COLLEGE OF ACCOUNTANCY

BSA Mastery Program

Daily Drill No. _______

NAME: ____________________________________ DATE: _______________ SCORE: ___________

1 11 21 31 41 51
2 12 22 32 42 52
3 13 23 33 43 53
4 14 24 34 44 54
5 15 25 35 45 55
6 16 26 36 46 56
7 17 27 37 47 57
8 18 28 38 48 58
9 19 29 39 49 59
10 20 30 40 50 60

FINANCIAL ACCOUNTING AND REPORTING

1. Ibrahim Company purchases the majority of its inventory from three primary suppliers for re-sale to customers
around the world. Ibrahim Company’s statement of financial position will include
a. Finished goods inventory.
b. Work-in-process inventory.
c. Merchandise inventory.
d. All of the choices are correct.

2. Companies must allocate the cost of all the goods available for sale (or use) between
a. The cost goods on hands at the beginning of the period as reported on the statement of financial position
and the cost of goods acquired or produced during the period.
b. The cost of goods on hand at the end of the period as reported on the statement of financial position and
the cost of goods acquired or produced during the period.
c. The income statement and the statement of financial position.
d. All of the choices are correct.

3. Why are inventories included in the computation of net income?

a. To determine cost of goods sold.
b. To determine sales revenue.
c. To determine merchandise returns.
d. Inventories are not included in the computation of net income.

4. Which of the following is a characteristic of a perpetual inventory system?

a. Inventory purchases are debited to a Purchases account.
b. Inventory records are not kept for every item.
c. Cost of goods sold is recorded with each sale.
d. Cost of goods sold is determined as the amount of purchases less the change in inventory.

5. Goods in transit which are shipped f.o.b. shipping point should be

a. included in the inventory of the seller.
b. included in the inventory of the buyer.
c. included in the inventory of the shipping company.
d. None of these are correct.
6. Safiye Corporation uses the perpetual inventory method. On March 1, it purchased P10,000 of inventory,
terms 2/10, n/30. On March 3, Safiye returned goods that cost 1,000. On March 9, Safiye paid the supplier. On
March 9, Safiye should credit
a. purchase discounts for P200.
b. inventory for P200.
c. purchase discounts for P180.
d. inventory for P180.

7. Mehmet Corporation uses the perpetual inventory method. On March 1, it purchased 30,000 of inventory,
terms 2/10, n/30. On March 3, Mehmet returned goods that cost 3,000. On March 9, Mehmet paid the supplier.
On March 9, Mehmet e should credit
a. purchase discounts for P600.
b. inventory for P600.
c. purchase discounts for P540.
d. inventory for P540.

8. Selim uses the periodic inventory system. For the current month, the beginning inventory consisted of 200 units
that cost P65 each. During the month, the company made two purchases: 300 units at £68 each and 150 units
at P70 each. Selim also sold 500 units during the month. Using the FIFO method, what is the amount of cost of
goods sold for the month?
a. P33,770.
b. P32,500.
c. P34,150.
d. P33,400.

9. Bayezid Corp. sells one product and uses a perpetual inventory system. The beginning inventory consisted of
10 units that cost P20 per unit. During the current month, the company purchased 60 units at P20 each. Sales
during the month totaled 45 units for P43 each. What is the number of units in the ending inventory?
a. 10 units.
b. 15 units.
c. 25 units.
d. 70 units.

10. Hatice uses the periodic inventory system. For the current month, the beginning inventory consisted of 1,200
units that cost P12 each. During the month, the company made two purchases: 500 units at P13 each and
2,000 units at P13.50 each. Hatice also sold 2,150 units during the month. Using the FIFO method, what is the
ending inventory?
a. P20,073.
b. P18,600.
c. P20,925.
d. P18,950

ADVANCED FINANCIAL ACCOUNTING AND REPORTING

11. Which of the following is not an element identified by the AICPA as being necessary in order to use
percentage-of-completion accounting?
a. The construction period can be reasonably estimated.
b. The buyer can be expected to satisfy obligations under the contract.
c. Dependable estimates can be made of the extent of progress toward completion.
d. Dependable estimates can be made of contract costs.

12. The profession requires that the percentage-of-completion method be used when certain conditions exist.
Which of the following is not one of those necessary conditions?
a. Estimates of progress toward completion, revenues, and costs are reasonably
b. The contractor can be expected to perform the contractual obligation.
c. The buyer can be expected to satisfy some of the obligations under the contract.
d. The contract clearly specifies the enforceable rights of the parties, the consideration to be exchanged, and
the manner and terms of settlement.
13. How should earned but unbilled revenues at the balance sheet date on a long-term construction contract
be disclosed if the percentage-of-completion method of revenue recognition is used?
a. In a footnote to the financial statements until the customer is formally billed for the portion of the work
completed.
b. As a receivable in the noncurrent asset section of the balance sheet.
c. As construction in progress in the noncurrent section of the balance sheet.
d. As construction in progress in the current asset section of the balance sheet.

14. "Costs of uncompleted contracts in excess of related billings" in most cases is shown as a
a. Current liability, i.e., Accounts Payable.
b. Long-term debt, i.e, Notes Payable.
c. Current assets, i.e., Receivables.
d. Investments, i.e., Construction in Progress.

15. "Billings on uncompleted contracts in excess of related costs" in most cases is shown as a
a. Current liability, i.e., Accounts Payable.
b. Long-term debt, i.e., Notes Payable.
c. Current assets, i.e., Receivables.
d. Investments, i.e., Construction in Progress.

16. Ahmed Construction Company began operation on January 2, 2013. During the year, the company
entered into a contract with Kosem Company to construct a manufacturing facility. At that time, Ahmed
estimated that it would take five years to complete the facility at a total cost of P1,800,000.

The total contract price for the construction of the facility if P2,500,000. During the year, the company incurred
P440,000 in construction costs related to the construction project. The estimated cost to complete the contract
is P1,560,000. Kosem Company was billed and paid 30% of the contract price subject to a 10% retention.

Using the percentage of completion method, how much is the excess of Construction in Progress over Contract
Billings or Contract Billings over Construction in Progress?
a. P125,000 current liability
b. P200,000 current liability
c. P125,000 current asset
d. P200,000 current asset

Construction in progress:
Cost incurred to date. 440k
Gross profit earned to date (P2,500,000 - P2,000,000). 110k
Total. 550k
Less: Contract billings (P2,500,000 × 30%) 750k
Excess of contract billings over construction in progress (CL) 200k

For items 17-18. Mihmirah Construction Company has two construction projects which commenced in 2013.
Data for the two projects are as follows:

Project 1 Project 2
Contract Price P420,000 P150,000
Cost incurred during 2013 120,000 140,000

Estimated costs to complete 60,000 35,000

Progress billings during 2013 125,000 145,000

Collections during 2013 120,000 140,000

Expenses 10,000 5,000

17.Using the percentage of completion method, what is the net income (loss) for the year ended December
31, 2013?
a. P120,000
b. P150,000
с. P125,000
d. P135,000

18. Under the zero profit method, what is the net income (loss) for the year ended December 31,2013?
a. P(30,000)
b. P30,000
c. P(25,000)
d. P25,000

For items 19-20. On January 15, 2011, Mahidevran Builders, Inc. won a bidding to build an athletic stadium. The
project was to be built at a total cost of P5,500,000 an was scheduled for completion by September 1, 2013.
One clause of the contract stated that Mahidevran Builders, Inc. was to deduct P15,000 from the P6,600,000 bid
price for each week that completion was delayed. Completion was delayed six weeks.
Data for the three-year construction period follows:

2011 2012 2013

Costs incurred each year P1,782,000 P2,068,000 P1,650,000

Estimated costs to 3,618,000 1,650,000 --

complete
Contract billings 1,200,000 1,900,000 ?
each year
Cash Collections 1,000,000 1,800,000 3,710,000
each year
Operating Expenses 100,000 90,000 70,000

19. What is the net income for the year 2012, using the percentage of completion method?
a. P284,000
b. P374,000
с. P248,000
d. P743,000

20. Using the percentage of completion method, what is the balance of the Construction in Progress account
net of billings at December 31, 2012?
a. P1,520,000
b. P1,784,500
с. P1,520,500
d. P1,250,000

MANAGEMENT ADVISORY SERVICES

21. The degree of financial leverage for April Company is 3.0, and the degree of financial leverage for August
Corporation is 6.2. According to this information, which firm is considered to have greater overall (total) risk?
a. April Company.
b. August Corporation.
c. The degree of financial leverage is a measure of financial risk, so the only conclusion that can be made with
the information given is that August Corporation has greater financial risk than April Company --we cannot tell
which firm has greater total risk.
d. To determine which firm has the greater total risk, we need to know the financial breakeven point of each
firm.

22. Which of the following changes would tend to decrease the company cost of capital for a traditional firm?
a. Decrease the proportion of equity financing.
b. Increase the market value of the debt.
c. Decrease the proportion of debt financing.
d. Decrease the market value of the equity.

23. The most commonly held view of capital structure is that the weighted average cost of capital:
a. falls first with moderate levels of leverage and then increases.
b. does not change with leverage.
c. increases proportionately with increases in leverage.
d. increases with moderate amounts of leverage and then falls.

24. The mix of debt and equity that minimizes the cost of capital is the:
a. optimal operating leverage
b. optimal degree of combined leverage
c. target financial structure
d. optimal capital structure

25. When establishing their optimal capital structure, firms should strive to:
a. minimize the weighted average cost of capital
b. minimize the amount of debt financing used
c. maximize the marginal cost of capital
d. none of the above

26. Nurbanu Corporation is preparing to issue common stock. The Chief Financial Officer is attempting to
estimate Nurbanu's cost of new common stock. The next dividend is expected to be P3.70 and will be paid one
year from now. Dividends are expected to grow at a constant 7% per year. Flotation cost costs on the new
issue will be P2.25 per share.

Nurbanu's Beta coefficient is 1.5, the risk-fee rate is 7.5%, and the expected return on the DJ Industrial Average
is 12.5%. Based on this information, Nurbanu"s cost of new common stock is nearest.
a. 8.4%
b. 12.5%
c. 13.7%
d. 15.4%

P3.70 / (15% - 7%) = P46.25

P3.70 / (P46.25 - P2.25) + 7% = 15.4%

27. ZRP Corporation is preparing to issue common stock. The Chief Financial Officer is attempting to estimate
ZRP's cost of new common stock. The next dividend is expected to be P4.25 and will be paid one year from
now. The current market price reflects an 18% expected annual return to investors. Dividends are expected to
grow at a constant 8% per year. Flotation cost costs on the new issue will be P1.25 per share. ZRP’s cost of new
common stock is nearest.
a. 18.30%
b. 19.25%
c. 18.00%
d. 19.44%

P4.25 / (18% - 8%) = Р42.50

P4.25 / (P42.50 - P1.25) + 8% = 18.3%

28. MDJ, Inc. is preparing to issue preferred stock. The preferred stock will have a P100 par value and will pay P8
per year in dividends. MDJ's marginal tax rate is 34%. Flotation cost for the new issue will be P2.38 per share. The
issue price is expected to be P96.50 per share. Based on this information, MDJ's cost of preferred stock is
nearest:
a. 5.3%
b. 8.5%
c. 5.6%
d. 8.0%

P8 / (P96.50-P2.38) = 8.5%

Use this information for questions 29 and 30.

Osman Co. is preparing to issue new common stock. Osman stock is currently selling in the market for PSO. Very
recently, the stock paid a dividend of P2 per share. Dividend are expected to grow at 10% per year through
the foreseeable future. Floatation costs on the new issue will be P3 per share. Osman' marginal tax rate is 34%.
Assume that the new stock can be sold to investors at the current price of the price existing shares.

29. Based on the information given above, Ames' cost of retained earnings is nearest:
a. 4.4%
b. 4.7%
с. 14.0%
d. 14.4%

[(P2 x 110%) / P50] + 10% = 14.4%

30. Based on the information given above, Ames' cost of new common stock is nearest:
a. 8.33%
b. 14.40%
с. 14.68%
d. 14.25%

[P2 x 110%) / (P50 - P3] + 10% = 14.68%

AUDITING
31. Suleiman audited the financial statements of Firuze Company for the year ended December 1, 2021. He
completed gathering sufficient appropriate evidence on January 30 and later learned of a stock split voted by
the board of directors on February 5. The financial statements were changed to reflect the split, and he now
needs to dual date the report on the company's financial statements before sending it to the company. Which
of the following is the proper form?
a. December 31, 2021, except as to Note X, which is dated January 30, 2021.
b. January 30, 2021, except as to Note X, which is dated February 5, 2021.
c. December 31, 2020, except as to Note X, which is dated February 5, 2021.
d. February 5, 2021, except for the audit completion date, for which the date is January 30, 2021.

32. Prior to the audit report release date, auditors have a responsibility to management's disclosure of
subsequent events until
a. The year-end balance sheet date.
b. The auditors' report date.
c. The audit report release date.
d. The following year's balance sheet date.

33. Which of the following is ordinarily performed last in the audit examination?
a. Securing a signed engagement letter from the client.
b. Performing tests of controls.
C Performing a review of subsequent events.
d. Obtaining signed management representations.

34. Which of the following substantive procedures would auditors most likely perform to obtain evidence about
the occurrence of subsequent events?
a. Recompute a sample of large-peso transactions occurring after year-end for arithmetic accuracy.
b. Investigate changes in shareholders’ equity occurring year-end.
c. Send confimations to vendors with whom the client normally does business but for whom no balance in
accounts payable is noted.
d. Confirm bank accounts established after year-end.

35. A charge in the subsequent period to a notes receivable account from the cash disbursements journal
should alert auditors to the possibility
that a
a. Contingent asset has come into existence in the subsequent period.
b. Contingent liability has come into existence in the subsequent period.
c. Provision for contingencies is required.
d. Contingent liability has become a real liability and has been settled.
36. A possible loss, stemming from past events that will be resolved as to existence and amounts, is referred to
as a(n):
a. Analytical process.
b. Loss contingency.
c. Probable loss.
d. Unasserted claim.

37. An auditor issued an audit report that was dual dated for a subsequent event occurring after the
completion of field work but before issuance of the auditor's report. The auditor's responsibility for events
occurring subsequent to the completion of field work was
a. limited to the specific event referenced.
b. limited to include only events occurring before the date of the last subsequent event referenced.
c. extended to subsequent events occurring through the date of issuance of the report.
d. extended to include all events occurring since the completion of field work.

38. Which of the following procedures is most likely to be included in the final review stage of an audit?
a. Obtain an understanding of internal control.
b. Confirmation of receivables.
c. Observation of inventory.
d. Perform analytical procedures.

39. Whit of the folowing events occurring on January 5, 2022 is most likely to result in an adjusting entry to the
2021 financial statements?
a. A business combination
b. Early retirement of bonds payable
c. Settlement of litigation
d. Plant closure due to a strike

40. CPA Firm A has performed most of the audit of Consolidated Company's financial statements and qualifies
as the principal auditor CPA Firm B did the remainder of the work. Firm A wishes to assume full responsibility for
Firm B's work. Which of the following statements is correct?
a. Such assumption of responsibility violates the profession's standards.
b. In such circumstances, when appropriate requirements have been met, Firm A should issue a standard
unmodified opinion on the financial statements.
c. In such circumstances, when appropriate requirements have been met, Firm A should issue an unmodified
opinion on the financial statements but should make appropriate reference to the Firm B in the audit report.
d. CPA Firm A should normally qualify its audit report on the basis of the scope limitation involved when another
CPA firm is involved.

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

41. Who is not liable for a loss caused by the willful act of through the connivance of the insured; but he is not
exonerated by the negligence of the insured, or of the insurance agents or others?
a. Mortgagor
b. Insurer
c. Guarantor
d. Beneficiary

42. To render an insurance effected by one partner or part-owner, applicable to the interest of his co-partners
of other part-owners, it is necessary that the terms of the policy should be such as are applicable to the?
a. Insurable interest
b. Joint venture
c. Joint arrangement
d. Common interest

43. When the description of the insured in a policy is so general that it may comprehend any person or any
class of persons,only he who can show that it was intended to include him,can claim the __________ of the
policy.
a. Interest
b. Proceeds
c. Benefit
d. Principal

44. It is one in which the value of the thing insured is not agreed upon, but is left to be ascertained in case of
loss.
a. Running policy
b. Closed policy
c. Open policy
d. Revalued policy

45. It is a warranty which is a statement in a policy of matter relating to the person or thing insured, or to the risk,
as a fact.
a. Implied warranty
b. Express warranty
c. Warranty
d. Guarantee

46. Whose consent is not necessary for the validity of an insurance policy taken out by a married person?
a. Paramour
b. Mistress
c. Spouse
d. Children

47. What kinds of insurance are subject to the provisions on the contract of insurance?
a. Ticket in a lottery drawing a prize.
b. All kinds of insurance as far as the provisions can apply
c. Liability insurance
d. Chance in winning a prize in jueteng

48. Which of the following situations is not authorize for as an insurance?

a. Drawing of any lottery
b. Damaged car caused by collision
c. Health insurance
d. Home insurance

49. No contract or policy of insurance on property shall be enforceable except;

a. For the benefit of some person having an insurable interest in the property insured
b. For the benefit of some person having no insurable interest in the property insured
c. For the benefit of some person having an insurable interest in the life insured
d. For the benefit of some person having no insurable interest in the property insured

50. When does the interest in property insured must exist?

a. When the less occurs
b. When the insurance takes effect
c. When
The insurance take effect or loss occurs
d. When the insurance take effect and loss occurs

TAXATION

51. Which of the following transactions are subject to VAT?

a. Export Sales
b. Sales of house and lot with selling price of P 2,500,000
c. Sale of food agricultural product in their original state
d. Casual sale of goods

52. Statement 1: VAT-exempt transactions of VAT-exempt person are allowed with attributable input tax credit.
Statement 2: Export sales of VAT registered person are allowed with attributable input tax credit.
a. Only statement 1 is correct
b. Only statement 2 is correct
c.Both statements are correct
d. Both statements are incorrect

53. Statement 1: Services rendered by an employee pursuant to employee-employer relationship are VAT
exempt and exempt from other business percentage tax.
Statement 2: Professional services of medical doctors registered with
PRC are VAT exempt transactions.
a. Only statement 1 is correct
b. Only statement 2 is correct
C. Both statements are correct
d. Both statements are incorrect

54. Statement 1: All transactions of cooperatives are VAT exempt.

Statement 2: Electric cooperatives transactions are subject to VAT.
a) Only statement 1 is correct
b) Only statement 2 is correct
c) Both statements are correct
d) Both statements are incorrect

55. Statement 1: The gross margin is included in the determination of VAT.

Statement 2: The standard input VAT allowed to sale of goods or services to the government is 12%.
a) Only statement 1 is correct.
b) Only statement 2 is correct.
c) Both statements are correct.
d) Both statements are not correct.

56. Toyo Clinic, a VAT registered entity, performed a prosthetic surgery on the legs of Soo Ka, a person with
disability. The total cost of medical operation inclusive of VAT was P 560,000. Being a disabled person, Soo Ka
received a 20% discount from Toyo. How much is the total amount to be paid by Soo Ka?
a. P 400,000
b. P 500,000
c. P 448,000
d. P 560,000

57. Lola Grammy, a senior citizen, bought a medicine with a selling price of P 9,520 inclusive of VAT. How much
is the net amount to be paid by Lola?
A. P 8,500
b. P 7,616
c. P 6,916
d. P 6,800

58. A taxpayer registered under the VAT system on January 1, 2019. Value of inventory as of December 31, 2018
purchased from VAT - registered persons, P 112,000; VAT paid on inventory as of December 31, 2018, P 12,000;
Value of inventory as of December 31, 2018 purchased, from non-VAT persons, P518,000; Sales, net of VAT, P
240,000; Sales, gross of VAT, P 45,920; Purchases, net of VAT, P 70,000;
Purchases of VAT exempt goods, P 50,000.

VAT PAYABLE IS:

a. P 23,080
b. P 25,320
c. P 12,720
d. P 12,230

59. Daye Hatun, VAT registered person, imported machines from Australia as follows:

Machine Acquisition Cost Purpose

A P 100,000 Personal use
B 200,000 Business use
C 300,000 For sale
The importations were subjected to 50% excise tax based on purchase price. Machine C was sold for P
1,000,000 exclusive of VAT. How much is the vat paid to the BOC?

A. 108,000
B. 90,000
с. 54,000
d. 36,000

60. Safiye Corp. is a vat-registered dealer of appliances. The following data are for the last quarter of the year:

Sales, total invoice value P 6,920,000

Purchases, net of input taxes 5,500,000

Sales return, total invoice value 200,000

Purchase return, net of VAT 300,000
Deferred input taxes (carried over from the third 12,000
quarter of the year)

The value added tax payable for the last quarter of the year by Safiye Corp. is:
a. 84,000
b. 96,000
c. P 108,000
d. 130,500

END