Excel Professional Services Inc.

Management Firm of Professional Review and Training Center (PRTC)

Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
Since 1977

Financial Accounting and Reporting (FAR) OCAMPO/OCAMPO

FIRST PRE-BOARD EXAMINATION CPA Review February 19, 20 & 21, 2023

Multiple Choice. Select the letter that corresponds to the How much of these items would typically be reported as
best answer. This examination consists of 70 items and the inventories in the statement of financial position?
exam is good for three (3) hours. Good luck! a. P2,300,000 c. P2,220,000
b. P2,260,000 d. P2,000,000
1. It is a “global phenomenon” intended to bring about
transparency and a higher degree of comparability in
financial reporting, both of which will benefit the Use the following information for the next two questions.
investors and are essential to achieve the goal of one
An entity wholesales bicycles. It uses the perpetual
uniform and globally accepted financial reporting
inventory system. The entity's reporting date is Dec. 31. At
standards.
Dec. 1, inventory on hand consisted of 350 bicycles at P820
a. Norwalk agreement
each and 43 bicycles at P850 each. During the month of
b. World Trade
December, the following inventory transactions took place
c. Borderless accounting
(all purchase and sales transactions are on credit):
d. IFRS
Dec. 02 Sold 300 bicycles for P1,200 each.
2. Created by the IFRS Foundation to help meet the 03 Five bicycles were returned by a customer.
demand of international investors with global They had originally cost P820 each and were
investment portfolios for high quality, transparent, sold for P1,200 each.
reliable and comparable reporting by companies on 09 Purchased 55 bicycles at P910 each.
climate and other environmental, social and governance 13 Purchased 76 bicycles at P960 each.
(ESG) matters. 15 Sold 86 bicycles for P1,350 each.
a. International Financial and Sustainability Standards 16 Returned one damaged bicycles to the supplier.
Board This bicycle had been purchased on 9
b. International Sustainability Standards Board December.
c. International Financial Reporting Standards Board 22 Sold 60 bicycles for P1,250 each.
d. International Sustainability Standards Committee 26 Purchased 72 bicycles at P980 each.
29 Two bicycles, sold on 22 December, were
3. Presented below is a list of items that may or may not returned by a customer. The bicycles were
be reported as inventory in an entity’s Dec. 31 badly damaged so it was decided to write them
statement of financial position. off. They had originally cost P910 each.
a) Goods purchased FOB shipping point
4. The cost of goods sold for the month of December using
(in transit) P120,000
moving average method is (Round unit costs to the
b) Goods purchased FOB destination
nearest peso)
(in transit) 200,000
a. P367,230 c. P366,320
c) Freight charges on goods purchased 80,000
b. P365,410 d. P372,725
d) Materials on hand not yet placed
into production 350,000
5. The cost of goods sold for the month of December using
e) Factory supplies 20,000
FIFO method is
f) Office supplies 10,000
a. P367,230 c. P366,320
g) Interest cost incurred for inventories
b. P365,410 d. P372,725
that are routinely manufactured 40,000
h) Costs identified with units started
6. Techniques for the measurement of the cost of
but which are not yet completed 280,000
inventories may be used for convenience if the results
i) Costs identified with units completed
approximate cost. The following are acceptable for year-
but not yet sold 310,000
end financial reporting purposes, except
j) Goods out on consignment at
a. Standard cost method
another company’s store 800,000
b. Retail method
k) Goods held on consignment from
c. Gross profit method
another company 450,000
d. None of these
l) Goods sold on installment basis 100,000
m) Goods sold to another company, for
7. Compute for the cost of inventory lost in fire using the
which the company has signed an
data below:
agreement to repurchase at a set
price that covers all costs related to Inventory, Jan. 1 P 51,600
the inventory 300,000 Purchases 368,000
n) Goods sold FOB seller (in transit) 120,000 Sales 583,000
o) Goods sold FOB buyer (in transit) 40,000 Purchase returns 11,200
p) Costs incurred to advertise goods 20,000 Purchase discounts taken 5,800
held for resale Freight in 3,800
q) Securities acquired for the purpose Sales returns 8,600
of selling in the near term 500,000
r) Equipment held for sale in 80,000
accordance with PFRS 5
s) Cryptocurrencies 180,000

Page 1 of 8 www.teamprtc.com.ph FAR.1stPB5.23

TEAM PRTC

A fire destroyed the entire inventory except for 12. Bearer plant is carried at
purchases in transit, FOB shipping point, of P2,000 and a. Its cost less any accumulated depreciation and any
goods having selling price of P4,900 that were salvaged accumulated impairment losses.
from the fire. The average gross profit rate on net sales b. Its fair value at the date of the revaluation less any
is 40%. subsequent accumulated depreciation and
a. P59,760 c. P62,660 subsequent accumulated impairment losses.
b. P56,940 d. P56,820 c. Its fair value less costs to sell.
d. Either a or b.
8. The records of an entity report the following data for the
month of January: 13. Which of the following plants will likely qualify as bearer
Beginning inventory at cost P 440,000 plants and accounted for in accordance with PAS 16?
Beginning inventory at sales price 800,000 I. Strawberry vines
Purchases at cost 4,500,000 II. Watermelon vines
Initial markup on purchases 2,900,000 III. Kiwi vines
Purchase returns at cost 240,000 IV. Cucumber vines
Purchase returns at sales price 350,000
Freight on purchases 100,000 a. I, II, III and IV c. I and III only
Additional mark up 250,000 b. I, III and IV only d. None of them
Mark up cancellations 100,000
Mark down 600,000 14. An entity reported property, plant and equipment of
Mark down cancellations 100,000 P20,000,000 in its statement of financial position as of
Sales 5,300,000 Dec. 31, 2023. This amount includes the following:
Sales allowances 300,000 • Land held for undetermined future use,
Sales returns 400,000 P3,000,000.
Employee discounts 200,000 • Property occupied by employees, P8,000,000. The
Theft and other losses 100,000 employees pay rent at market rates.
Using the average retail inventory method, the entity’s • Equipment held to earn rentals under operating
ending inventory at cost is lease, P1,200,000.
a. P1,024,000 c. P1,536,000 Compute for the adjusted property, plant and
b. P1,472,000 d. P1,664,000 equipment.
a. P 9,000,000 c. P17,000,000
b. P15,800,000 d. P17,800,000
Use the following information for the next two questions.
An entity is engaged in agricultural activity. Its trial balance 15. When determining the commercial substance of the
at Dec. 31 presents the following assets related to its exchange, which of the following items is not
farmland: considered?
• Two tractors (P500,000 each) a. Cash flow of exchanged asset.
• Four computers (P25,000 each) b. Cash flow of new asset.
• Computer software (P50,000) c. Cash flow from tax effects on the exchange to avoid
• Fruit-bearing trees (estimated value, P20 million of 
taxes.
which P3 million is attributed to the fruits attached to d. Cash flow from potential sale of new equipment at
the trees). 
a later date.
• Harvested fruits (estimated value, P2 million)
• Trees grown for use as lumber (estimated value, P10 16. In accordance with PIC Q&A No. 2012-02, it is
million) appropriate for an entity to account for the carrying
• Trees that are cultivated both for their fruit and their value of the old building as part of the cost of the new
lumber (estimated value, P8 million) building (constructed for rental to others), in which of
• Maize and wheat (estimated value, P4 million) the following?
a. An entity acquired a piece of land with existing
9. How much should be accounted for as biological assets? building with the intention to demolish the old
a. P25 million c. P7 million building right away in order to construct a new
b. P17 million d. P3 million building on its site as part of its planned
redevelopment.
10. How much should be accounted for as property, plant b. An entity acquired a piece of land with existing
and equipment? building with the intention to initially use the old
a. P17.525 million c. P26.100 million building as an owner-occupied property and then
b. P18.100 million d. P30.100 million demolish it in a future period and replace it with a
new building.
11. Which of the following is not an agricultural activity? c. Both a and b.
a. Pharma company growing its own plants in order to d. Neither a nor b.
produce drugs.
b. Dairy company grows its own bacteria and cultures 17. An entity has the following items of Machinery at Dec.
and then adds them to its yogurts. 31, 2023:
c. An entity operating zoo with an active program of Machine No. Cost Acc. Dep.
breeding animals.
1 P100,000 P95,000
d. An entity catching fish in the ocean in relation to its
sardines business. 2 200,000 160,000
3 300,000 210,000
4 400,000 240,000

Page 2 of 8 www.teamprtc.com.ph FAR.1stPB5.23

TEAM PRTC

Additional information: 22. Cute Corporation owns the following properties at Jan.
• All items – useful is 10 years and the fair value is 1, 2023:
higher than the carrying amount at Dec. 31, 2023
Property A
• Machine No. 2 - idle during 2023
• Machine No. 3 - retired from active use on June 1, An office building used by Cute for administrative
2023 but not yet derecognized at Dec. 31, 2023 purposes with a depreciated historical cost of P2 million.
• Machine No. 4 - classified as held for sale in At Jan. 1, 2023 it had a remaining life of 20 years. After
accordance with PFRS 5 on July 1, 2023 but still a re-organization on July 1, 2023, the property was
unsold at Dec. 31, 2023 leased to a third party and reclassified as an investment
property applying Cute’s policy of the fair value model.
The total depreciation for the year 2023 is An independent valuer assessed the property to have a
a. P95,000 c. P75,000 fair value of P2.3 million at July 1, 2023, which had risen
b. P80,000 d. P57,500 to P2.34 million at Dec. 31, 2023.
18. An entity takes a full year's depreciation expense in the Property B
year of an asset's acquisition, and no depreciation Another office building sub-leased to a subsidiary of
expense in the year of disposition. Data relating to one Cute. At Jan. 1, 2023, it had a fair value of P1.5 million
of the entity’s depreciable assets at Dec. 31, 2022, are which had risen to P1.65 million at Dec. 31, 2023. At
as follows: Jan. 1, 2023 it had a remaining life of 15 years.
Acquisition year 2020
In relation to these properties, determine the net
Cost P110,000
amount to be recognized in profit or loss in the entity’s
Residual value 20,000
separate financial statements for the year ended Dec.
Accumulated depreciation 72,000
31, 2023.
Estimated useful life 5 years
a. P140,000 c. P490,000
Using the same depreciation method as used in 2020,
b. P190,000 d. P540,000
2021, and 2022, how much depreciation expense should
the entity record in 2023 for this asset?
23. An entity acquired a broadcasting license for
a. P12,000 c. P22,000
P60,000,000. The license is renewable every 10 years if
b. P18,000 d. P24,000
the entity provides at least an average level of service
to its customers and complies with the relevant
legislative requirements. The license may be renewed
Use the following information for next two questions.
indefinitely at little cost and has been renewed twice
An entity acquired a building on Jan. 1, 2019 at a cost of before the most recent acquisition. The acquiring entity
P50,000,000. The building has an estimated life of 10 years intends to renew the license indefinitely and evidence
and residual value of P5,000,000. The building was revalued supports its ability to do so. Historically, there has been
on Jan. 1, 2023 and the revaluation revealed replacement no compelling challenge to the license renewal.
cost of P80,000,000, residual value of P2,000,000 and
At the time of acquisition, the technology used in
revised total life of 12 years.
broadcasting is not expected to be replaced by another
technology at any time in the foreseeable future.
19. The carrying amount of building as of Dec. 31, 2023 is
Therefore, the license is expected to contribute to the
a. P28,250,000 c. P42,950,000
entity’s net cash inflows indefinitely. The license is valid
b. P42,700,000 d. P48,800,000
for six years before the next renewal.
20. The revaluation surplus as of Dec. 31, 2023 is On Jan. 1, 2023, the licensing authority decides that it
a. P14,000,000 c. P15,400,000 will no longer renew broadcasting license, but rather will
b. P14,700,000 d. P16,800,000 auction the license. At the time the licensing authority’s
decision is made, the entity’s broadcasting license has
21. Quirino, Inc. and its subsidiaries have provided you, three years until it expires. The entity expects that the
their PFRS specialist, with a list of the properties they license will continue to contribute to net cash inflows
own: until the license expires.
• Land held by Quirino, Inc. for undetermined future
The carrying amount of the license at Dec. 31, 2023
use, P5,000,000.
should be
• A vacant building owned by Quirino, Inc. and to be
a. Nil c. P40,000,000
leased out under an operating lease, P20,000,000.
b. P20,000,000 d. P60,000,000
• Property held by a subsidiary of Quirino, Inc., a real
estate firm, in the ordinary course of its business,
P30,000,000.
Use the following information for the next three questions.
• Property held by Quirino, Inc. for use in production,
P1,000,000. Entity O purchased a patent from an inventor immediately
• A hotel owned by Sugo, Inc., a subsidiary of Quirino, after it was registered. The asking price is P1,980,000. The
Inc., and for which Sugo, Inc. provides security entity paid for the patent as follows: cash, P720,000;
services for its guests’ belongings, P50,000,000. issuance of 18,000 shares of its own ordinary shares, par
• A building owned by Quirino, Inc. being leased out P10 (fair value, P20 per share); and a note payable due at
to Status, Inc, a subsidiary of Quirino, Inc., the end of three years, face amount, P900,000, noninterest-
P20,000,000. bearing. The present value of this note using an appropriate
discount rate is P620,000.
How much will be reported as investment properties in
Quirino, Inc. and its subsidiaries consolidated financial
The entity believes that the patent will generate future
statements?
economic benefits evenly over its legal life.
a. P25,000,000 c. P75,000,000
b. P45,000,000 d. P95,000,000
After acquisition, the following transactions and events
occurred:

Page 3 of 8 www.teamprtc.com.ph FAR.1stPB5.23

TEAM PRTC

• At the beginning of the second year, the entity paid
P200,000 to successfully defend the patent in an
infringement suit.
• At the beginning of the fourth year, the entity determined
that the remaining estimated useful life of the patent is
only five years.
• Paid annual fee of:
Fifth year – P3,240
Sixth year – P4,320
• At the end of the sixth year, the entity sold the patent
for P610,000 and paid P12,000 for disposal costs.
24. The carrying amount of the patent at the end of year 1
is
a. P1,530,000 c. P1,700,000
b. P1,615,000 d. P1,881,000
25. The carrying amount of the patent at the end of year 4
is
a. P 952,000 c. P1,139,158
b. P1,108,800 d. P1,156,000
26. The gain or loss on disposal at the end of year 6 is
a. P20,000 c. P 32,000
b. P28,421 d. P122,000
27. These cryptographic assets give holders no ownership
in a company’s platform or assets and, although they
might be traded between holders, they are not primarily
used as a medium of exchange.
a. Cryptocurrencies
b. Asset-backed tokens
c. Utility tokens
d. Security tokens
28. Cryptocurrencies can be classified as
a. Financial assets at fair value through profit or loss
b. Financial assets at fair value through other
comprehensive income
c. Financial assets at amortized cost
d. None of these
29. An entity purchased in 2021 a property that contained
mineral deposit for P4,500,000. Estimated recovery was
1,000,000 metric tons of deposits. Development costs
of P150,000 were also incurred in the same year. The
mining property was expected to be worth P600,000
after the mineral deposits had all be removed. During
2022, the company extracted and sold 100,000 metric
tons of minerals. Further development costs of P75,000
were incurred in 2023, and the estimate of total
recoverable deposits (including the amount extracted in
2022) was revised to 925,000 metric tons. During
2023, the company recovered 150,000 metric tons.
The depletion for the year 2023 is
a. P603,658 c. P676,500
b. P618,750 d. P750,000
30. PAS 36 does not apply to which of the following assets?
a. Investment in associate
b. Investment property that is measured using the
cost model
c. Property, plant and equipment that is measured
using the revaluation model
d. Biological assets measured at fair value less costs to
sell
31. Internal sources of information indicating that an asset
may be impaired include
a. There are observable indications that the asset’s
value has declined during the period significantly
more than would be expected as a result of the
passage of time or normal use.
b. Significant changes with an adverse effect on the
entity have taken place during the period, or will
take place in the near future, in the technological,
market, economic or legal environment in which the
entity operates or in the market to which an asset
is dedicated.
c. Market interest rates or other market rates of return
on investments have increased during the period,
and those increases are likely to affect the discount
rate used in calculating an asset’s value in use and
decrease the asset’s recoverable amount materially.
d. Evidence is available of obsolescence or physical
damage of an asset.
32. An entity is testing an asset for impairment. The
carrying amount of the asset is P85,000. The following
data has been obtained by the entity in relation to the
asset.
• Future cash flows expected to be derived from the
asset, P100,000.
• Estimated fair value of the asset, P80,000.
• Present value of future cash flows expected to be
derived from the asset, P60,000.
• Costs of disposal for the asset, P2,000.
How much should be recognized as impairment loss?
a. Nil c. P 7,000
b. P5,000 d. P25,000
Use the following information for next two questions.
An entity reported an impairment loss of P250,000 in its
income statement for the year 2020. This loss was related
to an item of property, plant and equipment which was
acquired on Jan. 1, 2012 with a cost of P2,000,000.
Depreciation on the asset is computed on a straight-line
basis and annual depreciation on cost is P80,000.
Depreciation for the year 2021 was computed on the asset’s
recoverable amount at Dec. 31, 2020. On Dec. 31, 2023,
the entity decided to measure the asset using revaluation
model. This asset was then appraised at a fair value of
P1,650,000.
33. The gain on impairment recovery to be recognized by
the entity in 2023 profit or loss is
a. Nil c. P218,125
b. P203,125 d. P250,000
34. The revaluation increase to be recognized by the entity
in 2023 other comprehensive income is
a. P530,000 c. P610,000
b. P563,125 d. P748,125
35. An entity accounts for non-current assets using the cost
model. On Oct. 30, 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. Nil c. P5,500,000
b. P300,000 d. P5,800,000
36. An entity accounts for non-current assets using the
revaluation model. On June 30, 2023, the entity classified
a freehold property as held for sale in accordance with
PFRS 5. At that date the property's carrying amount was

Page 4 of 8 www.teamprtc.com.ph FAR.1stPB5.23

TEAM PRTC

P290,000 and the balance on the revaluation reserve was • Check written and dated Dec. 29, 2023 and
P20,000. At that date its fair value was estimated at delivered to payee on Jan. 2, 2024, P200,000.
P330,000 and the costs to sell at P20,000. At Dec. 31, • Check written on Dec. 27, 2023, dated Jan. 2,
2023, the property's fair value was estimated at 2024, delivered to payee on Dec. 29, 2023,
P325,000 and the costs to sell at P25,000. P300,000.
• Equity investment held for trading expected to be
The balance of the entity’s revaluation reserve as of Dec.
sold within 3 months, P600,000.
31, 2023 is
a. Nil c. P40,000 Compute for the adjusted cash and cash equivalents.
b. P30,000 d. P60,000 a. P4,780,000 c. P5,330,000
b. P5,280,000 d. P5,380,000
37. Bataan Inc. was granted a parcel of land by a local
government authority. The condition attached to this 41. An entity reported cash and cash equivalents of
grant was that Bataan Inc. should clean up this land and P12,000,000 in its statement of financial position as of
lay roads by employing laborers from the village in Dec. 31, 2023. This amount includes the following:
which the land is located. The entire operation will take • Customer’s check for P100,000 returned by bank
three years and is estimated to cost P100 million. This on Dec. 29, 2023 due to insufficient fund but
amount will be spent in this way: P20 million each in the subsequently redeposited and cleared by the bank
first and second years and P60 million in the third year. on Jan. 3, 2024.
The fair value of this land is currently P120 million. How • Customer’s check for P200,000 dated Jan. 2,
much should be recognized as income from government 2024, received on Dec. 29, 2023.
grant at the end of the first year? • Cash earmarked for bonds payable due on June
a. Nil c. P24,000,000 30, 2024, P5,000,000.
b. P20,000,000 d. P40,000,000 • P1,000,000 of compensating balance against
short-term borrowing arrangement at Dec. 31,
38. An entity started construction on a building on Jan. 1 of 2023. The compensating balance is legally
the current year and completed construction on Dec. 31 restricted as to withdrawal.
of the same year. Aries had only two interest notes • Check written and dated Dec. 29, 2023 and
outstanding during the year, and both of these notes delivered to payee on Jan. 2, 2024, P500,000.
were outstanding for all 12 months of the year. The • Check written on Dec. 27, 2023, dated Jan. 2,
following information is available: 2024, delivered to payee on Dec. 29, 2023,
Average accumulated expenditures P250,000 P800,000.
Ending balance in construction in • One-year certificate of deposit, P2,000,000.
progress before capitalization of Compute for the adjusted cash and cash equivalents.
interest 360,000 a. P3,700,000 c. P 8,700,000
6 percent note incurred specifically b. P5,700,000 d. P10,000,000
for the project 150,000
9 percent long-term note 500,000
What amount of interest should the entity capitalize for Use the following information for next two questions.
the current year? An entity had the following bank reconciliation on June 30:
a. P15,000 c. P22,500
b. P18,000 d. P27,900 Balance per bank statement, June 30 P3,000,000
Add: Deposit in transit 400,000
39. Which statement is incorrect? Total 3,400,000
a. In accordance with PIC Q&A No. 2018-10, an entity Less: Outstanding checks 900,000
should disclose write-downs of inventory held at the Balance per book, June 30 P2,500,000
end of the reporting period.
b. In accordance with PIC Q&A No. 2012-02, the costs The bank statement for the month of July showed the
incurred in relation to demolition (or the physical following:
tearing down) of the old building to give way for the Deposits (including P200,000 note
construction of the replacement building should collected for the entity) P9,000,000
preferably be capitalized as part of the cost of the Disbursements (including P140,000
new building. NSF check and P10,000 service
c. In accordance with PIC Q&A No. 2017-6, collector’s charge) 7,000,000
items for administrative or aesthetic purposes can be
accounted for in accordance with PAS 40. All reconciling items on June 30 cleared through the bank in
d. Subsequent expenditure on brands, mastheads, July. The outstanding checks totaled P600,000 and the
publishing titles, customer lists and items similar in deposits in transit amounted to P1,000,000 on July 31.
substance (whether externally acquired or internally
generated) is always recognized in profit or loss as 42. What is the amount of cash receipts per books in July?
incurred. a. P8,400,000 c. P9,600,000
b. P9,400,000 d. P9,800,000
40. An entity reported cash and cash equivalents of
P7,000,000 in its statement of financial position as of 43. What is the amount of cash disbursement per books in
Dec. 31, 2023. This amount includes the following: July
• Cryptocurrencies, P550,000. These are not held a. P5,950,000 c. P6,700,000
for sale in the ordinary course of business nor for b. P6,550,000 d. P7,450,000
investment purposes.
• Fund for acquisition of equipment, P800,000. 44. When the allowance method of recognizing uncollectible
• Cash surrender value of life insurance policy, accounts is used, the entry to record the write-off of a
P100,000. specific account
• Customer’s check for P170,000 dated Jan. 2,
2024, received on Dec. 29, 2023.

Page 5 of 8 www.teamprtc.com.ph FAR.1stPB5.23

TEAM PRTC

a. Decreases both accounts receivable and the The carrying amount of the note receivable of the entity
allowance for uncollectible accounts. as of Dec. 31, 2023 is
b. Decreases accounts receivable and increases the a. P365,802 c. P420,154
allowance for uncollectible accounts. b. P407,547 d. P500,000
c. Increases the allowance for uncollectible accounts
and decreases net income. 49. The following information pertains to Lender A’s loan
d. Decreases both accounts receivable and net income. portfolio at Dec. 31, 2023:
PV of Expected
45. Your analysis of the accounts receivable of an entity Future Cash Past due
indicates the following: Loan Amount Flows status
Accounts receivable, Jan. 1 P 300,000 1 P600,000 P360,000 91 days
Allowance for doubtful accounts, Jan. 1 40,000 2 500,000 450,000 Current
Credit sales during the year 1,200,000 3 400,000 320,000 31 days
Cash collections during the year 1,100,000 4 300,000 270,000 Current
Accounts receivable written off during 5 200,000 160,000 61 days
the year 20,000 6 100,000 60,000 91 days
In prior years, the entity’s bad debt expense has Lender A considers all loans over 90 days past due to be
averaged 2% of credit sales. credit-impaired based on historical experience with
On Dec. 31, what would be the amount of the entity’s recovering the associated debt.
accounts receivable, net of any allowance for doubtful Additional information taking into account historical
accounts, assuming that the entity uses the credit sales information, current conditions and forward- looking
method to estimating bad debt expense? information, including actual loss experience and
a. P336,000 c. P360,000 recoveries from the sale of collateral, is as follows:
b. P358,000 d. P400,000
Probability of default in the next 12 months 2%
46. An entity estimates bad debt expense at ½% of credit Lifetime probability of default
sales. The entity reported accounts receivable and Credit-impaired loans 100%
allowance for uncollectible accounts of P471,000 and Not credit-impaired loans 5%
P1,650 respectively, at Dec. 31, 2022. During 2023,
entity’s credit sales and collections were P315,000 and The total loss allowance to be recognized by Lender A at
P319,000, respectively, and P1,720 in accounts Dec. 31, 2023 is
receivable were written off. The balance of entity’s a. P280,000 c. P283,600
accounts receivable at Dec. 31, 2023 is b. P282,400 d. P287,600
a. P465,280 c. P469,280
b. P467,000 d. P473,280 50. As defined in PFRS 9, lifetime expected credit losses are
a. The expected credit losses that result from all
47. An entity sold equipment on July 1, 2022. The possible default events over the expected life of a
equipment cash price is P79,000. The buyer signed a financial instrument.
deferred payment contract that provides for a down b. The weighted average of credit losses with the
payment of P10,000 and an 8-year note for P103,472. respective risks of a default occurring as the
The note is to be paid in 8 equal annual payments of weights.
P12,934. The payments include 10% interest and are c. All cash shortfalls discounted at the original effective
made on June 30 of each year, beginning June 30, 2023. interest rate (or credit-adjusted effective interest
rate for purchased or originated credit-impaired
The total interest income for the year ended Dec. 31, financial assets).
2023 is d. The credit losses on
assets that are forecast to
a. P5,982 c. P6,612 actually default in the next 12 months.
b. P6,599 d. P6,900
51. An entity often factors its accounts receivable. The
48. On Jan. 1, 2019, an entity sold a machine with a finance company requires an 8% reserve and charges a
carrying amount of P300,000 and accepted in exchange 1.5% commission on the amount of the receivable. The
a promissory note with a face value of P500,000, a due remaining amount to be advanced is further reduced by
date of Dec. 31, 2028, and a stated rate of 4%, with an annual interest charge of 16%. What proceeds
interest receivable at the end of each year. The fair (rounded to the nearest peso) will the enterprise receive
value of the machine is not readily determinable and the from the finance company at the time a 110,000
note is not readily marketable. Under the account that is due in 60 days is turned over to the
circumstances, the note is considered to have an finance company?
appropriate imputed rate of interest of 8%. a. P83,630 c. P99,550
b. P81,950 d. P96,895

52. Which statement is correct regarding accounting for

transfers of receivables in accordance with PFRS 9?
a. The transfer of risks and rewards evaluated is
evaluated by determining the transferee’s ability to
sell the asset.
b. A sale of a financial asset together with a total
return swap that transfers the market risk exposure
back to the entity is an example of a transfer that
qualifies for derecognition.

Page 6 of 8 www.teamprtc.com.ph FAR.1stPB5.23

TEAM PRTC
c. The entity shall determine whether it has retained
control of the financial asset if an entity neither
transfers nor retains substantially all the risks and
rewards of ownership of a transferred asset.
d. The entity shall continue to recognize the
transferred asset in its entirety if an entity neither
transfers nor retains substantially all the risks and
rewards of ownership of a transferred asset, and
retains control of the transferred asset
53. Which of the following returns is not consistent with
cash flows that are solely payments of principal and
interest on the principal amount outstanding?
a. Return for the time value of money and credit risk
b. Return for liquidity risk
c. Return for amounts to cover expenses and a profit
margin
d. Return for equity price risk
Use the following information for next two questions.
On April 1, 2021, the entity purchased 5-year P1,000,000
10% bonds of June Corp. The bonds are dated Jan. 1, 2021.
The bonds were purchased to yield 8%. Interest is payable
annually every Dec. 31. The entity uses the ‘held for
collection’ business model for acquired and originated debt
instruments. The issuer paid the interest as scheduled in
2021 and 2022. During 2023, the issuer of the bonds is in
financial difficulties and it becomes probable that the issuer
will be put into administration by a receiver. On Dec. 31,
2023, the entity estimated that none of the interest will be
collected and only P800,000 of the principal will be collected
on maturity date.
54. The required loss allowance on investment in June Corp.
bonds at Dec. 31, 2023 is
a. P314,160 c. P365,721
b. P349,846 d. Nil
55. How much is the interest income to be recognized in
2024 on investment in June Corp. bonds?
a. P84,125 c. P54,867
b. P82,855 d. Nil
56. On July 1, 2023, TGV purchased 10,000 of BPO’s 50,000
outstanding shares at a price of P6.00 per share. BPO
had earnings of P3,000 per month during 2023 and paid
dividends of P10,000 on Mar. 1, 2023 and P12,500 on
Dec. 1, 2023. The fair value of BPO’s shares was P6.50
per share on
Dec. 31, 2023.
Assuming that TGV accounts for its investment in BPO
as a held-for-trading investment, what would be the
total effect on TGV’s profit or loss for the year ended
Dec. 31, 2023?
a. P2,500 c. P6,500
b. P4,500 d. P7,500
57. On Dec. 28, 2023, an entity commits itself to purchase
equity securities to be classified as held for trading for
P1,000,000, its fair value on commitment (trade) date.
These securities have a fair value of P1,002,000 and
P1,005,000 on Dec. 31, 2023 (the entity's financial
year-end), and Jan. 5, 2024 (settlement date),
respectively. If the entity applies the settlement date
accounting method to account for regular-way
purchases, how much should be recognized in its 2023
profit or loss related to these securities?
a. Nil c. P3,000
b. P2,000 d. P4,000
Page 7 of 8 www.teamprtc.com.ph
58. On Apr. 1, 2023, the entity purchased 25,000 ordinary
shares of Brian Corp. at P180 per share which reflected
book value as of that date. At the time of the purchase,
Brian had 100,000 ordinary shares outstanding. The
entity paid transaction costs of P67,500. The first
quarter statement ending Mar. 31, 2023 of Brian
recorded profit of P480,000. For the year ended Dec.
31, 2023, Brian reported profit of P2,400,000. Brian
paid the entity dividends of P60,000 on June 1, 2023
and again P60,000 on Dec. 31, 2023. The shares of
Brian are selling at P190 per share on Dec. 31, 2023.
The carrying amount of the investment in Brian Corp. as
of Dec. 31, 2023 should be
a. P4,860,000 c. P4,980,000
b. P4,927,500 d. P5,047,500
59. On Jan. 1, 2023, an entity acquired 25% of the shares
of an investee for P425,000. At this date all the
identifiable assets and liabilities of the investee were
recorded at amounts equal to fair value, and the equity
of investee consisted of the following:
Share capital P1,000,000
General reserve 300,000
Asset revaluation surplus 200,000
Retained earnings 200,000
In 2023, investee reported profit of P250,000. P50,000
of the asset revaluation surplus was realized in 2023.
Investee paid a P40,000 dividend and transferred
P30,000 to general reserve. What is the carrying
amount of the investment as of Dec. 31, 2023?
a. P477,500 c. P465,000
b. P490,000 d. P482,500
60. An entity has the following accounts with an investee,
an associate:
Investment in ordinary shares P4,500,000
Investment in preference shares 1,600,000
Loans receivable - unsecured 900,000
Loans receivable - secured 500,000
Accounts receivable 200,000
Accounts payable 100,000
If the ‘share of loss of associate’ recognized by the entity
is P6,500,000, how much should be allocated to Loans
receivable – unsecured?
a. Nil c. P720,000
b. P400,000 d. P900,000
61. Which statement is correct regarding accounting for
derivatives?
a. Derivative assets can be classified as financial
assets at fair value through OCI.
b. An entity may reclassify derivatives out of fair value
through profit or loss when, and only when, it
changes its business model for managing financial
assets.
c. An entity shall apply the general approach in
computing loss allowance on derivative assets.
d. A forward contract for the future purchase or
delivery of a commodity or other non-financial item
(e.g., gold, electricity, or gas) generally is
accounted for as a derivative if the contract can be
settled net.
62. Which statement is correct regarding accounting for
financial instruments in accordance with PFRS 9?
a. PFRS 9 distinguishes between the measurement
methods by reviewing the business model of each
entity and the risks and rewards of the transaction.
FAR.1stPB5.23
TEAM PRTC

b. Reclassification adjustments arise on disposal of • Purchased real estate for P220,000 cash which was
investments in equity instruments classified as fair borrowed from a bank.
value through other comprehensive income. • Sold investment in shares designated as FA at
c. An entity is not required to separately recognize FVTOCI for P200,000.
interest revenue or impairment gains or losses for a • Paid dividends of P240,000.
financial asset measured at fair value through profit • Issued 500 ordinary shares for P100,000.
or loss. • Purchased machinery and equipment for P50,000
d. When an entity uses settlement date accounting for cash.
an asset that is subsequently measured at • Paid P180,000 toward a bank loan.
amortized cost, the asset is recognized initially at its • Reduced accounts receivable by P40,000.
fair value on the settlement date. • Increased accounts payable P80,000.
Marcum's net cash used in investing activities for the
63. Which of the following financial assets are initially
current year was
measured at fair value plus transaction costs?
a. P70,000 c. P270,000
a. Derivatives.
b. P20,000 d. P150,000
b. Those that the entity intends to sell immediately or
in the near term.
69. An entity owns a royalty interest in an oil well. The
c. Those that the entity upon initial recognition
contract stipulates that the entity will receive royalty
designates as at fair value through profit or loss.
payments semiannually on Jan. 31 and July 31. The Jan.
d. None of these.
31, payments will be for 20% of the oil sold to jobbers
between the previous June 1 and Nov. 30, and the July
64. An entity’s statement of profit or loss for the year ended
31, payment will be for oil sold between the previous
Dec. 31, 2023 showed a net profit of P83,600. It was
Dec. 1 and May 31. Royalty receipts for 2023 amounted
later found that P18,000 paid for the purchase of a
to P80,000 and P100,000 on Jan. 31 and July 31,
motor van had been debited to the motor expenses
respectively. On Dec. 31, 2022, accrued royalty income
account. It is the entity’s policy to depreciate motor
receivable amounted to P15,000. Production reports
vans at 25% per year on the straight-line basis, with a
show the following oil sales:
full year’s charge in the year of acquisition.
June 1, 2022 – Nov. 30, 2022 P400,000
What would the net profit be after adjusting for this
Dec. 1, 2022 – May 31, 2023 500,000
error?
June 1, 2023 – Nov. 30, 2023 425,000
a. P79,100 c. P101,600
Dec. 1, 2023 – Dec. 31, 2023 70,000
b. P97,100 d. P106,100
What amount should Lorraine report as royalty income
65. The following may be classified as either current or for 2023?
noncurrent, except a. P179,000 c. P184,000
a. Biological assets b. P180,000 d. P194,000
b. Financial assets at fair value through OCI
c. Financial assets at amortized cost 70. An entity had total assets of P40,000, total liabilities of
d. Investment in associate P20,000, and total contributed capital of P8,000 at the
beginning of the year. For the year, the corporation
earned net income of P50,000 and paid cash dividends
Use the following information for the next two questions. of P10,000. At the end of the year, the company had
total assets of P80,000 and its total contributed capital
The accounts and balances shown below were gathered
remained at P8,000. At the end of the year, the
from an entity’s trial balance at the end of the reporting
corporation had total liabilities of:
period.
a. P 0 c. P28,000
Wages Payable P 25,600 b. P20,000 d. P32,000
Cash 17,700
Mortgage Payable 151,600
Dividends Payable 14,000 Thank you for participating in Team PRTC
Prepaid Rent 13,600 Nationwide Online Open First Pre-Board
Inventory 81,800 Examination.
Sinking Fund Assets 52,400
Short-Term Investments 15,200
Premium on Bonds Payable 4,600
Stock Investment - Associate 102,400
Taxes Payable 22,800
Accounts Payable 24,800
Accounts Receivable 36,600

66. The amount that should be reported as current assets

on the entity’s statement of financial position is
a. P151,300 c. P217,300
b. P164,900 d. P267,300

67. The amount that should be reported as current liabilities

on the entity’s statement of financial position is
a. P73,200 c. P 91,800
b. P87,200 d. P238,800

68. Marcum Corp.'s transactions for the current year

included the following:

Page 8 of 8 www.teamprtc.com.ph FAR.1stPB5.23