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Question 1

A gain arising from change in the fair value pf an investment property for which an
entity has opted to use the fair value model is recognized in
A. Share Premium
B. Profit or Loss
C. Share warrants outstanding
D. Retained Earnings

Answer 1

B. Profit or Loss

Question 2

A lease liability is measured at
A. The fair value of the underlying asset
B. The present value of fixed lease payments
C. The absolute amount of lease payments
D. The present value of lease payments

Answer 2

D. The present value of lease payments

Question 3

A lessee with a lease containing a purchase option that is reasonably certain to be
exercised should depreciate the right of use asset over
A. Useful life life of the asset or lease term, whichever is longer
B. Useful life of the asset or lease term, whichever is shorter
C. Lease term
D. Useful life of the asset

Answer 3

D. Useful life of the asset

Question 4

A machine with a four-year estimated useful life and an estimated 25% residual
value was acquired at the beginning of the current year. The increase in accumulated
depreciation for the second year using the double declining balance method would be
A. Original cost X 85% X 50%
B. Original cost X 50%
C. Original cost X 85% X 50% X 50%
D. Original cost X 50% X 50%

Answer 4

D. Original cost X 50% X 50%

Question 5

After initial recognition, an entity shall measure a note payable at
A. Amortized cost
B. Either amortized cost or fair value through profit or loss
C. Fair value through profit or loss
D. Either amortized cost or fair value through other comprehensive income

Answer 5

B. Either amortized cost or fair value through profit or loss

Question 6

All of the following are revenue accounts, except
A. Accrual of interest by a lending institution
B. Income generated from sale of goods by a candy shop
C. Income from services provided by an accounting firm
D. Accrual of interest by a maker of a note

Answer 6

D. Accrual of interest by a maker of a note

Question 7

Depletion Expense
A. Excludes restoration cost from the depletable cost
B. Excludes intangible development cost from the depletable cost
C. Includes tangible equipment cost in the depletable cost
D. Is usually part of cost of goods sold

Answer 7

D. Is usually part of cost of goods sold

Question 8

Disclosure is usually not required for
A. Contingent losses that are remote and can be reasonably estimated
B. Contingent gains that are probable and can be reasonably estimated
C. Contingent losses that are probable and can be reasonably measured
D. Contingent losses that are reasonably possible and cannot be reasonably
estimated

Answer 8

A. Contingent losses that are remote and can be reasonably estimated

Question 9

. Each of the following companies is a merchandising company except a
A. Wholesale department store
B. Space rentals
C. Candy store
D. Grocery store

Answer 9

B. Space rentals

Question 10

How would the amortization of premium on bonds payable affect carrying amount
of bonds payable and interest expense respectively?
A. Increase and decrease
B. Decrease and decrease
C. Increase and increase
D. Decrease and increase

Answer 10

B. Decrease and decrease

Question 11

If the financial asset is held for trading or if the financial asset is measured at
fair value through profit or loss, transaction costs directly attributable to the
acquisition shall be
A. Deferred and amortized over a reasonable period
B. Expensed immediately when incurred
C. Capitalized as cost of the financial asset
D. Included as component of other comprehensive income

Answer 11

B. Expensed immediately when incurred

Question 12

. In a debt restructuring that is considered an asset swap, the gain on
extinguishment is equal to the
A. excess of the carrying amount of the debt over the carrying amount
of the asset
B. excess of the fair value of the asset over the carrying amount.
C. excess if the fair value of the asset over the carrying amount of the debt
D. excess of the carrying amount of the debt over the fair value of the asset

Answer 12

A. excess of the carrying amount of the debt over the carrying amount
of the asset

Question 13

It is the deferred tax consequence attributable to a taxable temporary difference.
A. Current tax asset
B. Deferred tax liability
C. Current tax liability
D. Deferred tax asset

Answer 13

B. Deferred tax liability

Question 14

It is the systematic allocation of the amortizable amount of an intangible asset
over the useful life.
A. Depreciation
B. Expiration
C. Allocation
D. Amortization

Answer 14

D. Amortization

Question 15

On October 1, 2019, an entity borrowed cash and signed a three-year interestbearing note on which the principal is payable on October 1, 2019 and interest is
payable every September 30. On December 31, 2019, accrued interest payable
should
A. be reported as current liability
B. be reported as part of noncurrent note payable
C. be reported as noncurrent liability
D. not be reported as liability

Answer 15

A. be reported as current liability

Question 16

Statement 1: PAS 36, paragraph 104, provides that when an impairment loss is
recognized for a cash generating unit (CGU), such loss shall be allocated first to the
goodwill allocated to the CGU and then to all other noncash assets of the cash CGU
prorate based on carrying amount.
Statement 2: The revaluation surplus that is realized because of the use of the asset
or disposal of the asset may be transferred directly to retained earnings.
A. Both statements are true
B. Only Statement 2 is true
C. Neither statements are true
D. Only Statement 1 is true

Answer 16

A. Both statements are true

Question 17

The components of defined benefit cost include all, except
A. service cost
B. net interest
C. remeasurements
D. contribution to the plan

Answer 17

D. contribution to the plan

Question 18

The service cost of a defined benefit plan comprises all, except
A. Current service cost
B. Gain or loss on settlement
C. Past service cost
D. Net interest

Answer 18

D. Net interest

Question 19

. Trade receivables are classified as current assets if they are reasonably
expected to be collected
A. Within one year
B. Within the normal operating cycle
C. Within one year or within the operating cycle, whichever is longer.
D. Within one year or within the operating cycle, whichever is shorter

Answer 19

C. Within one year or within the operating cycle, whichever is longer.

Question 20

1. What is the treatment of customer’s postdated check?
   A. Accrued income
   B. Prepaid expense
   C. Accounts receivable
   D. Considered as cash

Answer 20

C. Accounts receivable

Question 21

When bonds are retired prior to maturity with proceeds from a new bond issue,
any gain or loss from the early extinguishment should be
A. amortized over the life of the new bond issue.
B. recognized in retained earnings.
C. amortized over the remaining original life of the retired bond issue.
D. recognized in income from continuing operations.

Answer 21

D. recognized in income from continuing operations.

Question 22

Which of the following additional disclosures must be made when an entity
chooses the cost model as the accounting policy for investment property?
A. Present value of the property
B. Fair value of the property
C. Net realizable value of the property
D. The discounted value of the property

Answer 22

B. Fair value of the property

Question 23

. Which of the following best describes the expense approach of accounting for
warranty cost?
A. Expensed when incurred
B. Expensed when liability is accrued
C. Expensed when warranty claims are certain
D. Expensed when paid

Answer 23

A. Expensed when incurred

Question 24

Which of the following concepts relates to the allowance method in accounting
for uncollectible accounts receivable?
A. Bad debt expense is an estimate that is based only on aging
B. Bad debt expense is management determination of which accounts will
be sent to the attorney for collection.
C. Bad debt expense is an estimate that is based on historical and
prospective information
D. Bad debt expense is based on the actual amount determined to be
uncollectible

Answer 24

C. Bad debt expense is an estimate that is based on historical and
prospective information

Question 25

Which of the following is most likely item to result in a deferred tax asset?
A. Using accelerated depreciation for tax purposes but straight line
depreciation for accounting purposes
B. Using the cost recovery method of recognizing construction revenue for
tax purposes but using percentage of completion method for financial
reporting purposes
C. Unearned revenue
D. Prepaid expense

Answer 25

C. Unearned revenue

Question 26

Which of the following items must be added to the cash balance per ledger in
preparing a bank reconciliation which ends with adjusted cash balance?
A. Note receivable collected by bank in favor of the depositor and
credited to the account of the depositor
B. NSF customer check
C. Service charge
D. Erroneous bank debit

Answer 26

A. Note receivable collected by bank in favor of the depositor and
credited to the account of the depositor

Question 27

Which of the following should not be taken into account when determining the
cost of inventories?
A. Storage costs of partly finished goods
B. Recoverable purchase taxes
C. Import duties on shipping of inventory inward
D. Trade discounts

Answer 27

B. Recoverable purchase taxes

Question 28

Which of the following statements is true concerning recognition of unrealized
gains and losses on financial assets?
I. Unrealized gains and losses on financial assets held for trading shall
be included in profit or loss.
II. Unrealized gains and losses on financial assets measured at
amortized cost shall be included as component of other comprehensive income.
A. Neither I nor II
B. Both I and II
C. I only
D. II only

Answer 28

C. I only

Question 29

Which will not require an estimate of inventory?
A. Determination of the ending inventory to be shown on the statement
of financial position at year-end
B. Proof of the reasonable accuracy of the physical inventory
C. Interim financial statements are prepared
D. Inventory destroyed by typhoon

Answer 29

A. Determination of the ending inventory to be shown on the statement
of financial position at year-end

Question 30

An employee of a large manufacturing company in Davao City earned 960,000
during the current year. The employee is covered by the firm’s defined contribution
plan which requires the entity to contribute the equivalent of 5% of the employee’s
salary or 48,000 for the current year to a trustee. The company paid 70,000 pesos
total in which 22,000 is in respect for services to be rendered in the next year. In the
current year how much is employee benefit expense?

Answer 30

Answer:48,000
960,000 x 5% = 48,000

Question 31

Asoos Company purchased office materials and paid cash P1,800 from National
bookstore which offers 10% cash discount to every purchase. The entry to be
prepared by Asoos to record the purchase includes a debit to office supplies in the
amount of

Answer 31

Answer: 1,800
Office Supplies 1,800
Purchase Discount 180
Cash 1,620

Question 32

At the beginning of current year, Amanda company entered into a ten year non
cancelable lease requiring year end payments of P3,000,000. Amanda’s incremental
borrowing rate is 12%, while the lessor’s implicit interest rate, known to Amanda 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, Amanda company paid initial direct cost of
P600,000 in negotiating and securing the leasing arrangement. Ownership of the
property remains with the lessor at expiration of the lease. The leased property has
an estimated economic life of 12 years. What is the lease liability at the end of
current year?

Answer 32

Answer: 17,278,500
Lease Liab. Beg. (3m x 6.145) 18,435,000
1st payment 3,000,000
Interest (1,843500)
(18,435,000 x 10%)
(1,156,500)
Lease Liab End 17,278,500

Question 33

Bonakeed Company purchased an investment property on January 1, 2017 for
P2,500,000. The property has a useful life of 40 years and on December 31, 2019
had a fair value of P3,000,000. On December 31, 2019, the property was sold for net
proceeds of P2,900,000. The entity used fair value model to account for the
investment property. What is the gain or loss on disposal to be recognized for the
year ended December 31, 2019?

Answer 33

Answer: (100,000)
PV 2,900,000
CA (3,000,00)
Loss on Disposal 100,000

Question 34

Choo Babells pays weekly salaries of P40,000 on Friday for a five-day week
ending on that day. If the calendar period ends on Wednesday, the effect of adjusting
entry is increase in expense in the amount of

Answer 34

Answer: 24,000
40,000 / 5 = 8,000 x 3 = 24,000

Question 35

During 2019, Dayang Dayang Company sold 500,000 boxes of cake mix under
a new sales promotional program. Each box contains one coupon which entitles the
customer to a baking pan upon remittance of P40. Dayang pays P50 per pan and P5
for handling and shipping. Dayang estimates that 80% of the coupons will be
redeemed, even though only 300,000 coupons had been processed during 2019. What
amount should Dayang report as a liability for unredeemed coupons on December
31, 2019?

Answer 35

Net Prem. Exp 50 + 5 – 40 = 15
Coupons to be redeemed (80% x 500,0000) 400,000
Coupons to be redeemed (300,000)
Coupons outstanding 100,000
Liab. For unredeemed coupons (100,000 x 15) 1,500,000

Question 36

During January of the current year, Jeanneth Company which maintains a
perpetual inventory system, recorded the following information pertaining to its
inventory:
Units Unit cost
Balance on 1/1 20,000 100
Purchased on 1/7 12,000 300
Sold on 1/20 18,000
Purchased 1/25 8,000 500
Under the FIFO periodic method, what amount should Jeanneth report as
inventory at January 31?

Answer 36

Answer: 7,800,000
20,000 – 12,000 = 2,000 x 100 = 200,000
12,000 x 300 = 3,600,000
8,000 x 500 = 4,000,000
7,800,000

Question 37

Faith Company reported taxable income of P3,000,000 in its income tax return
for the year ended December 31, 2019, the end of the first year of
operations. Temporary differences between financial income and taxable income for
the year are as follows:
Tax depreciation in excess of book depreciation 300,000
Accrual for product liability claim in excess of actual claim 450,000
Reported installment sales income in excess of taxable installment sales 975,000
The enacted income tax rate is 30% for 2019 and future years. What is the
total income tax expense to be reported in the 2010 income statement?

Answer 37

Answer: 1,147,500
Taxable Income 3,000,000
Tax Deprn 300,000
Installment sales (975,000)
2,325,000 x 30% + 450,000 = 1,147,500

Question 38

Feyt Company provided the following information relating to current
operations:
Accounts receivable, January 1 P 4,000,000
Accounts receivable collected 8,400,000
Cash sales 2,000,000
Inventory, January 1 4,800,000
Inventory, December 31 4,400,000
Purchases 8,000,000
Gross margin on sales 4,200,000
What is the balance of accounts receivable on December 31?

Answer 38

Answer: 6,200,000
Inv. Jan 1 4,800,000
Purchases 8,000,000
Goods Available for Sale 12,800,000
Inv. Dec. 31 (4,400,000)
COGS 8,400,000
Gross margin on sale 4,200,000
Gross sales 12,600,000
Cash Sales (2,000,000)
Credit Sales 10,600,000
AR Jan 1 4,000,000
Total 14,600,000
AR collected (8,400,000)
AR Dec. 31 6,200,000

Question 39

In preparing the August 31, 2019 bank reconciliation, Appendix Company
provided the following information:
Balance per bank statement P 1,800,000
Deposit in transit 320,000
Return of customer’s check for insufficient fund 65,000
Outstanding checks 270,000
Bank service for August 10,000
Collection on notes 325,000
Balance per book 1,600,000
What is the adjusted cash in bank on August 31, 2019?

Answer 39

Answer: 1,850,000
Balance per bank statement 1,800,000
Deposit on Transit 320,000
Total 2,120,000
Outstanding Checks (270,000)
Adjusted Bank Balance 1,850,000

Question 40

Indira company acquired an equity instrument for P8,000,000 on March 31, 2012
to be measured at fair value through other comprehensive income. The direct
acquisition costs incurred amounted to P1,400,000. On December 31, 2012, the fair
value of the instrument was P11,000,000 and the transaction costs that would be
incurred on the sale of the investment were estimated at P1,200,000. What amount
of unrealized gain should be recognized in other comprehensive income for the year
ended December 31, 2012?

Answer 40

Answer: 1,600,000
FV Dec 31 11,000,0000
Acquisition Cost (8m + 1.4m) (9,400,000)
UG OCI 1,600,000

Question 41

Kainin Company exchanged a car from its inventory for a computer to be used as
a long-term asset. The following information relates to this exchange:
Historical cost of the car P 900,000
Accumulated depreciation of the car 300,000
List selling price of the car 900,000
Fair value of the computer 860,000
Cash difference paid by Kainin 100,000
What amount of gain should be recognized on the exchange?

Answer 41

Answer: 160,000
FV of computer 860,000
Cash Paid (100,000)
FV of car – asset given 760,000
CA of car (900T – 300T) (600,000)
Gain on exchange 160,000

Question 42

Lady Bug Company provided the following information for the current year:
Allowance for doubtful accounts January 1 P 180,000
Sales 8,500,000
Sales returns and allowances 700,000
Sales discounts 300,000
Accounts written off as uncollectible 250,000
The entity provided for doubtful accounts expense at the rate of 3% of net
sales. What is the allowance for doubtful accounts at year-end?

Answer 42

Answer: 155,000
Sales 8,500,000
Sales Returns & Allo. (700,000)
Sales Discount (300,000)
Net Sales 7,500,000
Allow. For Doubtful Acct. – Beg 180,000
Doubtful Acct. Exp
(7.5m x 3%) 225,000
Accounts Written Off (250,000)
Allow. For doubtful acct – End 155,000

Question 43

Manika Monika Company which has a calendar year accounting period,
purchased a new machine for P2,000,000 on April 1, 2014. At that time, the entity
expected to use the machine for nine years and then sell it for P200,000. The machine
was sold for P1,100,000 on September 30, 2019. The entity uses straight-line method
and do not recognize depreciation in the year of acquisition. Instead, the company
recognizes full depreciation in the year of disposal. What amount should be
recognized as gain on disposal on September 30, 2019?

Answer 43

Answer: 100,000
(2m -200T) 1,800,000
(1,800,000 / 9 x 5) 1,000,000
(5= 2015 to 2019)
(1,100,000 – 1,000,000) 100,000

Question 44

Matrix company computed a pretax accounting income of 7,500,000 for its first
year of operations ended Dec. 31, 2018. In preparing the income tax return for 2018,
the following differences are noted between accounting income and taxable income.
Nondeductible expenses 300,000
Nontaxable revenue 750,000
Unearned income reported In Financial statement (expected to be earned in
2019) 1,500,000
Provision for doubtful accounts 150,000
Income tax rate 30%
What is the current tax expense

Answer 44

Answer: 2,610,000
Pre-Tax Income 7,500,000
Non-deductible exp 300,000
Non-taxable rev (750,000)
Acctng Income Subject to Tax 7,050,000
Unearned 1,500,000
Doubtful Accts 150,000
Taxable Income 8,700,000
Current Tax Income (8.7m x 30%/) 2,610,000

Question 45

On Aug. 1, your company paid P108,000 good for one year’s insurance that you
have debited to Prepaid Insurance. At year end Dec. 31, what amount of insurance
will be shown in the financial position?

Answer 45

Answer: 63,000
108,000 x 5/12 = 45,000
108,000 – 45,000 = 63,000

Question 46

On January 1, 2012, Gliezel company purchased marketable equity securities to
be held as “trading” for P2,500,000. The entity also paid commission, taxes and other
transaction costs amounting to P100,000. The securities had a market value of
P2,750,000 on December 31, 2012. No securities were sold during 2012. The
transaction costs that would be incurred on the disposal of the investment are
estimated at P50,000. What amount of unrealized gain on these securities should be
reported in the 2012 income statement?

Answer 46

Answer: 250,000
PV 2,750,000
CA (2,500,000)
UG 250,000

Question 47

On January 1, 2019, Mariz Company acquired a tract of land for 10,500,000. The
entity paid a 2,500,000 down payment and signed a non interest bearing note for the
balance which is due on January 1, 2022. There was no established exchange price
for the land and the note had no ready market. The prevailing interest rate for this
type of note was 12%. The present value of 1 at 12% for 3 periods is .7118. What is
the carrying amount of the notes payable on Dec. 31, 2019?

Answer 47

Answer: 6,377,728
NP (10,500,000 – 2,500,000) 8,000,000
Discount on NP (*2,305,600 –** 683,328) (1,622,272)
CA 6,377,728
*8m x .7118 = 5, 694,400 – 8,000,000 = 2,305,600
** 5, 694,400 x 12% = 683,328

Question 48

On January 1, 2019, Wessie Company issued 9% bonds in the face amount of
P5,000,000, which mature on January 1, 2029. The bonds were issued for P4,695,000
to yield 10%. Interest is payable annually on December 31. The entity used the interest
method of amortizing bond discount. On December 31, 2020, what is the carrying
amount of the bonds payable?

Answer 48

Answer: 4,735,950
Int Paid (9%) Int Exp. (10%) Amortiz. CA
Jan. 2019 4,695,000
Dec. 2019 450,000 469,500 19,500 4,714,500
Dec. 2020 450,000 471,450 21,450 4,735,950

Question 49

Piggery Corporation had the following account balances on December 31, 2019:
Cash in bank-current account P 5,000,000
Cash in bank-payroll account 1,000,000
Cash on hand 500,000
Cash in bank-restricted account for building
construction expected to be disbursed in 2020 3,000,000
Time deposit, purchased December 15, 2019
and due on February 15, 2020 2,000,000

What total amount should be reported as “cash and cash equivalents” on
December 31, 2019?

Answer 49

Answer: 8,500,000
CIB-current 5,000,000
CIB- payroll 1,000,000
Cash on Hand 500,000
Time in Deposit 2,000,000
Total CCE 8,500,000

Question 50

Ravenclaw Company developed a trademark to distinguish its products from
those of the competitors.
Marketing research to study consumers tastes P 400,000
Design cost of trademark 1,500,000
Legal fee of registering trademark 245,000
Advertising to establish recognition of trademark 200,000
Registration fee with Intellectual Property Office 75,000
What amount should be capitalized as cost of trademark?

Answer 50

Answer: 1,820,000
1,500,000
245,000
75,000
1,820,000

Question 51

. Ronald Trumpet Company has an incentive compensation plan under which a
branch manager received 10% of the branch income after deduction of the bonus but
before deduction of income tax. Branch income for the current year before the bonus
and income tax was P1,760,000. The tax rate is 30%. What is the bonus for the current
year?

Answer 51

Answer: 170,000
After Bonus & Before Tax
B= 10% (1,760,000 – B)
B= 176,000 – 0.10B
B + 0.10B = 176,000
1.10B = 176,000
B= 176,000 / 1.10
B= 160,000

Question 52

. Silingan Company is experiencing financial difficulty and is negotiating debt
restructuring with its creditor to relieve its financial stress. Silingan has a P2,500,000
note payable to Lebakero Bank. The bank accepted an equity swap in Silingan
Company in the form of 200,000 ordinary shares quoted at P12 per share. The par
value is P10 per share. What amount should be recognized as gain from the debt
extinguishment as a result of the “equity swap”?

Answer 52

Answer: 100,000
NP 2,500,000
FV of shares (200T x 12) (2,400,000)
Gain on debt extinguishment 100,000

Question 53

The following data are provided related to a defined benefit plan:
Fair value of plan assets – beginning 7,500,000
Actual return on plan assets 1,350,000
Contribution to the fund 1,500,000
Benefits paid 300,000
Interest income on plan assets 6%
How much is the re-measurement gain?

Answer 53

Answer: 900,000
1,3500,00
7,500,000 x 6% (450,000)
900,000

Question 54

The following figures are among those pertaining to Dianne company’s
operations for the six months ended June 30, 2011: Sales, P12,000,000; Beginning
inventory, P3,000,000 and Purchases, P7,800,000. On June 30, 2011, all of Dianne’s
inventory was destroyed by fire. If the gross profit rate is 30% based on sales, how
much is the estimated cost of this destroyed inventory?

Answer 54

Answer: 2,400,000
3,000,000 + 7,800,000 10,800,000
12,000,000 x 70% (8,400,000)
(100%-30%)
2,400,000