FINANCIAL ACCOUNTING AND REPORTING

1. Company A provided the following information a. 42,701

for the year ended December 31, 2014: b. 40,500
Inventory, Jan 1 650,000 c. 45,480
Purchases 2,300,000 d. 54,000
Purchase returns 80,000
Freight in 60,000 4. A Company has the following items:
Sales 3,400,000 Write-down of inventories P 120,000
Sales Discount 20,000 Loss on disposal of part of
Sales return 30,000 Sports Division 185,000
Loss on restructuring 113,000
On Dec. 1, 2014, a physical inventory revealed that
the ending inventory was only P 420,000. The gross Ignoring income taxes, what total amount should A
profit on sales has remained constant at 30% in recent Company report as other income and expenses?
years. The entity suspects that some inventory may a. 418,000
have been pilfered by one of the entity’s employees. b. 185,000
On Dec. 31, 2014, what is the estimated cost of notes c. 233,000
inventory? d. 298,000
a. 165,000
b. 151,000 5. A Corporation had 800 units of product MLR on
c. 420,000 hand on March 1, 2014 costing P 20 each.
d. 585,000 Purchases of product MLR during the month of
March were as follows:
2. Company A acquired 30% of the issued share March 10: 1,900 units @ 22
capital of an investee for P 1,000,000 on Jan. 1, March 18: 2,300 units @ 25
2015. The accumulated profits of the investee on March 20: 800 units @ 30
this date totaled P 2,000,000. The abbreviated
statement of financial position of the investee on A Corporation sells its inventory at a mark-up of 25%
Dec. 31, 2016 is as follows: of cost. Sales for the month of March were as follows:
Saundry net assets 6,000,000 March 5: 600 units
Share Capital, 10 par 1,000,000 March 12: 900 units
Share premium 2,000,000 March 16: 700 units
Retained Earnings 3,000,000 March 22: 1,800 units
March 29: 900 units
The fair value of the net assets of the investee at the
date of acquisition was P 5,000,000. The recoverable The cost of sales for the month of March 2014 under
amount of the net assets of the investee is deemed to the AVERAGE-PERIODIC cost flow method is
be P 7,000,000 on Dec. 31, 2016. What amount a. 112,800
should be reported on Dec. 31, 2016 as Investment in b. 115,085
Associate? c. 117,682
a. 1,800,000 d. 121,100
b. 2,100,000
c. 1,500,000 6. On January 1, 2014, A Company sold goods to B
d. 1,000,000 Company costing P300,000 and received in an
exchange a P750,000 non-interest bearing note
3. On January 2013, Company A sold its goods with a maturity date of January 1, 2019. The note
costing P500,000 to B Company. A Company has no ready market but an effective interest of
maintains a mark-up of 30% on cost. B Company 12% is considered appropriate for a note of this
made an initial payment of P 200,000 and issued type which will approximate the
a promissory note for the balance. The note a. 125,570
provides for 4 equal installments every December b. 240,716
31, starting Dec. 31, 2013 that would yield a c. 305,550
return rate of 12%. Interest income for 2014 d. 450,000
FINANCIAL ACCOUNTING AND REPORTING
7. Earnings per share disclosure are required only
for:
a. Public entities
b. Private entities
c. Entities with complex capital structure
d. Entities that change their capital structure during
the reporting period
8. Dividends in the form of non-cash assets are
measured at:
a. Fair value of the assets distributed
b. Carrying amount of assets distributed
c. Either the CA or FV of the assets distributed
d. Neither the CA nor FV of the assets distributed
9. Dub Dairy produces milk to sell to local and
national ice cream producers. Dub Dairy began
operations on January 1, 2014 by purchasing 840
milk cows for P 1,176,000. The company
controller had the following information
available at year-end relating to the cows:
Milking Cows
Carrying value, Jan. 1, 2014 P 1,176,000
Change in FV due to growth and
Price change 365,000
Decrease in FV due to harvest (42,000)
Milk harvested during 2014 54,000
At Dec. 31, 2014, what is the value of the milking
cows on Dub Dairy’s statement of Financial Position?
a. 1,499,000
b. 1,134,000
c. 1,176,000
d. 1,547,000
10. On January 1, 2015, A Company paid real estate
taxes for the calendar year 2015 in the amount of
P 600,000. In the first week of April 2015, the
entity made unanticipated ordinary repairs to
plant equipment at a cost of P 900,000. What total
amount of expenses should be reflected in the
interim income statement for the second quarter?
a. 1,050,000
b. 450,000
c. 150,000
d. 900,000
11. On Jan. 1, 2013, A Company started operations
with an initial capital of P 500,000. An equipment
was acquired for P 300,000 and a 10%, 1-year
note was issued. The equipment was to be
depreciated on a straight line basis over an
expected useful life of 8 years and a residual
value of P 200,000. A Company’s records are
kept on a cash basis and perform adjustments at
year-end for reporting purposes. During 2014, A
Company collected P 480,000 from its customers
and paid P 275,000 in expenses. The following
changes were identified in preparing the year-end
adjustments
Increase in A/R 45,000
Decrease in Unearned service revenue 20,000
Decrease in Accrued Expenses 15,000
Decrease in Prepaid Expenses 10,000
The net income to be expected in A Company’s 2014
financial statements (accrual basis) is?
a. 240,000
b. 200,000
c. 230,000
d. 270,000
12. On Jan. 1, 2014 A company bought a equipment
with a cost of P 3,060,000, a useful life of 12
years and no salvage value. The company uses
straight line depreciation. At Dec. 31, 2014, the
company determines that impairment indicators
are present. The fair value less cost to sell the
asset is estimated to be P 2,600,000. The asset’s
value in use is estimated to be P 2,365,000. There
is no change in the asset’s useful life or salvage
value. What amount of impairment loss should
appear in the statement of comprehensive income
of 2014?
a. 205,000
b. None
c. 440,000
d. 460,000
13. At the close of its first year of operations, Dec.
31, 2014, A Company had accounts receivable of
P 540,000, after deducting the related allowance
for doubtful accounts. During 2014, the company
had charges to bad debt expense of P 90,000 and
wrote off, as uncollectible, accounts receivable of
P 40,000. What should the company report on its
SFP at Dec. 31, 2014, as A/R before the
allowance for doubtful accounts?
a. 590,000
b. 440,000
c. 490,000
d. 670,000
540K + 50K (90K-40K) = 590K
FINANCIAL ACCOUNTING AND REPORTING
14. A Corporation began operations in 2012. The
company has been using the FIFO method in
costing its raw materials. However, at the start of
2015, A Company decided to change to average
costing method. Inventory balances under each
method were as follows:
Dec. 31, 2012 Dec. 31, 2013 12/2014
FIFO 490,000 438,000 576,000
Average 465,000 374,000 482,000
Ignoring taxes, the adjustment to the opening
balances of its retained earnings account in 2014 is
a. 64,000
b. 26,000
c. 38,000
d. 90,000
15. Entity A has an equipment with carrying amount
of P 1,600,000 on Dec. 31, 2013 after recording
depreciation for 2013. The following information
is available on Dec. 31, 2013 relative to the
equipment:
FV of similar equipment P 1,400,000
Discounted future cash flows 1,300,000
Undiscouted future cash flows 1,350,000
At what amount should the equipment be reported on Dec.
31, 2013?
a. 1,400,000
b. 1,600,000
c. 1,300,000
d. 1,350,000
16. The cash balance per bank is P 28,000 with P
5,000 outstanding checks, P 12,000 deposit in
transit, and P 2,000 bank credit memo. How much
is the correct amount of cash?
a. 35,000
b. 37,000
c. 30,000
d. 28,000
17. A Company is a diversified entity with
nationwide interests in commercial real estate
development, banking, mining, and food
distribution. The food distribution division was
deemed to be inconsistent with a long-term
direction of the entity. On Oct. 1, 2015, the board
of directors voted to approve the disposal of this
division. The sale is expected to occur in August
2016. The food distribution had revenue of P
35,000,000 and expenses of P 27,000.000 for the
period January 1 to September 30 and revenue of
P 15,000,000 and expenses of P 10,000,000 for
the period Oct. 1 to Dec. 31. The carrying amount
of the division’s net assets on Dec. 31, 2015 was
P 56,000,000 and the FV less cost of disposal was
P 58,000,000. The sale contract requires Xavier
to terminate certain employees incurring an
expected termination cost of p 4,000,000 to be
paid by Dec. 15, 2016. The income tax rate is
30%. What amount should be reported as income
from discontinued operations for 2015?
a. 6,300,000
b. 7,700,000
c. 8,300,000
d. 9,000,000
18. A Company acquired 100% of B Company in the
prior year. During the current year, the individual
entities included in their financial statements the
following:
Shaw Jane
Key Officers’ salary 750,000 500,000
Officer’s expense 200,000 100,000
Loans to Officers 1,250,000 500,000
Intercompany sales 1,500,000
What total amount should be reported as related party
disclosures in the notes to A Company’s consolidated
financial statements for the current year?
a. 3,000,000
b. 1,500,000
c. 1,550,000
d. 1,750,000
19. Which should be disclosed in the summary of
significant accounting policies?
a. Valuation method used for work in process
inventory
b. Borrowing cost capitalized for the period
c. Depreciation charges for the period
d. Adequacy of pension plan assets in relation to
vested benefits
20. On June 1, 2004, Entity A sold merchandise with
a list price of P 30,000 to Entity B on account.
Entity A allowed trade discounts of 30% and
20%. Credit terms were 2/15, n/40 and the sale
was made FOB Shipping Point. Entity A prepaid
P 600 of delivery costs for Entity B as an
accommodation. On June 12, 2004, Entity A
received from Entity B a remittance in full
payment amounting to
FINANCIAL ACCOUNTING AND REPORTING
a. 17,064 25. A Company provided the ff information for the
b. 16,464 current year:
c. 17,052 Sales 5,000,000
d. 16,794 COGS 2,800,000
Foreign translation adjustment- credit 400,000
21. Entity A purchased factory equipment which was Selling Exp 700,000
installed and put into service Jan. 1, 2013 at a total Unusual and infrequent gain 400,000
cost P 1,280,000. Residual value was estimated at Correction of invty error 200,000
P 80,000. The equipment is depreciated over 8 General & Administrative Exp 600,000
years by the double declining balance method. Income Tax Expense 150,000
What amount of depreciation expense should be Gain on sale or investment 50,000
recorded on the equipment for 2014? Proceeds from sale of land at cost 800,000
a. 240,000 Dividends 300,000
b. 225,000
c. 300,000 What amount should be reported as income from
d. 320,000 continuing operations?
a. 1,200,000
22. Product X sells for P 12; selling expenses are P b. 1,350,000
2.40; normal profit is P3. If the cost of Product X c. 1,600,000
is P 7.80, lower of cost or NRV is d. 2,000,000
a. 7.80
b. 5.40 26. For small and medium entities “SIRE” may under
c. 6.00 certain conditions replace which 2 financial
d. 6.60 statements?
a. Statement of CI and Statement of CIE
23. On Jan. 1, 20x1, Entity A acquired 12%, P
b. Balance Sheet and IS
4,000,000 bonds for P 4,198,948. The principal is
c. BS and SCI
due on Dec. 31, 2013 but interest is made
d. IS and SCIE
annually starting Dec. 31, 20x1. The effective
interest rate on the bonds is 10%. How much is
27. Which of the following is not descriptive of
the interest income recognized in 20x1?
SME’s?
a. 419,895
a. Listed companies
b. 413,884
b. Private entities
c. 407,273
c. Small and medium sized entities
d. 480,000
d. Non-publicly accountable entities
24. A Company reported that the financial records
were destroyed by the fire at the end of the current 28. Based on PIC rules (June 2013), the cost of the
year. However, certain statistical data related to demolition of unwanted building purchased as
the income statement are available: part of a parcel of land shall be charged to?
Interest expense 20,000 a. Cost of new building (preferred treatment); Cost
Cost of Goods Sold 2,000,000 of Land (alternative treatment)
Sales Discount 100,000 b. Profit or Loss
c. P&L (Preferred); Cost of land (Alternative)
The Beg Inventory was P 400,000 and decreased 20% d. Cost of land (preferred); cost of new building
during the year. Administrative expenses are 25% of (alternative)
COGS but only 10% of gross sales. 4/5 of the OPEX
relates to sale activities. What is the income before tax for 29.
the current year? Balance per book 6,776,000
a. 380,000 Balance per bank 6,532,000
b. 480,000 Deposit in bank closed by BSP 1,600,000
c. 330,000 DIT 1,234,000
d. 400,000 OC 987,000
FINANCIAL ACCOUNTING AND REPORTING
Currency and coins 950,000
PCF, including 10k
Paid voucher 50,000
Bank service not yet 6,000
Bond Sinking Fund 1,000,000
Error in book, 89k instead of 98k 9,000

What amount of cash should be reported as current asset

at year end?

30. During the calendar year 2012, A Company

purchased an equity security designated as
investment to other comprehensive income. As of
December 31, 2012, the fair market value of the
securities was P1,000,000 and the amount of
unrealized gain was P140,000 net of the deferred
tax liability of P60,000. On December 31, 2013,
A Company sold 40% of the equity security it
holds for P500,000 which is equal to its current
fair market value. What amount of realized gain
should A Company recognize and disclose in the
profit or loss?*