ACC124 Bridging Class

03.02.2023

PART I – CFAS

1. What is the law regulating the practice of accountancy in the Philippines?

a. R.A. No. 9298 c. R.A. No. 9928
b. R.A No. 9198 d. R.A. No. 9892

1. The basic purpose of accounting is

a. To provide the information that the managers economy entity need to control its operations.
b. To provide information that the creditors economic entity can use in deciding whether to additional
loans to the entity.
c. To measure the periodic income of the economic entity.
d. To provide quantitative financial information an entity that is useful in making rational economic
decisions.

2. It is the body authorized by law to promulgate rules and regulations affecting the practice of the
accountancy profession in the Philippines.
a. Board of Accountancy
b. Philippine Institute of Certified Public Accountants
c. Securities and Exchange Commission
d. Financial Reporting Standards Council

3. Which of the following statements best describes the term “going concern”?
a. When current liabilities of an entity exceed current assets
b. The ability of the entity to continue in operation for the foreseeable future.
c. The potential to contribute to the floe of cash and cash equivalents to the entity.
d. The expenses of an entity exceed its income

4. Continuation of an accounting entity in the absence of evidence to the contrary is an example of the basic
concept of
a. Accounting entity c. Going concern
b. Time period d. Accrual

5. Which underlying concept serves as the basis for preparing financial statements at regular intervals?
a. Accounting entity c. Accounting period
b. Going concern d. Stable monetary unit
e.

6. During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in
accordance with what basic accounting concept?
a. Accrual c. Unit of measure
b. Periodicity d. Continuity

7. Which of the following is an internal user of financial information?

a. Board of Directors
b. Shareholder in the entity
c. Holder of the entity’s bonds
d. Creditor with long-term contract with the entity

8. The “primary users” of financial information include

I. Existing and potential investors
II. Existing and potential lenders and other creditors
III. User group such as employees, customers, governments and their agencies, and the public
a. I only c. I and III only
b. I and II only d. I, II and III

9. The theory of accounting which best describes the accuracy of equation expressed “assets = liabilities +
equity” is the
a. Entity theory c. Proprietary theory
b. Fund theory d. Residual theory

1
10. Which of the following statements concerning the objectives of financial reporting is true?
a. The objectives are intended to be specific in nature.
b. The objectives are directed primarily toward the needs of internal users of accounting information
c. The objectives are the end result of the conceptual framework project
d. The objectives encompass not only financial statements disclosures but other information as well

11. The four phases of accounting are recording, classifying, summarizing and interpreting. The phase
whereby the liquidity, solvency and profitability of an entity are significantly is known as
a. Summarizing
b. Classifying
c. Recording
d. Interpreting

12. What is the meaning of “relevance”?

I. The capacity of the information to make a difference in the decisions made by users
II. The financial reports represent economic phenomena of transactions in words and numbers.
a. I only c. Both I and II
b. II only d. Neither I nor II

13. The financial accounting information is directed toward the common needs of users and is independent of
presumptions about particular needs and desires of specific users.
A. Relevance C. Neutrality
B. Verifiability D. Completeness

14. The ingredients of faithful representation are

a. Completeness and neutrality
b. Completeness and free from error
c. Completeness, neutrality and free from error
d. Completeness, neutrality, free from error and conservatism

15. The “fundamental” qualitative characteristics are

a. Relevance and faithful representation
b. Relevance, faithful representation and materiality
c. Relevance and reliability
d. Faithful representation and materiality

16. What are the qualitative characteristics of financial statements?

a. Qualitative characteristics are the attributes that make the information provided in financial statements
useful to users.
b. Qualitative characteristics are broad classes of financial effects of transactions and other events.
c. Qualitative characteristics are nonqualitative aspects od an entity’s position and performance and
changes in financial position.
d. Qualitative characteristics measure the extent to which an entity has complied with all relevant
standards and interpretations

17. The “fundamental” qualitative characteristics are:

a. Relevance and faithful representation
b. Relevance, faithful representation and materiality
c. Relevance and reliability
d. Faithful representation and materiality

18. Which of the following is the best description of “faithful representation” in relation to information in
financial statements?
a. Influence on the economic decisions of users
b. Inclusion of a degree of caution
c. Freedom form material error
d. Comprehensibility to users

19. The enhancing qualitative characteristics of financial information are:

a. Comparability and understandability
b. Verifiability and timeliness
c. Comparability, understandability and verifiability
d. Comparability, understandability, verifiability and timeliness

2
20. It is the removal of all part of a recognized asset or liability form the statement of financial position.
a. Write-off c. Extinguishment
b. Derecognition d. Retirement

21. Revenue from sale of goods is recognized

a. When the customer order is received.
b. When the customer order is accompanied by a check.
c. Only if the transaction will create an account receivable.
d. When the title to the goods changes.

22. Which of the following is an example of the cause-and-effect association principle?

a. Sales commissions
b. Allocation of insurance cost
c. Depreciation of property, plant and equipment
d. Officer’s salaries

23. The following are the recognition principles to be followed in the preparation and presentation of financial
statements, as explicitly enumerated in the Conceptual Framework except:
a. Current assets recognition principle
b. Expense recognition principle
c. Income recognition principle
d. Liability recognition principle

24. The elements directly related to the measurement of financial position are:
a. Assets, liabilities and equity
b. Assets and liabilities
c. Assets, liabilities, equity, income and expenses
d. Income and expenses

25. Which of the following statements is incorrect concerning assets?

a. Physical form is not essential to existence of an asset.
b. In determining existence of an asset, the right of ownership is essential.
c. An asset results from past event.
d. There is a close association between incurring an expenditure and generating asset but the two do not
necessarily coincide.

26. It is an increase in economic benefit during the accounting period related to an increase in asset or
decrease in liability that results in increase in equity other than contribution from owners.
a. Asset c. Income
b. Liability d. Expenses

27. It is a decrease in economic benefit during the accounting period related to a decrease in asset or an
increase in liability that results in decrease in equity other than distribution to owners.
a. Asset c. Income
b. Liability d. Expense

28. An asset is recognized when

a. It is probable that future economic benefit will flow to the entity.
b. The cost or value of the asset can be measured reliably.
c. The entity obtains control of the rights associated with the asset.
d. It is probable that future economic benefit will flow to the entity and the cost or value of the asset can
be measured reliably.

29. A liability is recognized when

a. It is probable that an outflow of future economic benefit will be required to settle the obligation.
b. The amount of the obligation can measured reliably.
c. It is probable that an outflow of future economic benefit will be required to settle an obligation and the
amount of the obligation can be measured reliably.
d. When the entity obtains control of the obligation.

30. An expense is recognized immediately in the income statement

I. When an expenditure produces no future economic benefits
II. When cost incurred ceases to qualify for recognition as an asset in the statement of financial position.
a. I only c. Either I or II
b. II only d. Neither I or II

3
31. Which is the discounted value of the future net cash flows that an item is expected to generate in the
normal course of business?
a. Past purchase exchange price
b. Current purchase exchange price
c. Current sale exchange price
d. Future exchange price

32. According to GAAP, at what amount should an entity measure its assets in the statement of financial
position?
a. Market value at all times.
b. Cash equivalent of asset given up or the asset received, whichever is more clearly evident.
c. Best estimate of an internal auditor
d. Cash outlay only, even if part of the consideration given was something other than cash.

33. What is the quality of information better that enables users to forecast future operations?
a. Faithful representation c. Comparability
b. Materiality d. Relevance

34. The qualitative characteristics of faithful representation includes

a. Predictive value c. Confirmatory value
b. Neutrality d. Timeliness

35. The principle of objectivity includes the concept of

a. Summarization c. Conservatism
b. Classification d. Verifiability

36. Which of the following concepts means that there should be no attempt on the part of the preparers of
financial reports to induce a predetermined outcome or a particular mode of behavior?
a. Verifiability c. Representational faithfulness
b. Neutrality d. Consistency

37. It is the ability to bring together for the purpose of noting similarities and dissimilarities.
a. Relevance c. Understandability
b. Reliability d. Comparability

38. The accounting record where a transaction is initially recorded is

a. Ledger c. Trial Balance
b. Account d. Journal

39. Which is false concerning the rules of debit and credit?

a. The left side of an account is always the debit side and the right side is always the credit side
b. Increases in assets and expenses are debit entries, and increases in liabilities, equity and revenue are
credit entries
c. The normal balance of any account appears on the side for recording increases
d. The word “debit” means to increase and the word “credit” means to decrease

40. The accounting equation must remain in balance

a. Throughout each step in the accounting cycle.
b. Only when journal entries are recorded.
c. Only at the time the trial balance is prepared.
d. Only when formal financial statements are prepared.

41. Nominal accounts are also called

a. Temporary accounts c. Real accounts
b. Permanent accounts d. Mixed accounts

42. Which statement is true regarding the trial balance?

a. Preparation of the trial balance ensures that all amounts have been posted to the correct accounts.
b. Preparation of the trial balance is a step in the recording process.
c. Preparation of the trial balance determines that total debits equal total credits.
d. Preparation of the trial balance determines that total debits equal total credits and that all amount have
been posted to the correct accounts.

4
 43. An adjusting entry to accrue wages incurred but not yet paid is an example of
a. Aligning recorded costs with appropriate accounting periods
b. Aligning recorded revenue with appropriate accounting period
c. Reflecting unrecorded expenses incurred during an accounting period
d. Reflecting unrecorded revenue earned during an accounting period

44. Which statement best defines an accrual?

a. Adjusting entries where cash flow precedes revenue or expense recognition
b. Adjusting entries where revenue or expense recognition precedes cash flow
c. Adjusting entries where cash flow and revenue or expense recognition are simultaneous
d. Adjusting entries where revenue or expenses are recognized in the absence of cash flow evidence

45. An accrued revenue can best be described as an amount

a. Collected and currently matched with expenses
b. Collected and not currently matched with expenses
c. Not collected and currently matched with expenses
d. Not collected and not currently matched with expenses

46. Which of the following properly describes a deferral?

a. Cash is received after revenue is earned.
b. Cash is received before revenue is earned.
c. Cash is paid after expense is incurred.
d. Cash is paid at the same time period that an expense is incurred.

47. The postclosing trial balance

a. Consists of statement of financial position accounts only
b. Will balance if a transaction is journalized and posted or if a transaction is journalized and posted
twice.
c. Shows that the accounting equation is in balance at the end of the accounting period.
d. All of the choices are correct regarding the postclosing trial balance

48. Reversing entries apply to

a. All adjusting entries c. All accruals
b. All deferrals d. All closing entries

49. Reversing entries apply to all of the following, except

a. Unearned revenue c. Prepaid insurance
b. Accrued wages d. Depreciation

PART II – Balance Sheet and Income Statement

1. Beng Company provided the following information for the year 2022:
Dec 31, 2022 Dec 31, 2021
Current Assets ? P28,000
Fixed assets P160,000 112,000
Current liabilities 12,000 ?
Noncurrent liabilities ? 40,000
Additional information:
• Working capital of P24,000 remained unchanged.
• Profit for 2022 was P16,000.
• No dividends were declared during 2022 and there were no changes in shareholders’ equity.
Required: Determine the following as of Dec. 31, 2022:
1.1. Current assets

1.2. Shareholders’ equity

5
 1.3. Noncurrent liabilities

2. The following selected accounts are taken from Tiger corporation on December 31, 2022: Cash – P 150,000; Accounts Receivable
– P 2,100,000; Inventories – P 1,600,000; Accounts payable – P 550,000; 12% notes payable – P 800,00; Employees’ Income
taxes payable – P 6,500.

Additional Information:
(a) The P 2,100,000 balance in accounts receivable represents the entire amount owed to the company; of this amount, P
500,000 represents a long-term advance to its president. The remaining amount is from trade costumers and 5% of that
amount is estimated to be uncollectible.
(b) Inventories (taken by physical count) include P 200,000 of goods which is not belonging to Tiger. As of December 31,
2022, the goods are still in transit. Office supplies on hand of P 50,000 are also included in the balance.
(c) The accounts payable balance includes a supplier’s invoice for P 95,000 received through fax machine which represents
goods shipped FOB destination and are still in transit at year-end.
(d) The 12% interest-bearing note is dated June 1, 2022 and matures May 31, 2023. Accrued interest in the note has not been
recorded.

Required:
2.1. How much is the total current assets on December 31, 2022?

2.2. How much is the total current liabilities on December 31, 2022?

3. BAM BAM BIGELOW Company is preparing its December 31, 2022 statement of financial position. The following items may
be reported as either current or non-current liability:
a) On December 15, 2022 BAM BAM BIGELOW declared a cash dividend of P2.50 per share to shareholders of record on
December 30. The dividend is payable on January 15, 2023. BAM BAM BIGELOW has issued 1,000,000 ordinary
shares, of which 50,000 shares are held in the treasury.
b) On December 31, 2022 BAM BAM BIGELOW declared a 10% bonus issue to shareholders of record on January 15,
2023. BAM BAM BIGELOW’s ordinary shares have a par and market value of P10 and P38, respectively.
c) On December 31, bonds payable of P10,000,000 are outstanding. The bonds pay 12% interest every September 30, and
mature in installments of P2,500,000 every September 30, beginning September 30, 2023. Accrued interest on the bonds
has not been recorded.
d) On December 31, 2021, costumer advances were P12,000,000. During 2022, BAM BAM BIGELOW collected
30,000,000 of costumer advances and advances of P17,000,000 were yet to earned.

6
 e) On December 31, 2022, retained earnings appropriated for future inventory losses amounted to 1,500,000.
How much of the foregoing is classified as current liabilities?

4. Gerry Inc. is a home furnishings manufacturer and retailer. Your review of the company’s financial statements for the fiscal year
ended December 31, 2021, reveals the following debt obligations at the end of the reporting period. Gerry’s financial statements
are scheduled to released on March 15, 2022.
Additional information:

(a) A short-term obligation of P180,000 due on March 1, 2022. Its maturity date could be extended to March 1, 2024 if Gerry
agrees to provide additional collateral. On February 15, 2022, an agreement is reached to extend the maturity date of the
loan to March 8, 2024.
(b) A P4,200,00 short-term obligation in the form of notes payable due February 25, 2022. On January 20, 2022, the company
issued 120,000 ordinary shares at P30 per share. On February 25, 2022, the proceeds of the issuance, plus P600,000 in
cash, were used to fully settle the debt.
(c) A P2,900,000 long-term obligation due December 5, 2031. Gerry breaches a debt covenant on November 12, 2021, and
the loan becomes payable on demand. On December 16, 2021 an agreement is reached to provide a waiver of the breach.
(d) A P8,000,000 long-term obligation matures over four years at a rate of P2,000,000 per year. The loan was made on
September 1, 2021, with first maturity date set for September 1, 2022.
(e) A P3,000,000 debt obligation due on December 31, 2024. The lender has the right to call the debt at any time.

4.1. Determine the amount of current liabilities to be reported on the December 31, 2021, statement of financial position.
4.2. Determine the amount of noncurrent liabilities to be reported on the December 31, 2021, statement of financial position.

5. The summarized trial balance of Haiku Corporation includes the following accounts on December 31, 2022:
Debit Credit
Cash P 239,738
Accounts Receivable 9,800
Dividend receivable 31, 386
Interest receivable 956
Investment at FVPL 136,910
Investment at FVOCI 3,760,944
Deferred tax asset 1,310
Accounts payable P 20,506
Interest payable 560
Other payables 166
Income tax payable 484
Provision for employee benefits 1,504
Deferred tax liability 112,828
Share capital 2,736,048
Share premium 752,180
Retained earnings 556,768
TOTAL P 4,181,044 P 4,181,044
The provision for employee benefits includes P1,050 payable in the subsequent year.

Required: Compute the following on December 31, 2022

5.1. Total current assets

7
 5.2. Total noncurrent assets

5.3. Total current liabilities

5.4. Total noncurrent liabilities

5.5. Total shareholders’ equity

6. The below information is excerpt from Enchong Company’s December 31, 2021 financial records:
Salaries payable P450,000
Accounts payable 660,000
Employees’ income tax payable 80,000
Estimated warranty payable 40,000
Notes payable (issued in 2021 maturing in 24 semi-annual installments
beginning on April 1, 2022) 4,800,000
Cash overdraft, Dee dank 70,000
Costumers’ accounts with credit balances 35,000
Estimated premium claims outstanding 110,000
Income tax payable 600,000
Cash balance, ABC Bank 1,240,000
Determine amount of current liabilities to be reported on the December 31, 2021, statements of financial position.

8
7. Pale Company reported the following information for 2021:
Sales revenue P500,000
Cost of goods sold 350,000
Operating expenses 55,000
Translation adjustment – credit 20,000
Cash dividend received on equity securities 2,000
Ignore income tax, how much should Pale Company report as total comprehensive income for the year 2021?

8. Financial records of Boo, Inc., were destroyed by fire at the end of 2021. Fortunately, the controller had kept certain statistical
data related to the income statement as presented below:
✓ The beginning merchandise inventory was P92,000 and decreased by 20% during the current year.
✓ Sales discounts amount of P17,000
✓ 20,000 ordinary shares were outstanding for the entire year.
✓ Interest expense was P20,000.
✓ The income tax rate is 35%.
✓ Cost of goods sold amounts to P500,000.
✓ Administrative expenses are 20% of cost of goods sold but only 8% of gross sales. Four-fifths (4/5) of the operating expenses
relate to sales activities.
How much is the net profit in the year 2021?

9. Macabu Company provided the following information for the year 2020:
Sales 5,600,000
Sales returns and allowances 80,000
Cost of goods sold 2,240,000
Utilities expense 800,000
Interest revenue 120,000
Income tax expense 640,000
Casualty loss due to earthquake 40,000
Finance cost 160,000
9
 Salaries expense 480,000
Loss on sale of investments 40,000
What amount should be reported as income from continuing operations?

10. JJ Prime Company provided the following information for the current year:
Income from continuing operations 2,000,000
Income from discounted operations 250,000
Unrealized gain on financial asset classified as FVPL 400,000
Unrealized loss on equity investment classified as FVOCI 500,000
Unrealized gain on debt investment classified as FVOCI 600,000
Unrealized gain on forward contract designated as cash flow hedge 200,000
Translation loss on foreign operation 100,000
Net actuarial gain on defined benefit plan 300,000
Loss on credit risk of a financial liability designated as FVPL 150,000
Revaluation surplus during the current year 1,250,000

10.1. What amount should be reported as profit for the current year?
10.2. What net amount should be reported as other comprehensive income for the current year?
10.3. What net amount in other comprehensive income that may be reclassified to profit or loss?
10.4. What net amount in other comprehensive income that may not be reclassified to profit or loss?
10.5. What amount should be reported as comprehensive income for the current year?

10