FAR

Question 1

Which of the following DOES NOT result in deferred tax asset?
A. Carryforward of unused tax credits
B. Carryforward of unused tax losses
C. Taxable temporary differences
D. Deductible temporary diferences

Answer 1

C. Taxable temporary differences

Question 2

What is the initial measurement of an internally generated intangible asset?
A. Fair value at the acquisition date
B. Cost
C. Fair value or nominal account plus directly attributable expenditures
D. Directly attributable cost incurred after the asset met the criteria for capitalizing development cost

Answer 2

D. Directly attributable cost incurred after the asset met the criteria for capitalizing development cost

Question 3

It is an amount by which the carrying amount of an asset exceeds its recoverable amount
A. Gain on exchanges
B. Impairment loss
C. Residual value
D. Fair value

Answer 3

B. Impairment loss

Question 4

What is the initial measurement of an intangible asset acquired through a government grant?
A. Cost
B. Fair value at the acquisition date
C. Directly attributable cost incurred after the asset met the iteria for capitalizing development cost
D. Fair value or nominal account plus directly attributable expenditures

Answer 4

D. Fair value or nominal account plus directly attributable expenditures

Question 5

Which condition must be met for an item to be recognized as an intangible asset other than goodwill?
A. The fair value can be measured reliably
B. The item is expected to be used in producing or supplying goods or services
C. The item is non-monetary, identifiably, and lacks physical substance
D. The item is part of an activity to gain new scientific or technical knowledge

Answer 5

C. The item is non-monetary, identifiably, and lacks physical substance

Question 6

These events indicative of conditions that arose after the reporting period
A. Change in accounting estimates
B. Non-adjusting events
C. Prior period errors
D. Adjusting events

Answer 6

B. Non-adjusting events

Question 7

It is an accounting method where the investment is initially recognized at cost and adjusted for the post-acquisition change in the investor’s share of the investee’s net assets.
A. Cash basis of accounting
B. Asset method
C. Equity method
D. Adjusted balance method

Answer 7

C. Equity method

Question 8

Which of the following should NOT be included in the physical inventory of a company?
A. Goods held on consignment from another company
B. None of these
C. Goods shipped on consignment to another company
D. Goods in transit from another company shipped FOB shipping point

Answer 8

A. Goods held on consignment from another company

Question 9

Which of the following is NOT an adjusting event after the reporting period?
A. The determination after the reporting period of the cost of assets purchased, or the proceeds from assets sold, before the end of the reporting period.
B. The determination after the reporting period of the amount of profit-sharing or bonus payments if the entity had a present legal or constructive obligation at the end of the reporting period to make such payment a result of events before that date.
C. The settlement before the reporting period of a court case that confirms the entity has a present value after the present obligation at the end of the reporting period.
D. Discovery of fraud or errors that shows the financial statements are incorrect.

Answer 9

C. The settlement before the reporting period of a court case that confirms the entity has a present value after the present obligation at the end of the reporting period.

Question 10

Shaina took the October 2000B Certified Public Accountant Licensure Exam (CPALE) and obtained a general average of 85%, with four subjects higher than 75% and no grade lower than 65% in the remaining two (2) subjects. Using the current Board of Accountancy (BOA) Resolution, what is er status in the examination?
A. Refresher
B. Failed
C. Conditional
D. Passed

Answer 10

D. Passed

Question 11

Yoshi Manufacturing incurred the following costs in its production of Product Y: Direct Materials of P10,000; Direct Labor of P8,000; and Manufacturing Overhead of P7,500. How much will Yoshi record as prime cost?
A. P17,500
B. P18,000
C. P25,500
D. P15,500

Answer 11

B. P18,000
Solution: DM + DL = 10,000+ 8,000 = 18,000

Question 12

Given the following account balances of Jan Company for the month ended June 30, 2X2, how much its total assets?
Revenue P85,000
Expenses:
Popcorn 22,800
Toppings and seasonings 17,300
Employee wages and benefits 10,700
Lease payments 24,000
Utilities 3,200
Advertising 900
Miscellaneous 300
Cash 6200
Equipment 12,500
Accounts Payable 650
Wages Payable 1,200
Investment by owner 12,500
Drawings by owner 1,450

A. P18,700
B. P19,350
C. P12,500
D. P16,850

Answer 12

A. P18,700
Solution: Cash 6,200 + Equipment 12,500 = P18,700

Question 13

The trial balance shows Prepaid Rent P1,575 and Rent Expense P0. If the P800 is the remaining balance of Prepaid Rent at the end of the reporting period, the adjusting entry is:
A. Dr. Rent Expense P775; Cr. Prepaid Rent P775
B. Dr. Rent Expense P800; Cr. Prepaid Rent P800
C. Dr. Rent Expense P800; Cr. Rent Expense P800
D. Dr. Prepaid Rent P775; Cr. Rent Expense P750

Answer 13

A. Dr. Rent Expense P775; Cr. Prepaid Rent P775

Question 14

Adjustments for unpaid rendered services:
A. Decrease liabilities and increase revenues
B. Have an assets and revenues account relationship
C. Have a liabilities and revenues account relationship
D. Decrease assets and revenues

Answer 14

B. Have an assets and revenues account relationship

Question 15

ML Company incurred the following costs in its production of Product Green: Beginning finished goods of P10,000; Cost of goods manufactured amounting to P6,500 and ending finished goods of P5,000. What amount will be reported as the cost of goods sold?
A. P11,500
B. P21,500
C. P16,500
D. P15,000

Answer 15

A. P11,500
Solution: Beg. Finished Inv. + COGM - End. Finished Inv. = 10,000 + 6,500 - 5,000 = P11,500

Question 16

Renalie Company was incorporated on January 1, 2X21, with P5,000,000 from the issuance of the share capital and borrowed funds of P1,500,000. During the first year, the net income was P2,500,000. On December 15, the entity paid a P500,000 cash dividend. On December 31, 2X21, the liabilities had increased to P1,800,000. What should be reported as total assets on December 31, 2X21?
A. P6,500,000
B. P6,800,000
C. P8,800,000
D. P9,300,000

Answer 16

C. P8,800,000
Solution: Liabilities P1,800,000 + Share Capital P5,000,000 + Retained Earnings P2,000,000 (P2,500,000 - P500,000) = P8,800,000

Question 17

A company has purchased a tract of land and plans to build a production plant on the land in approximately five (5) years. The land will be idle during the five (5) years before construction. The land should be reported as:
A. Long-term investment
B. Property, plant, and equipment (PPE)
C. Land expense
D. Intangible asset

Answer 17

A. Long-term investment

Question 18

Adjustments for professional fees received but not yet rendered:
A. Increase assets and increase revenues
B. Have an assets and revenues account relationship
C. Decrease liabilities and increase revenues
D. Decrease revenues and decrease asset

Answer 18

C. Decrease liabilities and increase revenues

Question 19

X Company incurred the following costs in its production of Product A: Direct Materials of P15,000; DIrect Labor of P10,000; and Manufacturing Overhead of P12,000. Compute the cost of goods manufactured if the company has P25,000 worth of beginning Work in Process (WIP) inventory and P13,000 ending WIP inventory.
A. P50,000
B. P62,000
C. P37,000
D. P49,000

Answer 19

D. P49,000
Solution: Beg. WIP + (DM +DL + MO) - End. WIP = P25,000 + (15,000 + 10,000 + 12,000) - P13,000 = P49,000

Question 20

Given the following account balances of Jan Company for the month ended June 30, 2X2, how much its net assets?
Revenue P85,000
Expenses:
Popcorn 22,800
Toppings and seasonings 17,300
Employee wages and benefits 10,700
Lease payments 24,000
Utilities 3,200
Advertising 900
Miscellaneous 300
Cash 6200
Equipment 12,500
Accounts Payable 650
Wages Payable 1,200
Investment by owner 12,500
Drawings by owner 1,450

A. 18,700
B. 19,350
C. 16,850
D. 11,05

Answer 20

C. 16,850
Solution: Total Assets P18,700 - Total Liabilities P1,850 = P16,850

Question 21

YM Company conducted a physical count on December 31, 2X21, which revealed the total cost of P3,600,000. However, the following items were excluded from the count:
- Goods sold to a customer, which are being held by the company on behalf of the customer. The customer may call the company to deliver the goods anytime. The cost of goods is P200,000
- A packing case containing a product costing P80,000 was standing in the shipping room when the physical inventory was taken. It was not included in the inventory because it was marked “hold for shipping instructions.”
- Goods in process costing P300,000are held by an outside processor for further processing.
- Goods worth P50,000 shipped by a vendor FOB seller on December 28, 20X1, and received YM Company on January 10, 20X2.
What is the inventory on December 31, 20X1?
A. 4,030,000
B. 4,230,000
C. 4,180,000
D. 3,980,000

Answer 21

A. 4,030,000
Solution: 3,600,000 + 80,000 + 300,000 + 50,000 = 4,030,000

Question 22

On December 31, 20X1, Mashiho Corporation had accounts receivable of P750,000. On January 1, 20X1, Allowance for Doubtful Accounts had a credit balance of P18,000. In 2020, P30,000 of uncollectible accounts receivable were written off. Experience indicates that 3% of accounts receivable became uncollectible. What should be the Bad Debt Expense for 20X1?
A. 34,500
B. 22,500
C. 30,000
D. 10,500

Answer 22

A. 34,500
Solution: ((750,000 x 3%) +30,000) - 18,000 = 34,500

Question 23

Able Towing Company purchased a tow truck for P60,000 on January 1, 2018. T was originally depreciated on a straightline basis over 10 years with an assumed salvage value of P12,000. On December 31, 2020, before adjusting entries had been made, the company decided to change the remaining estimated life to four (4) years (including 2020) and the salvage value to P2,000. What is the depreciation expense for 2020?
A. 6,000
B. 4,800
C. 15,000
D. 12,100

Answer 23

D. 12,100
Solution: ((60,000 - 12,000)/10)*2 = 9,600
60,000 - 9,600 = 50,400
(50,400 - 2,000)/4 = 12,100

Question 24

The following unadjusted cash balances are available for JK Company for the month ended November 30, 201A.
Cash balance per bank statement, November 30, 201A P62,305.75
Cash balance per company records, November 30, 201A P62, 189.70
The bank statement disclosed the following information:
- Charges by the bank included a returned customer’s check for P690.70 because of insufficient fund (NSF) and a service charge of P75 for November.
- Credits by the bank included a customer’s note for P6,000 plus interest of P60 collected on November 29, 201A.
A review of the company records disclosed the following information:
- A deposit for P5,714.35 made on November 29, 201A did not appear on the bank statement.
- Customer’s checks totaling P1,637 were still on hand on November 30, 201A awaiting deposit.
- The following company checks were still outstanding as of November 30, 201A:
Check#145243 P480.95
Check#145247 P735.90
Check#145250 P1,316.25
Check#145257 for P456 in payment of a creditor account and included with the canceled checks in the bank statement has been erroneously recorded in the company records as P96.
Using bank reconciliation, what is the adjusted ash balance per book?
A. 68,249.70
B. 69, 65710
C. 67,124
D. 62, 305.75

Answer 24

C. 67,124
Solution: (62,189.70 + 6,000 + 60) - (75 + 690.70 + (456 - 96)) = 67,124

Question 25

DY Company provided the following information relating to accounts receivable for 2X14:
Accounts receivable on January 1 P1,300,000
Credit Sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Accounts written off 125,000
Collection of accounts written off in a prior year (customer credit was not reestablished) 25,000
Estimated uncollectible receivables per aging of receivables on December 31 165,000
On December 31, 2X14, what is the accounts receivable balance before Allowance for Doubtful Accounts?
A. 1,950,000
B. 1,990,000
C. 1,850,000
D. 1,825,000

Answer 25

D. 1,825,000
Solution: 1,300,000 + 5,400,00 = 6,700,00 - (4,750,000 + 125,000) = 1,825,000

Question 26

The following unadjusted cash balances are available for JK Company for the month ended November 30, 201A.
Cash balance per bank statement, November 30, 201A P62,305.75
Cash balance per company records, November 30, 201A P62, 189.70
The bank statement disclosed the following information:
- Charges by the bank included a returned customer’s check for P690.70 because of insufficient fund (NSF) and a service charge of P75 for November.
- Credits by the bank included a customer’s note for P6,000 plus interest of P60 collected on November 29, 201A.
A review of the company records disclosed the following information:
- A deposit for P5,714.35 made on November 29, 201A did not appear on the bank statement.
- Customer’s checks totaling P1,637 were still on hand on November 30, 201A awaiting deposit.
- The following company checks were still outstanding as of November 30, 201A:
Check#145243 P480.95
Check#145247 P735.90
Check#145250 P1,316.25
Check#145257 for P456 in payment of a creditor account and included with the canceled checks in the bank statement has been erroneously recorded in the company records as P96.
Using bank reconciliation, what is the unadjusted cash balance per bank?
A. 68,249.70
B. 69, 65710
C. 67,124
D. 62, 305.75

Answer 26

D. 62, 305.75

Question 27

Jade Company acquired two (2) items of machinery as follows:
- On December 31, 2X14, Jade Company purchased a machine in exchange for a non interest bearing note requiring 10 payments of P500,000. The first payment as made on December 31, 2X15, and the others are due annually on December 31. The prevailing interest rate for this type of note at the date of issuance was 12%. The present value of an ordinary annuity of 1at 12% is 5.33 for nine (9) periods and 5.65 for 10 periods.
- On December 31, 2X14, Jade Company acquired used machinery by issuing the seller a two-year, non interest bearing note for P3,000,000. The entity has paid a 12% interest for this type of note in recent borrowing. The present value of 1 at 12% for two (2) years is 0.80, and the present value of an ordinary annuity f 1 at 12% for two (2) years is 1.69.
What is the total cost of machinery?
A. 8,235,000
B. 5,565,000
C. 5,065,000
D. 5,225,000

Answer 27

D. 5,225,000
Solution: (500,000 x 5.65) + (3,000,000 x 0.80) = 5,225,000

Question 28

Hype Company acquired a tract of land containing an extractable natural resource. The entity is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resources. A geological survey indicated that the recoverable reserves wil be 2,500,000 tons and that the extraction will be completed in five (5) years. Relevant cost information shows the following: Land - P9,000,000; Exploration and development cost - P1,000,000; Expected cash flow for restoration cost - P1,500,000; Credit adjusted risk free interest rate - 10%; and PV of 1 at 10% for five (5) periods - 0.62. What is the depletion charge per ton?
A. 4.0
B. 4.13
C. 4.37
D. 4.25

Answer 28

C. 4.37
Solution: 9,000,000 + 1,000,000 + (1,500,000 x 0.62) = 10,930,000/2,500,000 = 4.37

Question 29

Boyoung Company ventured into the construction of a condominium in Pasig. The entity’s board of directors decided to hold this property to earn rentals by letting out space to business executives in the area. The condominium construction was completed and placed in service on January 1, 2X14. The construction cost was P50,000,000, with a useful life of 25 years and a residual value of P5,000,000. An independent valuation expert provided the following fair value at each subsequent year-end: December 31, 2X14 - P55,000,000; December 31, 2X15 - P53,000; and December 31, 2X16 - P60,000,000. Under the fair value model, what amount should be recognized as gain or loss from change in fair value for 2X14?
A. 5,000,000 gain
B. 3,000,000 gain
C. 3,000,000 loss
D. 5,000,000 loss

Answer 29

A. 5,000,000 gain
Solution: 55,000,000 - 50,000,000 = 5,000,000

Question 30

In January of the current year, Hope Company which maintains a perpetual inventory system, recorded the following information of its inventory:
Balance - 1/1
Units 10,000
Unit cost 100
Total Cost 1,000,0000
Purchased - 1/7
Units 6,000,000
Unit Cost 300
Total Cost 1,800,000
Sold - 1/20
Units 9,000
Purchased - 1/25
Units - 4,000
Unit cost - 500
Total cost 2,000,000
Using the moving average method, what should the company report as inventory on January 31?
A. 3,900,000
B. 2,640,000
C. 3,300,000
D. 3,225,000

Answer 30

D. 3,225,000

Question 31

Post-employment employee benefits include all of the following EXCEPT:
A. Retirement benefits such as pensions
B. Post-employment medical care
C. Post-employment life insurance
D. Long-term disability benefits

Answer 31

D. Long-term disability benefits

Question 32

At the end of the current year, Lessee Company eased machinery with the following information:
Annual rental payable at the end of each year: P1,000,000
Residual value guarantee: 500,000
Payment to the lessor to obtain a long-term lease 800,000
Cost of dismantling and restoring the asset as required by the contract a present value 390,000
Annual executory cost paid by lessee 50,000
Lease term 4 years
Useful life of machinery 8 years
Implicit interest rate 10%
Present value of an ordinary annuity of 1 at 10% for four (4) periods 0.68
Based on the given information, what is the lease liability at year end?
A. 3,620,000
B. 3,159,000
C. 2,510,000
D. 2,861,000

Answer 32

C. 2,510,000

Question 33

On November 1, 2x19, ABC Company discounted its note of P1,000,000 at 12% for one (1) year. What is the net cash proceeds?
A. 0
B. 120,000
C. 880,000
D. 1,000,000

Answer 33

B. 120,000

Question 34

On December 31, 2X19, and 2X18, Mashiho Company had 100,000 ordinary shares and 10,000 cumulative preference shares of 5%, P100 par value. No dividends were declared on either the preference or ordinary shares in 2X19 or 2X18. Net income for the current year was P900,000. What amount should be reported as basic earnings per share?
A. 8.50
B. 9.50
C. 9.00
D. 5.00

Answer 34

A. 8.50

Question 35

At the beginning of the current year, Ashe Company entered into a 10-year noncancelable lease requiring year-end payments of P1,000,000. Ashe’s incremental borrowing rate is 12%, while lessor’s implicit interest rate known to Ashe is 10%. Present value factors for an ordinary annuity for 10 periods are 6.145 at 10% and 5.650 at 12%. On the same date, Ashe paid the initial direct cost of P200,000 to negotiate and secure the leasing arrangement. Ownership of the property remains with the lessor at the expiration of the lease. There is no purchase option. The leased property has an estimated economic life of 12 years. What amount should be capitalized initially as the cost of the right of use asset?
A. 5,650,000
B. 6,345,000
C. 5,850,000
D. 6,145,000

Answer 35

B. 6,345,000

Question 36

Which of the following statements is INCORRECT about recognizing and measuring a defined contribution plan?
A. The contribution shall be recognized as an expense in the payable period.
B. Any unpaid contribution at the end of the period shall be recognized as an accrued liability
C. An entity shall not disclose the amount recognized as an expense for a defined contribution plan
D. Any excess contribution shall be recognized as a prepaid expense, but only to the extent that the prepayment will lead to a reduction in future payments or a cash refund

Answer 36

C. An entity shall not disclose the amount recognized as an expense for a defined contribution plan