2022

Moon Company 200,000 220,000
Star Company 400,000 300,000
Sun Company 600,000 500,000
The equity securities do not qualify as held for trading. The entity has elected irrevocably
to present changes in fair value in other comprehensive income.
48.How much is the 2022 unrealized loss in the statement of changes in equity?
a. 210,000
b. 180,000
c. 30,000
d. 150,000
49. How much is the 2022 unrealized loss in the statement of comprehensive income?
a. 30,000
b. 70,000
c. 50,000
d. 20,000
Kendall Company held 40,000 shares purchased for P75 per share as noncurrent
investment. The following transactions pertain to such investment in the chronological
order.
1. Received share rights to purchase one new share at P80. Two rights are
required to acquire one share. The market value of the right at issuance date is
P10.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
2. Exercised 30,000 rights.

3. Sold 6,000 rights at P12 per right.
4. The remaining rights expired.
50.What is the cost of the new investment from the exercise of the stock rights?
a. 2,700,000
b. 1,200,000
c. 2,400,000
d. 1,500,000
51.What is the adjusted carrying amount of the original investment?

a. 3,000,000
b. 2,600,000
c. 2,640,000
d. 2,700,000
Logan Company revealed the following chronological transactions:
1. Purchased 80,000 shares, par P10, at P40 per share as long-term investment.
2. Received a share dividend of one share for every four owned.
3. Received a cash dividend of P5 per share.
4. Received share rights to purchase one share at P30 for every. five rights held.
On this date, the share right has a market value of P5.
5. Sold 40,000 rights at P7 each.
6. Exercised the remaining rights.
7. Sold 80,000 shares at P35 per share.
52.How much is the total income from this investment?

a. 1,220,000
b. 1,140,000
c. 1,580,000
d. 1,120,000
53.What is the total cost of the new investment?

a. 660,000
b. 600,000
c. 360,000
d. 540,000
On January 1, 2021, Roy Company purchased bonds with face amount of P5,000,000.
The entity paid P4,600,000 plus transaction cost of P142,000 for the bond investment.
The business model of the entity in managing the financial asset is to collect contractual
cash flows that are solely payment of principal and interest and to sell the bonds in the
open market.
The entity has not elected the fair value option of measuring financial asset.
The bonds mature on December 31, 2023, and pay 6% interest annually on December
31 each year with 8% effective yield. The bonds are quoted at 105 on December 31,
2021, and 110 on December 31, 2022.
Mobile : 0927 283 8234
Telephone : (043) 723 8412

a. 385,709
b. 300,000
c. 379,360
d. 284,520
55.What is the unrealized gain in the 2022 statement of comprehensive income?
a. 428,640
b. 758,000
c. 592,931
d. 164,291
On January 1, 2021, Romey Company purchased 12% bonds with face amount of
P5,000,000 for P5,380,000. The bonds provide an effective yield of 10%.
The bonds are dated January 1, 2021, mature on January 1, 2026 and pay interest
annually on December 31 of each year. The bonds are quoted at 120 on December
31,2021 and 115 on December 31,2022.
The entity has elected the fair value option for the bond investment.

a. 600,000
b. 500,000
c. 538,000
d. 645,600
57.How much is the unrealized loss in the 2022 income statement?

a. 250,000
b. 380,000
c. 620,000
d. 370,000
58.On December 31,2022, Bart Company purchased a machine in exchange for -a

noninterest bearing note requiring eight payments of P200,000.
The first payment was made on December 31, 2022, and the others are due annually
on December 31.
At date of issuance, the prevailing rate of interest for this type of note was 11%.
PV of an ordinary annuity of 1 at 11% for 8 periods 5.146 PV of an annuity of 1 in

advance at 11% for 8 periods 5.712. What is the cost of the machine?
a. 1,600,000
b. 1,029,200
c. 1,142,400
d. 942,400
On December 31, 2022, Brandon Company purchased a machine in exchange for a

noninterest bearing note requiring ten payments of P500,000.
The first payment was made on December 31, 2023, and the others are due annually on
December 31.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
The prevailing rate of interest for this type of note at date of issuance was 12%. The
present value of an ordinary annuity of 1 at 12% is 5.33 for nine periods and 5.65 for ten
periods.
On December 31, 2022, Brandon Company acquired used machinery by issuing the seller
a two-year, noninterest-bearing note for P3,000,000.
In recent borrowing, the entity had paid a 12% interest for this type of note. The present
value of 1 at 12% for 2 periods is .80 and the present value of an ordinary annuity of 1 at
12% for 2 periods is 1.69.
59.What is the cost of the first machine?

a. 5,000,000
b. 2,665,000
c. 2,825,000
d. 2,325,000
60.What is the cost of the second machine?

a. 2,400,000
b. 3,000,000
c. 5,070,000
d. 2,678,000
Bailout Company provided the following transactions:
A. Exchanged a car from inventory for a computer owned by Tito Company to be used
as a long-term asset.
Carrying amount of the car 600,000

Listed selling price of the car 950,000
Fair value of the computer 860,000
Cash difference paid by Bailout Company 100,000
B. Exchanged an old packaging machine which cost P1,200,000 and was 50%
depreciated, for new machine owned by Vic Company and paid a cash difference
of P200,000. The fair value of the old packaging machine is determined to be
P700,000 and the list price of the new machine is P1,150,000.
C. Exchanged an old equipment costing P3,000,000 with accumulated depreciation

of P1,800,000 and fair value of P1,000,000 for another used equipment owned by
Joey Company with fair value of P1,200,000. Additional cash was paid by Bailout.
D. Traded in an old machine costing P3,500,000 with carrying amount of P2,000,000

and paid a cash difference of P600,000 for a new machine with cash price of
P2,500,000 owned by Jose Company. The exchange lacks commercial
substance.
E. Issued shares for a parcel of land. The shares had a par value of 1,000,000 and a
fair value P1,500,000. The land was purchased by the owner, Wally Company for
800,000 but currently has a fair value of 1,300,000.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
61.What is the gain on exchange with Tito Company?

a. 350,000
b. 160,000
c. 260,000
d. 110,000
62.What is the cost of the new machine from Vic Company?

a. 900,000
b. 700,000
c. 1,150,000
d. 950,000
63.How much cash was paid by Bailout to Joey Company?

a. 100,000
b. 300,000
c. 150,000
d. 200,000
64.How much is the loss on exchange with Jose Company?

a. 500,000
b. 600,000
c. 100,000
d. 0
65.What is the cost of the land acquired from Wally Company?

a. 1,000,000
b. 1,500,000
c. 800,000
d. 1,300,000
At the beginning of 2023, Jimmy Company purchased a machine for P8,000,000 and
received a government grant of P2,000,000 toward the capital cost.
The machine is to be depreciated on a straight-line basis over 10 years and estimated to

have a residual value of P500,000 at the end of this period. Jimmy did not comply in
2024 and repaid the full amount on January 1, 2025.
66. What is the 2023 depreciation?

a. 550,000
b. 600,000
c. 750,000
d. 800,000
67.What is the 2025 depreciation?

a. 950,000
b. 550,000
c. 750,000
d. 1,150,000
68.What is the 2026 depreciation?

a. 1,350,000
b. 950,000
c. 550,000
d. 750,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
At the beginning of 2023, Darwin Company purchased a plating machine for P5,400,000.
The entity received a government grant of P400,000 and recorded as deferred income.
The machine is to be depreciated under straight-line basis over 10 years. The estimated
residual value is P200,000.
The grant became repayable in full in 2026 for noncompliance.
69.What is the 2023 grant income?

a. 40,000
b. 400,000
c. 80,000
d. 120,000
70.What is the loss in 2026?

a. 400,000
b. 40,000
c. 120,000
d. 280,000
Jonah Company is provided a grant by a foreign government for the purpose of acquiring
land for a building site. The grant is a zero-interest loan for 5 years evidenced by a
promissory note.
The loan was granted on January 1, 2023, for P8,000,000. The market rate of interest is
6%. The present value of 1 for five periods at 6% is .7473.
71.What is the 2023 interest expense?

a. 358,704
b. 480,000
c. 1,600,000
d. 0
72.What is the 2023 grant income?

a. 0
b. 480,000
c. 8,000,000
d. 358,704
Mack Company had the following loans outstanding for the entire year 2021.
Specific construction loan 2,000,000 10%

General loan 10,000,000 12%
The entity began the self-construction of a building on January 1, 2021, and the building
was completed on December 31,2021. 30,000 was earned from the temporary
investment of the excess specific borrowings. The following expenditures were made
during the current year:
January 1 1,000,000
July 1 4,000,000
November 1 3,000,000
Total 8,000,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
73. What is the 2021 capitalized borrowing cost?

a. 380,000
b. 350,000
c. 590,000
d. 620,000
74. What is the 2021 interest expense?

a. 1,200,000
b. 850,000
c. 820,000
d. 1,020,000
Jalen Company had the following outstanding loans during 2021 and 2022.
Specific construction loan 3,000,000 10%

General loan 25,000,000 12%
The entity began the self-construction of a new building on January 1, 2021, and the
building was completed on December 31, 2022. The following expenditures were made:
January 1, 2021 4,000,000

April 1, 2021 5,000,000
December 1, 2021 3,000,000
March 1, 2022 6,000,000

a. 960,000
b. 600,000
c. 900,000
d. 1,260,000
76. What is the 2022 weighted average expenditures?

a. 17,900,000
b. 17,000,000
c. 14,900,000
d. 5,000,000

a. 1,788,000
b. 2,148,000
c. 2,088,000
d. 300,000
Lauren Company purchased a tract of land as a factory site. An old building was
demolished, and construction began on the new building.
Purchase price of land and an old building 4,500,000

Fair value of old building 300,000
Cost of demolishing old building 150,000
Salvage value from scrap 50,000
Title insurance and legal fees to purchase 200,000
land
Architect fee 950,000
New building construction cost 8,000,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Survey before construction 100,000

Building permit or payment to city hall for
approval of building construction 150,000
Excavation before new construction 200,000
Liability insurance during construction 100,000
New fence surrounding the new building 50,000
Driveway, parking bay and safety lighting 350,000
Cost of trees, shrubs and other Landscaping 300,000
Cost of lighting and signage 90,000
Special assessment 20,000
78. What amount should be reported as cost of the land?

a. 4,520,000
b. 4,820.000
c. 4,500,000
d. 4,420,000
79. What amount should be reported as cost of the new building?

a. 9,600,000
b. 9,550,000
c. 9,800,000
d. 9,500,000
80. What amount should be reported as cost of land improvements?

a. 760,000
b. 810,000
c. 790,000
d. 740,000
Jake Company purchased a machine at a cost of P635,000 on January 1, 2021. It was

estimated that the machine would have a residual value of P35,000.
The estimated useful life is 5 years, 60,000 service hours and 150,000 production units.
Actual operations Service Hours Units produced

2021 14,000 34,000
2022 13,000 25,000
2023 10,000 29,000
2024 11,000 32,000
2025 12,000 30,000
81.What is the carrying amount of the machine on December 31, 2023 using straight-
line?
a. 395,000
b. 254,000
c. 275,000
d. 240,000
82.What is the accumulated depreciation on December 31, 2022, using service hours
for depreciation under the output method?
a. 270,000
b. 330,000
c. 440,000
d. 360,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
83.What is the depreciation expense for the year ended December 31, 2024 using units
produced for depreciation under the output method?
a. 128,000
b. 116,000
c. 120,000
d. 100,000
84.During the current year, Christian Company purchased a second-hand machine at a

price of P5,000,000. A cash payment of P1,000,000 was made and a two-year,
noninterest bearing note was issued for the balance of P4,000,000.
Recent transactions involving similar machinery indicate that the used machine has a
fair value of P4,500,000. A new machine would cost P6,500,000. The following
additional cost were incurred:
Cost of removing old machine that is replaced 350,000

Cash proceeds from sale of the old machine replaced 100,000
General overhaul and repairs to recondition
machine prior to use 330,000
Cost of spare parts to cover breakdowns 200,000
Cost of installation 180,000
Cost of testing machine prior to use 150,000
Cost of hauling machine from vendor to entity premises 40,000
Cost of repairing damage to machine caused
when machine was dropped during installation 50,000
Repairs incurred during first year of operations 200,000
Safety device added to the machine 300,000
Cost of training workers to operate the machine 250,000
What total amount should be capitalized as cost of the secondhand machine?

a. 5,500,000
b. 5,000,000
c. 5,750,000
d. 5,200,000
At the beginning of current year, Loi Company acquired the following assets:
Cost Residual Value Useful life

Machinery 310,000 10,000 5
Office equipment 110,000 10,000 10
Building 1,600,000 100,000 15
85.What is the composite life?

a. 8 years
b. 9 years
c. 10 years
d. 11 years
86.What is the composite rate?

a. 11%
b. 10%
c. 9%
d. 8%
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Louise Company purchased a tract of resource land in 2021 for P2,000,000. Exploration
cost was 1,000,000. Development cost was 800,000 and the present value of restoration
cost is 160,000. The content of the tract was estimated at 120,000 units and is expected
to be fully exhausted after 5 years. When the resource has been exhausted, it is estimated
that the land will be worth P120,000.
Building was set up at a cost of P960,000 and heavy equipment was purchased in early
January 2021 for P1,240,000. The useful life of the building is 8 years, and the useful life
of the equipment is 4 years. Both assets have no residual value and have no future use.
Louise uses the double declining method to depreciate equipment.
In 2021, 12,000 units have been extracted and sold. This was one half of the annual
extraction which can be expected after the first year of operations. In 2022, 25,000 units
were extracted but only 20,000 units were sold.
87.How much is depletion in cost of sales in 2022?

a. 384,000
b. 640,000
c. 768,000
d. 800,000
88.What is the building depreciation in 2022?

a. 120,000
b. 200,000
c. 100,000
d. 192,000
89.What is the equipment depreciation in 2022?

a. 258,333
b. 310,000
c. 620,000
d. 248,000
Hilarious Company provided the following data pertaining to a machinery on January 1,

2023, on the date of revaluation:
Cost Replacement cost

Machinery 4,500,000 7,200,000
Accumulated depreciation 900,000
Age of asset 3 years
Useful life 15 years
90.What is the depreciated replacement cost?

a. 7,200,000
b. 5,400,000
c. 5,040,000
d. 5,760,000
91.What is the revaluation surplus on January 1, 2023?

a. 3,600,000
b. 2,160,000
c. 1,440,000
d. 1,800,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
92.What is the revaluation surplus on December 31, 2023?

a. 1,980,000
b. 1,320,000
c. 1,650,000
d. 3,300,000
93.What is the depreciation expense for the year ended December 31, 2023?
a. 600,000
b. 420,000
c. 480,000
d. 450,000
Mayer Company purchased another entity for P4,000,000. The assets and liabilities of
the acquiree at fair value are:
Goodwill 1,000,000
Inventory 500,000
In-Process research and development 5,000,000
Assembled workforce 1,200,000
Accounts payable 2,600,000
Notes payable 400,000
94.How much is the goodwill from acquisition?

a. 2,700,000
b. 1,500,000
c. 4,500,000
d. 0
95.What is the net increase in the assets after the acquisition?

a. 7,000,000
b. 3,000,000
c. 5,500,000
d. 2,000,000
At year-end, Brandy Company has a cash generating unit with the following assets at
carrying amount:
Inventory 200,000
Accounts receivable 300,000
Plant and equipment 6,000,000
Accumulated depreciation 2,600,000
Patent 850,000
Goodwill 100,000
 The accounts receivable are regarded as collectible and the inventory has a fair
value less cost of disposal which is equal to the carrying amount. The patent has
a fair value less cost of disposal of P750,000.
 At year-end, the entity determined the value in use of the unit at P4,050,000.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
96.What is the goodwill impairment loss?

a. 100,000
b. 300,000
c. 400,000
d. 1,000,000
97. Howard Company paid P10,000,000 to purchase the following portfolio of intangibles
with the estimated fair values:
Internet domain name 3,000,000

Order backlog 2,400,000
In-process research and development 4,800,000
Operating permit 1,800,000
In addition, Howard spent P2,000,000 to run an advertising campaign to boost its

image in the local community. How much should be recognized as cost of acquired
in-process research and development?
a. 6,000,000
b. 4,800,000
c. 5,600,000
d. 4,000,000
98. The owners of Collins Company are planning to acquire a new business in the same
industry that it operates in. The cumulative net earnings for the past 3 years of a certain
company was P7,000,000, however, this figure included a casualty loss of P500,000.
The current value of net assets of this Company is P22,000,000. Goodwill is
determined by capitalizing average earnings at 10%. How much is the goodwill to be
recognized in the acquisition by Collins?
a. 1,800,000
b. 1,333,333
c. 3,000,000
d. 1,250,000
99.During 2023, Arthur Company developed a new product to be marketed beginning

January 1, 2024. The costs are expected to be recovered by December 31, 2026:
Research and development costs 400,000

Equipment acquired with an alternative future use 1,000,000
Materials and supplies consumed 550,000
Compensation paid to research consultants 200,000
How much cost incurred should be charged to expense in 2023?

a. 950,000
b. 1,400,000
c. 2,150,000
d. 1,150,000
- - END - -

FAR Pre-Week Part 1

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

FAR Pre-Week Part 1

Uploaded by

Copyright:

Available Formats

No. 125 Brgy.

FINANCIAL ACCOUNTING AND REPORTING May Exam 2023

1. Mitch Corporation’s trial balance contained the following account balances on

Accumulated Depreciation-Equipment 800,000

Net income 5,000,000

What should Roman report as comprehensive income?

7. Ramon Company, a major winery, begins construction of a new facility in Mindanao.

Production equipment 4,500,000

What portion of these expenditures is classified as organization costs?

Division Operating Profit (Loss)

What is the minimum profit to be considered as a reportable segment?

On December 31, 2022, Harbor. Company provided the following data:

Cash in bank 3,000,000

 The cash in bank included NSF customer check of P200,000

9. What is the total cash?

10.What is the total cash equivalents?

 The cash balance per book on June 30 is P8,500,000.

11.What is the adjusted balance of cash?

12.What is the net adjustment in the books for cash?

The following transactions occurred in summary form:

1. Sale of merchandise on account, 4,000,000

13.What is the net sales?

14.What is the NRV of the accounts receivable?

15.What is the total invoice price?

16.What is the collection if Romelia collects on June 25, 2022?

17.What is the gain on sale?

18.What is the 2022 interest income?

19.What is the required allowance under aging method?

20.What is the doubtful accounts expense?

21.What is the NRV of the accounts receivable?

PV of 1 at 8% for 5 periods .68

23.What is the 2023 interest income?

24.What is the current notes receivable on December 31, 2023?

Spirit Company provided the following transactions:

May 1 Spirit Company assigned P800,000 of accounts receivable to a

A cash advance of 80% less service charge of P20,000 was made

It was agreed that interest of 2% per month is to be made and that

May 5 The entity issued a credit memo to a customer for returned

25.What is the balance of the note on June 1?

27.What is the final settlement amount including interest?

28.What is the proceeds from discounting?

29.What is the loss on discounting?

30.What is the proceeds from discounting?

5. An invoice for P140,000, FOB destination, was received and recorded

32.What is the adjusted inventory on December 31, 2023?

33.What is the adjusted accounts payable on December 31, 2023?

Units Unit cost Total cost

34.What cost flow method was used for schedule 1?

35.What cost flow method was used for schedule 2?

36.How much is the ending inventory using FIFO?

37.How much is the ending inventory using average?

38.What is the loss on inventory writedown under the allowance method?

39.What is the carrying amount of inventory if LCNRV is applied to each individual

Inventory - January.1 650,000

Beginning inventory 650,000

45.Lettterman Company used the average cost retail inventory method.

What amount should be reported as cost of ending inventory?

46.How much was recognized in 2022 profit or loss?

47.How much was recognized in 2022 comprehensive income?

Hannibal Company acquired the following equity securities:

December 31, 2021 Cost Market

December 31, 2022

2. Exercised 30,000 rights.