ReSA B46 FAR Final PB Exam Questions Answers Solutions

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 46  Oct 2023 CPALE  17 Sept 2023  11:45 AM - 02:45 PM
FINANCIAL ACCOUNTING and REPORTING FINAL PRE-BOARD EXAMINATION
INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
The Retained Earnings account of GDM Company shows the following debits and credits
for the year 2023:
RETAINED EARNINGS
Date Debit Credit Balance
Jan.1 Balance P900,000
(a) Amortization of Patent 60,000
(b) Gain on reversal of impairment of Building 140,000
(c) Cumulative effect of change in accounting
policy (from Average method to FIFO method) 150,000
(d) Loss on sale of treasury stock 20,000
(e) 20% stock dividend on 100,000, P10 par value
shares issued and outstanding (FV at the
same date at P12.00) 240,000
(f) Accrual of salaries 100,000
(g) Premium on ordinary shares issued 70,000
(h) Share issuance cost related to ordinary share
issued above (g) 8,000
(i) Share options outstanding 25,000
(j) Loss on write-down of inventories 10,000
(k) Gain on sale of ordinary share as a result of
exercise of stock rights 30,000
(l) Warranty expense 60,000
(m) Correction of prior period error 40,000
(n) Cash dividends payable 195,000
(o) Premium income 16,500
(p) Donated capital 37,000
(q) Bad debts expense 8,000
(r) Decrease in fair value of investment 55,000
properties using the Fair value model
(s) Net income for the period 720,000
(t) Earned portion of rent collected in advance 31,000
(u) Amortization of discount on bonds payable 9,000
(v) Amortization of premium on Investment at
amortized cost 10,000
(w) Increase in fair value of Investment at FVPL 80,000
(x) Cumulative balance of unrealized gain on
Investment at FVOCI 35,000
(y) Share warrants outstanding 12,000
(z) Actuarial loss on remeasurement of defined
benefit obligation 120,000
Additional information:
a. The 20% stock dividend in item (e) was declared on October 1, 2023 distributable
on February 14, 2024. The company recorded the transaction as follows:
Retained Earnings 240,000

Share dividends distributable 200,000
Share premium 40,000
b. The company’s share premium from treasury account balance before any subsequent
reissuance and retirement amounted to P22,000.
c. The cumulative balance of Unrealized gain credited to Retained earnings was due
to the sale of equity investment during the year.
1. Statement 1: The correct restated retained earnings on January 1, 2023 is

P1,090,000.
Statement 2: The total net adjustments to Share premium/APIC is P160,000.
a. Only statement 1 is TRUE
b. Only statement 2 is TRUE
c. Both statements are TRUE
d. Both statements are FALSE
Page 1 of 28 0915-2303213  resacpareview@gmail.com

FINANCIAL ACCOUNTING & REPORTING
ReSA Batch 46 – October 2023 CPALE Batch
17 Sept 2023  11:45 AM to 02:45 PM FAR Final Pre-Board Exam
2. How much is the adjusted net income for the year 2023?
a. 675,500 b. 730,500 c. 748,500 d. 693,500
3. How much is the correct retained earnings on December 31, 2023?
a. 1,460,500 b. 1,370,500 c. 1,405,500 d. 1,412,500
The following relevant data for 2 different companies were as follows:
Company 1: Venus Company acquired an equipment on January 1, 2021 costing P1,550,000
for its operations. The equipment has an estimated useful life of 14 years and an
estimated salvage value of P150,000. It’s the company’s policy to depreciate all
equipment using the straight- line method. On January 1, 2023, Venus Company made a
revision of the useful life of the equipment and determined that the total revised
useful life of the equipment is 10 years from the date of acquisition and a new residual
value of P100,000.
Company 2: Earth Company has been using the FIFO method of inventory costing since it
began operations in 2022. In 2024, the company changed to the Weighted Average method.
The following are the December 31 inventory balances under each method:
FIFO Weighted Average
2022 450,000 560,000
2023 895,000 995,000
Earth Company reported net income of P500,000 and P400,000 under FIFO method for the
years 2022 and 2023, respectively.
4. Statement 1: The correct depreciation expense for the year 2023 is P156,250
related to Venus Company.
Statement 2: The correct net income for the year 2023 is P390,000 related to
Earth Company.
5. Statement 1: The total net adjustments to Retained Earnings on January 1, 2023
is P0 related to Venus Company.
Statement 2: The total net adjustments to Retained Earnings on January 1, 2024
is P100,000 decrease related to Earth Company.
For two consecutive years, Saturn Company failed to recognize accruals, prepayments
and other transactions in its records. Reported net income and a listing of the errors
appear below:
2022 2023
REPORTED PROFIT 490,000 670,000
a. Failed to record accrued expense 34,000 28,000
b. Overstated ending inventory 63,000 28,000
c. Failed to record accrued interest on notes 12,000 6,000
receivable
d. Failed to recognized unearned portion of revenue 24,000 20,000
e. Failed to record purchases on account. Purchases --- 25,000
were recorded when paid in the subsequent year.
Inventories were properly included at the end
f. Failed to recognized prepaid (unexpired portion) 4,800 6,200
insurance at the end of the year
g. Repairs and maintenance incurred during the year --- 120,000
was erroneously capitalized as part of cost of
the asset. Full year depreciation at annual rate
of 10% is provided in the year that the asset is
recognized
6. Statement 1: The correct net income for the year 2022 is P385,800.
Statement 2: The correct net income for the year 2023 P793,400.

Jupiter Company’s transactions for the year ended December 31, 2023 included the
following:
a) Sold long-term investment securities with a carrying value of P100,000 for
P130,000 cash.
b) Cash dividends of P500,000 were declared but P340,000 were only paid during the
period.
c) Issued 10,000 ordinary shares for cash amounting to P220,000.
d) Purchased machinery and equipment for P1,300,000. Included in the total purchase
was a machinery costing P100,000 acquired through issuance of long-term notes.
e) Purchased of treasury shares for cash costing P80,000.
f) Increased of accounts receivable by P 100,000
g) Decreased of inventories by P150,000
h) Increased of accounts payable by P 200,000
i) Obtained a short-term bank loan of P500,000
j) Depreciation expense for the year was P210,000
k) Building costing P600,000 with accumulated depreciation of P350,000 was sold for
P230,000.
l) Net Income for the year was P800,000.
7. Statement 1: The net cash provided by operating activities is P1,250,000.
Statement 2: The net cash used in investing activities is P840,000.
Statement 3: The net cash provided by financing activities is P300,000.
b. Only statements 1 and 2 are TRUE
c. All of the above statements are TRUE
d. None of the above statements are TRUE
8. Assuming a beginning cash balance of P5,000,000, how much is the correct ending
cash balance?
a. 4,290,000 b. 7,390,000 c. 5,710,000 d. 2,610,000
CPL Company’s December 31, 2023 balance sheet reported the following shareholders’
equity:
10%, Preference share capital, P100 par value per share,
20,000 shares issued and outstanding, liquidation value of P105 P2,000,000
Ordinary share capital, P100 par value, 72,000 shares issued 7,200,000
Treasury shares, (ordinary) 4,000 shares at cost 600,000
Retained Earnings 4,000,000
Subscribed ordinary share (12,000 shares subscribed,
net of P400,000 subscription receivable) 800,000
Revaluation surplus 700,000
Preference dividends have not been paid since last year up to the end of 2023.
9. Statement 1: The book value per ordinary share is P158.75, assuming the preference
is cumulative and non-participating.
Statement 2: The book value per preference share is P154.00, assuming the
preference is non-cumulative and participating.
AST Company started operations in 2021 with 250,000 P10 par value ordinary shares and
20,000, 9%, P100 par value preference shares. This capitalization did not change until
2023. AST paid dividends amounting to P100,000, P250,000 and P540,000 at the end of
2021, 2022 and 2023, respectively.
10. If the preference shares were cumulative and non-participating, how much is the
dividend per ordinary share in 2023?
a. P1.40
b. P1.44
c. P9.50
d. P9.00
11. If the preference shares were non-cumulative and fully participating, how much
is the cash dividends distributable to preference shareholders in 2023?
a. P12.00
b. P1.20
c. P240,000
d. P300,000
Badyangpogi Company invested 50,000 ordinary shares of the total 200,000 outstanding
ordinary shares of JPB Corporation on January 1, 2022. The shares were acquired at
P140.
The following are relevant information of JPB Corporation for the years 2022 and 2023:
2022 2023
Net income for the year P4,000,000 P5,000,000
JPB’s shares outstanding at December 31, 2023 follow:

Ordinary share P4,000,000
10%, Preference share 1,000,000
During 2023, JPB declared and distributed preference dividends amounting to P90,000 to
its preference shareholders. Badyangpogi received cash dividend of P10 per ordinary
share. JPB did not declare any kind of dividends during 2022. The share capital of
JPB did not change during 2023.
12. Statement 1: The share in net income for 2022 is P1,000,000, assuming the
preference share is non-cumulative.
Statement 2: The share in net income for 2023 is P1,225,000, assuming the
preference share is cumulative.
SCI Corporation had P500,000 net income in 2022. On January 1, 2022, there were 200,000
shares of ordinary outstanding. On April 1, 20,000 shares were issued and on September
1, bought 30,000 shares of treasury shares. There are 30,000 options to buy ordinary
shares at P40 per share on January 1, 2022. The market price of the ordinary shares
averaged P50 during 2022. The tax rate is 40%.
During 2022, there were 40,000 shares of cumulative preference shares outstanding. The
preference has P100 par, pays dividend of P3.50 per year, and is convertible into three
shares of ordinary. SCI issued P2,000,000 of 8% convertible bonds at face value during
2021. Each P1,000 bond is convertible into 20 shares of ordinary.
13. How much is the basic earnings per share for 2022?
a. P1.71 c. P1.60
b. P1.76 d. P1.17
14. How much is the diluted earnings per share for 2022?
a. P1.71 c. P1.51
b. P1.61 d. P1.46
On January 1, 2023, CTE Company acquired a tract of land for P5,000,000. CTE Company
paid P1,000,000 down and signed a non-interest-bearing note for the balance which is
payable in 4 equal annual payments every December 31 of each year. There was no
established exchange price for the land and the note had no ready market. The
prevailing interest rate for this type of the note was 12%. The present value of note
on January 1, 2023 is P3,037,300.
15. Statement 1: The non-current portion of notes payable on December 31, 2023 is
P1,689,989
Statement 2: The interest expense for the year 2024 is P288,213.
Pinas Company reported the following notes receivable balances from different companies
as of December 31, 2023:
Luz Company,12% 2,000,000
Vi Company, non-interest ?
Min Company, non-interest ?

(a) The notes receivable from Luz Company was received from sale of goods in the normal
course of business. The note is dated January 1, 2023 and is due on December 31, 2024.
The first annual interest collection on the loan on December 31 was correctly recorded.
(b) The notes receivable from Vi Company with a face value of P3,000,000 was received
on January 1, 2023 in exchange for the consultation services received. The note is due
on December 31, 2025. The fair value of the services is not readily determinable.
(c) The notes receivable from Min Company with a face value of P4,000,000 dated December
31, 2023 was received for the sale of an old machine having an original cost of
P5,000,000 and a book value of P3,500,000. The terms of the sale require Min to make
a down payment of P1,000,000 and the balance payable in 3 equal installments every
December 31. The fair value of the machine is not readily determinable.
The prevailing rate of interest for these notes was 12%. Present value of P1 at 12%
for three periods is 0.712. Present value of P1 at 12% for two periods is 0.797.
Present value of P1 at 12% for one period is 0.893. The present value of an ordinary
annuity of 1 for two periods is 1.690. The present value of an ordinary annuity of 1
for three periods is 2.402.
16. Statement 1: The interest income for the year 2023 related to notes receivable
from Luz Company is P240,000.
Statement 2: The service income to be recognized on January 1, 2023 related to
notes receivable from Vi Company is P2,136,000.
Statement 3: The gain on sale of machine related to notes receivable from Min
Company is P98,000.
b. Only statement 2 and 3 are TRUE
c. Only statements 1 and 2 are TRUE
d. All of the above statements are TRUE
KLM Company’s Accounts Payable on December 31, 2023, totaled P1,000,000 before any
necessary year-end adjustments relating to the following transactions:
❑ On December 21, 2023, KLM purchased and recorded goods with an invoice price of
P300,000, terms 2/10, n/30 from KEN Company. This amount had not been paid as of
December 31, 2023. KLM Company is using the net method for all purchases.
❑ Goods shipped FOB Destination on December 23, 2023 from a vendor were lost in
transit. The invoice cost of P35,000 was not recorded as of December 31, 2023.
❑ Goods shipped FOB Shipping Point on December 26, 2023 from a vendor were still in
transit as of December 31, 2023. The invoice cost of P150,000 was recorded on
December 31, 2023.
❑ Goods purchased and recorded goods with an invoice price of P50,000 from NETH
Company on December 28, 2023, terms 3/15, n/45. KLM Company paid its account in
full on January 5, 2024.
17. How much is the total adjusted accounts payable on December 31, 2023?
a. 1,006,000 b. 1,007,500 c. 992,500 d. 1,000,000
On January 2, 2023, Kundol Corporation purchased 25,000 ordinary shares at P25 per
share of Upo Company representing 30% interest in Upo Company. Kundol also paid
transaction cost of P15,000. The book values of the assets and liabilities of Upo on
the date of acquisition were 900,000 and 100,000, respectively.
Upo’s identifiable net assets equal their fair values except for Land which has a fair
value in excess of carrying amount of P300,000, Building which has a book value in
excess of fair value of P400,000 and Inventories with a book value of P200,000 and
fair value of P250,000. The building has an estimated remaining useful life of 10 years
on the date of acquisition. During the year, 70% of the inventories were sold.
Upo reported the following in its Statement of Comprehensive Income for the year ended
2023: Net Income of P450,000 and P100,000 increase in revaluation surplus. Kundol
received cash dividends of P200,000 during the year. The fair value of the net assets
acquired is P5,000,000. Fair value of the shares at year-end is P30 per share.
18. Statement 1: The company should recognize a gain on bargain purchase of P400,000.
Statement 2: The total income that should be reported in profit or loss is
P136,500.
19. Statement 1: The carrying value of the Investment in Upo Company on December
31, 2023 is P606,500.
Statement 2: Impairment loss of P143,500 should be reported in profit or loss
for the year 2023.
AJD Corporation has two classes of share capital outstanding: 12%, P100 par value
preference shares and P50 par value ordinary shares. Balances on January 1, 2023 were:
Preference Share Capital – 5,000 shares P500,000
Ordinary Share Capital – 50,000 shares 2,500,000
Share premium – Preference 200,000
Share premium – Ordinary 2,000,000
Accumulated profits 4,000,000
The following data summarize the transactions for 2023:
a. Issue of 20,000 shares of ordinary at P50 per share on January 20.
b. Purchase of 5,000 of the company’s own ordinary shares from stockholders at P60
per share on February 20.
c. A 2 for 1 share split on the ordinary on April 1.
d. 20% stock dividend to ordinary shares was declared on April 30 and distributed
on May 20. The prevailing fair value of share on this date was P60 per share.
e. Reissuance of 3,000 reacquired shares at P40 per share on May 3.
f. Donation of 15,000 shares of ordinary by shareholders on June 5.
g. Reissuance of 10,000 donated stocks at P40 per share on July 1.
h. Declaration of P12 cash dividends to preference shares and P3 per share dividends
to ordinary on November 30 to stockholders as of December 20 payable on January
30 of the next year.
i. The company appropriated 20% of the adjusted unappropriated accumulated profits
(after other appropriations) for plant expansion.
The net income for the year after adjustments was P1,200,000 and Cumulative unrealized
loss of investment at FVOCI was P200,000.
20. Statement 1: The adjusted balance of the Ordinary share capital on December 31,
2023 is P4,150,000.
Statement 2: The total Share premium on December 31, 2023 is P2,630,000.
Statement 3: The total Contributed capital on December 31, 2023 is P7,820,000.
21. How much is the total Shareholder’s equity as of December 31, 2023?
a. 10,458,000 b. 10,898,000 c. 10,868,000 d. 11,318,000
Company 1: On January 1, 2023, JMI Company acquired 25%, equivalent to 30,000 shares
of JOSE Company for P3,000,000. All identifiable assets and liabilities of JOSE show
carrying values equal to their fair values. On December 31, 2022, JOSE reported a net
income of P5,000,000. JMI received from JOSE a total cash dividend of P400,000. Fair
value of the shares on December 31, 2022 is P140 per share.
On January 1, 2024, JMI sold 12,000 shares of JOSE at fair value existing at end of
2023. A loss of significant influence occurred as a result of sale. During 2024, JOSE
reported a net income of P2,000,000 and distributed a total dividend of P600,000. Fair
value at the end of 2024 is P160 per share.
Company 2: On January 1, 2022, CSA Company purchased 2,000 of the P1,000 face value,
9%, 5-year debt instruments for P1,852,262. The debt instruments mature on January 1,
2027 and pay interest annually beginning December 31, 2022. The debt instruments were
purchased to yield an 11% rate of interest. The bonds were classified as Investment at
amortized cost.

On August 31, 2023, CSA decided to change its current business model to a business
model in managing the financial assets wherein any changes in fair value of the
investment are taken to other comprehensive income. The fair values of investment were
95, 103, 104 on December 31, 2022, 2023 and 2024, respectively.
Company 3: JFC Company acquired an investment property costing P1,500,000 on January
1, 2022. The property is being leased out under operating lease and the lessee pays
P10,000 on a monthly basis. JFC company depreciates its properties using the straight-
line method over a 5-year useful life. JFC company is using the fair value model. The
fair values of the building at the end of 2022 and 2023 were P1,900,000 P1,200,000,
respectively. On January 1, 2024, the property was reclassified to property, plant and
equipment because of the change in the use of the property.
22. Statement 1: The gain or loss on reclassification that should be recognized in

profit or loss by JMI Company on January 1, 2024 is P350,000.
Statement 2: The gain or loss on reclassification that should be recognized in
profit or loss by CSA Company on January 1, 2024 is P157,628.
Statement 3: The gain or loss on reclassification that should be recognized in
profit or loss by JFC Company on January 1, 2024 is P700,000.
23. How much is the unrealized gain or loss that should be reported in Other
Comprehensive Income on December 31, 2024 as a result of change in fair value
during the year, assuming the investment was reclassified to FVOCI related to
JMI Company?
a. 800,000 c. 350,000
b. 360,000 d. 440,000
24. How much is the carrying value of investment that should be reported in the
statement of financial position on December 31, 2024 related to CSA Company?
a. 2,080,000 c. 1,931,633
b. 2,060,000 d. 1,902,372
25. How much is the total net effect in profit or loss for the year 2023 related to
JFC Company?
a. 120,000 b. 80,000 c. 200,000 d. 320,000
Company 1: TWICE Company has the following property items on December 31, 2023:
Land held for capital appreciation P2,000,000
Building owned and leased out under finance lease 2,000,000
Machinery being leased out under operating lease 1,000,000
Building that is being constructed for future use as PPE 3,000,000
Condominium building that is being constructed
intended for sale in the ordinary course of business 4,000,000
Owner-Managed hotel building 4,500,000
Building being used for administrative purposes 3,500,000
Hotel building for which rentals are significant 5,000,000
Company 2: A physical count on December 31, 2023 revealed that BTS Company had inventory
with a cost of P4,400,000. The following items were excluded from this amount:
- Merchandise inventory of P600,000 was held on consignment by BTS.
- Goods costing P400,000 were shipped by BTS “Ex-ship” to a customer on December
31, 2023. The customer received the goods on January 3, 2024.
- Merchandise costing P500,000 was shipped by BTS “Free alongside” to a customer
on December 29, 2023. The customer received the goods on January 6, 2024.
- Goods costing P800,000 shipped by a vendor FOB destination on December 31,
2023 were received by BTS on January 7, 2024.
- Goods costing P700,000 was shipped by a supplier “CIF” on December 30, 2023
and received by BTS on January 10, 2024.

Company 3: On Dec. 31, 2023, BLACKPINK Company reported Cash and Cash Equivalents of
P5,040,000 which is comprised of the following:
Petty cash fund 225,000
Cash in Bank – BDO Checking Account 750,000
Cash in Bank – BPI (overdraft) (75,000)
Check from customer dated December 1, 2023, 37,500
returned by the bank marked NSF
Check from customer, dated January 5, 2024 37,500
Cash in Bank – Security bank including unrestricted 225,000
compensating balances of P25,000
Money order and Traveler’s check 150,000
Cash in Bank – PNB (money market, 90 days) 3,000,000
Restricted cash in Foreign Bank 150,000
IOUs 90,000
Bond sinking fund 450,000
Company 4: MOMOLAND Corporation provided you the following differences between 2023
financial income and taxable income:
Unearned rent income P500,000

Prepaid advertising expense 300,000
Installment sale which will be taxable upon collection 800,000
Accrued salaries expense 400,000
Bad debts expense using a method under accrual basis 100,000
Impairment loss on Building 150,000
Excess book depreciation over tax depreciation 350,000
Provision for litigation 250,000
Unrealized gain on FVPL 120,000
Excess warranty expense over warranty paid 90,000
Fines, Penalties and Surcharges 30,000
Company 5: ENHYPEN Corporation reported the following lists related to its agricultural
activity for the year ended December 31, 2023:
Dairy cattle 3,000,000
Grapes (harvested) 500,000
Sheep 2,000,000
Carcass 100,000
Fruit trees 1,500,000
Wine 800,000
Milk 900,000
Wool 700,000
26. How much should be classified as Investment Properties by TWICE Company on
December 31, 2023?
a. 7,000,000 c. 9,000,000
b. 6,500,000 d. 7,500,000
27. What is the correct amount of inventories to be reported by BTS Company on

December 31, 2023?
a. 4,900,000 c. 5,500,000
b. 5,400,000 d. 6,000,000
28. How much is the total Cash and Cash Equivalents to be reported by BLACKPINK
Company for the year ended December 31, 2023?
a. 5,040,000 c. 4,350,000
b. 5,115,000 d. 4,590,000
29. What is the total future taxable amount related to MOMOLAND Company?
a. 1,840,000 c. 1,570,000
b. 1,220,000 d. None of the choices
30. What amount of biological assets should ENHYPEN Company report in its December
31, 2023 statement of financial position?
a. 6,500,000 c. 6,600,000
b. 5,000,000 d. 7,200,000

On December 31, 2023, JDD Company presented the following information:
Ordinary share capital, P100 par P5,000,000

Share premium 2,000,000
Retained earnings (2,000,000)
JDD decided to undergo quasi reorganization. As a result, the company’s property,

plant and equipment with a book value of P4,000,000 should be written down to its
fair value of P3,000,000 and an Inventory with a fair value of P1,000,000 is currently
recorded in the accounts costing P1,500,000. Also, unrecorded accounts payable as
of this date was P300,000. The par value of the share capital is reduced to P50 per
share.
31. Statement 1: The balance of share premium after quasi-reorganization is
P700,000.
Statement 2: The balance of shareholders’ equity after the quasi-reorganization
is P3,200,000.
Company 1: POOH Company is experiencing financial difficulty during 2023 and is

negotiating a trouble debt restructuring to relieve its financial stress. POOH Company
owed P500,000 plus accrued interest of P50,000 to ACCA Bank to be paid on December 31,
2023. ACCA bank accepted an equity interest from POOH Company in a form of 10,000
ordinary shares. The fair value of ordinary shares is P40 per share while the par value
of the ordinary shares is P30 per share. The fair value of the liability to be settled
on December 31, 2023 was P420,000.
Company 2: INAMI Company has an overdue note payable to KAH Bank of P800,000 and
recorded accrued interest of P96,000 as of December 31, 2023. KAH Bank agreed to the
following restructuring agreement on December 31, 2023 wherein the prevailing market
interest rate for similar debt instrument on this date is 12%:
• Reduce the principal obligation by P100,000.
• Waive the P96,000 accrued interest.
• Extend the maturity date to December 31, 2025.
• Annual interest of 10% of the new principal is to be paid on December 31, 2024
and December 31, 2025.
• Present value of P1 at 12% for 2 periods is 0.7972. Present value of an ordinary
annuity of P1 at 12% for 2 periods is 1.6901.
• Present value of P1 at 10% for 2 periods is 0.8264. Present value of an ordinary
annuity of P1 at 10% for 2 periods is 1.7355.
32. Statement 1: The gain on debt restructuring to be reported by POOH Company in
profit or loss as a result of the restructuring is P150,000.
Statement 2: The gain on debt restructuring to be reported by INAMI Company in
profit or loss as a result of the restructuring is P219,653.
The shareholders' equity section of CUL Corporation as of December 31, 2023, contained
the following accounts:
Ordinary share capital, P20 par, 4,500,000 shares P4,500,000
authorized; 225,000 shares issued and outstanding
Share premium 2,500,000
Retained earnings 7,200,000
CUL Corporation’s board of directors declared a 10 percent bonus issue on April 1,
2024, when the market value of the share was P24 per share. Accordingly, new shares
were issued. Another P2.50 per cash dividends were declared on September 1, 2024 and
the equipment with carrying value of P650,000 currently having fair value of P720,000
was declared as dividends on December 1, 2024. CUL Corporation sustained a net loss of
P810,000 for the year ended December 31, 2024.

33. How much is the total shareholder’s equity should CUL Corporation in its December
31, 2024 Statement of Financial Position?
a. 11,511,250 c. 13,151,250
b. 12,051,250 d. 13,671,250
Company 1: LUCID Company granted 100 share options to each of its 100 employees on
January 1, 2021. The option plan allows the employees to purchase a share of the
entity’s P100 par value ordinary share at P130 per share. On January 1, 2021, the fair
value of each option is P40. The option plan requires the employees receiving the
options to be in the service of the company for the next three years. Options are
exercisable starting January 1, 2024 and options expire at the end of 2025. At January
1, 2021, it was estimated that 20% of the employees will leave during the next three
years.
Actual and revised estimate of employees leaving the company during 2021, 2022 and
2023 are as follows:
2021: 20 employees left; revised estimate is 15% of remaining employees
2022: 10 employees left; revised estimate is 10% of remaining employees
2023: 18 employees left
Company 2: On January 1, 2022, INTERVAL Corporation granted a total of 10,000 share
appreciation rights on selected officers on the condition that the employees remain
employed at least until December 31, 2024. Each SAR provides for a cash payment equal
to the excess of the company’s share market price on exercise date over P130.
The entity estimates the fair values of the SARs at the end of each year as follows:
2022: P16.80 2023: P21.20 2024: P29.40
The market values of the ordinary shares are presented for the following dates:
January 1, 2022 P130.00
December 31, 2022 P145.00
December 31, 2023 P150.00
December 31, 2024 P160.00
34. Statement 1: The compensation expense for the year 2023 is P85,333 related to
INTERVAL Company.
Statement 2: The share options outstanding balance as of December 31, 2023 is
P208,000 related to LUCID Company.
On January 1, 2020, NFS Corporation issued its 8%, 5-year convertible debt instruments
with a face amount of P8,000,000 for P7,700,000. Interest is payable every December
31 each year. The debt instruments are convertible into 50,000 ordinary shares with
a par value of P100. When the debt instruments were issued, the bonds without the
conversion option would have been sold for P7,393,312 yielding 10%. On December 31,
2022, P6,000,000 face value of the convertible debt instruments were converted. On
December 31, 2023, P1,000,000 face value bonds were retired at 104. Without the
conversion privilege, these bonds would have sold on this date at 101.
35. What amount should the company recognize as a result of retirement on December
31, 2023?
a. Gain of 8,336 taken to Profit or Loss
b. Loss of 8,336 taken to Profit or Loss
c. Gain of 8,336 taken to OCI
d. Gain of 8,336 taken to Equity
On January 1, 2023, MAGIGINGCPAAKO Company obtained a loan of P2,000,000 at an interest

rate of 10% specifically to finance the construction of its new building. Funds not
yet needed during the construction were temporarily invested in a short-term debt
security yielding a P20,000 interest revenue. The construction began on April 30, 2023
and the building was completed on December 31, 2023.
Costs incurred during the year were as follows:
April 30 – P200,000 October 1 – P500,000
August 1 – P400,000 December 1 – P100,000

On March 1, 2023, MAGIGINGCPAAKO Company purchased several machineries that will be
used in the production of goods at a purchase price of P1,000,000. The company paid
import duties of P30,000 and non-refundable purchase taxes of P20,000. The company
also incurred a P50,000 installation and assembly cost.
On April 30, 2023, MAGIGINGCPAAKO Company acquired a piece of Land in exchange for
50,000 shares of the company’s P5 par value ordinary shares. When the company acquired
the Land, the shares were selling for P10.00 per share.
36. How much is the total initial cost of the depreciable Property, Plant and
Equipment?
a. 2,300,000 b. 2,413,33 c. 2,913,333 d. 2,800,000
On January 1, 2020, Dalen Company issued P5,000,000 face value, 5-year bonds at 109.
Each P1,000 bond was issued with one non-detachable share warrant, each of which
entitled the bondholder to purchase 15 shares of P10 par ordinary share at P20. At
issuance date, the market value of each of the bonds without warrant sell at 99. The
stated rate on the bonds is 11% payable annually every December 31.
37. Assuming that ¾ of the warrants were exercised at a time when the market value
of the ordinary share is P25, how much is the total net effect on equity upon
exercise of the warrants?
a. 937,500 b. 1,125,00 c. 1,500,000 d. 562,500
Rhea Corporation acquired 20,000 shares of August Corporation on February 1, 2023 at

P1,000,000 including a P2 per share brokers’ fees and commissions. A P50,000 cash
dividends were received from Rome Corporation on July 1, 2023. Rome Corporation’s
shares were split 3 for 1 on November 1, 2023. The shares were selling at P30 per share
on December 31, 2023. Cost to sell on this is P5 per share. The investments were
classified as Investment at Fair Value through Profit or Loss.
38. How much is the unrealized gain or loss that should be reported in the statement
of comprehensive income?
a. 0 b. 540,000 UG c. 540,000 UL d. 840,000 UG
JTT Company incurred P400,000 of research and development costs to develop a product
for which a Patent A was granted on January 2, 2019. Legal fees and other costs
associated with registration of the patent A totaled P100,000. The estimated useful
life of patent A is 10 years. On November 1, 2023, JTT paid P150,000 for legal fees in
an unsuccessful defense of the patent.
Patent B was acquired on July 1, 2021 for P 300,000. The asset has a legal life of 15
years but due to rapidly changing technology, management estimates a useful life of
only ten years. On January 2, 2023, management is uncertain that the process can
actually be made economically feasible, and decides to write down the patent. The value
in use is P 145,000 while the fair value less cost to sell is P135,000. Amortization
will be taken over 4 years from that time.
39. How much is the total carrying value of the Patent on December 31, 2023?
a. 145,000 c. 108,750
b. 255,000 d. 306,667
Company 1: TITO Company inaugurated a premiums promotional campaign at the beginning

of 2021. Two stickers are included for every sachet of shampoo sold. These stickers
will be used to redeem a hair brush. To claim one hair brush, a customer shall present
30 stickers. Each sachet of shampoo is sold at P15 while the hair brush had a cost of
P5 each. The following is the summary of the promotional campaign for years 2021 and
2022:
2021 2022
Total sachet of shampoo sold 300,000 562,500
Total stickers presented for redemption 405,000 825,000
The company estimates that only 80% of the stickers will be presented for redemption.
The hair brush can be sold separately at P10 if not use in premium promotional program.

Company 2: VIC Company started its business in selling printers with three-year
warranty. It estimates its warranty cost as a percentage of peso sales. Based on past
experience, it is estimated that 3% will be repaired during the first year of warranty,
5% will be repaired during the second year of warranty and 7% will be repaired in the
third year. The product warranty provides service other than agreed upon specification.
In 2021 and 2022, the company was able to sell 10,000 units and 12,500 units,
respectively at a total price of P7,000 per unit. The company also incurred actual
repair costs of P3,500,000 and P9,500,000 in 2021 and 2022, respectively. The selling
price of the warranty is P2,000 per unit. The printer is selling at P5,000 if without
the warranty.
Company 3: The liability for compensated absences of JOEY Company had a beginning
balance of P555,000, it represents the probable unused sick leave and vacation leave
in 2021 and prior to 2021 carried over to 2022. The company’s policy is to allow the
employees to carry over unused leaves over two years from year of grant, thereafter,
it shall expire. Salary rate for current year (2022) increased by 7%. The balance
cumulative unused sick leave and vacation leave are as follows:
Prior to 2021 leaves carried over to 2022 300 days
Leaves earned in 2022 carried over to 2023 600 days
2021 leaves earned carried over to 2022 625 days
Prior to 2021 leaves used in 2022 720 days
Of the total leaves used in 2022, from prior to 2021 leaves used in 2022, 285 were
earned by employee prior to 2021.
40. How much is the unearned premium income at the end of December 31, 2022 that
should be reported by TITO Company?
a. 24,142
b. 37,524
c. 48,283
d. 49,817
41. How much is the unearned warranty income at the end of December 31, 2022 that
should be reported by VIC Company?
a. 10,625,000
b. 16,000,000
c. 21,666,667
d. 29,333,333
42. How much is the liability for compensated absences at the end of December 31,
2022 that should be reported by JOEY Company?
a. 302,625
b. 418,340
c. 507,180
d. 523,735
On January 1, 2022, Cielo Company leased a cutting machine from Heth Company. The lease
is for five years with bargain purchase option of P100,000. It is reasonably certain
that Cielo will exercise the option at the end of the lease period. The machine has an
estimated useful life of 8 years with zero residual value. The lease calls for Cielo
to make annual payments of P250,000 due at the beginning of each year. Cielo uses the
straight-line method of depreciation and pays 10% interest on borrowed money.
The lease contract also requires Cielo to make additional variable lease payments based
on the increase in consumer price index (CPI) at the start of each year compared to
the CPI on January 1, 2021. The CPI is 110 on January, 2022, and 120 on January 1,
2023.
43. What is the carrying amount of the right-of-use asset at the end of 2022?
a. 895,820
b. 899,819
c. 967,203
d. 995,224
On January 1, 2022, Cynthia Corporation signed a ten-year noncancelable lease for
certain machinery. The terms of the lease called for Dire to make annual payments of
P150,000 at the end of each year for ten years with title to pass to Cynthia at the
end of this period. The machinery has an estimated useful life of 15 years and no
residual value. Cynthia uses the straight-line method of depreciation for all of its
fixed assets. Cynthia accordingly accounted for this lease transaction as a finance
lease. The interest rate of 8% is implicit in the lease. Cynthia has an option to
purchase the asset at the end of lease term at P120,000 which is reasonably certain to
exercise by Cynthia. Estimated residual value at the end of 10 years is P100,000 and
end of 15 years is P80,000. Cynthia incurred a total of P350,000 direct cost to enter
the lease.
44. How much should Cynthia recognize related to the above transactions for the
year 2022?
a. lease expense of 150,000.
b. interest expense of P80,521 and depreciation expense of 85,101.
c. interest expense of P84,968 and depreciation expense of 88,806.
d. interest expense of P85,681 and depreciation expense of 131,210.
For the calendar year 2023, Mylene Corporation reported depreciation of P1,200,000 in
its income statement. On its 2023 income tax return, Mylene reported depreciation of
P1,800,000. Mylene's income statement also included P225,000 accrued warranty expense
that will be deducted for tax purposes when paid. Mylene's enacted tax rates are 30%
for 2023 and 2024, and 24% for 2025 and 2026. The depreciation difference and warranty
expense will reverse over the next three years as follows:
Depreciation Difference Warranty Expense

2024 P240,000 P 45,000
2025 210,000 75,000
2026 150,000 105,000
P600,000 P225,000
45. How much is the deferred tax asset on December 31, 2023?
a. 180,000
b. 158,400
c. 67,500
d. 56,700
The adjusted trial balance of BABANGONMULI Company includes the following accounts at
December 31, 2023:
Sales revenue P 5,000,000

Commission income 28,000
Interest expense 180,000
Inventory, 12/31/23 520,000
Purchase, net of returns 2,800,000
Sales commission 500,000
Administrative salaries 720,000
Office supplies expense 110,000
Dividends declared 800,000
Dividend income 16,000
Gain on sale of equipment 100,000
Rent expense 400,000
Unrealized gain on investment at fair value through profit 55,000
or loss
Unrealized gain on investment at fair value through other
comprehensive income 88,000
Depreciation expense – store equipment 70,000
Depreciation expense – office equipment 50,000
Freight-in 80,000
Freight-out 120,000
• Merchandise inventory, January 1, 2023, P450,000

• Income tax rate, 30%
• Rent expense is allocated 60% selling, 40% administrative.
46. How much is the total comprehensive income for the year 2023?
a. P167,300
b. P228,900
c. P255,300
d. P327,000

The following information pertains to WAGKANGSUMUKO Corporation defined benefit plan
for the year 2023:
Defined benefit obligation, January 1, 2023 P 2,500,000

Fair value of plan assets, January 1, 2023 2,000,000
Actual return on plan assets 300,000
Fair value of plan assets, December 31, 2023 2,100,000
Present value of additional DBO settled 175,000
Defined benefit obligation, December 31, 2023 2,400,000
Current service cost 500,000
Discount rate 10%
Benefits paid to retirees (at scheduled retirement) 620,000
Contribution made during the year 600,000
47. What amount of defined benefit cost should be reported in 2023 profit or loss?
a. 550,000 b. 555,000 c. 545,000 d. 450,000
48. What amount of net remeasurement gain/loss should be reported in 2023 other
comprehensive income?
a. 155,000 b. 45,000 c. 150,000 d. 50,000
KAYAKOPABA Company and its divisions are engaged solely in manufacturing. The data
pertain to the industries in which operations were conducted for the year ended December
31, 2023:
Intersegment External
Operating Segment Sales Revenues
A P1,000,000 P5,000,000
B 1,500,000 3,000,000
C 4,000,000 8,000,000
D 500,000 1,300,000
E 2,000,000 2,800,000
F 200,000 900,000
Total P9,200,000 P21,000,000
49. How many are considered reportable segments?

a. Three b. Four c. Five d. Six
SAWAKASNATAPOSDIN Company provided you the following information in preparing its interim
financial report in 2023:
• Inventory loss from market decline of P200,000 occurred in May 2023. None of this
loss was recovered by the end of the year.
• Sold a piece of Land in February 2023 resulting to a loss of P50,000
• Depreciation per month of 100,000 related to Machinery purchased at the beginning
of the year.
50. How should these items be reflected in the company's quarterly income
statements?
Three Months Ended
3/31/23 6/30/23 9/30/23 12/31/23
a. 400,000 550,000 350,000 350,000
b. 350,000 500,000 300,000 300,000
c. -0- 550,000 300,000 300,000
d. 350,000 550,000 300,000 300,000
51. Which of the following statements is/are true?

Statement 1: Recovery from accounts previously written off reduces the balance
of bad debt allowance
Statement 2: Compensating balances required by a bank should always be excluded
from “cash and cash equivalent”
a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false

Statement 1: Cash loans made by a financial institution is reported as Operating
activities in the Cash Flow Statement
Statement 2: The effect of asset ceiling in a defined benefit plan is the excess
fair value of plan assets over the present value of future available refund or
reduction in contribution

Statement 1: Any subsequent increase in fair value less cost to sell related to
non-current asset classified as held for sale would result to a recognition of
gain on recovery without limitation
Statement 2: Total contributed capital includes subscription receivable if
collectible within one year from the BS date

Statement 1: Bearer Plant should be depreciated if it bears agricultural produce
more than one period and to be sold in the ordinary course of business
Statement 2: Accounting for Assurance-type warranty and Service-type Warranty
should follow the PFRS 15 and PAS 37, respectively.

Statement 1: Amortization of discount increases interest expense on the part of
the bondholder
Statement 2: In a sales-type lease, the dealer’s profit under the unguaranteed
residual value is higher than the dealer’s profit under the guaranteed residual
value

Statement 1: FVPL Investments should be reported at fair value every BS date
whether equity or debt investment
Statement 2: If the type of government grant is related to asset under deduction
from asset approach, an income from government grant shall be recognized when
the related expense is incurred

Statement 1: Current and Prior year dividends are deducted from net income in
computing the earnings per share if the preference is cumulative.
Statement 2: Intangible assets refer to identifiable non-monetary asset without
physical substance.

Statement 1: If both fair values of the asset received and given up are not
determinable in an exchange of PPE, the exchange is considered as without
commercial substance
Statement 2: Factoring and Discounting without recourse would result to a
derecognition of notes receivable

Statement 1: Any changes in fair value of FVPL should be treated as future
taxable amount
Statement 2: FOB Shipping point, Freight Collect means that the buyer paid the
shipper freight charges and later asked for reimbursement from the seller
a. Only statement 1 is true.

Statement 1: Total cessation gain or loss is reported in profit or loss if the
reclassification of the remaining interest in associate is reclassified to FVPL
only
Statement 2: Reissuance of treasury shares at a gain or loss for cash will
increase the shareholder’s equity

Statement 1: If the notes receivable is not paid on maturity date, the accounts
receivable will increase by its face value of the notes, accrued interest and
other charges if any
Statement 2: Non-trade receivables are classified as current assets if
collectible within one year or within the normal operating cycle whichever is
longer
b. Only statement 2 is true.

Statement 1: In proof of cash, the adjustment in receipts and disbursements for
the current month is increase, if the error is committed in current month by
way of understating the receipts and disbursements and corrected also the error
in current month
Statement 2: If the ending inventory for the current period is understated, the
effect of the error in net income for the current period is understated and
overstated in subsequent period

Statement 1: Alternatively, dividend and interest received are reported under
investing activity
Statement 2: Discontinued operation, net of tax should be reported on the face
of other comprehensive income

Statement 1: Interest income is based on nominal interest for both FVPL
investment and Interest-bearing notes receivable with realistic rate
Statement 2: Share dividends payable and Share appreciation rights payable are
both reported as liabilities
b. Only statement 2 is true.
65. Which of the following is true about accounts payable?
1. Accounts payable should not be reported at their present value.
2. When accounts payable are recorded at the net amount, a Purchase Discounts
account will be used.
3. When accounts payable are recorded at the gross amount, a Purchase
Discounts Lost account will be used.
a. 1 only
b. 2 only
c. 3 only
d. Both 2 and 3 are true.
66. Star Corporation markets a 10-year bond issue dated January 1, 2023. The bonds
pay interest semi-annually on January 1 and July 1. If these bonds are issued
on August 1, 2023, how many months accrued interest must be paid by the purchaser
and over how many months would any discount on the bonds be amortized?
Months of accrued interest Amortization Period
a. 7 120 months
b. 7 113 months
c. 1 120 months
d. 1 113 months
67. Which of the following items is not matched correctly with its basis of valuation
for purposes of reporting in the Statement of Financial Position?
a. Cash → Face value
b. Long-term interest-bearing note with unrealistic rate → Face value
c. Inventories → Lower of cost or net realizable value
d. Accounts receivable→ Amortized cost
68. Which statement is incorrect concerning the elements directly related to the
measurement of performance?
a. Gains represent other items that meet the definition of income and do not
arise in the course of ordinary regular activities.
b. Losses represent other items that meet the definition of expenses and do
not arise in the course of ordinary regular activities.
c. The definition of expenses encompasses losses as well as those expenses
that arise in the course of ordinary regular activities.
d. The definition of revenue encompasses both income and gains.
69. Reversing entries are not made for
Statement I: Adjusting entries related to depreciation, doubtful accounts
and ending inventory.
Statement II: Adjusting entries related to prepayment of costs initially
recorded as assets or receipts in advance initially recorded as
liabilities.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
70. Which statement is incorrect concerning the conceptual framework?
a. The framework is not a Philippine Financial Reporting Standard and therefore
does not define standard for any particular measurement or disclosure issue
b. The framework is concerned with special purpose financial statements including
consolidated financial statements
c. There is nothing in the framework that overrides any PFRS
d. The framework applies to the financial statements of all commercial,
industrial and business reporting enterprises, whether in public or private
sector
- END of EXAMINATION –

ANSWERS & SOLUTIONS/CLARIFICATIONS

1 A 26 A 51 D
2 A 27 C 52 A
3 C 28 C 53 D
4 C 29 B 54 D
5 A 30 A 55 D
6 A 31 C 56 A
7 C 32 C 57 B
8 C 33 B 58 A
9 B 34 C 59 D
10 A 35 D 60 B
11 C 36 B 61 A
12 C 37 B 62 B
13 B 38 D 63 A
14 C 39 C 64 A
15 C 40 C 65 A
16 C 41 D 66 D
17 A 42 C 67 B
18 B 43 C 68 D
19 A 44 C 69 C
20 B 45 D 70 B
21 B 46 B
22 D 47 B
23 B 48 A
24 A 49 B
25 Bonus 50 B
1. A
UNRESTATED Retained Earnings, 1/1/23 P900,000
Cumulative effect of change in accounting policy - credit 150,000
Correction of prior period error - credit 40,000
RESTATED Retained Earnings, 1/1/23 P1,090,000
Loss on sale of treasury stock P(20,000)

20% stock dividend (40,000)
Premium on ordinary shares issued, net of share issuance
cost (70,000 – 8,000) 62,000
Share options outstanding 25,000
Gain on exercise of stock rights 30,000
Donated capital 37,000
Share warrants outstanding 12,000
Net adjustments to Share premium - increase P106,000
2. A
UNADJUSTED NET INCOME P720,000
Amortization of Patent (60,000)
Gain in reversal of impairment 140,000
Accrual of salaries (100,000)
Loss on write-down of inventories (10,000)
Warranty expense (60,000)
Premium income 16,500
Bad debts expense (8,000)
Decrease in FV of IP using the FV model (55,000)
Rent income 31,000
Amortization of discount on bonds payable (9,000)
Amortization of premium on IAC (10,000)
Increase in FV of investment at FVPL 80,000
ADJUSTED NET INCOME P675,500

3. C
RESTATED Retained Earnings, 1/1/23 P1,090,000
Large stock dividend (20%) (200,000)
Cash dividend (195,000)
Adjusted net income 675,500
Cumulative UG due to sale of FVOCI 35,000
Retained Earnings, 12/31/23 P1,405,500
4. C
Revised cost, 1/1/23 P1,350,000
(1,550,000 – 150,000) x 12/14 + 150,000
Revised depreciable cost,1/1/23

(1,350,000 – 100,000) 1,250,000
Divided by: Remaining useful life
(10 yrs. – 2 yrs.) 8 yrs.
Depreciation expense - 2023 P156,250
NET INCOME - FIFO P400,000

Beginning inventory – 2023 (understated) (110,000)
Ending inventory – 2023 (understated) 100,000
NET INCOME – WEIGHTED AVERAGE P390,000
5. A
• The net adjustments to RE, 1/1/23 related to Venus Company is zero because the change
should be treated PROSPECTIVELY (change in accounting estimate), hence, there will be no
adjustment to RE of prior periods.
• The net adjustments to RE, 1/1/23 related to Earth Company is P100,000 INCREASE
(understatement of 2023 EI of P100,000) because the change should be treated
RETROSPECTIVELY (change in accounting policy). The understatement of ending inventory
in 2022 of P110,000 will counterbalance in 2023, hence, there will be no effect at all in RE
as of 12/21/23 or 1/1/24.
6. A
2022 2023
UNADJUSTED REPORTED PROFIT P490,000 P670,000
a. Failed to record accrued expense (34,000) 34,000;(28,000)
b. Overstated ending inventory (63,000) 63,000;(28,000)
c. Failed to record accrued interest on notes receivable 12,000 (12,000);6,000
d. Failed to recognized unearned portion of revenue (24,000) 24,000;(20,000)
e. Failed to record purchases on account. Purchases were ---
recorded when paid in the subsequent year. Inventories (25,000)
were properly included at the end
f. Failed to recognized prepaid (unexpired portion) 4,800 (4,800);6,200
insurance at the end of the year
g. Repairs and maintenance incurred during the year was --- (120,000)
erroneously capitalized as part of cost of the asset. Full 12,000
year depreciation at annual rate of 10% is provided in the
year that the asset is recognized
ADJUSTED PROFIT P385,800 P577,400

7. C
OPERATING INVESTING FINANCING
Net income P800,000
a. (30,000) P130,000
b. P(340,000)
c. 220,000
d. (1,200,000)
e. (80,000)
f. (100,000)
g. 150,000
h. 200,000
i. 500,000
j. 210,000
k. 20,000 230,000
Provided by or P1,250,000 P(840,000) P300,000

(Used in)
8. C
OPERATING P1,250,000
INVESTING (840,000)
FINANCING 300,000
INCREASE IN CASH during the year P710,000
BEGINNING CASH BALANCE 5,000,000
ENDING CASH BALANCE P5,710,000
9. B
• TOTAL SHE = 2,000,000 + 7,200,000 + 500,000 – 600,000 + 4,000,000 + 800,000 +
400,000 + 700,000 = P15,000,000
• SHE TO ORDINARY SHAREHOLDERS = P15,000,000 – (105 x 20,000 shares) – (P10 per
share x 20,000 shares x 2 years) = P13,300,000
• OUTSTANDING ORDINARY SHARES = 72,000 + 12,000 – 4,000 = 80,000 shares
• BOOK VALUE PER ORDINARY SHARE = P13,300,000 / 80,000 shares = P166.25

(assuming the preference is cumulative and non-participating)
• TOTAL SHE = 2,000,000 + 7,200,000 + 500,000 – 600,000 + 4,000,000 + 800,000 +

400,000 + 700,000 = P15,000,000
• EXCESS SHE TO ORDINARY & PREFERENCE = P15,000,000 – (105 x 20,000 shares) – (P10
per share x 20,000 shares x 1 year) - (100 x 80,000 shares) – (P10 x 80,000) = P3,900,000
• EXCESS SHE ALLOCATED TO PREFERENCE = P2M/P10M x P3,900,000 = P780,000
• SHE TO PREFERENCE SHAREHOLDERS = (105 x 20,000 shares) + (P10 per share x 20,000
shares x 1 year) + 780,000 = P3,080,000
• BOOK VALUE PER PREFERENCE SHARE = P3,080,000 / 20,000 shares = P154.00

(assuming the preference is non-cumulative and participating)
10. A
• CASH DIVIDENDS TO ORDINARY SHAREHOLDERS in 2023 = P540,000 – (P10,000 prior
year’s preference dividend) – (P180,000 current year’s preference dividend) = P350,000
• CASH DIVIDEND PER ORDINARY SHARE = P350,000 / 250,000 shares = P1.40
11. C
• EXCESS CASH DIVIDENDS TO ORDINARY & PREFERENCE = P540,000 – (P180,000 current
year’s preference dividend) - (P225,000 current year’s ordinary dividend) = P135,000
• EXCESS CASH DIVIDENDS ALLOCATED TO PREFERENCE = P2M/P4.5M x P135,000 =
P60,000
• CASH DIVIDENDS DISTRIBUTABLE TO PREFERENCE SHARE = P180,000 + P60,000

= P240,000

12. C
• FULL AMOUNT OF PREFERENCE DIVIDEND = 10% x P1,000,000 = P100,000

• OWNERSHIP = 50,000 shares / 200,000 shares = 25%
• SHARE IN NET INCOME - 2022 = 25% x P4,000,000 = P1,000,000 (assuming the

preference share is non-cumulative)
• SHARE IN NET INCOME - 2023 = 25% x (P5,000,000 – P100,000) = P1,225,000

(assuming the preference share is cumulative)
13. B
• WANOSO = (200,000 x 12/12) + (20,000 x 9/12) – (30,000 x 4/12) = 205,000 shares
• BEPS = P500,000 – (P3.50 x 40,000 shares) / 205,000 shares = P1.76
14. C
Adjustment to Adjustment to EPIS

numerator denominator
OPTIONS - (50-40)/50 x 0 (#1)
30,000
= 6,000 shares
CONVERTIBLE BONDS 8% x P2,000,000 x
12/12 x 60% P2,000,000/P1,000 2.40(#3)
= P96,000 x 20
= 40,000 shares
CONVERTIBLE PREFERENCE SHARE P3.50 x 40,000 1.17 (#2)
shares 40,000 x 3
= P140,000 = 120,000 shares
• BEPS = P500,000 – (P3.50 x 40,000 shares) / 205,000 shares = P1.76
• DEPS = P500,000 – (P3.50 x 40,000 shares) / 205,000 shares + 6,000 = P1.71
• DEPS = P500,000 / 211,000 shares + 120,000 = P1.51
• DEPS = P500,000 + 96,000 / 331,000 shares + 40,000 = P1.61
15. C
Statement 1:
Date PP Applied to Interest Applied to P Balance, end
01/01/2023 3,037,300
12/31/2023 1,000,000 364,476 635,524 2,401,776
12/31/2024 1,000,000 288,213 711,787 1,689,989
Statement 2:
• Interest expense - 2024 = P2,401,776 x 12% x 12/12 = P288,213
16. C
• Interest income – 2023 related to LUZ = P2,000,000 x 12% x 12/12 = P240,000
• Service income on 1/1/23 related to VI = P3,000,000 x .712 = P2,136,000
• Gain on sale related to MIN = P0. The result was a LOSS on sale of P98,000 instead
of GAIN on sale.

DOWN PAYMENT P1,000,000
PV OF FCO
(1,000,000 x 2.402) 2,402,000
SALES PRICE OF MACHINE 3,402,000
CV OF MACHINE (3,500,000)
LOSS ON SALE P(98,000)
17. A
Before adjustments P1,000,000

Adjustment for discount lost (2% x 300,000) 6,000
Accounts payable after adjustment P1,006,000
18. B
Cash paid to Associate P625,000

(25,000 x P25/share)
Fair value of net assets acquired
(900,000 – 100,000) + 300,000 – 400,000 (225,000)
+ 50,000 = P750,000 x 30%
GOODWILL P400,000
Share in net income – UNADJUSTED P135,000

(P450,000 x 30% x 12/12)
Share in Overstatement of DE 12,000
(P400,000/10 x 12/12) x 30%
Share in Understatement of COGS (10,500)
(P50,000 x 70%) x 30%
SHARE IN NET INCOME – ADJUSTED P136,500
19. A
COST (P625,000 + P15,000) P640,000
Share in net income - adjusted 136,500
Share in OCI (P100,000 x 30%) 30,000
Share in cash dividends (200,000)
CV, 12/31/23 before impairment P606,500
Impairment loss:
*RV = 25,000 shares x P30 = P750,000 0
versus CV = 606,500
CV, 12/31/23 after impairment P606,500
20. B
ISSUED SHARES TREASURY SHARES OUTSTANDING
SHARES
Beg. balance 50,000 0 50,000
a. 20,000 - 70,000
b. - 5,000 65,000
c. 70,000 x 2 = 140,000 5,000 x 2 = 10,000 130,000
d. 130,000 x 20% = 26,000 - 156,000
e. - (3,000) 159,000
f. - 15,000 144,000
g. - (10,000) 154,000
• ORDINARY shares issued balance,12/31 = 140,000 + 26,000 = 166,000

• PAR VALUE of ORDINARY share after share split = P50 / 2 = P25
• ORDINARY share capital, 12/31 = 166,000 x P25 par value = P4,150,000

TOTAL SHARE PREMIUM, 1/1 (200,000 + 2,000,000) P2,200,000
(e.) Reissuance of TS at a gain
3,000 shares x ( P40 – P30 ) 30,000
(g.) Reissuance of donated shares at P40 – proceeds
credited to donated capital 400,000
10,000 shares x P40
SHARE PREMIUM, 12/31 P2,630,000
ORDINARY SHARE CAPITAL, 12/31 P4,150,000

PREFERENCE SHARE CAPITAL, 12/31 500,000
SHARE PREMIUM,12/31 2,630,000
TOTAL CONTRIBUTED CAPITAL, 12/31 P7,280,000
21. B
SHE, 1/1/23 P9,200,000
a.Proceeds from issuance of OS (20,000 x P50) 1,000,000
b.Purchase of TS (5,000 x P60) (300,000)
e.Reissuance of TS (3,000 x P40) 120,000
g.Reissuance of donated shares (10,000 x P40) 400,000
h.Declaration of cash dividends:
* Preference = P12 x 5,000 shares = P60,000
* Ordinary = P3 x 154,000 shares = P462,000 (522,000)
Net income 1,200,000

Cumulative UL-FVOCI (200,000)
SHE, 12/31/23 P10,898,000
22. D
Fair value of remaining investments, 1/1/24 P2,520,000
(18,000 shares x P140)
Carrying value of remaining investments,1/1/24 (2,310,000)
3,000,000 + (5,000,000 x 25%) – 400,000 =
3,850,000 x 18/30
GAIN ON RECLASSIFICATION taken to PROFIT P210,000
OR LOSS related to JMI Company
Fair value, 1/1/24 P2,060,000

(P2,000,000 x 1.03)
Amortized cost,1/1/24 (1,902,372)
(1,852,262 x 1.11 – 180,000 x 1.11 – 180,000)
GAIN ON RECLASSIFICATION taken to OCI P157,628
related to CSA Company
• NO GAIN OR LOSS ON RECLASSIFICATION shall be recognized by JFC Company on

1/1/24 upon transfer from Investment Properties to PPE. Journal entry to record
the transfer on 1/1/24 is Debit to PPE of P1,200,000 and Credit to Investment
Properties of P1,200,000.
23. B
Fair value of remaining investments, 1/1/24 P2,520,000
(18,000 shares x P140)
Fair value of remaining investments, 12/31/24 (2,880,000)
(18,000 shares x P160)
UNREALIZED GAIN on 12/31/23 taken to OCI P360,000

24. A
• FAIR VALUE OF NEW INVESTMENT (FVOCI) on 12/31/24 = P2,000,000 x 1.04
= P2,080,000
25. None of the Choices
Rent income for the year P120,000

(P10,000 x 12 months)
Unrealized LOSS due to change in FV (700,000)
(1,900,000 – 1,200,000)
NET EFFECT IN PROFIT OR LOSS (P580,000)
26. A
Land held for capital appreciation P2,000,000
Hotel building for which rentals are significant 5,000,000
TOTAL INVESTMENT PROPERTIES P7,000,000
27. C
• CORRECT COST OF INVENTORIES, 12/31 = P4,400,000 + P400,000 + P700,000

= P5,500,000
28. C
Petty cash fund P225,000
Cash in Bank – BDO Checking Account 750,000
Cash in Bank – Security bank including unrestricted 225,000
compensating balances of P25,000
Money order and Traveler’s check 150,000
Cash in Bank – PNB (money market, 90 days) 3,000,000
CORRECT CASH AND CASH EQUIVALENTS, 12/31/23 P4,350,000
29. B
Unearned rent income P500,000 FDAAB
Prepaid advertising expense 300,000 FTALE
Installment sale which will be taxable upon collection 800,000 FTALE
Accrued salaries expense 400,000 FDAAB
Bad debts expense using a method under accrual basis 100,000 FDAAB
Impairment loss on Building 150,000 FDAAB
Excess book depreciation over tax depreciation 350,000 FDAAB
Provision for litigation 250,000 FDAAB
Unrealized gain on FVPL 120,000 FTALE
Excess warranty expense over warranty paid 90,000 FDAAB
Fines, Penalties and Surcharges 30,000 NDE
• TOTAL FUTURE TAXABLE AMOUNTS = P300,000 + P800,000 + P120,000

= P1,220,000
30. A
Dairy cattle P3,000,000

Sheep 2,000,000
Fruit trees 1,500,000
TOTAL BIOLOGICAL ASSETS P6,500,000
31. C
Share premium before quasi-reorganization P2,000,000
Increase in share premium as a result of reduction in par 2,500,000
(P100 – P50) x 50,000 shares
Decrease in share premium as a result of absorption of deficit (3,800,000)
Share premium after quasi-reorganization P700,000
• Total adjusted deficit = 2,000,000 + (4,000,000 – 3,000,000) + (1,500,000 – 1,000,000)
+ 300,000 = P3,800,000
Ordinary share capital (P50 x 50,000 shares) P2,500,000

Retained earnings 0
TOTAL SHE AFTER QUASI-REORGANIZATION P3,200,000
32. C
• GAIN ON DEBT RESTRUCTURING related to POOH Company:

= P550,000 – (10,000 shares x P40) = P150,000
• CV of the debt P896,000

PV of modified cash flow
P700,000 x .7972 = P558,040
70,000 x 1.6901 = 118,307 676,347
GAIN ON DEBT RESTRUCTURING P219,653
related to INAMI Company
33. B
SHE, 12/31/23 (4,500,000 + 2,500,000 + 7,200,000) P14,200,000
Cash dividends declared
(225,000 x 1.10 ) x P2.50 (618,750)
Property dividends declared (at FV) (720,000)
Net loss (810,000)
SHE, 12/31/24 P12,051,250
34. C
Cumulative compensation expense as of 12/31/23 P141,333

(10,000 x P21.20) / 3 years x 2 years
Cumulative compensation expense as of 12/31/22 (56,000)
(10,000 x P16.80) / 3 years x 1 year
COMPENSATION EXPENSE – 2023 related to P85,333
INTERVAL Company
• SHARE OPTIONS OUTSTANDING on 12/31/23 related to LUCID Company:

= (100-18-10-20 = 52 employees x 100 options = 5,200 options
= (5,200 options x P40) /3 years x 3 years = P208,000
35. D
Retirement price on equity (3% x P1,000,000) P30,000

CV of bond conversion privilege cancelled
(7,700,000 – 7,393,312) x 1/8 38,336
Gain on cancellation of BCP taken to EQUITY P8,336
36. B
Borrowing cost DURING the construction period P133,333

(2,000,000 x 10% x 8/12)
Interest revenue (20,000)
Capitalized interest - 2023 P113,333
Actual expenditures P1,200,000
(200,000 + 400,000 + 500,000 + 100,000)
Capitalized interest 113,333
Initial cost of Building P1,313,333

• Initial cost of Machineries :

= P1,000,000 + P30,000 + P20,000 + P50,000 = P1,100,000
COST OF BUILDING P1,313,333

COST OF MACHINERIES 1,100,000
TOTAL COST OF DEPRECIABLE PPE P2,413,333
37. B
• Total net effect on equity = Cash received upon exercise of the warrants:
5,000 bonds x 1 warrant per bond x 15 shares per warrant x exercise price
of P20/share = P1,500,000 x ¾ = P1,125,000
• Alternative solution = OS of P562,500 + SP of P937,500 – SWO of P375,000

= P1,125,000
Journal entry:
Cash 1,125,000
SWO 375,000
OS 562,500
SP 937,500
38. D
Fair value, 12/31/23 P1,800,000

(20,000 x 3 = 60,000 shares x P30)
Carrying value bef. remeasurement, 12/31/23 (960,000)
(P1,000,000 – P40,000)
UNREALIZED GAIN taken to P/L section of SCI P840,000
39. C
Cost of Patent B P300,000

Accumulated amortization, 1/2/23
(P300,000 / 120 months x 18 months) (45,000)
CV, 1/2/23 P255,000
Impairment loss:
*Recoverable value = P145,000 (higher amount) vs. (80,000)
*CV of P225,000.
CV, 1/2/23 AFTER impairment P145,000

Revised annual amortization:
(P145,000 / 4 years) (36,250)
CV, 12/31/23 – PATENT B P108,750
• NOTE: CV of PATENT A, 12/31/23 = ZERO, because the outcome is unsuccessful.
40. C
• FV of Premium = P8 x 20,000 hair brush = P160,000

• Proceeds allocated to Premium = P160,000/P4,660,000 x P4,500,000 = P154,506
• Unearned Premium, 12/31/2021 = P154,506 – P130,364 = P24,142
2022
• FV of Premium = P8 x 27,500 hair brush = P300,000
• Proceeds allocated to Premium = P300,000/8,737,500 x P8,437,500 = P289,700
• Unearned Premium, 12/31/22 = P24,142 + P289,700 – P265,559 = P48,283
41. D
2021: P20,000,000 x 7/15 P9,333,333
2022: P25,000,000 x 12/15 20,000,000
Unearned Warranty,12/31/22 P29,333,333

42. C
• Unused and Unexpired leaves, 12/31/22 = 925 + 600 – 720 -15 = 790
• Salary rate in 2022 = (P555,000 / 925 x 1.07) = P642 per day
• Liability for compensated absences, 12/31/22 = 790 x P642 = P507,180
43. C
Cost of ROUA P1,042,475

*250,000 x 4.1699 = 1,042,475
* 100,000 x .6209 = 62,090
Accumulated depreciation
* P1,042,475 / 8 yrs. (138,071)
CV of ROUA, 12/31/22 P966,494
44. C
• Interest expense - 2022 = P1,062,100 x 8% = P84,968
• Depreciation expense – 2022 = (P1,412,100 – P80,000) / 15 yrs. = P88,806
45. D
2024 – P45,000 x 30% P13,500
2025 – P75,000 x 24% 18,000
2026 – P105,000 x 24% 25,200
Deferred tax ASSET, 12/31/23 P56,700
• NOTE: The difference in DEPRECIATION is treated as Future TAXABLE amount that

would result to a recognition of Deferred tax LIABILITY.
46. B
Net sales P5,000,000
COGS (450,000 + 2,800,000 + 80,000 – 520,000) (2,810,000)
Other income (28,000 + 16,000) 44,000
Operating expenses (1,970,000)
(500,000+720,000+110,000+400,000+70,000+50,000+120,000)
Non-operating income (100,000 + 55,000) 155,000
Interest expense (180,000)
Income before tax P239,000
Income tax (239,000 x 30%) (71,700)
Profit P167,300
OCI, net of tax (88,000 x .70) 61,600
Total comprehensive income P228,900
47. B
Current service cost P500,000

Interest expense on DBO (2,500,000 x 10%) 250,000
Settlement loss (180,000 – 175,000) 5,000
Interest income on FVPA (2,000,000 x 10%) (200,000)
Defined benefit cost taken to Profit or Loss P555,000
• Settlement price of additional DBO settled = 2,000,000 + 300,000 + 600,000 – 620,000 –

2,100,000 = 180,000
48. A
Remeasurement GAIN related to DBO P55,000
Remeasurement GAIN related to FVPA 100,000
TOTAL Remeasurement GAIN taken to OCI P155,000

DBO, 1/1 P2,500,000
Interest expense on DBO (2,500,000 x 10%) 250,000
Current service cost 500,000
Benefits paid to retirees at scheduled retirement date (620,000)
PV/CV of additional DBO settled (175,000)
DBO, 12/31 before remeasurement P2,455,000
DBO, 12/31 after remeasurement (2,400,000)
Remeasurement GAIN related to DBO taken to OCI P55,000
Actual return on Plan Assets P300,000

Interest income on FVPA (2,000,000 x 10%) (200,000)
Remeasurement GAIN related to FVPA taken to OCI P100,000
49. B
• Minimum amount of combined internal and external revenues to qualify as reportable
segment = (9,200,000 + 21,000,000) x 10% = P3,020,000
• Segments that reported at least P3,020,000 of internal and external revenues:

A= 6,000,000
B= 4,500,000
C= 12,000,000
E = 4,800,000
• Number of reportable segments = FOUR (A, B, C, E)
50. B
3/31/23 6/30/23 9/30/23 12/31/23
Inventory loss - (200,000) - -
Loss on sale of Land (50,000) - - -
Depreciation expense (300,000) (300,000) (300,000) (300,000)
TOTAL (350,000) (500,000) (300,000) (300,000)

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ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

FINANCIAL ACCOUNTING and REPORTING FINAL PRE-BOARD EXAMINATION

Retained Earnings 240,000

1. Statement 1: The correct restated retained earnings on January 1, 2023 is

Page 1 of 28 0915-2303213  resacpareview@gmail.com

Page 2 of 28 0915-2303213  resacpareview@gmail.com

JPB’s shares outstanding at December 31, 2023 follow:

Page 4 of 28 0915-2303213  resacpareview@gmail.com

The following relevant data for 3 different companies were as follows:

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22. Statement 1: The gain or loss on reclassification that should be recognized in

Page 7 of 28 0915-2303213  resacpareview@gmail.com

Unearned rent income P500,000

27. What is the correct amount of inventories to be reported by BTS Company on

Page 8 of 28 0915-2303213  resacpareview@gmail.com

Ordinary share capital, P100 par P5,000,000

JDD decided to undergo quasi reorganization. As a result, the company’s property,

Company 1: POOH Company is experiencing financial difficulty during 2023 and is

Page 9 of 28 0915-2303213  resacpareview@gmail.com

The following relevant data for 2 different companies were as follows:

On January 1, 2023, MAGIGINGCPAAKO Company obtained a loan of P2,000,000 at an interest

Page 10 of 28 0915-2303213  resacpareview@gmail.com

Rhea Corporation acquired 20,000 shares of August Corporation on February 1, 2023 at

The following relevant data for 3 different companies were as follows:

Company 1: TITO Company inaugurated a premiums promotional campaign at the beginning

Page 11 of 28 0915-2303213  resacpareview@gmail.com

Depreciation Difference Warranty Expense

Sales revenue P 5,000,000

• Merchandise inventory, January 1, 2023, P450,000

Page 13 of 28 0915-2303213  resacpareview@gmail.com

Defined benefit obligation, January 1, 2023 P 2,500,000

49. How many are considered reportable segments?

51. Which of the following statements is/are true?

Page 14 of 28 0915-2303213  resacpareview@gmail.com

53. Which of the following statements is/are true?

54. Which of the following statements is/are true?

55. Which of the following statements is/are true?

56. Which of the following statements is/are true?

57. Which of the following statements is/are true?

Page 15 of 28 0915-2303213  resacpareview@gmail.com

59. Which of the following statements is/are true?

60. Which of the following statements is/are true?

61. Which of the following statements is/are true?

62. Which of the following statements is/are true?

63. Which of the following statements is/are true?

Page 16 of 28 0915-2303213  resacpareview@gmail.com

Page 17 of 28 0915-2303213  resacpareview@gmail.com

ANSWERS & SOLUTIONS/CLARIFICATIONS

Loss on sale of treasury stock P(20,000)

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Revised depreciable cost,1/1/23

NET INCOME - FIFO P400,000

ADJUSTED PROFIT P385,800 P577,400

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Provided by or P1,250,000 P(840,000) P300,000

• BOOK VALUE PER ORDINARY SHARE = P13,300,000 / 80,000 shares = P166.25

• TOTAL SHE = 2,000,000 + 7,200,000 + 500,000 – 600,000 + 4,000,000 + 800,000 +

• BOOK VALUE PER PREFERENCE SHARE = P3,080,000 / 20,000 shares = P154.00

• CASH DIVIDEND PER ORDINARY SHARE = P350,000 / 250,000 shares = P1.40

• CASH DIVIDENDS DISTRIBUTABLE TO PREFERENCE SHARE = P180,000 + P60,000

Page 20 of 28 0915-2303213  resacpareview@gmail.com

• FULL AMOUNT OF PREFERENCE DIVIDEND = 10% x P1,000,000 = P100,000

• SHARE IN NET INCOME - 2022 = 25% x P4,000,000 = P1,000,000 (assuming the