REAL EXCELLENCE ONLINE REVIEW

FIRST MONTHLY ASSESSMENT EXAMINATIONS

1. Which of the following events is considered as a reciprocal transfer?
A. Declaration of cash dividends
B. Conversion of raw materials into finished goods
C. Purchase of merchandise inventories to be sold to outside customers
D. None from the choices

2. S1: A corporation cannot be registered for the purpose of practicing public accounting profession in
the Philippines.
S2: A passer of a recently conducted LECPA can immediately register an auditing firm under his or
her name.
A. Only the first statement is true. C. Both statements are true.
B. Only the second statement is true. D. Both statements are false.

3. Regarding FSRSC (formerly FRSC), which of the following statements is incorrect?

S1: FSRSC members serve with compensation for a term of three years, renewable for another
three years.
S2: FSRSC’s chairman should be a senior practitioner in public practice.

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S3: FSRSC members should be CPAs.
A. S3 only C. S2 and S3
B. S1 and S2 D. S1, S2 and S3

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4. Which of the following is represented in FSRSC (formerly FRSC)?
A. B. C. D. E.

5.
Insurance Commission
PICPA
CHED
Yes
Yes
No
No
Yes
No
ev Yes
No
No

Which of the following is included in the due process of standard setting?

No
No
No
Yes
No
Yes
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S1: Exposure of the proposed draft for comments and suggestion to PICPA members, FINEX
members and other interested parties.
S2: Approval of all the members of the final PFRS.
A. S1 only C. Both statements
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B. S2 only D. None from the statements

6. Which of the following statements best describes the term "financial position"?
A. The net income and expenses of an entity
B. The assets, liabilities and equity of an entity
C. The net of financial assets less liabilities of an entity
C

D. The potential to contribute to the flow of cash and cash equivalents to the entity

7. Which of the following statements about materiality is not correct?

A. An item must make a difference or it need not be disclosed.
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B. Materiality is a matter of relative size or importance.

C. An item is material if its inclusion or omission would influence or change the judgment of a
reasonable person.
D. All of these are correct statements about materiality.

8. S1: Since equity is the residual amount of assets over liabilities, equity cannot be recognized
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individually from the other elements of the financial position

S2: Physical form is a necessity for an item to be classified as asset.
A. True, false C. False, false
B. False, true D. True, true

9. Determine the false statement regarding the Conceptual Framework?

A. The Conceptual Framework is not a reporting standard and does not define standard for any
particular measurement or disclosure issue.
B. Under the Conceptual Framework, the concept of income encompasses both revenue and gains.
C. Users under the Framework that are interested in information about the continuance of an entity
when they have a long-term involvement with or are dependent on the entity pertain to
employees.
D. The Conceptual Framework sets out the concepts that underlie the preparation and presentation
of financial statements for external users only.
10. The cash account in the current asset section of the balance sheet for EARTHSHAKER CORP. showed a
balance of P 555,000. It was found to include the following items:

Financial Accounting & Reporting by Karim G. Abitago, CPA Page 1

 Petty cash fund (P 1,000 is in the form of paid vouchers), P 5,000; Checking account balance, per
bank statement (A P 25,000 check is still outstanding), P 255,000; Undeposited receipts (including a
post-dated check tor P 5,000). P 120,000; Currencies and coins awaiting deposit, P 55,000; Bond
sinking fund - cash, P 100,000; Check drawn by manager, returned by bank marked NSF, P 20,000
What is the correct cash balance for EARTHSHAKER’s balance sheet?
A. P 404,000 C. P 430,000
B. P 429,000 D. P 529,000

11. LUNA MOONFANG CORP. had the following account balances on December 31, 2014:
Petty cash fund 50,000
Cash in bank - current account 4,000,000
Cash in bank - sinking fund 2,000,000
Cash on hand 500,000
Cash in bank - restricted account for plant addition,
expected to be disbursed in 2015 1,500,000
Treasury bills 1,000,000
The petty cash fund included unreplenished December 2014 petty cash expense vouchers of P10,000
and employee IOU of P5,000. The cash on hand included a P100,000 check payable to LUNA dated
January 15, 2015. In exchange for a guaranteed line of credit, the entity has agreed to maintain a
minimum balance of P200,000 in its unrestricted current bank account. The sinking fund is set aside
to settle a bond payable that is due on June 30, 2015. What total amount should be reported as "cash

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and cash equivalents" on December 31, 2014?
A. 4,435,000 C. 5,535,000
B. 5,435,000 D. 7,435,000

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12. The books of MERCURIAL SERVICE, INC. disclosed a cash balance of P68,757 on June 30. The bank
statement as of June 30 showed a balance c P54,780. Additional information that might be useful in
reconciling the two balances follows:
a.
b.
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Check number 748 for P3,000 was originally recorded on the book as P4,500.
A customers note dated March 25 was discounted o n April 12. The note was dishonored on June
29 (maturity date). The bank charged MERCURIALs account for P14,265, including a protest fee
of P42.
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c. The deposit of June 24 was recorded on the books as P2,895, but was actually a deposit of
P2,700.
d. Outstanding checks totaled P9,885 as of June 30.
e. There were bank service charges for June of P210 not yet recorded on the books.
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f. MERCURIALs account had been charged on June 26 for a customers NSF check for P1,296.
g. MERCURIAL properly deposited P600 on June 3 that was not recorded by the bank.
h. Receipts of June 30 for P13,425 were recorded by the bank on July 2.
i. A bank memo stated that a customers note for P4,500 and interest of P165 had been collected
on June 27, and the bank charged a P36 collection fee.
What is the adjusted cash in bank on March 31?
C

A. P65,320 C. P50,800
B. P43,820 D. P58,920

13. The following information was included in the bank reconciliation for KAEL CORP. for July of 2014:
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Checks & charges recorded by bank in July, including a July service charge of P2,800, P932,600;
Service charge made by bank in June and recorded in books in July, P1,200 Customers NSF check
returned as a bank charge in July (no entry made in books), P6,000 Customers NSF check re turned
in June, recorded by the company in July, P15,000, Outstanding checks in July 31, P300,000;
Outstanding checks for June, P255,000; Checks issued in July for P20,000 recorded by the company
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as, P2,000; Erroneous bank charge in July, P20,000; Erroneous bank credit in June corrected in July,
P30,000 and Erroneous book receipt in June corrected in July, P5,000

What is the unadjusted disbursement per book on July 31, 2014?

A. P909,400 C. P922,000
B. P918,800 D. P927,600
14. The following information pertains to KADITA CORP.
Accounts receivable, beg. 140,000
Allowance for doubtful accounts, beg. 18,000
Cash sales 450,000
Credit sales 680,000
Collections of accounts receivable, including recoveries 570,000
Write-offs 12,000
Recoveries 2,000
Bad debts expense 28,000

Financial Accounting & Reporting by Karim G. Abitago, CPA Page 2

 What is the carrying amount of accounts receivable in KADITA CORP.s end -of-period financial
statements?
A. P204,000 C. P214,000
B. P240,000 D. P189,000

Use the following information in answering the next item(s):

On January 1, 2014, MOSKOV CORP. sold equipment with a carrying amount of P4,800,000 in
exchange for a P6,000,000 noninterest bearing note due January 1, 2017. There was no established
exchange price for the equipment. The prevailing rate of interest for a note of this type on January 1,
2014 was 10%. The present value of 1 at 10% for three periods is 0.75.

15. In the 2014 income statement, what amount should be reported as interest income?
A. 90,000 C. 500,000
B. 450,000 D. 600,000

16. In the 2014 income statement, what amount should be reported as gain or loss on sale of equipment?
A. 300,000 loss C. 1,200,000 gain
B. 300,000 gain D. 2,700,000 gain

Use the following information in answering the next item(s):

On December 31, 2019, BAXIA BANK recorded P2,000,000 loan granted to a client. The loan has a

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12% interest rate payable annually every December 31. The principal is due in full at maturity on
December 31, 2022. Unfortunately, the borrower is experiencing significant financial difficulty and
will have difficult time in making full payment. The 2021 interest was not paid. The parties agreed

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that no future interest payments be made and the principal loan amount is to be paid as follows:

Date Amount of Cash Flow

December 31, 2022 P500,000

17.
December 31, 2023
December 31, 2025
ev 500,000
500,000

What is the impairment loss on loans receivable on December 31, 2021?

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A. P1,359,900 C. P1,039,100
B. P1,459,900 D. P1,077,200

18. What is the interest income on loans receivable for the year 2022?
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A. P144,108 C. P139,536
B. P240,000 D. None, no interest was agreed

19. MARTIS CORP. accepted from a customer P1,000,000 face amount, 6-month, 8% note dated April 15,
2014. On the same date, the entity discounted the note without recourse at a 10% discount rate.
What amount of cash was received from the discounting?
C

A. 972,000 C. 990,000
B. 988,000 D. 1,040,000

20. RUSSIA CORP. conducted a physical count on December 31, 2014 which revealed inventory with a
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cost of P4,410,000. The audit identified that the following items were excluded from this amount:
* Merchandise of P610,000 is held by RUSSIA on consignment.
* Merchandise costing P380,000 was shipped by RUSSIA FOB destination to a customer on
December 31, 2014. The customer was expected to receive the goods on January 5, 2015.
* Merchandise costing P460,000 was shipped by RUSSIA FOB shipping point to a customer on
December 29, 2014. The customer was expected to receive the goods on January 5, 2015.
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* Merchandise costing P830,000 shipped by a vendor FOB destination on December 31, 2014 was
received by RUSSIA on January 5, 2015.
* Merchandise costing P510,000 purchased FOB shipping point was shipped by the supplier on
December 31, 2014 and received by RUSSIA on January 5, 2015.
What is the correct amount of inventory on December 31, 2014?
A. 3,800,000 C. 4,920,000
B. 4,690,000 D. 5,300,000

21. Costs excluded from cost of inventory and recognized as expenses in the period when incurred are
A. Freight and handling costs in acquiring goods
B. Storage costs, unless necessary in the production process
C. Borrowing costs incurred for inventories that require a substantial period of time to bring them
to a salable condition
D. Foreign exchange differences which result from severe devaluation of a currency against which
there is no hedging and that affects liabilities directly arising from the recent acquisition of
inventories

Financial Accounting & Reporting by Karim G. Abitago, CPA Page 3

22. During the current year, MALAYSIA CORP. which used a perpetual inventory system recorded the
following information pertaining to its inventory:
Units Unit cost Total cost Units on hand
Balance on 1/1 10,000 100 1,000,000 10,000
Purchased on 1/7 6,000 300 1,800,000 16,000
Sold on 1/20 9,000 7,000
Purchased 1/25 4,000 500 2,000,000 11,000
Under the moving average, what amount should be reported as inventory on January 3 1?
A. 2,640,000 C. 3,300,000
B. 3,225,000 D. 3,900,000

23. GEORGIA CORP. provided the following inventory data at year-end:

Cost NRV
Skis 2,200,000 2,500,000
Boots 1,700,000 1,500,000
Ski equipment 700,000 800,000
Ski apparel 400,000 500,000
What amount should be reported as inventory at year-end?
A. 4,800,000 C. 5,200,000
B 5,000,000 D. 5,300,000

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24. On June 30, 2014, a flash flood caused damage to the merchandise stored in the warehouse of
KOREA CORP.

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* Net sales for 2013 were P800,000 costing P560,000.
* Inventory, January 1 was P200,000, 90% of which was in the warehouse and 10% in downtown
showroom.
* From January 1 to date of flood, the invoice value of purchases all stored in the warehouse is

*
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P100,000, freight P4,000, and purchase return P6,000.
Cost of merchandise transferred from the warehouse to showroom was P8,000 and net sales
from January 1 to June 30, 2014 (all warehouse stock) amounted P320,000.
What is the estimated cost of merchandise destroyed by flood?
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A. 46,000 C. 66,000
B. 50,000 D. 80,000
25. IRAN COMPANY which used the FIFO retail inventory method provided the following information for
the current year:
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Cost Retail
Beginning inventory 1,200,000 1,800,000
Purchases 5,600,000. 7,200,000
Freight in 400,000
Net markup 1,400,000
Net markdown 600,000
C

Sales 7,600,000
What is the cost of goods sold for the current year?
A. 4,350,000 C. 5,594,000
B. 5,550,000 D. 5,682,000
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26. Which statement is correct concerning biological assets and agricultural produce?
A. Agricultural produce are measured at fair value less costs to sell at initial recognition and at
each subsequent reporting period.
B. Changes in fair value of a biological assets or an agricultural produce are included in the
determination of income of the current period.
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C. Inventories comprising agricultural produce that an entity has harvested from its biological
assets are measured on initial recognition at fair value.
D. A conditional government grant related to a biological asset that has been measured at fair
value less costs to sell should be recognized as income when the grant becomes receivable.

27. Forevermore Co. owns a number of herds of cattle. Where changes in the fair value of herd of cattle
should be recognized in the financial statements according to PAS 41?
I. Profit or Loss
II. Statement of Comprehensive Income
III. Other Comprehensive Income
A. I only D. I and II
B. II only E. II and III
C. III only

28. SENEGAL INC. reported the following lists of biological assets and agricultural produce for the year
ended December 31, 2014:

Financial Accounting & Reporting by Karim G. Abitago, CPA Page 4

 Assets Fair value
Dairy cattle P3,000,000
Beef cattle 5,000,000
Sheep 2,000,000
Calves on dairy cattle 1,000,000
Calves on beef cattle 1,500,000
Lambs 800,000
Milk on dairy cattle 500,000
Carcass on beef cattle 600,000
Wool 400,000
What amount of biological asset should SENEGAL 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

Use the following information in answering the next item(s):

SENEGAL AGRI CORP. has the following information pertaining to its biological assets for the year
2014:
A herd of 100, 2-year old animals was held at January 1, 2014. Ten animals aged 2.5 years were
purchased on July 1, 2014 for P5,400, and ten animals were born on July 1, 2014. No animals were
sold or disposed of during the period. Per unit fair values less estimated point-of-sale costs were as

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follows:
2.0-year old animal at January 1, 2014 P5,000
Newborn animal at July 1, 2014 3,500

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2.5-year old animal at July 1, 2014 5,400
Newborn animal at December 31, 2014 3,600
0.5-year old animal at December 31, 2014 4,000
2.0-year old animal at December 31, 2014 5,250

29.
2.5-year old animal at December 31, 2014
3.0-year old animal at December 31, 2014
ev 5,550
6,000

How much of the increase in the fair value of the biological assets due to price change?
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A. none C. P26,500
B. P25,000 D. P27,500

30. How much of the increase in the fair value of the biological assets due to physical change?
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A. P75,000 C. P110,000
B. P79,500 D. P118,500

- END OF EXAMINATION -
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