Far Mock Board

Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao
Since 1977
Financial Accounting and Reporting

FINAL EXAM
Multiple Choice. Select the letter that corresponds to the best answer. This examination consists
of 70 items only. Believe on what you can do, always bear on your mind that you can answer
everything to the best that you can. Always observe HONESTY. GODBLESS!
1. Which statement is correct regarding the Philippine Interpretations Committee (PIC) and its
Interpretations (Q&As)?
A. The consensus in PIC Q&As normally takes effect upon approval of the PIC.
B. PIC Q&As are less authoritative than PFRSs.
C. PIC Q&As are more authoritative than IFRIC Interpretations.
D. Generally, the draft of PIC Q&As are not circulated to the public for comment.
2. The accountant of Acceptance Company made the following adjusting entry on December 31.
Rent Income P60,000

Unearned Rent Income P60,000
If annual rent is received in advance every June 1, the original transaction entry made included
a credit to
A. Rent income, P120,000.
B. Rent income, P144,000.
C. Unearned rent income, P120,000.
D. Cash, P144,000.
3. Which statement is correct regarding rights that have the potential to produce economic
benefits?
A. All rights are established by contract, legislation or similar means.
B. All of an entity’s rights are assets of that entity.
C. An entity cannot have a right to obtain economic benefits from itself.
D. Rights that have the potential to produce economic benefits cannot be uncertain.
4. In accordance with the Conceptual Framework, the amount at which an asset, a liability or
equity is recognized in the statement of financial position is referred to as its
a. Cost
b. Fair value
c. Carrying amount
d. Book value
5. Which of the following best describes the purpose of disclosure notes in the financial
statements?
a. To provide more detail for the users of accounts about the information in the main financial
statements.
b. To allow companies to present their financial results in a more favorable way by only
disclosing some things in the notes and not on the main financial statements.
c. To give all the detail of all the transactions that occurred during the period because the main
financial statements only present a summary.
d. To explain the accounting treatment adopted where management have chosen not to apply
PFRSs.
6. In accordance with PAS 1, if the going concern basis is no longer appropriate, an entity should
a. Continue to prepare financial statements on going concern basis provided that this fact is
disclosed.
b. Prepare financial statements using the break-up basis.
c. Prepare financial statements on a basis consistent with PFRSs but modified to reflect the fact
that the going concern assumption is no longer appropriate.
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EXCEL PROFESSIONAL SERVICES, INC.
d. Consider PAS 8 in selecting and applying accounting policies that will provide the most
relevant and reliable financial information.
7. Which of the following subsequent events (events after the reporting date) would require
adjustment of the accounts before issuance of the financial statements?
a. Loss of plant as a result of fire
b. Changes in the quoted market prices of securities held as an investment
c. Loss on an uncollectible account receivable resulting from a customer’s major flood loss
d. Loss on a lawsuit, the outcome of which was deemed uncertain at year end.
8. Justice Inc. furnishes you with the following list of accounts:
Accounts payable P 66,000

Accounts receivable 40,000
Accumulated depreciation 44,000
Advances to sales persons 10,000
Advertising Expense 72,000
Allowance for Bad Debts 10,000
Bonds payable 80,000
Cash 22,000
Certificates of deposit 16,000
Share capital, (par) 100,000
Deferred income tax liability 46,000
Equipment 215,500
Inventory 55,000
Investment in X Co. shares
(20% of outstanding shares owned) 76,500
Investment in Y Co. shares
(trading securities) 21,000
Share premium 42,500
Premium on Bonds Payable 6,000
Prepaid Insurance 6,000
Rent revenue 37,000
Rent revenue received in advance (4 months) 12,000
Retained earnings 97,500
Taxes payable 10,000
Tools 52,000
The company’s working capital is

A. P72,000 C. P62,000
B. P66,000 D. P46,000
Use the following information for the next two questions.

The accounts below were taken from the unadjusted trial balance of VECO Co. as at December 31,
2023:
Cash P124,000
Investment in shares, at cost 87,000
Notes receivable 92,000
Trade accounts receivable 122,000
Allowance for doubtful accounts 6,000
Merchandise inventory 136,000
Notes payable 150,000
Trade accounts payable 75,000
Employees’ income tax withheld 4,000
Bonds payable 250,000
Share dividends payable 15,000
Income tax payable 28,000
Analysis of the above accounts disclosed the following:
 Bank overdraft of P13,000 was deducted from cash balance.

 Trade accounts receivable was net of customers’ deposit of P7,000.
 Merchandise worth P15,000 received December 30, 2023 was included in the inventory but was
not recorded as a purchase.
 Accounts payable was net of accounts with debit balance of P12,000.
 A bank loan of P30,000 due December 31, 2025 was included in the notes payable balance.
 Bonds payable which was issued in 2023 will mature in five annual installments beginning June
1, 2024.
 Investment in shares consists of 10,000 ordinary shares with published price quotation at
December 31, 2023 of P9 per share. These shares are designated as FVTOCI and the entity
expects to sell these in 2024.
QUESTIONS:
Compute for the following at December 31, 2023:
9. Total current assets

a. P590,000 c. P605,000
b. P598,000 d. P587,000
10. Total current liabilities

a. P272,000 c. P324,000
b. P289,000 d. P339,000

Jimmy Company’s income statement for the year ended December 31, 2023 reported net profit of
P10,000,000. The auditor raised questions about the following amounts that had been included in
the net profit:
Unrealized loss on decline in value of FA at FVTOCI P 500,000

Loss on write-off of inventory due to a government ban net of tax 1,500,000
Adjustment of profit of prior year net-debit 2,000,000
Loss from expropriation of property, net of tax 3,500,000
Exchange differences gain on translating foreign operations 4,500,000
Revaluation surplus realized 1,000,000
Equity in earnings of Joni Corp. 600,000
Dividends received from Joni Corp. 300,000
Defined benefit expense 800,000
Additional information:
 The loss from expropriation was unusual in occurrence in Jimmy’s line of business.
 Jimmy owns 20% of Joni's ordinary shares.
 Defined benefit expense includes: Service cost, P500,000; Interest cost, P200,000; Actuarial
loss on defined benefit obligation, P100,000.
11. Jimmy Company’s 2023 statement of comprehensive income should report profit of
a. P7,000,000 c. P6,700,000
b. P6,800,000 d. P6,600,000
12. Jimmy Company’s 2023 statement of comprehensive income should report total comprehensive
income of
a. P10,800,000 c. P10,600,000
b. P10,700,000 d. P 3,900,000
13. The following information relates to the activities of Jumong Inc. Income tax may be
ignored.
Net cash inflows from operating activities P720,000
Decrease in trade payables 23,000

Decrease in inventory 11,500
Increase in trade receivables 24,600
Cash proceeds from sale of plant
(book value of P25,000) 14,000
Increase in allowance for doubtful debts 1,000
What is the profit for the period?

a. P698,100 c. P744,100
b. P730,100 d. P767,100
14. An entity’s income statement for the year ended Dec. 31, 2023, reported net income of
P360,000. The financial statements also disclosed the following information:
Amortization P 20,000
Depreciation 60,000
Increase in accounts receivable 140,000
Increase in inventory 48,000
Decrease in accounts payable 76,000
Increase in salaries payable 28,000
Dividends paid 120,000
Purchase of equipment 150,000
Increase in long-term note payable 300,000
Net cash provided by operating activities for 2023 should be reported as

a. P 84,000 c. P234,000
b. P204,000 d. P324,000
15. Las Piñas Corporation’s accountant is attempting to determine the amount of cash to be
reported on its December 31, 2023 statement of financial position. The following information is
provided:
1. Commercial savings account of P1,200,000 and a commercial checking account balance of
P1,800,000 are held at PS Bank.
2. Travel advances of P360,000 for executive travel for the first quarter of the next year
(employee to reimburse through salary deduction).
3. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a long-
term debt.
4. Petty cash fund of P10,000.
5. An I.O.U. from a company officer in the amount of P40,000.
6. A bank overdraft of P250,000 has occurred at one of the banks the company uses to deposit
its cash receipts. At the present time, the company has no deposits at this bank.
7. The company has two certificates of deposit, each totaling P1,000,000. These certificates of
deposit have maturity of 120 days.
8. Las Piñas has received a check dated January 2, 2024 in the amount of P150,000.
9. Las Piñas has agreed to maintain a cash balance of P200,000 at all times at PS Bank to
ensure future credit availability.
10. Bills and coins on hand amounted to P15,000.
11. Cryptocurrencies valued at P100,000.
How much will be reported as cash and cash equivalents at December 31, 2023?
a. P2,575,000 c. P3,025,000
b. P2,825,000 d. P5,025,000
16. The books of Manila's Service, Inc. disclosed a cash balance of P687,570 on December 31,
2023. The bank statement as of December 31 showed a balance of P547,800. Additional
information that might be useful in reconciling the two balances follows:
(a) Check number 748 for P30,000 was originally recorded on the books as P45,000.
(b) A customer's note dated September 25 was discounted on October 12. The note was
dishonored on December 29 (maturity date). The bank charged Manila's account for
P142,650, including a protest fee of P2,650.
(c) The deposit of December 24 was recorded on the books as P28,950, but it was actually a
deposit of P27,000.
(d) Outstanding checks totaled P98,850 as of December 31.
(e) There were bank service charges for December of P2,100 not yet recorded on the books.
(f) Manila's account had been charged on December 26 for a customer's NSF check for P12,960.
(g) Manila properly deposited P6,000 on December 3 that was not recorded by the bank.
(h) Receipts of December 31 for P134,250 were recorded by the bank on January 2.
(i) A bank memo stated that a customer's note for P45,000 and interest of P1,650 had been
collected on December 27, and the bank charged a P360 collection fee.
Adjusted cash in bank balance is

a. P512,400 c. P583,200
b. P577,200 d. P589,200
17. The Roopun Corporation started its business on January 1, 2023. After considering the
collections experience of other companies in the industry, Roopun Corporation established an
allowance for bad debts estimated to be 5% of credit sales.
Further analysis of the company’s accounts showed that merchandise purchased in 2023
amounted to P2,250,000 and ending merchandise inventory was P375,000. Goods were sold at
40% above cost.
80% of total sales were on account. Total collections from customers, on the other hand,
excluding proceeds from cash sales, amounted to P1,500,000. Accounts written off during 2023
totaled P12,500.
The net realizable value of accounts receivable as of December 31, 2023 is

a. P495,000 c. P512,500
b. P993,750 d. P875,000
18. Caring Bank granted a loan to a borrower on Jan. 1, 2023. The interest rate on the loan is
10% payable annually starting Dec. 31, 2023. The loan matures in five years. The data related
to the loan are:
Principal amount P4,000,000

Direct loan origination cost 61,520
Indirect loan origination cost 26,400
Origination fees received from borrower 350,000
Fees received from borrower for servicing the loan 15,000
How much is the net amount to be recognized in Caring Bank’s 2023 profit or loss related to this
loan?
A. P445,382 C. P428,600
B. P433,982 D. P418,982
19. Graciousness Company provides financing to other companies by purchasing their accounts
receivable on a nonrecourse basis. Graciousness charges its clients a commission of 15% on all
receivable factored. In addition, Graciousness withholds 10% of receivables factored as
protection against sales returns or other adjustments. Experience has led Graciousness to
establish an allowance for bad debts of 4% of all receivables purchased.
On January 15, Graciousness purchased receivables from Respect Company totaling

P1,500,000. Respect had previously an allowance for bad debts for these receivables at
P35,000. By January 31, Graciousness had collected P1,200,000 on these receivables. What is
the loss on factoring to be recognized by Respect Company?
A. P190,000 C. P375,000
B. P225,000 D. P 0
20. On Jan. 1, 2023, an entity purchased a debt instrument at its face value of P1,000,000. The
contractual term is ten years with an annual coupon of 6%. On Dec. 31, 2022, the fair value of
the instrument decreases to P955,000. 12-month expected credit losses as determined under
the impairment model are P25,000.
Which statement is correct?

A. If the debt instrument is classified as FA at FVTPL, net amount to be recognized in 2023
profit or loss is P35,000.
B. If the debt instrument is classified as FA at FVTOCI, the amount to be recognized in 2023
other comprehensive income is P45,000.
C. If the debt instrument is classified as FA at AC, the amount to be reported on the entity’s
Dec. 31, 2023 statement of financial position is P975,000.
D. None of these.
21. When is the difference (‘day 1’ gain or loss) between the fair value measured by the entity
and the transaction price deferred as an adjustment to the carrying amount of the financial
instrument?
A. If the fair value is measured by a quoted price in an active market.
B. If the fair value is based on a valuation technique that uses only data from observable
markets.
C. If the fair value is not measured in either A or B.
D. If the fair value is measured in either A or B.

Both Rian Inc. and Bryan Corp. have 100,000 shares of no-par ordinary shares outstanding.
Friendliness Inc. acquired 10,000 shares of Rian for P6 per share and 25,000 shares of Bryan for
P10 per share on January 1, 2022. Changes in retained earnings for Rian and Bryan for 2022 and
2023 are as follows:
Rian Inc. Bryan Corp.

Retained earnings, (deficit), Jan. 1, 2022 P200,000 P(35,000)
Cash dividends, 2022 (25,000) -
P175,000 P(35,000)
Net income, 2022 40,000 65,000
Retained earnings, Dec. 31, 2022 P215,000 P30,000
Cash dividends, 2023 (30,000) (10,000)
Net income, 2023 60,000 25,000
Retained earnings, Dec. 31, 2023 P245,000 P 45,000
Fair value of shares:
December 31, 2022 P 7.00 P 12.00
December 31, 2023 7.50 11.00
22. The total amount to be recognized by Friendliness Inc. in its 2023 profit or loss related to
these investments is
A. P 9,250 C. P14,250
B. P12,450 D. P24,250
23. The carrying amount of Investment in Bryan Corp. as of December 31, 2023 is
A. P275,000 C. P261,250
B. P270,000 D. P253,750
24. Imaginative Corp. established a savings account for building construction by making annual
deposits of P800,000 at the beginning of each of six years to a savings account paying 8%. At
the end of the sixth year, the account balance was transferred to a bank paying 10%, and
annual deposits of P800,000 were made at the end of each year from the seventh through the
tenth years. What was the account balance at the end of the tenth year?
A. P12,992,617 C. P12,228,056
B. P12,305,193 D. P11,589,274
25. Designation as a financial asset at fair value through other comprehensive income applies to
a. Debt investments
b. Equity investments
c. Both a and b
d. Neither a nor b
26. Presented below is a list of items that may or may not be reported as inventory in a company’s
December 31 statement of financial position.
a) Goods purchased FOB shipping point (in transit) P120,000

b) Goods purchased FOB destination (in transit) 200,000
c) Freight charges on goods purchased 80,000
d) Materials on hand not yet placed into production 350,000
e) Factory supplies 20,000
f) Office supplies 10,000
g) Interest cost incurred for inventories that are routinely manufactured 40,000
h) Costs identified with units started but which are not yet completed 280,000
i) Costs identified with units completed but not yet sold 310,000
j) Goods out on consignment at another company’s store 800,000
k) Goods held on consignment from another company 450,000
l) Goods sold on installment basis 100,000
m) Goods sold to another company, for which the company has signed an
agreement to repurchase at a set price that covers all costs related to
the inventory 300,000
n) Goods sold FOB seller (in transit) 120,000
o) Goods sold FOB buyer (in transit) 40,000
p) Costs incurred to advertise goods held for resale 20,000
q) Securities acquired for the purpose of selling in the near term 500,000
r) Equipment held for sale in accordance with PFRS 5 80,000
s) Cryptocurrencies that are not held for sale in the ordinary course of
business nor for investment purposes. 180,000
How much of these items would typically be reported as inventories in the statement of financial
position?
a. P2,300,000 c. P2,220,000
b. P2,260,000 d. P2,000,000
27. Courage Corp. uses the perpetual inventory system. The entity’s inventory transactions for
the month of August were as follows:
Total
No. Unit cost cost
01 Aug. Beg. inventory 20 P4.00 P80.00
07 Aug. Purchases 10 4.20 42.00
10 Aug. Purchases 20 4.30 86.00
12 Aug. Sales 15 ? ?
16 Aug. Purchases 20 4.60 92
20 Aug. Sales 40 ? ?
28 Aug. Sales returns 3 ? ?
Assuming that the entity uses the weighted average cost flow method, the 12 August sales
should be costed at what unit cost?
A. P4.16 C. P4.07
B. P4.30 D. P4.60
28. On August 15, 2023, a typhoon damaged a warehouse of Contentment Merchandise

Company. The entire inventory and many accounting records stored in the warehouse were
completely destroyed. Although the inventory was not insured, a portion could be sold for
scrap. Through the use of the remaining records, the following data are assembled:
Inventory, January 1 P 375,000

Purchases, January 1-August 15 1,385,000
Cash sales, January 1-August 15 225,000
Collection of accounts, Jan. 1-Aug. 15 2,115,000
Accounts Receivable, January 1 175,000
Accounts Receivable, August 15 265,000
Salvage value of inventory 5,000
Gross profit percentage on sales 32%
Compute the inventory loss as a result of the typhoon.

A. P107,600 C. P102,600
B. P104,200 D. P255,600
29. Cooperation Corp. values its inventory by using the retail method (FIFO basis, lower of cost
or NRV). The following information is available for the year just ended:
Cost Retail
Beginning P 80,000 P140,000
inventory
Purchases 297,000 420,000
Freight-in 4,000 -
Breakage 8,000
Markups (net) 10,000
Markdowns (net) 2,000
Sales 400,000
At what amount would Cooperation report its ending inventory?

A. P112,000 C. P117,600
B. P113,400 D. P119,000
30. Which of the following activities involving living animals or plants are agricultural activities?
I. Harvesting from unmanaged sources
II. Managing recreational activities
III.Development of organisms for research purposes
A. I, II and III
B. II and III only
C. III only
D. None of these
31. Determination Corp. is engaged in raising dairy livestock. Data provided in 2023 follows:
Carrying amount on Dec. 31, P2,500,000; Increase due to purchases, P1,000,000; Gain arising
from change in fair value less costs to sell attributable to price change, P200,000; Gain arising
from change in fair value less costs to sell attributable to physical change, P300,000; Decrease
due to sales, P400,000; Decrease due to harvest, P100,000.
The carrying amount of the biological assets of Determination Corp. on Jan. 1, 2023 is
a. P1,000,000 c. P1,500,000
b. P1,400,000 d. P3,500,000
32. Items such as spare parts, stand-by equipment and servicing equipment that do not meet
the definition of property, plant and equipment are classified as
A. Investment property
B. Intangible assets
C. Inventory
D. Noncurrent assets held for sale
33. When assessing whether an item of property, plant and equipment is functioning properly,
an entity assesses
A. The technical and physical performance of the asset.
B. The financial performance of the asset.
C. Both A and B.
D. Neither A nor B.
34. Candon, Inc. completed the construction of a building at the end of 2021 for a total cost of
P20 million. The building is estimated to be economically useful for 25 years. The building was
constructed for the purpose of earning rentals under operating leases. The tenants began
occupying the building after its completion. The company opted to use the fair value model to
measure the building. An independent valuation expert was engaged by the entity to estimate
the fair value of the building on an annual basis. According to the expert the fair values of the
building at the end of 2021, 2022 and 2023 were P22 million, P24 million and 25 million,
respectively.
The entity’s business expanded in 2022. As a result, the entity started to use the building in its
operations on Jan. 1, 2023. Because of the change in use, the entity reclassified the building
from investment property to property, plant and equipment.
How much is the carrying amount of the building on Dec. 31, 2023?
a. P24,000,000 c. P23,000,000
b. P23,040,000 d. P21,120,000
35. Bubblegum Company takes a full year’s depreciation in the year of an assets acquisition, and
no depreciation in the year of disposition. Data relating to one depreciable asset acquired in
2021, with residual value of P400,000 and estimated useful life of 8 years, at December 31,
2022 are:
Cost P5,400,000
Accumulated depreciation 2,362,500
Using the same depreciation method in 2021 and 2022, how much depreciation should
Bubblegum record in 2023 for this asset?
A. P625,000 C. P659,375
B. P703,125 D. P759,375

On May 31, 2023, the Portland Co. acquired the rights to a coal mine containing an estimated
reserves of 1,000,000 tons of coal. The company estimated that 12,500 tons of coal would be
extracted and sold each month. Cost allocable to coal was P3,500,000.
Also on May 31, 2023, the company purchased an equipment to be used in the production, costing
P95,000 which has an estimated useful life of 10 years. The equipment was expected to become
obsolete after all the coal deposits had been extracted from the mine and only P5,000 selling price
of the equipment could be expected. Production was in full blast since June 1, 2023.
36. What would be the depletion expense for the year ended December 31, 2023?
a. P525,000 c. P153,125
b. P262,500 d. P306,250
37. What would be the depreciation expense on the new equipment for the year ended
December 31, 2023?
a. P9,000 c. P7,875
b. P4,500 d. P8,313
38. Penny Lane Company had purchased equipment for P10,000,000, on January 1, 2021. The
equipment had a 5-year life and a salvage value of 10%. Penny Lane Company depreciated the
equipment using the straight-line method. On December 31, 2023, Penny Lane had doubts on
the recoverability of the carrying amount of this equipment. On December 31, 2023, the
discounted expected net future cash inflows related to the continued use and eventual disposal
of the equipment totaled P4,300,000. The equipment’s fair value less costs of disposal on
December 31, 2023 is P4,500,000. After any loss on impairment has been recognized, what is
the carrying amount of the equipment?
a. P4,600,000 c. P4,300,000
b. P4,500,000 d. P4,000,000
39.An entity accounts for non-current assets using the cost model. On Oct. 31, 2023, the entity
classified a non-current asset as held for sale in accordance with PFRS 5. At that date the asset's
carrying amount was P15,000,000, its fair value was estimated at P11,000,000 and the costs to
sell at P1,500,000. On Nov. 20, 2023, the asset was sold for net proceeds of P9,200,000.
In accordance with PFRS 5, what amount should be included as a loss on disposal in the entity’s
statement of comprehensive income for the year ended Dec. 31, 2023?
a. P 300,000 c. P5,500,000
b. P1,800,000 d. P5,800,000
40. On January 1, 2021, Fairness Inc. purchased a patent with a cost P1,160,000, a useful life of
5 years. The company uses straight-line depreciation. At December 31, 2022, the company
determines that impairment indicators are present. The fair value less costs of disposal of the
patent is estimated to be P540,000. The patent's value-in-use is estimated to be P565,000.
The asset's remaining useful life is estimated to be 2 years.
Fairness Inc.’s 2023 income statement will report amortization expense for the patent of
A. P188,333 C. P282,500
B. P232,000 D. P595,000
41. Warhead Company had loans outstanding during 2022 and 2023.
Specific construction loan 2,000,000 10%

General loan 2,500,000 12%
The entity began the self-construction of a new building on January 1, 2022 and the building was
completed on December 31, 2023.
Expenditures during 2022 and 2023 were:
January 01, 2022 2,000,000

July 01, 2022 4,000,000
November 01, 2022 3,000,000
July 01, 2019 1,000,000
What is the cost of the new building on December 31, 2023?

A. P10,000,000 C. P11,700,000
B. P11,660,000 D. P11,500,000
42. Other things being equal, most managers would prefer to report liabilities as noncurrent rather
than current. The logic behind this preference is that the long-term classification permits the
company to report:
A. Higher working capital and a higher inventory turnover.
B. Lower working capital and a higher current ratio.
C. Higher working capital and a higher current ratio.
D. Higher working capital and a lower debt to equity ratio.
43. The Generous Corporation’s president has a profit-sharing agreement with the company.
The agreement states that the president is to receive a bonus consisting of a basic amount
equivalent to 10% of the company’s net income before deduction of bonus but after deduction
of income tax. In addition, the basic bonus shall be increased by the company’s tax savings on
bonus because the total amount of bonus is deductible in computing the company’s taxable
income. The company registered a net income of P5,000,000 before deduction of the
president’s bonus and income tax. The company is subject to corporate income tax of 30%.
The total bonus due to the president is
A. P522,388 C. P339,806
B. P360,825 D. P263,158
44. A debt instrument with NO ready market is exchanged for property whose fair value is
currently indeterminable. When such a transaction takes place:
A. The present value of the debt instrument must be approximated using an imputed interest
rate
B. It should not be recorded on the books of either party until the fair value of the property
becomes evident
C. The board of directors of the entity receiving the property should estimate a value to be
signed to the will serve as a basis for the transaction
D. The directors of both entities involved in the transaction should negotiable a value to be
assigned to the property
45. Bloy Company pays all salaried employees on a biweekly basis. Overtime pay however is
paid in the next biweekly period. The entity accrues salaries expenses only at the
December 31 year end.
Data relating to salaries earned in December 2023 are:
Last payroll was paid on December 26,2023 for the 2 week period ended December 26,
2023.
Overtime pay earned for the 2 week period ended December 26,2023 was P420,000
Remaining work days in 2023 were December 29,30 and 31 on which days there was no
overtime.
The recurring biweekly salaries totaled P7, 500,000.
Assuming a 5days work week, what amount should be recorded as accrued salaries payable
on December 31,2023?
a. P2,670,000 c. P2,250,000
b. P4,500,000 d. P4,920,000
46. On December 31, 2023, Merciful Bank entered into a debt restructuring agreement with
Floreza Corp., which was experiencing financial difficulties. A note for P1,000,000 and one
year's accrued interest was due on this date from Floreza. The note receivable from Floreza
was restructured as follows:
 reduced the principal obligation to P700,000.
 forgave the P120,000 of accrued interest for 2020.
 extended the maturity date to December 31, 2026.
 reduced the interest rate to 8%.
Interest is payable annually on December 31, beginning 2024. In accordance with the
agreement, Floreza made payment to Merciful Bank on December 31, 2024.
How much interest expense should Floreza report for the year ended December 31, 2024?
A. P75,931 C. P56,000
B. P64,258 D. P 0
47. On January 1, 2022, Perez Corporation issued 5,000 of its 5-year, P1,000 face value, 11%
bonds dated January 1 at an effective annual interest rate (yield) of 9%. Interest is payable
each December 31. Perez uses the effective interest method of amortization. On December 31,
2023, the 3,000 bonds were extinguished early through acquisition in the open market by Perez
for P2,970,000 plus accrued interest. Determine the Gain on early retirement of bonds on
December 31, 2023
a. Nil c. P181,785
b. P116,442 d. P266,811
48. On January 2, 2022, the Mauban, Inc. issued P2,000,000 of 8% convertible bonds at par.
The bonds will mature on January 1, 2026 and interest is payable annually every January 1.
The bond contract entitles the bondholders to receive 6, P100 par value, ordinary shares in
exchange for each P1,000 bond. On the date of issue, the prevailing market interest rate for
similar debt without the conversion option is 10%.
On January 1, 2026, the holders of the bonds with total face value of P1,000,000 exercised their
conversion privilege. On that date, the bonds were selling at 110 and the ordinary share at
P42. 35.
The interest expense for the year 2023 is

a. P138,940 c. P179,617
b. P160,000 d. P190,050
49. PFRS 16 applies to contracts that

a. Convey the right to use an underlying asset for a period of time.
b. Transfer control of the underlying asset to an entity.
c. Both a and b.
d. Neither a nor b.
50. Occidental Company leased an equipment from Mindoro Company on Jan. 1, 2023 for a 10-
year period. Equal payments under the lease are P2,000,000 and are due on Jan. 1 of each year
beginning Jan. 1, 2023. The rate of interest contemplated is 10%. The present value of the
lease payments discounted at 10% is P13,518,000. The cost of the equipment on Mindoro’s
accounting records is P12,000,000. The equipment will revert to Mindoro at the end of the lease
term and its unguaranteed residual value is P1,000,000 with a present value of P386,000.
Mindoro incurred direct costs of P250,000 in negotiating the lease. The finance lease is
appropriately recorded as a sales type lease. What is the total finance income to be earned by
Mindoro Company during the lease term?
a. P8,364,000 c. P7,096,000
b. P6,482,000 d. P6,096,000
51. Jessie Co. sponsors a defined benefit pension plan. For the current year ended December
31, the following information relevant to the plan has been accumulated:
Defined benefit obligation, 1/1 P10,000,000

Fair value of plan assets, 1/1 9,000,000
Current service cost 3,000,000
Gain on settlement 500,000
Actual return on plan assets 630,000
Increase in defined benefit obligation due to changes in actuarial
assumptions 800,000
Market yield on high quality corporate bonds 6%
Yield on bonds issued by the entity 8%
Expected return on plan assets 9%
What amount should Jessie contribute in order to report an accrued pension liability of P500,000
in its December 31 statement of financial position?
a. P2,060,000 c. P3,060,000
b. P2,770,000 d. P3,770,000
52. At the beginning of year 1, Addo Corporation grants 100 share options to each of its 200
employees. Each grant is conditional upon the employee remaining in service over the next
three years. The entity estimates that the fair value of each option is P21. On the basis of a
weighted average probability, the entity estimates that 60 employees will leave during the
three-year period and therefore forfeit their rights to the share options.
Suppose that 15 employees leave during year 1. Also suppose that by the end of year 1, the
entity’s share price has dropped, and the entity reprices its share options, and that the repriced
share options vest at the end of year 3. The entity estimates that a further 35 employees will
leave during years 2 and 3. During year 2, a further 10 employees leave, and the entity
estimates that a further 10 employees will leave during year 3. During year 3, a total of 8
employees leave.
The entity estimates that, at the date of repricing, the fair value of each of the original share
options granted (ie before taking into account the repricing) is P10 and that the fair value of
each repriced share option is P13.
The amount to be recognized as expense in year 3 is

A. P400,800 C. P150,750
B. P136,800 D. P145,050
53. On Nov. 7, 2023 local residents sued Brimley Corporation for excess chemical emissions that
caused some of them to seek medical attention. The total lawsuit is P8,000,000. Brimley
Corporation's lawyers believe that the lawsuit will be successful and that the amount to be paid
to the residents will be P4,000,000. On its Dec. 31, 2023 financial statements Brimley should:
a. Accrue a provision loss of P8,000,000 with no financial statement disclosure necessary.
b. Accrue a provision loss of P4,000,000 and note disclose.
c. Do nothing as the lawsuit has not yet ended.
d. Simply disclose the details regarding the lawsuit in a note.
54. An entity has the following assets and liabilities in its statement of financial position at Dec.
31, 2023:
Property P10,000,000
Plant and equipment 5,000,000
Inventory 4,000,000
Trade receivables 3,000,000
Trade payables 6,000,000
Cash 2,000,000
The value for tax purposes of property and for plant and equipment are P7 million and P4
million respectively. The entity has made a provision for inventory obsolescence of P2 million,
which is not allowable for tax purposes until the inventory is sold. Further, an impairment
charge against trade receivables of P1 million has been made. This charge does not relate to
any specific trade receivable but to the entity’s collective assessment of the overall collectability
of the amount. This charge will not be allowed in the current year for tax purposes but will be
allowed in the future. Income tax paid is at 25%.
The deferred tax expense for 2023 is

a. P250,000 c. P1,000,000
b. P750,000 d. P1,500,000
55. XYZ issues a P10 million note with no maturity date that is redeemable at the discretion of
the issuer, but can be converted by the holder for 10 million ordinary shares of XYZ at any time.
According to PAS 32, XYZ should classify the instrument as which one of the following?
a. Equity because the holder is exposed to changes in the fair value of the issuer’s shares
b. A liability because the holder is exposed to changes in the fair value of the issuer’s shares
c. Equity because the holder is not exposed to changes in the fair value of the issuer’s shares
d. A liability because the holder is not exposed to changes in the fair value of the issuer’s
shares
56. The total carrying amount of equity will generally equal:

a. The aggregate market value of equity claims on the entity.
b. The amount that could be raised by selling the entity as a whole on a going concern basis.
c. The amount that could be raised by selling all of the entity’s assets and settling all of its
liabilities.
d. None of these.
57. Which of the following should be presented in the statement of changes in equity?
a. For each component of equity, the effects of retrospective restatement recognized in
accordance with PAS 8.
b. For each component of equity, an analysis of other comprehensive income by item.
c. The amount of dividends recognized as distributions to owners during the period and the
related amount of dividends per share.
d. All of these.
58. An entity is considering the proper accounting for these contracts:

 The entity issued 100,000 warrants for P2 each. Each warrant gives the holder the right to
acquire one new P10 ordinary share for P50 during the next four years. The market value of
each warrant at the end of the reporting period is P5.
 At the end of the reporting period, the entity purchased a call option that gives it the right to
repurchase 10,000 of its own shares for a fixed price of P60 per share. The entity paid
P60,000 for these options.
 At the end of the reporting period, the entity entered into a forward contract that requires it
to repurchase 2,000 of its own shares for P120,000 at the end of the next accounting period.
No consideration is paid or received at the inception of the contract. The market interest
rate is 10% on the date of agreement.
 At the end of the reporting period, the entity entered into a non-derivative contract to deliver
to another entity as many of the entity’s own ordinary shares as will equal P100,000. This
contract is to be settled one month from the date of agreement.
At the end of the reporting period, the net increase in the entity’s equity as a result of these
contracts is
a. P 30,908 c. P140,000
b. P130,908 d. P330,908
59. The following information relate to an entity’s equity transactions for the year ended
December 31, 2023:
 Received P100,000 from the issuance of a call option that gives the holder the right to
purchase 10,000 shares of the entity for a fixed price of P100 per share. Fair value of the
option at December 31 is P110,000.
 On December 31, 2023, the entity enters into a forward contract that requires the entity to
repurchase its own shares for P60,000 on December 31, 2024. No consideration is paid or
received at the inception of the contract. The market interest rate is 10% on December 31,
2023 and expected to be 12% on December 31, 2024.
The net increase of these transactions on the entity’s equity for the year ended December 31,
2023 is
a. P40,000 c. P 55,454
b. P45,454 d. P100,000
60. The following balances are shown in the shareholders' equity of Vaz Company on Dec. 31,
2022:
Preference share capital, P10 par, 100,000 shares P1,000,000

Ordinary share capital, P10 par,500,000 shares, 5,000,000
Share premium - preference 50,000
Share premium – ordinary 200,000
Total P6,350,000
During 2023, the following transactions pertaining to the shareholders' equity were completed:
 Retirement of 5,000 preference shares at P9 per share.
 Purchase of 5,000 ordinary shares at P12 per share to be held as treasury shares.
 Share split, ordinary, 2 for 1.

 Reissue of 2,000 treasury shares at P8 per share.
 Profit for 2023, P300,000.
The total retained earnings at Dec. 31, 2023 is

a. P400,000 c. P392,000
b. P395,000 d. P387,000
61. PAS 10 states that if a dividend is declared after the reporting period but before the financial
statements are authorized for issue, the dividend is:
a. Recognized as a liability at the reporting period.
b. Not recognized as a liability at the reporting period.
c. Recorded as a direct reduction of equity at the reporting period.
d. Recorded as a reduction against the asset ‘cash’ at reporting period.
62. The shareholders’ equity account balances for the Zackery, Inc. on December 31, 2023
follows:
12% Preference share capital, P100 par, 20,000 shares P2,000,000

Ordinary share capital, P25 par, 145,000 shares 3,625,000
Subscribed share capital, net of P500,000 subscriptions receivable 1,000,000
Share premium 500,000
Treasury shares, 5,000 shares, at cost 400,000
Preference shares have a liquidation value of P110; shares are cumulative, with dividends in
arrears for 3 years including the current year and fully payable in the event of liquidation. The
book value of an ordinary share is
a. P22.50 c. P27.78
b. P25.00 d. P29.00
63. Kagame Company’s capital structure was as follows:
2022 2023
Outstanding securities:
Ordinary 1,000,000 1,000,000
Convertible preference 100,000 100,000
10% convertible bonds payable P30,000,000 P30,000,000
During 2023, Kagame paid dividends of P15 per share on its preference shares. The preference
shares are convertible into 150,000 ordinary shares and the 10% bonds are convertible into
300,000 ordinary shares. Profit for 2023 was P10,000,000. The income tax rate is 35%. The
diluted earnings per share for 2023 should be
a. P8.50 c. P8.24
b. P8.04 d. P7.50

An entity is required to publish interim financial reports and is currently considering the accounting
for the following:
 Sales of the entity for the first two quarters are as follows:
Quarter ended Amount

March 31 P3,200,000
June 30 3,000,000
 On January 1, the entity signed a 1-year rental with quarterly payments of P100,000 due at the
end of each quarter. In addition, the entity must pay contingent rent of 5% of all sales in
excess of P10,000,000. The contingent rent is payable on January 31 of the following year.
The entity estimates that it is probable that it will pay additional rent.
 The entity sells electrical goods, and normally 5% of customers claim on their warranty. The
provision in the first quarter was calculated as 5% of sales to date. However, in the second
quarter, a design fault was found and warranty claims were expected to be 10% for the whole
year.
 The entity paid P400,000 fire insurance premium for the calendar year.
 The entity paid P600,000 on February 1 for the calendar-year property tax.
 In the first week of April, the entity made unanticipated major repairs to its equipment at a
cost of P180,000.
 The inventory at June 30 was includes P500,000 of slow moving inventory that is expected to
be sold for a net amount of P300,000.
64. The total expense to be recognized in the entity’s profit or loss for the quarter ended March
31 is
a. P705,000 c. P510,000
b. P545,000 d. P495,000
65. The total expense to be recognized in the entity’s profit or loss for the quarter ended June 30
is
a. P1,215,000 c. P1,095,000
b. P1,190,000 d. P 895,000
66. Entity B changed its accounting policy with respect to the valuation of inventories. Up to
2022, inventories were valued using weighted-average cost method. In 2020 the method was
changed to FIFO, as it was considered to more accurately reflect the usage and flow of
inventories in the economic cycle. The impact on inventory valuation was determined to be
At Dec. 31, 2021: An increase of P100,000

The change in accounting policy increased profit for 2023 by

a. P 50,000 c. P200,000
b. P150,000 d. P450,000
67. An entity acquires patent rights from other enterprises and pays advance royalties in some
cases and in others, royalties are paid within ninety days after year-end. The following data are
included in the entity’s Dec. 31 statements of financial position:
2022 2023
Prepaid royalties P55,000 P45,000
Royalties payable 80,000 75,000
During 2023 the entity remitted royalties of P300,000. In its income statement for the year
ended Dec. 31, 2023, the entity should report royalty expense of
a. P295,000 c. P310,000
b. P305,000 d. P330,000
68. Which of the following apply both to medium-sized and small entity?
a. An entity shall account for all its investments in associates using cost model, equity method
or fair value model.
b. The projected unit credit method is only used when it could be applied without undue cost or
effort.
c. No recognition of internally generated intangible assets.
d. Should disclose information about key sources of estimation uncertainty.

A small entity acquired an investment in ordinary shares for P600,000 on June 30, 2023. The direct
acquisition costs incurred were P25,000.
On Dec. 31, 2023 the fair value of the investment was P700,000 and the transaction costs that would
be incurred on sale were estimated at P30,000.
69.If the shares are traded in an active market, the investment should be reported on the Dec. 31,
2023 statement of financial position at
a. P600,000 c. P670,000
b. P625,000 d. P700,000
70.If the shares are not traded in an active market, the investment should be reported on the Dec.
31, 2023 statement of financial position at
a. P600,000 c. P670,000
b. P625,000 d. P700,000
 - end - 

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Financial Accounting and Reporting

Rent Income P60,000

8. Justice Inc. furnishes you with the following list of accounts:

Accounts payable P 66,000

The company’s working capital is

Use the following information for the next two questions.

Analysis of the above accounts disclosed the following:

 Bank overdraft of P13,000 was deducted from cash balance.

9. Total current assets

10. Total current liabilities

Use the following information for the next two questions.

Unrealized loss on decline in value of FA at FVTOCI P 500,000

Net cash inflows from operating activities P720,000

Decrease in trade payables 23,000

What is the profit for the period?

Net cash provided by operating activities for 2023 should be reported as

Adjusted cash in bank balance is

The net realizable value of accounts receivable as of December 31, 2023 is

Principal amount P4,000,000

On January 15, Graciousness purchased receivables from Respect Company totaling

Which statement is correct?

Use the following information for the next two questions.

Rian Inc. Bryan Corp.

a) Goods purchased FOB shipping point (in transit) P120,000

28. On August 15, 2023, a typhoon damaged a warehouse of Contentment Merchandise

Inventory, January 1 P 375,000

Compute the inventory loss as a result of the typhoon.

At what amount would Cooperation report its ending inventory?

Use the following information for the next two questions.

Specific construction loan 2,000,000 10%

Expenditures during 2022 and 2023 were:

January 01, 2022 2,000,000

What is the cost of the new building on December 31, 2023?

Data relating to salaries earned in December 2023 are:

The recurring biweekly salaries totaled P7, 500,000.

The interest expense for the year 2023 is

49. PFRS 16 applies to contracts that

Defined benefit obligation, 1/1 P10,000,000

The amount to be recognized as expense in year 3 is

The deferred tax expense for 2023 is

56. The total carrying amount of equity will generally equal:

58. An entity is considering the proper accounting for these contracts:

Preference share capital, P10 par, 100,000 shares P1,000,000

 Share split, ordinary, 2 for 1.

The total retained earnings at Dec. 31, 2023 is

12% Preference share capital, P100 par, 20,000 shares P2,000,000

63. Kagame Company’s capital structure was as follows:

Use the following information for the next two questions.

Quarter ended Amount

At Dec. 31, 2021: An increase of P100,000

The change in accounting policy increased profit for 2023 by

Use the following information for the next two questions.

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