Final Quiz No.

1
Conceptual Framework

Name: _______________________________________ Score: ____________________

Professor: Mr. Kalven Perry T. Agustin Date: ____________________

INSTRUCTIONS
1. Choose the best answer.
2. Encircle the answer with a permanent ink pen
2. Erasure would invalidate your answers
3. No solutions no credit
4. If the answer is not in the above write the correct answer on the space provided

Multiple Choice: Theories

1. These are events that provide evidence of conditions that exist at the end of reporting
period.
a. Adjusting events b. Non-adjusting events c. Adjusting entries d. None of the above ________

Answer: A

2. These are events that are indicative of conditions that arise after the end of reporting period.
a. Adjusting events b. Non-adjusting events c. Adjusting entries d. None of the above ________

Answer: B

3. Non-adjusting events after the reporting period that require disclosure include all of the following,
except
a. A major business combination after reporting period
b. Announcing a plan to discontinue an operation
c. Expropriation of major asset after the reporting period
d. Destruction of a major production plant by a fire before the end of the reporting period

Answer: D

4. Events after reporting period that provide evidence about conditions that existed at the current year-
end and affect the realizability of accounts receivable should be
a. Discussed only in the management commentary
b. Disclosed only in the notes
c. Used to record an adjustment to doubtful accounts expense
d. Used to record an adjustment to retained earnings

Answer: C
A 1 Settlement after the reporting period of a court case because it confirms that the entity had a present obligation at the end of reporting period.
A 2 Bankruptcy of a customer which occurs after the reporting period.
N 3 Entering into significant commitments or contingent liabilities, for example, by issuing guarantees.
N 4 Commencing major litigation arising solely from events that occurred after the reporting period.
N 5 Change in tax rate enacted or announced after the end of reporting period that has a significant effect on current and deferred tax asset and
A 6 Sale of investments after the reporting period may give evidence about the net realizable value at reporting date.
A 7 The determination after the reporting period of the cost of assets purchased or the proceeds from assets sold before the end of reporting period.
The determination after the reporting period of the profit sharing or bonus payment if the entity has the present obligation at the end of reporting
A 8 period to make such payment.
N 9 Announcing or commencing the implementation of a major restructuring.
N 10 Abnormally large changes after the reporting period in asset prices or foreign exchange rates.

5. Bonus

Identification: Put A if this pertains to Adjusting events and N for Non-adjusting events

Final Quiz No. 2

Conceptual Framework

Name: _______________________________________ Score: ____________________

Professor: Mr. Kalven Perry T. Agustin Date: ____________________

INSTRUCTIONS
1. Choose the best answer.
2. Encircle the answer with a permanent ink pen
3. Erasure would invalidate your answers
4. If the answer is not in the above write the correct answer on the space provided

Multiple Choice: Theories

1. These are assets held for sale in the ordinary course of business, in the process of production
in such sale or in form of materials or supplies to be consumed in the production process or in
the rendering of services.
a. Inventories b. Finished goods c. Raw Materials d. None of the above ________

Answer: A

2. These are completed products which are ready for sale.

a. Inventories b. Finished goods c. Raw Materials d. None of the above ________

Answer: B

3. These are goods that are to be used in the production process.

a. Inventories b. Finished goods c. Raw Materials d. None of the above ________

Answer: C

4. These are deductions from the list of catalog price in order to arrive at the invoice price
which is the amount actually charge to the buyer.
a. Cash Discount b. Trade Discount c. Sales Discount d. None of the above _______

Answer: B
5. This method assumes that “the goods first purchased are the first sold” and consequently the
goods remaining at the end of the period are those most recently purchased or produced.
a. LIFO b. Weighted Average c. FIFO d. None of the above __________

Answer: C

6. It is computed by dividing the total cost of goods available for sale by total number of units
available for sale.
a. Weighted Average b. LIFO c. FIFO d. Weighted Average Cost

Answer: D

7. Which of the following method uses stock card in computing inventory

a. FIFO b. Perpetual c. Weighted Average d. Periodic

Answer: B

8. It means that specific costs are attributed to identified items of inventory.

a. Specific Identification b. Standard Costs c. FIFO d. LIFO

Answer: A

9. It is the estimated selling price in the ordinary course of business less the estimated cost of
completion and the estimated cost of disposal.
a. Carrying amount b. Book Value c. Current Value d. Net Realizable Value

Answer: D

10. Cost of goods sold method

a. Allowance Method b. Direct Method c. Write-off Method d. None of the above _____

Answer: B

Multiple Choice: Problem

1. Marsh Company had 150,000 units of T-shirts on hand at Jan 1, costing 21 each. Purchases of
T-shirts during the month of January were:
Units Unit Cost
January 10 200,000 P22.00
18 250,000 23.00
28 100,000 24.00

A physical count on January 31 shows 250,000 units of T-shirts on hand.

What is the cost of the inventory on January 31, under the FIFO Method Perpetual?
a. 5,850,000 b. 5,550,000 c. 5,607,500 d. None of the above ______

Answer: A
Solution
 Date Units Unit Cost Total Cost
18-Jan-20 150,000 23.00 3,450,000.00
28-Jan-20 100,000 24.00 2,400,000.00
Total 250,000 5,850,000

2. Marsh Company had 150,000 units of T-shirts on hand at Jan 1, costing 21 each. Purchases of
T-shirts during the month of January were:
Units Unit Cost
January 10 200,000 P22.00
18 250,000 23.00
28 100,000 24.00

A physical count on January 31 shows 250,000 units of T-shirts on hand.

What is the cost of the inventory on January 31, under the Weighted Average Method Periodic?

a. 5,850,000 b. 5,550,000 c. 5,607,500 d. None of the above ______

Answer: C
Solution
Date Units Unit Cost Total
Jan-01 150,000 21 3,150,000
10 200,000 22 4,400,000
18 250,000 23 5,750,000
28 100,000 24 2,400,000
700,000 22.43 15,700,000.00

250,000 22.43 5,607,500.00

3. Marsh Company had 150,000 units of T-shirts on hand at Jan 1, costing 21 each. Purchases of
T-shirts during the month of January were:
Units Unit Cost
January 10 200,000 P22.00
18 250,000 23.00
28 100,000 24.00

A physical count on January 31 shows 250,000 units of T-shirts on hand.

What is the cost of sales on January 31, under the FIFO Method Periodic?
a. 15,700,000 b. 10,150,000 c. 9,850,000 d. None of the above ______

Answer: C
 Date Units Unit Cost Total Cost
18-Jan-20 150,000 23.00 3,450,000.00
28-Jan-20 100,000 24.00 2,400,000.00
Total 250,000 5,850,000

Inventory Jan 1 3,150,000.00

Purchases
Jan-10 200,000 22 4,400,000
18 250,000 23 5,750,000
28 100,000 24 2,400,000 12,550,000
Total Goods Available for Sale 15,700,000.00
Inventory Dec 31 -5,850,000
Cost of Sales 9,850,000.00

4. Bill Company used the Perpetual System.

The following information has been extracted from the records about one product:
Date Particulars Unit Unit Cost Total Cost
Jan-01 Beginning Balance 8,000.00 70.00 560,000.00
Jan-06 Purchase 3,000.00 70.50 211,500.00
Feb-05 Sale 10,000.00
Mar-05 Purchase 11,000.00 73.50 808,500.00
Mar-08 Purchase return 800.00 73.50 58,800.00
Apr-10 Sale 7,000.00
Apr-30 Sales Return 300.00
If the FIFO cost flow method is used, what is the cost of the inventory on April 30?
a. 330,750 b. 315,000 c. 433,876 d. 329.360

Answer: A
From March 5 Purchases (4,500 units X 73.50) = 330,750
Whether Periodic or Perpetual System, the FIFO inventory is the same

5. Bill Company used the Periodic System.

The following information has been extracted from the records about one product:
Date Particulars Unit Unit Cost Total Cost
Jan-01 Beginning Balance 8,000.00 70.00 560,000.00
Jan-06 Purchase 3,000.00 70.50 211,500.00
Feb-05 Sale 10,000.00
Mar-05 Purchase 11,000.00 73.50 808,500.00
Mar-08 Purchase return 800.00 73.50 58,800.00
Apr-10 Sale 7,000.00
Apr-30 Sales Return 300.00
If the FIFO cost flow method is used, what is the cost of sales on April 30?
a. 1,521,529 b. 1,836,200 c. 1,190,450 d. None of the above _________

Answer: C
From March 5 Purchases (4,500 units X 73.50) = 330,750
Whether Periodic or Perpetual System, the FIFO inventory is the same
Inventory Jan 1 560,000
Purchases
Jan-06 3,000.00 70.50 211,500
Mar-05 11,000.00 73.50 808,500
Mar-08 - 800.00 73.50 -58,800 961,200
Total Goods Available for Sale 1,521,200
Inventory Dec 31 - 330,750
Cost of Sales 1,190,450

6. Winter Euni Company provided the following inventory data at year-end:

Particulars Cost NRV
Skis 2,200,000 2,500,000
Boots 1,700,000 1,500,000
Ski equipment 700,000 800,000
Ski apparel 400,000 500,000
What amount should be reported as inventory at year-end?
a. 5,000,000 b. 5,300,000 c. 4,800,000 d. 5,200,000

Answer: C
Solution
Particulars Cost NRV LCNRV
Skis 2,200,000 2,500,000 2,200,000.00
Boots 1,700,000 1,500,000 1,500,000.00
Ski equipment 700,000 800,000 700,000.00
Ski apparel 400,000 500,000 400,000.00
5,000,000.00 5,300,000.00 4,800,000.00

7-8 Las Vegas Company has two products in the inventory

Particulars Boots High Heels
Selling Price 2,000,000 3,000,000
Inventory at cost 1,500,000 1,800,000
General & administrative cost 300,000 800,000
Estimated selling costs 600,000 700,000
At year-end, the manufacture of items of inventory has been completed but no selling cost
have yet been incurred.

What amount should be reported as inventory using the LCNRV individual approach?
a. 3,700,000 b. 3,200,000 c. 3,800,000 d. 3,300,000

Answer: B
Solution
 Particulars Boots High Heels
Selling Price 2,000,000 3,000,000
Estimated selling costs 600,000 700,000
Net realizable value 1,400,000 2,300,000

Particulars Boots High Heels

Inventory at cost 1,500,000 1,800,000

Particulars Cost NRV LCNRV

Boots 1,500,000 1,400,000.00 1,400,000.00
High Heels 1,800,000 2,300,000.00 1,800,000.00
3,300,000.00 3,200,000.00

8. What amount should be reported as inventory using the LCNRV total approach?
a. 3,300,000 b. 3,200,000 c. 3,700,000 d. 2,450,000

Answer: A
Solutions
Particulars Boots High Heels
Selling Price 2,000,000 3,000,000
Estimated selling costs 600,000 700,000
Net realizable value 1,400,000 2,300,000

Particulars Boots High Heels

Inventory at cost 1,500,000 1,800,000

Particulars Cost NRV LCNRV

Boots 1,500,000 1,400,000.00
High Heels 1,800,000 2,300,000.00
3,300,000.00 3,700,000.00 3,300,000.00

9. Japan Company provided the following data for the current year:
Inventory - January 1
Cost 3,000,000
Net Realizable Value 2,800,000
Net Purchases 8,000,000
Inventory - December 31
Cost 4,000,000
Net Realizable Value 3,700,000
What amount should be reported as cost of goods sold?
a. 7,000,000 b. 7,100,000 c. 7,300,000 d. 7,200,000

Answer: B
Solution
Direct Method
Inventory - January 1 2,800,000
Net Purchases 8,000,000
Total Goods Available for Sale 10,800,000
Less: Inventory - December 31 - 3,700,000
Cost of Sale 7,100,000

Indirect Method
Inventory - January 1 3,000,000
Net Purchases 8,000,000
Total Goods Available for Sale 11,000,000
Less: Inventory - December 31 4,000,000
Cost of Sale before inventory Write down 7,000,000
Loss on Inventory write-down 100,000
Cost of Sale after inventory Write down 7,100,000

Required Allowance - December 31

(4,000,000-3,700,000) 300,000
Allowance for Inventory Write-down - January 1
(3,000,000-2,800,000) 200,000
Loss on Inventory Writedown 100,000

10. Bonus

Final Quiz No. 3

Conceptual Framework

Name: _______________________________________ Score: ____________________

Professor: Mr. Kalven Perry T. Agustin Date: ____________________

INSTRUCTIONS
1. Choose the best answer.
2. Encircle the answer with a permanent ink pen
3. Erasure would invalidate your answers
4. If the answer is not in the above write the correct answer on the space provided

Multiple Choice: Theories

1. Property, plant and equipment are defined as
a. Tangible assets held for sale in the ordinary course of business
b. Tangible assets held to earn rentals or for capital appreciation
c. Tangible assets held for use in the production or supply of goods or services or for
administrative purposes
d. Tangible assets held for use in the production or supply of goods or services, for rental to
others, or for administrative purposes and expected to be used during more than one reporting
period

Answer: D
2. A provision shall be recognized as liability when
a. An entity has a present obligation as a result of a past event
b. It is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation
c. The amount of the obligation can be measured reliably
d. All of these are required for the recognition of a provision as liability

Answer: D

3. In computing basic earnings per share, the amount of preference dividends on

noncumulative preference shares should be
a. Deducted from net income whether declared or not
b. Deducted from net income only when declared
c. Added to net income only when declared
d. Ignored

Answer: B

4. It is group of assets to be disposed of by sale or otherwise together as a group in a single

transaction, and liabilities directly associated with those assets that will be transferred in the
transaction.
a. Disposal group c. Noncurrent asset
b. Discontinued operation d. Cash generating unit

Answer: A

5. An operating segment is a component of an entity

a. That engages in business activities from which it may earn revenue and incur expenses.
b. Whose operating results are regularly reviewed by the entity’s chief operating decision
maker.
c. For which discrete information is available.
d. All of these characterize an operating segment.

Answer: D

6. Revenue may be recognized

a. At the point of sale
b. During production
c. At the end of production
d. All of the choices may be acceptable for revenue recognition

Answer: D

7. Borrowing costs are defined as

a. Interest expense using the effective interest method
b. Finance charges in respect of finance lease
c. Exchange differences arising from foreign currency borrowings to the extent that these are
regarded as an adjustment to interest cost
d. Interest and other costs that an entity incurs in connection with borrowing of funds
Answer: D

8. Which statement best describes “impairment loss”?

a. The removal of an asset from the statement of financial position
b. The amount by which the carrying amount of an asset exceeds the recoverable amount
c. The systematic allocation of cost of an asset less residual value over the useful life
d. The amount by which the recoverable amount of an asset exceeds the carrying amount

Answer: B

9. A financial liability
a. Must be classified as noncurrent liability.
b. Is a contractual obligation to deliver cash or another financial asset to another entity.
c. Is a contractual obligation to exchange financial assets or financial liabilities with another
entity under conditions that are potentially favorable to the entity.
d. Is a contractual obligation to deliver cash or any asset to another entity.

Answer: B

10. Bonus

Multiple Choice: Problem

1. At the beginning of current year, Besao Company received a grant of P10,000,000 from the
Australian government for the construction of a laboratory and research facility with an
estimated cost of P15,000,000 and useful life of 5 years.
The laboratory and research facility was completed and ready for the intended use at the end
of the current year.
What amount of grant income should be included in the income statement for the current
year?
a. 10,000,000 b. 2,000,000 c. 1,500,000 d. -0-
Solution: Answer B
Grant income (10,000,000 / 5) 2,000,000
PAS 20, paragraph 17, provides that grants related to depreciable assets are usually recognized
as income over the periods and in proportion to the depreciation of the related assets.

2. At the beginning of current year, Farley Company acquired 20% of the outstanding ordinary
shares of Davis Company for P8,000,000.
This investment gave Farley the ability to exercise significant influence over Davis. The carrying
amount of the acquired shares was P6,000,000.
The excess of cost over carrying amount was attributed to a depreciable asset which was
undervalued on Davis’ statement of financial position and which had a remaining useful life of
ten years.
The investee reported net income of P1,800,000 and paid cash dividends of P400,000 and
thereafter issued a 5% share dividend during the current year.
What amount should be reported as investment income for the current year?
a. 360,000 b. 160,000 c. 240,000 d. 340,000
Solution: Answer B
Share in net income (20% x 1,800,000) 360,000
Amortization of excess of cost (2,000,000 / 10) (200,000)
Investment income for current year 160,000

3. Galore Company ventures into construction of a condominium in Makati which is rated as the
largest state-of-the-art structure.
The board of directors decided that instead of selling the condominium, the entity would hold
this property for purpose of earning rentals by letting out space to business executives in the
area.
The construction of the condominium was completed and the property was placed in service on
January 1, 2018.
The cost of the construction was P50,000,000. The useful life of the condominium is 25 years
and the residual value is P5,000,000.
An independent valuation expert provided the following fair value at each subsequent year-
end:
December 31, 2018 55,000,000
December 31, 2019 53,000,000
December 31, 2020 60,000,000
Under the cost model, what amount should be reported as depreciation of investment property
for 2018?
a. 1,800,000 b. 2,000,000 c. 2,200,000 d. -0-
Solution: Answer A
Cost of investment property 50,000,000
Residual value (5,000,000)
Depreciable amount 45,000,000
Annual depreciation (45,000,000 / 25) 1,800,000

4. On December 31, 2019 and 2018, Gow Company had 100,000 ordinary shares and 10,000
cumulative preference shares of 5%, P100 par value.
No dividends were declared on either the preference or ordinary share in 2019 or 2018. Net
income for the current year was P900,000.
What amount should be reported as basic earnings per share?
a. 8.50 b. 9.50 c. 9.00 d. 5.00
Solution: Answer A
Preference share capital (10,000 x P100) 1,000,000

Net income 900,000

Preference dividend (1,000,000 x 5%) (50,000)
Net income to ordinary shares 850,000
Basic earnings per share (850,000 / 100,000 ordinary shares) 8.50
Whether cumulative or noncumulative, only one year preference dividend is deducted from net
income.
If cumulative, the preference dividend is deducted regardless of declaration. In noncumulative,
the preference dividend is deducted only when declared.

5. At the beginning of current year, Diamond Company acquired for P1,000,000 a new
machinery with useful life of 10 years.
The machine had a drum costing P200,000 that must be replaced every five years.
Continued operation of the machine required an inspection every four years after purchase and
the inspection cost is P80,000. The straight line method of depreciation is used.
What amount should be recorded as depreciation for the current year?
a. 100,000 b. 108,000 c. 120,000 d. 140,000
Solution: Answer C
Depreciation of machinery (1,000,000 – 200,000 / 10) 80,000
Depreciation of drum (200,000 / 5) 40,000
Total depreciation for the current year 120,000

6. Harmonious Company acquired a patent for a drug with a remaining legal and useful life of
six years on January 1, 2017 for P5,400,000.
On January 1, 2019, a new patent is received for an improved version of the same drug. The
new patent has a legal and useful life of twenty years.
What amounts should be recorded as amortization expense for 2019?
a. 900,000 b. 200,000 c. 180,000 d. 300,000
Solution: Answer C
Cost – January 1, 2017 5,400,000
Amortization for 2017 and 2018 (5,400,000 / 6 x 2) (1,800,000)
Carrying amount – January 1, 2019 3,600,000
Amortization for 2019 (3,600,000 / 20) 180,000

7. At the beginning of current year, Case Company issued P5,000,000 of 12% nonconvertible 5-
year bonds at 103.
In addition, each P1,000 bond was issued with 30 detachable share warrant, each of which
entitled the bondholder to purchase, for P50, on ordinary share of Case Company, par value
P25.
The quoted market value of each warrant was P4. The market value of the bonds ex-warrants at
the time of issuance is 95.
What amount of the proceeds from the bond issue should be recognized as an increase in
shareholders’ equity?
a. 600,000 b. 300,000 c. 200,000 d. 400,000
Solution: Answer D
Issue price of bonds with warrants (5,000,000 x 103%) 5,150,000
Market value of bonds without warrants (5,000,000 x 95%) 4,750,000
Residual amount allocated to warrants – equity component 400,000

8. Arlene Company accounted for noncurrent assets using the cost model. On October 30,
2019, the entity classified a noncurrent asset as held for sale.
At that date, the carrying amount was P1,500,000 the fair value was estimated at P1,100,000
and the cost of disposal at P150,000.
On December 31, 2019, the asset was sold for net proceeds of P800,000.
15. What amount should be reported as impairment loss for 2019?
a. 550,000 b. 400,000 c. 700,000 d. -0-
Solution: Answer A
Carrying amount 1,500,000
Fair value less cost of disposal (1,100,000 – 150,000) 950,000
Impairment loss 550,000

9. At the beginning of current year, Jade Company purchased a new machine for P4,800,000
and leased it to East the same day.
The machine has an estimated 12-year life and will be depreciated P400,000 per year.
The lease is for a three-year period at an annual rental of P850,000.
Additionally, East Company paid P300,000 to Jade as a lease bonus to obtain the three-year
lease.
Jade Company incurred insurance expense of P80,000 for the leased machine during the
current year.
What amount should be reported as pretax income on the leased asset for the current year?
a. 670,000 b. 550,000 c. 470,000 d. 370,000
Solution: Answer C
Annual rent 850,000
Amortization of lease bonus (300,000 / 3) 100,000
Total 950,000
Less: Depreciation 400,000
Insurance 80,000 480,000
Pretax income 470,000

10. Bonus