UNIT 3

Topic 6
PFRS for SMEs
Pretest
1. D 6. C
2. C 7. A
3. B 8. B
4. C 9. C
5. A 10. D

ASSESSMENT
ACTIVITY 1
1. D 11. D 21. D 31. B 41. C
2. C 12. D 22. A 32. D 42. C
3. C 13 A 23. B 33. D 43. C
4. B 14. C 24. D 34. E 44. F
5. C 15. D 25. A 35. E 45. C
6. D 16. A 26. D 36. B 46. D
7. B 17. C 27. B 37. D 47. A
8. B 18. A 28. B 38. D 48. A
9. C 19. D 29. A 39. A 49. D
10. A 20. C 30. C 40. D 50. A
51. C 61. D 71. D 81. C 91. A
52. C 62. A 72. D 82. A 92. B
53. B 63. D 73. D 83. C 93. A
54. C 64. C 74. A 84. B 94. B
55. D 65. C 75. A 85. B 95. A
56. A 66. D 76. C 86. A 96. D
57. C 67. C 77. C 87. C 97. C
58. B 68. A 78. B 88. D 98. A
59. C 69. D 79. C 89. D 99. D
60. D 70. C 80. B 90. C 100. B
101. B 111. C 121. B 131. D 141. D
102. C 112. B 122. D 132. C 142. B
103. E 113. A 123. C 133. B 143. B
104. B 114. C 124. D 134. D 144. A
105. E 115. C 125. E 135. E 145. A
106. A 116. A 126. C 136. C 146. B
107. D 117. A 127. D 137. D 147. B
108. A 118. D 128. D 138. D 148. C
109. B 119. A 129. B 139. B 149. B
110. C 120. C 130. C 140. C 150. C

151. B 161. C 171. D 181. E 191. D

152. B 162. B 172. B 182. D 192. D
153. A 163. D 173. A 183. B 193. C
154. C 164. C 174. A 184. D 194. B
155. C 165. A 175. D 185. B 195. C
156. C 166. B 176. A 186. D 196. A
157. D 167. B 177. A 187. A 197. B
158. E 168. A 178. D 188. D 198. A
159. B 169. D 179. A 189. A 199. C
160. C 170. C 180. C 190. E 200. C

201. A 211. B 221. C 231. C 241. C 251. C

202. C 212. A 222. A 232. D 242. A 252. B
203. C 213. E 223. A 233.A 243. C 253. D
204. A 214. A 224. D 234. B 244. B 254. D
205. B 215. A 225. D 235. A 245. A 255. B
206. A 216. A 226. C 236. C 246. B 256. B
207. B 217. C 227. B 237. C 247. A 257. D
208. A 218. C 228. B 238. A 248. F 258. C
209. D 219. D 229. D 239. A 249. E 259. B
210. A 220. B 230. C 240. B 250. C

ACTIVITY 2
1. B
Revenues 5,000
Dividend income (800)
Operating and other expenses (3,200)
Profit of the year 2,600
Retained earnings, Jan.1 2,400
Adjustments to operating balance:
Cumulative effect of change in accounting policy
(2600 FIFO-3,200 Average) (600)
Retrospective effect on correction of error (1,200)
Adjusted retained earnings, Jan. 1 600
Dividend declared (350)
Retained earnings, Dec. 31 2,850
2. A
Acquisition cost 1,000
Transaction cost 70
Initial measurement 1 ,070
3. A
4. B
5. A
Issue price 900
Less:Transaction cost (50)
Initial measurement 850
6. B
7. D
8. A
9. C
Proceeds 850,000
Less: Carrying amount (1,000,000)
Loss (150,000)

10. C
11. C
12. C
13. C
14. C
15. A
16. C
17. A
18. A
19. A
20. B
19-20. Major defects (5,000 x 8% P100) 40,000
Minor defects (5,000 x 12%x P20) 12,000
Warranty expense 52,000
Actual repair cost (10,000)
Year-end provision 42,000
21. B
22. D
21-22: Revenue 280,992
Cost of sale (280,992 x 100%/130%) (216,146)
 Gross profit 64,844
Interest income (280,992 x 10%) 28,099
Operating expenses (50,000)
Profit 42,944
23. D
24. D
Pretax income 18,000
Permanent differences –
Accounting profit subject to tax 18,000
Warranty provision (FI < TI) 3,000
Interest receivable (FI > TI) (1,000)
Depreciation (FI > TI) (30,000)
Taxable profit (Tax loss) (10,000)
Depreciation for financial reporting purposes (200K ÷ 10). 20,000
Depreciation for taxation purposes (200K ÷ 4) 50,000
Taxable temporary difference (FI > TI) (30,000)
or
Carrying amount (200K x 9/10) 180,000
Tax base (200K x 3/4) 150,000
Taxable temporary difference (FI > TI) 30,000
Required annual income tax payment –
Quarterly tax payments 50,000
Prepaid income tax / Current tax asset 50,000

25. D
Warranty provision (FI < TI) 3,000
Tax loss 10,000
Valuation allowance on tax loss (10,000 x 60%) (6,000)
Total deductible temporary difference 7,000
Multiply by: Tax rate applicable to 20x2 and future periods 30%
Deferred tax asset - Dec. 31, 20x1 2,100
26. A
Interest receivable (FI > TI) 1,000
Depreciation (FI > TI) 30,000
Total taxable temporary difference 31,000
Multiply by: Tax rate applicable to 20x2 and future periods 30%
Deferred tax liability - Dec. 31, 20x1 9,300
27. A
Accounting profit subject to tax 18,000 x 35% current tax rate = 6,300

28. B
Pretax income 280,000
Interest income subject to final tax (30,000)
Nondeductible entertainment expense 25,000
Accounting profit subject to tax 275,000
Bad debt expense (FI < TI) 2,000
Depreciation (FI > TI) (100K - 75K) (25,000)
Taxable profit 252,000Taxable profit 252,000
Multiply by: Tax rate 30%
Current tax expense 75,600
29. D
Change in DTA (2,000 x 30%) ... (600)
Change in DTL (25,000 x 30%) 7,500
Deferred tax expense 6,900
30. A
Accounting profit subject to tax 275,000
Multiply by: Tax rate 30%
Income tax expense 82,500