EASY ROUND

1. This means “applying a new accounting policy to transactions, other events and conditions as if
that policy had always been applied”
a. Retrospective application
b. Retrospective restatement
c. Prospective application
d. Prospective restatement

2. When restrictions that significantly limit the scope of the audit are imposed by the client, the
auditor generally should issue which of the following opinions?
a. “Except for”
b. Disclaimer
c. Adverse
d. Unqualified

3. The Bureau of Internal Revenue shall have a Commissioner and ____ deputy commissioner.

4. On Dec. 31, 2015, Kale Company had the following balances in the accounts maintained at First
State Bank:

Checking account #101 1,750,000

Checking account #201 ( 100,000)
Time deposit 250,000
Commercial papers 1,000,000
90-day treasury bill, due Feb. 28, 2016 500,000
180-day treasury bill, due March 15, 2016 800,000

The entity classified investments with original maturities of three months or less as cash
equivalents.

On December 31, 2015, what amount should be reported as cash and cash equivalents?

5. A decision-making concept, described as “the contribution to income that is foregone by not

using a limited source for its best alternative use,” is called
a. Marginal cost
b. Incremental cost
c. Potential cost
d. Opportunity cost
6. An agreement as to land to be valid
a. It should be in writing
b. It should be in writing and proper stamps should be pasted
c. Whether it is verbal or written but agreed in front of a lawyer
d. It should be in writing and notarialy executed

7. The effects of transactions and other events on economic resources and claims are depicted in
the periods in which those effects occur even if the resulting cash receipts and payments occur
in a different period.
a. Accrual basis
b. Cash basis
c. Hybrid basis
d. Income tax basis

8. Who is the one statutorily liable for the payment of Value-Added Tax (VAT)?
a. Consumer
b. Seller
c. Buyer
d. None of the above

9. The following are selected budget data of Russel Gil Company for the coming year:
Selling price per unit Php. 12.00
Budgeted sales 600,000
Fixed expenses 150,000
Variable cost per unit 8.00

What is the breakeven in sales in units?

10. TRAIn stands for ___________________________.

AVERAGE ROUND

1. Ericson Mateo, a single resident citizen, after treating her girlfriend to an international cruise
drowned and died in the Pacific Ocean last Feb. 14, 2018. The gross value of his estate
amounted to Php. 3,000,000.

Questions:

 Is a written notice of death required?

 Is the family of the deceased required to file the estate tax return?
 Is the statement required to be certified by a certified public accountant (CPA)?
 When is the deadline for the filing of the estate tax return?

a. Yes, Yes, Yes, Aug. 14, 2018

b. No, Yes, No, February 14, 2019
c. Yes, Yes, No, August 14, 2018
d. Yes, Yes, Yes, February 14, 2019

2. Mango Inc. acquired on January 1, 2017 all the issued and outstanding common shares of Celine
Inc. for Php. 310,000 and Celine Inc. is dissolved. On this day, the assets and liabilities of Celine
Inc. show:

Cash Php. 30,000

Merchandise Inventory 90,000
Plant and equipment 160,000
Goodwill 50,000
Liabilities (60,000)
Per appraisal, plant and equipment and merchandise inventory were valued at Php. 190,000 and
Php. 75,000, respectively. What is the amount of goodwill resulting from this transaction?
a. 125,000 b. 40,000 c. 75,000 d. 90,000

3. Which of the following statements is TRUE?

a. The intercompany profit in inventory transfer between affiliates is computed by multiplying
the inventory held by the buying affiliate which was acquired from the selling affiliate by the
gross profit rate based on sales of the buying affiliate.
b. The income and expenses of a subsidiary are included in the consolidated financial
statements from the acquisition date.
c. Recognition of the realized profit in beginning inventory requires a working paper debt to
cost of goods sold.
d. The non-controlling interest in profit is affected by the bargain purchase or gain on
acquisition.
4. Suspicious transactions are transactions with covered institutions, regardless of the amounts
involved, where any of the following circumstances exist (choose the exception):
a. There is no underlying legal or trade obligation, purpose or economic justification
b. The client is not properly identified
c. The amount involved is commensurate with the business or financial capacity of the client
d. The transactions is in a way related to an unlawful activity or offense under the Act that is
about to be, is being or has been committed

5. On July 1, 2006, James Jacinto signed an agreement to operate a franchise at Fast Foods Inc., for
an initial franchise fee of 60,000. Of this amount, 20,000 was paid when the agreement was
signed and the balance is payable in four equal annual payments of 10,000 beginning July 1,
2007. The agreement provides that the down payment is not refundable and no future services
are required of the franchisor. Jacinto’s credit rating indicates that he can borrow money at 14%
for a loan of this type. Information on present and future value factors is as follows:
Present value of P1 at 14% for 4 periods 0.59
Future amount of P1 at 14% for 4 periods 1.69
Present value of an ordinary annuity of P at 14% for 4 periods 2.91
Jacinto should record of the acquisition cost of the franchise on July 1, 2006 at
a. 43,600 c. 60,000
b. 49,100 d. 67,600

6. Blonde Company’s budgeted cost of sales for the coming year are Php. 14.4 million and Php. 9
million, respectively. Short-term interest rates are expected to average 15%. If the company can
increase inventory turnover from its present level of nine times a year to a level times a year, its
cost savings in the coming year would be
a. 60,000 c. 90,000
b. 67,500 d. 37,500

7. Viewsonic Manufacturing purchased 80 percent of the stock of Ronnie Mines, Inc., in 2015. In
preparing the consolidated financial statements at the end of 2017, the controller of Viewsonic
discovered that Viewsonic Manufacturing had purchased 750,000 of raw materials from Ronnie
Mines during the year and that the parent company had not paid for the last purchase of
120,000. All the inventory purchased was still on hand at year-end. Ronnie Mines had spent
500,000 in producing the items sold to Viewsonic Manufacturing.

What effect, if any, will failure to eliminate or adjust for these items have on total current assets
reported in the consolidated balance sheet on Dec. 31, 2017?
a. Overstated by 250,000 c. overstated by 370,000
b. Overstated by 870,000 d. overstated by 750,000

8. Juan dela Cruz has the following deposits in Bnk 1:

 Individual account in his name: 600,000 saving deposit
 Joint account in his name AND Maria dela Cruz: 500,000 time deposit
 Joint account in his name OR Pedro dela Cruz: 800,000 demand deposit
Assume that for the joint accounts, there is equal sharing.

What is the total insured deposit of Juan dela Cruz?

a. 500,000 b. 750,000 c. 1,000,000 d. 1,250,000
9. Reid Company, which began operations on January 1, 2014, has elected to use cash basis
accounting for tax purposes and accrual basis accounting for the financial statements. The entity
reported sales of 1,750,000 and 800,000 in the tax returns for the years ended Dec. 31, 2015
and 2014, respectively. The entity reported accounts receivable of 300,000 and 500,000 on Dec.
31, 2015 and 2014, respectively.
What amount should be reported as sales in the income statement for 2015?
a. 1,450,000 c. 1,950,000
b. 1,550,000 d. 2,050,000

10. An auditor most likely would modify an unqualified opinion if the entity’s financial statements
include a footnote on related party transactions.
a. Disclosing loans to related parties at interest rates significantly below prevailing market
rates.
b. Describing an exchange of real estate for similar property in a non-monetary related party
transaction.
c. Stating that a particular related party transaction occurred on terms equivalent to those
that would have prevailed in an arm’s-length transaction.
d. Presenting the peso volume of related party transactions and the effects of any change in
the method of establishing terms from prior periods.
DIFFICULT ROUND

1. CONCORD CO. purchased real property for P3,225,000 which included P67,500 for realty tax
arrears for prior years. A mortgage of P1,500,000 was assumed by CONCORD CO. on the
purchase. Twenty percent of the purchase price should be allocated to the land and the balance
to the building.
In order to make the building suitable for the use of CONCORD CO., remodeling costs had to be
incurred in the amount of P337,500. This however necessitated the demolition of a portion of
the building, which resulted in recovery of salvage material sold for P11,250 cash.
Landscaping and parking lot cost the company a total of P120,000 while repairs in the main hall
were P16,875.
The cost of the land was:
a.P631,500 b.P645,000 c.P765,000 d.P945,000

2. On June 30, 2007, COLT INC. had outstanding 10% P250,000 face amount 15 year bonds
maturing on June 30, 2017. Interest is paid on June 30 and December 31, and bond discount and
bond issue costs are amortized on these dates. The unamortized balances on June 30, 2007 of
bond discount and bond issue costs were P13,750 and P5,000 respectively. COLT INC. reacquired
all of these bonds at 96 on June 30, 2007 and retired them.
Ignoring income taxes, compute for the gain or loss on bond retirement.
a. Loss of P3,750 b. Loss of P8,750 c. Gain of P1,250 d. Gain of P10,000

3. You are conducting an audit of the MART CORPORATION for the year ended December 31, 2008. The
internal control procedures surrounding cash transactions were not adequate. Jane Quipit, the
bookkeeper-cashier handles cash receipts, maintains accounting records and prepares the monthly
reconciliations of the bank account. She prepared the following reconciliation at the end of the year:
Balance per bank statement P 315,000
Add : Deposit in transit P 157,725
Note collected by bank 13,500 171,225
Balance P 486,225
Less : Outstanding checks 222,075
Balance per general ledger P 264,150

In the process of your audit, you gathered the following:

a. At December 31, 2008, the bank statement and the general ledger showed balances of P315,000 and
P264,150 respectively.
b. The cut off bank statement showed a bank charge on January 02, 2009 for P35,250 representing a
correction of an erroneous bank credit.
c. Included in the list of outstanding checks were the following:
1. A check payable to a supplier, dated December 29, 2008, in the amount of P13,275, released
on January 05, 2009.
2. A check representing advance payment to a supplier in the amount of P33,489, the date of
which is January 04, 2009, and released in December 2008.
d. On December 31, 2008, the company received and recorded customer’s postdated check amounting to
P45,000.

Compute the adjusted deposit in transit as of December 31, 2008.

a.P157,725 b.P112,725 c.P202,725 d.P112,500
4. The employer of Ms. Min Chin, a non-rank and file (NRF) expatriate employee, leased a
residential property for her place of residence. The employer pays a monthly rental of 25,000.

In addition, her employer purchased a car on installment basis. The car shall be in Ms. Chin’s
name. the total purchase price of the car amounted to 750,000 exclusive of interest while the
down payment amounted to 300,000.

Finally, the employer shoulders the income tax due of Ms. Chin amounting to 250,000. The
shouldered income tax includes hypotax and Philippine income.

Assuming the rules set forth in the TRAIN Law are applied, how much is the employer’s fringe
benefit tax payable on Ms. Chin’s privileges during the year? Round your answer to the nearest
peso.

a. 296, 153 b. 161, 538 c. 141, 176 d. 134, 615

5. Voltron Inc. reported inventory of P360,000 at December 31, 2006. The following data were
gathered to confirm the reported inventory figure.
Inventory, December 31, 2005 P 320,00
Purchases during 2006 1,410,000
Cash sales during 2006 350,000
Shipment received on December 26, 2006 included
in physical inventory but not recorded as purchases 10,000
Deposit made with suppliers, entered as purchased
goods were not received during 2006 20,000
Collections on accounts receivable during 2006 1,800,000
Accounts receivable, December 31, 2005 250,000
Accounts receivable, December 31, 2006 300,000
Gross profit percentage on sales 40%
What is the estimated inventory shortage at December 31, 2006?
a.P60,000 b.P50,000 c.P40,000 d.P 5,000

6. Sales in which the buyer is not yet ready to take delivery but does take title are _________.

7. The following line items of the proposed bill which later signed by President Rodrigo Duterte
into law known as “Tax Reform for Acceleration Inclusion” (TRAIn Law) were vetoed, except for?
a. Reduced income tax rate of employees of Regional Headquarters (RHQs), Reaginal
Operating Headquarters (ROHQs). Offshore Banking Units (OBUs) and Petroleum Service
Contractors and Subcontractors.
b. Zero-rating of sales of goods and services to separate customs territory and tourism
enterprise zones.
c. Exemption from percentage tax of gross sales/receipts not exceeding five hundred thousand
pesos (500,000)
d. Exemption of various petroleum products from excise tax when used as input, feedstock, or
as raw material manufacturing of petrochemical products, or in the refining of petroleum
products, or as replacement fuel for natural gas fired combined cycle power plants
e. Earmarking of incremental alcohol taxes
f. None of the above
8. On October 01, 2006, Aguila Company consigned 50 computers at a unit cost of P15,000 to HP
Company for sale at P20,000 each and paid P20,000 transportation cost. On December 31, 2006,
HP Company reported the sales of 25 computers and returned 10 units. Cost paid by the
consignee on the returned units was P4,000. Amount due to consignor was remitted on the
same date. Commission rate as agreed upon was 15%.
What amount of inventory on consignment and net income related to the sold units respectively
should Aguila Company report on December 31, 2006?
a.P225,000 and P36,000 b.P231,000 and P32,000
c.P235,000 and P40,000 d.P375,000 and P44,000

9. With the effectivity of R.A. No. 10963, or the TRAIN Law, a resident citizen may claim decedent
may still claim as allowable deduction from his gross estate the following:
a. Funeral expense
b. Judicial expense
c. Medical expense
d. Standard deduction in the amount of 10,000,000
e. None of the above

10. BRAND CO. reported P9,000 of net income for 2007. The correct net income however was
P11,000. It was determined that the ending inventory was overstated by P1,000. The only other
error was with the beginning inventory which must have been:
a. Understated by P1,000 b. Understated by P3,000
c. Overstated by P1,000 d. Overstated by P3,000