Practical Accounting 1-SIR SALVA

1
. Logan Corp., a company whose stock is publicly traded, provides a noncontributory

defined-benefit pension plan for its employees. The company's actuary has provided the
following information for the year ended December 31, 2019:
Projected benefit obligation P650,0

00
Accumulated benefit obligation 525,0
00
Fair value of plan assets 825,0
00
Service cost 240,0
00
Interest on projected benefit obligation 24,000
Amortization of prior service cost 60,000
Expected and actual return on plan assets 82,500
The market-related asset value equals the fair value of plan assets. No contributions
have been made for 2019 pension cost. In its December 31, 2019 balance sheet, Logan
should report a pension asset / liability of
a. Pension liability of P650,000 c. Pension asset of P175,000
b. Pension asset of P825,000 d. Pension liability of P525,000
2. A company has the following per unit original costs and replacement costs for its
inventory:
Part A: 50 units with a cost of P5, and replacement cost of P4.50

Part B: 75 units with a cost of P6, and replacement cost of P6.50
Part C: 160 units with a cost of P3, and replacement cost of P2.50
Under the lower of cost or market method, the total value of this company's ending
inventory is:
1| PracticalAccounting1
a. P1,180.00.
b. P1,075.00 or P1,112.50, depending upon whether LCM is applied to individual
items or the inventory as a whole.
c. P1,112.50.
d. P1,180.00 or P1,075.00, depending upon whether LCM is applied to individual
items or to the inventory as a whole.
3. Mirr, Inc. was incorporated on January 1, 2018, with proceeds from the issuance of
P750,000 in stock and borrowed funds of P110,000. During the first year of operations,
revenues from sales and consulting amounted to P82,000, and operating costs and
expenses totaled P64,000. On December 15, Mirr declared a P3,000 cash dividend,
payable to stock holders on January 15, 2019. No additional activities affected owners’
equity in 2018. Mirr’s liabilities increased to P120,000 by December 31, 2018. On Mirr’s
December 31, 2018 balance sheet, total assets should be reported at
a. P885,000 c. P878,000
b. P882,000 d. P875,000
4. The following errors were made in preparing a trial balance: the P1,350 balance of
Inventory was omitted; the P450 balance of Prepaid Insurance was listed as a credit;
and the P300 balance of Salaries Expense was listed as Utilities Expense. The debit and
credit totals of the trial balance would differ by
a. P1,350 c. P1,800
b. P2,100 d. P2,250
5. Net Income for Vivo Company for the calendar year 2017 and 2018 is shown below.
A review of the accounts disclosed the following errors:
2017 2018
Net Income per books P75,600 P96,90
Errors disclosed: 0
Equipment purchased at
Year-end charged to
Expense (with estimated
2 | PracticalAccounting1
10-year life) 10,000
Increase of Reserve for
Contingencies charged
To operations 12,0
Overstatement of inventory 00
At year-end 3,000
Goods purchased not recorded
As liability and not included
Included in inventory 4,00
0
Rent received in advance 1,500
Unpaid salaries not taken up
In the books 900
Insurance Premium on one-year
Fire policy taken and paid
On May 1, 2018, all charged
To expense 1,20
0
The correct net income for 2018 is
a. P114,700 c. P108,300
b. P113,700 d. P114,200
Use the following information for the next five questions.

Presented below is the statement of financial position of Simple Corporation prepared by
the chief accountant for the current year, 2018.
Simple Corporation
Statement of Financial Position
December 31, 2018
Current assets P435,000

Investments 640,000
Property plant and equipment 1,720,000
Intangible assets 305,000
P3,100,000
Current liabilities P330,000

Long-term liabilities 1,000,000
Shareholder’s equity 1,770,000
P3,100,000
Consider the following information:
1. The current assets section includes: Cash P100,000, Accounts Receivable P170,000
less P10,000 for allowance for doubtful accounts, inventories P180,000, and
unearned revenue P5,000. The cash balance is composed of P114,000, less a bank
overdraft of P14,000. Inventories are stated on the lower of FIFO cost or market.
2. The investments section includes: the cash surrender value of a life insurance
contract P40,000; investment in ordinary shares, short-term (trading) P80,000 and
long-term (available-for-sale) P270,000; and bond sinking fund P250,000. The cost
and fair value of investments in ordinary shares are the same.
3. Property, plant and equipment includes: buildings P1,040,000 less accumulated
depreciation P360,000; equipment P450,000 less accumulated depreciation
P180,000; land P500,000; and land held for future use P270,000.
4. Intangible assets include: a franchise P165,000: goodwill P100,000; and discount on
bonds payable P40,000.
5. Current liabilities include: accounts payable P90,000; notes payable – short term
P80,000 and long term P120,000: and taxes payable P40,000.
6. Long – term liabilities are compose solely of 10% bond payable due 2024.
7. Shareholders’ equity has: preference shares, no par value, authorized 200,000
shares, issued 70,000 shares for P450,000; and ordinary shares, P1.00 par value,
authorized 400,000 shares, issued 100,000 shares at an average price of P10. In
addition, the corporation has retained earnings of P320,000.
QUESTIONS:
Compute the adjusted amounts to be reported on the company’s statement of financial
position as of December 31, 2018:
6. Current assets:
a. P548,000 c. P588,000
b. P574,000 d. P534,000
7. Noncurrent investments
a. P830,000 c. P560,000
b. P520,000 d. P790,000
8. Property, plant and equipment

a. P1,720,000 c. P1,615,0
b. P1,885,000 00
d. P1,450,0
9. Total assets 00
a. P2,814,000 c. P3,079,0
b. P2,979,000 00
d. P3,093,0
10. Current liabilities 00
a. P224,000 c. P210,000
b. P229,000 d. P215,000
11. Luarez Co.’s income statement for the year ended December 31, 2018, as prepared
by Luarez’ controller, reported income before taxes of P125,000. The auditor
questioned the following amounts that had been included in income before taxes:
Unrealized gain on available-for-sale investment P40,000

Equity in earnings of Mike Co. 20,000
Dividend received from Mike Co. 8,000
Loss from unusual and infrequent typhoon (30,000)
Adjustment to profits of prior years for arithmetical errors in depreciation (35,000)
Luarez owns 40% of Mike Co.’s ordinary shares. Luarez’s December 31, 2018 income
statement should report income before taxes of
a. P85,000 c. P112,000
b. P117,000 d. P152,000
12. The general ledger trial balance of Kimberly Limited includes the following accounts
for the current year:
Sales revenue P975,0
00
Interest income 20,0
00
Share of profit of associates 15,0
00
Other income 8,0
00
Decrease in inventories of finished goods 25,0
00
Raw materials used 350,0
00
Employee benefit expenses 150,0
00
Loss on translation of foreign operations 30,0
00
Depreciation of property and equipment 45,0
00
Impairment of property 80,0
00
Finance costs 35,0
00
Other expenses 45,0
00
Income tax expense 75,0
00
How much should be reported as profit for the year?
a. P288,000 c. P213,000
b. P263,000 d. P183,000
13. Heron Company commits to a plan to dispose of one of its operating segments. The
disposal meets the requirements for discontinued operations.
Records disclosed the following for the disposal group:
Carrying amount P8,000,000
Fair value less cost to sell 6,500,000
Loss from operations 2,000,000
Expected operating loss prior to disposal 500,000
Disregard the income tax, how much will be reported as loss from discontinued
operations?
a. P4,000,000 c. P2,000,0
b. P3,500,000 00
d. P1,500,0
00
AI Corp. uses the direct method to prepare its statement of cash flows. AI trial
balances at December 31, 2018 and 2017 are as follows:
12/31/2018 12/31/20
Debits 17
Cash P35,000 P32,000
Accounts Receivable 33,000 30,000
Inventory 31,000 47,000
Property, plant & equipment 100,000 95,000
Unamortized bond discount 4,500 5,000
Cost of goods sold 250,000 380,000
Selling expenses 141,500 172,000
12/31/2018 12/31/20
17
General and administrative expenses 137,000 151,300
Interest expense 4,300 2,600
Income tax expense 20,400 61,200
P756,700 P976,100
Credits
Allowance for uncollectable accounts P1,300 P1,100
Accumulated depreciation 16,500 15,000
Trade accounts payable 25,000 17,500
Income taxes payable 21,000 27,100
Deferred tax liability 5,300 4,600
8% callable bonds payable 45,000 20,000
Share capital 50,000 40,000
Share premium 9,100 7,500
Retained earnings 44,700 64,600
Sales 538,800 778,700
P756,700 P976,100
• AI purchased P5,000 in equipment during 2018.

• AI allocated one-third of its depreciation expense to selling expenses and the remainder
to general and administrative expenses.
QUESTIONS:
Based on the foregoing, what amounts should AI report in its statement of cash flows for the
year ended December 31, 2018 for:
14. Cash collected from customers?

a. P541,800 c. P536,000
b. P541,600 d. P535,800
15. Cash paid for goods to be sold?

a. P258,500 c. P242,500
b. P257,500 d. P226,500
16. Cash paid for interest?

a. P4,800 c. P3,800
b. P4,300 d. P1,700
17. Cash paid for income taxes?
a. P25,800 c. P19,700
b. P20,400 d. P15,000
18. Cash paid for selling expenses?

a. P142,000 c. P141,000
b. P141,500 d. P140,000
Use the following information for the next three questions.
The differences in Marylet, Inc.’s statement of financial position accounts at December 31,
2018 and 2017 are presented below:
Increase
(Decrease) Assets
Cash and cash equivalents P120,000
Available-for-sale securities 300,000
Accounts receivable, net --
Inventory 80,000
Long-term investments (100,000)
Property, plant and equipment 700,000
Accumulated depreciation ------
P1,100,000
Liabilities and Stockholders’ Equity
Accounts payable and accrued liabilities (P5,000)
Dividends payable 160,000
Short-term bank debt 325,000
Long-term debt 110,000
Share capital, P10 par 100,000
Share premium 120,000
Retained earnings 290,000_
P1,100,00
The following additional information relates to 2018:
a) Net income was P790,000.
b) Cash dividends of P500,000 were declared.
c) Building costing P600,000 and having a carrying amount of P350,000 was sold for
P350,000.
d) Equipment costing P110,000 was acquired through issuance of long-term debt.
e) A long-term investment was sold for P135,000. There were no other transactions
affecting long-term investments.
f) 10,000 ordinary shares were issued for P22 a share.
Determine the net cash provided by (used in)

19. Operating activities
a. P1,160,000 c. P920,000
b. P1,040,000 d. P705,000
20. Investment activities

a. (P1,115,000) c. (P515,000)
b. (P1,005,000) d. (P215,000)
21. Financing activities

a. (P280,000) c. P205,000
b. P45,000 d. P545,000
22. The following pertains to Miraflor, Inc. on December 31 of the current year:
Checking account balance P925,000; an overdraft in special checking account at
same bank as normal checking account of P17,000; certificate of deposit P400,000;
cash held in a bond sinking fund P200,000; postdated check from customer P11,000;
certified check from customer P9,800; NSF check received from customer P15,000;
cash advance to subsidiary of P300,000; postage stamps on hand P620; utility
deposit paid to electric company P8,000; currency and coins in a petty cash fund
(the company has not
10 | P r a c t i c a l A c c o u n t i n g 1
replenished the fund to the imprest amount of P5,000) P800. The correct amount that
should be reported as cash is:
a. P908,800 c. P1,318,600
b. P918,600 d. P1,322,800
23. If petty cash fund is established in the amount of P2,500, and contains P2,000 in cash
and P450 in receipts for disbursements when it is replenished, the journal entry to
record replenishment should include credit to the following accounts a. Petty Cash,
P450.
b. Petty Cash, P500.
c. Cash, P450; Cash Over and Short, P50.
d. Cash, P 500.
24. A company has prepared its bank reconciliation at 31 March 2018 taking the following
information into account:
Deposit in transit P1,50
0
Outstanding check 2,8
Bank chargers shown in bank 00
statement but not recorded
in the cash book 1
25
The adjusted cash book balance per the bank reconciliation was a debit balance of
P2,060.
What was the balance as shown on the bank statement at 31 March 2018? a.
P760
b. P885
c. P3,360
d. P3,485
25. The Hataw Corporation started its business on January 1, 2018. After considering the
collection experience of the other companies in the industry, Hataw Corporation
established an allowance for bad debts estimated to be 5% of credit sales.
Further analysis of the company’s accounts showed that merchandise purchased in
2018 amount to P2,250,000 and ending merchandise inventory was P375,000. Goods
were sold at 40% above cost.
80% of total sales were on account. Total collections from customers, on the other
hand, excluding proceeds from cash sales, amounted to P1,500,000. Accounts written
off during 2018 totaled P12,500.
The net realizable value of accounts receivable as of December 31, 2018 is

a. P495,000 c. P512,500
b. P993,750 d. P875,000
26. Totoy Company accepted a P10,000, 2% interest bearing note from Bibo Company
on December 31, 2018, in exchange for a machine with a list price of P8,000 and a
cash price of P7,500. The note is payable on December 31, 2020. In its 2018 income
statement, Totoy should report the sale at
a. P7,500 c. P8,000
b. P10,000 d. P10,400
27. Magic Co. purchased from Howard Co. a P20,000, 8%, five-year note that required
five equal annual year-end payments of P5,009. The note was discounted to yield a
9% rate to Magic. At the date of purchase, Magic recorded the note at its present
value of P19,485. What should be the total interest revenue earned by Magic over
the life of this note?
a. P5,045 c. P8,000
b. P5,560 d. P9,000
28. On December 31, 2017, Boil Company entered into a debt restructuring agreement
with Cool Company, which was experiencing financial difficulties. Boil restructured a
P100,000 note receivable as follows:
o Reduced the principal obligation to P70,000. o Forgave P12,000 of recorded
accrued interest.
o Extended the maturity date from December 31, 2017 to December 31, 2019.
o Reduced the interest rate from 12% to 8%.
Interest was payable annually on December 31, 2018 and 2019
Present value factors:
Single sum, two years @ 8% .8573
Single sum, two years @ 12% .7972
Ordinary annuity, two years @ 8% 1.7833
Ordinary annuity, two years @ 12% 1.6901
In accordance with the agreement, Cool made payment to Boil on December 31, 2018.
How much interest income should Boil report for the year ended December 31, 2018?
a.P46,731 c. P8,100
b. P5,600 d. P7,832
29. An entity often factors its accounts receivable. The finance company requires an 8%
reserve and charges a 1.5% commission on the amount of the receivable. The
remaining amount to be advanced is further reduced by an annual interest charge of
16%. What proceeds (rounded to the nearest peso) will the enterprise receive from
the finance company at the time a 110,000 account that is due in 60 days is turned
over to the finance company?
a. P83,630 c. P99,550
b. P81,950 d. P96,895
Use the following information for the next four questions.
An entity purchased P5,000,000 of 8%, 5-year bonds on January 1, 2018 with

interest payable on June 30 and December 31. The bonds were purchased for
P5,100,000 plus transaction cost of P108,000 at an effective interest rate of 7%. The
business model for this investment is to collect contractual cash flows and sell the
bonds in the open market. On December 31, 2018, the bonds were quoted at 106.
QUESTIONS:
30. What amount of interest income should be reported for 2018?
a. P400,000 c. P364,560
b. P200,000 d. P363,940
31. What is the adjusted carrying amount of the investment on December 31, 2018?
a. P5,300,000 c. P364,560
b. P5,171,940 d. P363,940
32. What amount should be recognized in OCI in the statement of comprehensive

income for 2018?
a. P300,000 c. P128,060
b. P125,440 d. P92,000
33. If the entity elected the fair value option, what total amount of income should be
recognized for 2018?
a. P400,000 c. P600,000
b. P492,000 d. P200,000
Use the following information for the next three questions.
An investor in Exempted Co. asked you for advice on the propriety of Exempted’s
financial reporting for two of its investments. You obtained the following information
related to the investments from Exempted’s December 31, 2018 financial statements:
o 20% ownership interest in Jun Co., represented by 200,000 ordinary shares
purchased on January 2, 2018 for P600,000. o 20% ownership interest in Pol
Co., represented by 20,000 ordinary shares purchased on January 2, 2018, for
P300,000. o On January 2, 2018, the carrying values of the acquired shares of
both investments equaled their purchase price.
o Jun reported earnings of P400,000 for the year ended December 31, 2018, and
declared and paid dividends of P100,000 during 2018. o Pol reported earnings
of P350,000 for the year ended December 31, 2018, and declared and paid
dividends of P60,000 during 2018.
o On December 31, 2018, Jun’s and Pol’s ordinary shares were trading over-
thecounter at P4 and P20 per share, respectively. o The investment in Jun is
accounted for using the equity method.
o The investment in Pol is accounted for as FVTOCI.
You recalculated the amounts reported in Exempted’s December 31, 2018 financial
statements, and determined that they were correct. Stressing that the information
available in the financial statements was limited, you advised the investor that,
assuming Exempted properly applied generally accepted accounting principles;
Exempted may have appropriately used two different methods to account for its
investments in Jun and Pol, even though the investments represent equal
ownership interests.
QUESTIONS:
34. Based on the foregoing information, determine the following amounts on

Exempted’s financial statements as of and for the year ended December 31, 2018:
Carrying amount of investment in

Jun Pol
a. P860,000 P458,000
b. P800,000 P358,000
c. P660,000 P400,000
d. P600,000 P400,000
35. Income in profit or loss from investment in
Jun Pol
a. P80,000 P70,000
b. P80,000 P12,000
c. P20,000 P70,000
d. P20,000 P12,000
36. Income in other comprehensive income on investment

Jun Pol
a. P 0 P 0
b. P 0 P100,000
c. P200,000 P100,000
d. P140,000 P 42,000
37. On January 1, 2018, Karl Corporation acquired 25% of the shares of Pot, Inc. for
P425,000. At this date all the identifiable assets and liabilities of Pot, Inc. were recorded
at amounts equal to fair value, and the equity of Pot consisted of the following:
Share capital P1,000,000
General reserve 300,000
Asset revaluation surplus 200,000
Retained earnings 200,000
In 2018, Pot reported profit of P250,000. P50,0000 of the asset revaluation surplus was
realized in 2018. Pot paid a P40,000 dividend and transferred P30,000 to general
reserve. What is the carrying amount of the investment in Pot, Inc. as of December 31,
2018?
a. P477,500 c. P465,000
b. P490,000 d. P482,500
38. Chain, Inc. purchased a P1 Million life insurance policy on its president, of which
Chain is the beneficiary. Information regarding the policy for the year ended December
31, 2018 follows:
Cash surrender value 1/1/18 P87,000

Cash surrender value 12/31/18 108,000
Annual advance premium paid 1/1/18 40,000
During 2018, dividends of P6,000 were applied to increase the cash surrender value of
the policy. What amount should Chain report as life insurance expense for 2018?
A.P40,000 C. P19,000
B. P21,000 D. P13,000
39. In your view of Hug Company, you find that a physical inventory on December 31,
2018, showed merchandise with a cost of P441,000 was on hand at that date. You also
discover the following items were all excluded from the P441,000.
a. Merchandise of P61,000 which is held by Hug on consignment. The consignor is
Kisses Company.
b. Merchandise costing P38,000 which was shipped by Hug FOB destination to a
customer on December 31, 2018. The customer was scheduled to receive the
merchandise on January 2, 2019.
c. Merchandise costing P46,000 which was shipped by Hug FOB shipping point to a
customer on December 29, 2018. The customer was scheduled to receive the
merchandise on January 2, 2019.
e. Merchandise costing P 83,000 shipped by a vendor FOB destination on
December 30, 2018, and received by Hug on January 4, 2019.
f. Merchandise costing P51,000 shipped by a vendor FOB seller on December
31, 2018, and received by Hug on January 5, 2019.
The adjusted cost of Hug Company’s inventory at December 31, 2018 should be
a. P538,000 c. P479,000
b. P530,000 d. P441,000
Use the following information for the next two questions.
Gatas Dairy produces milk to sell to local and national ice cream producers. Gatas Dairy
began operations on January 1, 2018 by purchasing 840 milk cows for P1,176,000. The
company controller had the following information available at year end relating to the
cows:
Carrying value, January 1, 2018 P1,176,000
Increase in fair value due to growth and price changes 365,000
Decrease in fair value due to harvest 42,000
Milk harvested during 2018 but not yet sold 54,000
40. At December 31, 2018, what is the value of the milking cows on Gatas Dairy’s
statement of financial position?
a. P1,583,000 c. P1,499,000
b. P1,553,000 d. P1,445,000
41. On Gatas Dairy’s Income Statement for the year ending December 31, 2018, what
amount of unrealized gain on biological assets will be reported?
a. P461,000 c. P377,000
b. P407,000 d. P323,000
42. Entity A exchanged a car for a computer from X Corp. to be used as a noncurrent
operating asset. The following information relates to this exchange that took place on
July 31, 2018:
Carrying amount of the Car P30,000
Listed selling price of the Car 45,000
Fair value of the computer 43,000
Cash difference paid by A Corp. 5,000
On July 31, 2018, how much profit should Entity A recognize on this exchange?
a. P13,000 c. P8,000
b. P10,000 d. P 0
43. On January 1, 2015, Neal Corporation acquired equipment at a cost of P540,000.

Neal adopted the sum-of-years-digits method of depreciation for this equipment and
had been recording depreciation over an estimated life of eight years, with no residual
value. At the beginning of 2018, a decision was made to change to the straight-line
method of depreciation for this equipment. The depreciation expense for 2018 would
be
a. P28,125 c. P67,500
b. P45,000 d. P108,000
44. In the 30 June 2018 annual report of Johnston Ltd, the equipment was reported as
follows:
Equipment (at cost) P5,000,000

Accumulated depreciation 1,500,000
P3,500,000
The equipment consisted of two machines, machine A and machine B. Machine A had
cost P3,000,000 and had a carrying amount of P1,800,000 at 30 June 2018, while
machine B had cost P2,000,000 and was carried at 1,700,000. Both machines are
measured using the cost model, and depreciated on a straight-line basis over a ten-year
period.
On 31 December 2018, the directors of Johnston Ltd decided to change the basis of
measuring the equipment from the cost model to the revaluation model. Machine A
was revalued to P1,800,000 with an expected useful life of six years, and machine B was
revalued to P1,550,000 with an expected useful life of five years.
The amount to be recognized in profit or loss as a result of the revaluation of assets on

December 31, 2018 is
a. P150,000 c. (P150,000)
b. P100,000 d. (P50,000)
45. Roller Ltd (Roller) is testing an asset for impairment. The carrying amount of the
asset is P85,000. The following data has been obtained by Roller in relation to the asset.
o Future cash flows expected to be derived from the asset, P100,000. o
Estimated fair value of the asset, P80,000. o Present value of future cash
flows expected to be derived from the asset, P60,000.
o Costs of disposal for the asset, P2,000.
How much should be recognized as impairment loss?

a. P25,000 c. P5,000
b. P7,000 d. Nil
46. Karon Company maintains escrow accounts and pays real estate taxes for mortgage
customers. Escrow funds are kept in interest bearing accounts. Interest, less a 20%
services fee is credited to the mortgagee’s account and used to reduce future escrow
payments. The information regarding the escrow accounts kept by Karon is as follows:
escrow accounts liability as of January 1 was P2,000,000, while Karon received
payments from customers during the year amounting to P4,200,000. Karon paid real
estate taxes during the year in the amount of P3,500,000, while the interest earned on
the escrow funds was P500,000. What amount should Karon report as escrow accounts
liability in its December 31 statement of financial position?
a. P3,200,000 c. P2,300,000
b. P3,100,000 d. P2,700,000
47. Atlanta Co. sells its products in reusable containers. The customer is charged a
deposit for each container delivered and receives a refund for each container returned
within two years after the year of delivery. Atlanta accounts for the containers not
returned within the time limit as being retired by the sale at the deposit amount.
Information for 2018 is as follows:
Container deposits at December 31, 2017
from deliveries in 2016 P150,000
2017 430,000 P580,000
Deposits for containers delivered in 2018 80,000
Deposits for containers returned in 2018
From deliveries in 2016 P90,000
2017 250,000
2018 286,000
626,000
In Atlanta’s December 31, 2018 statement of financial position, the liability for deposits
on returnable containers should be
a. P494,000 c. P584,000
b. P674,000 d. P734,000
48. Connie Corp. has an outstanding 10% note payable dated October 1, 2016 and is
payable in three equal annual payments of P600,000 plus interest. The first interest and
principal payment was made on October 1, 2017. In Connie’s June 30, 2018 statement
of financial position, what amount should be reported as accrued interest payable for
this note?
a. P135,000 c. P90,000
b. P45,000 d. P30,000
49. The 10% bonds payable of Lucille Company had a net carrying amount of P570,000
on December 31, 2017. The bonds, which had a face value of P600,000, were issued at a
discount to yield 12%. The amortization of the bond discount was recorded under the
effective-interest method. Interest was paid on January 1 and July 1 of each year. On
July 2, 2018, several years before their maturity, Lucille retired the bonds at 102. The
interest payment on July 1, 2018 was made as scheduled. What is the loss that Lucille
should record on the early retirement of the bonds on July 2, 2018?
a. P12,000 c. P33,600
b. P37,800 d. P42,000
50. SWQ Company issued P500,000 convertible bonds. In part, the journal entry to
record the bond issue included a credit to the conversion feature of P21,450 and a debit
to discount on bonds for P19,560. What was the amount of cash received for the for the
convertible bond issue?
a. P458,990 c. P501,890
b. P480,440 d. P521,450
51. Joel Corporation is the defendant in a breach of patent lawsuit. Its lawyers believe
there is a 70 percent chance that the entity will successfully defend the case. However,
if the court rules in favor of the claimant, the lawyers believe that there is a 60 percent
chance that the entity will be required to pay damages of P2 million (the amount sought
by the claimant) and a 40 percent chance that the entity will be required to pay
damages of P1 million (the amount that was recently awarded by the same judge in a
similar case). Other amounts of damages are unlikely.
The court is expected to rule in December of the following year. There is no indication
that the claimant will settle out of court.
A 7 percent risk adjustment factor to the cash flows is considered appropriate to reflect
the uncertainties in the cash flow estimates. An Appropriate discount rate is 5%.
How much should the entity recognize as provision for damages at the end of the
current year?
a. P1,500,000 c. P1,141,356
b. P1,712,000 d. Nil
52. Garner Food Company distributes to consumers coupons which may be presented
(on or before a stated expiration date) to grocers for discounts on certain products of
Garner. The grocers are reimbursed when they send the coupons to Garner. In Garner’s
experience, 50% of such coupons are redeemed and generally one month elapses
between the date a grocer receives a coupon from a consumer and the date Garner
receives it. During 2018 Garner issued two separate series of coupons as follows:
Consumer Amount
Issued On Total Value Expiration Date Disbursed as
of 12/31/18
1/1/18 P500,000 6/30/18 P236,000
7/1/18 720,000 12/31/18 300,00
The only journal entries to date recorded debits to coupon expenses and credits to cash
of P536,000. The December 31, 2018 statement of financial position should include a
liability for unredeemed coupons of
a. P 0 c. P74,000
b. P60,000 d. P360,000
| PracticalAccounting1
53. Esem Corporation, a grocery retailer, operates a customer loyalty program. The
entity grants program members loyalty points when they spend a specified amount
on
18
groceries. Program members can redeem the points for further grocery items. The
points have no expiry date.
During 2018, the entity granted 10,000 points. Management expects that 80% of these
points will be redeemed. The fair value of each loyalty point is estimated at P100. Sales
during 2018 amounted to P8,000,000 including loyalty points. On December 31, 2018,
4,000 points have been redeemed in exchange for groceries.
The amount to be recognized as revenue from the customer loyalty program for the
year 2018 is
a. P1,000,000 c. P400,000
b. P500,000 d. Nil
54. An entity, a retailer of bags and shoes, participates in a customer loyalty program
operated by an airline. The entity grants program members one air travel point for
every P1,000 spent on goods. Program members can redeem the points for travel with
the airline subject to availability.
The entity pays the airline P90 for each point. During 2018, the entity sold goods for
P5,000,000 and granted 5,000 points. The fair value of the point is P100.
Which statement is correct?

a. If the entity collected to consideration to the points on its own account, the entity
should recognize P500,000 as revenue from the customer loyalty program for the
year 2018.
b. If the entity collected the consideration to the points on behalf of the airline, the
entity should recognize P50,000 as revenue from the customer loyalty program
for the year 2018.
c. Both a and b.
d. Neither a nor b.
55. Julia Corp.’s equity as of December 31, 2017 is P534,000. The Julia’s shares have a
par value of P10 per share. The following transactions occurred in 2017: February 15:
Dividends of P10,000 are paid; March 14: 10,000 shares are sold for P14 per share; June
6: 2,000 shares are repurchased for P16 per share; October 8: 2,000 shares previously
repurchased are resold for P18 per share. Profit for 2018 is P103,000. On December 31,
2018, Julia should report equity of
a. P771,000 c. P664,000
b. P781,000 d. P767,000
19
56. The December 31, 2018 balance sheet of Maria Corp. showed shareholders’ equity
of P448,700. Transactions during 2018 which affected the shareholders’ equity
were: (1) and adjustment to Retained Earnings for an overstatement of depreciation
in 2017 P10,000; (2) gain on the sale of treasury shares, P9,000; (3) declared
dividends of P60,000 of which P40,000 were paid during the year; and (4) net
income after tax of P75,500. The share capital balance of P300,000 remain
unchanged during the year.
The retained earnings balance on January 1 ,2018 was

a. P134,200 c. P123,200
b. P132,300 d. P114,200
On January 1, 2018, an entity purchased a building for the cash price of P8,000,000. The
seller can choose how the purchase is to be settled.
The choices are 50,000 shares with par value of P100 in one year’s time, or a cash
payment equal to the market value of 40,000 shares on December 31, 2018.
At grant date on January 1, 2018, the market price of each share is P120 and on the date
of settlement on December 31, 2018, the market price of each share is P150.
QUESTIONS:
57. What is the initial measurement of the building?

a. P8,000,000 c. P7,000,000
b. P6,000,000 d. P5,000,000
58. What is the equity component arising from the purchase of the building with share
and cash alternative?
a. P3,000,000 c. P2,000,000
b. P3,200,000 d. P1,000,000
59. What is the interest expense to be recognized on December 31, 2018 if the seller
has chosen the cash alternative?
a. P1,200,000 c. P1,000,000
b. P2,700,000 d. P 0
60. What is the share premium on December 31, 2018 if the seller has chosen the share
alternative?
20
a. P3,000,000 c. P1,000,000
b. P1,500,000 d. P2,500,000
61. An asset is being constructed for an entity’s own use. The asset has been financed
with a specific new borrowing. The interest cost incurred during the construction
period is
a. A part of the historical cost of acquiring the asset to be written off over the
estimated useful life of the asset
b. A prepaid asset to be written off over the estimated useful life of the asset
c. A part of the cost of the asset to be written off over the term of the borrowing
d. Interest expense in the construction period
62. Diana Company borrowed P400,000 on a 10 percent note payable to finance a new
warehouse Diana is constructing for its own use. The only other debt on Diana’s books is
a P600,000. 12 percent mortgage payable on an office building. At the end of the
current year, average accumulated expenditures on the new warehouse totaled
P475,000. Diana should capitalize interest for the current year in the amount of
a.P52,250 c. P47,500
b. P49,000 d. P40,000
63. On April 1, year 1, Hall Fitness Center leased its gym to Dunn Fitness Center under a
four-year operating lease. Hall normally charges 36,000 per month to lease its gym, but
as an incentive, Hall gave Dunn half of the first year’s rent, and one quarter of the
second year’s rent. Dunn’s rental payments were as follows:
• Year 1 (12 X P3,000) = P36,000
• Year 2 (12 X P4,500) = P54,000
• Year 3 (12 X P6,000) = P72,000
• Year 4 (12 X P6,000) = P72,000
Dunn’s rent payments were due on the first day of the month, beginning on April 1, year
What amount should Dunn report as rent expense in its monthly income statement for
April year 3?
a. P3,000 c. P4,875
b. P4,500 d. P6,000
An entity is a dealer in equipment and uses leases to facilitate the sale of its product.
The entity expects a 12% return. At the end of the lease term, the equipment will revert
to the lessor.
On January 1, 2018, equipment is leased to a lessee with the following information:
Cost of equipment to the entity P3,500,000

Fair value of equipment 5,500,000
Residual value – unguaranteed 600,000
Initial direct cost 200,000
Annual rental payable in advance 900,000
Useful life and lease term 8 years
Implicit interest rate 12%
PV of 1 at 12% for 8 periods 0.40
PV of an ordinary annuity of 1 at
12% for 8 periods 4.97
PV of an annuity due of 1 at 12%
for 8 periods 5.56
First lease payment January 1, 2018
QUESTIONS:
64. What is the gross investment in the lease?

a. P7,800,000 c. P6,600,000
b. P7,200,000 d. P6,900,000
65. What is the net investment in the lease?

a. P5,004,000 c. P5,500,000
b. P5,244,000 d. P5,740,000
66. What is the total financial revenue?

a. P2,196,000 c. P2,556,000
b. P2,796,000 d. P1,956,000
67. What amount should be recognized as interest income for 2018?

a. P600,480 c. P536,760
b. P492,480 d. P521,280
22
68. What amount of cost of goods sold should be recognized in recording the lease?
a. P3,260,000 c. P3,740,000
b. P3,500,000 d. P3,460,000
69. Balances of the deferred tax accounts of Taxflow Ltd were as follows:
12/31/17 12/31/
18
Deferred tax liability P3,200 P2,000
Deferred tax asset 2,650 1,900
Income tax expense for the year ended December 31, 2018 was P1,550. The current tax
payable at December 31, 2018 is P200 less than the current tax payable at the
preceding year-end. What was the amount of income tax paid during the year ended
December 31, 2018?
a. P1,100 c. P2,000
b. P1,500 d. P2,200
70. Jessie Co. sponsors a defined benefit pension plan. For the current year ended
December 31, the following information relevant to the plan has been accumulated:
Defined benefit obligation, 1/1 P10,000,0

00
Fair Value of plan assets, 1/1 9,000,0
00
Current service cost 3,000,0
00
Gain on settlement 500,0
00
Actual return on plan assets 630,0
Increase in defined benefit obligation due to 00
changes in actuarial assumptions 800,0
00
Market yield on high quality corporate bonds 6%
Yield on bonds issued by the entity 8%
Expected return on plan assets 9%
What amount should Jessie contribute in order to report an accrued pension liability of
P500,000 in its December 31, statement of financial position?
a. P2,060,000 c. P3,060,000
b. P2,770,000 d. P3,770,000
71. In general , an entity preparing interim financial statements should

a. Use the same accounting principles followed in preparing the latest annual
financial statements.
b. Defer recognition of seasonal revenue.
c. Allocate revenue and expenses evenly over the quarters regardless of when they
occurred.
d. Disregard permanent decreases in the market value of inventory
72. Which of the following statements is true regarding interim reporting for companies
that prepare their financial statements in accordance with PAS 34?
a. The discrete view is required for interim financial statements.
b. Interim reports are required on a quarterly basis.
c. Interim reports require the preparation of only a statement of earnings and a
statement of financial position.
d. Interim reports are not required for PFRS reporting.
73. Cyrene Company, a calendar-year corporation, has the following income before
income tax provision and estimated effective annual income tax rates for the first
three quarters of the current year:
Income before Estimated

income tax effective annual
Quarter provision tax rate at end
of quarter
First P60,000 40%
Second 70,000 40%
Third 40,000 45%

Cyrene’s income tax provision in its interim income statement for the third quarter
should be
a. P18,000 c. P25,500
b. P24,500 d. P76,500
74. Lorraine Co. owns a royalty interest in an oil well. The contract stipulates that
Lorraine will receive royalty payments semiannually on January 31 and July 31. The
January 31, payments will be for 20% of the oil sold to jobbers between the previous
June 1 and November 31, and the July 31, payment will be for oil sold between the
previous June 1 and November 30, and the July 31, payment will be for oil sold between
the previous December 1 and May 31. Royalty receipts for 2019 amounted to P80,000
and P100,000 on January 31 and July 31 respectively. On December 31 ,2018 accrued
royalty income receivable amounted to P15,000. Production reports show the following
oil sales:
June 1, 2018 - November 30, 2018 P400,0

00
December 1, 2018 - May 31, 2019 500,00
0
June 1, 2019 – November 30, 2019 425,00
0
Dec. 1, 2019 – Dec. 31, 2019 70,00
0
What amount should Lorraine report as royalty income for 2019?

a. P179,000 c. P184,000
b. P180,000 d. P194,000
75. The closing inventory of Alucard corp. amounted to P 2,580,000. the following items
were not included in the inventory amount:
a. Purchased goods, in transit shipped FOB destination invoice price P 30,000
which included freight charges of P 2,000.
b. Goods held consignment, cost P 50,000.
c. Goods sold to a costumer, in transit, shipped FOB Destination, cost P
20,000.Shipping cost to customer, P 2,000.
d. Purchased goods in transit, terms FOB seller, invoice price P 38,000 Freight
cost, P 3,000.
e. Goods out on consignment cost P 43,000.
f. Goods sold to a customer, in transit, shipped FOB shipping point cost P
36,000.
The adjusted cost of Alucard corp.’s inventory at December 31 should be

a. P 2,686,000 c. P 2,681,000
b. P 2,684,000 d. P 2,570,000
Use the following information for the next two questions:

Leinard Company’s June 30, 2019 post-closing trial balance:
Account Title Debits Credits

Cash P850,000
Short-term investment s 630,000
Accounts receivable 2,800,000
Prepaid expenses 320,000
Land 750,000
Buildings 3,200,000
Accumulated dep. – buildings P1,600,000
Equipment 2,650,000
Accumulated dep. - equipment 1,200,000
Accounts payable 1,730,000
Accrued expenses 450,000
Notes payable 1,000,000
Mortgage payable 2,500,000
Ordinary shares 1,000,000
Retained earnings 1,720,000
Total P11,200,000 P11,200,000
Additional Information:
1. The short-term investments accounts includes P180,000 in treasury bills

purchased in May. The bills mature in July.
2. The accounts receivable account consist of the following:
a. Amounts owed by customers P2,250,000
b. Allowance for uncollectible accounts
Trade customers (150,000)
c. Nontrade note receivable
(due in three years) 650,000
d. Interest receivable on note
(due in four months) 50,000
Total P2,800,000
3. The notes payable accounts consists of two notes of P500,000 each. One note is
due on September 30, 2019, and the other is due on November 30, 2020.
4. The mortgage payable is payable in semiannual installment of P50,000 each plus
interest. The next payment is due on October 31, 2019. Interest has been
properly accrued and is included in accrued expenses.
5. Five hundred thousand shares is no par ordinary shares are authorized, of which
200,000 shares have been issued and are outstanding.
6. The land account includes P500,000 representing the cost of the land on which
the company’s office building resides. The remaining P250,000 is the cost of the
land the company is holding for investment purposes.
QUESTIONS:
76. The total current assets of Leinard Coompany as of June 30, 2019 is
a. P3,950,000 c. P3,590,000
b. P3,630,000 d. P3,900,000
77. The total current liabilities of Leinard Company as of June 30, 2019 is
a. P2,880,000 c. P2,780,000
b. P2,680,000 d. P2,280,000
The following date were taken from the records of Jess Company for the year 2019:
Sales P5,590,000 Sales returns 55,000
Inventories, January 1:
Raw materials 131,000
Work in process 238,350
Finished goods 442,000
Inventories, December 31:
Raw materials 145,500
Work in process 175,720
Finished goods 412,000
Direct labor 1,050,000
Purchases 2, 051,500
Purchase returns 17, 150
Purchase discounts 12,550
Freight-in 8,250
Freight-out 200,000
Allowance for doubtful accounts 25,000
Sales salaries 445,000
Office supplies 155,000
Depreciation – factory building 44,000
Depreciation – office equipment 44,000
Depreciation – store equipment 77,000
Depreciation – machinery and equip. 25,500
Amortization – patents 33,000
Bad debts expense 20,000
Factory supplies expense 75,550
Accrued manufacturing expenses payable 34,500
Indirect labor 35,300
Interest income 116,240
Interest receivable 34,250
Factory light and power 65,000
Property taxes and insurance
-factory building 13,200
Prepaid insurance expense 18,750
Royalties on production 13,200
Supervision expense 65,000
Tools expense 10,500
Miscellaneous factory expense 50,150
Dividends paid 70,000
QUESTIONS:
78. The cost of goods sold is

a. P3,588,880 c. P3,523,880
b. P3,542,680 d. P3,513,380
79. The income before taxes is

a. P1,005,120 c. P1,114,860
b. P1.051,360 d. P1,121,360
80. Inventory record for Natalia’s chemicals revealed the following:

March 1, 2019, inventory: 1,000 gallons @ P 7.20= P 7,200
Purchases Sales
Mar. 10 600 gals.@ P 7.25 Mar. 5 400 gals.
16 800 gals. @ 7.30 14 700 gals.
23 600 gals. @ 7.35 20 500 gals.
26 700 gals
Ending inventory assuming FIFO in a perpetual inventory system would be:
a. P 4,960 c. P5,080
b. P 5,060 d. P5,140
81. Joyce Company has provided the following 2019 account balances:
Jan. 1 Dec. 31
Accounts receivable P1,500,000 P2,800,000
400,000
Prepaid insurance 600,000
450,000
Accounts payable 900,000
1,200,000
Joyce’s profit for 2019 was P8,000,000. The net cash provided by operating activities
is
a. P9,550,000 c. P7,350,000
b. P8,650,000 d. P7,150,000
82. The following data have been accumulated for Freya Mfg. Inc.,
Raw materials- Beginning
Inventory (Jan. 1, 2019) 10,000 units @ P6.00
Purchases 8,500 units @ P7.00
11,000 units @ P7.50
Transferred 21,500 units of raw materials to work in process:

Work in process- beginning 5,600 units
Inventory (Jan. 1, 2019) @ P 13.50
Direct Labor P 250,000
Manufacturing Overhead P 325,000
Work in Process- Ending 4,200 units
Inventory (Mar. 31, 2019) @ P 13.75
If Freya Uses the FIFO method for valuing raw materials inventories, compute
for the cost of goods manufactured for, the quarter ended March 31, 2019.
a. P 699,150 c. P 734,850
b. P 717,000 d. P 746,850
83. At December 31, 2019, Jimwell Co. had the following balances in the accounts it
maintains at First State Bank:
Checking account #101 P175,000
Checking account #201 (10,00
0)
Monet market account 25,0
00
90-day certificate of deposit, due 2/28/20 50,0
00
180-day certificate of deposit, due 3/15/20 80,0
00
In its December 31, 2019 statement of financial position, what amount should
Jimwell report as cash and cash equivalent?
a. P190,000 c. P240,000
b. P200,000 d. P320,000
84. The closing inventory of Tigreal Corp. amounted to P 116,400 excluding the
following:
• 400 items which had cost P 4 each. All were sold after the reporting
period for P 3 each, with selling expenses P 200 for the batch.
• 200 different items which had cost P 30 each. These items were found
to be defected at the end of the reporting period. Rectification work
after the statement of financial position date amounted to P 1,200,
after which they were sold for P 35 each, with selling expenses totaling
P 300.
Which of the following total figures should appear in the statement of financial
position of Tigreal Corp. for inventory?
a. P 122,900 c. P 123,400
b. P 123,100 d. P 123,000
85. On November 20, 2019, Hylos Corporation entered into a non-cancelable contract
to purchase P100,000 of inventory on Jan 15, 2020. The value of the inventory on
December 31, 2019 Hylos’ year end, was P 90,000. What amount should be reported on
the statement of financial position at December 31 related to this purchase
commitment?
a. P 10,000 estimated liability on purchase commitment

b. P 100,000 accounts payable
c. P 90,000 Purchase commitment liability
d. P 90,000 inventory
86. The cash account shows a balance of P38,000 before reconciliation. The bank
statement does not include a deposit of P2,300 made on the last day of the month. The
bank statement shows a collection by the bank of P940 and a customer’s check for P220
was returned because it was NSF. A customer’s check for P450 was recorded on the
books as P540, and a check written for P79 was recorded as P97. The correct balance in
the cash account was
a. P38,612 c. P38,648
b. P38,828 d. P40,948
87. A physical inventory taken on December 31, 2019 resulted in an ending inventory of
P 1,440,000. Sun Company suspects some inventory may have been taken by
employees. To estimate the cost of missing inventory the following were gathered :
Inventory, Dec, 31, 2018 P 1,280,000
Purchased during 2019 5,640,000
Cash sales during 2019 1,400,000
Shipment received on December 26, 2019
included in physical inventory, but not
recorded as purchases 40,000
Deposits made with suppliers, entered as
purchases. Goods were not received in
2019 80,000
Collections on accounts receivable, 2019 7,200,000
Accounts receivable, Jan.1, 2019 1,000,000
Accounts receivable, Dec. 31, 2019 1,200,000
Gross profit percentage on sales 40%
At December 31, 2019 what is the estimated cost of missing inventory?
a. P200,000 c. P240,000
b. P160,000 d. P320,000
88. The Geraldine Manufacturing Company sells its products, offering 30 days credit to
its customers. Uncollectible amounts are estimated by accruing monthly charge to bad
debt expense equal to 2% of credit sales. at the end of the year, the allowance for
uncollectible accounts is adjusted based on aging of accounts receivable. The company
started the current year with the following balances in its accounts:
Accounts receivable P305,000

During the year, sales on credit were P1,300,000, cash collections from
customers were P1,250,000, and actual write-offs of accounts were P25,000. An
aging of accounts receivable at the end of the year indicates a required
allowance of P30,000.
Based on the foregoing, which statement is true?
a. The balance of accounts receivable at the end of the year is P300,000.
b. The doubtful accounts expense for the year is P26,000.
c. The adjusting entry for doubtful accounts at year-end includes a credit to
allowance for doubtful accounts of P3,500.
d. None of the above.
89. The physical inventory of alpha company as of Dec 26, 2019 totaled P1, 965,000. In
trying to establish the December 31 inventory, the accountant noted the following
transactions from December 27 to December 31, 2019.
Sales (20% markup on cost) P 600,000

Credit memos issued:
For goods returned on:
December 15 27,000
December 20 35,000
December 29 36,000
For goods delivered to customers not
In accordance with specifications 9,500
Credit memos received:
For goods returned on:
December 10 17,000
December 26 23,000
December 28 8,000
Purchases:
Placed in stock 120,000
In transit, FOB shipping point 50,000
In transit, FOB Destination 33,000
The inventory as of December 31, 2019 is

a. P1,675,800 c. P1,663,000
b. P1,657,000 d. P1,668,667
90. The records of Akai Department Store report the following data for the month of
January:
Beginning inventory at cost P 440,000
Beginning inventory at sales price 800,000
Purchases at cost 4,500,000
Initial markup on purchases 2,900,000
Purchase returns at cost 240,000
Purchase returns at sales price 350,000
Freight on purchases 100,000
Additional mark up 250,000
Mark up cancellations 100,000
Mark down 600,000
Mark down cancellations 100,000
Sales 5,300,000
Sales allowances 300,000
Sales return 400,000
Employee discounts 200,000
Theft and other losses 100,000
Using the average retail inventory method, Akai ending in inventory at cost is
a. P1,024,000 c. P1,536,000
b. P1,472,000 d. P1,664,000
91. On July 1, 2019, Daniboy Company finished consultation services and accepted in
exchange a promissory note with a face value of P300,000, a due date of June 30,
2022, and stated rate of 5%, with interest receivable at the end of each year. the fair
value of the services is not readily determinable and the note is not readily
marketable. Under the circumstances, the note is considered to have an appropriate
imputed rate of
interest of 10%. The total income to be recognized in Daniboy’s 2019 profit or loss is
a. P307,500 c. P275, 829
b. P288,963 d. P262,694
Zilong Corp. is engage in agricultural activity. Its trial balance at 31 December

2019 presents the following assets related to its farmland:
• Two tractors (P500,000 each)
• Four computers (25,000 each)
• Computer software (P50,000)
• Fruit-bearing (estimated value, P20 millions of which P3 Million is
attributed to the fruits attached to the trees).
• Harvested fruits (estimated value, P2 million).
• Trees grown for use as lumber (estimated value, P10 million).
• Tress that are cultivated both for their fruit and their lumber (estimated
value , P 8 million)
• Maize and wheat (estimated value, P4 million)
92. How much should be accounted for as property, plant and equipment assets?
a. P25 million c. P7 million
b. P17 million d. P3 million
93. How much should be accounted for as property, plant, and equipment?
a. P17.525 million c. P26.100 million
b. P18.100 million d. P30.100 million
94. On December 28, 2019, Eric Company commits itself to purchase of financial asset
to be classified as held for trading for P500,000, its fair value on commitment (trade)
date. This security has a fair value of P505,000 and P510,000 on December 31, 2019
(Eric financial year-end), and January 5, 2020 (settlement date), respectively.
If Eric applies the settlement date accounting method to account for regularway
purchases of its securities, how much should be recognized as fair value
adjustment gain in its 2019 profit of loss?
a. P15,000 c. P5,0
b. P10,000 00
d. Nil
Bruno Manufacturing started operations on 1 September 2014. The entity’s accounts at

31 December 2017 included the following balances:
Machinery
P91,000
Accumulated depreciation-machinery 48,200
Vehicles (at cost; purchased 21 Nov. 2016) 46,800
Accumulated depreciation-vehicles 19,656
Land (at cost; purchased 25 October 2014) 81,000
Buildings (at cost; purchased 25 Oct. 2014)
185,720
Accumulated depreciation-building 28,614
Details of machines owned at 31 December 2017 are as follows:
Machines Purchased Date Cost Useful life Residual value

1 7 October 2014 P43,000 5 years P2,5
00
2 4 February 2015 P48,000 6 years P3,0
00
Additional information:
• The entity calculates depreciation to the nearest month and balances the
records at month-end. Recorded amounts are rounded to the nearest peso, and
the reporting date is 31 December.
• The entity uses straight-line depreciation for all depreciable assets except
vehicles, which are depreciated on the diminishing balance at 40% p.a.
• The vehicles account balance reflects the total paid for two identical delivery, of
each cost P23,400.
• On acquiring the land and building, the entity estimated the building’s useful life
and residual value at 20 years and P5,000 respectively.
The following transaction occurred from 1 January 2018:
2018
03 January Bought a new machine (machine 3) for a cash price of P57,000. Freight
charges of P442 and installation of P1,758 were paid in cash. The useful
life and residual value were estimated at five years and P4,000
respectively.
22 June Bought a second-hand vehicle for P15,200 cash. Repainting costs of
P655 and four new tires costing P345 were paid for in cash.
28 August Exchanged machine 1 for furniture that had a fair value of P12,500 at
the date of exchange. The fair value of machine 1 at the date of
exchange was P11,500. The office furniture originally cost P36,000 and,
to the date of exchange, had been depreciated by P24,100 in the
previous owner’s books. The entity estimated the office furniture’s
useful and residual value at eight years and P540 respectively.
31 Dec. Recorded depreciation.
2019
30 April Paid for repairs and maintenance on the machinery at a cash cost of
P928.
25 May Sold one of the vehicles bought on 21 November 2016 for P6,600 cash.
26 June Installed a fence around the property at a cash cost of P5,500. The fence has
an estimated useful life of 10 years and zero residual value.
31 Dec. Recorded depreciation.
QUESTIONS:
95. The gain on exchange of machine 1 on August 28,2018 is

a. P1,225 c.P225
b. P900 d.P 0
96. The total depreciation expense in 2018 is

a. P42,131 c.
P47,572
b. P47,531 d.
P47,400
97. The loss on sale of vehicle on May 25, 2019 is
a. P186 c. P457
b. P1,543 d. P 0
98. The total depreciation expense in 2019 is

a. P37,662 c.
P38,744
b. P39,144 d.
P39,019
99. On January 1, 2017, Jomare Companny purchased equality investment at a cost of
P2,000,000. The investment is designated as FA@FVTOCI. The following table sets
out the changes in the fair value of the investment and the nature of the change in
each year:
Year Fair value change Nature of change

2017 P(40,000) No objective
evidence of
impairment 2018 ( 80,000 ) Objective
evidence of
impairment
2019 150,000 Objective evidence of
reversal
of impairment
How much should be recognized in profit or loss for 2017, 2018 And 2019,
respectively as a result of the fair value changes?
a. P 0; P 0; 0
b. P 0; P(120,000); P120,000
c. P 0; P 120,000); P120,000
d. P o; P(80,000 ); P 80,000
100. As of January 1, 2019, Saber Corp. decided to change the method of computing
depreciation on its sole piece of equipment from the sum-of the-years’ digits
method to the straight-line method. The equipment, acquired in January 2016 for
P520,000, had a estimated life of five years and a salvage value of P20,000.
The amount of the depreciation expense for 2019 is

a. P100,000 c. P50,000
b. P60,000 d. P42,000
101. During 2019, Jacob Co. pays an insurance premium of P81,800 on a P900,000 life
insurance policy covering the president. The cash surrender value of the policy will
increase from P165,000 to P175,200 during 2019. Dividends received from the
insurance company during 2019 total P6,300. The president died half-way through
2019. The policy indicates that the cash surrender value is P170,100 at that date
and 50% of the premium is refunded. The gain on life insurance settlement is
a. P714,000 c. P723,600
b. P729,900 d. P736,200
102. On 1 January 2014, Miya Co. purchased a property for P400,000. The property had
a useful life of 20 years and was depreciated on a straight-line basis. On 1January
2019, the property was revalued to P420,000. The company’s policy is to make the
allowed transfer of excess depreciation between the revaluation surplus and
retained earnings.
The balance of revaluation surplus at 31 December 2019 is

a. P18,667 c. P112,000
b. P19,000 d. P114,000
103. Nyll Inc. borrows P10 million from Bank A at a fixed rate of 7%, payable quarterly in
arrears. The prime rate is 4.5% when the loan is taken out. Nyll’s management
believes that interest rates will decline in the near future. Accordingly, it enters
into a swap agreement with Bank B. under the agreement, Nyll is committed to pay
Bank B a sum equal to prime plus 2.5% on a notional principal of P10 million and
Bank B is committed to pay to Nyll a sum equal to 7% on a notional principal of P10
million, with the amounts settled on a net basis at the end of each quarter. If the
prime rate drops to 4%, what are Nyll’s cash flows for the next quarter?
a. P162,500 inflow from Bank A
b. P162,500 outflow to Bank B
c. P175,000 outflow to Bank A and P12,500 inflow from Bank B
d. P175,000 outflow to bank A and P12,500 outflow to Bank B
104. Aldous Corporation’s properties included the following items:
• Land held as potential plant site, P5,000,000.
• A vacant building to be leased out under an operating lease,
P20,000,000.
• Property held for sale in the ordinary course of its business,
P30,000,000.
• Property acquired exclusively with a view to subsequent disposal in the
near future, P4,000,000.
• Property occupied by employees paying market rent, P3,000,000 
Property occupied by employees below market rent, P1,000,000 
Property held for administrative purposes, P10,000,000.
• A hotel owned and managed, P50,000,000.
• A building being leased out to a subsidiary, P8,000,000.
• A building, which cannot be sold or leased out separately, used in the
production of goods and around 2% of the area being leased out to
canteen operators, P2,000,000.
• Property that is being constructed for use as an investment property,
P7,000,000.
How much should be reported as investment properties in Aldous Corporation’s

separate financial statements?
a. P43,000,000 c. P38, 000,000
b. P40,000,000 d. P35,000,000
105. Vexana, Inc., a real estate company, has a property included in its inventory with a
cost of P10,000,000 and a net realizable value of P8,000,000 on December 31,
2018. Because of the decline in the real estate industry, the company decided to
lease out the property to a tenant under an operating lease in 2019 when the fair
value of the property was P7,000,000. If the company uses the fair value model to
measure its investment properties, how much should be recognized in 2019 profit
or loss as a result of the transfer from inventory to investment property?
a. P3,000,000 c. P2,000,000
b. P1,000,000 d. P0
Use the following information for the five questions.

The following information relate to an entity’s non-financial assets as of December
2019:
Inventory
The following figures relate to inventory of materials:
Item X Item Y
Cost P200,000 P400,000
Replacement cost 180,000 370,000
Estimated costs to convert materials into
finished goods 100,000 200,000
Estimated selling price of finished goods 320,000 610,000
Estimated costs to sell 10,000 15,000
Property, plant and equipment

The entity purchased a machine for P100,000 on January 1, 2016, with the following
additional items paid or incurred
Separation pay for laborer laid off upon

acquisition of new machine P1,2
00
Loss on sale of machine replaced 1,30
0
Transportation in 1,00
0
Installation cost 4,000
No changes were made in the asset’s estimated useful life.
QUESTUIONS:
106. The entity should recognize loss on write-down of inventory of materials of

a. P50,000 c. P5,000
b. P30,000 d. Nil
107. The depreciation charge on the machine for 2019 is

a. P12,150 c. P11,900
b. P12,000 d. P11,360
108. The net amount to be recognized in 2019 or loss in relation to the building is
a. P150,000 c. P(100,000)
b. P25,000 d. P(50,000)
109. The total expense to be recognized in 2019 profit or loss in relation to the patent is
a. P285,000 c. P260,000
b. P270,000 d. P235,000
110. Karina Company purchased a patent on January 1,2016, for P3,570,000. The
patent was being amortized over its remaining legal life 15 years. During 2019
Karina determined that the economic benefits of the patent would not last longer
than ten tears from the date of acquisition. What amount should be reported in
the statement of the financial position as patent, net of accumulated amortization,
at December 31, 2019?
a. P2,618,000 c. P2,448,000
b. P2,520,00 d. P2,142,000
111. The Fatima Corporation’s inventory at December 31, 2019, was P325,000 based on
a physical count priced at cost. And before any necessary adjustment for the
following:
• Merchandise costing P30,000, shipped F.o.b. shipping point from a vendor
on December 30,2019, was received on January 5, 2019.
• Merchandise costing P22,000, shipped F.o.b. destination from a vendor on
December 28, 2019, was received on January 3, 2020.
• Merchandise costing P38,000 was shipped to a customer F.o.b. destination
on December 28, arrived at the customer’s location on January 6, 2020.
• Merchandise costing P12,000 was being held on consignment by Club
Company.
What amount should Fatima Corporation report as inventory in its December

31, 2019, statement of financial position?
a. P367,000 c. P405,000
b. P427,000 d. P325,000
112. The following data were taken from the books of Kanna CO. for the current year:
From cash records:
Cash purchases P30,000
Payments to trade creditors for credit
purchases 302,600
From balance sheets

Accounts payable January 1 37,500
December 31 43,300 Merchandise inventory, January 1
12,800
From other records:
Purchase returns and allowances 7,500
Cost of goods for the year 335,000
The merchandise inventory at the end of the year is

a. P16,200 c. P12,800
b. P13,800 d. P23,700
113. Aljane Company uses the average cost retail method to estimate its inventory. Data
relating to the inventory at December 31, 2019 are:
Cost Retail
Inventory, January 1 P2,000,000 P3,000,00
00
Purchases 10,600,000 14,000,0
00
Net markups 1,600,0
00
Net markdown 600,0
00
Sales 12,000,0
00
Estimated
normal 400,0
shoplifting 00
Losses
Estimated
normal
shrinkage is
5% of sales
Aljane’s cost of goods sold for the year ended December 31, 2019 is
a. P8,680,000 c. P7,700,000
b. P9,100,000 d. P8,400,000
114. Franco Co. incurred the following costs during 2019:
Modification to the formulation of a chemical product P360,000
Trouble –shooting in connection with breakdowns during

Commercial production P450,000
Costs of testing prototype and design modifications P600,000
Seasonal or other periodic design changes to existing products P555,000
Laboratory research aimed at discovery of new technology P675,000
In its income statement for the year ended December 31, 2019, Franco should
report research and development expense of
a. P2,085,000 c. P1,275,000
b. P1,635,000 d. P1,035,000 c.
115. Marianne Farming Corp. has a flock of sheep, which were shorn shortly before
the year end. On November 30, 2018, the time of shearing, the value of the wool less
costs to sell was determined to be P15,000, and this value had risen to P16,500 by
December 31, 2018 (reporting date). The company estimates that it would incur P500 to
transport the wool to the nearest market.
On February 14, 2019, the wool was subsequently sold for P17,000 (after
deducting costs to sell). How much is the net profit recognized in 2019?
a. P2,500 c. P1,500
b. P2,000 d. P 500
116. Hayabusa, Incorporated embarked on new venture in Northern Luzon in 2019. It

expects to glean 2,000,000 ounces of a precious ore from its holdings there, over
several years. Relevant data follow:
Cost of the Mineral Rights P500,000

Exploration cost, 2019 (1/3 successful) 1,500,000
Extraction cost, 2019 2,000,000
Ore extracted 2019 500,000 oz. Ore sold, 2019 300,000 oz.
What the depletion for 2019, using the successful efforts method of accounting
for exploration costs?
a. P350,000 c P250,000
b. P300,000 d. P150,000
117. Jayvison Company takes a full year’s depreciation expense in the year of an
asset’s acquisition, and no depreciation expense in the year of disposition. Data relating
to one of Jayvoson’s depreciable assets at December 31, 2018, are so follows:
Acquisition year 2016

Cost P110,000
Residual value 20,000
Accumulated depreciation 72,000 Estimated
useful life 5 years
Using the same depreciation method as used in 2016, 2017, and 2018, how much
depreciation expense should Jayvison record in 2019 for this asset?
a. P12,000 c. P22,000
b. P18,000 d. P24,000
118. On January 2, 2018, Ruby Corporation purchased land with valuable natural ore
deposits for P10 million. The estimated residual value of the land was P2 million. At the
time of purchased a geological survey estimated 2 million tons of removable ore were
under the ground. Early in 2018, roads where constructed on the land to aid in the
extraction and transportation of the mined ore at a cost of P750,000. In 2018, 500,000
tons were mine. In 2019, Ruby fired its mining engineering and hired a new expert. And
new survey made at the end of 2019 estimated 3 million tons of ore were available for
mining. In 2019, 150,000 tons were mine. All the ore mined was sold. Compute the
amount of depletion for 2019.
a. P372,000 c. P426,000
b. P433,500 d. P406,500
119. On January 1, 2016, Claudine Corp. acquired a gold mine property for
P10,000,000. In 2016 and 2017, Claudine spent P4,000,000 on exploration and
development. It expects to be able to mine 35,000 ounces of gold over the 10-year life
of the mine. Claudine uses the output method to account for its gold costs and expects
to be able to sell the property to a real estate developer for P2,000,000 at the end of
the 10 years. It mined 3,100 ounces in 2018 and 2,800 in 2019. How much depletion
would be recorded related to the gold in 2019?
a. P960,000 c. P1,200,000
b. P1,120,000 d. P1,400,000
120. Clint Company acquired a machine for P6,400,000 on August 31,2016. The
machine has a 5-year life, a P1,000,000 salvage value, and was depreciated using the
straight line method. On May 31,2019, a test for recoverability reveals that the
expected net future
discounted cash inflows related to the continued use and eventual disposal of the
machine total P2,500,000. The machine’s fair value less costs of disposal on May 31,
2019 is P2,700,000 with no residual value. Assuming a loss on impairment is recognized
on May 31, 2019, what is Tuxedo’s depreciation for June 2019?
a. P100,000 c. P90,000
b. P92,000 d. P81,800
121. At the current year-end, Unice Co has undertaken impairment tests on two
machines. The following information is relevant:
Machine 1 Machin
e2
Cost P450,000 P250,0
00
Useful life 10 years 15
years
Age 4 years 3
years
Fair value P300,000 P230,0
00
Costs of disposal P15,000 P35,00
0
Value in use P260,000 P198,0
00
At what carrying amount should machinery be recognized in the accounts of Unice Co?
a. P498,000 c. P468,000
b. P470,000 d. P455,000
122. Bane Corporation acquired an asset on 1July 2016 for P250,000. Management
estimates that the useful life is 5 years. At 1 January 2017, impairment indicators are
present and management decides to write-down the asset to an estimated recoverable
amount of P75,000. Depreciation will be taken over 3 years from that point. On 1
January 2019, the entity adopts the revaluation model to measure the asset. The asset
now has a fair value of P300,000. Furthermore, the estimated remaining useful life is
now believed to be 5 years.
How much can be recognized as gain on impairment recovery in 2019 profit or
loss?
a. P275,000 c. P150,000
b. P175,000 d. P100,000
123. The Mariella Company accounts for non-current assets using the cost model. On
30 October 2019 Mariella classified a non-current asset as held for sale in accordance
with
PFRS5. At that date the asset’s carrying amount was P15,000,000, its fair value was
estimated at P11,000,000 and the costs to sell at P1,500,000. On 20 November 2019 the
asset was sold for net proceeds of P9,200,000.
In accordance with PFRS5, what amount should be included as a loss on disposal
in Mariella’s statement of comprehensive income for the year ended 31
December 2019?
a. Nil c. P5,500,000
b. P300,000 d. P5,800,000
124. The Moskov Company accounts for non-current assets using the revaluation model.
On 30 June 2019, Moskov classified a freehold property as held for sale in accordance
with PFRS5. At the date the property’s carrying amount was P290,000 and the balance
on the revaluation reserve was P20,000. At that date its fair value was estimated at
P330,000 and the costs to sell at P20,000. At 31 December 2018 the property’s fair
value was estimated at P325,000 and the costs to sell at P25,000.
The balance of Maskov’s revaluation reserve as of December 31, 2019 is

a. P60,000 c. P30,000
b. P40,000 d. Nil
The following information relate to an entity’s liabilities as of and for the year ended
31 December 2019:
 The entity had accounts payable of P5,000,000 recorded in the general ledger as
of December 31, 2019 before consideration of the following unrecorded
transactions:
Invoice Date Date

Date Amount Shipped Received FOB terms
1-3-20 P400,000 12-22-19 12-24-19 Destination
1-2-20 650,000 12-28-19 1-2-20 Shipping point
12-26-19 600,000 1-2-20 1-3-20 Shipping point
1-10-20 450,000 12-31-19 1-5-20 destination
• On July 1, 20919, the entry purchased a noncash asset with a list price of
P260,000 by issuing a five-year noninterest-bearing note. The market or “going”
rate of interest for this note was 12%. The note will; be paid in five equal annual
P64,000 installments each June 30, 2020 through 2024.
• In order to finance the entity’s planned expansion, a 12% P10,000,000 face
value bonds were issued for P10,800,000,including accrued interest of P200,000
on December 1, 2016. Interest is payable every October 1 and April 1. By the
end of the year 2018 the carrying amount of the bonds was reported at
P10,300,000. Francis uses the straight-line method to amortize premium and
discount. on September 1, 2019, Francis decided to reacquire the bonds at face
value plus accrued interest.
• The entity was sued for P1,000,000. Lawyers have advised that the obligating
event has occurred, but that the probability of making a payout is 25%, which is
deemed not certain. It is expected to take at least 3 years before the lawsuit is
finalized. The entity uses an 8% discount rate.
QUESTIONS:
125. In the December 31, 2019 statement of financial position, the accounts payable should
be reported in the amount of
a. P5,000,000 c. P6,050,000
b. P5,400,000 d. P7,100,000
126. In relation to the note payable, the interest expense to be recognized by the entry for
the year ended December 31, 2019 is
a. P27,685 c. P13,842
b. P15,600 d. Nil
127. What amount should the entity record as gain on early extinguishment of debt?
a. P2014,000 c. P140,000
b. P192,000 d. P120,000
128. What amount would be recorded as a liability from lawsuit?

a. P0 c. P250,000
b. P198,450 d. P314,928
129. The following information relate to an entity’s equity transaction for the year ended 31
December 2019.
• Received P100,000 from the issuance of a cool option that gives the holder the
right to purchase 10,000 share of the entity for a fix price of P100 per share. Fair
value of the option at December 31 P610,000.
• On 31 December 2019, the entity enters into a forward contract that requires
the entity to repurchased its own shares for P60,000 on December 31, 2020. No
consideration is paid or receives at the inception of the contract. The market
interest rate is 10% on 31 December 2019 and expected to be 12% on 31
December 2020.
The net increase of this transaction on the entity’s equity for the year ended 31
December 2019 is
a. P40,000 c. P55,454
b. P45,454 d. P100,000
130. Kimmy, Inc. is preparing its financial statement for the year ended December 31, 2019.
Accounts payable amounted to P200,000 any necessary year-end adjustment related to
the following:
• At December 31, 2019, Kimmy has a P50,000 debit balance in its account
payable to Twist, a supplier, resulting from a P50,000 advance payment
for goods to be manufactured to Kimmy’s specification.
• Checks in the amount of P25,000 were written to vendors and recorded
on December 29, 2019. The checks were dated January 5,2020.
What amount should Kimmy report as accounts payable in its December

31,2019 statement of financial position?
a. P275,000 c. P200,000
b. P250,000 d. P125,000
131. A court case decided on 21 December 2019 awarded damages against Layla Corp.
the judge has announced that the amount of damages will be set at a future date, expected
to be in March 2020.
Layla has received advice from its lawyers that the amount of damages could be
anything between P20,000 and P7,000,000. As of December 31,2019, how much
should be recognize in the statement of the financial position regarding this
court case?
a. P7,000,000 c. P20,000
b. P3,510.000 d. Nil
Intangible asset
On January 2, 2018, the entity purchased a patent with a cost P940,000 a useful life of 4
years. at December 31, 2018, and December 31, 2019, the company determines that
impairment indicators are present. The following information is available for impairment
testing at each year end:
Fair value less costs of disposal

Value-in-use P720,000 P445,000
No changes were made in the asset’s estimated useful life.

QUESTIONS:
132. The entity should recognize loss on write-down of inventory of materials of
a. P50,000 c. P5,000
b. P30,000 d. Nil
133. The depreciation charge on the machine for 2019 is

a. P12,150 c. P11,900
b. P12,000 d. P11,360
134. The net amount to be recognized in 2019 or loss in relation to the building is
a. P150,000 c. P(100,000)
b. P25,000 d. P(50,000)
135. The total expense to be recognized in 2019 profit or loss in relation to the patent is
a. P285,000 c. P260,000
b. P270,000 d. P235,000
136. Minotaur Corp. was organized on January 1,2017. On that date it issued 500,000, P10 par
value, ordinary shares at P15 per share. During the period January 1,2017 through
December 31, 2019, Minotaur reported profit of P3,000,000 and paid cash dividends of
P500,000. On January 5, 2019, Anil purchased 50,000 ordinary shares at P20 per share.
On December 31, 2019, 45,000 treasury shares were sold P30 per share and retired the
remaining treasury shares. What is the total shareholders’ equity on December31, 2019?
a. P10,850,000 c. P10,350,000
b. P10,500,000 d. P10,250,000
137. The Fatima Corporation’s inventory at December 31, 2019, was P325,000 based on a
physical count priced at cost. And before any necessary adjustment for the following:
• Merchandise costing P30,000, shipped F.o.b. shipping point from a vendor
on December 30,2019, was received on January 5, 2019.
• Merchandise costing P22,000, shipped F.o.b. destination from a vendor on
December 28, 2019, was received on January 3, 2020.
• Merchandise costing P38,000 was shipped to a customer F.o.b. destination
on December 28, arrived at the customer’s location on January 6, 2020.
• Merchandise costing P12,000 was being held on consignment by Club
Company.
What amount should Fatima Corporation report as inventory in its December 31, 2019,
a. P367,000 c. P405,000
b. P427,000 d. P325,000
138. Gord owns a small shop and the heat and light account for the year to 31 March
2019.
Gas Electricity
At 31 March 2018 P1,000 P500

prepayment accrual
At 31 March 2019 P2,000 P1,200
accrual prepayment
During the year, Gord made payments of P5,000 for gas and P7,800 for
electricity.
What is the total heat and light expense for the year ended 31 March 2019?
a. P14,100 c. P12,500
b. P13,100 d. P11,500
139. The following data were taken from the books of Kanna CO. for the current year:
From cash records:

Cash purchases P30,000
Payments to trade creditors for credit
purchases 302,600
From balance sheets
Accounts payable
January 1 37,500
December 31 43,300 Merchandise inventory, January 1
12,800
From other records:

a. P16,200 c. P12,800
b. P13,800 d. P23,700
140. Alice showed income before income taxes of P250,000 on December 31, 2019.
On your year-end verification to the transactions of the company, you discovered the
following errors:
a.) P100,000 worth of merchandise was purchase in 2019 and included in the
ending inventory. However, the purchase was recorded only in 2020.
b.) A merchandise shipment valued at P150,00 was properly recorded as
purchases at year-end. Since the merchandise were still at the port area,
they were inadvertently omitted from the inventory balance at December
31, 2019.
c.) Business taxes for the 4th quarter of 2019, amounting to P50,000, was
recorded when payment was made by the firm in January, 2020.
d.) Rental of P30,000 on an equipment, applicable for six months was received
on November 1, 2019. The entire amount was reported as income upon
receipts.
e.) Insurance premium covering the period from July 1, 2019 to July 1, 2020,
amounting to P120,000, was paid and recorded as expense on July 31, 2019.
The company did not make any adjustment at the end of the year.
The corrected income before income taxes for 2019 should be

a. P340,000 c. P280,000
b. P290,000 d. P240,000
141. Aljane Company uses the average cost retail method to estimate its inventory.
Data relating to the inventory at December 31, 2019 are:
Cost Retail
00
Purchases 10,600,000 14,000,0
00
Net markups 1,600,0
00
Net markdown 600,0
00
Sales 12,000,0
00
Estimated
normal 400,0
shoplifting 00
Losses
Estimated
normal
shrinkage is
5% of sales
Aljane’s cost of goods sold for the year ended December 31, 2019 is
a. P8,680,000 c. P7,700,000
b. P9,100,000 d. P8,400,000
142. Marianne Farming Corp. has a flock of sheep, which were shorn shortly before the
year end. On November 30, 2018, the time of shearing, the value of the wool less
costs to sell was determined to be P15,000, and this value had risen to P16,500 by
December 31, 2018 (reporting date). The company estimates that it would incur
P500 to transport the wool to the nearest market.
On February 14, 2019, the wool was subsequently sold for P17,000 (after
deducting costs to sell). How much is the net profit recognized in 2019?
a. P2,500 c. P1,500
b. P2,000 d. P 500
143. The accountant of Balmond Company made the following adjusting entry on
December 31.
Rent Expense P1,800
Prepaid Rent P1,800
If annual rent is paid in advance every October 1, the original transaction entry
made was
a. Debit Rent Expense and Credit Cash, P2, 400.
b. Debit Rent Expense and Credit Cash, P7, 200.
c. Debit Prepaid Rent and Credit Cash, P2, 400.
d. Debit Prepaid Rent and Credit Cash, P7, 200.
144. Jayvison Company takes a full year’s depreciation expense in the year of an asset’s
acquisition, and no depreciation expense in the year of disposition. Data relating to
one of Jayvoson’s depreciable assets at December 31, 2018, are so follows:
Acquisition year 2016

Cost P110,000
Residual value 20,000
Accumulated depreciation 72,000 Estimated
useful life 5 years
Using the same depreciation method as used in 2016, 2017, and 2018, how much
depreciation expense should Jayvison record in 2019 for this asset?
a. P12,000 c. P22,000
b. P18,000 d. P24,000
145. Presented below are account balances and related information on December 31,
2019 for Lesley, Inc.
Cash on hand and in banks P248,000
Accounts receivable 80,000
Allowance for bad debts (15,000)
Inventories 120,000
Prepaid insurance 25,000
Total current assets P458,000
Related information follows:
a. The cash balance consists of the following:
Cash in bank, net of bank overdraft of
P2,000 maintained in a separate bank P40,000
Cash set aside by Board of Directors for
Purchase of plant site 150,000
Petty cash (unreplenished expenses, P500) 4,000
Cash withheld from wages for income tax
Of employees 2,000
General cash 52,000
P458,000
b. The accounts receivable includes past due accounts of P5,000 on which a
loss of 100% is anticipated; hence, should be written off.
c. The merchandise inventory includes goods held on consignment, P4,000
and goods of P8,000 received on December 31, 2019. Neither of these items
having been recorded as a purchase.
d. The prepaid insurance includes cash surrender value of P5,000.
The total current assets that should be shown in the balance sheet at December
31, 2019 is
a. P299,500 c. P300,.500
b. P295,500 d. P303,500
146. On January 1, 2016, Claudine Corp. acquired a gold mine property for P10,000,000.
In 2016 and 2017, Claudine spent P4,000,000 on exploration and development. It
expects to be able to mine 35,000 ounces of gold over the 10-year life of the mine.
Claudine uses the output method to account for its gold costs and expects to be
able to sell the property to a real estate developer for P2,000,000 at the end of the
10 years. It mined 3,100 ounces in 2018 and 2,800 in 2019. How much depletion
would be recorded related to the gold in 2019?
a. P960,000 c. P1,200,000
b. P1,120,000 d. P1,400,000
147. Karrie Corp. had the following liabilities at December 31, 2019:
Accounts payable P55,000
Unsecured notes,8%, due 7/1/20 400,000
Accrued expenses 35,000
Contingent liability
450,000
Deferred income tax liability 25,000 Senior bonds, 7%, due, 3/31/20
1,000,000
The contingent liability is an accrual for possible losses on a P1,000,000 lawsuit filed
against Karrie. Karries’s legal counsel expects the suit to be settled in 2020, and has
estimated that Karrie will be liable for damages in the range of P450,000 to P750,000.
The deferred income tax liability is not related to a non-current asset and is expected to
reverse in 2020.
What amount should Karrie report in its December 31, 2019 statement of
financial position for current liabilities?
a. P490,000 c. P1,490,000
b. P1,090,000 d. P2,090,000
148. At the current year-end, Unice Co has undertaken impairment tests on two
machines. The following information is relevant:
Machine 1 Machin
e2
Cost P450,000 P250,0
00
Useful life 10 years 15
years
Age 4 years 3
years
Fair value P300,000 P230,0
00
Costs of disposal P15,000 P35,00
0
Value in use P260,000 P198,0
00
At what carrying amount should machinery be recognized in the accounts of Unice Co?
a. P498,000 c. P468,000
b. P470,000 d. P455,000
149. The following information for 2019 is provided by Argus Company:
Sales P20,000,0
00
Cost of goods sold 12,000,0
00
Selling expenses 1,200,0
00
General and administrative expenses 1,800,0
00
Interest expense 1,500,0
00
Gain on early extinguishment of long-term debt 500,0
00
Correction of inventory error, net of income tax- 800,0
credit 00
Investment income tax-equity method 600,0
00
Gain on sale of investment 2,000,0
00
Income tax expense 2,100,0
00
Dividends declared 2,500,0
00
What was the 2019 income from continuing operations?

a. P4,900,000 c. P6,600,000
b. P4,500,000 d. P7,000,000
150. The Mariella Company accounts for non-current assets using the cost model. On 30
October 2019 Mariella classified a non-current asset as held for sale in accordance
with PFRS5. At that date the asset’s carrying amount was P15,000,000, its fair value
was estimated at P11,000,000 and the costs to sell at P1,500,000. On 20 November
2019 the asset was sold for net proceeds of P9,200,000.
In accordance with PFRS5, what amount should be included as a loss on disposal in
Mariella’s statement of comprehensive income for the year ended 31 December 2019?
a. Nil c. P5,500,000
b. P300,000 d. P5,800,000
151. In the year ended 31 May 2019, Estes Co purchased non-current assets with a cost
of P140,000, financing them partly with a new loan of P120,000. Estes Co also
disposed of non-current assets with a carrying value of P50,000 making a loss of
P3,000. Cash of P18,000 was received from the disposal of investments during the
year. What should be
Estes Co’s net cash flow from investing activities according to PAS 7
Statement of cash flows?
a. P45,000 c. P69,000
b. P75,000 d. P48,000
The following information relate to an entity’s liabilities as of and for the year ended
31 December 2019:
 The entity had accounts payable of P5,000,000 recorded in the general ledger as
of December 31, 2019 before consideration of the following unrecorded
transactions:
Invoice Date Date

Date Amount Shipped Received FOB terms
1-3-20 P400,000 12-22-19 12-24-19 Destination
1-2-20 650,000 12-28-19 1-2-20 Shipping point
12-26-19 600,000 1-2-20 1-3-20 Shipping point
1-10-20 450,000 12-31-19 1-5-20 destination
• On July 1, 20919, the entry purchased a noncash asset with a list price of
P260,000 by issuing a five-year noninterest-bearing note. The market or “going”
rate of interest for this note was 12%. The note will; be paid in five equal annual
P64,000 installments each June 30, 2020 through 2024.
• In order to finance the entity’s planned expansion, a 12% P10,000,000 face
value bonds were issued for P10,800,000,including accrued interest of P200,000
on December 1, 2016. Interest is payable every October 1 and April 1. By the
end of the year 2018 the carrying amount of the bonds was reported at
P10,300,000. Francis uses the straight-line method to amortize premium and

discount. on September 1, 2019, Francis decided to reacquire the bonds at face
value plus accrued interest.
 The entity was sued for P1,000,000. Lawyers have advised that the obligating
event has occurred, but that the probability of making a payout is 25%, which is
deemed not certain. It is expected to take at least 3 years before the lawsuit is
finalized. The entity uses an 8% discount rate.
QUESTIONS:
152. In the December 31, 2019 statement of financial position, the accounts payable
should be reported in the amount of
a. P5,000,000 c. P6,050,000
b. P5,400,000 d. P7,100,000
153. In relation to the note payable, the interest expense to be recognized by the entry
for the year ended December 31, 2019 is
a. P27,685 c. P13,842
b. P15,600 d. Nil
154. What amount should the entity record as gain on early extinguishment of debt?
a. P2014,000 c. P140,000
b. P192,000 d. P120,000
155. What amount would be recorded as a liability from lawsuit?

a. P0 c. P250,000
b. P198,450 d. P314,928
156. The Helcurt Company’s ledger showed a balance in its cash account at December
31, 2019 of P68,225 which was determined to consist of the following:
Petty cash fund P360
Cash in Metro bank, per bank statement, with a check for P600
still outstanding 33,675
Notes receivable in the possession of a collecting agency 2,500
Undeposited receipts, including a postdated check for
P1,050 and a traveler’s check for P1,000 17, 800
Bond sinking fund-cash 12,750
IOUS signed by employees 495
Paid vouchers, not yet recorded 645
Total P68,225
At what amount should “Cash on hand and in bank” be reported on Helcurt’s statement
of financial position.
a. P50,185 c. P53,475
b. P62,935 d. P66,225
157. The following information relate to an entity’s equity transaction for the year
ended 31 December 2019.
• Received P100,000 from the issuance of a cool option that gives the holder the
right to purchase 10,000 share of the entity for a fix price of P100 per share. Fair
value of the option at December 31 P610,000.
• On 31 December 2019, the entity enters into a forward contract that requires
the entity to repurchased its own shares for P60,000 on December 31, 2020. No
consideration is paid or receives at the inception of the contract. The market
interest rate is 10% on 31 December 2019 and expected to be 12% on 31
December 2020.
The net increase of this transaction on the entity’s equity for the year ended 31
December 2019 is
a. P40,000 c. P55,454
b. P45,454 d. P100,000
158. The cash account of Hanabi Corp. on December 31, 2019 has a balance of
P127,600 and its consists of the following:
Bills and coins on hand P52,780
Petty cash including petty cash vouchers of P650
1,000
Balance in savings account with a bank closed by the BSP 36,000
Customer’s check dated January 15, 2020 8,000
Credit memo from suppliers for purchases returns 6,500
Postage stamps 120
Money order 800
IOU of an employee 400
Checking account balance in Bank of P.I 22,000
The correct cash balance on December 31, 2019 of Hanabi Corp. is

a. P76,580 c. P75,130
b. P76,330 d. P75,930
159. As of December 31, 2018, the shareholders equity of Riggs Corp. is presented
below:
Cumulative preference shares (P15 par value; 50,000 shares authorized, 6,000 shares
issued and outstanding)
Ordinary shares (P10 par value; 50,000 shares authorized, 165,000 shares issued and
outstanding) Retained earnings
Cumulative preference shares (P15 par value;
50,000 shares authorized, 6,000
shares issued and outstanding) P 90,000
Ordinary shares (P10 par value; 50,000
shares authorized, 165,000 shares issued
and outstanding) 1,650,000
P2,673,000
Rigg’s equity transactions during 2019 were as follows:

a. On January 31, 12,000 preference shares were issued in exchange for land
with an appraised value of P180,000.
b. On February 14, 6,750 ordinary shares were sold to a subscriber at P25 per
share.
c. On December 14, Rigg’s purchased dissident shareholder’s 6,750 shares at
P27 per share. The shares are to be held as treasury nshares.
d. On December 20, Rigg’s entered into a contract for the sale of 15,000
previously unissued shares at P25 per share to be issued when the purchase
price is fully paid. At December 31, only 292,500 had been paid. The
subscriber agreed to pay the balance on or before January 31, 2020.
e. On December 31, Riggs retired 6,000 preference shares at P18 per share.
f. A cash dividend of P2 per share was declared on the preference shares on
October 15, and paid on November 15.
g. A cash dividend of P1.50 per share on the ordinary shares was declared on
December 15, and payable on January 15, 2020.
h. Rigg’s profit for the year 2019 was P375,000.
The total shareholders’ equity as of December 31, 2019 is

a. P3,115,500 c. P3,198,000
b. P3,127,500 d. P3,210,000
160. The cashier of Hilda Inc. prepared the following bank reconciliation:
Bank per bank P28,375

Deposits in transit:
12/30/19 P4,500
12/31/19 1,525 6,025
34,400
Outstanding checks
160 11/30/19 P2,200
214 12/26/19 675
219 12/27/19 850
225 12/29/19 2,500
228 12/31/19 7,225 (13,450)
20,950
Customer note collected by bank (3,000)
Error: Check #216, written on
12/27/19 for P270 was erroneously
Charged by the bank as P720; bank was
Notified on 1/2/20 450
Book balance P18,400
The adjusted cash balance as of December 31, 2019 is

a. P21,850 c. P19,100
b. P21,400 d. P15,400
161. The Retained Earnings account of Gil Corp. for the year 2019 consists of the
following items:
Debit Credit
Balance, January 1, 2019 P112,50
0
Write-off organization costs P 6,000
Excess of issuing price of share
capital over par value 24,000
Loss on the sale of equipment 2,500
Correction of error of prior 10,500
year
Gain on sale of treasury shares
3,500
Cash and shares dividends 60,000
Net income for the year
58,500
Balance, December 31, 2019 119,500
P198,500 P198,500
The correct balance of retained earnings on December 31, 2019 is
a. P119,500 c. P94,500
b. P100,500 d. P92,000
162. The shareholders’ equity account balances for the Zackery, Inc. on December
31, 2019 follows:
12% Preference share capital, P100 par,

20,000 shares P2,000,0
00
Ordinary share capital, P25 par, 145,000
shares 3,625,0
00
Subscribed share capital, net of P500,000
subscriptions receivable 1,000,0
00
Treasury shares, 5,000 shares, at cost 400,000
Preference shares have a liquidation of P110; shares are cumulative, with

dividends in arrears for 3 years including the current year and fully payable
in the event of liquidation.
The book value of an ordinary share is

a. P22.50 c. P27.78
b. P25.00 d. P29.00
163. The books of Roger’s Service, Inc. disclosed a cash balance of P68,757 on June
30. The bank statement as of June 30 showed a balance of P54,780. Additional
information that might be useful in reconciling the two balances follows:
• Check number 748 for P3,000 was originally recorded on the books as
P4,500.
• A customer’s note dated March 25 was discounted on April 12. The note
was dishonored on June 29 (maturity date). The bank charged Roger’s
account for P14,265, including a protest fee of P42.
• The deposit of June 24 was recorded on the books as P2,895, but it was
actually a deposit of P2,700.
• There were bank service charges for June of P210 not yet recorded on
the books.
• Roger’s account had been charged on June 26 for a customer’s NSF
check P1,296.
• Roger properly deposited P600 on June 3 that was not recorded by the
bank.
• Receipts of June 30 for P13,425 were recorded by the bank on July 2.
• A bank memo stated that a customer’s note for P4,500 and interest of
P165 had been collected on June 27, and the bank charged a P26
collection fee.
What is the correct cash balance at June 30?

a. P58,920 c. P57,720
b. P58,320 d. P57,420
An entity reported the following I formation on January 1, 2019:

Ordinary share capital, P10 par, 800,000 shares 8,000,000
Preference share capital, P50 par, 50,000 shares 2,500,000
12% Bonds payable 5,000,000
The preference share capital is 10% cumulative and convertible into 100,000
ordinary shares. Dividends on preference shares are in arrears for two years.
The 12% bonds are convertible into 80 ordinary shares for each P1,000 bond.
Unexercised shares options to purchase 90,000 ordinary shares at P20 per share
were outstanding at the beginning and ending of 2019. The average market price of
the ordinary share was P30 per share and the market price on December 31, 2019
was P40 per share.
May 1 Issued 60,000 ordinary shares at P25 per share.

July 1 Purchased 100,000 ordinary shares at P15 to be held as treasury.
Oct. 1 Converted bonds with face amount of 2,000,000
Dec. 31 The net income for 2019 was P2,000,000. The tax rate is 30%.
QUESTIONS:
164. What is the amount of basic earnings per share?
a. P2.11 c. P1.81
b. P2.03 d. P1.74
165. What is the amount of diluted earnings per share?

a. P2.11 c. P1.81
b. P2.03 d. P1.74
166. On December 31,2019 the accounts receivable control account of Grock Corp. had
a balance P181,000. An analysis of the account receivable account showed the
following:
Accounts known to be worthless P2,50

Advance payments to creditors on purchase 0
Orders 10,0
00
Advances to affiliated companies 25,0
Customers’ accounts reporting credit 00
Balance arising from sale return
(15,000)
Interest receivable on bonds 10,0
00
Other trade accounts receivable-unassigned 50,0
Subscriptions receivable for ordinary share 00
capital due in 30 days 55,0
00
Trade accounts receivable-assigned Trade 15,0
installment receivable due 1-18 00
months,(including unearned finance charges, P2,000) 22,0
00
Trade receivables from officers, due currently
Trade accounts on which post-dated checks 1,500
are held (no entries were made on receipts on check) 5,00
0
Total P181,000
The correct balances of trade accounts receivable of Ipil-ipil on December 31,

2019 is
a. P206,000 c. P91,500
b. P103,500 d. P86,500
167. In connection with a share option plan for the benefit of key employees, Jeyson
Corp. intends to distribute treasury shares when the options are exercised. These
shares were bought in 2016 at P42 per share. On January 1, 2019, Jeyson granted
share options for 10,000 shares at P38 per share as additional compensation for
services to be rendered over the next three years. The options are exercisable
during a four year period beginning January 1, 2022, by grantees still employed by
Jeyson. Market price of Jeyson’s shares was P47 per share at the grant date. The
fair value of a similar share option with the same terms was P12 at the grant date.
No share options were terminated during 2019. In Jeyson’s 2019 income
statement, what amount should be reported as compensation expense pertaining
to the options?
a. P120,000 c. P 40,000
b. P 90,000 d. P 30,000
168. Kagura Corp. estimates bad debt expense at ½ % of credit sales. The company
reported accounts receivable sand allowance for uncollectible accounts of
P471,000 and P1,650 respectively, at December 31, 2018. During 2019, Kagura’s
credit sales and collection were P315,000 and P319,000, respectively, and P1,720
in accounts receivable at December 31, 2019 is
a. P467,000 c. P465,280
b. P473,280 d. P469,280
169. Kenneth Co. purchase land and constructs a service station and car wash for a total
of P360,000. At January 2, 2018, when construction is completed, the facility and
land on which it was constructed are sold to a major oil company for P400,000 and
immediately leased from the oil company by Kenneth. Fair value of the land at time
of the sale was P40,000. The lease is a 10-year, noncancelable lease. Kenneth uses
straightline depreciation for its other various business holdings. The economic life
of the facility is 15 years with zero salvage value. Title to the facility and land will
pass to Kenneth at termination of the lease. A partial amortization schedule for this
lease is as follows:
Payments Interest Amortization Balance

Jan 2, 2018 P400,000.
00
Dec. 31,2018 P 65,098.13 P40,000.00 P25,098.13 374,901.
87
Dec. 31, 2019 65,098.13 37,490.19 27,607.94 347,293.
87
Dec. 31, 2020 65,098.13 34,729.39 30,368.74 316,925.
19
The total lease-related expenses recognized by the lessee during 2019 are which of the
following? (Rounded to the nearest peso.)
a. P64,000 c. P73,490
b. P65,098 d. P61,490
170. Chou Company had the following information relating to its accounts receivable:
Accounts receivable, 12/31/2018 P1,300,000

Credit sales for 2019 5,400,000
Collections from customers for 2019,
excluding recovery 4,750,000
Accounts written off 9/30/2019 125,000
Collection of accounts written off in prior year
(customer credit was not reestablished) 25,000
Estimated an collectible receivables per aging
Of receivables at 12/31/2019 165,000
On December 31,2019 the amortized cost of accounts receivables is
a. P1,825,000 c. P1,635,000
b. P1,800,000 d. P1,660,000
171. Which of the following is most likely an effect of PFRS16 on lessor’s financial
statements?
a. Increase in finance lease receivables.
b. Increase in finance income.
c. Increase in asset turnover.
d. None of the above.
172. Rafaela Company has P3 million note receivable from sale plant bearing interest at
12% per annum. The note is dated June 1,2018. The note is payable in 3 annual
installments of P1,000,000 plus interest on the unpaid balance every June 1. The
initial principal and interest payment was made on June 1, 2019.
The interest income for 2019 is
a. P360,000 c. P300,000
b. P310,000 d. P290,000
173. Olivia Corp. began operations on January 1, 2018. For financial reporting, Olivia
recognizes revenue from all sales under the accrual method. However, in its
income tax
returns, Olivia reports qualifying sales under the installment method. Olivia gross profit
on these installment sales under each method was a follows:
Year Accrual method Installment method
2018 P 1,600,000 P 600,000
2019 2,600,000 1,400,000
The income tax rate is 30% for 2018 and future years. There are no other temporary or
permanent differences. In its December 31, 2019 balance sheet, what amount should
Olivia report as liability for deferred income taxes?
a. P360,000 c. P660,000
b. P600,000 d. P840,000
174. On July 1, 2019, Eudora Co. sold a machine costing P500,000 with accumulated
depreciation of P380,000 on the date of sale. Eudora received as consideration for
the sale, a P300,000 noninterest-bearing note, due July 1, 2022. There was no
established exchange price for the equipment and the note had no ready market.
The prevailing rate of interest for a note of this type at July 1, 2019 was 12% and
13% on December 31, 2019. In relation to this transaction, the total income to be
recognized in Eudora’s 2019 profit or loss is
a. P180,000 c. P106,352
b. P119,165 d. P101,445
175. Anne Corporation leased a building and received the P36,000 annual rental
payment on june 15, 2019. The beginning of the lease was July 1, 2019. Rental
income is taxable when received. Anne’s tax rates are 30% for 2019 and 40%
thereafter. Anne had no other permanent or temporary differences. Anne
determined that no valuation allowance was needed. What amount of deferred tax
asset should Anne report in its December 31, 2019 statement of financial position?
a. P5,400 c. P10,800
b. P7,200 d. P14,400
176. On January 1, 2019, the lending company made a P200,000, 8% loan. The interest is
receivable at the end of each year, with the principal amount to be received at the
end of 5 years. As of December 31, 2019, the interest for the current year has not
yet been received nor recorded because the borrower is experiencing financial
difficulties. The lending company negotiated a restructuring of the loan. The
payment of all the interest based on the original principal will be delayed until the
end the 5-year loan term. In addition, the amount of principal repayment will be
dropped from P200,000 to P100,000. The prevailing interest rate for similar type of
loan as of December 31, 2019 is
10%.
The impairment loss to be recognized in 2019 is
a. P67,700 c. P77,492
b. P73,506 d. P0
An entity provided the following pension plan information:
Defined benefit obligation – January 1, 2019 3,500,0

00
Fair value of plan assets – January 1, 2019 2,800,
00
Pension benefits paid during the year 250,0
00
Current service cost for 2019 1,750,0
00
Past service cost for 2019 (vesting period 5 years) 425,0
00
Actual return on plan assets 180,0
00
Contribution to the plan 2,500,0
00
Decrease in defined benefit obligation due to
changes in actuarial assumptions 120,0
00
Discount or settlement rate 10%
QUESTIONS:
177. What is the amount that the entity would recognize in profit or loss for the current
year?
a. P2,525,000 c. P1,905,000
b. P2,245,000 d. P1,750,000
178. What amount should be reported as accrued benefit cost a December 31, 2019?
a. P665,000 c. P325,000
b. P425,000 d. P 85,000
179. Uranus Inc. factors P2,000,000 of its account receivables without guarantee
(recourse) for a finance charge of 5%. The finance company retains an amount
equal to 10% of the accounts receivable for possible adjustments. What would be
recorded as a gain (loss) on the transfer of receivables?
a. Loss of P100,000 c. Loss of P300,000
b. Gain of P100,000 d. Loss of P200,000
180. Jerry Corp. experienced a P50,000 decline in value of its inventory in the first
quarter of its fiscal year. Jerry had expected this decline to reverse in the third
quarter, and in fact, the third quarter recovery exceeded the previous decline by
P10,000. Jerry’s inventory did not experience any other declines in value during the
fiscal year. What amounts of loss or gain should Jerry report in its interim financial
statements for the first and third quarters?
First Quarter Third Quarter
a. P0 P0
b. P0 P10,000
c. P50,000 loss gain
d. P50,000 loss P50,000
gain
P60,000
gain
181. The following information pertains to Judy-an Company and its operating
segments for the current year. Sales to unaffiliated customers; P10,000,000,
intersegment sales, P3,000,000; interest earned on loans to other segment, P500,000;
traceable operating expenses, P6,000,000; indirect operating expenses, P2,500,000;
general corporate expenses, P90,000; interest expense P400,000; income taxes,
p_,200,000. Judy-an and all of its divisions are engaged solely in manufacturing
operations and evaluates divisional performance based on controllable contribution.
Judy-an has a reportable segment if that segment’s operating profit is at least.
a. P150,000 c. P410,000
b. P370,000 d. P450,000
182. Aurora Corporation obtained a P40,000 note receivable from a customer on a

June 30, 2019. The note, along with interest at 6%, is due on June 30, 2020. On
September 30, 2019, Aurora discounted the note at Mage Bank. The bank’s discount
rate is 10%.
What amount of cash did Aurora receive from Mage Bank?
a. P40,600 c. P39,220
b. P36,000 d. P36,820
183. Jessa Company assigns some of its patents to other enterprises under a variety
of licensing agreements. In some instances advance royalties are received when the
agreements are signed, and in others, royalties are remitted within sixty days after each
license year-end. the following data are included in Jessa’s December 31 balance sheet:
2018 2019
Royalties receivable P90,000 P85,000
Unearned royalties 60,000 40,000
During 2019 Jessa received royalty remittances of P200,000. In its income statement for
the year ended December 31, 2019, Jessa should report royalty income of
a. P195,000 c. P220,000
b. P215,000 d. P225,000
184. On January 1, 2015, Fanny Inc. invested P926, 405 in the bonds of Lolita Corp.
the face value of the bonds is P1,000,000. The bonds pay interest of 5% per annum and
mature on December 31, 2024. The bonds are held to maturity. The market value of the
bonds was P940, 340 on December 31, 2019. The carrying amount of the investment in
the bonds at December31, 2019 is
a. P940,340 c. P957,920
b. P950,834 d. P965,357
185. Mae Company acquires patent rights from other enterprises and pays advance
royalties in som cases and in others, royalties are paid within ninety days after year-end.
the following data are included in Mae’s December 31 balance sheets:
2018 2019
Prepaid royalties P55,000 P45,000
Royalties payable 80,000 75,000
During 2019 Mae remitted royalties of P300,000. In its income statement for the year
ended December 31, 2019. Mae should report royalty expense of
a. P295,000 c. P310,000
b. P305,000 d. P330,000
186. In November 2019, Nana purchased two marketable securities, smooch and
Blitz, which it bought and held principally to sell in the near term by February 28, 2020.
Relevant data is as follows:
Fair Value
Cost 12/31/19 2/28/19
Smooch P125,000 P145,000 P155,000
Blitz 235,000 205,000 230,000
The amount of holding gain or loss at December 31, 2019 is

a. P10,000 loss c. P25,000 loss
b. P10,000 gain d. P25,000 gain
187. Zea Corp. reports on a calendar-year basis. Its 2018 and 2019 financial
statements contained the following errors:
2018 2019
Over (under) statement of ending inventory P(10,000) P4,000
Depreciation understatement 4,000 6,000 Failure to
accrue salaries at year end 8000 12,000
As a result of the above errors, 2019 net income would be overstated by

a. P 4000 c. P22,000
b. P16,000 d. P24,000
188. In its financial statements, Keith co. discloses supplemental information on the
effects of changing prices. Keith computed the increase in current cost of inventory
as follows:
Increase in current cost (nominal pesos) P15,000

Increase in current cost (constant pesos) P12,000
What amount should Keith disclose as the inflation component of the increase in current
cost of inventories?
a. P3,000 c. P15,000
b. P12,000 d. P27,000
189. The following information pertains to Camille Company for 2017:

 The company had net monetary items of P1,600,000 on January 1.
 Sales of P6,000,000 and purchases of P2,400,000 were made evenly throughout
the year
 Operating expenses of P1,800,000 and income tax expense of P1,200,000 were
incurred evenly throughout the year.
 Cash dividends of P400,000 were declared on November 30 and paid on
December 31. Selected values of the CPIU during 2017 appear below:
Jan. 1 110.0 Nov. 30 131.0

Average of the year 121.0 Dec. 31 133.1
The purchasing is power loss for 2017 expressed in constant year-end pesos is
a. P53,588 c. P396,000
b. P360,000 d. P389,588
190. Johnrei Company discovered error in its ending inventory for the year ended
December 31, 2016. The error was discovered in early 2017, after the books were
closed. Some inventory in the amount of P12, 000 was counted twice and inventory
valued at P5,000 was excluded from the inventory count because it was in transit
(with terms FOB shipping point). The tax rate is 30%. Which of the following would
be included in the correcting Journal entry to be done in 2017?
a. Debit deferred income tax P1,500
b. Debit cost of goods sold P12,000
c. Debit retained earnings P4,900
d. Credit inventory for P12,000
191. On December 31, 2014, Mark Company presented the following current assets.
Cash 3,200,000
Inventory 2,800,000
Initial direct cost in leasing equipment to a lessee in a sales-type 200,000 The
accounts receivable consisted of the following items:
Customer’s accounts 1,420,000
Accounts receivable-assigned
(Net of equity of consignee in accounts assigned, P60, 000) 240,000
Advances to subsidiary 260,000
Allowance for sales return (120,000)
Claim against shipper for goods in transit 100,000
Subscription receivable due on December 31, 2015 100,000
What amount should be recognized as total current assets on December 31, 2014?
A. 7,740,000 C. 7,800,000
B. 7,700,000 D. 8,000.000
192. A company who does not keep full accounting records. The following details
relate to transactions details relate to transactions with credit customers and suppliers
for the year ended December 31, 2017:
Trade receivables, 1/1/17 P130,0

00
Trade payables, 1/1/17 60,0
00
Cash received from customers 686,4
00
Cash paid to suppliers 302,8
00
Discounts allowed 1,4
00
Discounts received 2,9
60
Bad Debts 4,1
60
Amount due from a customer who is also a supplier offset against an
amount due for goods supplied by the company 2,000
Trade Receivables, 12/31/17 181,000
Trade payables, 12/31/17 84,000
Based on the above information, what figure should appear in the company’s
income statement for the year ended December 31, 2017 for sales revenue?
a. P746,520 c. P748,960
b. P742,960 d. P744,960
193. Omar Company presented the following information on December 31,

2014:
Cash 1,320,000
Investment securities held for trading,
including long-term investment of P550,000 in ordinary shares 2,200,000
Inventories, including goods received on
consignment of P220, 000 880,000
Prepaid expenses, including a deposit P55,000 made on
Inventories to be delivered in 15 months 165,000
Property, plant & equipment 11,000,00
Goodwill, solely based on skill of employee estimated 0
by the president 1,100,0
00
Total assets 16,665,0
00
Cash in general checking account 660,000

Sinking fund to retire bonds payable in 2016
550,000
Cash held to pay value added taxes
110,000
Total cash 1,320,00
0
What total amount of current assets should be reported on December 31,
2014?
A. 3,190,000 C. 3,740,000
B. 3,245,000 D. 3,795,000
194. Ham Company showed the following information for the year ended December 31,
2017:
Cash balance, January 1 P1,500,000

Cash balance, December 31 2,000,000
Accounts receivable, January 1 3,000,000
Accounts receivable, December 31 3,500,000 Collections
from customers 8,000,000
Total assets, January 1 15,000,000
Total assets, December 31 18,000,000
Total liabilities, December 31 7,000,000
Shareholders’ equity January 1 6,000,000
During the year 2017, Ham Company did not declare dividends and no share capital
was issued. What was the net income for 2017?
a. P5,000,000 c. c. P2,000,000
b. b. P3,000,000 d. d. P4,000,000
Question 195 thru 197 are based on the following information.

Joanna company provided the following trial balance on December 31, 2014 which
has been adjusted except for income tax expense:
Cash 600,000
Cost in excess of billings on long-term contracts 1,600,000
Billings in excess of cost on long-term contracts 700,000
Prepaid taxes 450,000
Property, plant & equipment, net 1,510,000
Note payable-noncurrent 1,620,000
Share capital 750,000
Share premium 2,030,000
Retained earnings unappropriated 900,000
Retained earnings, restricted for note payable 160,000
Earnings from long-term contracts 6,680,000
Costs and expenses 5,180,000
12, 840,000
12,840,000
• The entity used the percentage-of-completion method to account for long-term

construction contracts for financial and income tax purposes. All receivables on
these contracts are considered to be collectible within 12 months.
• During 2014, estimated tax payments of P450, 000 were charged to prepaid taxes.
The entity has not recorded income tax expense. There were no temporary or
permanent differences the tax rate is 30%
On December 31, 2014, what amount should be reported as
195. Total current assets?

A. 4,100,000 C. 5,700,000
B. 5,000,000 D. 6,225,000
196. Total noncurrent liabilities?

A. 1,620,000 C. 2,320,000
B. 1,780,000 D. 2,560,000
197. Total retained earnings?

A. 1,950,000 C. 2,400,000
B. 2,110,000 D. 2,560,000
198. An entity prepares quarterly financial reports in accordance with PAS 34. At the
end of the first quarter, an entity’s acquired goodwill is impaired by P100,000. The
fair value of the goodwill subsequently increased at the end of the second quarter
so that by the half-year date there had not been a significant decline in recoverable
amount. The entity would not recognize an impairment loss on its annual financial
statements if it is tested for impairment only at its annual reporting date. How
much should the entity recognize as reversal of impairment loss on its second
quarter income statement?
a. P100,000 c. P25,000
b. P 50,000 d. P 0
199. Maria company reported that the “Revenue” Section of the single-step income
statement for the current year consisted of the following:
Net sales revenue 2,000,000
Loss from discounted component, including loss on
Disposal of P12, 000, net tax benefit of P40, 000 125,000
Interest revenue 100,000
Gain on sales of equipment 50,000
Unrealized gain on available for sale financial asset 15,000
What total amount should be reported under the “Revenue” section of the income
statement?
A. 2,100,000 C. 2,165,000
B. 2,150,000 D. 2,275,000
200. An entity has the following assets and liabilities in its statement of financial position
at December 31, 2017:
Property P10,000,000
Plant and equipment 5,000,000
Inventory 4,000,000
Trade receivables 3,000,000
Trade payables 6,000,000
Cash 2,000,000
The value for tax purposes of property and for plant and equipment are P7 million
and P4 million respectively. The entity has made a provision for inventory
obsolescence of P2 million, which is not allowable for tax purposes until the
inventory is sold. Further, and impairment charge against trade receivables of P1
million has been made. This charge does not relate to any specific trade receivable
but to the entity’s collective assessment of the overall collectability of the amount.
This charge will not be allowed in the current year for the tax purposes but will be
allowed in the future. Income tax is paid is at 35%. The deferred tax expense for
2017 is
a. P1,400,000 c. P2,100,000
b. P1,050,000 d. P350,000
201. Carmela company provided the following information for the current year
Net sales 1,800,000
Freight in 45,000
Purchase discount 25,000
Ending inventory 120,000
Gross margin on sales 40%
What is the cost of goods available for sale?
A. 840,000 C. 1,200,000
B. 960,000 D. 1,220,000
202. Troy company reports operating expenses as selling and general and
administrative. The adjusted trial balance at year-end included the following:
Accounting and legal fees 25,000
Advertising 150,000
Freight out 80,000
Interest expense 70,000
Loss on sale of long-term investment 30,000
Officers’ salaries 225,000
Rent for office space 220,000
Sales salaries and commissions 140,000
One-half of the rented premises is occupied by the sales department. What amount
should be reported as total selling expenses?
A. 360,000 C. 400,000
B. 370,000 D. 480,000
203. Wong company prepaid an income statement for the current year which included
legal and audit fees of P1,700,000, rent for office space P2,400,000, Interest on
inventory loan P2, 100, 000, and loss on abandoned data processing equipment
P350,000. The office space is used equally by sales department and accounting
department. What total amount should be included in general and administrative
expenses?
A. 2,900,000 C. 4,100,000
B. 3,250,000 D. 5,000,000
204. Jamaica Corporation which is subject to a 35% tax rate reported current tax
expenseof P4,000,000 for the year ended December 31, 2017, its first year in
operations. The following items were also recognized in the statement of financial
position during the year. Deferred tax asset in the amount P560,000 arising from
an installment sale expected to be collected equally in 2018 and 2019. And a
deferred tax liability of P1,440,000, caused by accelerated depreciated methods
used in tax reporting. P440,000 of the deferred tax liability is expected to reverse
with in 2018 while the balance in later years. The 2017 total income tax expense is
a. P4,000,000 c. P3,120,000
b. P4,720,000 d. P4,880,000
205. Abigail Company reported P2, 450 net of tax debit reclassification adjustment of
other comprehensive income in the year the securities are sold. The tax rate is
30%. What is the gain or loss that is included in income from continuing operations
before income tax?
A. 3,500 loss C. 2,450 gain
B. 2,450 loss D. 3,500 gain
206. Sanny Co. purchases land and constructs a service station and car wash for a total
of P360, 000. At January 2, 2016, when construction is completed, the facility and
land on which it was constructed are sold to a major oil company for P400,000 and
immediately leased from the oil company by Sanny. Fair value of the land at time
of sale was P40, 000. The lease is a 10-year, non-cancelable lease. Sanny uses
straight-line depreciation for its other various business holdings. The economic life
of the facility is 15 years with zero salvage value. Title to the facility and land will
pass to Sanny at termination of the lease. A partial amortization schedule for this
lease is as follows:
Payments Interest Amortization Balance Jan.

2, 2016 P400,000.00
Dec. 31, 2016 P65,098.13 P40,000.00 P25,098.13 374,901.

87
Dec. 31, 2017 65,098.13 37,490.19 27,607.94 347,293.
93
Dec. 31, 2018 65,098.13 34,729.39 30,368.74 316,925.
19
The total lease-related expenses recognized by the lessee during 2017 are which of
the following?
a. P64,000 c. P73,490
b. P65,098 d. P61,490
207. During the current year, steel company retired bonds payable five years before
their scheduled maturity resulting in a P260,000 gain. A steel forming segment
suffered P55,000 in loss due to storm surge damage during the year. Moreover, a
component of steel’s operations was sold at a loss of P350,000. What amount of
pretax gain or loss should be reported separately as a component of income from
continuing operations?
A. 350,000 loss C. 205,000 gain B.
255,000 loss D. 260,000 gain
208. At the beginning of year 1, Joshua Corporation grants 100 share options to each of
its 200 employees. Each grant is conditional upon the employee remaining in
service over the next three years. The entity estimates that the fair value of each
option is P21. On the basis of a weighted average probability, the entity estimates
that 60 employees will leave during the three-year period and therefore forfeit
their rights to the share options. Suppose that 15 employees leave during year 1.
Also suppose that by the end of year 1, the entity’s share price has dropped, and
the entity reprices its share options, and that the repriced share options vest at the
end of year 3. The entity estimates that a further 35 employees will leave during
year 2 and 3. During year 2, a further 10 employees leave, and the entity estimates
that a further 10 employees will leave during year 3. During year 3, a total of 8
employees leave.The entity estimates that, at the date of repricing, the fair value of
each of the original share options granted (ie before taking into account the
repricing) is P10 and that the fair value of each repriced share option is P13.
The amount to be recognized as expense in year 3 is
a. P400,800 c. P150,750
b. P136,800 d. P145,050
209. Alyssa Company had comprehensive insurance policy which allows its assets to be
replaced at current value. The policy has P250, 000 deductible clause. One of the
waterfront warehouses was destroyed in hailstorm. Hailstorms occur
approximately every four years. The entity incurred P100, 000 for dismantling the
warehouse and plans to replace it. The current carrying amount of the warehouse
is P1, 500,000 and the replacement cost is P5, 500,000. What amount of gain
should be reported as a separate component of income from continuing
operations?
A. 0 C. 3,900,000
B. 3,650,000 D. 5,150,000
210. Diana Company borrowed P400,000 on a 10% note payable to finance a new
warehouse Diana is constructing for its own use. The only other debt on Diana’s
books is a P600,000, 12% mortgage payable on an office building. At the end of the
current year, average accumulated expenditures on the new warehouse totaled
P475,000. Diana should capitalize interest for the current year in the amount of
a. P52,250 c. P47,500
b. P49,000 d. P40,000
211. Merill company reported the following information for the current year:
Sales 575,000
Cost of sales 240,000
Administrative expenses 70,000
Loss on sale of equipment 10,000
Sales commissions 50,000
Freight out 15,000
Loss on early retirement of long-term debt 20,000
Uncollectible accounts expense 15,000
The finished goods inventory was P400,000 On January 1 and P360,000 on
December 31
The tax rate is 30%. What amount should be reported as income from continuing
operations?
A. 126,000 C.140,000
B. 129,500 D. 147,000
212. At the beginning of 2016, SBP Corp. grants share options to each of its 100
employees working in the sales department. The share options will vest at the end of
2018, provided that the volume of sales of a particular product increases by at least an
average of 5% per year. If the volume of sales of the product increases by an average of
between 5% and 10% year, each employee will receive 100 share options. If the volume
of sales increases by an average of between 10% and 15% each year, each employee will
receive 200 share options. If the volume of sales increases by an average of 15% or
more, each employee will receive 300 share options.On grant date, SBP Corp. estimates
that the share options have a fair value of P20 per option. SBP Corp. also estimates that
the volume of sales of the product will increase by an average of between 10% and 15%
per year. The entity also estimates, on the basis of a weighted average probability, that
19% of employees will leave before the end of 2018.
By the end of 2016, seven employees have left and the entity still expects that a total of
19 employees will leave by the end of 2018. Product sales have increased by 12% and
the entity expects this rate if increase to continue over the next 2 years. By the end of
2017, a further six employees have left. The entity now expects only three more
employees will leave during 2018. Product sales have increased by 18%. The entity now
expects that sales will average 15% or more over the three-year period. The
compensation expense in 2017 is
a. P228,000 c. P232,000
b.P224,000 d. P0
213. The following balances are shown in the shareholders’ equity of Armel company
on December 31, 2016:
Preference share capital, P10 par, 100,000 shares P 1,000,000

Ordinary share capital, P10 par, P500,000 shares 5,000,000
Share premium- preference 50,000
Share premium- ordinary 200,000
Total P6,350,000
During 2017, the following transactions pertaining to the shareholders’ equity were
completed:
 Retirement of 5,000 preference shares at P9 per share.

 Purchase of 5,000 ordinary shares at 12 per share to be held as treasury
shares.
 Shares split, ordinary, 2 for 1.
 Reissue of 2,000 treasury shares at P8 per share.
 Profit for 2017, P300,000.
The total retained earnings at 31 December 2017 is

a. P400,000 c. P392,000
b. P395,000 d. P387,000
214. Shanille company reported income before tax of P125,000 for 2014. The
auditor questioned the following amounts that has been included in income tax:
Unrealized gain on available-for-sale investment 40,000
Equity in earnings of Cinn company 20,000
Dividends received from Cinn company 8,000
Adjustment to profit of prior years for arithmetical error in depreciation
(35,000) Shanille company owns 40% of Cinn’s ordinary shares. What amount
should be reported as income tax for 2014?
A. 85,000 C. 117,000
B. 112,000 D. 152,000
215. Yahairah Corp.’s outstanding share capital at December 15, 2017, consisted of
the following:
 30,000 5% cumulative preference shares, par value P10 per share, fully
participating as to dividends. No dividends were in arrears.
 200,000 ordinary shares, par value P1 per share.
On December 15, 2017, Yahairah declared dividends of P100,000. What was the
amount of dividends payable to Yahairah’s ordinary shareholders?
a. P10,000 c. P40,000
b. P34,000 d. P47,500
216. The shareholder’s equity account balances for the Julieann, Inc. on December 31,
2017 follows:
12% Preference share capital, P100 par, 20,000 shares P2,000,000

Ordinary share capital, P25 par, 145,000 shares 3,625,000
Subscribed share capital, net of P500,000 subscriptions receivable 1,000,000
Treasury shares, 5,000 shares, at cost 400,000
Preference shares have a liquidation value of P110; shares are cumulative, with
dividends in arrears for 3 years including the current year and fully payable in the
event of liquidation. The book value of an ordinary share is
a. P22.50 c. P27.78
b. P25.00 d. P29.00
217. On December 1, 2014, Andrew company committed to a plan to dispose of a

business components assets. The disposal meets the requirements to be classified as
discontinued operations. On that date, the entity estimated that the loss from the
disposition of the assets would P700,000 and the component’s operation loss was
P200,000. Disregarding income tax, what amount of loss should be reported for
discontinued operation for 2014?
A. 0 C. 700,000
B. 200,000 D. 900,000
218. Maricris Company’s capital structure was as follows:

2016 2017
Outstanding securities:
Ordinary P1,000,000 1,000,000
Convertible preference 100,000 100,000
10% convertible bonds payable P30,000,000 P30,000,0
00
During 2017, Maricris paid dividends of P15 per share on its preference shares. The
preference shares are convertible into 150,000 ordinary shares and the 10% bonds
are convertible into 300, 000 ordinary shares. Profit for 2017 was P10,000,000. The
income tax rate is 35%. The diluted earnings per share for 2017 should be
a. P8.50 c. P8.24
b. P8.04 d. P7.50
219. On December 31, 2014, the Board of Directors of Max Company committed to a
plan to discontinue the operations of its Underwear Division. The entity estimated that
underwear’s 2015 operating loss would be P500,000 and that the fair value of its
facilities was P300,000 less than carrying amount. Underwear’s 2014 operating loss was
P1,400,000, and the division was actually sold for P400,000 less than carrying amount in
2015. The effective tax rate is 30%
What amount should be reported as loss from discontinued operations in 2014?
A. 0 C. 1,190,000
B. 980,000 D. 1,1400,000
The entity has a nuclear power plant and a related decommissioning liability. The
nuclear power plant started operating on 1 January 2014. The plant has a useful life of
40 years. Its initial cost was P120 million, this included an amount for decommissioning
costs of P10 million, which represented estimated cash flows payable in 40 years
discounted at a risk-adjusted rate of 5%. The entity’s financial year ends on 31
December.
The entity adopts the revaluation model on 31 December 2016. A market-based
discounted cash flow valuation of P115 million is obtained at 31 December 2016. It
includes an allowance of P11.6 million for decommissioning costs, which represents no
change to the original estimated, after the unwinding of three years’ discount. On
December 31, 2017, the decommissioning liability (before any adjustment) is P12.2
million and the discount rate has not changed. However, on that date, the entity
estimates that, as a result of technological advances, the present value of the
decommissioning liability has decreased by 5 million. The entity decides that a full
valuation of the asset is needed at 31 December 2017, in order to ensure that the
carrying amount does not differ materially from fair value. The asset is now valued at
P107 million, which is net of an allowance of P7.2 million for the reduced
decommissioning obligation that should be recognized as a separate liability. The entity
does not transfer realized surplus directly to retained earnings.
220. The entity should report revaluation surplus as of 31 December 2016 at

a. P15.6 million c. P4 million
221. The entity should report revaluation surplus as of 31 December 2017 at

a. P8.358 million c. P0.108 million
b. P11.622 million d. Nil
222. Palmyra company has net income of P1, 100,000, a positive P100, 000 net
cumulative effect of a change in accounting policy, a P300,000 unrealized loss on
available-for-sale securities, a positive P200,000 foreign current translation
adjustment, and a P600,000. Increase in share capital. What is the comprehensive
income?
A. 400,000 C. 1,100,000
B. 1,000,000 D. 1,700,000
223. Gamaliel has just acquired the net assets of complete for P100,000. In acquiring
complete, the owners of Gamaliel felt that complete had unrecorded goodwill.
They decided to capitalize the estimated annual superior earnings of complete at
20% to determine the amount of goodwill. The computation resulted in an
estimated goodwill of P10,000. A rate of 10% on net assets before recognition of
goodwill was used to determine normal annual earnings complete, because it is
the rate that is earned on net assets in the industry in which complete operates. All
other assets of complete were properly recorded. The estimated annual earning of
complete is
a. P10,000 c. P9,000
b. P2,000 d. P11,000
224. On January 1, 2013, the Junniel Corporation purchased machinery for P650,000
which it installed in a rented factory. It is depreciating the machinery over 12 years
by the straight-line method to a residual value of P50,000. Late in 2017, because of
increasing competition in the industry, the company believes that its asset may be
impaired and will have a remaining useful life of 5 years, over which it estimates
the asset will produce total cash inflows of P1,000,000 and will incur total cash
outflows of P825,000. The cash flows are independent of the company’s other
activities and will occur evenly each year. The company is not able to determine
the fair value based on a current selling price of the machinery. The company’s
discount rate is 10%. The impairment loss to be recognized in 2017 profit or loss is.
a. P317,322 c. P246,490
b. P267,322 d. P217,322
225. Nicole Company on provided the following net of tax figures for the current year:
Net remeasurement loss on defined benefit plan 300,000
Unrealized gain on available for sale securities 1,500,000
Reclassification adjustment for gain on sale of available-for-sale
Securities included in net income 250,000
Share warrants outstanding 400,000
Net income 7,700,000
What is the comprehensive income for the current year?
A. 8,650,000 C. 8,950,000
B. 8,900,000 D. 9,050,000
226. On January 1, 2015, Sam Inc. purchased a patent with a cost P1,160,000, a useful
life of 5 yrs. The company uses straight-line depreciation. At December 31, 2016,
the company determines that impairment indicators are present. The fair value
less cost of disposal of the patent is estimated to be P540,000. The patent’s value-
in-use is estimated to be P565,000. The asset’s remaining useful life is estimated to
be 2 years. The company’s 2017 income statement will report amortization
expense for the patent of
a. P188,333 c. P282,500
b. P232,000 d. P595,000
227. Jonald, Inc. is preparing its financial statements for the year ended December 31,
2017. Accounts payable amounted to P200, 000 before any necessary year-end
adjustment related to the following:
 At December 31, 2017, Jonald has a P50,000 debit balance in its accounts
payable to Twist, a supplier, resulting from a P50,000 advance payment for
goods to be manufactured to Jonald’s specifications.
 Checks in the amount of P25,000 were written to vendors and recorded on
December 29, 2017. The checks were dated January 5, 2018.
What amount should Jonald report as accounts payable in its December 31, 2017
a. P275,000
b. P250,000
c. P200,000
d. P125,000
228. Rachel Company reported the following for the current year:
Unrealized loss on futures contract designated as cash flow hedge 500,000
Revaluation surplus during the year 350,000
Unrealized gain on financial asset at TVTOCI 150,000
Remeasurement gain on employee benefits 120,000
Gain on translation of financial statements of a foreign corporation 150,000
Loss from change in fair value attributable to credit risk of a
Financial liability designated at FVTPL 200,000
In preparing the statement of comprehensive income, what net amount should be
reported in other comprehensive income that may not be recycled to profit or loss?
A. 350,000 C. 470,000
B. 420,000 D. 620,000
229. An entity issued a P100, 000 debenture to a local bank. The debenture contract
requires the entity, on the sixth anniversary of the loan, to pay the local bank
P134,010 to redeem the debenture (ie P100,000 repayments of capital and
P34,010 premium). The debenture has a coupon of zero (ie it is ‘interest-free’). The
interest expense to be recognized by the entity in the second year of the loan is
a. P6,700 c. P5,250
b. P6,365 d. Nil
230. Jacqueline Company reported net income of P300, 000,000 for the current year.
Changes occurred in certain accounts as follows:
Equipment 250,000 increase
Accumulated depreciation 400,000 increase
Note payable 300,000 increase
During the year, the entity sold equipment costing P250, 000 with accumulated
depreciation of P120, 000 for a gain of P50, 000. In December of the year, the entity
purchased equipment costing P500, 000 with P200, 000 cash and a 12% note
payable of P300,000. In the statement of cash flows, what amount should be
reported as net cash provided by operating activities?
A. 3,400,000 C. 3,520,000
B. 3,470,000 D. 3,570,000
231. On January 1, 2017, Joyce Company dated and issued P1,000,000, 5%, 5-year
convertible bonds for P1,045,000. Bonds are convertible at the investor’s option
into 200,000 ordinary shares. Interest is payable quarterly. Bonds without the
conversion feature would have been issued to yield 6%. What is the value of the
conversion
feature? c. P87,080 a. P42,892 d. P87,892
b. P56,917
232. In 2014, a storm surge completely destroyed a building belonging to Holland

Company. The building cost P100,000 and had accumulated depreciation of
P48,000 at the time of the loss. The entity received a cash settlement from the
insurance entity and reported a loss of P21,000 in the 2014 statement of cash
flows what is net change reported in the investing activities?
A. 10,000 increase C. 31,000 increase
B. 21,000 decrease D. 52,000 decrease
233. In January 2017, Daniel Corporation acquired 20 percent of the outstanding

ordinary shares of Investee Company for P1, 120,000. This investment gave Daniel
the ability to exercise significant influence over Investee. The book value of the
acquired shares was P840, 000. The excess of cost over book value was attributed
to an identifiable intangible asset that was undervalued on Investee’s balance
sheet and that had a remaining useful life of ten years. For the year ended
December 31, 2017, Investee reported net income of P252, 000 and paid cash
dividends of P56, 000 on its ordinary shares. What is the proper carrying value of
Daniel’s investment in Investee at December 31, 2017?
a. P1, 080,800
b. P1, 092,000
c. P1,131,000
d. P1,181,000
234. Fara Company reported bonds payable of P47,000 on December 31, 2014, and
P50,000 on December 31, 2015. During 2015, the entity issued P20,000 of bonds
payable in exchange for equipment. There was no amortization of bond premium
or discount during the year. What amount should be reported in the 2015
statement of cash flows for redemption of bonds payable?
A. 3,000 C. 20,000 B.
17,000 D. 23,000
235. During 2017, Jude Co. pays an insurance premium of P31,800 on a P900,000 life
insurance policies covering the president. The cash surrender value of the policy
will increase from P165,000 to P175,200 during 2017. The entity received dividends
to P3, 300 from the insurance company during 2017. The president died half-way
through 2017. The policy indicates that the cash surrender value P170,100 at that
date and 50% of the premium is refunded. The life insurance expense for the year
2017 is a. P18,300 b P5,700 c. P7,500
d. P2,400
236. On 1 January 2017, an entity accepted an order for 7,000 custom-made corporate
gifts. On 3 January 2017 the entity purchased raw materials to be consumed in the
production process for P550,000, including P50,000 refundable purchase taxes.
The purchase price was funded by raising a loan P555,000 (Including P5,000 loan-
raising fees). The loan is secured by the inventories. During January 2017 the entity
designed the corporate gifts for the customer. Design costs included:
 Cost of external designer = P7,000

 Labor = P3,000
During February 2017, the entity’s production team developed the manufacturing
technique and made further modifications specified in the agreement. The following
costs were incurred in the testing phase:
 Material, net of P3,000 recovered from the sale of the scrapped output =
P21,000
 Labor = P11,000
 Depreciation of plant used to perform the modifications =P5,000
During February 2017 the entity incurred the following additional cost in
manufacturing the customized corporate gifts:
 Consumable stores = P55,000
 Labor = P65,000
 Depreciation of plant used to perform the modifications = P15,000
The customized corporate gifts were ready for sale on 1 March 2017. No abnormal
wastage occurred in the development and manufacture of the
corporate gifts. What is
the cost of the inventory?
a. P682,000 c. P632,000
b. P635,000 d. P585,000
237. King Company provided the following information for the current year.
Dividends paid 300,000

Proceeds from issuance of shares 250,000
Borrowings under a line of credit 200,000
Proceeds from issuance of convertible bonds 100,000
Proceeds from sale of building 150,000
What is the increase in cash flows provided by financing activities?

A. 50,000 C. 250,000
B. 150,000 D. 550,000
238. The following information has been extracted from the records of Katrina
Corporation about one of its products.
Date No. of Units Unit

Cost
Jan. 1. Beginning Balance 1,600
P14.0
0
Jan. 6 Purchased 600
14.10
Feb. 5 Sold @ P24.00 per unit 2,000
Mar. 19 Purchased 2,200
14.70
Mar. 24 Purchased returns 160
14.70
Apr. 10 Sold @ P24.20 per unit 1,400
June 22 Purchased 16,800
15.00
July 31 Sold @ P26.50 per unit 3,600
Aug. 4 Sales returns @ P26.50 per unit 40
Sept. 4 Sold @ P27.00 per unit 7,000
Nov. 15 Purchased 1,000
16.00
Dec. 28 Sold @ P30.00 per unit 6,200
Compute for the cost of ending inventory under moving average method. (Round
unit costs to two decimal places.)
a. P28,241 c. P28,421
b. P28,050 d. P28,500
239. The following data were taken from the books of Roi Co, for the current year:
From cash records:

Cash purchases P
30,000
Payments to trade creditors for credit purchases 302,6
From balance sheets 00
Accounts Payable
January 1 37,5
00
December 31 43,3
00
Merchandise Inventory, January 1 12,800
From other records:
0

a. P16,200 c. P12,800
b. P13,800 d. P23,700
240. Charlie Company uses the averaged cost retail method to estimate its inventory.
Data relating to the inventory at December 31, 2017 are:
Cost Retail
00
Purchases 10,600,000 14,000,0
00
Net markups 1,600,0
00
Net markdown 600,0
00
Sales 12,000,0
00
Estimated normal shoplifting losses 400,0
Estimated normal shrinkage is 5% of sales 00
Charlie’s cost of goods sold for the year ended December 31, 2017 is
a. P8,680,000 c. P7,700,000
b. P9,100,000 d. P8,400,000
241. Tristine Dairy produces milk to sell local and national ice cream producers.
Tristine Dairy began operations on January 1, 2017 by purchasing 840 milk cows for
P1,176,000. The company controller had the following information available at year end
relating to the cows:
Carrying Value, January 1, 2017 P1,176,000
Increase in fair value due to growth and price changes 365,000
At December 31, 2017, what is the value of the milking cows on Tristine Dairy’s
a. P1,583,000 c. P1,499,000
b. P1,553,000 d. P1,445,000
Question 242 thru 246 are based on the following information
Kristy Company used the direct method to prepare statement of cash flows:
2015 2014
Cash 35,000 32,000
Accounts receivable 33,000 30,000
Inventory 31,000 47,000
Property, plant and equipment 100,000 95,000
Unamortized bond discount 4,500 5,000
Cost of goods sold 250,000 380,000
Selling expenses 141,500 172,000
General and administrative expenses 137,000 151,000
Interest expense 4,300 2,600
Income tax expense 20,400 61,200
756,700 976,100

1,100
Trade accounts payable 25,000 17,500
Income taxes payable 21,000 27,000
Deferred income taxes 5,300 4,6
00
8% callable bonds payable 45,000 20,0
00
Share capital 50,000 40,000
Share premium 9,100 7,500
Sales 538,800 778,7
00
756, 700 976, 100
The entity purchased P5,000 in equipment during 2015.the entity allocated one-third of
the depreciation expense to selling expenses and remainder to general administrative
expense. There statement of cash flows for the following:
242. Cash collected from customer?

A. 535,800 C. 541,600
B. 536,000 D. 541,800
243. Cash paid for goods to be sold?

A. 226,500 C .257,500
B. 242,500 D. 258,500
244. Cash paid for selling expense?

A. 140,000 C. 142,500
B. 141,000 D. 142,000
245. Cash paid for interest?

A. 1,700 C. 4,300
B. 3,800 D. 4,800
246. Cash paid for income taxes

A. 15,000 C. 20,400
B. 19,000 D. 25,800
247. In January,Jomarc Corporation entered into a contract to acquire a new machine

for its factory. The machine, which had a cash price of P300,000, was paid for as
follows:
Down payment P 30,000

Note payable in 10 equal monthly installments 240,000 1,000
Ordinary share of Jomarc with an agreed value of P50 per share 50,000
Total P320,000
Prior to the machine’s use, installation costs of P8,000 were incurred. The machine has
an estimated useful life of ten years and an estimated salvage value of P10,000. What
should Jomarc record as depreciation expense for the first year under the straight-line
method?
a. P31,800 c. P30,0
b. P31,000 00
d. P29,8
00
Question 248 thru 250 are based on the following information.
Vanessa Company provided the following data:

2015 2014
Cash 350,000 150,000
Accounts receivable, net 840,000 580,000
Merchandise inventory 660,000 420,000
Prepaid expense 50,000 100,000
Long-term investment 80,000 -
Property, plant and equipment 1,130,000 600,000
Accounts payable 530,000 440,000
Accrued expense 140,000 130,000
Dividend payable 70,000 -
Note payable – long-term debt 500,000 -
Share capital 1,200,000 900,000
Net credit sales 6,400,000 4,000,000
Cost of goods sold 5,000,000 3,200,000
Expenses 1,000,000 520,000
Net income 400,000 280,000
All accounts receivable and accounts payable relate to trade merchandise. Accounts
payable are recorded net and always paid to take all of the discounts allowed. The
allowance for doubtful accounts at the end of 2015 was the same as the end of
2014. No receivables were charged against the allowance during 2015.
The proceeds from the note payable were used to finance a new store building.
Share capital was sold to provide additional working capital.
248. What is the net cash provided by operating activities for the current year?
A. 100,000 B. 200,000 B.
110,000 C. 400,000
249. What is the net cash used in investing activities for the current year?
A. 80,000 C. 610,000
B. 530,000 D. 660,000
250. What is the net cash provided by financing activities for the current year?
A. 140,000 C. 500,000
B. 300,000 D. 700,000
251. Michael Corporation has a machine costing P480,000, with an annual depreciation
of P96,000, and has accumulated depreciation of P240,000 on December 31, 2016.
On April 1, 2017, when the machine has a fair value of P192,000, it is exchanged for
a similar machine with a fair value of P576,000 and the proper amount of cash is
paid. The loss to be recognized on exchange is
a. P48,000 c. P168,000
b. P24,000 d. P 0
252. Correy Company and its divisions are engaged solely in manufacturing operations.
Segment Revenue Operating Profit Assets
A 10,000,000 1,750,000 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 1,200,000 12,500,000
D 3,000,000 550,000 7,500,000
E 4,250,000 675,000 7,000,000
F 1,500,000 225,000 3,000,000
How many reportable segments does Correy have?
A. Three C. Five
B. Four D. Six
253. Factory equipment with an estimated useful life of 10 years was purchased by
Jaymoore Co. on December 30,2013. The equipment was expected to have a residual
value of P5, 000 at the end of its service life. The sum of the year’s digit method was
used in computing depreciation. For the year ended December 31, 2017, the
depreciation applicable to this equipment was P42,000. The cost of the factory
equipment purchased on December 30, 2013 was
a. P325,000 c. P335,000
b. P293,750 d. P330,000
254. Ina Company, a publicly-owned entity, assesses performance and makes

operating decisions using for the reportable segment total revenue of P7, 680,000 and
total profit and loss of P460, 000. The total profit and loss included intersegment profit
of P61, 000. In addition the entity has P5, 000 of common costs for the reportable
segments that are not allocated in reports reviewed by the chief operating decision-
maker. For purposes of segment reporting, what amount should be reported as
segment profit to the reportable segments?
A. 345,000 C. 460,000
B. 350,000 D. 411,000
255. Klaus Company followed the calendar year as the accounting period. The 2014
financial statements were authorized for issue on March 15, 2015.
• On February 1, 2015, the entity determined that the total cost of the
equipment purchased is P3, 700, 000. The asset was purchased on November
12,2014
• On March 15, 2015, the entity discovered that the 2014 depreciation expense
was overstated by P470, 000.
• On March 20, 2015, the entity issued 100,000 ordinary shares at par of P10 per
share.
• On March 27, 2015, the entity filed a case against another entity for patent
infringement. The legal counsel assed that it is probable that the entity will win
the case for an amount of P550,000
What total amount should be reported as adjusting entries on December 31, 2014?
A. 3,700,00 C. 5,170,000 B.
4,170,000 D. 5,720,000
256. The following account balances appear in the trial balance of Jet’s Garment
Manufacturing Company as of December 31, 2017:
Raw Materials Inventory, January 1 P115, 000

Raw Materials inventory, December 31 160,000
Direct Labor 180,000
Light and power 30,000
Freight in and handling 15,000
Factory supplies used 25,0
00
Insurance – factory 8,000
Goods in process- January 1 140,000
Goods in process inventory- December 31 132,0
00
Fuel, oil, and lubricants 23,000
Taxes and licenses- factory 11,000
Repairs and Maintenance- factory 7,0
00
Depreciation- plant and equipment 35,0
00
Depreciation- Office equipment 9,0
00
Finished Goods inventory, January 1 137,0
00
Finished goods inventory, December 31 110,0
00
Sales 933,000
Selling expenses 105,000
Administrative Expenses 50,000
Sales return and allowance 7,000
Indirect labor 60,000
Interest expense 18,000
Purchases or raw materials 500,000
SSS and Medicare premiums- factory 22,000
Retained earnings, January 1135,000
Cost of goods sold was

a. P905, 000 c. P869,000
b. P896, 000 d. P874,000
257. Ronald Inc. is a small publicly listed company whose activities consist of an
engineering branch (also acting as the head office) and a paint shop branch producing
specialized industrial coatings. During the year ended December 31, 2017, the paint
shop branch became unprofitable and the directors made the decision to close down
the branch. The employees have been told of the closure and those employees who
cannot be transferred to the engineering branch have been redundancy/retrenchment
notices. In addition, the directors have written to all of the paint shop’s customers
informing them that no further orders will be accepted and the branch will formally
close on January 31, 2018. The estimated direct costs of the closure, which have not yet
been provided for, are:
Employee related to costs P10, 000,000
Losses on disposal of branch net assets 15,000,000
The paint shop’s revenues and operating expenses for 2017, respectively, were P40,
000, 000 and P60, 000,000. In addition, it is expected that the operating losses of
the paint shop during January 2018 will be P2, 000,000. Assuming a 35% tax rate,
how much will be reported as loss from discontinued operations in Ronald’s 2017
income statement?
a. P13,000,000 c. P30,550,000
b. P19,500,000 d. P29,250,000
258. On June 30, 2014, Line Company incurred a P100, 000 net loss from disposal of a
business segment. Also on June 30, 2014, the entity paid P40, 000 for property taxes
assessed for the 2014. What amount should be included in the determination of net
income or loss for the six-month interim period ended June 30, 2014?
A. 70,000 C. 120,000
B. 90,000 D. 140,000 259. What
amount of comprehensive income should John Corporation report on
its statement of profit or loss and other comprehensive income given
the following net of tax figures that represent changes during a
period?
Remeasurement loss on defined benefit obligation (P3,000)
Unrealized gain on available-for-sale securities 15,000
Reclassification adjustment, for securities gain included in net income (2,500)
Share warrants outstanding 4, 000
Net Income 77,000
a. P86,500 c. P89,500
b. P89,000 d. P90,500
260. Jessa Company reported P4,750,000 net income for the quarter ended September
30,2014 which included the following after tax items:
• A P3, 000,000 expropriation gain, realized on April 30, 2014, was allocated equally
to the second, third, and fourth quarters of 2014.
• An P800,000 cumulative-effect loss resulting from a change in inventory valuation
method was recognized on August 1, 2014
The entity paid P2, 400,000 on February 1, 2014, for 2014 calendar year property
taxes. Of this amount, P600, 000 was allocated was the third quarter ended
September 30, 2014.
What amount should be reported as net income for third quarter?
A. 4,550,000 C. 5,550,000
B. 5,150,000 D. 5,750,000
261. In the year ended 31 May 2017, Hanne Co purchased non-current assets with a
cost of P140, 000, financing them partly with a new loan of P120, 000. Hanne Co
also disposed of non-current assets with a carrying value of P50, 000 making a loss
of P3, 000. Cash of P18, 000 was received from the disposal of investments during
the year. What should be Hanne Co’s net cash flow from investing activities
according to PAS 7 Statement of cash flows?
a. P45,000
b. P75,000
c. P69,000
d. P48,000
262. Julius company had the following account balances on December 31, 2014:
Cash in bank 5, 200, 000
Cash on hand 350, 000
Cash fund set aside for dividends payable in 2015 200, 000
Cash fund set aside for land acquisition in 2015 1, 500, 000 The cash in bank
included P250, 000 compensating balance against short-term borrowing and is not
legally restricted as to withdrawal. The cash on hand included a check ofP100, 000
payable to the entity dated January 3, 2015.
What amount should be reported as cash under current assets on December 31, 2014:
A. 5,400,000 C. 5,750,000
B. 5,650,000 D. 7,150,000
263. An analyst compiled the following information for Dominic, Inc. for the year
ended December 31, 2017:
 Net Income was P1, 700,000.

 Depreciation expense was P400, 000.
 Interest paid was P200, 000.
 Income taxes paid were P100, 000.
 Common stock was sold for P200, 000.
 Preferred stock (eight percent annual dividend) was sold at par value of P250,
000.
 Common stock dividends of P50, 000 were paid.
 Preferred stock dividends of P20, 000 were paid.
 Equipment with book values of P100, 000 was sold for P200,000.
Using the indirect method, what was Dominic, Inc.’s net cash flow from operating
activities for the year ended December 31, 2017? a. P1,630,000
b. P1,700,000
c. P1,900,000
D P2,000,000
264. Annibelle company provided the following account balances on December 31,
2014:
Cash in bank 2,250,000
Cash on hand 125,000
Cash restricted for addition to plant expected to be disbursed in 2015 1,600,000
Cash in money market account 750,000
Treasury bill purchased November 1, 2014 maturing January 31, 2015 3,500,000
Treasury bill purchased December 1, 2014 maturing March 31, 2015 2,000,000
Cash in bank included P600, 000 of compensating balance against short-term barrowing
arrangement. The compensating balance is not legally restricted as to withdrawal. What
total amount should be reported as cash equivalents on December 31, 2014?
A. 6,025,000 C. 8,225,000 B.
6,625,000 D. 8,625,000
265. Joshuarey Co. provided the following information on selected transactions during
2017:
Purchase of land by issuing bonds P250, 000

Proceeds from issuing bonds 500,000
Purchases of inventory 950,000
Purchases of treasury shares 150,000
Loans made to affiliated corporations 350,000
Dividends paid to preference shareholders 100,000
Proceeds from issuing preference share 400,000
Proceeds from sale of equipment 50,000
The net cash provided by financing activities during 2017 is
a. P550, 000 c. P800,000
b. P650, 000 d. P900,000
266. Karen company provided the following information on December 31,2014

Cash on hand 500,000
Pretty cash fund 20,000
Security bank current account 3,000,000
BDO Current account No. 1 4 00,000 BDO
Current account No. 2 (50,000)
BSP treasury bill-60 days 4,000,000
BPI time deposit-30 days 1,000,000
The cash on hand included a costumer postdated check of P100,000 and postal
money order ofP40,000. A check of P300.000 was drawn against Security Bank
account, dated January 15,2015, delivered to the payee and recorded December 31,
2014. The BPI time deposit is setaside for acquisition of equipment. What total of
amount of cash & cash equivalents should be reported on December 31, 2014?
A. 7,470,000 C. 8,070,000
B. 7,770,000 D. 9,070,000
267. Eddielyn Co. had the following balances at December 31, 2017:
Cash in checking Account P35,0

00
Cash in money market account 75,000
Treasury bill, purchased 11/1/2017, maturing 1/31/2018 350,0
00
Treasury bill, purchased 12/1/2017,maturing 3/31/2018 400,00
0
What amount should Eddielyn report as cash and cash equivalents in its December
31, 2017 statement of financial position? a. P110,000
b. P385,000
c. P460,000
d. P860,000
268. Joan Company prepared the following bank reconciliation dated June 30 of the
current year.
Balance per bank 9,800,000

Deposit in transit 400,000
Outstanding check (1,400,000)
Balance per book 8.800,000
There were total deposits of P6, 500,000 and charges for disbursements of P9,
000,000 for July per bank statement. All reconciliation items on June 30 cleared the
bank on July 31. Deposits in transit totaled P900, 000 and checks outstanding
amounted to P1,000,000 on July 31. What is the amount of cash in the bank to be
reported on July 31?
A. 6,200,000 C. 7,200,000
B. 7,000,000 D. 8,600,000
269. Your analysis of the accounts receivable of Mark Company indicated the following:
Accounts Receivable, January 1 P 300,000

Allowance for doubtful accounts, January 1 40,000
Credit sales during the year 1,200,000
Cash collections during the year 1,100,000
Accounts Receivable written off during the year 20,000
In prior years, Mark’s bad debt expense has averaged 2% of credit sales. On
December 31, what would be the amount of Mark’s accounts receivable, net of any
allowance for doubtful accounts, assuming that Mark uses the credit sales method
to estimating bad debt expense?
a. P336, 000 c. P360,000
b. P358, 000 d. P400,000
270. On January 1, 2012, Christian Company sold a machine with a carrying amount of
P300, 000 and accepted in exchange a promissory note with a face value of P500,
000, a due date of December 31, 2021, and a stated rate of 4% with interest
receivable at the end of each year. The fair value of the machine is not readily
determinable and the note is not readily marketable. Under the circumstances, the
note is considered to have an appropriate imputed rate of interest of 8%. The
interest income to be recognized in
2017 is
a. P20, 000 c. P32, 604
b. P29, 264 d. P33, 612
271. Pope company had the following bank reconciliation at march 31,2014
Balance per bank statement 3/31/2014 46,500
Add deposit in transit 10,300
Total 56,800
Less than outstanding checks 12,600 Balance per book,
3/31/2014 44,200
Data per bank for the month of April 2014 follow:
Deposits 58,400
Disbursement 49,700
All reconciling items on March 31, 2014 cleared the bank in April. Outstanding
checks on April 30, 2014 totaled P7, 000. There were no deposits in transits on April
30, 2014.
What is the cash balance per book at April 30, 2014?
A. 48,800 C. 55,200
B. 52,900 D. 58,500
272. On January 1, 2016, Jaybee Corporation purchased P1,000,000 10% bonds for
P1,051,510 (including broker’s commission of P20,000). Interest is payable annually
every December 31. The bonds mature on December 31, 2018. The bonds are
classified as available-for-sale. The prevailing market rate for the bonds is 9% at
December 31, 2016. On December 31, 2017, Jaybee sold the bonds at 105. (Round
off present value factors to four decimal places).How much is the gain on sale of
bonds on December 31, 2017?
a. P31, 510 c. P18,490
b. P32, 390 d. P 1,510
273. Janine Company prepared the following bank reconciliation on June 30:
Balance per bank 9,800,000
Deposit in transit 400,000
Outstanding checks (1,400,000)
Balance per book 8,800,000
There were total deposit of P6, 500,000 and charge for disbursement of
P900,000,000 for July per bank statement. All reconciliation items on June 30
cleared the bank on July 31. Checks outstanding amounted to 1,000,000 on July 31.
What is the amount of cash disbursements per book in July?
A. 7,600,000 C. 8,600,000
B. 8,400,000 D. 9,400,000
274. Sherwin Company reported assets totaling P870, 000. The following information
relates to those assets:
 A rival company recently offered to give a P100, 000 signing bonus to the head
of Sherwin’s fabrication department if she would leave Sherwin and join the
rival company. She declined. Sherwin has consequently recorded a long-term
asset, “Employees Under Contract,” for P100, 000.
 Sherwin purchased a patent from a small research firm for P75, 000.
Subsequent research has shown that the patented technology doesn’t work as
well as originally thought and the technology actually has no economic use.
Sherwin reports the patent at its amortized cost of P60, 000.
 An independent appraiser recently set Sherwin’s market value at P500, 000.
This exceeded the book value of equity by P120, 000. Accordingly, Sherwin
recorded Goodwill totaling P120,000.
 Near the end of the year, Sherwin paid P30, 000 for the exclusive right to
market electronic equipment to be imported from abroad. Sherwin reported
this as a P30, 000 “Intangible Asset.”
 Sherwin placed an advertisement for its products in a local newspaper. The
newspaper advertisement cost the entity P20, 000 which the entity paid on
December 1. Although the advertisement will only appear in the December 31
newspaper, the entity expects that the advertisement will continue to generate
additional sales of its products in January next year. Sherwin reported this as a
P20, 000 “Intangible Asset.”
 When Sherwin started business three years ago, it was required to deposit P5,
000 with the local electric utility. The deposit is refundable if Sherwin cancels its
electric service. Sherwin earns no interest on the deposit. The deposit is record
as an “Other Long-Term Asset.”
After considering the items above, what should be the total of Sherwin’s
reported Assets?
a. P590, 000
b. P570, 000
c. P565,000
d. P535,000
275. Jerico Company reported liabilities totaling P1, 230,000. The following information
relates to those liabilities:
 Jerico reported a P100, 000 bank loan payable. However, Jerico intends to repay
this loan in January of the following year.
 Jerico has reported a P40, 000 liability for the estimated cost of future warranty
repairs based on product sales for the past year.
 Jerico is being sued for P350, 000 by a disgruntled employee. Jerico’s attorney
thinks that it is possible that Jerico will lose the case. Jerico has not yet recorded
any liability for this potential loss.
 Jerico receives consulting services from a local CPA. Expected services by the CPA
for the coming year will cost P35, 000. No liability has been recorded.
 Jerico has reached an agreement with a major customer. Jerico expects to
provide services totaling P400, 000 over the coming three years. The customer
has already paid Jerico P100, 000. No liability has been recorded.
After considering these items, what should be the total of Jerico’s reported
liabilities?
a. P1, 230, 000 c. P1,290,000
b. P1, 630, 000 d. P1,330,000
276. Art Inc. furnishes you with the following list of accounts:
Accounts payable P66,000

Accounts Receivable 40,000
Accumulated depreciation 44,000
Advances to sales persons 10,000
Advertising Expense 72,000
Allowance for Bad Debts 10,000
Bonds Payable 80,000
Cash 22,000
Certificates of deposit 16,000
Share capital, (par) 100,000
Deferred income tax liability 46,000
Equipment 215,500
Inventory 55,000
Investment in X Co. Shares (20% of outstanding shares owned) 76,500
Investment in Y Co. Shares (Trading securities) 21,000
Share Premium 42,500
Premium on Bonds Payable 6,000
Prepaid Insurance 6,000
Rent revenue 37,000
Rent Revenue received in advance (4 months) 12,000
Retained Earnings 97,500
Taxes Payable 10,000
Tools 52,000
The company’s working capital is

a. 72,000 c. 62,000
b. 66,000 d. 46,000
277. Terra Company used the imprest system in accounting for pretty cash fund. The
fund had an imprest balance of P20,000 at year-end which consisted of currency and
coins P1,000, employees advances P3,000, currency in envelope marked “collection for
Christmas Party” P2,000, check drawn by Terra Company payable to pretty cashier
representing salary P14,000.
What is included in the entry to adjust the pretty cash fund at year-end?
A. Debit cash short/over P2,000 C. Credit cash short/over P2,000
B. Debit pretty cash fund P15,000 D. Credit advances to employees P3,000
278. Arwin Company revealed the following information for 2014

Accounts receivable on January 650,000
Credit sales 2,700,000
Sales returns 75,000
Collections from customers 2,150,000
Accounts written off 40,000
Estimated future sales return at year-end 50,000
Estimated uncollectible accounts receivable at year-end per aging 110,000 On
December 31, 2014, what is the balance of accounts receivable before allowance for
doubtful accounts and allowance for sales returns?
A. 925,000 C. 1,125,000
B. 1,085,000 D. 1,200,000
Records of the Esme Company shows the following relative to product “Emerald”
Beginning January 3,000 units @ ₱ 300
Purchases March 2,500 units @ ₱ 320 SaleFebruary 1,600
units
June 1,500 units @ ₱ 350 April 2,000
units
July 500 units @ ₱ 420 August 400
units
October 1,000 units @ ₱ 380 September 600
units
November 1,200 units @ ₱ 360 December 1,800
units
279. The inventory balance under average – Perpetual

a. 996,000
b. 1,104,675
c. 1,165,000
d. 1,232,000
280. The Gross Profit under FIFO – periodic as compared to the gross profit under the
average-periodic is
a. Higher by 67,100 c. Higher by 127,325
b. Lower by 67,100 d. Lower by 127,325
281. Inge Company determined the net value of accounts receivable on December 31,
2014 based on an aging of accounts receivable was P325,000.
Allowance for uncollectible accounts- 1/1/2014 30,000
Uncollectible accounts written-off during 2014 18,000
Uncollectible accounts recovered during 2014 2,000
Accounts receivable on 12/31/2014 350,000
What is the uncollectible accounts expense for the current year?
A. 5,000 C. 15,000
B. 11,000 D. 21,000
The following transactions of Feodor Company during October were as follows:

 On October 1, Feodor Company discounted at the bank a customer’s ₱800,000,
9 – month, 12% note receivable dated May 1, 2018. The bank discounted the
note at 15%.
 On October 12, Feodor Company factors ₱600,000 of its receivables to Gian
Company on a without recourse basis. The agreement includes a factoring fee of
6% and a 12% holdback both based on the factored accounts.
 On October 30, 2018, Feodor Company assigned ₱500,000 to Hadiyyah Finance
Company, receiving an advance of 85% less a service charge of ₱8,500. The note
carries an interest rate of 8%.
282. The net cash proceeds from the transactions during October is
a. 1,668,500 c. 1,736,900
b. 1,722,400 d. 1,808,900
283. The loss arising from the derecognition of the receivable is

a. 56,100 c. 16,100
b. 47,600 d. 7,600
284. Brat Company adopted the aging method of estimating doubtful accounts on
December 31, 2014. The following data are available for the current year:
Allowance for doubtful accounts, January 2,500,000
Provision for doubtful accounts recorded during the year based on credit sale 2,000,000
Recoveries of accounts written off 500,000
Accounts written off 2,050,000
Estimated uncollectible accounts per aging on December 2,200,000
Estimated future sales return 1,500.000
What is the year-end adjustment to allowance for doubtful account?
A. 250,000 debit C. 750,000 debit
B. 250,000 credit D. 750,000 credit
285. Anchor Company acquired the following portfolio of investment through profit or
loss securities during 2014 and reported the following balances at December 31, 2014:
Security Cost December 31, 2014 Market Value

R P350,000 P360,000
P 425,000 400,000
N 525,000 640,000
No sales occurred during 2014. What is the carrying value of the securities on December
31, 2014 on Anchor's statement of financial position?
a. P1,275,000 c. P1,400,000
b. P1,300,000 d. P1,425,000
286. At year-end, Jana Company reported allowance for doubtful accounts with a debit
balance of P50, 000 and net sales P9,000,000nbefore adjustment. The entity estimated
uncollectible accounts receivable at 5% of net sales. What is the allowance for doubtful
accounts at year-end?
A. 400,000 C. 500,000
B. 450,000 D. 550,000
287. Master Company acquired the following portfolio of equity securities through
profit or loss during 2014 and reported the following balances at December 31, 2014:
Security Cost December 31, 2014 Market Value

C P300,000 P280,000
B 360,000 370,000
A 500,000 460,000
No sales occurred during 2014. All declines are considered to be temporary. What is the
carrying value of tie securities on December 31, 2014 on Master's statement of financial
position?
a. P1,110,000 c. P1,160,000
b. P1,150,000 d. P1,170,000
288. On January 1, 2014, Jamin Company had a credit balance of P260,000 in the
allowance for uncollectible accounts. Based on fast experiences, 2% of credit sales
would be uncollectible. During the year, the entity wrote off P325, 000 of uncollectible
accounts. Credit sales for the year were P9, 000,000. On December 31, 2014, what
amount should be reported as allowance for uncollectible accounts?
A. 115,000 C. 245,000
B. 180,000 D. 440,000
289. Cordial Company purchased the following portfolio equity securities through profit
or loss during 2014 and reported the following balances at December 31, 2014. No sales
occurred during 2014. All declines are considered to be temporary.
Security Cost December 31. 2014 Market Value

X P 800,000 P 820,000
Y 1,400,000 1,320,000
Z 320,000 280,000
How much should Cordial Company report as unrealized loss related to the securities
transactions in its 2014 profit or loss?
a. none c. P100,000 unrealized loss
b. P20,000 unrealized loss d. P120.000 unrealized loss
290. Klaire Company provided the following information about accounts receivable on
December 31, 2014:
0-60 days outstanding 6,000,000 5% uncollectible
61-120 days outstanding 4,500,000 10% uncollectible
Over 120 days outstanding 5,000,000 1,250,000 uncollectible
During 2014, the entity wrote off P700,000 in accounts receivable and recovered
P300,000 that had been written off in prior years. On January 1, 2014, the allowance
for uncollectible accounts was P500, 000. Under the aging method, what amount of
uncollectible accounts expenses should be reported for 2014?
A. 1,900,000 C. 2,100,000
B. 2,000,000 D. 2,200,000
291. Fortune Company purchased the following portfolio of equity securities through
profit or loss during 2014 and reported the following balances at December 31, 2014.
No sales occurred during 2014. All declines are considered to be temporary.
Security Cost Dec. 31. 2014 Market Value

AA P200,000 P205,000
BB 350,000 330,000
CC 280,000 270,000
Total P830,000 P805.000
How much should Fortune Company report as unrealized loss related to the securities
transactions in its 2014 profit or loss?
a. none c. P25,000 unrealized loss
b. P5,000 unrealized loss d. P30,000 unrealized loss
292. Delta Company sells to wholesalers on terms of 2/15, net 30. The entity has no
cash sales but 50% of the customers take advantage of the discount. The entity uses the
gross method of recoding sales and accounts receivable, an analysis on December 31,
2014 revealed the following:
AGE AMOUNT COLLECTIBLE
0-15 days 100,000 100%
16-30 days 60,000 95%
31-60 days 5,000 90%
Over 60 days2,500 500
On December 31, 2014, what amount should be reported as allowance of the

discounts?
A. 1,000 C. 1,675
B. 1,620 D. 2,000 293.
Primary Company purchased the following portfolio of equity securities
through profit or loss during 2014 and reported the following balances
at December 31, 2014. No sales occurred during 2014.
Security Cost Dec. 31, 2014 market

Value
M P400,000 P 390,000
N 600,000 630,000
O 500,000 540,000
Total P1,500,000 P1,560,000
How much should Primary Company report as unrealized gain or loss related to the
securities transactions in its 2014 profit or loss?
a. none c. P60,000 unrealized gain
b. P60,000 unrealized loss d. P70,000 unrealized gain
294. Meridith company provided the following information:

January 1, 2014 December 31, 2014
Sales on account 16,000,000
Cash collections from customers 14,000,000
The cash collection included recovery of P20, 000 from a customer whose accounts
had been written off as worthless in 2013. During 2014, it was necessary to
recognize doubtful accounts expense of P200,000 and write off worthless accounts
of P60,000. On December 1, 2014 a customer settled an account by issuing a 12%
six-month note for P800,000. What is the net realizable value of accounts receivable
on December 31,2014?
A. 3,260,000 C. 3,340,000
B. 3,280,000 D. 3,560,000
295. . National Company began business in February of 2014. During the year, National
Company purchased the three equity securities throUgh profit or loss listed below. In its
December 31, 2014 .statement of financial position, National Company appropriately
reported a P40,000 debit balance in its "Fair Value Adjustment- account. There was no
change during 2015 in the composition of National company's portfolio of equity
securities. Pertinent data are as follows:
Security Cost. Dec. 31, 2015 Market Value

A P1,200,000 P1,260,000
B 900,000 950,000
C 1,600,000 1,620,000
Total P3,700,000 P3,830,000
What amount of gain on these securities should be included in National Company's
profit or loss for the year ended December 31, 2015?
a. None c. P90,000
b. P40,000 d. P130,000
296. Bum Company had no cash sales 50% of customers take advantage of the discount
based on past experienced. The terms were 5/15, n/30. The entity the gross method of
recording sales. An analysis of collectability of accounts receivable on December
31,2014 revealed the following k
0-15 days 5,000,000 100%
16-30days 2,000,000 90%
Over 30 days 1,000,000 700,000
What amount should be reported as net realizable value of accounts receivable?
A. 6,975,000 C. 7,500,000 B.
7,375,000 D.7,875,000
297. Morgan Company began business in February of 2012. During the year, Morgan
purchased a portfolio or investment in profit or loss equity securities. In its December
31, 2012 statement of financial position, Morgan appropriately reported a P100,000
credit balance in its "Fair Value Adjustment account. There was no change during 2013
in the composition of Morgan's portfolio of equity securities to profit or loss. Pertinent
data are as follows:
Security Cost Dec. 31,2013 Market

Value
P P2,400,000 P2,250,000
Q 2,500,000 2,350,000
R 1,900,000 1,800,000
P6,800,000 P6,400,000
What amount of unrealized loss on these securities should be included in Morgan's

profit or loss for the year ended December 31, 2013?
a. None c. P300,000
b. P100,000 d. P400,000
298. On December 30, 2014, Chang company sold a machine In exchange for a
noninterest bearing note requiring ten annual payments of P100, 000. The first payment
was made on
December 30, 2014. The market interest rate for similar notes at date of issuance
was 8% Period 9
10
Present value of 1 at 8% 0.50 0.46
Present value of ordinary annuity 1 at 8% 6.25 6.71
On December 31, 2014, what amount should be reported as note receivable?
A. 450,000 C. 625,000
B. 460,000 D. 671,000
299. Diane company purchased a P2,000,000, 8% five year note that required five equal
annual year-end payment of P500,900. The note was discounted to yield 9%. At the date
of purchase, the entity recorded the note at the present value of P1, 948,500. The entity
did not elect the fair value option. What is the total interest revenue earned over the
life of this note?
A. 504,500 C. 800,000
B. 460,000 D. 900,000
300. Storm Company began business in November of 2014. During the year, Storm
purchased the three equity securities listed below. In its December 31, 2014 statement
of financial position, Storm appropriately reported a P50,000 debit balance in its "Fair
Value Adjustment account. There was no change during 2015 in the composition of
Storm's portfolio of equity securities to profit or loss. Pertinent data are as follows:
Security Cost Dec. 31. 2015 Market

Value
G P 400,000 P 350,000
O 500,000 350,000
D 900,000 800,000
P1,800,000 P1,500,000
What amount of unrealized loss on these securities should be included in Storm's profit
or loss for the year ended December 31, 2015?
a. None c. c. P350,000
b. b. P300,000 d. d. P400,000
301. On December 1, 2014, Czarina gave Home Company a P200,000. 11% loan. The
entity paid proceeds of P194 after deduction of a P6, 000 non-refundable loan
organization fee. Principal and interest are due in sixty monthly installments of P4,310,
beginning January 1, 2015. The repayments yield an effective interest rate of 11$ at a
present value of P200, 000 and 12.4% at a present value of P194, 000. What amount of
income from this loan should money report in 2014?
A. 0 C. 2,005
B. 1,833 D. 7,833
302. Rainy Company began business in October of 2014. During the year, Rainy
purchased the three equity securities listed below. In its December 31, 2014 balance
sheet, Rainy appropriately reported a P50,000 credit balance in its "Fair Value
Adjustment account. There was no change during 2015 in the composition of Rainy's
portfolio of investment in equity to profit or loss securities. Pertinent data are as
follows:
Security Cost Dec.31, 2015 Market Value

W P 400,000 P 600,000
A 500,000 700,000
Y 900,000 800,000
P1,800,000 P2,100,000
What amount of unrealized gain on these securities should be included in Rainy's profit
or loss for the year ended December 31, 2015?
a. None c. P300,000
b. P250,000 d. P350,000
303. On December 31, 2014, Marianne Company received two P2, 000,000 notes
receivable from customers. On both notes, interest is calculated on the outstanding
principal balance at the annual rate of 3% and payable at maturity. The first note, made
under customary trade terms, is due in nine months and the second note is due in five
years. The market interest rate for similar notes on December 31, 2014 was 8%. The PV
of 1 at 8% due in nine months is 0.944, and the PV of 1 at 8% due in 5 years is 0.68. On
December 31, 2014, what total carrying amount should be reported for the two notes
receivable?
A. 3,248,000 C. 3,494,400
B. 3,360,000 D. 3,564,000
304. On November 1, 2014, Ribbon Company invested P600,000 in equity securities
representing 20,000 ordinary shares of Carbon Company. The investment was classified
as equity security to profit or loss since the company intends to sell the security for a
short-term profit. On December 31, 2014, this investment has a market value of
P580,000. On January 15, 2015, Ribbon Company sold the investment for P630,000.
What amount of realized gain should Ribbon Company recognize on the disposal of the
trading security?
a. None c. P30,000
b. P20,000 d. P50,000
305. Kathleen bank granted a 10-year loan to barrower in the amount of P1, 500,000
with slated interest rate of 6%. Payments are due monthly and are computed to be P16,
650. The bank incurred P40, 000 of direct loan origination cost and P20, 000 of indirect
loan origination cost in addition, the bank charged the borrower a 4-point
nonrefundable loan origination fee. What is the carrying amount of the loan receivable
to be reported initially by the bank?
A. 1,440,000 C. 1,500,000
B. 1,480,000 D. 1,500,000
306. During 2015, Hong Kong Bank purchased marketable equity securities as
ashortterm investment in equity to profit or loss.The cost and market valueat December
31, 2015 were as follows:
Security Shares Cost December 31,2015MarketValue

X 200 P 84,000 P102,000
Y 2,000 430,000 459,000
Z 4,000 945,000 885,000
Hong Kong Bank sold the investment in security Y on March 9, 2016 for P250 per share.
How much should Hong Kong Bank report as realized gain on the sale?
a. P 5,000
b. P30,000
c. c. P41,000
d. d. P70,000
307. On December 31, 2014, Gabriel Company sold a machine in exchange for a
noninterest bearing note requiring ten annual payments of P500, 000. The buyer made
the first payment on December 31, 2014. The market interest rate for similar notes at
date of issuance was 8%. The PV of 1 at 8% is 0.50 for 9 periods and 0.46 for 10 periods.
The PV of an ordinary annuity of 1 at 8% is 6.25 for 9 periods and 6.71 for 10 periods.
On December 31, 2014, what is the carrying amount of the note receivable?
A. 2,250,000 C. 3,125,000
B. 2,300,000 D. 3,355,000
308. The following information relates to Trust Company for 2015:
Realized gain on sale of investment P 40,000

Unrealized gains arising during from change in value of
investment to profit or loss 120,000
What amount of other comprehensive income should Trust Company disclose in its
statement of comprehensive income?
a. None c. P120,000
b. P40,000 d. P160,000
309. On December 31, 2014, macho bank has 5-year loan receivable with a face value of
P6,000,000 dated January 1, 2012 due on December 31,2017 interest is payable
annually every December 31 at 9%. The borrower made the required interest
payment on December 31, 2013 but in formed the bank the interest accrued for
2014 will be paid together with the principal at maturity. There is a high probability
that remaining interest payments will not be paid. The prevailing market interest
rate is 10%. What is the loan impairment loss for 2014?
(Round PV factors to 2 decimals)
A. 1,046,400 C.1,504,200
B. 1,111,800 D. 1,635,000
310. Information regarding ABC Bank's portfolio of equity securities to profit or loss is
as follows:
Aggregate cost, December 31, 2014 P3,000,0

00
Unrealized gains, December 31, 2014 90,0
00
Unrealized losses, December 31, (300,00
2014 0)
Net realized gains during 2014 350,0
00
If the company has an accounting reporting policy of offsetting unrealized gains and
losses with realized gains and losses on their investments amount of net realized gain
should the company report in their statement of comprehensive income?
a. P 90,000 c. P350,000
b. P140,000 d. P440,000
311. Scarbrough Company factored P600, 000 of accounts receivable on October 1,

2014. Control was surrendered by Scarbrough. The factor accepted the accounts
receivable subject to recourse for nonpayment. The factor assessed a fee of 3% and
retains a hold back equal to 5% of accounts receivable. In addition, the factor charged
15% interest computed on a weighted-average time of maturity of fifty-four days. The
fair value of recourse obligation is P9, 000. What amount of cash was initially received?
A. 529,685 C. 547,685
B. 538,685 D. 556,685
312. PCIB Corporation has the following short-term marketable securities classified as
equity securities to profit or loss as of December 31, 2014:
Historical Cost Market Value ABC

P1,625,000 P1,700,000
DEF 2,375,000 2,400,000
On March 31, 2015, PCIB Corporation decided to dispose ABC and DEF securities for a
lump sum price of P4,365,000. What is the amount of realized gain that PCIB should
report in its 2015 profit or loss result of the sale of securities?
a. None b. P265,000 c. P340,000 d. P365,000
313. Jesus Company factored P3,000,000 of Accounts receivable without recourse. The
factor required as assessment fee of 10% of the accounts factored and a holdback of
15% of the accounts factored for possible sales returns and allowances. The accounts
factored had related allowance for doubtful accounts of P200, 000. What amount of loss
on manufacturing should be recognized?
A. 100,000 C. 650,000
B. 300,000 D. 750,000
314. PNB Company purchased the following portfolio of Investment to profit or loss
and reported the following balances at December 31, 2014. All declines are judged to be
temporary:
Security Historical Cost Market Value,

12/31/14
P P 450,000 P 465,000
I 650,000 675,000
C 375,000 400,000
P1,475,000 P1,540,000
On February 1, 2015, PNB Company decided to sell all the securities receiving net
proceeds of P1,750,000. What is the total amount of realized gain that PNB Company
should recognize on the sale of the securities?
a. None b. P210,000 c. P215,000 d. P275,000
315. On December 28, 2014, Paolo Company purchased goods costing P500, 000. The
terms were F.B.O destination. Some of the cost incurred in connection with the sales
and delivery of the goods were packaging for shipment P10, 000, shipping P15, 000, and
special handling charges P25, 000. These goods were received on December 31, 2014.
On December 31, 2014, what total cost for these goods should be included in inventory?
A. 500,000 C. 535,000
B. 520,000 D. 545,000
316. The Holy Family, Inc. a medium size business entity. Holy Family, Inc. fully
adopts ?FRS for SME's. On December 31, 2013 contains the following investment in
equity securities:
• Anima Co. ordinary, 3% ownership, 5,000 shares; cost, P100,000; market value,
P105,000; classified investment to profit or loss.
• Christi, Inc. preference, 2,000 shares; cost, P40,000; market value, P43,000;
classified as investment to profit or loss.
• Soul, Inc. ordinary, 30% ownership, 20,000 shares; cost, P1,150,000 excluding
P5,000 transaction cost; market value, P1,170,000; classified as investment in
associate.. The company adopts the fair value model for Investment in
associate.
• Body Co. ordinary, 15% ownership, 25,000 shares; cost, P67,500; market value,
P50,000; classified as investment to profit or loss.
It is the company's accounting policy to adopt the fair value model for all types of
investment in equity. What amount of unrealized gain (loss) should be included in the
profit or loss?
a. P17,500 b. P20,500 c. P25,500 d) P45,500
317. On December 15, 2014, Flanagan Company purchased goods costing P100, 000.
The term was F.B.O shipping point. Cost incurred by the entity in connection with the
purchase and delivery of the goods were as follows:
Normal freight charge 3,000
Handling cost 2,000
Insurance on shipment 500
Abnormal freight charge for express shipping 1,200
The goods were received on December 17, 2014. What is the amount that should be
charged to inventory and expense respectively?
A. 3,000 and 3,700 C.5,500 and 1,200 B.
5,000 and 1,700 D. 6,700 and 0
318. The equity securities of Hilltop Company, a medium size entity are listed below.
Listed and publicly traded entities:

Securities (Ordinary Shares) Initial Cost Market Value
12/31/13
Ocean Co. P200,000 P280,000
Deep Co. 140,000 100,000
Sea Co. 420,000 460,000
Total P760,000 P840,000
Unlisted entities:
Eastern Company
Initial Cost P300,000
Recoverable value 175,000
On December 31, 2013, Eastern Company entered into a financial reorganization. As a
result of the current development Hilltop Company assessed that its investment in
Eastern Company is impaired. What amount should Hilltop Company disclose in its
statement of comprehensive income as unrealized gain related to its investments?
a. P40,000 b. P60,000 c. P 80,000 d. P140,000
319. Fortitude Company purchased cattle at an auction for P200,000 on July 1, 2014.
Cost of transporting the cattle back to the company's farm was P2,000 and the company
would have to incur cost similar transportation cost if it was to sell the cattle in the
auction, in addition an auctioneer's fee of 2% of sales price. What amount should the
biological assets be initially recognized?
a. P194,000 b. P196,000 c. P198,000 d. P200,000
320. Opal Company reported the following items that were included in inventory at
year at year-ended:
Merchandise out on consignment, at sales price.
Including 40% markup on selling price
Goods purchased in transit shipped FOB shipping point
Goods held on consignment by Opal Company
By what amount should the inventory be reduced?
A. 43,000 C. 67,000
B. 51,000 D. 103,000
Solo Company acquired forest assets for a lump sum amount of P20,000,000 which is
equal to the lump sum value of the group of assets. At the time of purchase the
company is unable to determine the fair value of the trees separately since no active
market was clearly available. The other assets in the group had a determinable fair
value. The forest assets are listed below and their related fair value less point of sell
costs:
Land under trees 2,000,000
Roads in forest 1,000,000
321. What amount should the biological asset be initially recorded?
a. P1,000,000 c. P17,000,000
b. P2,000,000 d. P19,000,000
322. What amount should the non-current non-depreciable asset be initially recorded?
a. P1,000,000 c. P17,000,000
b. P2,000,000 d. P19,000,000
323. What amount should the non-current depreciable asset be initially recorded?
a. P1,000,000 c. P17,000,000
b. P2,000,000 d. P19,000,000
324. Herc Company reported inventory on December 31, 2014 at P1,500,000 based on
a physical count period at cost and before any necessary adjustment for the
following:
• Merchandise costing P90, 000 shipped FOB shipping point from a vendor on
December 30, 2014 was received and recorded on January 5, 2015.
• Goods in the shipping area were excluded from inventory although shipment was
not made until January 4, 2015. The goods billed to the customer FOB shipping point
on December 30, 2014, had a cost of P120, 000.
What amount should be reported as inventory on December 31, 2014?

A. 1,500,000 C. 1,620,000
B. 1,590,000 D. 1,710,000
Central Farm Corporation reported the following lists of biological assets and
agricultural produce for the year ended December 31, 2014:
Assets Fair value

Diary cattle P3,000,000
Beef cattle 5,000,000
Sheep 2,000,000
Calves on diary cattle 1,000,000
Calves on beef cattle 1,500,000
Lambs 800,000
Milk on diary cattle 500,000
Carcass on beef cattle 600,000
Wool 400,000
325. What amount of biological asset should Central Farm Company report in its
December 31, 2014 statement of financial position?
a. P8,000,000 c. P13,300,000
b. P10,000,000 d. P14,800,000
326. What amount should Central Farm Company report as inventory related to the
above biological assets?
a. P500,000 c. P1,100,000
b. P600,000 d. P1,500,000
327. A physical count on December 31, 2014 revealed that Tones Company had
inventory with a cost of P4, 400,000. The following items were excluded from this
amount
• Merchandise of P600,000 is held on consignment by tones
• Goods costing P400, 000 was shipped by tones “Ex-ship” to a customer on
December 31, 2014. The customer received the goods on January 3, 2015.
• Merchandise costing P500, 000 was shipped by tones “free alongside” to a customer
on December 29, 2014. The customer received the goods on January 6, 2015
• Goods costing P800, 000 shipped by a vendor FOB destination on December 1, 2014
was received by tones on January 7, 2015.
• Goods costing P700,000 was shipped by supplier “CIF” on December 30, 2014 and
received by tones on January 10, 2015
What is the correct amount of inventory on December 31, 2014?
A. 4,900,000 C. 5,500,000
B. 5,400,000 D. 6,000,000
Fortune Company purchased Diary cattle at an auction for P300,000 on July 1, 2014.
Cost of transporting the cattle back to the company's farm was P3,000 and the company
would have to incur cost similar transportation cost if it was to sell the cattle in the
auction, in addition an auctioneer's fee of 2% of sales price.
On December 31, 2014, after taking into account and location, the fair value of the
biological assets had increased to P500,000 (that is, the market price including the cost
of transporting the asset).
328. What amount should the biological assets be initially recognized?

a. P291,000 c. P297,000
b. P294,000 d. P300,000
329. What amount should the biological assets be reported in the December 31, 2014
a. P487,000 c. P497,000
b. P490,000 d. P500,000
330. What amount of gain or loss should the company include in the statement of
comprehensive income due to the change in the fair value of the biological assets?
a. P193,000 c. P200,000
b. P196,000 d. P209,000
331. During the current year, Isabel Company paid P100,000 cash and traded inventory
which had a carrying amount of P2,000,000 and a fair value of P2,100,000 for
other inventory in the sale line of business with a fair value of P2,200,000. What
amount should be recorded as cost of the inventory received in exchange?
A. 2,000,000 C. 2,200,000
B. 2,100,000 D. 2,300,000
332. Vortex Company's standing cane fair value as of January 1, 2014 was P2,700,000
and as of December 31, 2014 was P2,250,000. The fair value of the agricultural
produce harvested during the period was P2,100,000, on the respective dates of
harvest.
What net amount of gain or loss should Vortex Company report in its December 31,
2014 profit or loss related to the biological asset and agricultural produced?
a. None c. P310,000
b. P110,000 d. P420,000
333. During the current year bred Company exchange inventory with Oreo Company.
The configuration of cash flows before and after the exchange does not
significantly differ. Bred’s inventory had a fair value of P2, 800,000 and Bred
appropriately recorded the inventory received in exchange at P2, 600,000. Oreo’s
inventory had a fair value of P2, 500,000 and Oreo appropriately recorded the
inventory received in exchange at P2, 300,000. Oreo paid P300, 000 to Bred to
make up the difference in fair value. What was the carrying amount of Bred’s old
inventory?
A. 2,000,000 C. 2,600,000
B. 2,300,000 D. 2,900,000
Creep Company purchased 100 beef cattle at an auction for P800,000 on July 1, 2014.
Transportation costs were P8,000. Creep Company would have to incur the same
transportation costs if it had sold its cattle in the auction. In addition there would be a
2% auctioneer's fee on the market price of the cattle payable by the seller. Creep
Company also incurred P4,000 veterinary expenses. On December 31, 2014, the fair
value of the cattle in the most relevant market increases to P880,000. On May 2, 2015,
Creep Company sold 18 cattle at auction for P160,000 and incurred transportation
charges of P1,200. On June 15, 2015, the fair value of the remaining cattle was P662,560
but on the same day, 42 cattle were slaughtered with total cost of P33,600. The fair
value of the carcasses on that day was P386,400 and the estimated transportation cost
to sell the carcasses is P3,360. No other selling costs are expected. On June 30, 2015,
the fair value of the remaining 40 cattle was P358,400. The estimated transportation
cost is P3,200.
334. What amount should the biological asset be initially recognized on July 1, 2014?
a. P776,000 c. P792,000
b. P784,000 d. P800,000
335. What amount should the biological asset be reported on December 31, 2014?
a. P854,400 c. P872,000
b. P862,400 d. P880,000
336. Gecelle Company reported during the current year beginning inventory P500, 000,
net purchases P2, 500,000 and net sales P3,200,000. A physical inventory at year-
ended resulted in an inventory of P575, 000. The gross profit in sales has remained
constant at 25%. Theentity suspected that some inventory may have been taken
by a new employee. What is the estimated cost of missing inventory at year-end?
A. 25,000 C. 175,000
B. 100,000 D. 2,900,000
337. Maria company reported that the “Revenue” Section of the single-step income
statement for the current year consisted of the following:
Net sales revenue 2,000,000
Loss from discounted component, including loss on
Disposal of P12, 000, net tax benefit of P40, 000 125,0
00
00
Gain on sales of equipment 50,0
00
Unrealized gain on available for sale financial asset 15,0
00
What total amount should be reported under the “Revenue” section of the income
statement?
a. 2,100,000 c. 2,150,000
b. 2,165,000 d. 2,275,000
338. Danika Company provided the following information for the current year:
Inventory, January 1 1,300,000
Purchases 4,600,000
Purchases returns 100,000
Freight-in 200,000
Sales 6,800,000
Sales discount 100,000
Sales returns 300,000
At year-ended, a physical inventory revealed that the ending inventory was only
P850, 000. The gross profit on sales was 30%. The entity suspected that some
inventory may have been pilfered:
What is the estimated cost of missing inventory at year-end?
A. 600,000 C. 1,450,000
B. 670,000 D. 1,520,000
339. On December 30, 2014 Future Company paid P2,000,000 for land. On December
31, 2014, the current value of the land was P2,000,000. In January 2015, the land was
sold for P2,250,000. Ignoring income tax, by what amount should shareholders’ equity
be increased for 2014 and 2015 in current value financial statements?
A. B. C. D.
2014 0 0 200,000 200,000
2015 50,000 25,000 0 50,000___
340. Mariel Company used the retail inventory method to inventory. Data relating to
the inventory computation at the year-end are as follows
Cost Retail
Inventory, January 1 700,000 1,000,000
Purchases 4,100,000 6,300,000
Net markups 700,000
Net markdowns 500,000
Sales 6,600,000
Estimated normal shoplifting losses 200,000
Under the conventional retail method, what is the estimated inventory at year-end?
A. 420,000 C. 540,000
B. 448,000 D. 576,000
341. David Company reported the following machinery on December 31, 2014:
Cost Accumulat
depreciation ed
Acquired in December 2011 400,000 1,600,000
Acquired in December 2013 1,000,000 200,000
Index numbers at the end year are 120 for 2011 for 2013, and 350 for 2014.
What should be reported in a hyperinflationary statement of financial position
prepared on December 31, 2014 as the carrying amount of the machinery?
a. 3,200,000 c. 7,800,000
b. 8,960,000 d. 9,240,000
342. Ferdinand Company used the retail inventory method to value inventory. The
following information is available for the current year:
Cost Retail
Beginning inventory 1,500,000 2,500,000
Purchases 7,250,000 10,000.000
Freight-in 168,250
Net markup 425,000
Net markdown 1,035,000
Employee discounts 50,000
Sales 10,250,000
Sales discount 750,000
What is the estimated cost of ending inventory using the conventional approach?
A. 1,097,000 C. 1,590,000
B. 1,166,000 D. 1,614,000
343. Ina Company had the following beginning and ending balances in prepaid expense
and accrued liabilities for the current year:
Prepaid expense Accrued liabilities
Beginning balance 5,000 8,000
Ending balance 10,000 20,000
Debits to operating expenses totaled P100,000. What amount was paid for
operating expenses during the current year?
a. 83,000 c. 93,000
b. 107,000 d. 117,000
344. Divine Company used the conservative retail method and showed the following
information at year-end:
Cost Retail
Inventory, January 1 560,000 1,400,000
Sales 10,000,000
Purchases 4,960,000 10,320,000
Freight-in 150,000
Markup 1,000,000
Markup cancellation 120,000
Markdown 500,000
Markdown cancellation 100,000
The estimated normalshrinkage is 5% of sales, what is the estimated cost of
inventory at year-end?
A. 765,000 C. 990,000
B. 945,000 D. 1,170,000
345. In 2015 financial statements. Cris Company reported interest expense of P85,000
in the income statement and cash paid for interest of P68,000 in the statement of cash
flows. There was no prepaid interest or interest capitalization either at the beginning or
end of 2015.nAccrued interest on December 31, 2014 was P15,000. What amount
should be reported as accrued interest payable on December 31, 2015?
a. 2,000 c. 15,000
b. 17,000 d. 32,000
346. Aloha Company determined the following information for the inventory at
yearend:
Historical cost 100,000
Current replacement cost 70,000
Net realized value 90,000
Net realized value less a normal profit margin 85,000
Fair value 95,000
What amount should be reported as inventory at year-end?

A. 70,000 C. 90,000
B. 85,000 D. 95,000
347. On December 31, 2014, Grace Company appropriately reported P100, 000
unrealized loss. There was no change during 2015 in the composition of the portfolio of
equity securitiesdesignated as FVTOCI. The entity provided the following information:
Security Cost Fair Value at 12/31/15
X 1,250,000 1,600,000
Y 1,000,000 900,000
Z 1,750,000 1,000,000
What unrealized loss should be reported in the statement of comprehensive income
for the year ended December 31, 2015?
A. 0 C. 500,000
B. 400,000 D. 600,000
Items 348 and 349 are based on the following information:
Knob Company provided the following information relating to the transfer of real
estate pursuant to a troubled-debt restricting in full liquation of liability:
Carrying amount of liability liquidated 150,000
Carrying amount of real estate transferred 100,000
Fair value of real estate transferred 90,000
348. What amount should be reported as gain or loss on restricting of payable?

a. 10,000 c. 0
b. 50,000 gain d. 60,000 gain

a. 50,000 loss c. 10,000 loss
b. 0 d. 50,000 gain
350. Trisha Company buys ten shares of securities at P1,000 each on January 15, 2014.
The securities are classified as available-for-sale. The fair value of the securities
increases to P1, 250 per share on December 31, 2014. The entity does not elect the
fair value option for reporting available-for-sale securities. Assume no dividends
are paid and that the entity has as 30% tax rate. What is the amount of the holding
gain that is classified in other comprehensive income?
A. 0 C. 2,500
B. 1,750 D. 7,500
351. Hancock Company reported the following on December 31, 2014:
Unsecured
10% registered bonds, P25, 000 maturing annually beginning 2016 275,000
11% convertible bonds, callable beginning in 2022, due 2034 125,000
Secured
12% guaranty security bonds, due 2024 275,000
13% commodity-backed bonds, P50, 000 maturing annually
beginning in 2020 200.000
What are the total amounts of serial bonds and debentures bonds?
A B. C. D
Serial bonds 200,000 450,000 475,000 475,000
Debenture bonds 650,000 400,000 125,000 400,000
352. During the current year, sunshine Company reported in the statement of
comprehensive income P5, 000 in interest revenue, P15, 000 equity in associate’s
earnings, and P25,000 gain
On sale of available-for-sale securities. Assuming the same of the securities increased
the current portion of income tax expense by P10, 000, what is the amount of
reclassification adjustment of other comprehensive income?
A. 2,500 C. 15,000
B. 5,000 D. 35,000
353. During 2014, Rina Company is the defendant in a patent infringement lawsuit.
The lawyers believe there is a 30% chance that the court will dismiss the case and the
entity will incur no out flow of economic benefits. However, if the court rules in favor of
the claimant, the lawyers believe that there is a 20% chance that the entity will be
required to pay damages ofP100,000. Other outcomes are unlikely. The court is
expected to rule in late December2015. There is no indication that the claimant will
settle out of court. A 7% risk adjustment factor to the probability-weighted expected
cash flows is considered appropriate to reflect the uncertainties in the cash flow
estimates. An appropriate discount rate is 5% per year. The present value of 1 at 5% for
one period is 0.95, what is the measurement of the provision for lawsuit?
a. 0 c. 85,396
b. c. 36,594 d. 89,880
354. John Company buys ten shares of securities at P2, 000 each on December 31,
2014. The securities are classified as available-for-sale. The entity does not elect the fair
value option for reporting available-for-sale securities. The fair value of the securities
increases to P2,500 on December 31, 2015, and to P2,750 ON December 31, 2016. On
December 31, 2016, the entity sells the securities. Assume no dividends are paid and
that tax rate is 30%. What is the amount of the reclassification adjustment for other
comprehensive income on December 31, 2016?
A. (7,500) C. 5,250
B. (5,250) D. 7,500
356. Alton Company began operation on January 1, 2014. The following information
pertains to the portfolio of marketable equity securities on December 31, 2014:
Trading Available-for-
sale
Aggregate cost 360, 000 550, 000
Aggregate fair value 320, 000 450, 000
Aggregate lower of cost or market value applied
to teach security in the portfolio 304, 000 420, 000
The entity elects the fair value option for all financial instruments. If the fair value
declines are judge to be temporary, what amount should be reported as a loss on
these securities in the 2014 income statement?
A B C D
Trading securities 0 40,000 40,000 56,000
Available-for-sale securities 100,000 0 100,000 130,000
357. City Company included one coupon in each package sold. A towel is offered as a
premiumto customers who send in 10 coupons?
2014 2015
Packages sold 500,000 800,000
Number of towels acquired at 40 per towel 30,000 45,000
Number of towels distributed as premium 20,000 40,000
Number of towels to be distributed as premium next period 5,000 10,000
What amount should be reported as premium expense in 2015?
a. 1,800,000 c. 2,000,000
b. 2,200,000 d. 2,400,000
358. On January 1, 2014, Gilberto Company purchased 9% bonds with a face amount
ofP4,000,000 for P3,756,000 to yield 10%. The bonds are dated January 1, 2014,
matured onDecember 31, 2013 the pay interest annually on December 31. The interest
method of amortizing bond discount is used. What amount should be reported as
interest revenue from the bond investment for 2015?
A. 360,000 C. 377,160
B. 375,600 D. 400,000
359. Janelle Video one and two-year mail order subscriptions for video of the month
business. Subscription are collected in advance and credited to assets. An analysis of the
recordedsales activity revealed the following:
2013
2014
Sales 420,000 500,0
00
Cancellations 20,000 30,0
Subscription expiration: 00
2013 120,000 130,0
00
2014 155,000 200,0
00
2015 125,000 200,0
00
2015 140,0
00
On December 31, 2014, what is the unearned subscription revenue?
a. 340,000 c. 465,000
b. 470,000 d. 495,000
360. On July 1, 2014, East Company purchased as long-term investment P500,000 face
amount 8% bonds for P461,500 to yield 10% per year. The bonds pay interest
semiannually on January 1 and July 1. The entity does not elect the fair value option for
reporting these securities. On December 31, 2014, what amount should be reported as
interest receivable?
A. 18,460 C. 23,075
B. 20,000 D. 25,000
361. Ashwood Company reported accounts payable on December 31, 2014 at
P900,000 beforeany necessary year-end adjustments relating to the following:
• Goods were in transit from a vendor to Ashwood on December 31, 2014. The
invoice cost was P50,000, and the goods were shipped FOB shipping point on
December 29, 2014. The goods were received on January 4, 2015.
• Goods shipped FOB shipping point on December 20, 2014 from a vendor to
Ashwood was lost in transit. The invoice cost was P25,000. On January 5, 2015,
Ashwood filed a P25,000 claim against the common carrier.
• Goods shipped FOB destination on December 21, 2014 from a vendor to Ashwood
was received on January 6, 2015. The invoice cost was P15,000
What amount should be reported as accounts payable on December 31, 2014?
a. 925,000 c. 940,000
b. 950,000 d. 975,000
362. Jelline Company had the following liabilities on December 31, 2014:
Unsecured notes, 8% due 7/1/2015 400,000
Accrued expense 35,000
Contingent liability 450,000
Deferred tax liability 25,000
Senior bonds, 7%, due 3/31/2015 1,000,000
The contingent liability is an accrual for possible loss on a P1,000,000 lawsuit filed
against the entity. The legal counsel expects the suit to be settled in 2015 and has
estimated that the entity will be liable for damages in the range of P450,000 to
P750,000, the deferred tax liability is not related to an asset for financial reporting
and is expected to reverse in 2016.
What amount should be reported on December 31, 2014 for current liabilities?
a. 515,000 c. 940,000
b. 1,490,000 d. 1,515,000
363. On January 1, 2014, rainier company purchased 12% bonds with face value of
P5,000,000 for P5,380,000. The bonds provide an effective yield of 10%. The bonds are
dated January1, 2014, mature on January 1,2019 and pay interest annually on
December 31 of each year.The bonds are quoted at 120 on December 31, 2014. The
entity elected the fair value option for the bond investment. What total income should
be reported for 2014?
A. 600,000 C. 1,138,000
B. 1,120,000 D. 1,220,000
364. Mark Company acquired equipment on January 1, 2013 for P5,000,000. The
equipment has a 10-year useful life and no residual value. On December 31, 2014, the
following information was obtained:
Expected value of undiscounted cash flows 3,600,000
Fair value estimated with in-use premise 3,700,000
Fair value estimated with in-exchange premise 3,500,000
What amount should be recognized as impairment loss for 2014?

a. 0 c. 300,000
b. 400,000
d. 500,000
365. On September 1, star Company received P500,000 cash dividend from Sun
Company in which Star Company owned a 30% interest. On October 1, Star Company
received P100,000 liquidating dividend from Moon Company. Star Company owned a
5% interest in Moon Company. Star Company owned a 10% interest in sky Company
which declared a P2,000,000 cash dividend on December 31. What amount of dividend
revenue should be reported for the current year?
A. 200,000 C. 700,000
B. 600,000 D. 800,000
366. Windsor Company developed a trademark and incurred the following expenditures
Marketing research 600, 000
Design cost of trademark 1, 700, 000
Legal registration of fee 200, 000
Advertising cost 350, 000
Registration with intellectual Property Office 100, 000 What
amount should be capitalized as cost of trademark?
a. 1,900,000 c. 2,000,000
b. 2,450,000 d. 2,600,000
367. Sage Company bought 40% of an investment on January 1, 2014 for P 400,000. The
carrying amount of the investee’s net assets at the purchase date totaled
P900,000. Fair value and carrying amounts were the same for all items except for
plan and inventory, for which fair values exceeded their carrying amounts by
P90,000 and
P10,000,respectively. The plant has an eighteen-year life. All inventory was sold during
2014. During 2014, the investee reported net income of P120,000 and paid a P20,000
155
cash dividend. What amount should be reported as income from the investment in
associate for 2014?
A. 32,000 C. 42,000
B. 36,000 D. 48,000
368. On January 1. 2014, Kristine Company signed an agreement to operate as a

franchisee of another entity for an initial franchise fee of P12,000,000. The same
date, the entity paid P4,000.000 and agreed to pay the balance in four equal
annual installments P2,000,000 beginning January 1, 2015. The down payment is
not
refundable and no future services are required of the franchisor. The entity can borrow
at 14% for the loan of thistype. Present and future factors are as follows:
Present value of 1 at 14% for 4 periods 0.59
Future value of 1 at 14% for 4 periods 1.69
Present value of an ordinary annuity of 1 at 14% for 4 periods 2.91 What
is the acquisition cost of the franchise?
a. 8,720,000 c. 9,820,000
b. 12,000,000 d. 13,520,000
369. On July 1, 2014, Diamond Company paid P1,000,000 for 100,000 outstanding
shares (40%) of Ashley Company. At that date, the net assets of Ashley totaled
P2,500,000 and the fair values of all of Ashley’s identifiable assets and liabilities
were equal to their carrying amount. Ashley reported net income of P500,000 for
2014, of which P300,000 was for the six months ended December 31, 2014, Ashley
paid cash dividends of P250,000 on September 30, 2014. Diamond does not affect
the fair value option for reporting the investment in Ashley. What amount of
income should Diamond report from the investment in Ashley?
A. 80,000 C. 120,000
B. 100,000 D. 200,000
370. Weir Company used straight-line depreciation for property, plant and equipment:
12/31/2015 12/31/2014
Land 25,000 25,0
00
Buildings 195,000 195,0
00
Machinery and equipment 695,000 650,0
00
00
The depreciation expense for 2015 and 2014 was P55, 000 and P50,000,
respectively. What amount was debited to accumulated depreciation during 2015
because of retirement?
a. 10,000 c. 20,000
b. 25,000 d. 40,000
371. Moss Company owns 20% of Dubro Company’s preference shares and 80% of the
ordinary shares. Dubro’s share capital outstanding on December 31, 2014 is as
follows:
10% cumulative preference share capital 100,000
Ordinary share capital 700,000
157
Dubro reported net income of P60,000 for 2014. Moss does not elect the fair value
option to report the investment in Dubro. What amount should be reported as
equity in earnings of Dubro for 2014?
A. 42,000 C. 48,400
B. 48,000 D. 50,000
372. Punk Company acquired land and an existing building in exchange for 60,000
ordinary shares. The real property tax boiled showed an assessed value of P3,000,000
for the land and P20,000,000 for the building. The shares have a par value of P100 and a
fair value of P150 per share. Punk also incurred the following costs:
Payment to tenants to vacate the building 100,000
Unpaid property taxes on land and building assumed by Punk 375,000
Assessment by city for sewerage project 10,000
Driveways and parking bays 550,000
Cost of grading and leveling 50,000
Cost of new wing attached to the building 750,000
Cost of new split type air-conditioning units 300,000
Remodeling cost prior to occupancy 200,000
What is the total cost of the building?

a. 4,650,000 c. 4,800,000
b. 5,025,000 d. 5,100,000
373. Rock Company purchased 30% of Dale Company’s ordinary shares on January 1,
2014. The purchase resulted in no goodwill or excess fair value
• Dale sold goods costing P500,000 for P750,000 to rock in 2014. On December 31,
2014, the goods remained unsold by rock. In 2015, Rock sold such goods to the
regular customers.
• On January 1, 2014, Dale also sold machinery with carrying amount of P3,000,000 to
Rock for P4,200,000.the machinery’s remaining life was 6 years.
• Dale reported net income of P3,500,000 and P2,500,000 in 2014 and 2015,
respectively.
What amount of equity in earnings of Dale should Rock report for 2015?
A. 675,000 C. 825,000
B. 750,000 D. 885,000
374. You have been asked to prepare an income statement on the accrual basis. The
following information is given to you to assist in the preparation:
• Amounts due from customers at year-end were P224,000. Of this amount,
P24,000 will probably not be collected.
• Salaries of P88,000 for December 2006 were paid on January 5, 2007.
• Zamboanga rents its building for P24,000 a month, payable quarterly in
advance. The contract was signed on December 31, 2005.
• The bill for December’s utility costs of P21,600 was paid January 10, 2007.
• Equipment of P240,000 was purchased on January 1, 2006. The expected life is
5 years, no salvage value. Assume straight-line depreciation.
• Commissions of 15% of sales are paid on the same day cash is received from
customers.
• A 1-year insurance policy was issued in company assets on July 1, 2006.
Premiums are paid annually in advance.
• Zamboanga borrowed P400,000 for one year on May 1, 2006. Interest payments
based on an annual rate of 12% are made quarterly, beginning with the first
payment on August 1,2006.
How much is the net income before income tax under the accrual basis of
accounting?
a. 526,000 c. 286,000
b. 514,000 d. 574,000
The next two questions are based on the following information.

An enterprise had the pre-closing trial balance at December 31 shown below:
Cash 80,000
Accounts receivable 100,000
Inventory 230,000
Property, plant, and equipment 600,000
Accumulated Depreciation 60,000
Long-term debt 1,000,00
0
Share capital 2,000,00
0
Retained earnings – Jan. 1 500,000
Sales revenue 750,000
Purchases
530,000
Administrative expenses
200,000
Additional information:
• The long-term debt pays interest at a rate of 10% per annum, payable every 12
months. The debt was issued on July 1 of the current year and originally had 5
years to maturity.
• The assets classified as property, plant, and equipment have a 10-year
estimated useful life and were 1 year old at the start of the current year.
Straight-line depreciation is used.
375. Assume that the enterprise reports cost of goods sold of 200,000 and interest
expense of 10,000 for the current period. Also assume a 50% tax rate on corporate
earnings. The final closing entry required to ensure that current earnings are
incorporated into year-end retained earnings is
a. Income summary 140,000 Retained earnings
140,000 b. Retained earnings
280,000
Income summary 280,000
c. Income summary 240,000
Retained earnings 240,000 d.
Income summary 240,000
376. The enterprise will report year-end total assets of
a. 800,000 c. 950,000
b. 890,000 d. 1,010,000
377. On January 1,2014, Gerald company purchased 10% of Dana’s Company’s

outstanding ordinary shares for P4,000,000 Gerald is the largest single shareholder
in Dana and Gerald‘s officers are a majority of Dana’s board of directors. The
investee reported net income of P5,000,000 for 2014 and paid dividends of
P1,500,000. On December 31, 2014, what amount should be reported as
investment in Dana Company?
A. 3,850,000 C. 4,350,000
B. 4,000,000 D. 4,500,000
378. On January 1, 2005, E Company granted 5,000 share options with a ten-year life to
each of 10 executives. The chare option will vest and become exercisable immediately if
and when the company’s share price increases from P50 to P70 and provided that the
executives remain in service until the share price target is achieved.
The company applies a binomial option model, which takes into account the
possibility that the share price will be achieved during the ten-year life of the options
and the possibility that the target share price will not be achieved. The company
estimates that the fair value of the options at grant date is P25 per option. From the
option-pricing model, the company determines that the mode of the distribution of
possible vesting dates is five years. The most likely outcome of the market condition is
that the share price target will be achieved at end of 2009. Therefore, E Company
estimates that the expected vesting period is five years. E Company also estimates that 2
executives will have left by the end of 2009 and therefore expects that 40,000 share
options will vest at the end of 2009.
Throughout 2005 to 2008, E Company continues to estimate that a total of two
executives will leave be the end of 2009. However, in total, three executives had left,
one each in 2007, 2008 and 2009. Another executive left in 2010 before the share price
target is achieved.
What amount of remuneration expense should the company recognize in its

December 31, 2009 income statement?
a. 85,000 c. 150,000
b. 75,000 d. 120,000
379. On January 1, 2014, Kean Company purchased a 30% interest for P250,000. On
this date, the investee’s shareholders’ equity has P500,000. The carrying amounts of the
investee’s identifiable net assets approximated fair value, except for land whose fair
value exceeded carrying amount by P200,000. The investee reported net income of
P100,000 for 2014, and paid no dividends. On December 31, 2014, what amount should
be reported as investment in associate?
A. 210,000 C. 270,000
B. 220,000 D. 280,000
380. On January 1, 2005, F Company grants 100 share options to each of its 400
employees. Each grant is conditional upon the employee remaining in the employ of the
company over the next three years. F Company estimates that the fair value of each
option is P20. On the basis of weighted average probability, F Company estimates that
100 employees will leave during the three-year period and therefore their right to the
share option will be forfeited.
During 2005, 30 employees had left and the share price dropped and F Company
reprises its share options, and that the reprised share options vest at the end of 2007. F
Company estimates that a further 70 employees will leave during 2006 and 2007. During
2006, 35 employees left the company and the company estimates that 30 employees
will leave in 2007, while during 2007, 28 employees left the company.
At the end of 2005 (date of reprising), the company estimates that the fair value of each
of the original share options granted (before taking into account the reprising) is P6 and
that the fair value of each reprised share option is P9.
What amount of remuneration expense should the company recognize in its

December 31, 2007 income statement?
a. 265,678 c. 253,683
b. 245,653 d. 233,853
381. On January 1, 2014, Remy Company acquired 20,000 ordinary shares of Global
Company for P9,000,000. At the time of purchase, Global Company had outstanding
800,000 shares with a carrying amount of P36,000,000. Global Company reported net
income of P1,800,000 for 2014. Remy Company received from Global Company a
dividend of P15,000 during the year the market value of Global Company share had
temporarily declined to P40, Remy Company elected to measure the investment at fair
value through other comprehensive income. What is the carrying amount of the
investment on December 31, 2014?
A. 8,000,000 C. 9,300,000
B. 9,000,000 D. 9,450,000
382. On January 1, 2005, Rayzeureda Company granted 20,000 shares with a fair
market value of P30 per share to its key officers, conditional upon the completion of
three years’ service. By the end of 2006, the share price has dropped to P26 per share.
Immediately, Rayzeureda Company adds a cash alternative to the grant, whereby the
officer can choose whether to receive 20,000 shares or cash equal to the value of
20,000 shares on vesting date, which is on December 31, 2007. On December 31, 2007,
the share price is P24.
What amount of remuneration cost should the company recognize in its December
31, 2007 income statement?
a. 133,333 c. 26,667
b. 160,000 d. 180,000
383. On January 1, 2014, Buff Company purchased 25,000 shares or 10% interest of
clean Company for P2,000,000. Buff used the cost method to account for this
investment. Clean reported net income of P4,000,000 and paid no dividends in 2014. On
January 1, 2015, Buff paid P5,000,000 for 50,000 additional shares of clean company.
The fair value of the existing 10% interest was P1,700,000 On January 1,2015. The fair
values of the identifiable net assests of clean company equal the carrying amount of
P20,000,000 on such date except for land whose fair value is greater than carrying
amount by P4,000,000. The investee reported net income of P6,000,000 for 2015 and
paid dividend of P10 per share. What is the carrying amount of the investment in
associate on December 31,2015?
A. 6,700,000 C. 8,250,000
B. 7,750,000 D. 8,550,000
384. The following information pertains to Galileo Company:
Sales (all account) made evenly throughout 2005 P
220,000
Equipment purchased for cash on May 1, 2005 50,0
00
Purchases (all account) made evenly throughout 200 80,0
Cash received evenly throughout 2005 from customers on 00
Account 190,0
Cash dividends declared on September 1, 2005 and paid on 00
October 1, 2005 20,0
00
Land acquired for cash on June 1, 2005 30,0
00
Depreciation expense for 2005 10,0
00
Ordinary shares issued for cash on March 1, 2005 60,0
00
Operating expenses paid evenly throughout 2005 40,0
00
Income tax expense paid evenly throughout 2005 25,0
00
Purchase of treasury shares for cash on Nov. 1, 2005 17,0
Sale of investment in ordinary shares on August 1, 2005 for cash 00
(cost = P5,000; selling price = P8,000)
8,000
Cash paid evenly throughout 2005 on accounts payable
Monetary assets 60,000
January 1, 2005
25,000
December 31, 2005
Monetary liabilities 71,000
January 1, 2005
10,000
December 31, 2005
30,000
The following values of the CPI-U for 2005 are available:
1/1 100 8/1 114
2/1 102 9/1 116
3/1 104 10/1 118
4/1 106 11/1 120
5/1 108 12/1 122
6/1 110 12/31 124
7/1 112 Average for the year 112
The purchasing power gain (loss) for 2005 in end-of-year pesos is

a. ( 1,000) c. 10,704
b. 10,000 d. (10,704)
385. On January 1 2014, jerica Company acquired 10% of the outstanding ordinary
shares of an investee for P4,00,000. On January 1, 2015, the entity acquired an
additional 20% of the investee’s outstanding ordinary shares for P10,000,000. The fair
value of the investee’s net assets equaled carrying amount on January 1, 2015, the fair
value of the 10% interest on January 1, 2015 was P6,000,000. The investee reported the
following:
2014 2015
Dividend paid 2,000,000 3,000,000
Net income 6,000,000 7,000,000
What is the carrying amount of the investment in associate on December 31, 2015?
A. 15,200,000 C. 17,200,000
B. 16,000,000 D. 17,600,000
386. The carrying value of building C on December 31, 2005 is P8,000,000 and had
remaining useful life of 25 years. It is the company’s policy to depreciate all its buildings
using the straight-line method.
On January 2, 2006, Chamber Company committed to a plan to sell building C and

classified this asset as held for sale. Building C was priced at P8,600,000, which is equal
to its fair market value.
During 2006, the market conditions that existed at the date the building was classified
initially as held for sale deteriorate and as a result, the asset is not sold at the end of the
end of 2006. During 2006, the company actively solicited but did not received any
reasonable offers to purchase the building and, in response, reduced the price to
P7,500,000. The building continues to be actively marketed at a price that is reasonable
given the change in market conditions.
In 2007, the market conditions deteriorate further, and the building is yet to be sold by
the end of 2007. Chamber Company believes that the market conditions will improve
and has not further reduced the price of the building. The building continues to be held
for sale at a price in excess of its current fair value.
In Chamber Company’s December 31, 2007 balance sheet, the building

a. should be included among the property, plant and equipment at P8,000,000
b. should be reported separately as non-current asset held for sale and valued at
P7,500,000.
c. should be included as property, plant & equipment valued at P7,360,000.
d. should be reported separately as non-current asset held for disposal and valued
at P8,600,000.
387. Smythe Company invested P20,000 in a call option for 1,000 shares of Gin Company
P50 par, when the market price was P100 per share. The option expired in three months
and had an exercise price of P90 per share. What the intrinsic value of the call option at
the time of initial investment?
A.5,000 C. 20,000
B 10,000 D. 90,000
The next three questions are based on the following information:

Kibungan Company has the following information on January 1, 2007 relating to its
property, plant and equipment.
Land P30,000,000
Building 300,000,000
Accumulated depreciation-building (37,500,000)
Machinery 400,000,000
Accumulated depreciation-machinery (100,000,000)
Book value P592,500,000
There were no additions or disposals during 2007. Depreciation is computed using

straight line over 20 years for building and 10 years for machinery. On June 30, 2007, all
of the property, plant and equipment were revalued as follows:
Replacement cost Sound value

Land 40,000,000 40,000,000
Building 500,000,000 425,000,000
Machinery 650,000,000 455,000,000
Tax rate is 35%.
388. What is the revaluation surplus on June 30, 2007?

a. 355,000,000 c. 230,750,000
b. 545,000,000 d. 920,000,000
389. What is the total depreciation for 2007?
a. 90,000,000 c. 72,500,000
b. 55,000,000 d. 66,750,000
390. The December 31, 2007 balance sheet should show revaluation surplus at
a. 337,500,000 c. 219,375,000
b. 345,000,000 d. 355,000,000
391.In arriving at its profit before tax for the year ended 31 December 20X7 The Ryan
Company has accrued royalties receivable of CU200,000 and interest payable of
CU250,000. Both royalties and interest are dealt with on a cash basis in tax
computation. What are Ryan’s net temporary differences at 31 December 20X7,
according to IAS12 Income taxes?
a. Taxable temporary differences of CU50,000
b. Deductible temporary differences of CU450,000
c. Deductible temporary differences of CU50,000
d. Taxable temporary differences of CU450,000
392. Castlehill Company regularly hedges its purchase requirements and the sale of its
finished products in the future market. On November 1, 2014, the entity entered into
the following three contracts designated as cash flow hedge:
Type of contractQuantityFuture strike priceMarket price 12/31/14
Purchase cotton 100,000 85 75
Purchase wool 150,000 90 110
Sell shirts 90,000 350 400
All three contracts are to be settled on January 1, 2015. What is the derivate asset
or liability on December 31, 2014?
A. 2,500,000 asset C. 6,500,000 asset
B. 2,500,000 liability D. 6,500,000 liability
393. On January 1, 2014, Tara Company received a 5-year variable interest rate loan of
P10,000,000 with interest payment at the end of each year and the principal to be paid
on December 31, 2018. The interest rate for 2014 is 8% and rate in each succeeding year
is equal to market interest rate on January 1 of each year. Tara Company entered into a
“receive variable, pay fixed” interest rate swap agreement. The swap payments are
made at the end of the year. This interest rate swap agreement is designated as a cash
flow hedge. On January 1, 2015, the market rate of interest is 6%. On December 31,
2014, what amount should be reported as derivative asset or liability?
A. 694,000 asset C. 800,000 asset
B. 694,000 liability D. 800,000 liability
394. The Lykdeoldtym Company leased a canning machine with a fair value of
CU165,000 for a period of 5 years under a finance lease. The initial direct costs included
in negotiating the lease were CU1,250. The present value of the minimum lease
payments discounted at the rate implicit in the lease is CU158,400. Under the
requirements of IAS17 Leases, at what amount should the machine be recognised in
Lykdeoldtym’s financial statements?
a. CU165,000 c. CU159,650
b. CU166,250 d. CU158,400
395. Assume that Danica Company agreed to service the loans without explicitly
stating thecompensation. The fair value of the service is P50. What are the net proceeds
and the gain (loss) on the sale, respectively?
A. 2,150 and 150 C. 2,200 and 200
B. 2,200 and (250) D. 2,250 and 250
396. A Company is an experienced home appliance dealer. A Company also offers a

number of services together with the home appliances that it sells (installation and
maintenance). A Company sells dishwashers on a standalone basis; it also sells
installation and maintenance service or dishwashers.
Pricing for dishwashers is as follows:

Dishwasher only P16,000
Dishwasher with installation services 1,700
Dishwasher with maintenance services 1,950
Dishwasher with installation and maintenance services 2,000
In cases where maintenance services are provided, the maintenance service is

separately prices within the arrangement at P350. Dishwashers are sold subject to a
general right return. If a customer purchases a dishwashers with installation and/or
maintenance services, in the event A Company does not complete the service
satisfactorily, the customer is only entitled to a refund of the portion of the fee that
exceeds P1,600. On January 1, 2012, A Company sells 100 dishwashers to BB Complex,
Inc. a developer of high-rise condos. The dishwashers are installed and BB Complex Inc.
purchases the dishwashers with the installation and maintenance services. The total
price for the 100 dishwashers is P190,000.
How much revenue should A Company allocate to the dishwashers?
a. P150,000 c. P160,000
b. P152,000 d. P190,000
397. During the year, King Company made the following expenditures relating to plant
building:
Continuing and frequent repairs 40, 000
Repainted the plant building 10, 000
Major improvement to the electrical wiring system 32, 000
Partial replacement of roof tiles 14, 000
How much should be charged to repair and maintenance expense?
A. 54,000 C. 82,000
B. 64,000 D. 96,000
398. The terms and conditions of employment with The Pleasing Company include
entitlement to share in the staff bonus system, under which 5% of the profits for the
year before charging the bonus are allocated to the bonus pool, provided the annual
profits exceed P50 million. The profits (before accrual of any bonus) for the first half of
2017 amount to P40 million and the latest estimate of the profit (before accrual any
bonus) for the year as whole is P60 million. How much should be recognized in profit or
loss in respect of the staff bonus for the half year to 30 June 2012, according to IAS34
Interim financial reporting?
a. Nil c. P2.0 million
399. On January 1, 2014, Harbor Company purchased land and building at a single
cost of P20, 000. On this date, it was determined that the land and building had a fair
value of P18,000,000 and P7,000,000 respectively. The entity also incurred legal fees for
purchase contract and recording ownership P200,000, and title guarantee insurance
P100,000. The entity immediately demolished the building to make way for construction
of a new building to be used as owner-occupied. The total contract price and other
directly attribute cost to the building amounted to P15,000,000. The entity incurred
demolition cost of P350,000. Under the PICInterpretation, what is the initial cost of the
land?
A. 14,700,000 C. 15,350,000
B. 15,050,000 D. 20,300,000
400. Matter Corporation is in the business of leasing new sophisticated computer

systems. As a lessor of computers, Matter purchased a new system on December 31,
2015. The system was delivered the same day (by prior arrangement) to DOT Company,
a lessee. The corporation’s accountant revealed the following information relating to
the lease transaction: Cost of system to Matter: P550,000. Estimated useful life and
lease term: 8 years Expected residual value (unguaranteed); P40,000. Implicit rate of
interest; 12%. Date of first lease payment December 31, 2015. Additional information as
follows: At the end of the lease, the system will revert to Matter. Dot is aware of
Matter’s rate of implicit interest. The lease rental consists of equal annual payments.
Accounts for leases using the direct financing method. Dot intends to record the lease as
a finance lease. Both the lessee and the lessor report on a calendar year basis and elect
to depreciate all assets on the straight-line basis. What amount of depreciation expense
should the lessee recognized related to the leased asset for the year ended December
31, 2016? Carry present value computations up to 3 decimal places.
a.52,547 b. 64,061
c. 66,730 d.119,277
401. On December 1, 2014, Boyd Company purchased a P400,000 tract of land as an

investment property. The entity razed an old building on the property and sold the
materials it salvaged from the demolition,. The entity incurred additional costs and
realized salvage proceeds as follows:
Demolition of old building 50,000
Legal fees for purchase contract and recording ownership 10,000
Title guarantee insurance 12,000
Proceeds from sale of salvaged materials 8,000
On December 31, 2014, what is the carrying amount of the land?
A. 422,000 C. 460,000
B. 442,000 D. 464,000
402. On January 2, 2017, Brand Company received a grant of P60,000,000 to
compensate it for costs it incurred in planting trees over a period of five years. Brand
Company will incur such cost in this manner: 2017 P2,000,000 2018 P4,000,000 2019
P6,000,000 2020 P8,000,000 2021 P10,000,000. Actual costs incurred in planting the
trees showed P2,000,000 and P4,000,000 in years 2017 and 2008respectively. However,
in 2019 and up to year 2021, the company has stopped planting trees. Due to the
nonfulfillment of its obligation, the government is demanding an immediate repayment
of the grant in the amount of P50,000,000 which is considered reasonable. What
amount should be recognized as an expense related to the repayment of grant?
a.None c.P44,000,000
b.P2,000,000 d.P50,000,000
403. Isabel Company purchased for P4,500,000 a tract of land as a factory site. An
existingbuilding on the property was razed and construction was begun on a new
factory building.The entity incurred the following costs:
Costs of razing old building, net of proceeds from salvaged materials 300,000
Title insurance and legal fees to purchase land 200,000
Architect fee 950,000
New building cost 8,000,000 What is
the cost of the building in accordance with PIC interpretation?
A. 8,950,000 C. 9,250,000
B. 9,150,000 D. 9,450,000
404. Zebra Co. leased equipment from Cobra Corp. on January 1, 2015 for an 8-year
period expiring December 31, 2022. Equal payments under the lease are P600,000 and
are due on December 31 of each year. The first payment was made on December 31,
2015. The rate of interest contemplated by Zebra and Cobra is 11%. The present value
of the equipment is P3,087,674. Zebra Company incurred a total transaction costs of
P64,969 to negotiate the contract of lease. If the transaction cost is deducted, the
effective yield is 11.6%.37.If the lease is accounted as a sales type lease, what is the
initial carrying value of the lease rental receivable on December 31, 2015?
a.2,773,339 c.3,022,705
b.2,827,318 d.3,087,674
405. During the current ear, Kim Company had the following transactions pertaining
to a new office building.
Purchase price of land and an old unusable building 3,000,000
Legal fees for contract to purchase land 100,000
Architect fee 400,000
Demolition of old building to make room for new building construction 250,000
Sale of scrap from old building 50,000
Construction cost of new building fully completed 15,000,000
What amount should be reported as initial cost of the new building?

A. 15,500,000 C. 15,700,000
B. 15,000,000 D. 15,750,000
406. On January 2, 2015, Haven Corporation acquired a track of land that is to be

sold in the ordinary conduct of business. The purchase price of the property of
P50,000,000 was paid in cash and a total transaction costs of P500,000 related to the
acquisition of the property was also paid at a later date. The land was subdivided into
2,000 lots (200
square meters for every lot) for an additional cost of P5,500,000. On December 31,
2015, the market value of the lot was P1,500 per square meter. As of December 31,
2016, only 20,000 square meters are still unsold and market value of the lot had
increased to P1,600 per square meter. On this date, Haven Corporation decided to
transfer the remaining lots into investment property that is to be carried under the fair
value model. There was no additional cost incurred on the change of intention on the
property. What amount of gain should Haven Corporation recognize as a result of the
transfer?
a.29,200,000 c.29,475,000
b.29,225,000 d.29,500,000
407. Punk Company acquired land and an existing building in exchange for 60,000
ordinary shares. The real property tax boiled showed an assessed value of P3,000,000
for the land and P20,000,000 for the building. The shares have a par value of P100 and a
fair value of P150 per share. Punk also incurred the following costs:
Payment to tenants to vacate the building 100,000
Unpaid property taxes on land and building assumed by Punk 375,000
Assessment by city for sewerage project 10,000
Driveways and parking bays 550,000
Cost of grading and leveling 50,000
Cost of new wing attached to the building 750,000
Cost of new split type air-conditioning units 300,000
Remodeling cost prior to occupancy 200,000
What is the total cost of the building?
A. 4,650,000 C. 5,025,000
B. 4,800,000 D. 5,100,000
408. H Company is in the process of filing an insurance claim in connection with a fire on
September 15, 2027 that destroyed its inventory and accounting records. As the
external auditor of the company, you were requested the company to determine the
amount of loss and in filing the said insurance claim. You obtained the following
information based on your investigation: Inventory as reported in the latest annual
financial statements, dated December 31, 2026 amounted to P632,369.40 this amount
is based on the physical inventory count conducted by the H Company under you
observation on December 31,2026. Accounts payable and accounts receivable as
reported in the latest annual financial statements amounted to P330,319.23 and
P405,027.54. Unpaid open invoices due to the suppliers as of the date of the fire were
ascertained to be P380,836.11. All sales are on account and unpaid open invoices due
from customer as of the date of the fire were ascertained to be P321,435.75. Payments
to vendors from December 31,2026 to the date of the fire totaled to P1,925,614.68
while total collections on receivables during the same inclusive dates totaled to
P2,628,586.50. Almost all the merchandise items are sold at approximately 30% in
excess of cost. As at September 15, 2027, the total cost of inventory items not
destroyed by the fire amounted to P434,646.99. The annual premium of P23,640 on the
insurance carried was due and paid on January 1, 2026. The policy, which has a face
amount of P465,000 carries an 80% coinsurance clause (applied to the estimated book
value of inventories on the date of the fire.)
What is the estimated amount to be recovered from the insurance company?

a.121,722.48 c. 275,776.67
b.193,060.65 d. 465,000
409. Amble Company exchanged a truck with a carrying amount of P12,000 and a fair
value of P20,000 for a truck and P2,500 each. The cash flows from the new truck
are not expected to be significantly different from the cash flows of the old truck.
The fair value of the truck received was P17, 500. At what amount should Amble
record the truck received in the exchange?
A. 7,000 C. 10,500
B. 9,500 D. 17,500
410. Mayanne Company provided the following data for the current year:
Cash sales 2,500,000

Sales on account 850,000
Cash purchases 1,700,000
Credit purchases 400,000
Expenses paid 750,000
Accounts receivable – January 1 250,000
Accounts receivable – December 31 300,000
Accounts payable – January 1 150,000
Accounts payable – December 31 200,000
Inventory – January 1 500,000
Inventory – December 31 600,000
Accrued expenses – December 31 20,000
Prepaid expenses – December31 30,000
Equipment – December 31 1,000,000
Interest received 40,000

Interest receivable – January 1 10,000
Interest receivable – December 31 20,000
Interest receivable – December 31 20,000
On July 1 of the current year, an equipment was acquired for P200,000. The terms are
P50,000 down and the balance to be paid after one year. The useful life of equipment is
10 years with no residual value.
What is the net income under cash basis?

a. 550,000 c. 540,000
b. 570,000 d. 640,000
411. Andrew Company has the following comparative balance sheets at December 31
(based on historical costs in nominal dollars):
2017 2018
Cash $ 0 $ 800
Inventory, 10 and 2 units, respectively 500 100
Total Assets $ 500 $ 900

Original paid-in capital $ 500 $ 500
Retained income -- 400
Stockholders' equity $ 500 $ 900
The company had acquired all ten units of inventory at $50 per unit on Dec. 31, 2017,
and had held the units until December 31, 2018. Eight units were sold for $120 per unit
on Dec. 31, 2018. The replacement cost of the inventory on that date was $70 per unit.
The general-price-level index was 100 on Dec. 31, 017 and 130 on December 31, 2018.
Andrew's income from continuing operations using current cost/constant dollars to
measure income would be
a. $140 c. $340
b. $240 d. $440
412. Dreamer Corp. has an employee benefit plan for compensated balances that
gives employees 10 paid vacation days and 10 paid sick days. Both vacation and sick
days can be carried over indefinitely. Employees can elect to receive payment in lieu of
vacation days; however, no payment is given for sick days not taken. At December 31,
2015, Dreamer’s unadjusted balance of liability for compensated absences was P
210,000. Dreamer estimated that there were 150 vacation days and 75 sick days
available at
December 31, 2015. Dreamer’s employees earn an average of P 1,000 per day. In its
December 31, 2015 balance sheet, what amount of liability for compensated absences is
dreamer required to report?
a. P360,000 c. P210,000
b. P225,000 d. P150,000
413. On January 1, 2014, Karlo Company constructed a building costing P4,215,000.

The weighted-average accumulated expenditures on the building during 2014 was
P3,900,000. The entity borrowed P2,000,000 at 7.5% on January 1, 2014. Funds not
needed forconstruction were temporarily invested in short-term securities, and earned
P59,000 ininterest revenue. In addition to the construction loan, the entity had two
other notesoutstanding during the year a P1,500,000, 10-year, 10% note payable dated
October 1,2012, and a 5-year P1,000,000, 8% note payable dated November 2, 2013.
Construction was completed on December 31, 2014 and the building is to leased out
under an operating lease. What is the initial cost of the building on December 31, 2014?
A. 4,165,800 C. 4,480,800
B. 4,215,000 D. 4,539,800
414. A firm has had the following earnings history over the last five years:
Year Earnings per Share

2019 $2.50
2018 2.00
2017 1.75
2016 1.25
2015 –1.00
If the firm’s dividend policy is based on a $0.50 payout per share, increasing by $0.05
per share whenever earnings exceed $1.50 per share, the annual dividends for
2016 and 2019 were
a. $1.25 and $2.50, respectively. c. $0 and $0.50, respectively.
b. $0.50 and $0.50, respectively. d. $0.50 and $0.55, respectively.
415. A firm needs P2 million of new long-term financing. The firm is considering the
saleof common stock or a convertible bond. The current market price of the
common stock is P42 per share. To sell this new issue, the stock would have to be
underpriced by P2 and sold for P40 per share. The firm currently has 300,000 shares
of common stock outstanding. The alternative is to issue 20-year. 10 percent, and
P1,000 par-value convertible bonds. The conversion price would be set at P50 per
share, and the bond could be sold at par. The earnings for the firm are expected to
be P500,000 in the coming year. Assuming the firm chooses the sale of common
stock, the earnings per share in the coming year will be? a. P1.43
b. P1.44
c. P1.45
d. P1.47
416. Rose Company installed a production assembly line to manufacture tennis balls.
In the current year, the entity acquired a machine and rearranged the assembly line
to install the machine. The rearrangement resulted in efficiency in production. The
following expenditures were incurred:
Purchase price of the machine (VAT inclusive 12%) 1,006,000
Labor cost to install machine 250,000
Parts added in rearranging the assembly line 400,000
Cost of testing the machine 150,000
Proceeds from sale of samples produced from testing 50,000
Cost of training worker who will operate the machine 100,000
What is the initial cost of the machine?

A. 1,250,000 C. 1,358,000
B. 1,300,000 D. 1,650,000
Banko Company used the cost recovery method of accounting since it began operations
in 2016. In 2019, management decided to adopt the percentage of completion method.
2016 2017 2018
Revenue from completed contracts 25,000,000 42,000,000 40,000,000
Cost of completed contracts 18,000,000 29,000,000 28,000,000
Income from operations 7,000,000 13,000,000 12,000,000
Casualty loss 0 0 (2,000,000)
Income 7,000,000 13,000,000 10,000,000
Analysis of the accounting records disclosed the following income by contracts using the
percentage of completion method.
2016 2017 2018

Contract 1 7,000,000
Contract 2 5,000,000 8,000,000
Contract 3 3,000,000 7,000,000
2,000,000
Contract 4 1,000,000
6,000,000
Contract 5 (1,000,000)
417. Ignoring income tax, what is the cumulative effect of change in accounting
policy that should be reported in the statement of retained earnings for 2019?
a. 0 c. 8,000,000
b. 6,000,000 d. 7,000,000
418. During 2014, Leah Company constructed asset costing P5,000,000. The
weighted average expenditures totaled P3,000,000. To help construction an amount of
P2,200,000 was borrowed at 10% on January 1, 2014, and funds not needed for
construction were temporarily invested in short-term securities yielding P50,000 in
interest revenue. Other than the construction funds borrowed. The only other debt
outstanding during the year was a P2,500,000 10-year, `12% note payable dated January
1, 2011. What amount of interest should be capitalized during 2014?
A. 266,000 C. 470,000
B. 300,000 D. 500,000
On January 1, 2013, Builder Company entered into a P20,000,000 long-term fixed price
contract to construct a factory building. The entity accounted for this contract under the
percentage of completion at the end of each quarter for 2013.
Quarter Percentage of completion

Estimated cost
1 10% 15,000,000
2 10% 15,000,000
3 25% 19,200,000
4 25% 19,200,000
419. No work was performed in the second and fourth quarters. What amount
should be reported as income (loss) on construction contract in the quarterly income
statements?
First Second Third Fourth

a. 0 0 0 200,000
b. 500,000 0 (300,000) 0
c. 500,000 0 0 0
d. 500,000 0 (120,000) 0
420. On July 1, 2014, Rudd Company reported that a delivery van was destroyed in
an accident. On that date, the carrying amount was P2,500,000. On July 15,2014, Rudd
receive and recorded a P700,000 invoice for a new engine installed in the van in may
2014, and another P500,000 Invoice for various repair. In august, Rudd receive
P3,500,000 under an insurance policy on the van, which it plans to use to replace the
van. What amount should be reported as gain or loss on disposal of the van?
A. 200,000 loss C. 300,000 gain
B. 0 D. 1,000,000 gain
Foltz Corp.'s 2012 income statement had pretax financial income of P250,000 in its
first year of operations. Foltz uses an accelerated cost recovery
method on its tax return and straight-line depreciation for financial reporting. The
differences between the book and tax deductions for depreciation
over the five-year life of the assets acquired in 2012, and the enacted tax rates for
2012 to 2016 are as follows:
Book Over (Under) Tax Tax Rates

2012 P(50,000) 35%
2013 (65,000) 30%
2014 (15,000) 30%
2015 60,000 30%
2016 70,000 30%
421. There are no other temporary differences. In Foltz's December 31, 2012 balance
sheet, the noncurrent deferred income tax liability and the income taxes currently
payable should be
Noncurrent Deferred Income Taxes
Income Tax Liability Currently Payable
a. P39,000 P50,000
b. P15,000 P60,000
c. P39,000 P70,000
d. P15,000 P70,000
422. Alyssa Company owned a machine that was bought on January 1, 2011 for
P6,000,000.The machine was estimated to have useful life of five years and a residual
value ofP500,000 the entity use the sum of years’ digits method of depreciation. On
January 1, 2014, the entity determined that the total useful life of the machine should
have been four years and the residual value is P400,000. What amount should be
recorded as depreciation for2014?
A. 700,000 C. 1,400,000
B. 1,000,000 D. 2,000,000
The following pension plan information is for Farr Company at December 31, 2013.
Projected benefit obligation P8,700,000

Accumulated benefit obligation 7,500,000
Plan assets (at fair value) 6,150,000
Accumulated OCI (PSC) 540,000
Pension expense for 2013 3,000,000
Contribution for 2013 2,400,000
423.The amount to be reported as the liability for pensions on the December 31, 2013
balance sheet is
a. P2,550,000 c. P1,650,000.
b. P2,250,000. d. P1,350,000.
424. Darlene Company owned the machine that was bought on January 1, 2011 for
P5,000,000.The machine was estimated to have a useful life of five years and a residual
value ofP200,000. The entity used the sum of years’ digits method of depreciation. On
January 1,2014, the entity determined that the total useful life of the machine should
have been four years and the residual value is P400,000. What amount should be
recorded as depreciation for 2014?
A. 460,000 C. 580,000
B. 480,000 D. 760,000
The summarized balance sheets of Goebel Company and Dobbs Company as of

December 31, 2012 are as follows:
Goebel Company
Balance Sheet
December 31, 2012
Assets P1,200,000
Liabilities P 150,000
Capital stock 600,000
Total equities P1,200,000
Dobbs Company
Balance Sheet
December 31, 2012
Assets P900,000
Liabilities P225,000
Total equities P900,000
425. If Goebel Company acquired a 30% interest in Dobbs Company on December 31,
2012 for P225,000 and the equity method of accounting for the investment were used,
the amount of the debit to Equity Investments (Dobbs) would have been
a. P285,000. c. P180,000.
b. P225,000. d. P202,500.
426. Swift Company purchased a machine on January 1, 2010, for P500,000. At the
date of acquisition, the machine had an estimated useful life of six years with no
salvage. The machine is being depreciated on a straight-line basis. On January 1, 2013,
Swift determined, as a result of additional information, that the machine had an
estimated useful life of eight years from the date of acquisition with no salvage. An
accounting change was made in 2013 to reflect this additional information. Assume that
the direct effects of this change are limited to the effect on depreciation and the related
tax provision, and that the income tax rate was 30% in 2010, 2011, 2012, and 2013.
What should be reported in Swift's income statement for the year ended December 31,
2013, as the cumulative effect on prior years of changing the estimated useful life of the
machine?
a. P0 c. P50,00
b. P33,000 0
d. P175,0
00
427. A firm is analyzing two possible capital structures—30 and 50 percent debt
ratios. The firm has total assets of P5,000,000 and common stock valued at P50 per
share. The firm has a marginal tax rate of 40 percent on ordinary income. If the interest
rate on debt is 7 percent and 9 percent for the 30 percent and the 50 percent debt
ratios, respectively, the amount of interest on the debt under each of the capital
structures being considered would be
a. 30 percent debt ratio: P105,000 and 50 percent debt ratio: P225,000.
b. 30 percent debt ratio: P245,000 and 50 percent debt ratio: P225,000.
c. 30 percent debt ratio: P105,000 and 50 percent debt ratio: P250,000.
d. 30 percent debt ratio: P135,000 and 50 percent debt ratio: P175,000.
428. Bauk Company signed a 10-year lease for office space on January 1, 2014. The
entity has the option to renew the contract for an addition five years on or before
January 1, 2014.During January 2015, the entity incurred P1,400,000 for general
improvements on the space. The improvements have a useful life of 16 years. Also the
entity acquired furniturefor P300,000 with a useful life of 12 years. On December 31,
2015, the entity’s intentions to renew the lease contract are certain. What is the
depreciation of the lease improvements in2015?
A. 87,500 C. 125,000
B. 100,000 D. 140,000
The following information pertains to Nixon Corp. and its divisions for the year ended
December 31, 2013.
Sales to unaffiliated customer P3,500,000

Intersegment sales of products similar to those sold to
unaffiliated customers 1,050,000
Interest earned on loans to other operating segment 70,000
429. Nixon and all of its divisions are engaged solely in manufacturing operations.
Nixon has a reportable segment if that segment's revenue exceeds
a. P462,000. c. P357,000.
b. P455,000. d. P350,000.
430. On January 1, 2014, Union Company purchased a machine for P264,000 and
depreciated it by the straight-line method using an estimated useful life of eight years
with no residual value. On January 1, 2017, the entity determined that The Machine had
a useful life of six years from the date of acquisition with residual value of P24,000.
What is the accumulated depreciation on December 31, 2017?
A. 146,000 C. 160,000
B. 154,000 D. 176,000
The following information was included in the bank reconciliation for Bayside Company
for October and November 2013:
Checks and charges recorded by bank in November, including a

November service charge of P4,000 and NSF check of P20,000 550,000
Service charge made by bank in October and recorded
by depositor in November 2,000
Total credits to cash in all journals during November 620,000
Customer's NSF check returned in October and redeposited in
November (no entry made by depositor in either October or November) 40,000
Outstanding checks on October 31, 2013 that cleared in November 230,000
431. What is the amount of outstanding checks on November 30,2013?

a. 282,000 c. 322,000
b. 300,000 d. 302,000
Turner Corporation had the following information in its financial statements for the year
ended 2012 and 2013:
Cash dividends for the year 2013 P

15,00
0
Net income for the year ended 2013 155,0
00
Market price of stock, 12/31/13 24
Common stockholders’ equity, 12/31/12 2,200,0
00
00
Outstanding shares, 12/31/13 160,0
00
Preferred dividends for the year ended 2013 30,000
432. What is the payout ratio for Turner Corporation for the year ended 2013?
a. 9.7% c. 19.4%
b. 12.0% d. 29.0%
Torrey Co. manufactures equipment that is sold or leased. On December 31, 2013,
Torrey leased equipment to Dalton for a five-year period ending December 31, 2018,
at which date ownership of the leased asset will be transferred to Dalton. Equal
payments under the lease are P440,000 (including P40,000 executory costs) and are
due on December 31 of each year. The first payment was made on December 31,
2013. Collectibility of the remaining lease payments is reasonably assured, and Torrey
has no material cost uncertainties. The normal sales price of the equipment is
P1,540,000, and cost is P1,200,000. For the year ended December 31, 2013,
433. What amount of income should Torrey realize from the lease transaction?
a. P340,000 b. P440,000 c. P460,000 d.P660,000
Information concerning the capital structure of Piper Corporation is as follows:

December31
2013 2012
Common stock 150,000 shares 150,000
shares
Convertible preferred stock 15,000 shares 15,000
shares
6% convertible bonds P2,400,000 P2,400,000
434. During 2013, Piper paid dividends of P0.80 per share on its common stock and
P2.00 per share on its preferred stock. The preferred stock is convertible into 30,000
shares of common stock. The 6% convertible bonds are convertible into 75,000
shares of common stock. The net income for the year ended December 31, 2013,
was P400,000. Assume that the income tax rate was 30%. What should be the
diluted earnings per share for the year ended December 31, 2013, rounded to the
nearest centavos?
a. P2.13 c. P1.89
b. P1.96 d. P1.57
435. Weir Company used straight-line depreciation for property, plant and
equipment: 12/31/2015 12/31/2014
Land 25,000 25,0
00
Buildings 195,000 195,0
00
Machinery and equipment 695,000 650,0
00
00
The depreciation expense for 2015 and 2014 was P55,000 and P50,000,
respectively. What amount was debited to accumulated depreciation during 2015
because of retirement?
A. 10,000 C. 25,000
B. 20,000 D. 40,000
436. Al is trying to decide which of two bonds to buy. Bond H is a 10 percent coupon,
10-year maturity, P1,000 par, January 1, 2000 issue paying annual interest. Bond F
is a 10 percent coupon, 10-year maturity, P1,000 par, January 1, 2000 issue paying
semiannual interest. The market required return for each bond is 10 percent.
When using present value to determine the prices of the bonds, Al will find that
a. there is no difference in price. c. the price of H is greater than F.
b. the price of F is greater than H. d. he needs more information before
determining the prices
437. Enrico Company uses the sum-of-years-digits method to depreciate equipment

purchased in January 2014 for P2,000,000. The residual value is P200,000 and the
useful life is four years. What is the carrying amount of the equipment on
December 31, 2016?
A. 180,000 C.380,000
B. 200,000 D. 450,000
438. A firm needs P1.5 million of new long-term financing. The firm is considering the
sale of common stock or a convertible bond. The current market price of the common
stock is P16 per share. To sell this new issue, the stock would have to be underpriced by
P1 and sold for P15 per share. The firm currently has 600,000 shares of common stock
outstanding. The alternative is to issue 30-year,
8 percent, and P1,000 par-value convertible bonds. The conversion price would be set at
P20 per share, and the bond could be sold at par. The earnings for the firm are expected
to be P700,000 in the coming year. Which plan results in less dilution of the earnings per
share?
a. The common stock with an EPS of P1.17.
b. The common stock with an EPS of P1.00.
c. The convertible bond with an EPS of P1.04.
d. The convertible bond with an EPS of P1.00.
439. Star Company leased a building for product showroom. The ten-year nonrenewable
lease will expire on December 31, 2019. In January 2014, star redecorated the
showroom and made leasehold improve of P48,000. The estimated useful of the
improvement is eight years. The entity used the straight-line method depreciation.
What amount of leasehold improvements, net of depreciation, should be reported on
June 30, 2014?
A. 43,200 C. 45,000
B. 44,000 D. 45,600
440. On January 1, 2009, Nicole Company purchased a new building at a cost of
P6,000,000.Depreciation was computed on the straight-line basis at 4% per year. On
January 1, 2014, the building was revalued at a fair value of P8,000,000. What is the
revaluation surplus onDecember 31, 2014?
A. 1,900,000 C. 3,040,000
B. 1,920,000 D. 3,072,000
441. A firm is offered credit terms of 1/10 net 45 EOM by a major supplier. The firm
has determined that it can stretch the credit period (net period only) by 25 days without
damaging its credit standing with the supplier. Assuming the firm needs short-term
financing and can borrow from the bank on a line of credit at an interest rate of 14
percent, the firm should
a. give up the cash discount and finance the purchase with the line of credit.
b. give up the cash discount and pay on the 70th day after the date of sale.
c. take the cash discount and pay on the first day of the cash discount period.
d. take the cash discount and finance the purchase with the line of credit, the
cheaper source of funds.
442. During the current year, Wilson Company sold a piece of equipment used in
production.The equipment had been accounted for using the revaluation method and
details of the accounts and sale are as follow:
Sale price 100,000 Carrying
amount of equipment 90,000 Revaluation surplus
20,000 Which of the following is correct about recording the sale?
A. The gain should be recorded in profit and loss is P30,000
B. The should be recorded in other comprehensive income is P10,000 C. The
gain should be recorded in other comprehensive income is P30,000.
D. The gain should be recorded in profit and loss is P10,000 and the P20,000
443. Tangshan Mining was extended credit terms of 3/15 net 30 EOM. The cost of giving
up the cash discount, assuming payment would be made on the last day of the
credit period, would be _________. If the firm were able to stretch its accounts
payable to 60 days without damaging its credit rating, the cost of giving up the cash
discount would only be _________.
(a) 72.99%; 18.81%. b.

72.99%; 18.25%
c. 75.25%; 21.90%.
d. 75.25%; 22.58%.
444. In January 2014, Troy Company purchased a mineral mine for P36,000,000 with
removable ore estimated by geological survey at 2,160,000 tons. The properly has
an estimated value of P3,600,000 after the ore has been extracted. The entity
incurred P10,800,000 of development cost preparing the property for the
extraction of ore. During the current year, 270,000 tons were removed and
240,000 tons were sold. What amount of depletion should be included in cost of
goods sold for 2014?
A. 3,600,000 C. 4,800,000
B. 4,050,000 D. 5,400,000
On January 2, 2012, Indian River Groves began construction of a new citrus processing
plant. The automated plant was finished and ready for use on September 30, 2013.
Expenditures for the construction were as follows:
January 2, 2012 P300,000

September 1, 2012 900,000
December 31, 2012 900,000
March 31, 2013 900,000
September 30, 2013 600,000
445. Indian River Groves borrowed P1,650,000 on a construction loan at 12% interest on
January 2, 2012. This loan was outstanding during the construction period. The
company also had P6,000,000 in 9% bonds outstanding in 2012 and 2013. The
interest capitalized for 2012 was:
a. P270,000 c. P228,000
b. P72,000 d. P90,000
446.. In January 2014, Mark Company purchased a mineral mine for P36,000,000 with
removable ore estimated by geological survey at 4,000,000 tons. The property hasan
estimated value of P3,600,000after the ore has been extracted. The entity incurred
P10,800,000 of development cost preparing the property for the extraction of ore. The
entity is required to restore the property to the original condition at an estimated cost
of P2,500,000. The present value of the estimated restoration cost is P1,800,000. During
the 2014, 400,000 tons were removed and 300,000 tons were sold. For the year ended
December 31, 2014, what amount of depletion should be included in cost of goods sold?
A. 3,375,000 C. 4,500,000
B. 3,427,500 D. 4,570,000
Knob Company provided the following information relating to the transfer of real estate
pursuant to a troubled-debt restricting in full liquation of liability:
Carrying amount of liability liquidated 150,000
Carrying amount of real estate transferred 100,000 Fair value of real estate
transferred 90,000

a. 50,000 loss c. 0
b. 10,000 loss d. 50,000 gain
448. On January 1. 2014, Kristine Company signed an agreement to operate as a

franchisee of another entity for an initial franchise fee of P12,000,000. The same
date, the entity paid P4,000.000 and agreed to pay the balance in four equal
annual installments P2,000,000 beginning January 1, 2015. The down payment is
not refundable and no future services are required of the franchisor. The entity can
borrow at 14% for the loan of thistype. Present and future factors are as follows:
Present value of an ordinary annuity of 1 at 14% for 4 periods 2.91
What is the acquisition cost of the franchise?

A. 8,720,000 C. 12,000,000
B. 9,820,000 D. 13,520,000
Haystack, Inc. owns 30% of the outstanding stock of Hallmark, Inc. and accordingly
uses the equity method to account for its investment. The stock was purchased on
January 1, 2013 for P780,000. During the year ended December 31, 2013, Hallmark,
Inc. reported the following:
Dividends declared and paid P

400,00
0
Net income 2,400,0
00
449. Haystack, Inc. uses the FIFO method for costing its inventories, while Hallmark, Inc.
uses the LIFO method to conform with other companies in its industry. Haystack,
Inc. determines that if Hallmark, Inc. had used the FIFO method, its income would
have been P350,000 higher during 2013. What is the balance in the Investment in
Hallmark, Inc. that will be reported on Haystack, Inc.’s balance sheet at December
31, 2013 assuming Haystack, Inc. follows Philippine GAAP for its external financial
reporting?
a. P1,725,000 c. P1,485,000
b. P1,380,000 d. P1,275,000
450. Royal Company purchased a trademark and incurred the following costs:
One-time trademark purchase price 100,000
Nonrefundable VAT taxes 5,000
Training sales personnel on the use of the new trademark 7,000
Research expenditures associated with the purchase of the new trademark 24,000
Legal costs incurred to register the trademark 10,500
Salaries of the administrative 12,000
What is the initial cost of the trademark?

A. 100,000 C. 146,500
B. 115,500 D. 158,500
451. Windsor Company developed a trademark and incurred the following expenditures
Marketing research 600, 000
Design cost of trademark 1, 700, 000
Legal registration of fee 200, 000
Advertising cost 350, 000
Registration with intellectual Property Office 100, 000
What amount should be capitalized as cost of trademark?

A. 1,900,000 C. 2,450,000
B. 2,000,000 D. 2,600,000
452. Grimm Company has 2,000,000 shares of common stock outstanding on
December 31, 2012. An additional 150,000 shares of common stock were issued on July
1, 2013, and 300,000 more on October 1, 2013. On April 1, 2013, Grimm issued 6,000,
P1,000 face value, 8% convertible bonds. Each bond is convertible into 40 shares of
common stock. No bonds were converted into common stock in 2013. What is the
number of shares to be used in computing basic earnings per share and diluted earnings
per share, respectively, for the year ended December 31, 2013?
a. 2,150,000 and
2,330,000 c. 2,150,000 and
b. 2,150,000 and 2,150,000
2,390,000 d. d. 2,450,000 and
2,630,000
453. On January 1, 2014, Judd Company bought a trademark for P500,000. The entity
retained an independent consultant who estimated the trademark’s remaining useful
life to be fifty years. The unamortized cost of the trademark was P380,000. On
December 31, 2014, what amount should be reported as accumulated amortization?
A. 7,600 C. 10,000
B. 9,500 D. 12,500
454. Wright Co., organized on January 2, 2012, had pretax accounting income of
P640,000 and taxable income of P1,600,000 for the year ended December 31, 2012 The
only temporary difference is accrued product warranty costs which are expected to be
paid as follows:
2013 P320,0
00
2014 160,0
00
2015 160,0
00
2016 320,0
00
The enacted income tax rates are 35% for 2012, 30% for 2013 through 2015, and 25%
for 2016. If Wright expects taxable income in future years, the deferred tax asset in
Wright's December 31, 2012 balance sheet should be
a. P192,000. c. P272,000.
b. P224,000. d. P336,000.
455. Greene Company bought a patent from White Company on January 1, 2014 for
P102,000. An independent research consulting estimated that the remaining useful life
of the patent was four years. The remaining legal wifewas six years. The unamortized
cost of the patent on January 1, 2014 was P30,000. What is the amortization of patent
for 2014?
A. 5,000 C. 17,000
B. 7,500 D. 25,000
456. On January 2, 2013, Hernandez, Inc. signed a ten-year noncancelable lease for a
heavy duty drill press. The lease stipulated annual payments of P250,000 starting at the
end of the first year, with title passing to Hernandez at the expiration of the lease.
Hernandez treated this transaction as a capital lease. The drill press has an estimated
useful life of 15 years, with no salvage value. Hernandez uses straight-line depreciation
for all of its plant assets. Aggregate lease payments were determined to have a present
value of P1,500,000, based on implicit interest of 10%. . In its 2013 income statement,
what amount of depreciation expense should Hernandez report from this lease
transaction?
a. P250,000 c. P150,000
b. P200,000 d. P100,000
457. On December 1, 2014, popular Company purchased for cash at P18 per share all
200,000 shares of spruce company. On December 1, 2014, spruce showed a carrying
amount of net assets of P3,200,000. The carrying amounts are equal to the fair values of
all the identifiable assets except property, plant and equipment. The fair value of
property, plant and equipment exceeded carrying amount by P150,000. What amount
should be reported as goodwill?
A. 0 C. 400,000
B. 250,000 D. 550,000
458. An investor is considering buying 500 shares of ABC Company at P32 per share.
Analysts agree that the firm’s stock price may increase to P45 per share in the
next 4 months. As an alternative, the investor could purchase a 120-day call
option at a striking price of P30 for P5,000. At what stock price would the investor
break even?
a. P35.
b. P40.
c. P42.
d. P45.
A schedule of machinery owned by Mallon Co. is presented below:
Estimated
Estimated
Total Cost Salvage Value Life in Years
Machine A P260,000 P20,000 12
Machine C 390,000 30,000 10
Machine M 195,000 15,000 6
459. Mallon computes depreciation by the composite method. . The composite rate
of depreciation (in percent) for these assets is
a. 10.18. c. 11.03.
b. 10.77. d. 11.67.
460. On January 1, 2014, Paye Company purchased another entity at a cost that
resulted in recognition of goodwill of P200,000. During the first quarter, the entity spent
an additionalP80,000 on expenditures designed to maintain goodwill. On December 31,
2014, whatamount should be reported as goodwill?
A. 180,000 C. 252,000
B. 200,000 D. 280,000
461. Eddy Co. is indebted to Cole under a P600,000, 12%, three-year note dated
December 31, 2011. Because of Eddy's financial difficulties developing in 2013, Eddy
owed accrued interest of P72,000 on the note at December 31, 2013. Under a troubled
debt restructuring, on December 31, 2013, Cole agreed to settle the note and accrued
interest for a tract of land having a fair value of P540,000. Eddy's acquisition cost of
the land is P435,000. Ignoring income taxes, on its 2013 income statement Eddy should
report as a result of the
troubled debt restructuring
Gain on Disposal Restructuring Gain
a. P237,000 P0
b. P105,000 P60,000
c. P165,000 P0
d. P105,000 P132,000
462. Mark Company acquired equipment on January 1, 2013 for P5,000,000. The
equipment has a 10-year useful life and no residual value. On December 31, 2014, the
following information was obtained:
Expected value of undiscounted cash flows 3,600,000
Fair value estimated with in-use premise 3,700,000
Fair value estimated with in-exchange premise 3,500,000
What amount should be recognized as impairment loss for 2014?

A. 0 C. 400,000
B. 300,000 D. 500,000
Riley Co. incurred the following costs during 2013:
Significant modification to the formulation of a chemical product P160,000

Trouble-shooting in connection with breakdowns during commercial
production 150,000
Cost of exploration of new formulas 200,000
Seasonal or other periodic design changes to existing products 185,000
Laboratory research aimed at discovery of new technology 275,000
463. In its income statement for the year ended December 31, 2013, Riley should
report research and development expense of
a. P635,000. c. P820,000.
b. P785,000. d. P970,000.
464. Synthia Company purchased a sewing machine for P1,000,000 on July 1, 2014.
The machine had a ten-year life, a P50,000 residual value, and was depreciated using
the straight-line method. On December 31,2016, a test for impairment indicates that
the undiscounted cash flows from the sewing machine are less than carrying
amount.The machine’s actual fair value on December 31, 2016 is P300,000. What is loss
onimpairment for 2016?
A. 415,000 C. 475,000
B. 462,500 D. 650,000
465. In January 2012, Fehr Mining Corporation purchased a mineral mine for P6,300,000
with removable ore estimated by geological surveys at 2,500,000 tons. The
property has an estimated value of P600,000 after the ore has been extracted. Fehr
incurred P1,725,000 of development costs preparing the property for the
extraction of ore. During 2012, 340,000 tons were removed and 300,000 tons were
sold. For the year ended December 31, 2012, Fehr should include what amount of
depletion in its cost of goods sold?
a. P775,200 c. P891,000
b. P684,000 d. P1,009,800
Sealy Corporation had the following information in its financial statements for the years
ended 2012 and 2013:
Cash dividends for the year 2013 P 5,000

Net income for the year ended 2013
78,000
00
00
Outstanding shares, 12/31/13 100,0
00
Preferred dividends for the year ended 2013
10,000
466. What is the price-earnings ratio for Sealy Corporation for the year ended 2013?
a. 14.7 c. 17.6
b. 15.4 d. 19.0
467. Metro Company, a dealer in machinery and equipment, leased equipment to

Sands, Inc., on July 1, 2013. The lease is appropriately accounted for as a sale by
Metro and as a purchase by Sands. The lease is for a 10-year period (the useful life
of the asset) expiring June 30, 2023. The first of 10 equal annual payments of
P828,000 was made on July 1, 2013. Metro had purchased the equipment for
P5,200,000 on January 1, 2013, and established a list selling price of P7,200,000 on
the equipment. Assume that the present value at July 1, 2013, of the rent
payments over the lease term discounted at 8% (the appropriate interest rate) was
P6,000,000. What is the amount of profit on the sale and the amount of interest
income that Metro should record for the year ended December 31, 2013?
a. P0 and P206,880 c. P800,000 and P240,000
b. P800,000 and P206,880 d. P1,200,000 and P480,000
468. On January 1, 2014, Westfield Company purchased building to be leased out under
an operation lease. The total payment for the purchase is P9,000,000 Which
included a 10% non-recoverable purchase tax. The entity used the cost model for
the investment property.The building has a useful life of 20 years. On December
31, 2015, impairment indicatorsa46re present. On such date, it was determined
that the fair value less cost of disposal of thebuilding was P7,000,000, What
amount of impairment loss should be recognized for 2015?
A. 0 C. 2,405,000
B. 1,910,000 D. 2,900,000
The following information relates to Jackson, Inc.:
For the Year Ended December 31,
2012 2013
Plan assets (at fair value) P1,310,000 P1,824,0
00
Pension expense 570,000 450,0
00
Projected benefit obligation 1,620,000 1,984,0
00
Annual contribution to plan 600,000 450,0
00
Accumulated OCI (PSC) 480,000 420,0
00
469. The amount reported as the liability for pensions on the December 31, 2013
balance sheet is
a. P -0-. c. P1,984,000.
b. P160,000. d. P420,000.
470. On July 1, 2014, Carver Company acquired Jones Company in a business

combination. As a result of the combination, the amounts of goodwill recorded for each
of the three reporting units of the acquired were retailing P300,000, Service P200,000
and financing P400,000 near the end of 2014 a new major competitor entered the
market and Carver was concernedthat this Might cause a significant decline in the value
of the goodwill for the three majorreporting units On December 31, 2014. On such date,
the amounts of goodwill are retailingP250,000 service P100,000 and financing P600,000.
What amount of impairment of goodwill should be recorded on December 31,2014?
A. 0 C. 150,000
B. 100,000 D. 250,000
Included in Vernon Corp.'s liability account balances at December 31, 2012, were the
following:
7% note payable issued October 1, 2012, maturing September 30, 2013 P250,000
8% note payable issued April 1, 2012, payable in six equal annual
installments of P150,000 beginning April 1, 2013 600,000
471. Vernon's December 31, 2012 financial statements were issued on March 31,
2013. On January 15, 2013, the entire P600,000 balance of the 8% note was refinanced
by issuance of a long-term obligation payable in a lump sum. In addition, on March 10,
2013, Vernon consummated a noncancelable agreement with the lender to refinance
the 7%, P250,000 note on a long-term basis, on readily determinable terms that have
not yet been implemented. On the December 31, 2012 balance sheet, the amount of
the notes payable that Vernon should classify as short-term obligations is
a. P175,000. c. P50,000.
b. P125,000. d. P0
On January 2, 2012, Indian River Groves began construction of a new citrus processing
plant. The automated plant was finished and ready for use on September 30, 2013.
Expenditures for the construction were as follows:
January 2, 2012 P300,000

September 1, 2012 900,000
December 31, 2012 900,000
March 31, 2013 900,000
September 30, 2013 600,000
472. What were the weighted-average accumulated expenditures for 2013 by the
end of the construction period?
a. P585,000 c. P2,979,000
b. P2,452,500 d. P2,079,000
473. Marjorie Company acquired a Machine for P320,000 on August 31,2014. The
machine has a five-year life, a P50,000 residual value and was depreciated using the
straight-line method. On may 31, 2017, a test continued use and eventual disposal of
the machine totalP150,000. The machine’s actual fair value on may 31, 2017 is P135,000
with no residualvalue. Assuming a loss on impairment is recognized on May 31, 2017,
what is thedepreciation expense for June 2017?
A. 3,148 C. 5,000
B. 4,500 D. 6,352
The summarized balance sheets of Goebel Company and Dobbs Company as of
December 31, 2012 are as follows:
Dobbs Company
Balance Sheet
December 31, 2012
Assets P900,000
Liabilities P225,000
Total equities P900,000
Goebel Company
Balance Sheet
December 31, 2012
Assets P1,200,000
Liabilities P 150,000
Total equities P1,200,000
474. If Goebel Company acquired a 20% interest in Dobbs Company on December 31,
2012 for P195,000 and the fair value method of accounting for the investment were
used, the amount of the debit to Equity Investments (Dobbs) would have been
a. P135,000. c. P195,000.
b. P111,000. d. P180,000.
475. On January 1, 2012, Crown Company sold property to Leary Company. There
was no established exchange price for the property, and Leary gave Crown a P3,000,000
zerointerest-bearing note payable in 5 equal annual installments of P600,000, with the
first payment due December 31, 2012. The prevailing rate of interest for a note of this
type is 9%. The present value of the note at 9% was P2,163,000 at January 1, 2012.
What should be the balance of the Discount on Notes Payable account on the books of
Leary at December 31, 2012 after adjusting entries are made, assuming that the
effective-interest method is used?
a. P0 c. P669,600
b. P642,330 d. P837,000
476. Ben Company provided the following calculation of an impairment loss on
December 31,2014.
Goodwill Net assets
Carrying amount 3,000,000 9,000,000
Impairment loss (3,000,000) (2,000,000)
Adjusted carrying amounts . -7,000,000
There has been a favorable change in the estimate of the recoverable amount of the
net assets. The recoverable amount is now P8,000,000 on December 31, 2015. The
carrying amount of the net assets would have been P7,200,000 on December 31,
2015 if there was no impairment loss recognized on December 31, 2014. Assets are
depreciated at 20% of reducing balance. What gain on reversal of impairment
should be recognized in 2015?
A. 0 C. 1,600,000
B. 1,000,000 D. 2,400,000
477. Logan Company incurred P4,000,000 (P1,100,000 in 2011 and P2,900,000 in
2012) to develop a computer software product. P1,200,000 of this amount was
expended before technological feasibility was established in early 2012. The product will
earn future revenues of P8,000,000 over its 5-year life, as follows: 2012 – P2,000,000;
2013 – P2,000,000; 2014 – P1,600,000; 2015 – P1,600,000; and 2016 – P800,000. What
portion of the P4,000,000 computer software costs should be expensed in 2012?
a. P700,000.
b. P750,000.
c. P800,000.
d. P2,900,000.
478. On January 1, 2014, Arlyn Company had capitalized cost of P6,000,000 for a new
computer software with an economic life of 4 years. Sales for 2014 amounted to
P3,000,000. The total sales of software over the economic life are expected to be
P10,000,000. The pattern of future sales cannot be measured reliably. On December 31,
2014, the software had a fair value less cost of disposal of P4,400,000. What net amount
of the capitalized software cost should be reported on December 31, 2014?
A. 4,200,000 C. 4,500,000
B. 4,400,000 D. 6,000,000
A schedule of machinery owned by Mallon Co. is presented below:

Estimated Estimated
Total Cost Salvage Value Life in Years
Machine A P260,000 P20,000 12
Machine C 390,000 30,000 10
Machine M 195,000 15,000 6
Mallon computes depreciation by the composite method.
479. The composite life (in years) for these assets is

a. 9.1. b. 9.3. c. 9.8. d. 10.0.
480. On January 1, 2014, Alpha Company signed an annual maintenance agreement
with asoftware provider for P15,000 and the maintenance period begins on March
1, 2014. Alpha also incurred P5,000 on January 1, 2014 related to software
modification request that willincrease the functionally of the software asset over
five years using the straightline method.What is the total expense that should be
recognized as a result of the maintenance agreementand the software
modification for 2014?
A. 5,000 C. 16,000
B. 13,500 D. 20,000
481. Balcom Corporation acquires a coal mine at a cost of P1,500,000. Intangible
development costs total P360,000. After extraction has occurred, Balcom must restore
the property (estimated fair value of the obligation is P180,000), after which it can be
sold for P510,000. Balcom estimates that 5,000 tons of coal can be extracted. If 900 tons
are extracted the first year, which of the following would be included in the journal
entry to record depletion?
a. Debit to Accumulated Depletion for P275,400
b. Credit to Inventory for P270,000
c. Debit to Inventory for P275,400
d. Credit to Accumulated Depletion for P459,000
482. On June 1, 2012, Yang Corp. loaned Gant P400,000 on a 12% note, payable in
five annual installments of P80,000 beginning January 2, 2013. In connection with this
loan, Gant was required to deposit P4,000 in a zero-interest-bearing escrow account.
The amount held in escrow is to be returned to Gant after all principal and interest
payments have been made. Interest on the note is payable on the first day of each
month beginning July 1, 2012. Gant made timely payments through November 1, 2012.
On January 2, 2013, Yang received payment of the first principal installment plus all
interest due. At December 31, 2012, Yang's interest receivable on the loan to Gant
should be
a. P0. b. P4,000.
c. P8,000. d. P12,000.
483. Flip Company incurred the following computer software costs for the
development and saleof software programs during the current year:
Planning costs 500,000
Design of the software 1,500,000
Substantial testing of the project’s initial stages 750,000
Production and packaging costs for the first month’s sales 5,000,000
Costs of producing product masters and technology feasibility
was established 2,000,000
The project was not under any contractual arrangement when these expenditures
were incurred. What amount should be reported as research and development
expense for the current year?
A. 2,000,000 C. 5,000,000
B. 2,750,000 D. 9,750,000
484. On January 2, 2012, Wine Corporation wishes to issue P3,000,000 (par value) of its
8%, 10-year bonds. The bonds pay interest annually on January 1. The current yield
rate on such bonds is 10%. Using the interest factors below, compute the amount
that Wine will realize from the sale (issuance) of the bonds.

32
55
Present value of an ordinary annuity at 8% for 10 periods 6.71
01
Present value of an ordinary annuity at 10% for 10 periods 6.14
46
a. P3,000,000 c. P3,000,018
b. P2,631,204 d. P3,318,078
485. Jeff Company incurred the following costs during the current year:
Routine on-going effort to refine, enrich or improve an existing product 2,500,000
Design, construction and testing of preproduction models 2,200,0
00
Quality control during commercial production 3,000,0
00
Laboratory research for discovery of new knowledge 3,600,0
What is the total research and development expense? 00
A. 4,700,000 C. 5,800,000
B. 5,500,000 D. 6,600,000
486. On January 1, 2012, Kline Company decided to begin accumulating a fund for asset
replacement five years later. The company plans to make five annual deposits of
P40,000 at 9% each January 1 beginning in 2012. What will be the balance in the
fund, within P10, on January 1, 2017 (one year after the last deposit)? The
following 9% interest factors may be used.
Present Value of Future Value

of
Ordinary Annuity Ordinary Annuity
4 periods 3.2397 4.5731
5 periods 3.8897 5.9847
6 periods 4.4859 7.5233
a. P260,932 c. P218,000
b. P239,388 d. P200,000
487. Cody Company incurred the following costs during the current year
Design of tools, jigs, molds, and dies involving new technology 15,000
Modification of the formulation process 160,000
Trouble shooting of breakdowns during commercial production 100,000
Adaption of an existing capability to a particular customer need
as part of a continuing commercial activity 110,000
What amount should be recognized as research and development expense for the
current year?
A. 125,000 C. 235,000
B. 160,000 D. 285,000
488. Stemway requires a new manufacturing facility. Management found three
locations; all of which would provide needed capacity, the only difference is the price.
Location A may be purchased for P500,000. Location B may be acquired with a down
payment of P100,000 and annual payments at the end of each of the next twenty years
of P50,000. Location C requires P40,000 payments at the beginning of each of the next
twenty-five years. Assuming Stemway's borrowing costs are 8% per annum, which
option is the least costly to the company?
a. Location A. c. Location C.
b. Location B. d. Location A and Location B.
489. Ball Company incurred the following research and development costs during the
current year:
Direct costs of doing contract research and development work for the
government to be reimbursed by government unit 400,000
Depreciation 300,000
Salaries 700,000
Indirect costs appropriately allocated 200,000
Materials 180,000
What is the total research and development expense in the current year?
A. 1,080,000 C. 1,580,000
B. 1,380,000 D. 1,780,000
490. Howard Company incurred the following research and development costs in the
current year:
Materials used in R&D projects 400, 000
Equipment acquired that will have alternative future use in
future R&D projects 2, 000,
000
Depreciation on above equipment 500, 000
Personnel costs of persons involved in R&D projects 1, 000,
000
Consulting fees paid to outsiders for R&D projects 100, 000
Indirect costs reasonably allocate to R&D projects 200, 000
What amount of R&D costs should be expensed in the current year?
A. 1,500,000 C. 2,200,000
B. 1,700,000 D. 3,500,00
Operating income and tax rates for C.J. Company’s first three years of operations were
as follows:
Income Enacted tax rate

2012 P200,000 35%
2013 (P500,000) 30%
2014 P840,000 40%
491. Assuming that C.J. Company opts to carryback its 2013 NOL, what is the amount of
income tax payable at December 31, 2014?
a. P136,000 b. P336,000
c. P246,000 d. P216,000
492. Metal Company incurred the following costs during the current year:
Laboratory research aimed at discovery of new knowledge 75,000

Design of tools, jigs molds and dies involving new knowledge 22,000
Quality control during commercial production, including routine testing 35,000
Equipment acquired two years ago, having an estimated useful life of five years with no
residual value, used in various R&D projects the entire year 150,000
R&D services performed by Stone Company for Metal Company 23,000
R&D services performed by Metal Company for Kaye Company 2,000
What amount of R&D expense should be reported in the current year?

A. 120,000 C. 187,000
B. 150,000 D. 217,000
493. Assuming that C.J. Company opts only to carryforward its 2013 NOL, what is the
amount of deferred tax asset or liability that C.J. Company would report on its
December 31, 2013 balance sheet?
Amount Deferred tax asset or liability a. P150,000

Deferred tax liability
b. P200,000 Deferred tax asset
c. P175,000 Deferred tax liability
d. P150,000 Deferred tax asset
494. On January 1, 2014, the city government provided Eros Company a zero-
interest, P8,000,000 loan with a 4-year term. The prevailing market rate of interest for
this type ofloan is 8%. The PV of 1 and 8% for 4 periods is 0.735, and the PV of an
ordinary annuityof 1 and 8% for 4 periods is 3.312. What amount of deferred grant
income should berecognized on December 31, 2015?
A. 0 C. 1,649,600
B. 1,141,568 D. 2,120,000
495. Hogan Farms produced 1,200,000 pounds of cotton during the 2013 season.
Hogan sells all of its cotton to Ott Co., which has agreed to purchase Hogan's entire
production at the prevailing market price. Recent legislation assures that the market
price will not fall below P.70 per pound during the next two years. Hogan's costs of
selling and distributing the cotton are immaterial and can be reasonably estimated.
Hogan reports its inventory at expected exit value. During 2013, Hogan sold and
delivered to Ott 900,000 pounds at the market price of P.70. Hogan sold the remaining
300,000 pounds during 2014 at the market price of P.72. What amount of revenue
should Hogan recognize in 2013?
a. P630,000 c. P648,000
b. P840,000 d. P864,000
496. On January 1, 2014, Jessica Company received a consolidated grant of

P12,000,000.Three fourth of the grant will be utilized to purchase a college building for
students from underdeveloped countries. The balance of the grant is for subsidizing the
tuition costs of those students for four years from date of grant. The building was
purchased in January2014 and is to be depreciated using the straight-line method over
10years.the tuition costspaid in 2014 amounted to P600,000. What amount of grant
income should be recognized for2014?
A. 1,050,000 C. 1,650,000
B. 1,200,000 D. 3,000,000
Gage Co. purchases land and constructs a service station and car wash for a total of
P360,000. At January 2, 2012, when construction is completed, the facility and land on
which it was constructed are sold to a major oil company for P400,000 and
immediately leased from the oil company by Gage. Fair value of the land at time of the
sale was P40,000. The lease is a 10-year, noncancelable lease. Gage uses straight-line
depreciation for its other various business holdings. The economic life of the facility is
15 years with zero salvage value. Title to the facility and land will pass to Gage at
termination of the lease. A partial amortization schedule for this lease is as follows:
Jan. 2, 2012 Payments Interest Amortization Balance
P400,000.
00
Dec. 31, 2012 P65,098.13 P40,000.00 P25,098.13 374,901.87
Dec. 31, 2013 65,098.13 37,490.19 27,607.94 347,293.93
Dec. 31, 2014 65,098.13 34,729.39 30,368.74 316,925.19
497. From the viewpoint of the lessor, what type of lease is involved above?
a. Sales-type lease c. Direct-financing lease
b. Sale-leaseback d. Operating lease
498. Jelline Company had the following liabilities on December 31, 2014:
Unsecured notes, 8% due 7/1/2015 400,000
Accrued expense 35,000
Contingent liability 450,000
Deferred tax liability 25,000
Senior bonds, 7%, due 3/31/2015 1,000,000
The contingent liability is an accrual for possible loss on a P1,000,000 lawsuit filed
against the entity. The legal counsel expects the suit to be settled in 2015 and has
estimated that the entity will be liable for damages in the range of P450,000 to
P750,000, the deferred tax liability is not related to an asset for financial reporting
and is expected to reverse in 2016.
What amount should be reported on December 31, 2014 for current liabilities?
A. 515,000 C. 1,490,000
B. 940,000 D. 1,515,000
499. Eleysia Company recorded purchases at gross amount but decided to change to
recordingpurchases net of purchase discounts. Discounts available on purchases
recorded fromOctober 1,2014 to September 30, 2015 totaled P20,000. Of this amount,
P2,000 is still available in the accounts payable. The balances in the accounts as of and
for the year ended
September 30, 2015 before conversion are:
Purchases 1,000,000
Purchase discount taken 8,000
Account payable 300,000
What amount should be reported as accounts payable on September 30, 2015?
A. 282,000 C. 292,000
B. 288,000 D. 298,000
500. Metro Company, a dealer in machinery and equipment, leased equipment to

Sands, Inc., on July 1, 2013. The lease is appropriately accounted for as a sale by Metro
and as a purchase by Sands. The lease is for a 10-year period (the useful life of the
asset) expiring June 30, 2023. The first of 10 equal annual payments of P828,000 was
made on July 1, 2013. Metro had purchased the equipment for P5,200,000 on January
1, 2013, and established a list selling price of P7,200,000 on the equipment. Assume
that the present value at July 1, 2013, of the rent payments over the lease term
discounted at 8% (the appropriate interest rate) was P6,000,000. Assuming that Sands,
Inc. uses straight-line depreciation, what is the amount of depreciation and interest
expense that Sands should record for the year ended December 31, 2013?
a. P300,000 and P206,880 c. P360,000 and P206,880
b. P300,000 and P240,000 d. P360,000 and P240,000
501. Lyle Company is preparing financial statements for the year ended December
31, 2014,
Accounts payable amounted to P360,000 Before any necessary year-end adjusted
related tothe following:
• On December 31, 2014, Lyle has a P50,000 debit balance in accounts payable to
Ross, a supplier, resulting from a P50,000 advance payment for goods to be
manufactured.
• Checks in the amount of P100,000 were written to vendors and recorded on
December 20, 2014. Should be recorded as accounts payable on December 31,
2014?
What amount should be recorded as accounts payable on December 31, 2014?
A. 210,000 C. 410,000
B. 310,000 D. 510,000
David Company reported the following machinery on December 31, 2014:
Cost Accumulated depreciation
502. What should be reported in a hyperinflationary statement of financial position

prepared on December 31, 2014 as the carrying amount of the machinery?
a. 3,200,000 c. 8,960,000
b. 7,800,000 d. 9,240,000
503. On January 1, 2014, Norren Company key executives 160,000 shares options at
an optionprice of P35 per share. Market prices of the shares were P46 and P51 on
December 31, 2014and 2015, respectively. The options were granted as compensation
for services to berendered over a two-year period beginning January 1, 2014. The
BlackScholes option pricing model determined total compensation expense to be
P1,600,000.
What amount ofcompensation expense should be recognized for 2015?
a. 800,000 c. 1,760,000
b. 1,600,000 d. 2,800,000
504. Ashwood Company reported accounts payable on December 31, 2014 at P900,000
beforeany necessary year-end adjustments relating to the following:
• Goods were in transit from a vendor to Ashwood on December 31, 2014. The
invoice cost was P50,000, and the goods were shipped FOB shipping point on
December 29, 2014. The goods were received on January 4, 2015.
• Goods shipped FOB shipping point on December 20, 2014 from a vendor to
Ashwood was lost in transit. The invoice cost was P25,000. On January 5, 2015,
Ashwood filed a P25,000 claim against the common carrier.
• Goods shipped FOB destination on December 21, 2014 from a vendor to Ashwood
was received on January 6, 2015. The invoice cost was P15,000
What amount should be reported as accounts payable on December 31, 2014?
A. 925,000 C. 950,000
B. 940,000 D. 975,000

Taylored Corp. factored P400,000 of accounts receivable to Rich Corp. on July 1, 2023.
Control was surrendered by Taylored. Rich accepted the receivables subject to recourse
for nonpayment. Rich assessed a fee of 2% and retains a holdback equal to 5% of the
accounts receivable. In addition, Rich charged 15% interest computed on a
weightedaverage time to maturity of the receivables of forty-one days. The fair value of
the recourse obligation is P12,000.
505. Taylored will receive and record cash of

a. P385,260 c. P365,260
b. P357,260 d. P377,260
506. Assuming all receivables are collected, Taylored’s cost of factoring the receivables
would be
a. P 8,000 c. P42,740
b. P34,740 d. P14,740

Company ABC sells loans with a P2,200 fair value and a carrying amount of P2,000. ABC
Company obtains an option to purchase similar loans and assumes a recourse obligation
to repurchase loans. ABC Company also agrees to provide a floating rate of interest to
the transferee company. The fair values are listed.
Fair values
Cash proceeds P2,100
Interest rate swap 140
Call option 80
Recourse obligation (120)
507. What is the gain (loss) on the sale?

a. P 320
b. P 200
c. P(100)
d. P 120
508. Assume for this problem that ABC Company agreed to service the loans without
explicitly stating the compensation. The fair value of the service is P50. What are
the net proceeds received and the gain (loss) on the sale?
Net proceeds received Gain (loss)
a. P2,200 P 200
b. P2,250 P 250
c. P2,150 P 150
d. P2,200 P(250)
509. Fay Company pays outside salesperson fixed monthly salaries and commissions on
sales.Sales commissions are computed and paid on a monthly basis in the month
following themonth of sale, and the fixed salaries are treated as advantages against
commissions.However, if the fixed salaries for salesperson exceed their sales
commissions earned for amonth, suchexcess is not charged backed to them.
Pertinent data for the month of March forthree salespersons are as follows:
SalespersonFixed salary Net sales Commission
A 10,000 200,000 4%
B 14,000 400,000 6% C
18,000 600,000 6%
What amount should be accrued sales commissions on March 31?

A. 26,000 C. 68,000
B. 28,000 D.70,000
510. Roro, Inc. paid P7,200 to renew its only insurance policy for three years on
March 1, 2023, the effective date of the policy. At March 31, 2023, Roro’s unadjusted
trial balance showed a balance of P300 for prepaid insurance and P7,200 for insurance
expense. What amounts should be reported for prepaid insurance and insurance
expense in Roro’s financial statements for the three months ended March 31, 2023?
Prepaid insurance Insurance expense
a. P7,000 P300
b. P7,000 P500
c. P7,200 P300
d. P7,300 P200
511. Jasmine Company sells appliance service contracts agreeing appliances for a
twoyearperiod. The past experience is that, of the total amount spend for repair on
service
contracts, 40% is incurred evenly during the first contract year and 60% evenly during
the secondcontract year. Receipts from service contract sales for 2014 and 2015 are
P500,000 and 600,000 respectively. Receipts from contracts are credited to unearned
service contractrevenue. All sales are made evenly during the year. What amount
should be reported as unearned service contract revenue on December 31, 2015?
A. 360,000 C. 480,000
B. 470,000 D. 630,000
512. On January 1, 2014, Christine Company borrowed P5,000,000 from a bank at a

variable rate of interest for 4 years. Interest is payable annually to the bank every
December 31 and the principal is due on December 31, 2017. Under the agreement, the
market rate of interest every January 1 resets the variable rate for that period and the
amount of interest to be paid on December 31, in connection with the loan, the entity
entered into a “receive variable fixed” interest rate swap agreement with another bank
speculator. The agreement was treated as a cash flow hedge and the market interest
rates are January 1, 2014 – 10%, January 1, 2015-14%, January 1,2016-12%, January 1,
2017 – 11% round off PV factor to two decimals. What amount should be reported as
derivative asset on December 31, 2015?
A. 169,000 C. 240,000
B. 200,000
D. 464,000
513. Janelle Video one and two-year mail order subscriptions for video of the month
business. Subscription are collected in advance and credited to assets. An analysis of the
recordedsales activity revealed the following:
2013 2014
Sales 420,000 500,0
00
Cancellations 20,000 30,0
Subscription expiration: 00
2013 120,000 130,0
00
2014 155,000 200,0
00
2015 125,000 200,0
00
2015 140,0
00
On December 31, 2014, what is the unearned subscription revenue?
A. 340,000 C. 470,000
B. 465,000 D. 495,000
514. Delta, Inc. sells to wholesalers on terms of 2/15, net 30. Delta has no cash sales but
50% of Delta's customers take advantage of the discount. Delta uses the gross method
of recording sales and trade receivables. An analysis of Delta's trade receivables
balances at December 31, 20X5, revealed the following:
Age Amount Collectible
0 - 15 days P100,000 100%
16 - 30 days 60,000 95%
31 - 60 days 5,000 90%
Over 60 days 2,500 P500
P167,500
In its December 31, 20X5, balance sheet, what amount should Delta report for
allowance for discounts?
a. P1,000. c. P1,675.
b. P1,620. d.P2,000
.
515. Merill Company offers three payment plans on its twelve-month contracts.
Information onthe three plans and the number of children enrolled in each plan for the
September 1, 2014 to August 31, 2015 contract year follow:
Initial payment per childMonthly fee per childNumber of children
Plan A 50,000 - 15
Plan B 20,000 3,000 12 Plan C 5,000
9
The entity received P99,000 Of initial payment on September 1, 2014 and P324,000
of monthly fees during the period September 1, 2014 to December 31, 2014. On
December 31, 2014, what amount should be reported as deferred revenue?
A. 330,000 C. 660,000
B. 438,000 D. 990,000
516. Merill Company offers a cash rebate of P50 on each P200 Package of biscuit sold
during theyear. Historically, 30% of the customers mail in the rebate form. During the
year, 7,700packages of biscuits are sold, and 1,470 P50 rebates are mailed to
customers.
What amountor rebate liability should be recognized at year-end?
A. 42,000 C. 115,500
B. 73,500 D. 311,500
517. On November 1, 20X4, Davis Co. discounted with recourse at 10% a one-year,
noninterest bearing, P20,500 note receivable maturing on January 31, 20X5. What
amount of contingent liability for this note must Davis disclose in its financial
statements for the year ended December 31, 20X4?
a. P0. c. P20,333.
b. P20,000. d. P20,500.
518. Janine Company sells products in reusable containers. The customer is charged
a deposit foreach container delivered and receives a refund for each container returned
within two yearsafter the year of delivery. The entity accounts for the containers not
returned within the timelimit as being retired by sale at the deposit amount.
Information for 2014 as follows:
Container deposit on December 31, 2013 from deliveries in
2012 150,000
2013 430,000
580,000
Deposit for containers delivered in 2014 780,000
Deposit for containers returned in 2014 from deliveries in:
2012 90,000
2013 250,000
2014 286,000
626,000
On December 31, 2014, what amount should be reported as liability for deposits on
returnable containers?
A. 494,000 C. 674,000
B. 584,000 D. 734,000
519. On January 2, 20X3, Emme Co. sold equipment with a carrying amount of
P480,000 in exchange for a P600,000 noninterest bearing note due January 2, 20X6.
There was no established exchange price for the equipment. The prevailing rate of
interest for a note of this type at January 2, 20X3, was 10%. In Emme's 20X3 income
statement, what amount should be reported as gain (loss) on sale of machinery?
a. (P30,000) loss. c. P120,000 gain.
b. P30,000 gain. d. P270,000 gain.
520. City Company included one coupon in each package sold. A towel is offered as a
premiumto customers who send in 10 coupons?
2014 2015
Packages sold 500,000

800,000
Number of towels acquired at 40 per towel 30,000
45,000
Number of towels distributed as premium 20,000
40,000
Number of towels to be distributed as premium next period 5,000 10,000
What amount should be reported as premium expense in 2015?
A. 1,800,000 C. 2,200,000
B. 2,000,000 D. 2,400,000
521. George Co. sold to Beloy Co. a P20,000, 8%, 5-year note that required five equal
annual year-end payments. The uniform installment payment was predetermined on
initial recognition, which includes payment for interest. This note was discounted to
yield a 9% rate to Beloy. What should be the total interest revenue earned by Beloy on
this note?
a. P9,000 c. P5,560
b. P8,000 d. P5,050
On January 1, 2020, Northstar Company entered into an 8-year lease of a floor of

building with a useful life of 15 years with the following terms:
Annual rental for the first three years payable

at the end of each year 300,000
Annual rental for the next year five years payable
at the end of each year 400,000
PV of an ordinary annuity of 1 at 10% for the three periods 2.49
PV of an ordinary annuity of 1 to 10% for the five periods 3.79
PV of at 10% for three periods 0.75
The lease provides for neither a transfer of title to the lessee nor a purchase option.
522. What is the lease liability on January 1, 2020?

a. 1, 516,000 c. 1,884,000
b. 2, 263,000 d. 1,697,250
523. What is the interest expense for 2020?

a. 188,400 c. 151,600
b. 226,300 d. 169,725
524. What is the interest expense 2023?
a. 151,460 c. 164,964
b. 126,606 d. 200,00
525. What is the lease liability on December 31, 2023?

a. 1,614,604 c. 1,366,064
b.1,266,064 d. 1,214,604
526. Shelton Company responded the following portfolio of available for-sale securities:
Aggregate cost, 12/31/2014 150,000
Unrealized gains, 12/31/2014 14,000
Unrealized losses, 12/31/2013 26,000
Net realized gains during 2014 30,000
The entity elects the fair value option for reporting all available-for-sale securities.
What total amount should be reported in the income statement for 2014?
A. 4,000 gain C. 30,000 gain
B. 18,000 gain D. 44,000 gain
527. Conn Company owns an office building and normally charges tenants P3,000 per
square meter per year for office space.
Because the occupancy rate is low, Conn Company agreed to lease 1,000 square meters
to Hanson Company at P1,200 per square meter for the first year of a three year
operating lease. Rent for remaining years will be at the P3,000 rate.
Hanson Company moved into the buiding on January 1, 2020, and paid the first year’s
rent in advance.
What amount of rental revenue should be reported in the income statement for the
year ended September 30, 2020?
a. 2,400,000 c. 1,800,000
b. 1,200,000 d. 900,000
528. Wall Company leased an office to Fox Company for a five-year term beginning
January 1, 2020.
Under the terms of the operating lease, rent for the first year is P800,000 and rent for
years 2 through 5 is P1,250,000 per annum.
However, as an inducement to enter the lease, Wall Company granted Fox Company the
first six months of the lease rent-free.
What amount should be reported as rental income for 2020?
a. 1,200,000 c. 1,080,000
b. 1,160,000 d. 800,000
529. On January 1, 2020, Abba Company leased a building to Bee Company under a
fouryear operating lease.
The monthly rental for 2020, 2021, 2022, and 2023 is P100,000, P150,000, P200,000 and
P250,000, respectively.
Rentals are payable at the end of each month. All rental payments within the year were
made when due.
What amount should be reported as rent receivable from Bee Company on December
31, 2021?
a. 1,000,000 c. 600,000
b. 1,200,000 d. 900,000
530. Abe Company, lessor , leased an equipment under an operating lease.
The lease term is 5 years and the lease payments are made in advance on January 1 of
each year as shown in the following schedule:
January 1, 2020 1,000,000

January 1, 2021 1,000,000
January 1, 2022 1,400,000
January 1, 2023 1,700,000
January 1, 2024 1,900,000
On December 31, 2021, what amount should be reported as rent receivable?

a. 1,400,000 c.400,000
b. 800,000 d. 0
531. At the beginning of current year, Wren Company leased a building to Brill Company
under an operating lease for ten years at P500,000 per year, payable the first day of each
lease year. Wren Company paid P150,000 to a real estate broker as initial direct cost.
The building is depreciated P120,000 per year. Wren Company incurred insurance and
property tax expense totaling P90,000 for the current year.
What is the net rent income for the current year?
a. 275,000 c. 350,000
b. 290,000 d. 365,000
532. At the beginning of the current year, Rapp Company leased a new machine to Lake
Company for 5 years. The annual rental is P900,000.
Additionally, Lake Company paid P500,000 to Rapp Company as a lease bonus and
P250,000 as a security deposit to be refunded upon expiration of the lease.
What amount should be reported as rent revenue for the current year?
a. 1,400,000 c. 1,000,000
b. 1,250,000 d. 900,000
At the beginning of current year, Jade Company purchased a new machine for
P4,800,000 and leased it to East the same day.
533. The machine has an estimated 12-year life and will be depreciated P400,000 per
year. The lease is for a three- year period at an annual rental of P850,000.
Additionally, East paid P300,000 to Jade as a lease bonus to obtain the three-year lease.
Jade incurred insurance expense of P80,000 for the leased machine during the current
year.
What is the operating profit of the lessor on the leased asset for the current year?
a. 670,000 c. 470,000
b. 550,000 d. 370,000
534. On January 1, 2020, Glen Company leased a building to Dix Company for a ten- year
at an annual rental of P500,000.
At inception of the lease, Glen received P2,000,000 covering the first two year’s rent of
P1,000,000 and a security deposit of P1,000,000.
This deposit will not be returned to Dix upon expiration of the lease but will be applied to
payment of rent for the last two years of the lease.
What amount should be reported as current and noncurrent liability in the December 31,
2020 statement of financial position?
Current liability Noncurrent liability
a. 0 2,000,000
b.500,000 1,000,000
c.1,000,000 1,000,000
d.1,000,000 500,000
535. Barnel Company owns and manages apartments. On signing a lease, each tenant
must pay the first month and last month rent and a P50,000 refundable security deposit.
The security deposit is rarely refundable in total because cleaning costs of P15,000 per
apartment are almost always deducted.
About 30% of the time, the tenants are also charged for damages to the apartment which
typically cost P10,000.
If a one-year lease is signed on a P90,000 per month apartment what amount should be
reported as refundable security deposit?
a. 140,000 c. 35,000
b. 50,000 d.32,000
536. On July 1, 2020, Hutch Company leased equipment to Elder Company for a one
year period expiring June 30, 2021 for P60,000 a month.
On July 1, 2021, Hutch leased this piece of equipment to Toil Company for a three-year
period expiring June 30, 2024 for P75,000 a month.
The original cost of the equipment was P4,800,000. The equipment, which has been
continually on lease since July 1, 2017 is being depreciated on a straight line basis over an
eight-year period with no residual value.
What is the amount of net rental income that would be reported by Hutch Company for
the year ended December 31, 2021?
a. 210,000 c.810,000
b.450,000 d.360,000
537. On May 1, 2020, Hug Company equipment to Rave Company which expires on
May 1, 2021. Rave could have bought the equipment from Hug for P3,200,000 instead of
leasing it.
Hug’s accounting records showed a carrying amount for the equipment on May 1, 2020
of P2,800,000. Hug’s depreciation on the equipment in 2020 was P360,000.
During 2020, Rave paid P720,000 in rentals to Hug for the 8-month period. Hug incurred
maintenance and other related costs under the terms of the lease P64,000 in 2020.
After the lease with Rave expires, Hug will lease the equipment to another entity for two
years.
What is the pretax income derived by Hug for 2020?

a. 296,000 c. 656,000
b. 360,000 d. 720,000
Desiree Company is in the business of leasing new sophisticated equipment. The lessor
expects a 12% return on net investment.
All leases are classified as direct financing lease. At the end of the lease term , the
equipment will revert to the lessor.
At the beginning of current year, an equipment is leased to a lessee with the following
information:
Cost of equipment to the lessor 5,000,000

Residual value-unguaranteed 600,000
Annual rental payable at the beginning of each year 900,000
Initial direct cost incurred by the lessor 250,000
a. 7,200,000 c. 5,000,000
b.7,800,000 d. 5,250,000
a. 5,000,000 c. 4,400,000 b. 5,250,000 d.

4,650,000
540. What is the total interest income over the lease term?
a. 2,550,000 c. 3,150,000
b. 1,950,000 d. 1,500,000
541. What is the interest income for the current year?

a. 594,000 c. 630,000
b. 522,000 d. 450,000
Oceanic Company is engaged in leasing equipment. Such an equipment was delivered to

a lessee at the beginning of current year under a direct financing lease with the
following provisions:
Cost of equipment 4,361,200

Unguaranteed residual value 200,000
Present value of an ordinary annuity of 1 for 8 years at 10% 5.335
Present value of 1 for 8 years at 10% 0.466
The annual rental is payable at the end of each year. The equipment will revert to the
lessor upon the lease expiration.
542. What is the net investment in the lease to be recovered from rental?
a. 4,361,200 c. 4,268,000
b. 4,161,200 d. 4,561,200
543. What is the annual rental over the lease term?
a. 800,000 c. 779,980
b. 817,470 d. 834,940
544. What amount of interest income should be recognized for the current year?
a. 436,120 c. 426,800
b. 416,120 d. 640,000
At the beginning of current year, lessor Company leased a machine to lessee Company.
The machine had an original cost of P6,000,000. The lease term was five years and the
implicit interest rate on the lease was 15%.
The lease is properly classified as direct financing lease. The annual lease payments of
P1,730,541 are made each December 31.
The machine reverts to lessor at the end of the lease term, at which time the residual
value of the machine will be P400,000. The residual value is unguaranteed.
The PV of 1 at 15% for 5 periods is .4972, and the PV of an ordinary annuity of 1 at 15%
for 5 periods is 3.3522.
545. At the commencement of the lease, what would be the net lease receivable on the
part of the lessor?
a. 6,400,000 c. 6,000,000
b. 5,801,120 d. 5,600,000
a. 8,652,705 c. 6,000,000
b. 9,052,705 d. 8,252,705
547. What is the total unearned interest income?
a. 3,052,705 c. 2,252,705
b. 2,652,705 d. 6,000,000
a. 1,297,905 c. 900,000
b. 1,357,905 d. 870,168
On January 1, 2020, Lyle Company entered into a direct financing lease. A third party
guaranteed the residual value of the asset under the lease estimated to be P1,200,000 on
January 1, 2025, the end of the lease term.
Annual lease payments are P1,000,000 due each December 31, beginning December
31,2020. The last payment is due December 31, 2024.
The remaining useful life of the asset was six years at the commencement of the lease.
The lessor used 10% as the implicit interest rate. The PV of 1 at 10% for 5 periods is .62,
and the PV of an ordinary annuity of 1 at 10% for 5 periods is 3.79.
549. What is the net lease receivable of the lessor at the commencement of the lease?
a. 4,534,000 c. 4,990,000
b. 3,790,000 d. 2,590,000

a. 5,000,000 c. 3,800,000 b. 6,200,000 d.
5,744,000
551. What is the total unearned interest income?

a. 2,410,000 c. 1,210,000
b. 1,666,000 d. 466,000
552. What is the interest income for 2020?

a. 379,000 c. 453,400
b. 620,000 d. 500,000
553. Glade Company leases a computer equipment under a direct financing lease. The
equipment has no residual value at the end of the lease and the lease does not contain
purchase option.
The entity wishes to earn 8% interest on a 5-year lease of equipment with a cost of
P3,234,000.
The present value of an annuity due of 1 at 8% for 5 years is 4.312.
What total amount of interest revenue should be recognized over the lease term?
a. 1,293,600 c. 516,000
b. 1,394,500 d. 750,000
554. At the beginning of current year, Nueva Company, as lessor, leased an equipment
for ten years at an annual rental of P1,200,000, payable by Caster Company , the lessee,
at the beginning of each year. The lease is appropriately accounted for as finance lease.
The equipment had a cost of P8,400,000 with an estimated life of 12 years and no
residual value. The straight line depreciation is used. The implicit interest rate is 9%.
What amount of interest income should be reported in the income statement for the
current year?
a. 500,000 c. 756,000
b. 648,000 d. 360,000
555. Cassandra Company is in the leasing business. The entity acquired a specialized
packaging machine for P3,000,000 cash and leased it for a period of six years, after
which the machine is to be returned to Cassandra Company for disposition. The
guaranteed residual value of machine is P200,000.
The lease term was arranged so that a return of 12% is earned by Cassandra Company.
The PV of 1 at 12% for six periods is .51, and the present value of annuity of 1 in advance
at 12% for six periods is 4.60.
What is the annual lease payment payable in advance required to yield the desired
return?
a. 630,000 c. 608,695
b. 652,174 d. 732,000
556. Magnum Company had an asset costing P5,239,000.The asset was leased at the
beginning of current year to another entity. Five annual lease payments are due in
advance at the beginning of each lease year.
The lessee guaranteed the P2,000,000 residual value of the asset at the end of the
5-year lease term.
The lessor’s implicit interest rate is 8%. The PV of 1 at 8% for 5 periods is .68, and the PV
of annuity of 1 in advance at 8% for 5 periods is 4.31.
What is the annual lease payment?
a. 1,215,545 c. 900,000
b. 1,531,090 d. 751,500
557. Ericson Company leased an asset to another entity. The cost of the asset was
P7,994,000. Terms of the lease specify four-year life for the lease, an annual interest rate
of 15% and four year-end rental payments. The lease qualified as a direct financing lease.
The lease provided for a transfer of title to the lessee at the end of the lease term.
After the fourth year, the residual value was estimated at P1,000,000.
The PV of 1 at 15% for 4 periods is .572 and the PV of an ordinary annuity of 1 at 15% for
4 periods is 2.855.
What is the annual rental payment?
a. 2,000,000 c. 2,800,000 b. 3,000,00

d. 2,599,650
558. Irene Company acquired a specialized machine for P2,300,000. At the beginning of
current year, the entity leased the machine for a period of six years, after which title to
the machine is transferred to the lessee.
The six annual lease payments are due in advance at the beginning of each lease year.
The residual value of the machine P200,000.
The lease terms are arranged so that a return of 12% is earned by the lessor.
The present value of 1 at 12% for six periods is 0.51, and the present value of an
annuity in advance of 1 at 12% for six periods is 4.60 What is the annual lease rental
payable in advance?
a. 500,000 c. 383,333
b. 477,826 d. 460,000
At the beginning of current year, Yolk Company signed a ten-year noncancelable lease
agreement to lease a storage building from Warehouse Company. The agreement
required equal rental payments at the end of each year.
The fair value of the building at the inception of the lease is P2,949,600. However,
the carrying amount to Warehouse Company is P2,458,000. The building has an
estimated economic life of 10 years with no residual value.
At the termination of the lease, the title to the building will be transferred to Yolk
Company. The incremental borrowing rate of Yolk Company is 12% per year
Warehouse Company set the annual rental to insure a 10% rate of return. The implicit
rate of the lessor is known by the lessee.
The annual total lease payment included P20,000 of executor costs related to taxes on
the property. Round off present value factor to the three decimal places.
559. What is the annual lease payment?
a. 400,000 c. 480,000
b.435,044 d. 522,053
560. What is the total annual lease payment?
a. 420,000 c. 542,053
b. 455,044 d. 500,000
561. What is the unearned interest income of the lessor at the beginning of current year?
a. 1,850,400 c. 1,542,000
b. 2,342,000 d. 2,542,000
562. At the beginning of current year, Howe Company leased equipment to kew
Company for an eight-year period.
Equal payments under the lease are P500,000 and are due at the beginning of each year.
The selling price of the equipment is P2,900,000 and the carrying amount is P2,000,000.
The lease is appropriately accounted for as a sales type lease.
The present value of the lease payments at an implicit interest rate of 12% is
P2,780,000 .
What amount of profit on the sale should be reported for the current year?
a. 900,000 c. 240,000
b. 780,000
d. 333,600
Gold Company leased equipment to Fair Company and properly recorded the sales type
lease. The eight annual payments of P300,000 are due at the beginning of each year.
The lessor had purchased the equipment for P1,100,000 and had a list price of
P1,800,000. The present value of the lease payments is P1,700,000. The imputed
interest rate on the lease was 11% and the lessee had an incremental borrowing rate of
10%.
563. What profit on sale should be reported in the current year?

a. 380,000 c.220,000
b. 600,000 d. 0
564. What amount of interest income should be reported in the current year?
a. 165,000 c. 187,000
b. 140,000 d. 154,000
On July 1, 2020 , Meg Company leased equipment to Wee Company for an 8-year period.
Equal payments under the lease are P600,000 and are due on July 1 of each year. The
first payment was made on July 1, 2020. The interest rate contemplated by Meg
Company and Wee Company is 10%
The cash selling price of the equipment is P3,520,000 and the cost of the equipment on
Meg Company’s accounting records is P2,800,000.
The lease is appropriately recorded as a sales type lease.
565. What amount of profit on sale should be recognized for the year ended
December 31, 2020?
a. 600,000 c. 360,000
b. 720,000 d. 300,000
566. What amount of interest revenue should be recorded for the year ended
December 31, 2020?
a. 292,000 c. 352,000
b. 146,000 d. 176,000
On January 1, 2020, Gallant Company entered into a lease agreement with Blacksheep
Company for a machine which was carried on the accounting records of Gallant Company
at P2,000,000.
Total payments under the lease which expires on December 31, 2029 aggregate
P3,550,800 of which P2,400,000 represents cost of the machine to Blacksheep
Company. Payments of P355,080 are due each January 1 of each year.
The interest rate of 10% which was stipulated in the lease is considered fair and adequate
compensation to Gallant Company.
Blacksheep Company expects the machine to have a 10-year life, no residual value and be
depreciated on a straight line basis. The lease qualifies as a sales type lease.
567. What amount should be recognized by Gallant as profit from sale for the year ended
December 31, 2020?
a. 1,150,800 c. 400,000
b. 1,550,800 d. 355,080
568. What amount of interest income should be recognized by Gallant for the year ended
December 31, 2020?
a. 244,080 c. 204,492
b. 200,000 d. 240,000
569. What total income before tax should be recognized by Gallant from the lease for the
year ended December 31, 2020?
a. 204,492 c. 355,080
b. 604,492 d. 755,080
Reagan Company used leases as a method of selling products. In 2020, Reagan Company
completed construction of a passenger ferry.
On January 1, 2020, the ferry was leased to the Super Ferry Line on a contract specifying
that ownership of the ferry will transfer to the lessee at the end of the lease period.
Original cost of the ferry 8,000,000

Fair value of ferry at lease date 13,000,000
Lease payments in advance 1,500,000
Residual value 2,000,000
Date of first lease payments January 1, 2020
Lease term 20 years
Present value of an annuity due of 1 at 10% for 20 periods 8.37

a. 30,000,000 c. 10,000,000
b. 32,000,000 d. 38,000,000

a. 12,555,000 c. 12,755,000
b. 13,000,000 d. 8,000,000
572. What is the gross profit on sale for 2020?

a. 6,555,000 c. 5,000,000
b. 4,555,000 d. 7,000,000
573. hat is the interest income for 2020?
a. 1,506,600 c. 1,326,600
b. 1,560,000 d. 1,380,000
France Company is a dealer in equipment. At the Beginning of current year, an

equipment was leased to another entity with the following provisions:
Annual rental payable at the end of each year 1,500,000
Lease term and useful life of machinery 5 years
Cost of equipment 4,000,000
Residual value-unguaranteed 500,000
PV of an ordinary annuity of 1 at 12 % for 5 periods 3.60
At the end of the lease term the equipment will revert to the lessor.
The entity incurred initial direct cost of P200,000 in finalizing the lease agreement.

a. 7,500,000 c. 4,000,000
b. 8,000,000 d. 4,500,000

a. 5,400,000 c. 4,000,000
b. 5,685,000 d. 3,500,000
576. What interest income should be reported for current year?

a. 682,200 c. 900,000
b. 648,000 d. 960,000
577. What amount should be reported as gross profit on sale?

a. 1,485,000 c. 3,500,000
b. 1,685,000 d. 4,000,000
Rizza Company used leases as amethod of selling products. In the current year, Rizza
Company completed construction of machinery.
At the beginning of current year, the machinery was leased on a contract specifying that
ownership of the machinery will transfer to the lessee at the end of the lease period. The
annual lease payments do not include executor cost.
Original cost of the machinery 9,000,000

Lease payments payable at beginning of each year 2,000,000
Estimated residual value 1,000,000
Lease term 10 years
Present value of annuity due of 1 at 12% for 10 years 6.33
578. What is the total financial revenue over the lease term?
a. 8,340,000 c. 8,020,000
b. 7,340,000 d. 6,340,000
579. What amount should be reported as gross profit on sale?

a. 3,980,000 c. 7,340,000
b. 3,660,000 d. 8,020,000
580. What is the interest income for current year?

a. 1, 557,600 c. 1,279,200
b. 1,317,600 d. 1,519,200
Marianas Company adopted the policy of leasing as the primary method of selling
products. The entity’s main product is a small cargo vessel. Marianas Company
constructed such a cargo vessel for Jade Company at a cost of P8,500,000.
The terms of the lease provided for annual advance payments of P2,500,000 to be paid
over 10 years with the ownership transferring to Jade Company at the end of the lease
period. It is estimated that the cargo vessel will have a residual value of P1,600,000 at
that date.
The lease payments began at the beginning of current year. Marianas Company incurred
initial direct cost of P500,000 in financing the lease agreement with Jade Company. The
sale price of the cargo vessel is P14,875,000.
Financing the construction was at a 14% rate. The present value of an annuity due of 1 at
14% for 10 periods is 5.95.
581. What amount should be reported as gross profit on sale for the current year?
a. 5,875,000 c. 4,275,000
b. 6,375,000 d. 4,775,000
582. What is the unearned interest income at the beginning of current year?
a. 10,125,000 c. 9,625,000
b. 11,725,000 d. 8,525,000

a. 2,082,500 c. 2,306,500
b. 1,732,500 d.
1,956,500
584. On January 1, 2020, Dexter Company leased equipment to another entity. The lease
is for an eighty-year period expiring December 31, 2027. The first of eight equal annual
payments of P900,000 was made on January 1, 2020.
Dexter Company had previously purchased the equipment for P4,800,000.

The lease is appropriately accounted for as a sales type lease by Dexter Company.
The present value on January 1, 2020 of all rent payments over the lease term discounted
at a 10% interest rate was P5,280,000.
What amount of interest revenue should be recorded in 2020?

a. 490,000 c. 438,000
b. 480,000 d. 391,800
585. Liza Company is a car dealer. On January 1, 2020, the entity entered into a finance
lease with customer under which the customer would pay P200,000 on January 1 each
year for 5 years, commencing in 2020.
The cost of the car is P600,000 and the cash selling price was P750,000. The entity paid
legal fees of P20,000 to a law firm in connection with the arrangement of the lease.
What amount of gross profit on sale should be recognized for the year ended December
31, 2020?
a. 150,000 c. 20,000
b. 130,000 d. 0
On December 31, 2020, Benz Company, a lessor, actually sold a machinery that it had
been leasing under a sales type lease.
On January 1, 2020 after receipt of the lease payment fore the year, the following
account balances were associated with the lease:
Gross lease receivable 5,850,000

Unearned interest income 1,000,000
The interest rate implicit in the lease is 10%.

On December 31, 2020, Benz Company actually sold the leased machinery to the lessee
for P3,250,000 cash.
586. What is the interest income for 2020?

a. 585,000 c. 325,000 b.
485,000 d. 0
587. What is the carrying amount of the lease receivable on December 31, 2020?
a. 5,850,000 c. 5,335,000
b. 4,850,000 d. 5,365,000
588. What is the loss on sale of the machinery that should recognized on December 31,
2020?
a. 2,085,000 c. 2,600,000
b. 1,600,000 d. 2,015,000
589. On December 31, 2020, Bain Company sold a machine to Ryan Company and
simultaneously leased it back for one year. The entity provided the following information
at this date:
Sales price 360,000

Carrying amount 330,000
Present value of reasonable lease rentals
(P30,000 for 12 months @12%) 341,000
Estimated remaining useful life 12 years
In the income statement for 2020, what amount should be reported as gain from sale of
the machine?
a. 34,100 c. 4,100
b. 30,000 d. 0
590. On December 31, 2020, Lane Company sold equipment to Noll Company and
simultaneously leased it back for 3 years.
The leaseback is appropriately considered a low value lease.
Sales price 480,000

Carrying amount 360,000
Estimated remaining economic life 5 years
What amount should be reported as gain from sale of equipment for 2020?
a. 120,000 c. 40,000
b. 60,000 d. 0
At the beginning of current year, Racquel Company sold a building and immediately
leased it back. The following data pertain to the sale and leaseback transaction:
Sale price at above fair value 9,000,000

Fair value of building 8,000,000
Carrying amount of building 7,200,000
Annual rental payable at the end of each year 600,000
Remaining life of building 20 years
Lease term 4 years
Present value of an ordinary annuity of
1 at 12% for four periods 3.037
591. What is the initial lease liability?

a. 1,822,200 c. 1,200,000
b. 2,400,000 d. 1,000,000
592. What is the cost of right of use asset?
a. 1,639,980 c. 822,200
b. 739,980 d. 411,100
593. What is the gain on right transferred to buyer-lessor?

a.800,000 c. 717,780
b. 720,000
d. 400,000
594. What is the annual rental income of the buyer-lessor?

a. 600,000 c. 270,728
b. 329,272 d. 300,000
At the beginning of current year, Arianne Company sold a machine and immediately
leased it back.
Sale price at fair value 5,000,000

Carrying amount of machine 6,000,000
Lease term 5 years
Remaining life of machine 20 years
PV of an ordinary annuity of 1 at 6% for 5 periods 4.21

a. 2,105,000 c. 2,895,000
b.2,526,000 d. 1,500,000
596. What is the loss on right transferred to the transferred to the buyer-lessor?
a. 579,000 c. 500,000
b. 505,200 d. 0
597. hat is the lease liability at year-end?

a. 2,177,560 c. 1,731,300
b. 1,605,000 d. 2,105,000
598. What is the net annual rental income of the buyer-lessor?

a.373,700 c. 500,000
b. 200,000 d. 250,000
At the beginning of current year, an entity sold an equipment with remaining life of 10
years and immediately leased it back for 4 years at the prevailing market rental.
Sale price at fair value 6,000,000

Carrying amount of equipment 4,500,000
1 at 10% for four periods 3.17

a. 2,536,000 c. 3,000,000
b. 3,200,000 d. 0
a. 1,902,000 c. 2,536,000
b. 2,598,000 d. 0
601. What is the gain on right transferred?

a. 866,000 c.750,000
b.634,000 d. 0
602. What is the annual depreciation of the lessee?

a. 475,500 c. 634,000
b. 190,200 d.253,600
At the beginning of current year, Judy Company sold a building with remaining useful life
of 30 years and immediately leased it back for 5 years.
Sale price at below fair value 18,000,000

Fair value of building 20,000,000
Carrying amount of building 24,000,000
Annual rental payable at the end of each year 1,000,000
1 at 12% for 5 periods 3.60

a.3,600,000 c. 4,800,000
b. 4,000,000 d. 0

a. 3,000,000 c. 5,760,000
b. 4,320,000 d. 6,720,000
605. What is the loss on right transferred?

a. 4,000,000 c. 5,760,000
b. 2,880,000 d. 6,720,000
606. What is the interest expense of the seller-lessee for the current year?
a. 120,000 c. 672,000
b. 576,000 d. 432,000
607. What is the net annual rent income of the buyer-lessor?

a. 400,000 c. 300,000
b. 200,000 d.100,000
608. Hilton Company reported pretax financial income of P6,200,000 for the current
year.
Included in other income was P200,000 of interest revenue from government bonds held
by the entity.
The income statement also included depreciation expense of P500,000 for a machine
costing P3,000,000. The income tax return reported P600,000 as depreciation on the
machine .
The enacted tax rate is 30% for the current year and future years.
What is the current tax expense for the current year?

a. 1,860,000 c. 1,770,000
b. 1,800,000 d. 1,830,000
609. Tantrum Company began operations at the beginning of current year. At the end of
the first year operations, the entity reported P6,000,000 income before income tax in the
income statement but only P5,100,000 taxable income in the tax return.
Analysis of the P900,000 difference revealed that P500,000 was a permanent difference
and P400,000 was a temporary tax liability difference related to a current asset.
The enacted tax rate for the current year and future years is 30%.
What is the total income tax expense to be reported in the income statement for the
current year?
a. 1,800,000 c.1,650,000
b. 1,530,000 d. 1,950,000
610. Huskie Company reported in the income statement for the current year pretax
income of P400,000.
The following items are treated differently on the tax return and on the book.
Tax return Per book

Royalty income 20,000 40,000
Depreciation expense 125,000 100,000
Payment of a penalty None 15,000
The enacted tax rate for current year is 30% and 25% for all future years.
What amount should be reported as current portion of income tax expense in the income
statement for the current year?
a. 111,000 c. 115,500
b. 102,000 d. 92,500
611. Pine Company reported pretax income of P800,000 for the current year.
In the computation of income taxes, the following data were considered:
Nontaxable gain 350,000

Depreciation deducted for tax purpose in
excess of depreciation for book purposes 50,000
Estimated tax payments during current year 70,000
Enacted tax rate 30%
What amount should be reported as current tax liability at year-end?

a. 135,000 c. 50,000
b. 120,000 d. 65,000
612. Grim Company reported pretax accounting income of P20,000 and taxable income
of P150,000 for the current year.
The difference is due to the following:
Interest income on saving deposit 70,000

Premium expense on keyman life insurance ( 20,000)
Total 50,000
The income tax rate is 30%
What amount should be reported as current provision for income tax expense in the
income statement for the current year?
a. 45,000 c. 60,000
b. 50,000 d. 0
613. Viking Company reported in the income statement for the current year pretax
income of P1,000,000. The following items are treated differently in the tax return and in
the accounting records:
Tax return Accounting record

Rent income 70,000 120,000
Depreciation 280,000 220,000
Premium on officer’s life insurance 90,000
The tax rate is 30%. The entity is the beneficiary of the officer’s life insurance policies.
What is the total tax expense for the current year?

a. 360,000 c. 294,000
b. 300,000 d. 327,000
614. Dunn Company reported P900,000 income before provision for income tax during
the current year.
To compute the provision for income tax, the following data are provided:
Rent received in advance 150,000

Interest income on time deposit 200,000
Depreciation deducted for income tax purposes
in excess of depreciation
for financial statement purposes 100,000
Estimated tax payment in the current year 125,000
Income tax rate 30%
What amount of current tax liability should be reported at year-end?

a. 125,000 c. 210,000
b. 100,000 d. 225,000
615. Herbie Company has cumulative taxable temporary differences on December 31,
2020 and December 31, 2019 of P1,350,000 and P960,000 respectively.
The tax rate enacted for 2020 is 40% while the tax rate enacted for future years is 30%.
Taxable income for 2020 is P2,400,000 and there are no permanent differences.
a. 3,750,000 c. 2,010,000
b. 2,790,000 d. 1,050,000
616. Thorn Company reported the following tax effects of temporary differences at year-
end:
Deferred tax asset (liability) Related asset classification
Accelerated tax depreciation (75,000) Noncurrent

Additional cost in inventory
for tax purposes 25,000 Current
(50,000)
The entity anticipated that P10,000 of the deferred tax liability will reverse next year.
What amount should be reported as noncurrent deferred tax liability at year-end?

a. 40,000 c. 65,000
b. 50,000 d. 75,000
617. Joan Company grants all employees two weeks of paid vacation for each full year
of employment. Unused vacation time can be accumulated and carried forward to
succeeding years and will be paid at the salaries in effect when vacations are taken or
when employments terminated. There was no employee turnover in 2014. Additional
information relating to the year ended December 31, 2014 is as follows:
Liability for accumulated vacations on January 1, 2018 Pre- 350,
2018 accrued vacations on January 1, 2018 000
September 30, 2018 (the authorized period for vacations) 200,
000
Vacation earned for work in 2014 adjusted to current rate 300,
000
The entity granted a 10% salary increase to all employees on October1, 2014, the annual
salary increase date. What amount should be reported as vacation pay expense for
2014?
a. 300,000
b. 335,000
c. 315,000
d. 450,000
618. In the year-end statement of financial position, Sheen Company had income tax
payable of P260,000 and a deferred tax asset of P400,000.
The entity had reported a deferred tax asset of P300,000 at the beginning of current
year. No estimated tax payments were made during the current year.
The entity determined that it was probable that the deferred tax asset would be realized.
In the income statement for the current year, what amount should be reported as total
income tax expense?
a. 260,000 c. 170,000
b. 150,000 d. 160,000
619. On January 1, 2020, Bolton Company reported a deferred tax liability of P1,000,000
and a deferred tax asset of P400,000. On December 31, 2020, the entity reported a
deferred tax liability of P1,500,000 and a deferred tax asset of zero.
What is the net deferred tax expense for the current year?
a. 500,000 c. 400,000
b. 900,000 d. 100,000
620. Aries company reported a deferred tax asset of P90,000 on January 1 ,2020. During
the year, the entity reported pretax financial income of P3,000,000. Temporary
differences of P1,000,000 resulted in taxable income of P2,000,000 for the year.
On December 31 , 2020 , the entity had cumulative taxable differences of P700,000. The
income tax rate is 30%.
What amount should be reported as deferred tax expense for the current year?
a. 120,000 c. 300,000
b. 210,000 d. 600,000
621. Abigail Company reported in the income statement for the first year of operations
pretax income of P6,000,000. In addition, the following differences existed between the
tax return and accounting record:
Tax return Accounting record
Uncollectible accounts expense 2,200,000 2,500,000

Depreciation expense 8,600,000 5,700,000
Tax exempt interest revenue ------ 500,000
The current year tax rate is 30% and the enacted rate for future year is 40%.
What amount should be reported as deferred tax expense for the current year?
a. 1,480,000 c. 1,040,000
b. 1,240,000 d. 780,000
622. Caleb Company has three financial statement elements for which the year-end
carrying amount is different from the tax base:
Carrying amount Tax base Difference
Equipment 2,000,000 1,200,000 800,000

Prepaid officer’s
insurance policy 750,000 0 750,000
Warranty liability 500,000 0 500,000
The entity is the beneficiary of the officer’s life insurance policy.
As a result of these differences, what is the future taxable amount?

a. 2,050,000 c. 800,000
b. 1,550,000 d. 500,000
623. Boom Company prepared the following reconciliation of financial income and
taxable income for the current year:
Pretax financial income 6,000,000

Permanent difference (500,000)
Financial income subject to tax 5,500,000

Temporary difference-capitalized interest
for book and expensed for tax (200,000)
Taxable income 5,300,000
Cumulative taxable temporary difference is P300,00 on January 1 and P500,000 on

December 31. The tax rate is 30%.
What amount should be reported as deferred tax liability on December 31?

a. 150,000 c. 60,000
b. 90,000 d. 0
624. Canterbury Company has one temporary difference at the end of 2020 that will
reverse and cause taxable amounts of P1,100,000 in 2021, P1,200,000 in 2022 and
P1,200,000 in 2023.
The entity has also a deductible temporary difference of P1,500,000. The pretax
accounting income for 2020 is P6,000,000 and the tax rate is 30%. There are no deferred
taxes at the beginning of 2020.
What is the net deferred tax expense for 2020?

a. 1,050,000 c. 600,000
b. 1,200,000 d. 450,000
625. Tower Company began operations on January 1, 2020. For financial reporting, the
entity recognized revenue from all sales under accrual method.
However, in the income tax return, the entity reported qualifying sales under the
installment method. The gross profit on these installment sales under each method was:
Accrual method Installment method

2020 3,200,000 1,200,000
2021 5,200,000 2,800,000
8,400,000 4,000,000
The income tax rate is 30%. There are no other temporary or permanent differences.
What amount should be reported as deferred tax asset or liability on

December 31, 2021?
a. 1,320,000 asset c. 720,000 asset
b. 1,320,000 liability d. 720,000 liability
626. Jillian Company has a noncurrent asset which had a carrying amount of P1,800,000
in the statement of financial position at year-end.
The tax written down value or tax base of the asset at that date was P900,000. The tax is
P30%.
What is the deferred tax balance in respect of the asset at year-end?

a. 900,000 asset c. 270,000 asset
b. 270,000 liability d. 900,000 liability
627. Ranger Company located business in two jurisdictions, Singapore and Malaysia.
In both countries, the entity has the legal right to offset the taxes receivable and payable.
The following information related to deferred tax assets and liabilities:
Classification Amount Taxing jurisdiction
Deferred tax asset 800,000 Singapore

Deferred tax liability 300,000 Malaysia
Deferred tax liability 600,000 Singapore
How should the entity present deferred taxes at year-end?
Deferred tax asset Deferred tax liability

a. 800,000 900,000
b. 0 1,000,000
c. 200,000 600,000
d. 200,000 300,000
Zeff Company prepared the following reconciliation for the first year of operations:
Pretax financial income 1,600,000

Nontaxable interest received ( 50,000 )
Long-term loss accrual in excess of deductible amount 100,000
Depreciation in excess of financial depreciation ( 250,000 )
Taxable income ( Tax rate is 30% ) 1,400,000
628. What amount should be reported as current tax expense?

a. 480,000 c. 465,000
b. 420,000 d. 495,000
629. What amount should be reported as total income tax expense?

a. 495,000 c. 465,000
b. 480,000 d. 420,000
630. What amount should be reported as deferred tax liability?

a. 90,000 c. 75,000
b. 45,000 d. 30,000
631. What amount should be reported as deferred tax asset?

a. 30,000 c. 45,000
b. 90,000 d. 75,000
Chamber Company revealed the following differences between the book and tax basis of
the assets and liabilities on December 31, 2020:
Book basis Tax basis
Installment accounts receivable 1,000,000 0

Litigation liability 200,000 0
It is expected that the litigation liability will be settled in 2021. The difference in accounts
receivable will result in taxable amounts of P600,000 in 2021 and P400,000 in 2022.
The entity has a taxable income of P7,000,000 in 2020. The income tax rate is 30%. This is
the first year of operations of the entity.
632. What amount should be reported as current tax expense?
a. 2,100,000 c.2,460,000
b. 2,400,000 d. 2,040,000
633. What amount should be reported as total tax expense?

a. 2,400,000 c. 2,160,00
b. 2,340,000 d. 2,400,000
634. What amount should be reported as deferred tax liability?

a. 240,000 c. 300,000
b. 360,000 d. 0
635. What amount should be reported as deferred tax asset?

a. 300,000 c. 60,000
b. 300,000 d. 0
Pecorino Company had pretax financial income of P2,500,000 in the current year.
The entity made corporate estimated tax payment in the amount of 180,000 during the
current year.
To compute the provision for the income tax, the following information was provided:
Interest income received 360,000

Tax depreciation in excess of financial statement amount 160,000
Rent received in advance 280,000 Corporate tax rate 30%
636. What amount of permanent difference between book income and taxable income
existed at year-end?
a. 520,000 c. 800,000
b. 360,000 d. 280,000
637. What amount of current tax expense should be reported?

a. 786,000 c. 750,000
b. 510,000 d. 678,000
638. What amount of income tax payable should be reported?

a. 498,000 c. 330,000
b. 606,000 d. 570,000
639. What amount of total tax expense should be reported?

a. 714,000 c. 642,000
b. 726,000 d. 594,000
Stabilizer Company reported taxable income of P8,000,000 in the income tax return for
the first year of operations. The enacted income tax rate is 30% for the current and
future years.
Temporary differences between financial income and taxable income for the year are:
Tax depreciation in excess of book depreciation 800,000

Accrual for product liability claim in excess of actual claim 1,200,000
Reported installment sales income in excess of
taxable installment sales income 2,600,000
640. What is deferred tax asset at year-end?

a. 240,000 c. 780,000
b. 360,000 d. 0
641. What is the deferred tax liability at year-end?

a. 1,020,000 c. 240,000
b. 780,000 d. 0
642. What is the net deferred tax expense for the current year?
a. 1,020,000 c. 660,000
b. 1,380,000 d. 360,000
643. What is the total income tax expense for the current year?
a. 3,060,000 c. 2,640,000
b. 2,400,000 d. 2,820,000
Jessabel Company has established a defined benefit pension plan for an employee.
Annual payments under the pension plan are equal to the employee’s highest lifetime
salary multiplied 3% multiplied by number of years with the entity.
On December 31, 2020, the employee had worked for Jessabel Company for 15 years.
The current salary is P500,000.
The employee is expected to retire in 5 years and the salary increases are expected to
average 4% per year during that period.
The employee is expected to live for 6 years after retiring and will receive the first annual
pension payment one year after retirement. The discount rate is 12%.
PV of an ordinary annuity of 1 at 12% for 6 periods 4.111
644. What is the projected benefit obligations on December 31, 2020?

a. 638,269 c. 524,460
b. 225,000 d. 608,500
645. A director of Ester Company shall receive a retirement benefit of 20% of final salary
per annum for a contractual period of three years.
The anticipated salary is P1,000,000 for 2020, P1,200,000 for 2021 and P1,500,000 for
2022.
The discount rate is 10%. The present value of 1 at 10% is .909 for one period and .826
for two periods.
Under the projected unit credit method, what is the estimated pension liability on
December 31, 2021?
a. 900,000 c. 600,000
b. 520,500 d. 545,280
646. Seda Company provided the following information pertaining to a pension plan for
the current year :
Actuarial value of projected benefit obligation

at the beginning of year 7,200,000 Assumed discount rate 10%
Service cost 1,800,000
Pension benefits paid 1,500,000
No change in actuarial estimate occurred during the current year.
What is the projected benefit obligation at year-end?

a. 6,420,000 c. 7,920,000
b. 7,500,000 d. 8,220,000
647. Greenbelt Company provided the following information with respect to the
defined benefit plan for the current year:
Projected benefit obligation:
January 1 3,000,000
December 31 3,500,000
Contribution to the plan 600,000
Benefits paid to retirees 500,000
Settlement discount rate 10%
What is the current service cost for the current year?

a. 700,000 c. 500,000
b. 600,000 d. 300,000
Pension benefits paid 135,000
PBO at year-end 2,160,000
Interest expense on PBO 120,000
Discount rate 8%

a. 675,000 c. 540,000
b. 810,000 d. 255,000
January 1 Projected benefit obligation 3,500,000
Accumulated obligation 2,600,000
During the year Pension benefits plan paid 250,000
Actuarial loss 200,000
Past service cost 500,000
December 31 Projected benefit obligation 4,700,000
Accumulated benefit obligation 3,600,000
Settlement rate 10%
648. Bronson Company received the following report from the independent actuary in
relation to a defined benefit pension plan at year-end:
649. Winter Company provided the following defined benefit plan information for the
current year:
There is no change in actuarial assumptions during the current year.

a. 400,000 c. 200,000
b. 800,000 d. 750,000
650. Gail Company provided following information pertaining to defined benefit plan
for the current year :
651. Manaoag Company maintains a fund to cover a pension plan with the following
data for the current year:
January 1 Fair value of plan assets 8,750,000

Market-related value of the pension fund
Fair value of plan assets, beginning of year 3,500,000
Fair value of plan assets, end of year 5,250,000
Employer contributions 1,100,000
Benefits paid 850,000
What was the actual return on plan assets?

a. 1,500,000 c. 1,750,000
b. 2,600,000 d. 650,000
( 5 year weighted average) 7,150,000 During year Pension benefits paid
600,000
Contribution to the fund 7,000,000 Actual return on plan assets
950,000
What is the fair value of plan assets on December 31?
a. 8,200,000 c. 7,250,000
b. 9,800,000 d. 8,850,000
652. Caticlan Company provided the following information:

January 1 December 31
Fair value of plan assets ` 3,500,000 3,900,000
Market related value of pan assets 2,800,000 2,900,000
Benefits paid to retirees 250,000
What is the actual return on plan assets for the current year?
a. 400,000 c. 430,000
b. 370,000 d. 100,000
653. Marion Company provided the following data for the current year:
What is the remeasurement gain or loss on plan assets for the current year?
a. 300,000 gain c. 600,000 gain
b. 300,000 loss d. 600,000 loss
654. Angela Company provided the following information pertaining to a defined benefit
pension for the current year:
Prepaid pension cost, January 1 20,000

Current service cost 190,000
Interest expense on PBO 380,000
January 1 Fair value of plan assets 9,000,000
During year Pension benefits paid 700,000
Contribution to the fund 1,000,000
Expected return on plan assets 1,200,000
Interest income of plan assets 900,000
December 31 Fair value of plan assets 9,900,000
Interest income on plan assets 400,000
Past service cost during the year 500,000
Employer contribution 400,000
What is the accrued pension cost at year-end?

a. 250,000 c. 270,000
b. 290,000 d. 400,000
655. Kerr Company provided the following information in relation to a defined benefit
plan at year-end:
Fair value plan assets 3,450,000 Accumulated benefit obligation 4,300,000

Projected benefit obligation 5,700,000
What is the accrued liability at the year-end?

a. 5,700,000 c. 1,400,000
b. 2,250,000 d. 850,000
At the beginning of current year. Dakak Company reported the following information in
relation to a defined benefit plan:
Fair value of plan assets 7,000,000
Projected benefit obligation 7,500,000
During the current year, the entity determined that the current service cost was
P1,400,000 and the discount rate is 10%.
The actual return on plan assets during the year was P840,000.
Other related information for the current year:
Contribution to the plan 1,200,000

Benefits paid to retirees 1,500,000
Decrease in projected benefit obligation due to changes in
actuarial assumptions 200,000
Present value of defined benefit obligation settled 500,000
Settlement price of defined benefit obligation 400,000
656. What amount should be reported in the income statement for the current year as
employee benefit expenses?
a. 2,150,000 c. 1,350,000
b. 2,050,000 d. 1,450,000
657. What is the net amount of “remeasurement” on December 31?

a. 140,000 c. 340,000
b. 200,000 d.100,000
658. What is the fair value of plan assets on December 31?

a. 7,140,000 c. 8,200,000
b. 7,540,000 d. 7,000,000
659. What is the projected benefit obligation on December 31?

a. 7,950,000 c. 7,650,000
b. 7,450,000 d. 9,650,000
660. What is the balance of the prepaid/accrued benefit cost on December 31?
a. 310,000 debit c. 650,000 debit
b. 310,000 credit d. 650,000 credit
At the beginning of current year, Maximus Company had a projected benefit obligation of
P10,000,000 and a pension fund with a fair value of P9,200,000.
The entity provided the following information related to the pension plan during the
current year:
Current service cost 1,200,000

Actual return on pension fund 250,000
Benefits paid to retirees 1,100,000
Contribution to the pension fund 1,050,000
Discount rate 9%
Expected return on pension fund 10%
661. What is the pension expense for the current year?

a. 1,272,000 c. 1,850,000
b. 2,100,000 d. 1,050,000
662. What is the remeasurement gain or loss for the current year?
a. 578,000 gain c. 250,000 gain
b. 578,000 loss d. 250,000 loss
663. What is the pension asset or liability at year-end?

a. 1,600,000 liability c. 800,000 liability
b. 1,600,000 asset d. 800,000 asset
Danica Company provided the following information related to a defined benefit plan for
the current year:

Contribution to the fund 21,000 Fair value of plan assets:
January 1 2,100,000
December 31 2,400,000
Projected benefit obligation:
January 1 2,200,000
December 31 2,500,000
Past service cost for the current year 115,000
At the beginning of the current year, the discount rate and expected rate of return are
5% and 7% respectively.
At the end of current year, the discount rate and e expected rate of return are 6% and 8%
respectively.
664. What amount should be recognized as employee benefit expense in income
statement for the current year?
a. 150,000 c. 115,000
b. 145,000 d. 140,000
665. What is the actual return on plan assets?

a. 310,000 c. 163,000
b. 147,000 d.341,000
666. What is the actuarial loss arising from the increase in projected benefit obligation?
a. 191,000 c. 185,000
b. 300,000 d. 76,000
667. What is the net remeasurement gain or loss for the current year?
a. 281,000 gain c. 129,000 gain
b. 281,000 loss d. 129,000 loss
668. What amount should be reported as prepaid or accrued benefit cost at year-end?
a. 150,000 accrued c. 100,000 accrued
b. 150,000 prepaid d. 100,000 prepaid
Ultimate Company provided the following information in relation to a defined benefit

plan for the current year:
January 1 December 31
Fair Value of plan assets 2,600,000 3,000,000
Projected benefit obligation 2,000,000 2,100,000
Prepaid/accrued benefit cost-surplus 600,000 900,000
Asset ceiling 200,000 300,000
Effect of asset ceiling 400,000 600,000
Discount rate 10%
669. What is the actual return on plan asset for the current year:
a. 200,000 c. 150,000
b. 350,000 d.260,000
670. What is the actuarial gain due to decrease in PBO?

a. 50,000 c. 30,000
b. 40,000 d. 0
671. What amount should be reported as employee benefit expense?

a. 200,000 c. 80,000
b. 100,000 d. 40,000
672.What is the net remeasurent loss for the current year?

a. 110,000 c. 270,000
b. 220,000 d. 170,000
673. Andrew Company issued 200,000 shares of P5 Par value at P10 per share. On
January 1,2014, the retained earnings amounted to P3,000,000. In March 2014, the
entity reacquired50,000 treasury shares at P20 per share. In June 2014, the entity sold
10,000 of these sharesto corporate officers for P25 per share. The entity used the cost
method to record treasuryshares. Net income for the year ended December 31, 2014
was P4,000,000 and the entitypaid cash dividends of P1,000,000 on December 31,
2014, what amount should be reportedas unappropriated retained earnings?
A. 5,000,000 C. 5,800,000
B. 5,200,000 D. 6,000,000
674. North Company has an employee benefit plan for compensated absences that gives
employees 10 paid sick days. Both vacation and sick days can be carried over indefinitely.
Employees can elect to receive payment in lieu of vacation days. However, no payment is
given for sick days not taken.
On December 31, 2020, the unadjusted balance of liability for compensated absences
was P210,000. The entity that there were 150 vacation days and 75 sick days available on
December 31, 2020. The employees earn as average of P 1,000 per day.
On December 31, 2020, what amount of liability for compensated absences should be
reported?
a. 360,000 c. 210,000
b. 225,000 d. 150,000
675. Xiera Company reported that employees earned vacation days during the first year
of operations as follows:
Employee Average wage Vacation days Vacation days taken

per day earned this year this year
1 400 10 10
2 600 15 10
3 800 20 5
What amount should be reported as accrued vacation pay at year-end?

a. 29,000 c. 15,000
b. 14,000 d. 0
676. Gavin Company granted all employees 2 weeks of paid vacation for each full year of
employment. Unused vacation time can be accumulated and carried forward to
succeeding years and will be paid at the salaries in effect when vacations are taken or
when employment is terminated. There was no employee turnover in 2020.
The entity provided the following additional information relating to the current year:
Liability for accumulated vacations on January 1, 2020 350,000

Pre-2020 accrued vacations taken from
January 1, 2020 to September 30, 2020,
the authorized period for vacations 200,000
Vacations earned for work in 2020 adjusted
to current rates 300,000
The entity granted a 10% salary increase to all employees on October 1, 2020, the annual
salary increase date.
What amount should be reported as vacation pay expense for the current year?
a. 450,000 c. 315,000
b. 335,000 d. 300,000
677. On January 1, 2020, Gracia Company agreed to grant its employees two weeks
vacation each year with the stipulation that vacation earned each year can be taken the
following year. For the year ended December 31, 2020, the employees each earned an
average of P10,000 per week.
Two hundred vacation weeks earned in 2020 were not taken during 2020. Wage rates for
employees rose by an average of 10% by the time vacations actually were taken in 2021.
What amount of wages expense related to 2020 vacation time should be reported in
2021?
a. 2,000,000 c. 200,000
b. 2,200,000 d. 0
678. Erika Company’s employees earn vacation time at the rate of two hours per 40hour
work period. The vacation pay vests immediately, meaning an employee is entitled to the
pay even if employment terminated.
During 2020, total wages paid to employees equaled P8,160,000, including P160,000 for
vacations actually taken in 2020 but not including vacations related to 2020 that will be
taken in 2021.
All vacations earned before 2020 were taken before January 1, 2020. No accrual entries
have been made for the vacations.
When amount should be reported as vacation pay liability on December 31, 2020 ?
a. 400,000 c. 160,000
b. 240,000 d. 0
679. Elaine Company gives each of the 50 employees 12 days of vacation a year if they
are employed at the end of the year.
The vacation accumulates and may be taken starting January 1 of the next year. The
employees work 8 hours per day.
The employees made P70 per hour in 2020 and P80 per hour in 2021. During 2020, the
employees took an average of 9 days of vacation each.
The entity’s policy is to record the liability existing at the end of each year at the wage
rate for that year.
What amount of vacation liability should be reported on December 31, 2021?
a. 468,000 c. 336,000
b. 480,000 d. 384,000
680. Cola Company pays all salaried employees on a biweekly basis. Overtime pay,
however is paid in the next biweekly period. The entity accrues salaries expense only at
the December 31 at year-end.
Last payroll was paid on December 26, 2020 for the 2 week period ended December 26,
2020.
Overtime pay earned in the 2 week period ended December 26, 2020 was P50,000.
Remaining work days in 2020 were December 27, 28, 29 on which days there was no
overtime.
The recurring biweekly salaries total P900,000. The entity follows a five day work week.
What amount should be recorded as accrued salaries payable on December 31,2020?

a. 270,000 c. 540,000
b. 320,000 d. 590.00
Vanessa Company had 35 employees who work 8 hours day and are paid hourly.
On January 1, 2020 , the entity began a program of granting the employees 10 days of
paid vacation each year.
Vacation days earned in 2020 may first be taken on January 1, 2020.
Year Hourly wage Vacation days earned Vacation days used

by each employee by each
employee
2020 129.00 10 0
2021 135.00 10 8
2022 142.50 10 10
The entity has chosen to accrue the liability for the paid absences at the current rate of
pay in effect when the compensated time is earned.
681. What amount should be reported as vacation pay expense in 2020?

a. 361,200 c. 344,400
b. 378,000 d. 0
682. What amount of accrued liability for paid absence should be reported on
December 31, 2022?
a. 474,600 c. 399,000
b. 453,600 d. 478,800
Surigao Company has 50 employees who work 8 hours a day and are paid hourly.
On January 1, 2020, the entity began a program of granting the employees 15 days of
paid vacation each year.
Vacation days earned in 2020 may first be taken on January 1, 2021?
The entity has chosen to accrue the liability for compensated absences existing at the end
of each year at the current wage rate for that year.
683. .What is the vacation pay expense for 2020?

a. 900,000 c. 700,000
b. 800,000 d. 0
Year Hourly wage Vacation days earned Vacation days used
by each employee by each employee
2020 150 15 0
2021 200 15 13
2022 250 15 15
684. What is the accrued liability on December 31, 2022?

a. 1,700,000 c. 1,360,000
b. 1,660,000 d. 1,020,000
On September 1, 2020 ,Howe Company offered special termination benefits to

employees who had reached the early retirement age specified in the entity’s pension
plan.
The termination benefits consisted of lump sum and periodic future payments.
Additionally, the employees the accepting the entity offer receive the usual early
retirement pension benefits. The offer expired on November 30, 2020.
Actual on reasonably estimated amounts on December 31, 2020 relating to the
employees accepting the offer are as follows:
Lump sum payments made on January 1, 2021 475,000

Present value of periodic payments of P60,000 annually
for 3 years which will begin January 1, 2022 155,000
Reduction of accrued pension cost on December 31,
2020 for terminating employees 45,000
685. On December 31, 2020 , what amount should be reported as total liability for
termination benefits?
a. 475,000 c. 630,000
b. 585,000 d. 655,000
686. What amount should be recognized in profit or loss as a result of the termination
benefits in 2020?
a. 630,000 c. 585,000
b. 475,000 d. 45,000
At the beginning of current year, an entity announced a decision to close a factory

located in Mindanao and terminate all 200 employees as a result of economic
downturn.
The entity shall pay P20,000 per employee upon termination.
However, to ensure that the windup of the factory occurs smoothly and all remaining
customer orders are completed, the entity needs to retain at least 20% of employees
until closure of the factory in eight months.
As a result, the entity announced that employees who agree to stay until the closing of
the factory shall receive P60,000 payment at the end of eight months in addition to
receiving their current wage throughout the period of closure instead of the P20,000.
Based on this offer, the entity expected to retain 50 employees until the factory is closed.
687. What is the total benefit under the termination plan?

a. 6,000,000 c. 4,000,000
b. 3,000,000 d. 8,000,000
688. What is the termination benefit?

a. 4,000,000 c. 6,000,000
b. 3,000,000 d. 2,000,000
689. What is the short-term employee benefit?

a. 2,000,000 c. 4,000,000
b. 3,000,000 d. 0
At the beginning of current year , Zamba Company announced the decision to close the
factory located in Zamboaga and terminate all 150 employees as a result of economic
downturn.
The entity shall pay P30,000 per employee upon termination.
However, to ensure that the windup of the factory occurs smoothly and all remaining
customer orders are completed. The entity needs to retain some employees until closure
of the factory in nine months.
As a result, the entity announced that employees who agree to stay until the closing of
the factory shall receive P80,000 payment at the end of nine months in addition to
receiving their current wage throughout the period of closure instead of the P30,000.
Based on this offer, the entity expected to retain 20 employees until the factory is closed.
690. What is the total benefit under the termination plan?

a. 5,500,000 c. 3,000,000
b. 6,000,000 d. 9,600,000
691. What is the amount of termination benefit?

a. 5,500,000 c. 4,500,000
b. 3,900,000 d.1,600,000
692. What is the amount of short-term benefit?

a. 1,600,000 c. 3,900,000
b. 1,000,000 d. 0
693. Mara Company provided the following data at year-end:

Authorized share capital 5,000,000
Unissued share capital 2,000,000
Subscribed share capital 1,000,000
Subscription receivable 400,000
Retained earnings appropriated 300,000
Revaluation surplus 200,000
What total amount should be reported as shareholder’s equity?

a. 5,200,000 c. 4,900,000
b. 5,500,000 d. 4,800,000
694. Bronze Company provided the following information at year-end:

Subscribed share capital 3,000,000
Subscription receivable 2,000,000
Cumulative translation loss 500,000
Treasury shares, at cost 700,000
Cumulative unrealized gain on futures contract
designated as cash flow hedge 600,000
What is the contributed capital at year-end?
a. 9,500,000 c. 8,500,000
b. 7,500,000 d. 6,800,000
695. On January 1, 2020, Negros Company was incorporated with the following
authorized capitalization:
Ordinary share capital, no par, P100 stated value 20,000,000

Preference share capital, 10%,P50 par 10,000,000
During the year, the entity issued 150,000 ordinary shares for a total of P18,000,000 and
50,000 preference shares at P60 per share.
In addition, on December 15, 2020, subscriptions for 20,000 preference shares were
taken at a purchase price of P100. These subscribed shares were paid for on January 15,
2021.
Net income for 2020 was P5,000,000.
What amount should be reported as total contributed capital on December 31, 2020?
a. 28,000,000 c. 23,000,000
b. 21,000,000 d.26,000,000
696. Glee Company revealed the following shareholders equity;

Preference share capital, P100 par 2,300,000
Share premium-preference shares 805,000
Ordinary share capital, P15 par 5,250,000
Share premium-ordinary share 2,750,000
Subscribed ordinary share capital 500,000
Subscription receivable-ordinary shares 400,000
What is the amount of legal capital?
a. 8,050,000 c. 9,950,000
b. 7,650,000 d. 11,605,000
697. On January 1, 2014, Alynna Company had 110,000 shares issued and 100,000
sharesoutstanding. The entity had the following transactions in 2014:
March1 Issued 15,000 shares
June 1 Resold 2,500 shares of treasury
September 1 Completed a 2-for-1 share split
What is the number of shares outstanding on December 31, 2014?
A. 117,000 C. 235,000
B. 230,000 D. 250,000
698. At the beginning of the current year, Cove Company, a closely-held entity, issued 6%
bonds with a maturity value of P 6,000,000 , together with 10,000 ordinary shares of P50
par value, for a combined cash amount cash amount of P11,000,000.
If the bonds were issued separately, they would have sold for P4,000,000 on an 8% yield
to maturity basis.
What amount should be reported for share premium on the issuance of the ordinary
shares?
a. 7,500,000 c. 5,500,000
b. 6,500,000 d. 4,500,000
Remington Company issued 10,000 ordinary shares with P200 par value and 20,000
preference shares withP200 par value for a total consideration of P8,000,000.
At the date of issue, the ordinary share was selling for P270.
699. What amount of the proceeds should be allocated to the preference shares?
a. 6,000,000 c.4,800,000
b. 5,400,000 d.4,400,000
700. What amount of the proceeds should be allocated to the ordinary shares?
a. 3,600,000 c. 3,200,000
b. 2,000,000 d. 4,000,000
701. What is the share premium from the issuance preference shares?
a. 1,800,000 c. 800,000
b. 1,000,000 d. 0
702. What is the share premium from the issuance of ordinary shares?
a. 2,000,000 c. 1,200,000
b. 1,600,000 d. 0
On January 1, 2020, Penn Company began operations by issuing at P15 per share onehalf
of the 950,000 ordinary shares of P10 par value that had been authorized for sale.
In addition, the entity has 5000,000 authorized preference shares of P5 par value.
During 2020, the entity had P1,025,000 of net income and declared P230,000 of dividend.
During 2021, the entity had the following transactions:
• Issued 100,000 ordinary shares for P17 per share.

• Issued 150,000 preference shares for P8 per share.
• Authorized the purchase of a custom-made machine to be delivered in January
2022.
The entity restricted P300,000 of retained earnings for the purchase of the machine.
• Issued additional entity 50,000 preference shares for P9 per share.
• Reported P1,215,000 of net income and declared on December 31, 2021 a cash
dividend of P635,000 to shareholders of record on January 15, 2022 to be paid
on February 1, 2022.
703. What is the shareholders’ equity on December 31, 2020?
a. 7,920,000 c. 8,150,000
b. 7,125,000 d. 8,380,000
704. What is the shareholders’ equity on December 31, 2021?

a. 11, 850,000 c. 12,485,000
b. 11,550,000 d.10,635,000
During the current year , Hyatt Company issued for P110 per share, 15,000 convertible
preference shares of P100 par value.
One preference share may be converted into three ordinary shares with P25 par value at
the option of the preference shareholder.
All of the preference shares were converted into ordinary shares at year-end.
The market value of the ordinary share at the conversion date was P40.
705. What amount should be credited to ordinary share capital as a result of the
conversion at year-end?
a. 1,125,000 c. 1,650,000
b. 1,500,000 d. 1,800,000
706. What amount should be credited to share premium as a result of the conversion at
year- end?
a. 375,000 c. 150,000
b. 525,000 d. 0
707. Nerve Company was organized on January 1, 2020. On that date, the entity issued
200,000 P10 par value shares at P15 per share.
During the period January 1, 2020, through December 31, 2021, the entity reported net
income of P750,000 and paid cash dividends of P380,000.
On January 5, 2021, the entity purchased 12,000 treasury shares at P12 per share. On
December 31, 2021, 8,000 treasury shares were sold at P8 per share and retired the
remaining 4,000 shares.
What is the shareholder’s equity on December 31, 2021?
a. 3,290,000 c. 3,338,000
b.3,306,000 d. 3,370,000
708. Caper Company disclosed the following shareholder’s equity at the beginning of
current year:
Share capital, par value P20

authorized 50,000 shares; issued
and outstanding, 30,000 shares 600,000
During the year, the following transactions occurred relating to shareholder’s equity:
* 1,000 shares were reacquired at P28 per share.

* 900 shares were reacquired at P30 per share.
* 1,500 shares of treasury were sold at P32 per share.
The entity reported net income of P110,000 for the current year.
What amount should be reported as shareholder’s equity at year-end?

a. 1,071,000 c. 1,083,000
b.1,078,000 d. 973,000
709. At the beginning of the current year, Dorr Company approved a two for one split of
the entity’s share capital, and an increase in authorized shares from 100,000 P20 par
value shares to 200,000 P10 par value shares.
The shareholders equity accounts immediately before issuance of the share split shares
were as follows:
Share capital, par value P20, 50,000 shares outstanding 1,000,000

Share premium, P3 per share on issuance 150,000
What should be the balances in the share premium and retained earnings accounts
immediately after the share split is effected?
Share premium Retained earnings

a. 0 50,000
b. 150,000 350,000
c. 150,000 1,350,000
d. 1,150,000 350,000
710. Precious Company was organized at the beginning of current year with an
authorization of P 1,200,000 ordinary shares with a par value of P6 per share.
During the current year, the entity had the following capital transactions:
January 5 Issued 675,000 shares at P10 per share

July 28 Purchased 90,000 treasury shares at P11 per share
December 31 Sold the 90,000 shares held in treasury at P18 per share
The entity used the cost method to record the purchase and reissuance of the treasury
shares.
What is the total amount of share premium at year-end?

a. 3,330,000 c. 2,700,000
b. 2,070,000 d. 0
711. At the beginning of current year, Alto Company declared a 1 for 5 reverse share
split, when the market value of share was P100. Prior to the split, the entity had 10,000
shares of P10 par value issued and outstanding.
What is the par value of share after the share split?

a. 10 c. 50
b. 20 d. 2
712. Beck Company issued 200,000 ordinary shares when it began operations in 2018 and
issued an additional 100,000 ordinary shares in 2019.
The entity also issued preference shares convertible to 100,000 ordinary shares.
Jan 1 Number of shares authorized 100,000

Feb 1 Number of shares issued 80,000
July 1 Number of shares reacquired but not cancelled 10,000
Dec 1 Two for one share split
What is the number of ordinary shares outstanding at year-end?
a. 140,000 c. 150,000
b. 160,000 d.180,000
In 2020, the entity purchased 75,000 ordinary shares and held as treasury.
On December 31, 2020, how many ordinary shares were outstanding?
a. 400,000 c. 300,000
b. 325,000 d. 225,000
713. Sam Company was incorporated at the beginning of current year and provided
the following information:
714. At the beginning of current year, Vey Company had 125,000 issued shares and
25,000 shares held as treasury.
During the current year, transactions involving share capital were as follows:
January 1 through October 31-13,000 treasury shares were distributed to officers as

part of a share compensation plan.
November 1- A 3 for 1 share split took effect.
December 1 – The entity purchased 5,000 of its own shares to discourage an unfriendly
takeover. These shares were not retired.
How many shares were issued and outstanding at year-end?
Issued Outstanding
a. 375,000 334,000
b. 375,000 324,000
c. 334,000 334,000
d. 325,000 324,000
715. Nest Company issued 100,000 ordinary shares. Of these, 5,000 shares were held as
treasury at the beginning of current year.
During the year, the following transactions occurred:
May 1 1,000 shares of treasury were sold

Aug 1 10,000 unissued shares were sold Nov 15 A 2 for 1 share
split took effect
How many shares were issued and outstanding at year-end?
Issued Outstanding
a. 220,000 212,000
b. 220,000 216,000
c. 222,000 214,000
d. 222,000 218,000
716. Rona Company originally issued 5,000 shares of P10 par value for P100 per share.
during the current year the entity acquired 2,000 of the shares at P150 per share and
immediately canceled these 2,000 shares.
In connection with the retirement on the shares, what amount is debited respectively to
share premium and retained earnings?
a. 20,000 and 280,000
b.100,000 and 180,000
c. 180,000 and 100,000
d. 280,000 and 0
717. Berna Company reported the following equity accounts at the beginning of
current year:
Share capital. P20 par 8,000,000

Share premium 2,550,000 Retained earnings 1,275,000
All shares outstanding at the beginning of current year were issued for P26 a share. At
year-end, the entity required 20,000 shares at P24 a share and retired them.
What is the balance of the share premium?

a.2,430,000 c.2,510,000
b.2,470,000 d.2,590,000
718. Viscar Company was organized at the beginning of the current year with 100,000
authorized shares of P100 par value.
During the current year, the entity issued 75,000 shares at P140 per share. at year-end,
the entity purchased 5,000 shares at P110 per share.
The par value method is used to record the purchase of the treasury shares. What
is the balance of the share premium from treasury shares at year-end?
a. 200,000 c. 50,000
b. 150,000 d. 0
Pack Company canceled 5,000 shares of P50 par value held in treasury at an average cost
of P120 per share.
Before recording the cancelation of the treasury shares, the entity had the following
shareholder’s equity:
Share capital, 50,000 shares originally issued at P75 2,500,000

What amount should be reported for the following after cancelation of treasury shares?
719. Share Capital
a. 2,250,000 c.1,900,000
b. 2,500,000 d. 2,100,000
720. Share Premium
a. 1,250,000 c. 900,000
b.1,125,000 d. 800,000
721. Retained Earnings
a. 1,000,000 c. 775,000
b. 1,125,000 d. 650,000
Hanna Company reported the following shareholders’ equity at the beginning of the
current year:
Share capital, P10 par, outstanding 225,000 shares 2,250,000
During the year, the entity had the following transactions:
*Acquired 10,000 treasury shares for P500,000.
*Sold 5,000 treasury shares at P60 per share.
*Sold 2,000 treasury shares at P45 per share.
722. What is the total amount of share premium at year-end?

a. 1,500,000 c. 1,540,000
b. 1,560,000 d. 1,550,000
723. What is the share capital at year-end?

a. 2,250,000 c. 2,220,000
b. 2,150,000 d. 2,300,000
724. What is the total shareholders’ equity at year-end>

a. 5,640,000 c. 5,750,000
b. 5,800,000 d. 5,790,000
At the beginning of current year, Guess Company was organized and authorized to issue
100,000 shares with P50 par value.
During the current year, the entity had the following transactions relating to
shareholders’ equity:
• Issued 10,000 shares at P70 per share.

• Issued 20,000 shares at P80 per share.
• Reported net income of P1,000,000.
• Paid cash dividends of P200,000.
• Purchased 3,000 treasury shares at P100 per share.
725. What amount should be reported as share capital at year-end?
a. 1,500,000 c.1,200,000
b.3,300,000 d.1,800,000
726. What mount should be reported as share premium at year-end?

a. 800,000 c. 600,000
b. 200,000 d. 0
727. What is the total shareholders’ equity at year-end?

a. 2,800,000 c.3,300,000
b. 3,000,000 d.2,000,000
728. What is the contributed capital at the year-end?
a. 2,300,000 c.2,000,000
b. 1,500,000 d.1,200,000
Levi Company provided the following information from a comparative statement of

financial position at year-end:
2021 2020
Share capital, P5 par 7,500,000 4,500,000
Share premium 52,000,000 40,000,000
Retained earnings 19,500,000 15,500,000
Treasury shares, at cost, 600,000 in 2021
and 400,000 in 2020 7,000,000 5,000,000
729. What is the number of outstanding shares on December 31,2021?
a. 1,500,000 c. 900,000
b. 1,000,000 d.600,000
730. What is the number of outstanding shares on December 31,2020?

a. 900,000 c. 400,000
b. 500,000 d.700,000
731. How many shares were issued during 2021?

a. 600,000 c.200,000
b. 300,000 d.500,000
732. What was the average price of additional shares issued in 2021?
a.25 c. 10
b.20 d. 5
Juan Company was organized at the beginning of current year with 100,000 authorized
shares of P100 par value.
January 1 Sold 30,000 shares at P150 per share
February 1 Issued 2,000 shared for legal services with a fair value of
P250,000. The shares on this date are quoted at P140 per
share.
March 15 Purchased 5,000 treasury shares at a cost of P120 per share
October 31 Issued P5,000,000 convertible bonds at 120. The bonds are
quoted at 98 without the conversion feature.
November 5
Declared a 2-for-1 share split when the market value of the
share was P160.
December 15 Sold 20,000 shares at P75 per share
December 31 The net income for the year was P2,000,000.
a.5,200,000 c. 4,200,000
b.3,600,000 d. 5,300,000
734. What amount should be recognized as share premium at year-end?

a. 2,050,000 c.3,130,000
b. 3,150,000 d.2,650,000

a. 8,750,000 c. 9,350,000
b. 7,650,000 d. 9,250,000
736. How many shares are outstanding at year-end?

a. 64,000 c. 74,000
b. 79,000 d. 84,000
737. East Company had sufficient retained earnings in 2020 as a basis for dividends but
was temporarily short of cash.
The entity declared a dividend of P100,000 on April 1, 2020 and issued promissory notes
to its shareholders in lieu of cash.
The notes , which were dated April 1, 2020 had a maturity date of March 31, 2021 and
10% interest rate.
How should the scrip dividend and related interest accounted for?
a. Debit retained earnings P110,000 on April 1, 2020.
b. Debit retained earnings P110,000 on March 31, 2021.
c. Debit retained earnings P100,000 on April 1, 2020 and debit interest expense P10,000
on March 31, 2021.
d. Debit retained earnings P100,000 on April 1, 2020 and debit interest expense P7,500
on December 31, 2020.
738. In 2020, Elm Company bought 10,000 shares of Oil Company at a cost of P200,000.
On December 1, 2020, Elm Company declared a property dividend of the Oil Company
shares to shareholders of record on February 1, 2021, payable on February 15, 2021.
The Oil Company shares had the following market value:
December 1, 2020 250,000

December 31, 2020 260,000 February 15, 2021 240,000
What is the net charge of the property dividend against retained earnings during 2020?
a. 200,000 c. 250,000
b. 240,000 d. 260,000
During 2020 , Ray Company reported the following cash dividends on the P10 par value
share capital:
1st quarter 800,000

nd
2 quarter 900,000
rd
3 quarter 1,000,000
th
4 quarter 1,100,000
The 4th quarter cash dividend was declared on December 20, 2020 to shareholders of
record December 31, 2020 payable on January 31, 2021.
In addition , the entity declared a 10% share dividend on December 1, 2020 when there
were 300,000 shares issued and outstanding and the market value was P25 per share on
declaration date and P30 distribution date.
739. What total amount was charged against retained earnings for the dividends?
a. 3,800,000 c. 4,700,000
b. 4,550,000 d. 4,100,000
740. What amount was credited to share capital for the share dividend?
a. 300,000 c. 450,000
b. 750,000 d. 0
741. What amount was credited to share premium for the share dividend?
a. 600,000 c. 300,000
b. 450,000 d. 0
742. Solace Company declared and distributed 10% share dividend with fair value of
P1,500,00 and par value of P1,000,000 and 25% share dividend with fair value of
P4,000,000 and par value of P3,500,000.
What aggregate amount should be debited to retained earnings for the share dividends?
a. 4,500,000 c. 5,000,000
b. 3,500,000 d. 5,500,000
743. Sol Company declared a 10% share dividend. The market price of the 30,000
outstanding shares of P20 par value was P90 per share on declaration date.
When the share dividend was distributed, the share market price was P100.
What amount should be credited to share premium for the share dividend?
a. 210,000 c. 270,000
b. 240,000 d. 300,000
744. During the year, Grey Company issued 4,000 shares with P100 par value in
connection with a share dividend. The market value per share on the date of declaration
was P150.
The shareholders equity before issuance of the share dividend was as follows:
Share capital, P100 par, 20,000 shares outstanding 2,000,000
What is the retained earnings balance immediately after the share dividend?
a. 1,100,000 c. 2,100,000
b. 1,500,000 d. 900,000
745. Sydney Company reported the following capital accounts at year-end:

Share capital, par P25, authorized 150 ,000 shares,
55,000 shares issued of which 5,000 shares
are in treasury 1,375,000
The share was selling at P40 at this time. A 100% share dividend was declared and that
all the treasury shares were issued as share dividends and the balance from the
unissued shares.
What amount of retained earnings should be capitalized?
a. 1,250,000 c. 1,275,000
b. 1,800,000 d. 1,125,000
746. The directors of Ontario Company whose P50 par value share capital is currently
selling at P60 per share have decided to issue a share dividend. The selling price is not
expected to be affected by the share dividend.
The entity which has an authorization for P1,000,000 shares, had issued 500,000 shares,
of which 100,000 shares are now held as treasury.
The entity capitalized P2,400,000 of the retained earnings balance.
What percentage was declared as a share dividend by the directors?

a. 10% c. 6%
b. 8% d. 4%
747. Katrina Company reported the following shareholders equity at the beginning of
current year:
Share capital, 250,000 shares authorized,P30 par
100,000 shares issued and outstanding 3,000,000
The board of directors declared a 10% share dividend on April 1 when the market value
of the share was P70.
The share dividend was issued on July 1 when the market value of the share was P100.
The entity sustained a net loss of P1,200,000 for the current year.
What amount should be reported as retained earnings at year-end?

a. 6,100,000 c. 6,800,000
b. 6,500,000 d. 5,050,000
748. Kiara Company provided the following shareholders equity at year-end:

2020 2021
Share capital (P100 par value) 5,000,000 5,100,000
Share premium 2,500,000 2,900,000
Retained earnings 5,000,000 ?
During 2021, the entity declared and paid cash dividend of P 750,000 and also declared
and issued a share dividend.
There were no other changes in shares issued and outstanding during 2021. The net
income for 2021 was P1,500,000.
What amount should be reported as retained earnings on December 31, 2021?
a. 5,250,000 c. 5,650,000
b. 5,750,000 d. 6,500,000
749. Beauty Company provided the following information:

Preference share capital, P500 par value, 2,200 shares 1,100,000
Treasury preference shares, 100 shares at cost 110,000
Ordinary share capital, no par, 3,000 shares at issue price 600,000
The Board of Directors resolved to pay a 100% share dividend on all shares outstanding
capitalizing amounts of retained earnings equal to the par value and the issue price of
the preference and ordinary shares outstanding, respectively.
Subsequently, the Board of Directors resolved to pay a cash dividend of 10% on
preference share and a cash dividend of P10 per ordinary share.
What is the shareholders equity after effecting the dividend transactions?

a. 4,090,000 c. 3,820,000
b. 3,810,000 d. 3,955,000
750. At the beginning of current year, Coleen Company had 220,000 P5 par value shares
outstanding. On June 1, the entity acquired 20,000 shares to be held in the treasury.
On December 1, when the market price of the share was P20, the entity declared a 10%
share dividend to be issued to shareholders of record on December 15.
What was the impact of the share dividend on retained earnings?

a.100,000 decrease c. 440,000 decrease
b. 400,000 decrease d. No effect
751. Gem Company reported the following shareholders equity at the beginning of
current year:
Share capital, P20 par, authorized 200,000 shares,
issued and outstanding 100,000 shares 2,000,000
On March 1, the board of directors declared a 15% share dividend, and accordingly
15,000 additional shares were issued.
On March 1, the fair value of the share was P60. The entity sustained a net loss of
P1,000,000 for the current year.
What amount should be reported as retained earnings at year-end?

a.5,600,000 c. 6,600,000
b.6,200,000 d. 7,200,000
752. At the beginning of the current year, Flash Company had retained earnings of
P4,000,000.
During the year, the entity reported net income of P2,000,000, sold treasury shares at a
“gain” of P720,000, declared a cash dividend of P1,200,000, and declared and issued a
small share dividend of 60,000 shares with P10 par value when the fair value of the share
was P20.
What is the amount of retained earnings available for dividends at the end of current
year?
a. 3,600,000 c. 4,320,000
b. 4,200,000 d. 4,920,000
753. Kremlin Company reported the following shareholders’ at year-end:

Share capital, P50 par value 3,000,000
A 15% share dividend was declared and distributed at year-end when entity’s share was
selling at P65.
What amount should be reported as share capital outstanding?

a. 3,450,000 c. 3,615,000
b. 3,585,000 d. 4,185,000
754. On December 31, 2020, the board of directors of Blake Company declared a cash
dividend of P800,000 to shareholders of record on January 15, 2021 and payable on
February 15, 2021.
The entity reported the following data on December 31, 2020 before declaration of
dividend:
Accumulated depletion 500,000

Retained earnings- December 31, 2020 600,000
Net Income for 2020 150,000
What amount should be reported as liquidating dividend?

a. 600,000 c. 200,000
b. 300,000 d. 50,000
755. Dayron Company had 80,000 ordinary shares outstanding in January of current year.
The entity distributed a 15% share dividend in March and a 10% share dividend in June.
After acquiring 10,000 shares of treasury in July, the entity split the share 4 for 1 in
December.
How many ordinary shares are outstanding at year-end?
a. 364,800 c. 498,000
b. 488,000 d. 451,500
756. Rudd Company had 700,000 ordinary shares authorized and 300,000 shares
outstanding at the beginning of current year.
January 31 Declared 10% share dividend

June 30 Purchased 100,000 shares
August 1 Reissued 50,000 shares
November 30 Declared 2-for2 share split
How many ordinary shares are outstanding at year-end?

a. 560,000 c. 630,000
b. 600,000 d. 660,000
757. Ray Company declared a 5% share dividend on 100,000 issued and outstanding
shares of P20 par value, which had a fair value of P50 per share before the share dividend
was declared. This share dividend was distributed 60 days after the declaration date.
What is the increase in current liabilities as a result of the share dividend declaration?
a. 250,000 c. 150,000
b. 100,000 d. 0
At the beginning of the current year, Franta Company was authorize to issue share capital
of 100,000 shares with P50 par value. The entity had the following share capital
transactions during the year:
Jan. 1 Sold 80,000 shares at P60 per share.
May 1 Required 4,000 treasury shares at P65 per share.
July 1 Approved a share split of 5 for 1.
Oct. 31 Declared and issued a 10% share dividend when the market value of a
share is P25.
Dec. 31 Reissued all of the treasury shares at P30.
Dec. 31 Net income for the year was P3,000,000.
758. What is the number of shares outstanding at year-end?
a. 418,000 c. 440,000
b. 438,000 d. 422,000
a. 4,000,000 c. 3,800,000
b. 4,380,000 d. 3,760,000
760. What amount should be reported as share premium at year-end?
a. 1,370,000 c. 1,400,000
b. 1,710,000 d. 1,970,000
a. 8,140,000 c. 7,560,000
b.7,800,000 d. 8,400,000
762. Mega Company provided the following information:
•Dividends on 10,000 cumulative preferences shares of 6% P100 par value have

not been declared or paid for 3 years.
• Treasury shares were acquired at a cost of P1,500,000. The treasury shares had
not been reissued as of year-end.
What amount of retained earnings should be appropriated?
a. 1,500,000 c. 180,000
b. 1,680,000 d. 0
763. On January 1,2020, Rama Company had 20,000 treasury shares of P5 par value that
had been previously acquired at P12 per share.
In May 2020, the entity reissued 15,000 of these treasury shares at P10 per share. The
cost method is used to record treasury transactions.
On December 31,2020, what amount should be reported in the notes to financial

statements as a restriction of retained earnings as a result of a treasury share
transactions?
a. 5,000 c. 60,000
b. 10,000 d. 90,000
764. On January 1, 2020, Eagle Company reported P1,750,000 of appropriated retained

earnings for the construction of a new office building which was completed in 2020 at a
total cost of P1,500,000.
In 2020, the entity appropriated P1,200,000 of retained earnings for the constructions of
a new plant.
Also, P2,000,000 of cash was restricted for the retirement of bonds payable due ion 2021.
On December 31, 2021, what amount should be reported as appropriated retained

earnings?
a. 1,200,000 c. 2,950,000
b. 1,450,000 d. 3,200,000
765. Elvis Company reported the following shareholders’ equity on January 1, 2020:
Share capital, P5 par, 600,000 shares authorized,

200,000 shares issued and outstanding 1,000,000
On January 31, 2020, the entity reacquired 10,000 shares at P30 per share to be held as
treasury. On July 1, 2020, the entity declared and issued a 30% share dividend.
On December 31, 2020, the entity declared and paid cash dividend of P10 per share. The
net income for the current year was P3,000,000.
What is the unappropriated balance of retained earnings on December 31, 2020?
a. 2,745,000 c. 2,700,000
b. 3,045,000 d. 2,600,000
766. Cyan Company issued share capital of 20,000 shares with P5 par at P10 per share.
On January 1, 2020, the retained earnings totaled P300,000.
In March 2020, the entity reacquired 5,000 shares at P20 per share. In June 2020, the
entity sold 1,000 of these shares to corporate officers for P25 per share.
The cost method is used to record treasury shares. Net income for 2020 was P60,000. On
December 31, 2020,, what amount should be reported as unappropriated retained
earnings?
a. 280,000 c. 375,000
b. 365,000 d. 360,000
767. Cerritos Company began operations on January 1, 2017.
During the first three year of the operations, Cerritos Company reported net income of
P800,000 for 2017, P2,500,000 for 2018, and P3,000,000 for 2019.
The entity reported the following data for 2020:
Income before income tax 4,800,000

Prior period adjustment – understatement of 2018
depreciation before tax 400,000
Cumulative decrease in income from change in
inventory method before tax 700,000
Dividend declared (of this amount, P500,000
will be paid on January 15, 2021) 2,000,000
Income tax rate 30%

a. 4,890,000 c. 6,000,000
b. 5,450,000 d. 5,660,000
768. On January 1, 2020, Nam Company reported the following amounts in the
Preference share capital, P150 par value,20,000 shares 3,000,000
Ordinary share capital, P50 par value, 100,000 shares 5,000,000
On January 1, 2020, the entity sold 20,000 additional ordinary shares for P90 per share.
Late in 2020, it was learned that because of mathematical error, an overstatement of

depreciation expense by P500,000 had occurred in 2019.
The entity reported net income of P4,000,000 for 2020.
The entity declared cash dividend of P1,000,000 on preference shares and P2,000,000 on
ordinary shares during 2020.
The income tax rate is 30%.

a. 5,850,000 c. 5,150,000
b. 6,000,000 d. 4,450,000
769. Brown Company reported the following shareholders’ equity at year-end:

Retained earnings (deficit) (2,100,000)
The shareholders approved a quasi-reorganization by reducing the par value to P5 and

eliminating the deficit against share premium.
Immediately after quasi-reorganization, what amount should be reported as share
premium?
a. 1,500,000 c. 4,000,000
b. 1,900,000 d. 600,000
770. Gaston Company has sustained heavy losses over a period of tine and conditions
warrant that the entity should undergo a quasi-reorganization at year-end.
• Inventory with cost of P6,500,000 was recorded at the market value o f

P6,000,000.
• Property, plant and equipment were recorded at P12,000,000, net of
accumulated depreciation. The sound value was P8,000,000.
• The share capital is P7,000,000 consisting of 700,000 shares with par value of
P10, the share premium is P1,600,000, and the deficit in the retained earnings is
P900,000.
• The par value of the share is to be reduced from P10 to P5.
Immediately after the quasi-reorganization, what is the shareholders’ equity?
a. 3,300,000 c. 3,700,000
b. 3,500,000 d. 4,200,000
771. Adverse financial and operating circumstances warrant that Solid Company should
undergo a quasi-reorganization at year-end.
The following information may be relevant in accounting for the quasi-reorganization:

• Inventory with a fair value of P2,000,000 is currently recorded in the accounts at
cost of P2,500,000 .
• Plant assets with a fair value of P7,000,000 are currently recorded at P8,500,000,
net of accumulated depreciation.
• Individual shareholders contribute P4,000,000 to create additional capital to
facilitate the reorganization. No new shares are issued.
• The par value of the share is reduced from P25 to P5.
Immediately before these events, the shareholders’ equity appears as follows:

Retained earnings (deficit) (3,000,000)
After the quasi-organization, what amount should be reported as share premium?

a. 2,750,000 c. 3,750,000
b. 3,250,000 d. 1,750,000
772. Christelle Company has incurred heavy losses since the inception of operations.
The board of directors voted to implement a quasi-reorganization, subject to approval of

shareholders.
Immediately prior to the restatement, the shareholders’ equity was as follows:
Share capital, P100 par, 500,000 shares 50,000,000

Retained earnings(deficit) ( 8,000,000 )
The shareholders approved the quasi-reorganization to be accomplished by:
Reduction of inventory 2,000,000

Reduction of property, plant and equipment 4,000,000
Write-off of goodwill 1,000,000
Appropriate adjustment is made to the capital structure against share premium first and
any remaining deficit against the share capital account.
To implement the quasi-reorganization, the share capital account should be reduced by

what amount?
a. 10,000,000 c. 20,000,000
b. 15,000,000 d. 3,000,000
At the beginning of the current year, Jade Company showed the following shareholders’
equity:

Treasury share, 100,000 at cost ( 900,000)
All of the outstanding and treasury shares were originally issued for P11 per share. The
treasury shares were reacquired in the previous year.
During the current year, the following events or transactions occurred relating to
a. February 15 – Issued 400,000 shares for P12.50 per share.

b. June 15 – Declared a cash dividend of P0.20 per share to shareholders of record on
April 1 and payable on April 15. This was the first dividend ever declared.
c. September 15 – The president retired. The entity purchased from the retiring
president 100,000 shares for P13.00 per share which was equal to market value on this
date. These shares were canceled.
d. December 15 – Declared a cash dividend of P0.20 per share to shareholders
payable in early part of next year.
e. On December 31, the entity is being sued by two separate parties for patent
infringement. The management and legal counsel share the following opinion regarding
these suits:
Suit Likelihood of losing the suit Estimated loss
#1 Reasonably possible 600,000
#2 Probable 400,000
773. What is the increase in share premium arising from the issuance of 400,000 shares
on February 15?
a. 4,000,000 c. 4,600,000
b. 5,000,000 d. 400,000
774. What is the decrease in share premium arising from the retirement of 100,000
shares on September 15?
a. 1,300,000 c. 1,000,000
b. 1,200,000 d. 100,000
775. The entity decided to appropriate retained earnings for all loss contingencies that
are not properly accruable by a charge to expense. How much of loss contingencies
should be appropriated by a charge to unappropriated retained earnings?
a. 1,000,000 c. 400,000
b. 600,000 d. 500,000
776. What amount of cash dividend should be charged against unappropriated retained
earnings in the current year?
a. 700,000 c. 360,000
b. 680,000 d. 340,000
777. What amount should be reported in the notes to financial statements as restriction
on retained earnings because of acquisition of treasury shares?
a. 200,000 c. 1,200,000
b. 900,000 d. 1,300,000
778. On January 1, 2020, Doro Company granted an employee an option to purchase

20,000 ordinary shares with P5 par value at P20 per share.
The option became exercisable on December 31, 2021, after the employee completed
two year of service. The fair value of the share option is P15. The option was exercised on
January 10, 2022.
The share prices are P30 on January 1, 2020, P50 on December 31, 2020, and P60 on
January 10, 2022.
What is the compensation expense for 2020?
a. 150,000 c. 300,000
b. 100,500 d. 400,000
779. At the beginning of current year, Cancun Company granted share options to key
employees for the purchase of 40,000 shares at P25 per share. The options are intended
to compensate employees for the next two years.
The option are exercisable within a four-year period after vesting by grantees still in the
employ of the entity.
The market price of the share was P40 at the date of grant. The fair value of each share
option is P20. No share options were terminated during the current year.
What amount should be recognized as compensation expense for the current year?
a. 600,000 c. 800,000
b. 300,000 d. 400,000
780. At the beginning of the current year, Red Company issued share options for 200,000
shares to a division manager. The options have an estimated fair value of P6 each.
To provide additional incentive for managerial achievement, the options are not
exercisable unless divisional revenue increases by 6% in three years.
The entity initially estimated that is probable the goal will be achieved.
What is the compensation expense for the current year?

a. 800,000 c. 400,000
b. 600,000 d. 0
781. At the beginning of the current year, Gray Company granted share options to key
employees for the purchase of 80,000 ordinary shares at P25 per share. The options are
intended to compensate employees for the next two years.
The options are exercisable within a four-year period after vesting by the grantees still in
the employ of the entity.
No options were terminated during the current year, but the entity does have an
experience of 4% forfeitures over the life of the share options.
The market price of the share was P31 at the date of the grant. The entity used the
Binomial pricing model and estimated fair value of each share option at P10.
What amount should be reported as compensation expense for the current year?
a. 307,200 c. 384,000
b. 320,000 d. 400,000
782. Francesca Company decided to issue 1,000 share options to an employee in lieu of
many years service.
However, the fair value of the share options cannot be reliably measured as the entity
operates in a highly specialized market where there are no comparable entities.
The exercise price is P100 per share and the options were granted at the beginning of
current year, when the value of the shares was also estimated at P100 per share.
At the end of the current financial year, the value of the shares was estimated at P150
per share and the options the current year?
a. 100,000 c. 50,000
b. 150,000 d. 25,000
783. On January 1, 2020, Oak Company granted share options to certain key employees
as additional compensation.
The options were for 100,000 ordinary shares of P10 par value at an option price of P15
per share.
Market price of this share on January 1, 2020 was P20. The fair value of each share
option on January 1, 2020 is P8.
The options were exercisable beginning January 1, 2020 and expire on December 31,
2022. On December 31, 2020 , when the share was trading at P21, all share options were
exersiced.
What amount of compensation expense should be reported in 2020 in connection with

the share options?
a. 800,000 c. 200,000
b. 500,000 d. 125,000
784. On January 1, 2018, Kit Company granted share options to employees. The total
expense to the vesting date on December 31, 2021 had been calculated at P8,000,000.
The entity decided to settle the award early on December 31, 2020.
The expense charged since the date of grant was P2,000,000 for 2018 and P 2,100,000 for
2019. The expense that would have been charged for 2020 is P2,200,000.
What amount should be recognized as compensation expense for 2020?

a. 2,200,000 c. 3,900,000
b. 8,000,000 d. 2,000,000
785. On January 1, 2018, Kristel Company granted share options to the employees. The
total compensation expense to the vesting date on December 31, 2021 had been
calculated at P6,000,000.
The entity decided to settle the award early on December 31, 2020.
The compensation expense charged since the date of grant was P 1,500,000 for 2018 and
P1,300,000 for 2019. The compensation expense that would have been charged for 2020
is P1,200,000.
What amount should be recognized as compensation expense for 2020, assuming the
share options are not exercised but instead, the entity paid the employees P5,000,000 on
December 31, 2020?
a. 5,000,000 c. 3,200,000
b. 2,200,000 d. 0
786. Under the executive share option plan, Marien Company granted options on
January 1, 2020 on January 1, 2020 that permit executives to purchase 15,000 P100 par
ordinary shares within the next eight years but not before December 31, 2022.
The exercise price is the market price of the shares on the date of grant.
The fair value of the share option estimated by an appropriate option pricing model is
P40.
No forfeitures were anticipated. However, unexpected turnover during 2021 caused the
forfeiture of 5% of the share options.
What is the compensation expense for 2021?

a. 200,000 c. 180,000
b. 190,000 d. 0
787. On January 1, 2020, Green Company had issued executive share options permitting
executives to buy 40,000 shares for P25 per share.
The vesting schedule is 20% the first year, 30% the second year, and 50% the third year
(Graded-vesting).
Vesting date Amount vesting Fair value per option

December 31, 2020 20% 10
December 31, 2021 30% 15
December 31, 2022 50% 20
Assuming the entity used the straight line method, what amount of compensation
expense should be recorded in 2020?
a. 660,000 c. 220,000
b. 180,000 d. 400,000
788. On January 1, 2020 , Kline Company granted Morgan, the president, compensatory
share options to buy 10,000 ordinary shares of P10 par value.
The options call for a price of P20 per share and are exercisable in 3 years following the
grant date.
Morgan exercised the options on December 31, 2020. The market price of the share was
P60 on January 1, 2020, and P70 on December 31, 2020. The fair value of the share
option is P30 on the date of grant.
By what net amount should shareholders equity increase as a result of the grant and
exercise of the options?
a. 200,000 c. 500,000
b. 300,000 d. 700,000
On January 1, 2020, Jeanne Company granted the president compensatory share options
to buy 5,000 shares of P100 par value.
The options call for a price P120 per share and are exercisable for four years following the
grant date. The president exercised the options on December 31, 2020.
The market price of the share was P150 on January 1, 2020 and P180 on December 31,
2020. The fair value of a similar share option with the same terms was P60 on the grant
date.
789. What is the compensation expense for 2020?

a. 300,000 c. 150,000
b. 100,000 d. 75,000
790. By what net amount should shareholders equity increase as a result of the grant
and exercise of the options?
a. 600,000 c. 500,000
b. 900,000 d. 750,000
791. Gabriel Company’s employee share purchase plan specifies that for every P1
withheld from employees wages for the purchase of Gabriel’s ordinary shares, Gabriel
Company contributes P2.
The shares are purchased for Gabriel Company’s treasury shares at market price on the
date of purchase.
During the current year, the employee withholding was P350,000, the market value of
P150,000 shares issued was P1,050,000 and the carrying amount of treasury shares
issued was P900,000.
What amount should be recognized as expense in the current year for the share purchase
plan?
a. 1,050,000 c. 700,000
b. 900,000 d. 550,000
792. Emerald Company issued fully paid shares to 200 employees at the end of current
year. Normally, shares issued to employees vest over a two-year period but these shares
have given as a bonus to the employees because of their exceptional performance during
the year.
The shares have a market value of P500,000 at current year-end and an average fair value
of P600,000 for the year.
What amount should be expensed for the share-based payment transaction?

a. 600,000 c. 300,000
b. 500,000 d. 250,000
793. On June 30, 2020, Newman Company granted compensatory share options for
30,000 P20 par value ordinary shares to certain key employees. The market price of the
share on that date was P36 and the option price was P30.
The black-Scholes option pricing model measured the total compensation expense to be
P5,400,000.
The options are exercisable beginning January 1, 2023, provided the key employees are
still in entity’s employ at the time the options are exercised. The options expire on June
30,2024.
On January 15, 2023, when the market price of the share was P42, all 30,000 options a
were exercised.
What amount of compensation expense should be recorded for 2022?

a. 2,160,000 c. 5,400,000
b. 2,700,000 d. 0
794. On January 1, 2020, Greece Company granted an employee an option to buy

20,000 shares for P40 per share, the option exercisable for three years from January 1,
2022. The service period is for two years beginning January 1, 2020.
Using a fair value option pricing model , total compensation expense is determined to be
P240,000.
The employee exercised the option on September 1, 2022, and sold the 20,000 shares on
December 1, 2022.
What amount should be recognized as compensation expense for 2020?

a. 240,000 c. 160,000
b. 120,000 d. 80,000
On January 1 , 2020, Kamagong Company granted 100 share options each to 500
employees, conditional upon the employee’s remaining in the entity’s employ during the
vesting period. The share options vest at the end of a three-year period.
On grant date, each share option has a fair value of P30. The par value per share is P100
and the option price is P120.
On December 31, 2021, 30 employees have left and it is expected that on the basis of a
weighted average probability, a further 30 employees will leave before the end of the
three-year period.
On December 31, 2022, only 20 employees actually left and all of the share options are
exercised on such date.

a. 1,500,000 c. 500,000
b. 750,000 d. 0

a. 1, 320,000 c. 380,000
b. 500,000 d. 0

a. 500,000 c. 380,000
b. 880,000 d. 470,000
798. What is the share premium upon exercise of the share options on December 31,
2022?
a. 2,250,000 c. 900,000
b. 2,350,000 d. 0
On January 1, 2020, Paranoid Company granted to a senior executive 30,000 share
options, conditional upon the executive’s remaining in the entity employ until December
31, 2022. The par value per share is P50. The exercise price is P100.
However, the exercise price drops to P80 if the entity’s earnings increase by at least an
average of 10% per year over the three-year period.
The entity estimated that the fair value of the share option is P30 if the exercise price is
P80.
If the exercise price is P100, the fair value of the share option is P25.
During 2020 and 2021, the earnings increased by 11% and 12% respectively. However,
during 2022, the earnings increased only by 4%.

a. 900,000 c. 300,000
b. 450,000 d. 0

a. 900,000 c. 300,000
b. 600,000 d. 150,000

a.300,000 c. 150,000
b.600,000 d. 750,000
2022?
a. 2,250,000 c. 1,650,000
b. 1,500,000 d. 900,000
On January 1, 2020, Nova Company granted share options to each of the 300 employees
working in the sales department. The option price is P80 and the par value is P50 per
share.
The share options vest at the end of a three-year period provided that the employees
remain in the entity’s employ and provided the volume of sales will increase by 10%
per year.
The fair value of each share option on grant date is P30. If the sales increase by 10%, each
employee will receive 200 share options.
If the sales increase by 15%, each employee will receive 300 share options.
On December 31, 2020, the sakes increased by 10% and no employees have left the
entity.
On December 31, 2021, sales increased by 15% and no employees have left.
On December 31, 2022, the sales increased by 15% and 50 employees left the entity.

a. 1,200,000 c. 900,000
b. 2,250,000 d. 450,000
2022?
a. 4,500,000 c. 2,700,000
b. 2,250,000 d. 4,950,000
On January 1, 2020, Alterra Company granted 60,000 share options to employees. The
share options will vest at the end of three years provided the employees remain in
service until then. The option price is P60 and the par value per share is P50.
At the date of grant , the entity concluded that the fair value of the share options cannot
be measured reliably.
The share options have a life of 4 years which means that the share options can be
exercised within one year after vesting.
The share prices are P62 on December 31, 2020, P66 on December 31, 2021, P75 on
December 31, 2022 and P85 on December 31, 2023. All share options were exercised on
December 31, 2023.

a. 120,000 c. 200,000
b. 240,000 d. 660,000

a. 900,000 c. 660,000
b. 600,000 d. 450,000
2023?
a. 2,100,000 c. 600,000
b. 1,500,000 d. 900,000
808. Frame Co. has an 8% note receivable dated June 30, 20X4, in the original
amount of P150,000. Payments of P50,000 in principal plus accrued interest are due
annually on July 1, 20X5, 20X6, and 20X7. In its June 30, 20X6, balance sheet, what
amount should Frame report as a current asset for interest on the note receivable?
a. P0. c. P8,000.
b. P4,000. d. P12,000.
809. Kristine Company records stamp services revenue and provides for the cost of
redemptionsin the year stamps are sold licensees. The past experienced indicates that
only 80% of thestamps are sold to licensees will be redeemed. The liability for stamp
redemptions wasP6,000,000 on January 1, 2014. Additional information during the year
is as follows:
Stamp service revenue from stamps sold to licensees 4,000,000
Cost of redemptions for stamps sold prior to January 1, 2014 2,750,000
If all stamps sold in 2014 were presented for redemption in 2015, the redemption
costwould be P2,250,000. What is the estimated liability on December 31, 2014?
A. 3,250,000 C. 5,500,000
B. 5,050,000 D. 7250,000
810. Oak Company offers a three-year warranty on its products. The entity previously
estimatedwarranty costs to be 2% of sales. Due a technological advance in production at
the beginning of 2016, the entity now believes 1% of sales to be a better estimate of
warrantycosts. Warranty costs of P80,000 and P96,000 were reported in 2014 and
2015,respectively. Sales for 2016 were P5,000,000. What is the warranty expense for
2016?
A. 50,000 C. 100,000
B. 88,000 D. 138,000
811. On June 1, 20X6, Yola Corp. loaned Dale P500,000 on a 12% note, payable in five
annual installments of P100,000 beginning January 2, 20X7. In connection with this loan,
Dale was required to deposit P5,000 in a noninterest-bearing escrow account. The
amount held in escrow is to be returned to Dale after all principal and interest payments
have been made. Interest on the note is payable on the first day of each month
beginning July 1, 20X6. Dale made timely payments through November 1, 20X6. On
January 2, 20X7, Yola received payment of the first principal installment plus all interest
due. At December 31, 20X6, Yola's interest receivable on the loan to Dale should be
a. P0 b. P5,000
c. P10,000 d. P35,000
812. During 2014, Mei Company introduced a new line of machine that carry a
threeyearwarranty against. Based on experience, warranty costs are estimated at 2% of
sales in the yearof sale, 4% in the year after sale, and 6% in the second year after sale.
Sales were P1,200,000,P3,000,000 and P4,200,000 for 2014, 2015 and 2016,
respectively. Actual warrantyexpenditures were P18,000, P90,000 and P270,000 for
2014, 2015 and 2016, respectively.What amount should be reported as warranty
liability on December 31, 2016?
A. 0 C. 408,000
B. 30,000 D. 630,000
813. On December 30, 20X4, Chang Co. sold a machine to Door Co. in exchange for a
noninterestbearing note requiring ten annual payments of P10,000. Door made the first
payment on December 30, 20X4. The market interest rate for similar notes at date of
issuance was 8%. In its December 31, 20X4, balance sheet, what amount should Chang
report as note receivable?
a. P45,000 c. P62,500
b. P46,000 d. P67,100
814. After three profitable years, Clarisse Company decided to officer a bonus to the
branchmanager of 25% of income over P2,000,000 earned by the branch. The income
for thebranch was P3,500,000 before tax and before bonus for the current year. The
bonus iscomputed on income in excess of P2,000,000 after deducting the bonus but
beforededucting tax. What is the bonus for the current year?
A. 300,000 C. 400,000
B. 375,000 D. 700,000
815. Leaf Co. purchased from Oak Co. a P20,000, 8%, 5-year note that required five
equal annual year-end payments of P5,009. The note was discounted to yield a 9% rate
to Leaf. At the date of purchase, Leaf recorded the note at its present value of P19,485.
What should be the total interest revenue earned by Leaf over the life of this note?
a. P5,045 c. P8,000
b. P5,560 d. P9,000
816. Able Company provides an incentive compensation plan under which president
receives abonus equal to 10% of the income before tax but after deduction of the
bonus. The tax rateis 40% and net income after bonus and income tax was P360,000.
What was the amount ofthe bonus?
A. 36,000 C. 66,000
B. 60,000 D. 90,000
817. Bren Co.'s beginning inventory at January 1,2018, was understated by P26,000, and
its ending inventory was overstated by P52,000. As a result, Bren's cost of goods sold for
2018 was
a. Understated by P26,000. c. Understated by P78,000.
b. Overstated by P26,000. d. Overstated by P78,000.
818. On February 5, 2015, an employee filed a P2,000,000 lawsuit against steel company
fordamaged suffered when one of steel’s plant exploded on December 20, 2014. Steel’s
legalbut the entity will not agree to the settlement. On December 31, 2014, what
amount shouldbe reported as liability from lawsuit?
A. 500,000 C. 1,000,000
B. 900,000 D. 2,000,000
819. Ashe Co. recorded the following data pertaining to raw material X during January
200A:
Units
Date Received Cost Issued On hand

1/1/200A - Inventory P8.00 3,200
1/11/200A – Issue 1,600 1,600
1/22/200A – Purchase 4,800 9.60 6,400
The moving-average unit cost of X inventory at January 31, is
a. 8.80 b. 8.96 c. 9.20 d. 9.60
820. Ace Company is involved in litigation regarding a faulty product sold in a prior
year. The entity has consulted with an attorney and determined that there is a 50%
chance of losing.The attorney estimated that the amount of any payment would be
between P500,000 andP800,000 With P500,000 as the best estimate. What is the
required journal entry as a resultof this litigation?
A. No journal entry is required
B. Debit litigation Expense and credit litigation liability P250,000 C. Debit
litigation Expense and credit litigation liability P500,000
D. Debit litigation Expense and credit litigation liability P660,000
821. During 2014, Rina Company is the defendant in a patent infringement lawsuit. The
lawyersbelieve there is a 30% chance that the court will dismiss the case and the entity
will incur noout flow of economic benefits. However, if the court rules in favor of the
claimant, thelawyers believe that there is a 20% chance that the entity will be required
to pay damages ofP100,000. Other outcomes are unlikely. The court is expected to rule
in late December2015. There is no indication that the claimant will settle out of court. A
7% risk adjustmentfactor to the probability-weighted expected cash flows is considered
appropriate to reflect theuncertainties in the cash flow estimates. An appropriate
discount rate is 5% per year. Thepresent value of 1 at 5% for one period is 0.95, what is
the measurement of the provision forlawsuit?
A. 0 C. 85,396
B. 36,594 D. 89,880
822. Simpson Co. received dividends from its common stock investments during the
year ended December 31, 2019, as follows:
• A cash dividend of P8,000 from Wren Corp., in which Simpson owns a 2%

interest.
• A cash dividend of P45,000 from Brill Corp., in which Simpson owns a 30%
interest. This investment is appropriately accounted for using the equity
method.
• A stock dividend of 500 shares from Paul Corp. was received on December 15,
2019, when the quoted market value of Paul's shares was P10 per share.
Simpson owns less than 1% of Paul's common stock.
Simpson's 2019 income statement, dividend revenue should be

a. P58,000 c. P13,000
b. P53, d. P8,000
823. In May 2013, Caso Company filed suit against Wayne seeking P1,900,000
damages forpatent infringement. A court verdict in November 2014 awarded Caso
P1,500,000 in damages but Wayne’s appeals is not expected to be decided before 2016.
Caso’s counselbelieves it is probable that Caso will be successful against Wayne for an
estimated amount in the range between P800,000 and P1,000,000 With considered the
mostly likely amount.
What amount should Caso record as income from the lawsuit in 2014?
A. 0 C. 1,000,000
B. 800,000 D. 1,500,000
824. Turtle Co. purchased equipment on January 2, 20X4, for P50,000. The
equipment had an estimated five-year service life. Turtle's policy for five-year assets
is to use the 200% double-declining depreciation method for the first two years of
the asset's life, and then switch to the straight-line depreciation method. In its
December 31, 20X6, balance sheet, what amount should Turtle report as
accumulated depreciation for equipment?
a. P30,000. c. P39,200.
b. P38,000. . P42,000.
825. Cristy Company acquired a new machine which had a cash price of P2,100,000.
The payment terms are down payment P500,000, note payable in 3 equal annual
installments of
P600,000 each year, and P100,000 ordinary shares with par value of P20 and fair
value of
P35 per share. Prior to use, the entity incurred installation cost of P80,000,What
amount of discount on note payable should be recognized on the date of purchase?
A. 0 C. 550,000
B. 15,000 D. 1,250,000
826. Vore Corp. bought equipment on January 2, 20X5, for P200,000. This equipment
had an estimated useful life of five years and a salvage value of P20,000.
Depreciation was computed by the 150% declining balance method. The
accumulated depreciation balance at December 31, 20X6, should be
a. P102,000 c. P91,800
b. P98,000 d. P72,000
827. On December 31, 2014, Roth Company issued a P1,000,000 face value note
payable to Wake Company in exchange for services rendered to Roth. The note,
made at usual trade term, is due in nine months and bears interest, payable at
maturity, at the annual rate 3%.The market interest rate is 8%. The compound
interest factor of 1 is due in nine months at8% is 0.944. At what amount should the
note payable be reported on
December 31, 2014?
A. 671,000 C. 1,000,000
B. 965,200 D. 1,030,000
828. On July 1, 2014, Marseto Company borrowed P100,000 on a 10%, five-year

interest-bearing note. On December 31, 2014, the fair value of the note is determined to
be P97,500.
Marseto elects the fair value option for reporting financial liabilities. On December
31,2014,What amounts should be presented for this note?
____________ . A B C
D
Interest expense 0 5,000 10,000 10,000
Note payable 97,500 97,000 97,500 100,000
Gain (loss) (7,500) 2,500 2,500 0
829. On January 1, 2014, London Company borrowed P500,000 on an 8%, non-

interestbearing note due in four years. The present value of the note on January 1,
2014 was P367,500, The entity elects the fair value option for reporting financial
liabilities. On
December 32, 2014, it is determined the fair value of the note on January 1, 2014 was
P367, 500. The entity elects the fair value option for reporting financial liabilities. On
December 31, 2014, it is determined the fair value of the note P408, 150. At what
amount should the discount on note payable b presented on December 31, 2014?
A. 0 C. 103, 100
B. 91, 850 D. 132, 500
830. Blue Company reported the following information on December 31, 2014:
11% registered debentures, callable in 2024, due in 2030 700,000
12% collateral trust bond, convertible into ordinary shares
beginning in 2023 due in 2035 600,000
10% subordinated debentures P30,000 maturing
annually beginning 2020 300,000
What is the total amount of term bonds?
A. 600,000 C. 1,000,000
B. 700,000 D. 1,300,000
831. Hancock Company reported the following on December 31, 2014:

Unsecured
10% registered bonds, P25, 000 maturing annually beginning 2016 275,000
11% convertible bonds, callable beginning in 2022, due 2034 125,000
Secured
12% guaranty security bonds, due 2024 275,000
13% commodity-backed bonds, P50, 000 maturing annually beginning in 2020 200.000
What are the total amounts of serial bonds and debentures bonds?
A B. C. D
Serial bonds 200,000 450,000 475,000 475,000
Debenture bonds 650,000 400,000 125,000 400,000
832. During the current year, Lake Company issued 3,000 9%, P1,000 face value bonds at
101. In connection with the sale of these bonds, the entity paid the following expenses:
Promotional cost 20,000

Engraving and printing 25,000
Underwriter commission 200,000
What amount should be recorded as bond issue cost to be amortized over the term
of the bonds?
a. 0 c. 225,000
b. 220,000 d. 245,000
833. On January 1, 2014, Southern Company received P107, 720 for a P100,000 face
amount,12% bond, a price that yields 10%. The bonds pay interest semi-annually. The
entity effects the far value option for valuing financial liabilities. On December 31, 2014,
the fair value ofthe bond is determined to be P106,460. The entity organized interest
expenses of P12,000 inthe 2014 income statement. What was the gain or loss
recognized in the income statement toreport this bond at fair value?
A. 13,260 loss. C. 1,260 gain.
B. 12,000 loss. D. 6,640 gain.
834. On January 1, 2014 west Company issued 9% bounds in the amount of
P500,000 which mature on January 1,2024. The bonds were issued for P469,500 to yield
10%. Interest is payable annually on December 31. The entity uses the interest method
of amortizing bond discount and does not elect the fair value option for reporting
financial liabilities. On June 30, 2014, what amount should be reported as bonds
payable?
A. 469,500 C. 471,025
B. 470,475 D. 500,000
835. Webb Company has outstanding a 7%, ten-year P100,000 face value bond. The
bond was originality sold to yield 6% annual interest. The entity uses the effective
method to amortize bond premium and does not elect the fair value option for
reporting financialliabilities On June 30, 2014, the carrying amount of the outstanding
bond was P105,000.What amount of unamortized premium on bonds should be
reported on June 30, 2015?
A. 1,050 C. 4,300
B. 3,950 D. 4,500
836. On January 1, 2014, Hubert Company sold 12% bonds with a face value of
P6,000,000.The bonds mature in five years and interest is paid semi-annually on June 30
and December31.The bonds were sold for P6,462,000 to yield 10%. The entity used the
effective interestmethod of amortization. What is the interest expense for 2014?
A. 600,000 C. 646,200
B. 644,355 D. 720,000
837. On July 1, 2014, after recording interest and amortization, York Company
convertedP1,000,000 of 12% convertible bonds into 50,000 ordinary shares of 1 par
value. On theconversation date, the carrying amount of the bonds was P1,300,000, The
market value ofthe bond was P1,400,000, and the share were publicly trading at P30 Per
share. Using the book value method, what amount of share premium should be
recorded as a result of theconversion?
A. 950,000 C. 1,350,000
B. 1,250,000 D. 1,500,000
838. On December 31, 2014, Moss Company issued P1,000,000 of 11% bonds at 109.
EachP1,000 bond was issued with fifty detachable share warrants, each of which
entitled thebondholder to purchase one ordinary share of P5 par for P25. Immediately
after issuance, themarket value of each warrant was P4. On December 31, 2014, what
amount should berecorded as discount or premium on issuance of bonds payable?
A. 40,000 premium C. 110,000 discount
B. 90,000 premium D. 200,000 discount
839. On June 30, 2014, King Company had outstanding 9%, P5,000,000 face value
bondsmaturing on June 30, 2019. Interest was payable semi-annually every June 30
andDecember 31. The entity did not elect the fair value option for reporting financial
liabilities.On June 30, 2014, after amortization was recorded for the period, the
unamortized bondpremium and bond issue cost were P30,000 and P50,000,
respectively. On that date, theentity acquired all outstanding bonds on the open market
at 98 retired them. On June 30,2014, what amount should be recognized as gain before
income tax on redemption of bonds?
A. 20,000 C. 120,000
B. 80,000 D. 180,000
840. On December 31, 2014, Laurence Company reported bonds payable having a
face amountof P2,000,000 and unamortized discount of P160,000. The bonds were
retired at 102 onOctober 31, 2015. Accrued interest on October 31,2015 amounted to
P50,000 which waspaid in cash the annual discount amortization for 2015 was P30,000.
What amount of gainor loss on extinguishment should be recognized for 2015?
A. 175,000 loss C. 125,000 loss
B. 170,000 loss D. 175,000 gain
841. On January 1, 2014, Feather Company issued P8,000,000 10% bonds at 105
which are dueon December 31, 2018. Each 1,000 bond was issued with 20 non-
detachable share warrants,each of which entitled the bondholder to purchase one
share of feather for P45 with a parvalue of P20 per share. On January 1, 2014, the
market value of each warrant is P4 whilethe bond ex-warrant was selling at 95. What is
the equity component from the issuance ofbonds with share warrants?
A. 0 C. 640,000
B. 400,000 D. 800,000
842. During 2014, Mae Company experienced financial difficulties and is likely to
default on aP5,000,000, 15% Three year note dated January 1, 2012, payable to Global
Bank. OnDecember 31, 2014. The bank agreed to settle the note and unpaid interest of
P750,000 forP4,000,000 cash payable on January 31, 2015. What amount should be
reported as gain fromextinguishment of debt in the 2014 income statement?
A. 0 C. 1,750,000
B. 1,000,000 D. 2,250,000
843. Taft Company borrowed P1,000,000 from a bank on July 1, 2014. As part of the
loanagreement, the borrowed granted the bank a security interest in land with original
cost ofP750,000. The fair value of the land on July 1, 2014 was P900,000. On June 30,
2015, theborrower defaulted on the loan the land was transferred to the bank in full
settlement of theloan on June 30, 2015. The land had a fair value of P950,000 on June
30, 2015. Whatamount should be recorded by the ban for the land on June 30, 2015?
A. 0 C. 900,000
B. 750,000 D. 950,000
844. Tabloid Company negotiated with a major creditor to restructure a maturing debt
onDecember 31, 2014. The creditor was owned a principal of P10,000,000 and interest
ofP1,200,000 but agreed to accept equipment with fair value of P8,000,000 and not
receivablefrom tabloid Company’s customer with a face value of P2,000,000. The
equipment had acarrying amount of P5,000,000.What amount should be recognized as
gain from extinguishment of debt on December 31, 2014?
A. 0 C. 2,000,000
B. 1,200,000 D. 4,200,000
Question 845 & 846 are based on following information:

Knob Company provided the following information relating to the transfer of real estate
pursuant to a troubled-debt restricting in full liquation of liability:
Carrying amount of liability liquidated 150,000 Carrying amount of real estate
transferred 100,000 Fair value of real estate transferred 90,000
A. 10,000 C. 50,000 gain
B. 0 D. 60,000 gain

A. 50,000 loss C. 0
B. 10,000 loss D. 50,000 gain
847. Seda Company provided the following information related to pension plan: Actuarial
estimate of projected benefit obligation at 1/1/2014 72,000
Assume discount rate 10%
Service cost for 2014 18,000
Pension benefits paid during 2014 15,000
No change in actuarial estimates occurred during 2014. What amount should be
responded as projected benefits obligation on December 31, 2014?
A. 64,200 C. 79,200
B. 75,000 D. 82,200
848. Payne Company implemented a defined plan on January 1, 2014. The following data
areprovided on December 31, 2014
Projected benefit obligation 103,000
Plan assets at fair value 78,000
Net periodic pension cost 90,000
Employer’s contribution 70,000
What amount should be recorded as pension liability on December 31, 2014?

A. 0 C. 25,000
B. 20,000 D. 45,000
849. Salve Company reported plan assets of fair value of P2,000,000 and projected
benefitobligation of P4,000,000 on December 31, 2014. On January 1, 2014, the
prepaid/accruedbenefit cost account had a credit balance of P1,500,000. During the
year, the entityrecognized contribution of P1,200,000 and remeasurement loss of
P600,000 there was noremeasurement gain or loss on January 1, 2014. What amount of
employed benefit expensewas recognized for 2014?
A. 500,000 C. 1,200,000
B. 1,000,000 D. 1,700,000 850. Hoax Company reported the
following data on January 1, 2014 based on PAS 19R
Projected benefit obligation 10,000.000
Fair value of plan asses 9,000,000
During the current year, the actuary determined the current service cost at
P2,000,000 and interest cost at P1,000,000. The interest income on plan assets was
P900,000 while actual return on plan assets was P600,000. There was a decrease in
the projected benefit obligation due to changes in actuarial assumptions of
P200,000. The average remaining service period of the employees is 10 years. What
is the defined benefit cost for the current year?
A. 2,000,000 C. 2,200,000
B. 2,100,000 D. 2,500,000
851. On December 31, 2014. Veronica Company reported fair value of plan assets
P9,000,000and project benefit obligation P9,400,000 On December 31, 2015 the
entityreported fairvalue of plan assets P9,900,000 and projected benefit obligation
P11,100,000. During 2015contribution was P1,260,000 and benefits paid were
P1,125,000. The discount rate for 2014and 2015 were 10% and 9% respectively. What is
the measurement gain or loss attribute to plan assets for 2015?
A. 45,000 gain C. 135,000 gain
B. 45,000 loss D. 135,000 loss
852. On January 1, 2014 before adoption of PAS 19R, Church Company had a
projected benefitobligation of P4,350,000 and pension plan assets with a fair value of
P2,650,000 The entityhad unrecognized past service cost of P450,000 and an
unrecognized actuarial gain of P150,000. The entity decided to adopt PAS 19R on
January 1, 2014 of PAS 19R? A. No entry is necessary
B. Debit expense 300,000
C. Debit retained earnings P300,000
D. Debit prepaid/accrued benefit cost P450,000
853. West Cost determined that is has an obligation relating to employees right to
receivecompensation for future absences attribution to employees services already
rendered. Theobligation relates to rights that vest, and payment of the compensation is
probable. Theamounts of west’s obligations of December 31,2014 are reasonably
estimated as follows:
Vacation pay 110,000
Sick pay 80,000
On December 31, 2014, what amount should be reported as liability for compensated
absences?
A. 0 C. 110,000
B. 80,000 D. 190,000
854. Joan Company grants all employees two weeks of paid vacation for each full year
ofemployment. Unused vacation time can be accumulated and carried forward to
succeedingyears and will be paid at the salaries in effect when vacations are taken or
when employmentis terminated. There was no employee turnover in 2014. Additional
information relating to theyear ended December 31, 2014 is as follows:
Liability for accumulated vacations on January 1, 2014 350, 000
Pre-2014 accrued vacations on January 1, 2014
September 30, 2014 (the authorized period for vacations) 200, 000
Vacation earned for work in 2014 adjusted to current rate 300, 000 The entity
granted a 10% salary increase to all employees on October1, 2014, the annual salary
increase date. What amount should be reported as vacation pay expense for 2014?
A. 300,000 C. 335,000
B. 315,000 D. 450,000
855. On September 1, 2014, Joanna Company offered special termination benefits to
employeeswho had reached the early retirement age. The termination benefits
consisted of lump-sumand periodic future payments. Additionally, the employees
accepting the offer received theusual early retirement pension benefits. The offer
expired on November 30, 201.Information on December 31, 2014 is as follows:
• Lump-sum payments totaling P475,000 were made January 1, 2015
• Periodic payments of P60,000 annually for three years will begin, January 1, 2016.
The present value on December 31, 2014 of these payments was P155,000.
• Reduction of accrued pension costs on December 31, 2014 for the terminating
employees was P45,000
On December 31, 2014, what is the total liability for special termination benefits?
A. 475,000 C. 630,000
B. 585,000 D. 655,000
856. Rapp Company leased a new machine to a lessee on January 1, 2014. The lease is
anoperating lease and expires on January 1, 2019. The annual rental is P90,000.
Additionally,on January 1, 2014, the lessee paid P50,000to the lessor as a lease bonus
and P25,000 as asecurity deposit to be refunded upon expiration of the lease. What
amount of rental revenueshould be recognized for 2014?
A. 90,000 C. 125,000
B. 100,000 D. 140,000
857. Wall Company leased office premises to a lessee for a five-year term beginning
January 1,2014. Under the terms of operating lease, rent for the first year is P80,000 and
rent for yearstwo through five is P125,000 per annum. However, as a lease bonus and
P25,000 as asecurity deposit to be refunded upon expiration of the lease. What amount
of rental revenueshould be reported as rental income for 2014?
A. 80,000 C. 116,000
B. 108,000 D. 120,000
858. On January 1, 2014, Wren Company leased a building to a lessee under an

operating leasefor ten years at P500,000 per year, payable the first day of each lease
year. The lessor paidP150,000 to a real estate broker as a finder fee. The build is
depreciated P120,000 per year.The entity incurred insurance and property tax expense
totaling P90,000, what is the net rentalincome for 2014?
A. 275,000 C. 350,000
B. 290,000 D. 365,000
859. Adrian Company leased an office space from a lessor at an annual rental of
P300,000 on January 1, 2014. The lease will commence on January 1, 2014 and will end
December 31, 2017. The lease agreement specifies that rental will be paid ta the
beginning of each year and will increase at 10% annually. What of rent expense should
be recognized for 2015?
A. 300,000 C. 348,075
B. 330,000 D. 363,000
860. On October 1, 2014, Nova Company leased office space at a month rental of
P350,00 forten years expiring on September 30, 2024. Payment is made at start of every
month. As aninducement to enter into the lease, the lessor permitted the lessee to
occupy the premisesrent-free from October 1, 2014 to December 31, 2014. On
December 31, 2015, what amountshould be recognized as accrued rent payable?
A. 0 C. 1,023,750
B. 918,750 D. 4,095,000
861. Christopher Companyleased machine on January 1, 2014 with the following
information:
Annual rental payable at the beginning of each lease year 400,000
Lease term 10 years
Useful life of machine 12 years
PV of an annuity of 1 in advance for 10 periods at 14% 5.95
PV of 1 for 10 periods at 14% 0.27
The entity has the option to purchase the machine on January 1, 2014 by paying
P500,000 which approximates the fair value of the machine on option exercise date.
What amount should be recognized initially as lease liability?
A. 0 C. 2,245,000
B. 2,380,000 D. D. 2,515,000
862. Mane Company lease equipment with a ten-year useful life, form joy Company on
January1, 2014 for an eighty-year period expiring December 31, 2022. Equal annual
paymentsunder the lease are P800,000 and are due on January 1 of each year. The first
payment wasmade on January 1, 2014. The rate of interest contemplated by mane and
joy is 8%. Thecash selling price of the equipment is P4,965,000 and the cost of the
equipment on joy’saccounting records was P4,200,000. The lease provide for a bargain
purchase option on the part of the lessee upon the lease expiration. What amount of
expense should Manerecognized for the year ended December 31, 2014?
A. 496,000 C. 829,700
B. 893,700 D. D. 953, 825
863. Howe Company leased equipment to a lessee on January 1, 2014 for an eight-year
periodexpiring December 31, 2021. Equal payments under the lease are P600,000 ad
due onJanuary 1 of each year. The first payment was made on January 1, 2014, the list
selling priceof the equipment is P3,520,000 and the carrying amount is P2,800,000. The
lease isappropriately accounted for as a sales-type lease. The present value of the lease
payments isP3,300,000. What amount of profit on the sales should be reported or 2014?
A. 0 C. 500,000
B. 90,000 D. 720,000
864. Orville Company is a dealer in equipment. The entity leased equipment to leased
equipmentto a lessee on January 1, 2014 for an eight-year period expiring January 1,
2022. Equalannual payments under the lease are due at the end of each year beginning
December 31, 2014. The lease agreement included a guaranteed residual value of
P200,000 and an implicitrate of 10%. It was determined that fair value of the asset is
P300,000, The carrying amountis P2,500,000 and that the present value of the minimum
lease payment at 10% isP2,760,900. The PV of 1 at 10% for 8 periods is 0.467, and the
PV of an ordinary annuity of1 at 10% for 8 periods is 5,335. that is the total financial
revenue over the lease term?
A. 1,379,156 C. 1,498,594
B. 1,439,100 D. 1,558,538
865. On January 1, 2014, Yole Company signed a 10-year non-cancelable lease

agreement tolease an equipment to warehouse Company. The agreement required
equal payments at the reach ofeach year beginning December 31, 2014. The fair value of
the building on January 1, 2014is P6,000,000 and the carrying amount is P5,000,000. The
equipment has an estimatedeconomic life of 10 years with no residual value. At the
termination of the lease, the title tothe building will be determined the annual rental to
insure a 10% rate of return which isknown to the lessee. What total amount of income
should the lessor recognize in 2014 if thetransaction is treated as sales type?
A. 1,000,000 C. 1,600,000 B.
1,500,000 D. 1660,000
866. On January 1, 2014, Halt Company sold a Computer system to finance Company
for5,000,000 and immediately leased the computer system back. The computer was
carried onhalt’s book at a value of P400,000. The term of the non-cancelable lease is 10
years and titlewill transfer to the lessee at the end of the lease term. The lease
agreement requiredequal rental payments of P830,000 at the end of each year. The
implicit rate is 10%. Thecomputer has a fair value of P5,000,000 on January 1, 2014, and
an estimated economic lifeof 12years. Halt Company paid executor costs of P100,000 for
the year. What is the deferredgain on December 31, 2014?
A. 440,000 C. 550,000
B. 540,000 D. 600,000
867. On January 1, 2014, Hook Company sold equipment with a carrying amount of
P100,000 and a remaining useful life of ten years for P150,000. The entity immediately
leased theequipment back under a ten-year finance lease with a present value of
P150,000 and willdepreciate the equipment using the straight-line method. The entity
made the first annuallease payment of P24,412 in December 2014. On December 31,
2014, what amount shouldbe reported as unearned gain on equipment sale?
A. 0 C. 45,000
B. 25,588 D. 50,000
868. Grim Company reported pretax financial statement income of P200,000 and taxable
incomeof P150,000. The Difference is due to the following:
Interest on municipal bonds 70,000
Premium expense on keyman life insurance (20,000)
Total 50,000
The income tax rate is 30%. What amount should be reported as current provision
for income of P150,000. The difference is due to the following:
A. 45,000 C. 60,000
B. 51,000 D. 66,000
869. Boom Company reported current tax expense of P5,000,000 for 2015. The changes
in assets and liabilities are as follows:
December 31, 2015 December 31, 2014
Deferred tax asset 1,000,000 800,000
Deferred tax liability 450,000 600,000
Income tax payable 500,000 200,000
The deferred tax liability was caused by accelerated depreciation and the deferred
tax asset is for rentals received in advance. What amount of total tax expense
should be recognized in 2015?
A. 4,650,000 C. 4,950,000
B. 5,350,000 D. 5,650,000
870. Justin Company reported P9,000,000 income before provision for income tax. The
following data are provided for the current year:
Rent received in advance 1,600,00
Income from exempt municipal bonds 2,000,000
Depreciation deduction for income tax purposes in excess
Of depreciation reported for financial reporting purpose 1,000,000
Estimated tax payment for current year 500,000
Enacted corporate income tax rate 30%
What amount of current income tax liability should reported at year-end?
A. 1,780,000 C. 2,280,000
B. 2,580,000 D. 2,880,000
871. On January 1, 2014, Warren Company purchased a P600,000 machine, with a
fiveyears useful life and no residual value. The machine was depreciated by
acceleratefor book and tax purposes. The carrying amount was P24,000 on December
31,2015. On January 1, 2016, the entity changed to the straight-line method forfinancial
reporting purposes. The tax income rate is 30%. On January 1, 2016, what amount
should be reported as deferred tax liability as a result of the change?
A. 0 C. 36,000
B. 72,000 D. 120,000
872. Tower Company began operations on January 1, 2014. For financial reporting the
entityrecognized revenue from all sales under accrual. However, in the income tax
return, theentity reported under the installment method. The gross profit on these
installment salesunder each method was as follows:

2014 1,600,000 600,000
2015 2,600,000 1,400,000 .
The income tax rate is 30% for 2014 and future years. There are no other temporary
orpermanent differences. On December 31, 2015, what amount should be reported as
deferredtax liability?
A. 360,000 C. 600,000
B. 660,000 D. 840,000
873. Kathleen Company prepared the following reconciliation for the first year of
operations:
Pretax financial income for 2014 9,000,000
Tax-exempt interest revenue (750,000)
Temporary difference (2,250,000)
Taxable income 6,000,000
The temporary difference will reverse evenly in 2015 and 2016 at an enacted tax
rate of 35% in 2015, and 32% in 2016. The tax rate for 2014 is 30%. What amount
should be reported as deferred tax asset or liability on December 31, 2014?
A. 720,000 asset C. 753,750 asset
B. 720,000 liability D. 753,750 liability
874. On January 1, 2014, Norren Company key executives 160,000 shares options at an
optionprice of P35 per share. Market prices of the shares were P46 and P51 on
December 31, 2014and 2015, respectively. The options were granted as compensation
for services to berendered over a two-year period beginning January 1, 2014. The
BlackScholes option pricing model determined total compensation expense to be
P1,600,000. What amount ofcompensation expense should be recognized for 2015?
A. 800,000
B. 1,760,000 C. 1,600,000
D. 2,800,000
875. In connection with a share option plan, Ward Company intends to distribute
treasury shareswhen the options are exercised. These shares were bought in 2014 at
P42 Per share. OnJanuary 1, 2015, the entity granted share options for 10,000 shares at
P38 per share asadditional compensation for services to be rendered over the next
three years. The optionsare excisable during four-year period beginning January 1, 2018
by grantees still employed. Market price was P47 per share at the grant date. The fair
value of a similar share optionwith the same terms was P12 at the grant date. No share
options were terminated during2015. What amount should be reported as
compensation expense pertaining to the optionsfor 2015?
A. 0 C. 40,000
B. 30,000 D. 90,000
876. On January 1, 2014, Morey Company granted the president, 20,000 share
appreciationrights for past services. Those rights are exercisable immediately and expire
on January 1,2017.On exercise, the grantee is entitle to receive cash for the excess of
the market price onthe exercise date over the market price on the grant date. The
grantee did not exercise any ofthe rights during 2014. The market price of share was P30
on January 1, 2014 and P45 onDecember 31, 2014. What amount should be recognized
as compensation expense for 2014?
A. 0 C. 300,000
B. 100,000 D. 600,000
877. On January 1,2014, Mae Company issued to employees 10,000 restricted shares.
On January 1, 2015, the entity issued to employees an additional 20,000 restricted
shares.
Date Fair value of share
January 1, 2014 20
December 31, 2014 22
January 1, 2015 25
The shares vest at the end of a four-year period. There are no forfeitures. What
amountshould be recorded as compensation expense for 2015?
A. 175,000 C. 225,000
B. 205,000 D. 500,000
878. Zinc Company reported the following information on December 31, 2014:
Ordinary share capital, P3 par 600,000
Net unrealized loss on available-for-sale securities 20,000
Retained earnings appropriately for uninsured earthquake loss 150,000
What amount should be reported as total shareholders’ equity on December 31,
2014?
A. 1,680,000 C. 1,780,000
B. 1,720,000 D. 1,820,000 879. Rudd
Company had 700,000 ordinary shares authorized and 300,000 shares outstanding
onDecember 31, 2014. The following events occurred during 2015:
January 31 Declared 10% stock dividend
August 1 Reissued 50,000
November 30 Declared 2-for-1 stock split On
December 31, 2015, how many ordinary shares are outstanding?
A. 560,000 C. 630,000
B. 600,000 D. 660,000
880. Arp Company reported the following outstanding share Capital on December 31,
2014:
• 30,000 preferences shares, 5% cumulative, par value P10, fully participating as to
dividends. No dividends were in arrears.
• 200,000 ordinary shares, par value P1
On December 31, 2014, the entity dividends of P100,000. What was the amount of
dividends payable to ordinary stockholders?
A. 10,000 C. 40,000
B. 34,000 D. 47,500
881. On December 1, 2014, Nilo Company declared a property dividend of marketable

securitiesto be distributed on December 31, 2014 to share holders record on December
15, 2014. OnDecember 1, 2014, the trading securities had a carrying amount of P60,000
and a fair valueof P78,000. What is the effect of this property dividend on 2014 retained
earning after allnominal accounts are closed?
A. 78,000 decrease C. 0
B. 60,000 decrease D.180,000 increase
882. Mine Company declared and distributed a 15% share dividends with fair value
ofP5,000,000 and par value of P4,000,000 and a 30% share dividend with a fair
valueP10,000,000 and par value of P7,000,000. What amount should be recognized as
sharepremium from share dividend?
A. 0 C. 3,000,000
B. 1,000,000 D. 4,000,000
883. At the current year-end, Danica Company issued 4,000 ordinary shares of P100 par
value inconnection with a stock dividend. The market value per share on the sate of
declaration wasP150. The shareholders’ equity immediately before issuance of stock
dividend comprisedshare capital P100 par P2,000,000, share premium P3,000,000 and
retained earningsP1,500,000. What amount should be reported as retained earnings
immediately after thestock dividend?
A. 900,000 C. 1,500,000
B. 1,100,000 D. 2,100,000
884. On July 1, 2014, Bart Company had 200,000 ordinary shares of P10 par outstanding
and themarket price of the share is P12. On the same date, the entity declared a 1-for-2
reverseshare split. The par of the share was increased from P10 to P20 and one new P20
pare sharewas issued for each two P10 shares outstanding. Immediately before the 1to-
2 reversestock split, the share premium was P450,000. What is the balance of the share
premiumaccount immediately after the reverse stock split is effected.
A. 0 C. 650,000
B. 450,000 D. 850,000
885. Cyan Company issued 20,000 ordinary shares of P5 par at P10 per share. On
December,2014, the retained earnings amounted to P300,000. In March 2015, the
entity reacquired5,000 shares at P20 per share. In June 2015, the entity sold 1,000 of
these shares tocorporate officers for P25 per share. The cost method is used to record
treasury shares. Netincome for 2015 was P60,000. On December 31, 2015, what amount
should be reported asretained earnings?
A. 360,000 C. 375,000
B. 365,000 D. 380,000
886. On January 1, 2014, Troy company reported share capital P20 par P2,000,000,
sharepremium P1,000,000 and retained earnings P3,500,000. The entity used the cost
method of accounting for treasury shares at P25 per share and declared the remaining
treasury shares as dividends when the fair value of the share is P40. Net income for
2014 was P1,500,000. What amount should be reported as retained earnings December
31, 2014?
A. 4,725,000 C. 4,800,000
B. 4,775,000 D. 4,925,000
887. Lourdes Company reported assets decreased by P9,000,000 and liabilities also
decreased byP16,000,000 in the current year. It was determined that a financial asset a
FVOCIdecreased by P400,000 due to fair value change and an investment in associate
increased byP600,000 due to share in the net income of the associate. The entity
received equipmentvalued at P500,000 from a shareholders as donation and corrected
prior period error resultingfrom an overstatement of ending inventory for P1,500,000.
What is the net income for thecurrent year?
A. 6,900,000 C. 8,000,000
B. 7,800,000 D. 8,400,000
888. On December 31, 2014, Eagle Company reported P1,750,000 of appropriated

retainedearnings for the construction of a new office building which was completed in
2015 at atotal cost of P1,500,000. In 2015, the entity appropriated P1,200,000 of
retained earningsfor the construction of a new plant also P2,000,000 of cash was
restricted for the retirementof bonds due in 2016. What amount of appropriated
retained earnings should be reported onDecember 31, 2015?
A. 1,200,000 C.2,950,000
B. 1,450,000 D. 3,200,000
889. Meg Company provided the following information:
• Dividends on 1,000 cumulative preference share, 6%, P10 par value, have not been
declared or paid for three years
• Treasury shares that cost P15,000 were issued for P8,000.
What amount of retained earnings should be appropriated a result of these items?

A. 0 C. 7,000
B. 1,800 D. 8,800
890. Karen Company provided the following data for the year ended December 31, 2014:
Retained earnings unappropriated, January 1 200,000
Over-depreciation of 2013 due to prior period error 100,000
Net income for 2014 1,300,000
Retained earnings appropriated for treasury shares (original balance is
P500,000 but reduced by P200,000 by reason
of reissuance of the treasury shares) 300,000
Retained earnings appropriated for contingencies (beginning balance
P700,000, but increased by current appropriation of P100,000)800,000
Cash dividends paid to shareholders 500,000
Change in accounting policy from FIFO to average-credit adjustment 150,000
What is the balance of unappropriated retained earnings on December 31, 2014?

A. 1,150,000 C. 1,750,000
B. 1,350,000 D. 1,950.000
891. Ute Company had the following capital structure during 2014 and 2015:
Preference shares, P10 par, 4% cumulative,
25,000 shares issued and out satnding 250,000
Ordinary shares, par, 200,000 shares issued and outstanding 1,000,000 The
entity reported net income of P500,000 for 2015. The entity paid no
preferencedividends during 2014 and paid 16,000 in preferences dividends during
2015. What amountshould be reported as basic earnings per share?
A. 2.42 C. 2.48
B. 2.45 D. 2.50
892. On December 31, 2014, Richard Company had 300,000 ordinary shares and 5%, 100
parvalue 10,000 cumulative preference shares outstanding. No dividends were declared
oneither the preference or ordinary shares in 2014 or 2015. On January 30, 2016, prior
to theissuance of financial statements for 2015, the entity declared a 100% share
dividend onordinary shares net income for 2015 was P90,000. What amount of basic
earnings per shareshould be reported in the 2015 financial statements?
A. 1.50 C. 3.00
B. 1.58 D. 3.17
893. On December 31, 2014, Donne Company had 1,200,000 ordinary shares
outstanding. OnSeptember 1,2015, an additional 600,000 shares were issued. The entity
issued P12,000,000of 6% convertible bonds on October 1, 2015, convertible into
800,000 and the income taxrate was 30%. What amount should be reported as diluted
earnings per share for 2015?
A. 2.10 C. 2.89
B. 2.27 D. 3.21
894. Peter Company reported the following capital structure:
2014 2015
Outstanding shares
Ordinary shares 110,000 110,000
Convertible preference share 10,000 10,000
During 2015, the entity paid preference dividends of P3 per share. The preference is
convertible into 20,000 ordinary shares. Net income for 2015 was P850,000. The
income tax rate is 30%. What amount should be reported as diluted earnings per
share for 2015?
A. 6.31 C. 7.08
B. 6.54 D. 7.45
895. Hoyt Company reported the following shareholders equity:

5% cumulative preference shares, par value P100,
2,500 shares issued and outstanding 250,000
Ordinary shares, par value P3.50, 100,000 shares issued and outstanding 350,000
Dividends in arrears on the preference shares amount to P25,000. If the entity were to
beliquidated, the preference shareholders would receive par value plus a premium of
P50,000. What is the book value per ordinary share?
A. 7.00 C. 7.50
B. 7.25 D. 7.75
896. Kevin Company sustained heavy losses for several years and underwent
quasireorganization via recapitalization on December 31, 2014. The entity provided
thefollowing information:
Fair value Carrying amount
Inventory 5,700,000 6,000,000
Equipment 7,200,000 8,000,000
The shares capital is P6,000,000 with a P6 par value, share premium is P1,500,000
and thedeficit is P6,200,000 before the adjustments. The par value is reduced by 1/3
of the originalamount. What must the shareholders contribute in order to eliminate
the deficit?
A. 0 C. 3,800,000
B. 1,800,000 D. 6,200,000
897. France Company had sales of P1,000,000 during December 2014. Experience has
shownthat merchandising equaling 7% of sales will be returned within thirty days and
anadditional 3% will be returned within ninety days. Returned merchandise is
realityresalable. In addition, merchandise equaling 15% of sales will be exchange for
merchandiseof equal or greater value. What amount should be reported for net sales for
the month ofDecember 2014?
A. 750,000 C. 850,000
B. 780,000 D. 900,000
898. Zoe Company, a distributor of machinery, bought a machine from the manufacturer
inNovember 2014 for P10,000. On December 30, 2014, the entity sold this machine
forP15,000 Under the following terms: 2% discount if paid within thirty days, 1%
discount ifpaid after thirty days but within sixty days, or payable in full within ninety
days if not paidwithin the discount periods. However, the customer had the right to
returns this machine if itwas unable to resell the machine before expiration the
ninetyday payment period, in whichcase the obligation would be canceled. In the net
sales for the year ended December 31,2014, what amount should be included for the
sale of this machine.
A. 0 C. 14,850
B. 14,700 D. 15,000
899. Belgica Company allows customers to return goods within 90 days of purchase. The
entityestimated the 5% of sales will be returned within the 90-day period. During the
month, theentity has sales of P200,000 and returns of sales made in prior months of
P5,000. Whatamount should be recorded as net sales revenue for new sales made
during the month?
A. 185,000 C. 195,000
B. 190,000 D. 200,000
900. Charlene Farms produced P50,000 kilos of tobacco for another entity which has
agreed topurchase the entire production at the prevailing market price. Recent
legislation assured thatthe market price will not fall below P70 per kilo during the next
two years. The cost ofselling and distributing the tobacco are immaterial and can be
reasonably estimated. Theentity reported its inventory at expected exit value. During
2014, the entity sold and delivered to the buyer 40,000 kilos at the market price of P70.
The entity sold the remaining10,000 kilos during 2015 at the market price of P72. What
amount of revenue should berecognized in 2014?
A. 2,800,000 C. 3,500,000
B. 2,880,000 D. 3,600,000
901. On October 20, 2014 Grimm Co. consigned forty freezers to a consignee for sale at
P10,000each and paid P80,000 in transportation cost. On December 30, 2014, the
consigneereported the sale of ten freezers and remitted P85,000. The remittance was
net of the agreed 15% commission. What amount should be recognized as consignment
sales revenue for2014?
A. 77,000 C. 98,000
B. 85,000 D. 100,000
902. On December 31, 2014, Alt Company received 505 sweaters on consignment from
aconsignor. The cost for the sweaters was P800 each and were priced to sell at P1,000.
Thecommission on consigned goods is 10%. On December 31, 2014, five sweaters
remained.On December 31, 2014, what amount should be reported as payable for
consigned goods?
A. 404,000 C. 454,000
B. 450,000 D. 490,000
903. During 2014, Super Company sold a comic strip to fantasy Company and will
receiveroyalties of 20% of future revenue associated with the comic strip. On December
31, 2014, Super reported royalties receivable of P75,000 from Fantasy. During 2015,
Super receivedroyalty payments of P200,000. Fantasy reported revenue of P1,500,000 in
from the comicstrip. What amount should Super report as royalty revenue in 2015?
A. 125,000 C.200,000
B. 175,000 D. 300,000
904. Joanna Company had a trademark that was licensed to Marie Company for royalties
of 15%of sales of the trademarked items. Royalties are payable semi-annually on March
15 forsales in July through December of the prior year, and on September 15 for sales in
Januarythrough June of the current year. The entity received royalties of p1,000,000
andP1,200,000 on March 15, 2014 and March 15, 2015, respectively. The license
estimated thatsales of the trademarked items would total P6,000,000 for July through
December 2015.What amount of royalty revenue should be reported in 2015?
A. 2,600,000 C. 3,800,000
B. 2,000,000 D. 4,100,000
905. Rill Company owns a 20% royalty interest in an oil well. The entity receives
loyaltypayments on January 31, for the oil sold between the previous June 1 and
November 30, andon July 31 for oil sold between December 1 and May 31. Production
reports show thefollowing of sales:
June 1, 2014 – November 30, 2014 300,000
December 1, 2014 – December 31, 2014 50,000
December 1, 2014 – May 31, 2015 400,000
June 1, 2015 – November 30. 2015 325,000
December 1, 2015 – December 31, 2015 70,000
What amount should be reported as royalty revenue for 2015?
A. 140,000 C. 149,000
B. 144,000 D. 159,000
906. Clark Company reported advertising expense of P146,000 on December 31, 2014
before any necessary year-end adjustment to the following:
• Included in the P146,000 is the P15,000 of printing catalogs for a sales promotional
campaign in January 2015.
• Radio advertisements broadcast during December 2014 were billed to Clark on
January 2, 2015. Clark paid the P9,000 invoice on January 11, 2015? What amount
should be reported as advertising expense for 2014?
A. 122,000 C. 140,000
B. 131,000 D. 155,000
907. Rea Company had a balance of P4,100,000 in the professional fees expense account
on December 31, 2014, before considering year-end adjustment relating to the
following:
• Consultants were hired for a special project at a total fee not to exceed P3,250,000.
The entity had recorded P2,750,000 of this fee based on billings for work performed
in 2014.
• The attorney’s letter requested by the auditors dated January 31, 2015, indicated
that legal fees of P300,000 were billed on January 15,2015 for work performed in
November 2014, and unbilled fees for December 2014 were P350,000 What amount
should be reported for professional fees expense for 2014?
A. 4,100,000 C. 4,750,000
B. 4,400,000 D. 5,250,000
908. On January 1, 2014, Gemma Company changed the inventory method from
weightedaverage to FIFO for both financial and income tax reporting resulted in a
P600,000 increasein the January 1, 2014 inventory balance. The income tax rate is 30%.
What is included inthe journal entry to effect the accounting change?
A. Debit income tax payable P180,000
B. Debit inventory P420,000
C. Credit income tax payable P180,000
D. Credit retained earnings P600,000
909. Jeric Company purchased machinery on January 1, 2014 for P6,300,000. The
entity used the sum of years’ digits method with no residual value to depreciate the
asset for the first two years of the estimated six-year life. In 2016, the entity changed to
the straight-line depreciation method. The depreciation recorded under sum of years’
digits method totaled P1,800,000 for 2014 and P1,500,000 for 2015. The depreciation
under straight-line method would have been P1,050,000 each for 2014 and 2015. The
tax rate is 30%. What is the cumulative effect of this change as an adjustment of
retained earnings on January 1, 2016?
A. 0 C. 1,200,000
B. 840,000 D.
1,530,000
910. During 2014, Patrick Company changed from the cost recovery method to the
percentage of completion method. The tax rate is 30%. Gross profit figures are as
follows:
2012 2013 2014

Cost recovery method 3,800,000 5,000,000 5,600,000
Percentage of completion method 6,400,000 7,600,000 8,400,000
How should this accounting change be reported in 2014?
A. 3,640,000 increase in profit or loss
B. 5,600,000 increase in profit or loss
C. 3,640,000 increase in retained earnings
D. 5,600,00 increase in retained earnings
911. On January 31, 2015, Air Company agreed to pay the former president P300,000
under a deferred compensation arrangement. Air should have recorded this expense in
2014 but did not do so. The income tax expense would have been P70,000 lower in 2014
had it. Properly accrued this deferred compensation. What is the adjustment of the
A. 230,000 debit C. 230,000 credit
B. 370,000 debit D. 300,000 credit
912. Rowelma Company reported the following during the year ended December 31,
2014
• It was decided to write off P1,000,000 from inventory as it was obsolete.
• Sales of P1,500,000 had been omitted from the financial statements for 2013
What amount should be reported as prior period error in the financial statements in
2014?
A. 500,000 C. 1,500,000
B. 1,000,000 D. 2,500,000
913. Greg Company reported revenue of P1,250,000 in the accrual basis income
statement for the year ended June 30, 2015.
Accounts receivable, June 30, 2014 400,
000
Accounts receivable, June 30, 2015 530,
000
Uncollectible accounts written off during the fiscal year 15, 000
Under the cash basis, what amount should be reported as revenue?
A. 835,000 C. 1,105,000
B. 850,000 D. 1,135,000
914. Czarina Company provided the following information during the first year of
operations:
Purchases on account 6,200,000
Ending inventory 2,200,000
Sales on account 5,600,000
Accounts receivable and accounts payable have ending balances at year-end of
P1,400,000and P1,200,000, respectively. Other expenses paid amounted to
P1,000,000 during the year and equipment with a 5-year useful life was purchased
for P600,000 during the year. The accounting policy is full year depreciation in the
year of purchase using a straight-line. What is the net income under cash basis of
accounting?
A. 280,000 C. 400,000
B. 340,000 D. 480,000
915. In 2015 financial statements. Cris Comapany reported interest expense of P85,000
in theincome statement and cash paid for interest of P68,000 in the statement of cash
flows. Therewas no prepaid interest or interest capitalization either at the beginning or
end of 2015.nAccrued interest on December 31, 2014 was P15,000. What amount
should be reported asaccrued interest payable on December 31, 2015?
A. 2,000 C. 17,000
B. 15,000 D. 32,000
916. Coke Company acquires patent rights from other entities. The following data are
availableat year-end:
2014 2015
Prepaid royalties 55,000 45,000
Royalties payable 80,000 75,000
During 2015, the entity remitted royalties of P300,000. What amount should be
reported as royalty expense for 2015?
A. 295,000 C. 310,000
B. 305,000 D. 330,000
917. Ina Company had the following beginning and ending balances in prepaid expense
andaccrued liabilities for the current year:
Prepaid expense Accrued
liabilities
Beginning balance 5,000
8,000
Ending balance 10,000 20,000
Debits to operating expenses totaled P100,000. What amount was paid for operating
expenses during the current year?
A. 83,000 C. 107,000
B. 93,000 D. 117,000
918. Richard Company disclosed supplemental information on the effects of changing

prices.
The entity computed the increase in current cost of inventory as follow:
Increase in current cost (nominal peso) 1,500,000
Increase in current cost (constant peso) 1,200,000
What amount should be disclosed as the inflation component of the increase in
current cost?
A. 300,000 C. 1,500,000
B. 1,200,000 D. 2,700,000
919. On December 31, 2014, Kim Company owned two assets as follows:
Equipment
Inventory
Current cost 100,000
80,000
Recoverable amount 95,000 90,000
The entity voluntarily disclosed supplementary information about current cost on
December31, 2014. In such a disclosure, what amount should be reported as total
assets?
A. 175,000 C. 185,000
B. 180,000 D. 190,000
920. On December 30, 2014 Future Company paid P2,000,000 for land. On December 31,
2014, the current value of the land was P2,000,000. In January 2015, the land was
sold forP2,250,000. Ignoring income tax, by what amount should shareholders’
equity be increased for 2014 and 2015 in current value financial statements?
A. B. C. D.
2014 0 0 200,000 200,000
2015 50,000 25,000 0 50,000
921. David Company reported the following machinery on December 31, 2014:
Cost Accumulat
ed
depreciati
on
What should be reported in a hyperinflationary statement of financial position
prepared onDecember 31, 2014 as the carrying amount of the machinery?
A. 3,200,000 C. 8,960,000
B. 7,800,000 D. 9,240,000
922. On April 1, 20X5, Kew Co. purchased new machinery for P300,000. The machinery
has an estimated useful life of five years, and depreciation is computed by the sum-
ofthe-years'-digits method. The accumulated depreciation on this machinery at
March 31,
20X7, should be
a. P192,000 c. P120,000
b. P180,000 d. P100,000
923. On December 31, 20X6, a building owned by Pine Corp. was totally destroyed by
fire. The building had fire insurance coverage up to P500,000. Other pertinent
information as of December 31, 20X6, follows:
Building, carrying amount P520,000

Building, fair market value 550,000
Removal and clean-up costs 10,000
During January 20X7, before the 20X6 financial statements were issued, Pine
received insurance proceeds of P500,000. On what amount should Pine base the
determination of its loss on involuntary conversion?
a. P520,000 c. P550,000
b. P530,000 d. P560,000
924. Cole Co. began constructing a building for its own use in January 20X4. During
20X4, Cole incurred interest of P50,000 on specific construction debt, and P20,000
on other borrowings. Interest computed on the weighted-average amount of
accumulated expenditures for the building during 20X4 was P40,000. What amount
of interest cost should Cole capitalize?
a. P20,000. c. P50,000.
b. P40,000. d. P70,000.
925. Clay Company started construction of a new office building on January 1, 20X4, and
moved into the finished building on July 1, 20X5. Of the building's P2,500,000 total
cost, P2,000,000 was incurred in 20X4 evenly throughout the year. Clay's
incremental borrowing rate was 12% throughout 20X4, and the total amount of
interest incurred by Clay during 20X4 was P102,000. What amount should Clay
report as capitalized interest at December 31, 20X4?
a. P102,000 c. P150,0
b. P120,000 00
d. P240,0
00
926. During 20X6, Belardo Corporation constructed and manufactured certain assets,
and incurred the following interest costs in connection with those activities:
Interest costs incurred on warehouse constructed for

Belardo's own use P20,000
Special-order machine for sale to unrelated customer,
produced according to customer's specifications 9,000
Inventories routinely manufactured, produced on a
repetitive basis 7,000
All of these assets required an extended period of time for completion. Assuming
the effect of interest capitalization is material, what is the total amount of interest
costs to be capitalized?
a. P0. c. P29,000.
b. P20,000. d. P36,000.
927. On June 27, 20X6, Brite Co. distributed to its common stockholders 100,000
outstanding common shares of its investment in Quik, Inc., an unrelated party. The
carrying amount on Brite’s books of Quik’s P1 par common stock was P2 per share,
equal to fair value. On distribution date, the market price of Quik’s stock was P2.50
per share. In its income statement for the year ended June 30, 20X6, what amount
should Brite report as gain on disposal of the stock?
a. P250,000 c. P50,000
b. P200,000 d. P0
928. Caine Motor Sales Exchanged a car from its inventory for a computer to be used as
a long-term asset. The following information relates to this exchange that took
place on July 31, 20X5:
Carrying amount of the car P30,000
Listed selling price of the car 45,000
Fair value of the computer 43,000 Cash difference paid by Caine
5,000
Caine states that there will be a significant change in cash flows as a result of this
transaction. On July 31, 20X5, what amount of profit should Caine recognize on this
exchange?
a. P0 b. P8,000
c. P10,000 d. P13,000
929. On December 30, 20X5, Diamond Company traded in an old machine with a book
value of P10,000 for a similar new machine having a list price of P32,000, and paid
a cash difference of P19,000. Diamond does not think there will be a significant
change in cash flows as a result of this transaction. Diamond should record the new
machine at:
a. P32,000 b. P29,000 c. P22,000
d. P19,000
930. The Gunther Company acquired a tract of land containing an extractable natural
resource. Gunther is required by its purchase contract to restore the land to a
condition suitable for recreational use after it has extracted the natural resource.
Geological surveys estimate that the recoverable reserves will be 4,000,000 tons,
and that the land will have a value of P1,000,000 after restoration. Relevant cost
information follows:
Land P9,000,000
Estimated restoration costs (at present value) 1,200,000
If Gunther maintains no inventories of extracted material, what should be the charge

to depletion expense per ton of extracted material?
a. P2.00. c. P2.30.
b. P2.25. d. P2.55.
931. During 20X5, Jase Co. incurred research and development costs of P136,000 in its
laboratories relating to a patent that was granted on July 1, 20X5. Costs of
registering the patent equaled P34,000. The patent's legal life is 17 years, and its
estimated economic life is 10 years. In its December 31, 20X5, balance sheet, what
amount should Jase report as patent, net of accumulated amortization?
a. P 32,300 c. P161,500
b. P 33,000 d. P165,000
932. On December 31, 20X7, Bit Co. had capitalized costs for a new computer software
product with an economic life of five years. Sales for 20X8 were 30 percent of
expected total sales of the software. At December 31, 20X8, the software had a
recoverable amount equal to 90 percent of the capitalized cost. What percentage of
the original capitalized cost should be reported as the net amount on Bit’s December
31, 20X8, balance sheet?
a. 70% c. 80%
b. 72% d. 90%
933. Cody Corp. incurred the following costs during 20X6:

Design of tools, jigs, molds and dies involving new technology P125,0
00
Modification of the formulation of a process 160,0
Trouble-shooting in connection with breakdowns during 00
commercial production 100,0
Adaptation of an existing capability to a particular 00
customer's need as part of a continuing commercial activity 110,0
00
In its 20X6 income statement, Cody should report research and development
expense of
a. P125,000 c. P235,000
b. P160,000 d. P285,000
934. Brill Co. made the following expenditures during 20X5:

Costs to develop computer software for internal use in Brill's
general management information system
P100,000
Costs of market research activities 75,000
What amount of these expenditures should Brill report in its 20X5 income statement
as research and development expenses?
a. P175,000. c. P75,000.
b. P100,000. d. P0.
935. Miller Co. incurred the following computer software costs for the development and
sale of software programs during the current year:
Planning costs P
50,000
Design of the software 150,0
00
Substantial testing of the project’s initial stages 75,00
0
Production and packaging costs for the first month’s sales 500,0
Costs of producing product masters after technology 00
feasibility was established 200,0
00
The project was not under any contractual arrangement when these expenditures
were incurred. What amount should Miller report as research and development
expense for the current year?
a. P200,000 c. P500,000
b. P275,000 d. P975,000
936. On March 1, 20X4, Fine Co. borrowed P10,000 and signed a two-year note bearing
interest at 12% per annum compounded annually. Interest is payable in full at
maturity on February 28, 20X6. What amount should Fine report as a liability for
accrued interest at December 31, 20X5?
a. P0 b. P1,000 c.
P1,200 d. P2,320
937. Black Co. requires advance payments with special orders for machinery
constructed to customer specifications. These advances are nonrefundable.
Information for 2020 is as follows:
Customer advances-balance 12/31/19 P 118,000

Advances received with orders in 2020 184,000
Advances applied to orders shipped in 2020 164,000
Advances applicable to orders canceled in 2020 50,000
In Black's December 31, 2020, balance sheet, what amount should be reported as a
current liability for advances from customer?
a. P0 c. P138,000
b. P 88,000 d. P148,000
938. During 2019, Lake Co. issued 3,000 of its 9%, P1,000 face value bonds at 101½. In
connection with the sale of these bonds, Lake paid the following expenses:
Promotion costs P 20,000
Engraving and printing 25,000
Underwriters’ commissions 200,000
What amount should Lake record as bond issue costs to be amortized over the term
of the bonds?
a. P0 c. P225,000
b. P220,000 d. P245,00
939. On January 2, 2021, West Co. issued 9% bonds in the amount of P500,000, which
mature on January 2, 2011. The bonds were issued for P469,500 to yield 10%.
Interest is payable annually on December 31. West uses the interest method of
amortizing bond discount. In its June 30, 2021, balance sheet, what amount should
West report as bonds payable?
a. P469,500 c. P471,025
b. P470,475 d. P500,000
940. Gavin Co. grants all employees two weeks of paid vacation for each full year of
employment. Unused vacation time can be accumulated and carried forward to
succeeding years and will be paid at the salaries in effect when vacations are taken
or when employment is terminated. There was no employee turnover in 20X6.
Additional information relating to the year ended December 31, 20X6, is as follows:
Liability for accumulated vacations at 12/31/X5 P35,000

Pre-20X6 accrued vacations taken from 1/1/X6 to
9/30/X6 (the authorized period for vacations) 20,000
Vacations earned for work in 20X6 (adjusted to current rates) 30,000
Gavin granted a 10% salary increase to all employees on October 1, 20X6, its annual
salary increase date. For the year ended December 31, 20X6, Gavin should report
vacation pay expense of
a. P45,000 c. P31,500
b. P33,500 d. P30,000
941. The following information pertains to Rik Co.’s two employees:

Name Weekly salary Number of weeks Vacation rights vest
worked in 20X6 or accumulate
Ryan P800 52 Yes
Todd 600 52 No
Neither Ryan nor Todd took the usual two-week vacation in 20X6. In Rik’s December
31, 20X6, financial statements, what amount of vacation expense and liability
should be reported?
a. P2,800 c. P1,400
b. P1,600 d. P0
942. Fay Corp. pays its outside salespersons fixed monthly salaries and commissions on
net sales. Sales commissions are computed and paid on a monthly basis (in the
month following the month of sale), and the fixed salaries are treated as advances
against commissions. However, if the fixed salaries for salespersons exceed their
sales commissions earned for a month, such excess is not charged back to them.
Pertinent data for the month of March 20X5 for the three salespersons are as
follows:
Salesperson Fixed salary Net sales Commission rate
A P10,000 P 200,000 4%
B 14,000 400,000 6%
C 18,000 600,000 6%
Totals P42,000 P1,200,000
What amount should Fay accrue for sales commissions payable at March 31, 20X5?
a. P70,000 c. P28,000
b. P68,000 d. P26,000
943. Scott Corp. received cash of P20,000 that was included in revenues in its 2019
financial statements of which P12,000 will not be taxable until 2020.Scott's enacted
tax rate is 30% for 2019, and 25% for 2020. What amount should Scott report in its
2019 balance sheet for deferred income tax liability?
a. P2,000 c. P2,400
b. P3,000 d. P3,600
944. For the year ended December 31, 2021, Tyre Co. Reported pretax financial
statement income ofP750,000. Its taxable income was P650,000. The difference is
due to accelerated depreciation for income tax purposes. Tyre's effective income
tax rate is 30%, and Tyre made estimated tax payments during 2021 of P90,000.
What amount should Tyre report as current income tax expense for 2021?
a. P105,000 c. P195,000
b. P135,000 d. P225,000
945. Pine Corp.'s books showed pretax income ofP800,000 for the year ended
December 31, 2016. In the computation of federal income taxes, the following data
were considered:
Gain on an involuntary conversion (Pine has elected to
replace the property withi the statutory period using total proceeds.) P350,000
Depreciation deducted for tax purposes in excess of
depreciation deducted for book purposes 50,000
• Tax payments, 2016
70,000
• Tax rate, 2016
30%
What amount should Pine report as its current income tax liability on its December
31, 2016,balance sheet?
a. P50,000 c. P120,000
b. P65,000 d. P135,000
946. On December 30, 2015, Haber Co. leased a new machine from Gregg Corp. The
following data relate to the lease transaction at the inception of the lease:
• Lease term 10 years
• Annual rental payable at the end of each lease year P100,000
• Useful life of machine 12 years
• Implicit interest rate 10%
• Fair value of the machine P700,000
The lease has no renewal option, and the possession of the machine reverts to
Gregg when the lease terminates. At the inception of the lease, Haber should record
a lease liability of
a. P0 c. P630,000
b. P615,000 d. P676,000
947. Jay & Kay partnership’s balance sheet at December 31, 2016, reported the
following:
Total assets P 100,000
Total liabilities 20,000
Jay, capital 40,000
Kay, capital 40,000
On January 2, 2019, Jay and Kay dissolved their partnership and transferred all
assets and liabilities to a newly-formed corporation. At the date of incorporation,
the fair value of the net assets was P12,000 more than the carrying amount on the
partnership’s books, of which P7,000 was assigned to tangible assets and P5,000
was assigned to goodwill. Jay and Kay were each issued 5,000 shares of the
corporation’s P1 par value common stock. Immediately following incorporation,
additional paid-in capital in excess of par should be credited for
a. P68,000 c. P77,000
b. P70,000 d. P82,000
948. Georgia, Inc. has an authorized capital of 1,000 shares of P100 par, 8% cumulative
preferred stock and 100,000 shares of P10 par common stock. The equity account
balances at December 31, 2018, are as follows:
Cumulative preferred stock P 50,000
Common stock 90,000
Additional paid-in capital 9,000
Treasury stock, common – 100 shares at cost (2,000)
P160,000
Dividends on preferred stock are in arrears for the year 2018. The book value of a
share of common stock, at December 31, 2018, should be
a. P11.78 b. P11.91
c. P12.22 d. P12.36
949. Rand, Inc., had 20,000 shares of common stock outstanding at January 1, 2018.
On May 1, 2018, it issued 10,500 shares of common stock. Outstanding all year were
10,000 shares of nonconvertible preferred stock on which a dividend of P4 per share was
paid in December 2018. Net income for 2018 was P96,700. Rand's basic earnings per
share for2018 are
a. P1.86 c. P2.84
b. P2.10 d. P3.58
950. At December 31, 2019 and 2018, Gow Corp. had 100,000 shares of common
stock and 10,000 shares of 5%, P100 par value cumulative preferred stock outstanding.
No dividends were declared on either the preferred or common stock in 2019 or 2018.
Net income for 2019 was P1,000,000. For 2019, basic earnings per common share
amounted to
a. P10.00 c. P9.00
b. P9.50 d. P5.00
951. During 2019, Moore Corp. had the following two classes of stock issued and
outstanding for the entire year.
• 100,000 shares of common stock, P1 par.
• 1,000 shares of 4% preferred stock, P100 par, convertible share for share into
common stock.
Moore's 2019 net income was P900,000, and its income tax rate for the year was
30%. In the computation of diluted earnings per share for 2019,the amount to be
used in the numerator is
a. P896,000 c. P900,000
b. P898,800 d. P901,200
952. Rowelma Company reported the following during the year ended December 31,
2017
• It was decided to write off P1,000,000 from inventory as it was obsolete.
• Sales of P1,500,000 had been omitted from the financial statements for 2016
What amount should be reported as prior period error in the financial statements in
2014?
a. 500,000 c. 1,000,000
b. 1,500,000 d. 2,500,000
953. John Company measured inventory at LCNRV. The entity provided the following
information regarding inventory:
Historical cost 5,000,000
Estimated selling price 4,500,000
Expected selling price 4,700,000
Cost to complete and sell 250,000
Replacement cost 4,000,000
What amount should be reported as inventory at LCNRV?
A. 4,250,000 C. 4,450,000
B. 4,000,000 D. 5,000,000
954. Jeric Company purchased machinery on January 1, 2014 for P6,300,000. The
entity used the sum of years’ digits method with no residual value to depreciate the
asset for the first two years of the estimated six-year life. In 2016, the entity changed to
the straight-line depreciation method. The depreciation recorded under sum of years’
digits method totaled P1,800,000 for 2014 and P1,500,000 for 2015. The depreciation
under straight-line method would have been P1,050,000 each for 2014 and 2015. The
tax rate is 30%. What is the cumulative effect of this change as an adjustment of
a. 0 c. c. 840,000
b. b. 1,200,000 d. d. 1,530,000
955. On December 31, 2014, Erica Company experienced a decline in the value of
inventory resulting in a write-down from P2,400,000 to P2,000,000. The entity used the
loss method in 2014 to record the necessary adjustment. In 2015, market conditions
have improved dramatically. On December 31, 2015. The inventory had a cost of P3,
000,000 and NRV of P3,500,000. Cost of goods sold before LCNRV measurement for
2015 was P5, 600,000. What amount of cost of goods sold should be reported for 2015?
A. 5,100,000 C. 5,600,000
B. 5,200,000 D. 6,000,000
956. Rea Company had a balance of P4,100,000 in the professional fees expense account
on December 31, 2014, before considering year-end adjustment relating to the
following:
• Consultants were hired for a special project at a total fee not to exceed P3,250,000.
The entity had recorded P2,750,000 of this fee based on billings for work performed
in 2014.
• The attorney’s letter requested by the auditors dated January 31, 2015, indicated
that legal fees of P300,000 were billed on January 15,2015 for work performed in
November 2014, and unbilled fees for December 2014 were P350,000
What amount should be reported for professional fees expense for 2014?
a. 4,100,000 c. 4,400,000
b. 4,750,000 d. 5,250,000
957. On January 1, 2014, Dannielle Company signed a three year, noncancelable

purchase contract, which allows the entity to purchase up to 50,000 units of a
computer part annually at P100 per unit and guarantees a minimum annual
purchase of 10,000 units. During 2014, the part unexpectedly becomes obsolete.
The entity had 25,000 units of this inventory on December 31, 2014, and believed
these parts can be sold as scrap for P20 per unit. What amount of loss from the
purchase commitment should be reported in 2014?
A. 1,600,000 C. 2,400,000
B. 2,000,000 D. 3,600,000
958. Hoyt Company reported the following shareholders equity:

5% cumulative preference shares, par value P100,
2,500 shares issued and outstanding 250,000
Ordinary shares, par value P3.50, 100,000 shares issued and outstanding 350,000
Dividends in arrears on the preference shares amount to P25,000. If the entity were
to beliquidated, the preference shareholders would receive par value plus a
premium of P50,000. What is the book value per ordinary share?
a. 7.00 c. c. 7.25
b. b. 7.50 d. d. 7.75
959. Drew Company used the average cost inventory method for inventory reporting
purposes and LIFO for financial statement and income tax reporting. On December
31, 2014, the inventory was P375, 000 using average cost and P320, 000 using LIFO.
The unadjusted credit balance in the LIFO Reverse account on December 31, 2014
was P35, 000. What adjusting entry should be recorded to adjust from average cost
to LIFO on December 31, 2014?
A. Cost of goods sold 55,000
Inventory 55,000
B. Cost of goods sold 55,000
LIFO reserve 55,000
C. Cost of goods sold 20,000
Inventory 20,000
D. Cost of goods sold 20,000
LIFO reserve 20,000
960. Karen Company provided the following data for the year ended December 31,
2014:
Retained earnings unappropriated, January 1 200,000
Over-depreciation of 2013 due to prior period error 100,000
Net income for 2014 1,300,000
Retained earnings appropriated for treasury shares (original balance is
P500,000 but reduced by P200,000 by reason
of reissuance of the treasury shares) 300,000
Retained earnings appropriated for contingencies (beginning
Balance P700,000, but increased by current appropriation of P100,000) 800,000
Cash dividends paid to shareholders 500,000
Change in accounting policy from FIFO to average-credit adjustment 150,000
What is the balance of unappropriated retained earnings on December 31, 2014?

a. 1,150,000 c. 1,350,000
b. 1,750,000 d. 1,950.000
961. Faith Company produces milk for sale to local and national ice cream produces. The
entity began operation on January 1, 2014 by purchasing 650 milk cows for P8, 000,000.
The entity had the following information available at year-end relating to the cows:
Acquisition cost, January 1, 2014 8,000,000
Change in fair value due to growth and price changes 2,500,000
What amount of gain on change in fair value should be recognized for biological
asset in 2014?
A. 2,250,000 C. 2,650,000
B. 2,500,000 D. 2,900,000
962. Rudd Company had 700,000 ordinary shares authorized and 300,000 shares
outstanding onDecember 31, 2014. The following events occurred during 2015:
January 31 Declared 10% stock dividend
August 1 Reissued 50,000
November 30 Declared 2-for-1 stock split
On December 31, 2015, how many ordinary shares are outstanding?
a. 560,000 c. c. 600,000
b. b. 630,000 d. d. 660,000
963. Mars Company is engaged in dairy livestock and provided the following for
current year:
Carrying amount of biological assets on January 1 5,000,000
Increase due to purchase 2,000,000
Gain attributable to price change of biological assets 1,000,000
Gain attributable to physical change of biological asset 600,000
Milk produced during the year but unsold at year-end 100,000
What is the carrying amount of biological asset at year-end?
A. 8,000,000 C. 8,600,000
B. 8,100,000 D. 8,700,000
964. On January 1,2014, Mae Company issued to employees 10,000 restricted shares.
On January 1, 2015, the entity issued to employees an additional 20,000 restricted
shares.
Date Fair value of share

January 1, 2014 20
January 1, 2015 25
The shares vest at the end of a four-year period. There are no forfeitures. What
amount should be recorded as compensation expense for 2015?
a. 175,000 c. 205,000
b. 225,000 d. 500,000
965. On March 5, 2014, Ashe Company adopted a plan to accumulate P1, 000,000 by
September 1, 2018. The entity plans to make four equal annual deposits to a fund that
will earn interest at 10% compounded annually. The entity made the first deposit on
September 1, 2014.
Future amount of ordinary annuity of 1 at 10% for four periods 4.64
Future amount of annuity in advance of 1 at 10% for four periods 5.11
What is the annual deposit to the fund (rounded)?

A. 146,000 C. 215,500
B. 195,700 D. 250,000
966. Tower Company began operations on January 1, 2014. For financial reporting the
entity recognized revenue from all sales under accrual. However, in the income tax
return, the entity reported under the installment method. The gross profit on these
installment sales under each method was as follows:

2014 1,600,000 600,000
2015 2,600,000 1,400,000__________
The income tax rate is 30% for 2014 and future years. There are no other temporary
or permanent differences. On December 31, 2015, what amount should be reported
as deferred tax liability?
a. 360,000 c. 600,000
b. 660,000 d. 840,000
967. On July 1, 2014, Blass Company exchanged a truck for 25,000 shares of Ace
Company. On that date, the truck’s carrying amount was P2, 500,000, and the fair value
was P3, 000,000. Also, the book value of Ace’s share was P60. On December 31, 2014,
Ace had 250,000 shares outstanding and the book value for share was P50. What
amount should Blass report on December 31, 2014 as investment in Ace?
A. 1,250,000 C. 2,500,000
B. 1,500,000 D. 3,000,000
968. Orlando Company issued 8,000 convertible preference shares with P 100 par
value at P105 per share.
One preference share can be converted into three ordinary shares with P25 par value at
the option of the shareholders.
Subsequently, all the preference shares were converted into ordinary shares. The
market value of the ordinary share on the date of conversion was P30.
What amount should be credited to share premium as a result of the issuance of the
preference shares and the subsequent conversion into ordinary shares?
a. 120,000 c. 200,000
b. 240,000 d. 80,000
969. On December 31, 2014, Alvin Company had a P4,950,000 balance in the advertising
expense account before any year-end adjustments.
• Radio and television advertising spots broadcast during December 2014 were billed
to Alvin on January 4, 2015. The invoice cost of P250,000 was paid on January 15,
2015.
• Included in the P4,950 is P300,000 for newspaper advertising for a January 2015
sales promotional campaign.
What amount should be reported as advertising expense for 2012?
A. 4,650,000 C. 5,000,000
B. 4,900,000 D. 5,200,000
970. In October 20X6 Allen Company exchanged a used packaging machine, having a
book value of P120,000, for a dissimilar new machine and paid a cash difference of
P15,000. The market value of the used packaging machine was determined to
beP140,000. Assume that the transaction has commercial substance. In its income
statement for the year ended December 31, 20X6, how much gain should Allen
recognize on this exchange?
a. P0
b. P5,000
c. P15,000
d. P20,000
First National Bank of Micanopy has offered you the following loan alternatives in
response to your request for a P75,000, 1-year loan.
Alternative 1: 7 percent discount interest, with a 10 percent
compensating balance.
Alternative 2: 8 percent simple interest, with interest paid monthly.
971. What is the effective annual rate on the cheaper loan?

a. 7.23% c. 7.67%
b. 8.30% d. 8.43%
The following information pertains to Galileo Company:

Sales (all account) made evenly throughout 2005 P
220,000
Equipment purchased for cash on May 1, 2005 50,000
Purchases (all account) made evenly throughout 2005 80,000
Cash received evenly throughout 2005 from customers on account 190,000
Cash dividends declared on September 1, 2005 and paid on October 1, 2005
Land acquired for cash on June 1, 2005 30,000
Depreciation expense for 2005 10,000
Ordinary shares issued for cash on March 1, 2005 60,000
Operating expenses paid evenly throughout 2005 40,000
Income tax expense paid evenly throughout 2005 25,000
Purchase of treasury shares for cash on Nov. 1, 2005 17,000
Sale of investment in ordinary shares on August 1, 2005 for cash
(cost = P5,000; selling price = P8,000) 8,000
Cash paid evenly throughout 2005 on accounts payable 60,000
Monetary assets
January 1, 2005 25,000
December 31, 2005 71,000
Monetary liabilities
January 1, 2005 10,000
December 31, 2005 30,000
The following values of the CPI-U for 2005 are available:
1/1 100 8/1 114

2/1 102 9/1 116
3/1 104 10/1 118
4/1 106 11/1 120
5/1 108 12/1 122
6/1 110 12/31 124
7/1 112 Average for the year 112
972. The purchasing power gain (loss) for 2005 in end-of-year pesos is
a. (1,000) c. 10,000
b. (10,704) d. 10,704
973. Moore Securities recently issued 30-year bonds with a 7 percent annual coupon at
par (P1,000). The bonds also had 20 warrants attached. If Moore were to issue
straight debt, the interest rate would be 9 percent. What is the value of each
warrant?
a. P 5.00 b. P 7.96
c. P18.00 d. P10.27
974. Deep River Power Corporation recently sold an issue of preferred stock that had an
after-tax yield of 9.6 percent. The company’s new bonds recently sold at par with
an aftertax yield of 8.1 percent. Both issues were placed primarily with corporate
investors in the 40 percent tax bracket. Given that the preferred stock enjoys a 70
percent dividend tax exclusion for corporate investors, what was the percentage
point difference in the beforetax yields between the two issues to corporate
investors?
a. 1.50% c. 1.20%
b. 2.59% d. 2.81%
975. You have just taken out a loan for P75,000. The stated (simple) interest rate on this
loan is 10 percent, and the bank requires you to maintain a compensating balance
equal to 15 percent of the initial face amount of the loan. You currently have
P20,000 in your checking account, and you plan to maintain this balance. The loan
is an add-on installment loan that you will repay in 12 equal monthly installments,
beginning at the end of the first month. How large are your monthly payments?
a.P6,250 c. P7,500
b. P5,250 d. P6,875
976. What is the nominal annual add-on interest rate on this loan?
a. 16.47% c. 18.83%
b. 20.00% d. 24.00%
977. The Marfak Company provides services service contacts to customers for
maintenance of their electrical systems. On 1 October 20X8 it agrees a four year
contract with a major customer for CY 154,000. Cost over the period of the
contract are reliably estimated at CU51,333. UNDER ias18 Revenue, How much
should the company recognize in profit or loss in the year ended 31 December
20X8:
a. CU9625 c. CU3,208
b. CU38,500 d. CU165,000
978. Johnson Beverage’s common stock sells for P27.83, pays a dividend of P2.10, and
has an expected long-term growth rate of 6 percent. The firm’s straight- debt
bonds pay 10.8 percent. Johnson is planning a convertible bond issue. The bonds
will have a 20-year maturity, pay P100 interest annually, have a par value of
P1,000, and a conversion ratio of 25 shares per bond. The bonds will sell for P1,000
and will be callable after 10 years. Assuming that the bonds will be converted at
Year 10, when they become callable, what will be the expected return on the
convertible when it is issued?
a. 10.80% b. 11.44% c.
12.16% d. 14.00%
979. Dream Fashions recently sold bonds with warrants to finance its expansion into the
retail market, and to support its new spring fashion line. The warrants each had an
implied value at issue of P7.40, and 35 warrants were issued with each P1,000 par
value bond. The bonds were sold for P1,000 each, have 10 years to maturity, and
pay P40 semiannual coupon interest. What was the yield to maturity on the bonds
when they were issued?
a. 8.00% c. 10.18%
b. 12.50% d. 12.63%
P Co. has the following information from its comparative financial statements.
20x2 20x1
Trade account receivable from service revenues 6,000,000 4,800,000
Prepaid insurance 480,000 400,000
Building - net of accumulated depreciation 36,000,000 38,000,000
Estimated liability for warranty obligation 1,200,000 1,120,000
980.P recognizes revenues from service fees as services are rendered but are taxed only
when cash is collected. Total collections in 20x2 amounted to P3,200,000. The
prepaid insurance account pertains to the unexpired portion of life insurance
premiums taken on the life of key personnel. P is the irrevocable beneficiary of the
insurance policy. Total premiums paid in 20x2 were P200,000. The building was
acquired on January 1, 20x1 and is depreciated over an estimated useful life of 20
years with no residual value. The straight line method of depreciation is used for
financial reporting while the double declining balance method is used for taxation.
Warranty expense is recognized at the time goods are sold but are tax deductible
only when actually paid. Tax deductible warranty expense for 20x2 amounted to
P160,000. Pretax income in 20x2 is P4,000,000. Income tax rate is 30%. How much
is the current tax expense for 20x2?
a. 236,000 c. 420,000
b. 479,000 d. 880,000
981.Wentworth Greenery harvests its crop four times annually and receives payment 90
days after it is picked and shipped. However, the firm must plant, irrigate, and
harvest on a near continual schedule. The firm uses 90-day bank notes to finance its
operations. The firm arranges an 11 percent discount interest loan with a 20
percent compensating balance four times annually. What is the effective annual
interest rate of these discount loans?
a. 11.00% c. 11.46%
b. 13.75% d. 15.94%
982.On January 1, 2005, E Company granted 5,000 share options with a ten-year life to
each of 10 executives. The share option will vest and become exercisable
immediately if and when the company’s share price increases from P50 to P70 and
provided that the executives remain in service until the share price target is
achieved. The company applies a binomial option model, which takes into account
the possibility that the share price will be achieved during the ten-year life of the
options and the possibility that the target share price will not be achieved. The
company estimates that the fair value of the options at grant date is P25 per option.
From the option-pricing model, the company determines that the mode of the
distribution of possible vesting dates is five years. The most likely outcome of the
market condition is that the share price target will be achieved at end of 2009.
Therefore, E Company estimates that the expected vesting period is five years. E
Company also estimates that 2 executives will have left by the end of 2009 and
therefore expects that 40,000 share options will vest at the end of 2009.
Throughout 2005 to 2008, E Company continues to estimate that a total of two
executives will leave be the end of 2009. However, in total, three executives had
left, one each in 2007, 2008 and 2009. Another executive left in 2010 before the
share price target is achieved. What amount of remuneration expense should the
company recognize in its December 31, 2009 income statement?
a. 75,000 c. 150,000
b. 85,000 d. 120,000
983.Suppose you borrow P2,000 from a bank for one year at a stated annual interest
rate of 14 percent, with interest prepaid (a discounted loan). Also, assume that the
bank requires you to maintain a compensating balance equal to 20 percent of the
initial loan value. What effective annual interest rate are you being charged?
a. 14.00% c. 16.28%
b. 21.21% d. 28.00%
984.The govern Company acquired a financial asset as its market value of P320,000.
Brokers fees of P20,000 were incurred in relation to the purchase.
In accordance with IAS39 Financial instruments: recognition and measurement at
what amount should the financial asset initially be recognized if it is classified as at
fair value through profit or loss, or as available for sale ?
A. P340,000 and P320,000 C. P320,000 and P340,000
B. P320,000 and P320,000 D. P340,000 and P340,000
985.A firm needs P5 million of new long-term financing. The firm is considering the sale
of common stock or a convertible bond. The current market price of the common
stock is P65 per share. To sell this new issue, the stock would have to be
underpriced by P2 and sold for P63 per share. The firm currently has 600,000 shares
of common stock outstanding. The alternative is to issue 20-year, 10 percent, and
P1,000 par-value convertible bonds. The conversion price would be set at P73 per
share, and the bond could be sold at par. The earnings for the firm are expected to
be P4,000,000 in the coming year. Assuming the firm chooses the convertible bond,
the earnings per share after all bonds are converted will be?
a. P6.67 b. P5.98 c. P5.91 d.
P5.88
986.The rattan Company purchases P2,000,000 of bonds. The asset has been designated
as one at fair value through profit and loss. One year later, 10% of the bonds are
sold for P400,000. Total cumulative gains previously recognized in Rattan’s financial
statements in respect of the asset are P100,000. In accordance with IAS39
Financial instruments: recognition and measurement, what is the amount of the
gain disposal to be recognized in profit or loss ?
A. P90,000 B. P100,000 C. P190,000 D. P200,000
987.The Winston Company has a policy of using non-current assets until they can no
longer be operated and are worthless. On 1 January 2017 it acquired an item of
plant and machinery for P1,000,000. It is being depreciated over 10 years on a
straight-line basis. For tax purposes there is an allowance of 20% per annum on a
reducing balance basis. There are two rates of tax: 15% on trading profits and 25%
on gains on disposals. What deferred tax balance should Winston recognize at 31
December 2017, according to IAS12 Income taxes ?
a. Deferred tax asset of P15,000 c. Deferred tax liability of P15,000
b. Deferred tax asset of P25,000 d. Deferred tax liability of P25,000
989. Vogril Company issued 20-year, zero coupon bonds with an expected yield to
maturity of 9 percent. The bonds have a par value of P1,000 and were sold for
P178.43 each. What is the expected interest expense on these bonds for Year 8?
a. P29.35 b. P32.00 c. P90.00 d. P26.12
990. On January 1, 2012, Zheng Corporation will issue new bonds to finance its
expansion plans. In its efforts to price the issue, Zheng Corporation has identified a
company of similar risk with an outstanding bond issue that has an 8 percent
coupon rate that is due January 1, 2017. This firm’s bonds currently are selling for
P1,091.96. If interest is paid semiannually for both bonds, what must the coupon
rate of the new bonds be in order for the issue to sell at par?
a. 5.75% b. 6.00% c. 6.50% d. 7.00%
991. The Radiant Company purchases P2,000,000 of bonds for P1,800,000. The asset
has been designated as one at fair value through other comprehensive income.
One year later, 10% of the bonds are sold for P300,000. At the amortized cost of
the instrument was P1,850,000. Total cumulative gains previously recognized in
Radiant’s financial statements in respect of the asset are P200,000. In accordance
with IAS39 Financial instruments: recognition and measurement, what is the
amount of the gain on disposal to be recognized in profit or loss ?
A. P95,000 B. P100,000 C. P115,000 D. P120,000
992. An investor is considering buying 500 shares of ABC Company at P32 per share.
Analysts agree that the firm’s stock price may increase to P45 per share in the next
four months. As an alternative, the investor could purchase a 120-day call option
at a striking price of P30 for P5,000. What profit would the investor realize if the
stock price increased to P42 per share?
a. P0 b. P1,000 c. P4,000 d. P6,000
993. X Company manufactures agricultural chemicals is required to have the protective

lining of its chemical processing plant inspected for corrosion at six-month
intervals. If an inspection reveals damage to the lining the entity is required to
replace the lining immediately. Experience has shown that linings require
replacement, on average, every four years. The entity depreciates linings on the
straight-line basis over their estimated four year useful life to a nil residual value.
The other parts of the plant are depreciated on the straight-line basis over their
estimated 20 year useful life. At the beginning of the current period an inspection
revealed that a three year old lining with a carrying amount of P150,000 was
damaged. The lining was immediately replaced at a cost of P450,000. What
amount should the company recognize in the profit or loss at the end of the
current year related to the replacement ?
a. None b. P150,000 c. P262,500 d. P300,000
994. A warrant is attached to a P1,000 par, 10 percent, 10-year bond, paying annual
interest and having 20 warrants attached for the purchase of the firm’s stock. The
bonds were initially sold for P1,200. When issued, similar risk, straight bonds were
selling at a
14 percent rate of return. The implied price of the warrant is
a. P10.40. b. P20.40. c. P10.00. d. P20.00.
995. Karlson Company purchased a melting oven for P8,000,000. It arrived at the
factory on May 1, 2017 and was installed and ready for use on July 1, 2017. The
company estimated that the oven can be used to produce 20 million units, and
therefore decided to depreciate the oven based on the amount of units
produced. It is expected to take 20 years to produce the 20 million units. The
lining of the oven needs to be replaced every two years and P2,000,000 of the
purchase price can be attributed to the lining based on advice from engineers. On
July 1, 2017 the company also had major inspection done by specialist that cost
P200,000. These inspections are required (by law) initially and every five years
thereafter. The oven started operating on September 1, 2017. By December 31,
2017 the company has produced 100,000 units. What total amount of
depreciation should the company recognized on December 31, 2017 ?
a. P40,000 b. P500,000 c. P530,000 d. P550,000
996. Creep Company purchased 100 beef cattle at an auction for P800,000 on July 1,
2010. Transportation costs were P8,000. Creep Company would have to incur the
same transportation costs if it had sold its cattle in the auction. In addition there
would be a 2% auctioneer’s fee on the market price of the cattle payable by the
seller. Creep Company also incurred P4,000 veterinary expenses. On December
31, 2010 the fair value of the cattle in the most relevant market increases to
P880,000. On May 2, 2011, Creep Company sold 18 cattle at auction for P160,000
and incurred transportation charges of P1,200. On June 15, 2011, the fair value of
the remaining cattle was P662,560 but on the same day, 42 cattle were
slaughtered with total cost of P33,600. The fair value of the carcasses is P3,360.
No other selling costs are expected. On June 30, 2011, the fair value of the
remaining 40 cattle was P358,400. The estimated transportation cost is
P3,200.What amount of gain as a result in the change in value of biological asset
to be reported in the statement of comprehensive income for the year ended
December 31, 2010 ?
a. None b. P78,400 c. P80,000 d. P96,000
997. Wolfpack Multimedia follows a strict residual dividend policy. Wolfpack forecasts
that its net income will be P12 million this year. The company has no
depreciation expense so its net cash flow is P12 million, and its target capital
structure consists of 70 percent equity and 30 percent debt. Wolfpack’s capital
budget is P10 million. What is the company’s dividend payout ratio?
a. 11.67% b. 16.67% c. 41.67% d. 58.30%
998. Nico bought 100 shares of Cisco Systems stock for P24.00 per share on January 1,
2002. He received a dividend of P2.00 per share at the end of 2002 and P3.00 per
share at the end of 2003. At the end of 2004, Nico collected a dividend of P4.00
per share and sold his stock for P18.00 per share. What was Nico’s realized return
during the three year holding period? What was Nico’s compound annual rate of
return?
a. –12.5%; –4.4%
b. –16.7%; –4.4%
999. Tangshan Mining Company has an outstanding issue of convertible bonds with a
P1,000 par value. The bonds have a 10 percent coupon rate, have a 10-year
maturity, and are convertible into 100 shares of common stock. The yield to
maturity on bonds of similar risk is 10 percent and the market price of the firm’s
common stock is currently P15.00. Based on this information, the conversion
value of the bond is
a. P1,000.00. b. P1,500.00. c. P750.00. . none of the above.
1000. Justine Company leases an entire shopping complex in Manila from Jasmine
Company under a 20-year operating lease. Under the lease agreement Justine
Company would manage and take the risks of operating the shopping complex for
twenty years. It pays a yearly rental of P40,000,000 to Jasmine Company. Justine
Company uses 20% of the floor area for its own operations. The rest of the floor area is
subleased to other tenants. Justine Company expects rental income from the sub-lease
to be about P35,000,000 for 20 years. The barrowing cost of Justine Company is 8% per
year. The cost of constructing the complex incurred by Jasmine Company amount to
P480,000,000. Transaction costs and other incidental costs amount to P20,000,000. If
Justine Company would elect to treat its interest in the shopping complex as an
investment property, being its interest in the underlying property (rather than the
physical property), what amount should the investment property be initially recorded?
a. P343,640,000 c. P400,000,000
b. P480,000,000 d. P500,000,000
ANSWER KEY
Practical Accounting 1
1 C 31 A 61 A 91 C 121 C 151 B
2 B 32 C 62 B 92 A 122 B 152 C
3 A 33 D 63 C 93 B 123 B 153 C
4 D 34 C 64 A 94 A 124 A 154 A
5 B 35 B 65 B 95 C 125 C 155 B
6 D 36 B 66 C 96 B 126 C 156 A
7 A 37 A 67 D 97 A 127 A 157 B
8 D 38 C 68 D 98 D 128 B 158 D
9 C 39 B 69 D 99 A 129 B 159 C
10 B 40 C 70 D 100 C 130 A 160 B
11 C 41 D 71 A 101 B 131 D 161 C
12 B 42 C 72 D 102 C 132 B 162 B
13 B 43 B 73 B 103 C 133 C 163 A
14 D 44 D 74 C 104 B 134 D 164 A
15 D 45 B 75 B 105 B 135 C 165 D
16 C 46 B 76 A 106 B 136 A 166 C
17 A 47 B 77 C 107 D 137 C 167 C
18 C 48 C 78 A 108 D 138 B 168 C
19 C 49 B 79 D 109 C 139 A 169 D
20 B 50 C 80 D 110 C 140 B 170 D
21 C 51 D 81 C 111 C 141 B 171 D
22 B 52 B 82 C 112 A 142 B 172 D
23 B 53 B 83 C 113 B 143 D 173 C
24 C 54 C 84 A 114 B 144 A 174 C
25 A 55 A 85 A 115 B 145 C 175 B
ANSWER KEY
26 A 56 D 86 C 116 B 146 A 176 A

27 B 57 A 87 B 117 A 147 C 177 B
28 D 58 B 88 C 118 A 148 C 178 B
29 D 59 A 89 B 119 A 149 B 179 A
30 D 60 A 90 B 120 B 150 B 180 C
181 D 211 A 241 C 271 A 301 C 331 C

182 C 212 A 242 A 272 A 302 D 332 C
183 B 213 A 243 A 273 C 303 D 333 D
184 C 214 B 244 B 274 B 304 D 334 A
185 B 215 C 245 B 275 D 305 B 335 A
186 A 216 B 246 D 276 A 306 C 336 A
187 D 217 D 247 D 277 A 307 C 337 C
188 A 218 B 248 B 278 B 308 A 338 A
189 D 219 C 249 C 279 C 309 C 339 D
190 C 220 A 250 B 280 C 310 B 340 A
191 C 221 B 251 B 281 B 311 B 341 D
192 D 222 B 252 C 282 C 312 B 342 A
193 A 223 D 253 D 283 B 313 A 343 C
194 A 224 B 254 C 284 C 314 B 344 A
195 C 225 S 255 B 285 C 315 A 345 D
196 A 226 C 256 B 286 A 316 D 346 C
197 B 227 A 257 D 287 A 317 C 347 B
198 D 228 B 258 C 288 A 318 C 348 D
199 B 229 C 259 A 289 C 319 A 349 C
ANSWER KEY
200 D 230 B 260 A 290 A 320 A 350 B

201 C 231 D 261 B 291 C 321 C 351 D
202 D 232 C 262 B 292 A 322 B 352 C
203 A 233 C 263 D 293 C 323 A 353 C
204 D 234 B 264 B 294 B 324 D 354 B
205 D 235 C 265 B 295 C 325 C 355 C
206 D 236 A 266 C 296 B 326 D 356 C
207 C 237 C 267 C 297 C 327 C 357 B
208 D 238 C 268 C 298 C 328 A 358 C
209 B 239 A 269 A 299 C 329 B 359 C
210 B 240 B 270 D 300 C 330 B 360 B
361 D 391 B 421 D 451 B 481 B 511 D

362 B 392 B 422 C 452 A 482 C 512 A
363 D 393 B 423 A 453 C 483 C 513 B
364 C 394 C 424 D 454 C 484 B 514 A
365 A 395 A 425 B 455 D 485 A 515 C
366 C 396 B 426 A 456 D 486 A 516 A
367 C 397 B 427 A 457 B 487 D 517 D
368 C 398 C 428 B 458 B 488 C 518 C
369 C 399 A 429 B 459 A 489 B 519 A
370 B 400 B 430 A 460 B 490 C 520 C
371 A 401 D 431 C 461 A 491 D 521 C
372 C 402 B 432 B 462 B 492 B 522 C
373 D 403 C 433 A 463 A 493 B 523 A
ANSWER KEY
374 A 404 B 434 B 464 B 494 B 524 A

375 A 405 B 435 C 465 C 495 B 525 B
376 B 406 A 436 A 466 C 496 C 526 B
377 C 407 B 437 C 467 B 497 D 527 C
378 B 408 B 438 C 468 B 498 C 528 C
379 D 409 C 439 B 469 B 499 D 529 B
380 C 410 A 440 C 470 C 500 A 530 B
381 A 411 C 441 B 471 D 501 D 531 A
382 D 412 D 442 D 472 D 502 D 532 C
383 C 413 C 443 D 473 C 503 A 533 C
384 D 414 D 444 C 474 C 504 D 534 B
385 C 415 A 445 B 475 B 505 C 535 B
386 C 416 A 446 A 476 C 506 D 536 A
387 B 417 B 447 B 477 C 507 B 537 A
388 C 418 A 448 B 478 C 508 C 538 B
389 C 419 B 449 B 479 B 509 B 539 B
390 C 420 C 450 B 480 A 510 B 540 A
541 B 571 A 601 A 631 A 661 A 691 C

542 C 572 B 602 A 632 A 662 A 692 B
543 A 573 C 603 A 633 B 663 A 693 A
544 A 574 B 604 D 634 C 664 A 694 B
545 C 575 B 605 B 635 C 665 A 695 C
546 B 576 A 606 D 636 B 666 D 696 A
ANSWER KEY
547 A 577 A 607 A 637 D 667 C 697 C

548 C 578 B 608 C 638 A 668 C 698 B
549 A 579 B 609 C 639 C 669 A 699 C
550 B 580 C 610 A 640 B 670 A 700 B
551 B 581 A 611 C 641 A 671 C 701 C
552 C 582 A 612 A 642 C 672 D 702 C
553 C 583 B 613 D 643 A 673 B 703 A
554 B 584 D 614 B 644 A 674 D 704 A
555 A 585 B 615 B 645 D 675 C 705 A
556 C 586 B 616 D 646 D 676 C 706 B
557 C 587 C 617 C 647 A 677 C 707 A
558 A 588 A 618 D 648 A 678 B 708 C
559 C 589 B 619 B 649 A 679 B 709 C
560 D 590 A 620 C 650 A 680 B 710 A
561 A 591 A 621 C 651 B 681 A 711 C
562 B 592 B 622 C 652 B 682 A 712 D
563 B 593 C 623 A 653 B 683 A 713 A
564 D 594 C 624 C 654 A 684 B 714 A
565 B 595 B 625 B 655 B 685 C 715 A
566 B 596 A 626 B 656 C 686 C 716 C
567 C 597 C 627 D 657 C 687 A 717 B
568 C 598 D 628 B 658 A 688 A 718 B
569 C 599 A 629 C 659 B 689 A 719 A
570 B 600 A 630 C 660 B 690 A 720 B
721 C 751 A 781 C 811 B 841 D 871 A
ANSWER KEY
722 C 752 A 782 C 812 D 842 C 872 B

723 A 753 A 783 A 813 C 843 D 873 D
724 A 754 C 784 C 814 A 844 D 874 A
725 A 755 A 785 B 815 B 845 D 875 C
726 A 756 A 786 C 816 B 846 B 876 C
727 A 757 D 787 C 817 C 847 C 877 A
728 A 758 B 788 A 818 A 848 C 878 A
729 C 759 B 789 A 819 C 849 B 879 A
730 B 760 B 790 A 820 A 850 C 880 A
731 A 761 A 791 C 821 C 851 B 881 B
732 A 762 A 792 B 822 D 852 C 882 B
733 C 763 C 793 A 823 A 853 D 883 B
734 B 764 A 794 B 824 B 854 B 884 B
735 A 765 A 795 C 825 C 855 C 885 A
736 C 766 A 796 C 826 A 856 B 886 B
737 D 767 A 797 D 827 C 857 B 887 D
738 D 768 A 798 A 828 B 858 A 888 A
739 B 769 B 799 C 829 A 859 C 889 A
740 A 770 C 800 C 830 D 860 B 890 B
741 B 771 A 801 C 831 D 861 B 891 B
742 C 772 A 802 A 832 D 862 C 892 A
743 A 773 B 803 D 833 C 863 C 893 C
744 A 774 C 804 A 834 B 864 B 894 B
745 C 775 B 805 D 835 C 865 C 895 A
746 A 776 A 806 B 836 B 866 B 896 C
ANSWER KEY
747 A 777 B 807 A 837 B 867 C 897 D

748 A 778 A 808 C 838 C 868 A 898 A
749 C 779 D 809 B 839 B 869 A 899 B
750 B 780 C 810 A 840 A 870 A 900 C
ANSWER KEYB
901 D 921 D 941 B 961 A 981 D

902 B 922 B 942 C 962 A 982 A
903 D 923 B 943 B 963 C 983 B
904 C 924 B 944 C 964 A 984 C
905 B 925 A 945 A 965 B 985 C
906 B 926 C 946 B 966 B 986 B
907 A 927 C 947 D 967 D 987 C
908 C 928 B 948 B 968 B 988 C
909 B 929 B 949 B 969 B 989 A
910 B 930 C 950 B 970 D 990 D
911 C 931 A 951 C 971 B 991 C
912 C 932 A 952 B 972 B 992 B
913 B 933 B 953 A 973 D 993 C
914 A 934 D 954 A 974 B 994 B
915 D 935 B 955 B 975 D 995 D
916 B 936 D 956 B 976 B 996 B
917 B 937 B 957 A 977 A 997 C
918 A 938 D 958 A 978 B 998 C
919 A 939 B 959 D 979 D 999 B
920 D 940 C 960 C 980 C 1000 A

Practical Accounting 1-SIR SALVA

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1

. Logan Corp., a company whose stock is publicly traded, provides a noncontributory

Projected benefit obligation P650,0

Part A: 50 units with a cost of P5, and replacement cost of P4.50

The correct net income for 2018 is

Use the following information for the next five questions.

Current assets P435,000

Current liabilities P330,000

8. Property, plant and equipment

Unrealized gain on available-for-sale investment P40,000

Use the following information for the next five questions.

• AI purchased P5,000 in equipment during 2018.

14. Cash collected from customers?

15. Cash paid for goods to be sold?

16. Cash paid for interest?

18. Cash paid for selling expenses?

Use the following information for the next three questions.

Determine the net cash provided by (used in)

20. Investment activities

21. Financing activities

The net realizable value of accounts receivable as of December 31, 2018 is

Use the following information for the next four questions.

An entity purchased P5,000,000 of 8%, 5-year bonds on January 1, 2018 with

32. What amount should be recognized in OCI in the statement of comprehensive

Use the following information for the next three questions.

34. Based on the foregoing information, determine the following amounts on

Carrying amount of investment in

36. Income in other comprehensive income on investment

Cash surrender value 1/1/18 P87,000

Use the following information for the next two questions.

43. On January 1, 2015, Neal Corporation acquired equipment at a cost of P540,000.

Equipment (at cost) P5,000,000

The amount to be recognized in profit or loss as a result of the revaluation of assets on

How much should be recognized as impairment loss?

Which statement is correct?

The retained earnings balance on January 1 ,2018 was

Use the following information for the next four questions.

57. What is the initial measurement of the building?

Use the following information for the next five questions.

On January 1, 2018, equipment is leased to a lessee with the following information:

Cost of equipment to the entity P3,500,000

64. What is the gross investment in the lease?

65. What is the net investment in the lease?

66. What is the total financial revenue?

67. What amount should be recognized as interest income for 2018?

Defined benefit obligation, 1/1 P10,000,0

71. In general , an entity preparing interim financial statements should

Income before Estimated

Second 70,000 40%

Third 40,000 45%

June 1, 2018 - November 30, 2018 P400,0

What amount should Lorraine report as royalty income for 2019?

The adjusted cost of Alucard corp.’s inventory at December 31 should be

Use the following information for the next two questions:

Account Title Debits Credits

1. The short-term investments accounts includes P180,000 in treasury bills

Use the following information for the next two questions:

78. The cost of goods sold is

79. The income before taxes is

80. Inventory record for Natalia’s chemicals revealed the following: