Rewiewer

THEORIES
1) Which of the following statements is/are not true concerning property, plant and equipment (PPE)?
I. PPE acquired by donation should be recorded at the fair value of the donated asset at the time
of donation.
II. When a group of assets is acquired for a lump-sum price, the total cost should be allocated to
the individual assets based on their carrying amounts.
III. Property acquired in exchange for shares or other securities in the enterprise should always
be recorded the fair value of the securities issued.
IV. When a property is acquired in exchange for another asset and both the fair value of the asset
given up and the asset received are clearly determinable, its cost is usually determined by
reference to the fair value of the asset given up.
V. When an asset is acquired under a deferred payment plan, the asset is recorded at its cash
equivalent price. If the cash equivalent price is not reliably determinable, the asset cost is the
total of the undiscounted future cash payments required by the debt.
VI. An impairment loss is an amount by which the carrying amount of the asset exceeds the sum
of the expected future net cash flows from the use of that asset.
VII. Under revaluation model, if an asset’s recoverable amount is higher than the carrying
amount, no impairment loss will be reported in profit or loss but a gain on recovery may be
recognized in profit or loss on the period’s income statement.
A. I, IV, V, and VI. II is false. The total cost should be allocated based on the individual assets’ relative fair values
B. I, and VII only. instead of the carrying amounts.
III is false. The enterprise is usually recorded at the fair market value of shares/securities issued, or
C. I, III, IV, V, and VII. the fair market value of asset acquired, whichever is more clearly evident.
D. II, III, V, and VI. V is false. If an asset is acquired under a deferred payment plan and there is no available cash price,
the asset is recorded at an amount equal to the present value of all payments using an implied
E. Answer not given. interest rate.
VI is false. Impairment loss is the carrying amount of the asset exceeding the fair market value.
2) Under IFRS 9, the cumulative balance recognized in the OCI as a result of measuring the equity
investment at fair value through other comprehensive income
A. None of the responses is correct. The cumulative balance recognized
in the OCI as a result of measuring
B. Shall not be recycled to profit or loss and cannot be transferred to retained earnings. the equity investment at fair
value through other comprehensive
C. Shall be recycled in profit or loss. income shall not be recycled to profit
D. Shall not be recycled to profit or loss but may be transferred to retained earnings. or loss but may be
transferred to retained earnings.
E. Shall be recycled in profit or loss when there is objective evidence of impairment.
3) Statement 1: The allocation of the transaction price is based on the stand-alone selling prices of the
products sold and premiums.
Statement 2: In the case of premiums as a component of the transaction price, cash received from
the customer during the redemption of premiums shall be a deduction from the cost of premiums.
Statement 3: If the loyalty award/point is supplied by a third party, the amount received as
consideration for the goods or services sold is recognized in full as unearned revenue and
recognized as revenue upon the redemption of customers.
Statement 1 is correct. The allocation of the transaction price is based on the stand-alone selling
Which of the following is correct? prices of the products sold and premiums.
Statement 2 is incorrect. In the case of premiums as a component of the transaction price, cash
A. Only two statements are correct. received from the customer during the redemption of premiums shall be recorded as sales revenue.
Statement 3 is incorrect. The transaction price on the contract shall be apportioned to the
B. All of the statements are correct. performance obligation. The allocation shall be based on the relative stand-alone selling prices of
C. Only one statement is correct. each distinct good or service promised in the contract. Thus, when an entity provided customer
loyalty awards on the principal goods or service sold, the consideration received or receivable by
D. All of the statements are incorrect. the entity is apportioned between the product or service sold and the customer loyalty awards
redeemable in the future.
4) In order to properly record a direct-financing lease, the lessor needs to know how to calculate the
lease receivable. The lease receivable in a direct-financing lease is best defined as:
A. the amount of funds the lessor has tied up in the asset which is the subject of the direct-
financing lease.
B. the difference between the lease payments receivable and the fair value of the leased
property.
C. the present value of minimum lease payments. Lease receivable in a direct-financing lease is the
present value of minimum lease payments.
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D. the total book value of the asset less any accumulated depreciation recorded by the lessor
prior to the lease agreement.
5) If there is a subsequent increase in the fair value less cost of disposal of a previously impaired non-
current asset classified as held for sale, IFRS 5: Non-Current Asset Held for Sale and Discontinued
If there is a subsequent increase in the fair value less cost of disposal of a
Operations provides that previously impaired non-
current asset classified as held for sale, IFRS 5: Non-Current Asset Held for Sale
A. The gain shall be recognized in full. and Discontinued
Operations provides that the gain shall be recognized only to the extent of
B. The gain shall not be recognized in any circumstances. cumulative impairment
losses previously recognized.
C. The gain shall be recognized only when the subsequent increase is equal to at least 10% of the
asset’s carrying amount on the basis that the asset had never been classified as held for sale.
D. The gain shall be recognized only to the extent of cumulative impairment losses previously
recognized.
6) Statement 1: In extremely rare circumstances in which management concludes that compliance with
a requirement in a standard would be so misleading, the entity shall depart from that requirement
provided the relevant regulatory Conceptual Framework requires, or otherwise does not prohibit,
such departure.
Statement 2: In the statement of comprehensive income, the prior period errors are shown as either
a revenue or an expense account depending on the nature of the error that occurred in the prior
period.
Statement 3: If the entity does have the discretion to refinance or roll over an obligation for a period
of less than 12 months after the reporting period under an existing loan facility, the obligation is
classified as noncurrent even if it would otherwise be due within a shorter period.
Statement 4: The following are examples of financing activities: (a) Cash advances and loans to other
parties (other than advances and loans made by financial institution), (b) Cash payment for future
contract, forward contract, option contract and swap contract, (c) Cash receipts from sales of
equity instruments of other entities and interests in joint venture.
Statement 2 is incorrect. The prior period errors are shown as an adjustment of the beginning
Which of the following is correct? balance of retained earnings to arrive at the corrected beginning balance.
Statement 3 is incorrect. If the entity does have the discretion to refinance or roll over an obligation
A. True, true, true true. for a period of at least 12 months after the reporting period under an existing loan facility, the
B. True, true, false, false. obligation is classified as noncurrent even if it would otherwise be due within a shorter period.
Statement 4 incorrect. The following are examples of investing activities: (a) Cash advances and
C. True, false, false, false. loans to other parties (other than advances and loans made by financial institution, (b) Cash
D. False, false, false, false. payment for future contract, forward contract, option contract and swap contract, (c) Cash
receipts from sales of equity instruments of other entities and interests in joint venture.
E. Answer not given.
7) The principles for recognizing and measuring losses from inventory write-downs, restructurings, The principles for
recognizing and
or impairments in an interim period are the same as those that an entity would follow if it prepared measuring losses from
only annual financial statements. However, if such items are recognized and measured in one inventory write-downs,
restructurings,
interim period and the estimate changes in a subsequent interim period of that financial year, or impairments in an
interim period are the
same as those that an
A. the original estimate is changed in the subsequent interim period by restating the prior entity would follow if it
interim financial statements. prepared
only annual financial
statements. However, if
B. the original estimate is not changed in the subsequent interim period but the annual financial such items are recognized
and measured in one
statement is adjusted either by accrual of an additional amount of loss or by reversal of the interim period and the
previously recognized amount. estimate changes in a
subsequent interim period
of that financial year, the
C. the original estimate is changed in the subsequent interim period either by accrual of an original estimate is
changed in the
additional amount of loss or by reversal of the previously recognized amount. subsequent interim period
either by accrual of an
D. ignored, since interim period measurements are made as if each interim period stands alone additional
amount of loss or by
as an independent reporting period. reversal of the previously
recognized amount.
8) A bank reconciliation is
A. A formal financial statement that lists all of the bank account balances of an entity.
B. A statement that reconciles the beginning and ending balances of cash for the month, as well
as the recorded receipts and disbursements made by the bank and by the depositor company.
C. A statement sent by the bank to depositor on a monthly basis.
D. A schedule that accounts for the differences between cash balance shown on the bank
statement and the cash balance shown on the general ledger. A bank reconciliation is a schedule that accounts for the
differences between cash balance shown
on the bank statement and the cash balance shown on
the general ledger.
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9) When the interest payment dates of a bond are May 1 and November 1 and a bond is purchased on
June 1, the amount of cash paid by the investor would be
The amount of cash paid by the investor would be
A. Decreased by accrued interest from June 1 to November 1. increased by accrued interest from May 1 to June
B. Decrease by accrued interest from May 1 to June 1. 1.
C. Increased by accrued interest from June 1 to November 1.
D. Increased by accrued interest from May 1 to June 1.
Offsetting in financial statements is
10) Technically, offsetting in financial statements is accomplished when accomplished when gain or loss from
disposal of a noncurrent
A. The allowance for doubtful accounts is deducted from accounts receivable. asset is reported by deducting from the
B. The accumulated depreciation is deducted from property plant and equipment. proceeds the carrying amount of asset
and the related
C. The total liabilities are deducted from total assets. disposal costs.
D. The gain or loss from disposal of a noncurrent asset is reported by deducting from the proceeds
the carrying amount of asset and the related disposal costs.
11) Statement 1: The retail method is often used in the retail industry for measuring inventories of large
numbers of rapidly changing items with different margins for which it is impracticable to use other
costing methods.
Statement 2: Accounting principles permit the gross profit method to determine ending inventory
for interim reporting purposes, provided a company discloses the use of this method.
Statement 3: The cost flow assumption adopted must be consistent with the physical movement of
the goods.
Statement 4: The inventory cost on its statement of financial position was lower using first-in, first-
out than it would have been using average cost. There is no beginning inventory, therefore, the cost
of purchases moved downward during the period.
Which of the following is correct? Statement 1 is incorrect. The retail method uses similar margins for
measuring inventories.
A. None of the statements is correct. Statement 3 is incorrect. The cost flow assumption does not necessarily
B. Only 2 statements are correct. match the actual flow of
C. Only 1 statement is correct. goods (if that were the case, most companies would use the FIFO method).
Instead, it is allowable
D. All statements are correct. to use a cost flow assumption that varies from actual usage.
12) Under the concept of financial capital maintenance where capital is defined in terms of nominal Under the concept of
financial capital
monetary units, increases in the prices of assets held over the period, conventionally referred to as maintenance where
holding gains, are conceptually capital is defined in
terms of nominal
A. profits but they may not be recognized as such until the assets are disposed of in an exchange monetary units,
transaction. increases in the
prices of assets held
B. profits and they may be recognized as such during the period they arise. over the period,
conventionally
C. not profits but they may be recognized as such over the period until the assets are disposed referred to as
of in an exchange transaction. holding gains, are
conceptually profits
D. not profits but they may be recognized as profits only until the assets are disposed of in an but they may not be
exchange transaction. recognized as such
until the assets are
disposed of in an
13) Under PFRS 8, which of the following is not a criterion used to determine reportable segments? exchange transaction.
A. Segment assets
Segment liabilities is not a criterion used to determine reportable segments
B. Segment liabilities
under PFRS 8.
C. Segment sales
D. Segment operating profit or loss
14) In accounting for a defined benefit plan

A. An appropriate funding must be established to ensure that enough fund would be available at
retirement.
B. The employer’s responsibility is simply to make contribution each year.
C. The expense recognized each period is equal to the cash contribution to the plan.
D. The liability is determined based upon variables that reflect current salary levels.
An appropriate funding must be established to ensure that enough fund would
be available at
retirement.
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15) Statement I. Capital stock is the amount fixed in the articles of incorporation to be subscribed and
paid in or secured to be paid in by the shareholders of the corporation, either in services, money, or
properties, at the organization of the corporation, or afterwards and upon which the corporation is
to conduct its operations.
Statement II. Whenever the share capital of a corporation is increased and new shares are issued,
the new issue must be offered first to the existing shareholders in proportion to their shareholdings
before subscriptions are received from the general public.
Statement III. Appropriation for retained earnings does not change the total amount of shareholder’s
equity but affects the total amount of retained earnings.
Statement IV. A callable preference share is one in which can be called in for redemption at a
specified price at the option of the corporation and has a definite redemption date.
Statement V. In case where there are no bidders, the corporation may not purchase for itself the
delinquent shares thus the delinquent subscriber is then released from liability with regard to the
subscription which is deemed fully paid.
Statement VI. If treasury shares are subsequently retired, the share capital account is debited at par
value or stated value and the treasury shares account is credited at fair value.
Statement VII. The following items may affect the balance of retained earnings: (a) Net income or
loss for the period, (b) Prior period errors, (c) Gain/loss on reissuance of treasury shares, (d)
Dividends to shareholders, and (e) Effect of change in accounting policy.
Which of the following is correct?

Statement III is incorrect. Appropriation for retained earnings does not affect the total amount of
A. All but one statement are correct. retained earnings.
Statement IV is incorrect. A callable preference share has no definite redemption date as this is
B. All but two statements are incorrect. dependent on the call of the issuer.
C. All but three statements are incorrect. Statement V is incorrect. In the event that there is no bidder for the delinquent shares, the shares
will be issued in the name of the corporation and will be placed in treasury.
D. All but four statements are correct. Statement VI is incorrect. If treasury shares are subsequently retired, the treasury shares account
is credited at cost.
E. All but one statement are incorrect. Statement VII is incorrect. Gain on reissuance of treasury shares will not affect the balance of
F. Answer not given. retained earnings.
16) The FRSC recognizes that in a limited number of cases there may be a conflict between the The FRSC recognizes
that in a limited number
Conceptual Framework and a Philippine Financial Reporting Standard. In those cases where there of cases there may be
is a conflict, a conflict between the
Conceptual Framework
A. the requirements of the Philippine Financial Reporting Standard prevail over those of the and a Philippine
Conceptual Framework. Financial Reporting
Standard. In those
B. the requirements of the Conceptual Framework prevail over those of the Philippine Financial cases where there
is a conflict, the
Reporting Standard.
requirements of the
C. the professional judgment of the accountant should prevail, and this may necessitate Philippine Financial
Reporting Standard
disclosure in the notes. prevail over those of
D. the provisions of standards issued by FASB will prevail. the Conceptual
Framework.
17) Transfers from investment property to property, plant, and equipment are appropriate
A. When there is change of use. Transfers from investment property to property,
B. Based on the entity’s discretion. plant, and equipment are appropriate when there
is change of use.
C. Only when the entity adopts the fair value model under PAS 38.
D. The entity can never transfer property into another classification on the balance sheet once
it is classified as investment property.
18) These are differences that will result in future taxable amount in determining taxable income of
future periods
A. Temporary differences. Taxable temporary differences are differences that will
B. Taxable temporary differences. result in future taxable amount in
C. Deductible temporary differences. determining taxable income of future periods.
D. Permanent differences.
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19) Statement I. The board of directors of an entity has the primary responsibility for the preparation
and presentation of financial statements.
Statement II. Materiality of an item depends on the relative size rather than absolute size thus what
is material for one entity shall also be material for another.
Statement III. IAS 1 requires the use of going concern in the preparation of financial statements
despite of management's determination after the reporting period that it intends to liquidate the
entity or to cease trading or that it has no realistic alternative but to do so.
Statement IV. Retrospective adjustments and retrospective restatements are presented in the
statement of changes in equity as adjustment to the ending balance of retained earnings as changes
in equity during the period.
Statement I is incorrect. The management of an entity has the primary responsibility for
the preparation and presentation of financial statements.
Which of the following is correct? Statement II is incorrect. Materiality of an item depends on the relative size rather than
absolute size thus what is material for one entity may be immaterial for another.
A. All but one statement are correct.
Statement III is incorrect. IAS 10 prohibits the preparation of financial statements on a
B. All but two statements are incorrect. going concern basis if the management determines after reporting period that it intends
C. All but three statements are incorrect. to liquidate the entity or cease trading or that it has no realistic alternative but to do so.
Statement IV is incorrect. Retrospective adjustments and retrospective restatements
D. All statements are correct. are presented in the statement of changes in equity as adjustment to the beginning
E. Answer not given. balance of retained earnings rather than as changes in equity during the period.
20) Which of the following methods of determining bad debt expense least likely to properly match Charging bad debts
expense and revenue? as accounts are
written off as
A. Charging bad debts with a percentage of sales under the allowance method. uncollectible is the
B. Charging bad debts as accounts are written off as uncollectible. method of
determining bad
C. Charging bad debts with an amount derived from aging accounts receivable under the debt expense least
allowance method. likely to properly
match expense and
D. Charging bad debts with an amount derived from a percentage of accounts receivable under revenue.
the allowance method.
21) Total net income over the life of an entity is

A. Higher under cash basis than under accrual basis.
B. Lower under cash basis than under accrual basis. Total net income over the life of an entity is the same under
C. The same under the cash basis and accrual basis. the cash basis and accrual basis.
D. Not susceptible to measurement.
22) Statement 1: Produce harvested from bearer plants is a biological asset.
Statement 2: A loss may arise on initial recognition of a biological asset because costs to sell are
deducted in determining fair value less costs to sell of a biological asset.
Statement 3: There is a presumption that fair value can be measured reliably for a biological asset.
However, that presumption can be rebutted only on initial recognition for a biological asset for
which quoted market prices are available and for which alternative fair value measurements are
determined to be clearly unreliable.
Statement 4. The agricultural activity includes raising livestock, annual perennial cropping,
floriculture and aquaculture. Statement 1 is incorrect. The agricultural produce growing on bearer plant is classified as biological
asset. Once harvested, the agricultural produce is measured at fair value less cost of disposal at the
A. Only one statements are correct. point of harvest. The fair value less cost of disposal at point of harvest is the deemed cost of
inventory.
B. Only two statement is correct. Statement 3 is incorrect. The presumption can be rebutted only on initial recognition for a biological
C. All of the statements are incorrect. asset for which quoted market prices are not available and for which alternative fair value
measurements are determined to be clearly unreliable.
D. All of the statements are correct.
23) In what circumstances is compensation expense immediately recognized under a share option plan
A. In all circumstances.
B. When the options are exercisable within two years. When the options are immediately exercisable,
compensation expense is immediately recognized
C. When the options are immediately exercisable. under a share option plan.
D. In no circumstance.
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24) An entity neglected to amortize the discount on outstanding bonds payable. What is the effect of the
failure to record the discount amortization on interest expense and bond carrying amount,
respectively?
A. Understated and understated. If an entity neglected to amortize the discount on outstanding bonds payable,
the interest expense
B. Understated and overstated. is understated and the bond carrying amount is also understated.
C. Overstated and overstated.
D. Overstated and understated.
25) Minimum disclosure requirements for intangibles are as follows:

I. Amortization methods. The amortization methods used for those assets having finite useful
lives.
II. Carrying amounts. The gross carrying amounts, accumulated amortization, and
accumulated impairment losses at the beginning and end of the period.
III. Line items. The line items in the statement of comprehensive income where amortization is
included.
IV. Reconciliation. A reconciliation for the carrying amounts at the beginning and end of the
period. It should include additions, assets classified as held for sale, revaluation changes and
impairment changes impacting other comprehensive income, impairment losses and
reversals impacting profit or loss, amortization, net foreign exchange differences resulting
from translation into the presentation currency, and any other changes in the carrying
amount.
V. Useful lives. State whether the useful lives are indefinite or finite. If finite, state either the
useful lives or the depreciation rates being used.
A. II, III, IV.
B. I, II, III, IV, V. All statements are correct except that in Statement V, if finite, either the useful lives
C. I, II, III, V. or the amortization rate should be used.
D. I, II, III, IV.
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Problems
1) The accounts below were taken from the unadjusted trial balance of Integrity Corporation at
December 31, 2022:
Cash P360,000
Equity investments at fair value through profit or loss (at cost) 100,000
Notes receivable 257,000
Trade accounts receivable 69,000
Allowance for uncollectible accounts 5,800
Employees income tax withheld 73,000
Notes payable 290,000
Trade accounts payable 85,000
Merchandise inventory 198,500
Bonds payable 450,000
Share dividends distributable 150,000
Income tax payable 26,000
An analysis of the above accounts disclosed the following:

(a) Bank overdraft of P40,000 was deducted from cash balance
(b) Trade accounts receivable was net of customers’ deposit of P4,600
(c) Merchandise worth P25,000 received December 30, 2022 was included in the inventory
but was not recorded as a purchase.
(d) Accounts payable was net of accounts with debit balance of P15,000
(e) A bank loan of P150,000 due December 31, 2025 was included in the notes payable balance
(f) Bonds payable that was issued in 2022 will mature in five annual installments beginning
June 1, 2023.
(g) The fair value of the equity investments at December 31, 2022 was P120,000.
How much is the working capital of Integrity Corporation at December 31, 2022?
A. Php559,700
B. Php587,700
C. Php590,700
D. Php602,700
2) An analysis of the records of Objectivity Company disclosed the changes for the year 2022 and
the supplementary data listed below:
Cash - P250,000 increase; Accounts receivable - P150,000 decrease; Merchandise inventory -

P130,000 increase; Accounts payable - P50,000 increase; Prepaid expenses - P10,00 increase;
Accrued expenses - P20,000 increase; Unearned rental revenue - P15,000 decrease.
During 2022, the owner borrowed P250,000 in notes from the bank and paid off notes of
P150,000 and interest of P25,000. Interest of P15,000 is accrued on December 31. 2022. There
was no accrued interest on notes payable at December 31, 2021. In the same year, the owner
transferred trading securities to the business which were sold for P125,000 to finance the
purchase of inventory items. He also made withdrawals in 2022 of P25,000. What was the net loss
for the year 2022?
A. Php110,000
B. Php100,000
C. Php85,000
D. Php30,000
3) Comprehensive Exam Company encourages its employees older than 60 years old to extend their
employment with the entity by promising a lump sum benefit to equal to 3% of final salary for each
year of service they remain employed by the entity after their 60th birthday provided they remain
employed until they are 65, at which time, in accordance with local laws, employees are required
to retire. The benefit is payable to the employees on retirement. There are five (5) employees
entitled for the benefit whose 60th birthday is on January 1, 2022. Their salary rates for the year
ended December 31, 2022 is P1,200,000.
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In 2022 and 2023, the entity made the following assumptions:
❖ Employee salary rate should increase by 10% compounded each year.
❖ The rate of return on high - quality corporate bonds is 5%.
❖ The employee salary rate for 2023 is P1,320,000.
Assuming that at the beginning of 2023, the management increased the benefit rate to 4% as a
result of plan amendment. How much is the past service cost?
A. Php75,885
B. Php87,846
C. Php216,813
D. Php303,539
4) You noted the following in connection with Third Year Company's biological assets. A herd of 17 2-
year-old animals was held at January 1 of the current period. On July 1, two animals aged 2.5 years
was purchased for 10,800 and one animal was born. No animals were sold or disposed of during
the period. Per-unit fair values less costs to sell (FV - CTS) were as follows:
2-year-old animal on January 1 10,000
Newborn animal at July 1 7,000
2.5-year-old animal on July 1 10,800
New born animal on December 31 7,200
0.5-year-old animal on December 31 8,000
2-year-old animal on December 31 10,500
2.5-year-old animal on December 31 11,100
3-year-old animal on December 31 12,000
Based on the information given, the increase in Fair Value – Cost to Sell of biological assets in the
current period due to physical changes is
A. Php9,300
B. Php28,100
C. Php35,100
D. Php44,400
5) The following records were obtained from CAF Corp. related to the company’s liabilities as of
December 31, 2021.
Accounts payable P650,000
Notes payable, trade P190,000
Notes payable, bank P800,000
Wages and salaries payable P15,000
Interest payable ?
Mortgage notes payable, 10% P600,000
Mortgage notes payable, 12% P1,500,000
Bonds payable P2,000,000
The following additional information pertains to these liabilities.

(a) All trade notes payable are due within six months from the end of the reporting period.
(b) Bank notes payable include two separate notes payable to Allied Bank.
i. A P300,000, 8% note issued March 1, 2019, payable on demand. Interest is payable
every six months.
ii. A 1-year, P500,000, 11 ½% notes issued January 2, 2021. On December 30, 2021, Milk
Tea negotiated a written agreement with Allied Bank to replace the note with a 2-
year, P500,000, 10% note to be issued January 2, 2022. The interest was paid on
December 31, 2021.
(c) The 10% mortgage note was issued on October 1, 2018, with a term of 10 years. Terms of the
note give the holder the right to demand immediate payment if the company fails to make
a monthly interest payment within 10 days of the date the payment is due. As of December
31, 2021, Milk Tea is three months behind in paying its required interest payment.
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(d) The 12% mortgage note was issued May 1, 2015, with a term of 20 years. Principal and
interest payable annually on April 30. A payment of P220,00 is due April 30, 2022. The
payment includes interest of P180,000.
(e) The bonds payable is 10-year, 8% bonds, issued June 30, 2012. Interest is payable semi-
annually every June 30 and December 31.
What amount of current liabilities should CAF Corp. report at December 31, 2021?
A. Php3,938,000
B. Php4,138,000
C. Php3,950,000
D. Php3,998,000
6) CPA Company purchased a patent on January 1, 2019 for P428,400. The patent was being
amortized over its remaining legal life of 15 years. Early 2022, CPA determined that the economic
benefits of the patent would not last longer than 10 years from the date of acquisition. What
amount should be reported in the statement of financial position as patent, net of accumulated
amortization at December 31, 2022?
A. Php257,040
B. Php293,760
C. Php302,400
D. Php314,160
7) The books of FAR Company showed the following balances as of December 31, 2022:
Cash on Hand – P400,000; Cash in Bank–Current Account – P1,400,000; Cash in Bank- Peso
Savings Account – P9,000,000; Escrow deposits - 870,000; Cash in Bank–Unrestricted dollar
deposit – $400,000; Cash in Bank–Restricted dollar deposit – $280,000; Undeposited check from
customers, dated 12/31/2020 - 60,000; Treasury bills, maturing February 28, 2023, acquired
December 1, 2022 – P4,680,000; Money market instrument, maturing February 28, 2023, acquired
March 1, 2022 – P2,000,000; Gift certificates from a generous customer - 35,000; Sinking fund –
P800,000: Investment in equity securities – P600,000.
Additional information:
❖ Cash on hand includes a P80,000 check payable to FAR Company dated January 10, 2023.
❖ During December 2022, checks amounting to P240,000 and P160,000 were drawn against
the current account in payment of accounts payable. The P240,000 check is dated January
15, 2023. The P160,000 check is dated December 31, 2022 but was delivered to the payee
only on January 15, 2023.
❖ The Cash in Bank – peso savings deposit includes a compensating balance amounting to
P2,360,000 which is legally restricted.
❖ The Cash in Bank – dollar deposit (unrestricted) account includes interest of $8,000 directly
credited to FAR Company’s account. The average exchange rate for the year of $1 to
Philippine peso is P45 while the closing rate is P40.
❖ 40% of the investment in equity securities were acquired on December 15, 2022 which were
intended to generate short-term profits and to be sold within 3 months. The remaining were
in a form of preference shares acquired on December 25, 2022 with mandatory redemption
by March 25, 2023.
How much is the Cash and Cash Equivalents to be reported in the 2022 Statement of Financial
Position?
A. Php29,440,000
B. Php29,800,000
C. Php29,860,000
D. P30,825,000
4
8) Financial Accounting Inc. engaged you to assist in the preparation of the December 31, 2020,
financial statements. You are told that on November 30, the correct inventory level was 145,730
units. During the month of December, sales totaled 138,630 units including 40,000 units shipped
on consignment to Tax Corp. a letter received from Tax Corp. indicates that as of December 31, it
has sold 15,200 units and was still trying to sell the remainder. Financial Accounting Inc. uses the
“passing of title” for inventory recognition.
A review of the December purchase orders (P.O) to various suppliers show the following:
P.O. Date Invoice Quantity Date Shipped Date Terms
Date Received
12/05/20 01/02/21 3,600 12/17/20 12/22/20 FOB Destination
12/06/20 01/03/21 7,900 01/05/21 01/07/21 FOB Shipping Point
12/18/20 12/20/20 8,000 12/29/20 01/02/21 FOB Shipping Point
12/22/20 01/05/21 4,600 01/04/21 01/06/21 FOB Destination
12/27/20 01/07/21 3,500 01/05/21 01/07/21 FOB Destination
12/31/20 01/02/21 4,200 01/02/21 01/05/21 FOB Destination
How many units should be included in Financial Accounting Inc.’s inventory on December 31,
2020?
A. 39,900 units
B. 18,700 units
C. 43,500 units
D. 47,700 units
9) Honesty Corporation accounted for noncurrent assets using the revaluation model. On September
1, 2022, the entity classified a land as held for sale. At that date, the carrying amount of the land
was P5,000,000 and the balance in the revaluation surplus was P1,500,000. On the same date,
the fair value of the land was estimated at P5,500,000 and the cost of disposal at P100,000. On
December 31, 2022, the fair value less cost of disposal of the land did not change. The land was sold
on January 31, 2023 for P6,000,000. What amount should be recognized as impairment loss in
2022?
A. Php100,000
B. Php500,000
C. Php400,000
D. Php0
10) Comprehensive Exam Inc. provided you the following selected transactions related to its liabilities.
• The liability for compensated absences of Comprehensive Exam Inc. had a beginning balance
of P555,000, it represents the probable unused sick leave and vacation leave in 2021 and prior
to 2021 carried over to 2022. The company’s policy is to allow the employees to carry over
unused leaves over two years from the year of grant, thereafter, it shall expire. Salary rate for
the current year (2022) increased by 7%. The balance cumulative unused sick leave and
vacation leave are as follows:
Prior to 2021 leaves carried over to 2022 300 days
Leaves earned in 2022 carried over to 2023 600 days
2021 leaves earned carried over to 2022 625 days
Prior to 2021 leaves used in 2022 720 days
Of the total leaves used in 2022, from prior to 2021 leaves used in 2022, 285 were
earned by employee prior to 2021.
• Comprehensive Exam Inc. sold 100,000 brand new, top of the line calculators under a new
sales promotional program. Each calculator carried two coupons which entitled the customer
a P25 cash rebate. The entity estimated that 80% of the coupon will be redeemed even though
only 100,000 coupons were processed during the current year.
• Comprehensive Exam Inc. has a widely published environmental policy in which it undertakes
to clean up all contamination that its production causes. On January 1, 2021, contamination
5
occurs while manufacturing its merchandise. Based on past incidences of such contamination,
a third-party contractor is willing to undertake the cleaning up on behalf of Comprehensive
Exam Inc. It estimates that the cleaning up work would take about two years to complete, and
it provides the following price quotation (based on current prices); Year 1, P200,000 and Year
2, P150,000. Due to general inflation and other price increases, Comprehensive Exam Inc.
estimates that the contractor prices would increase by 4% by the end of year 1 and another
4.5% at the end of year 2. Payments will be made at the end of each year. The current one-year
and two-year risk-free rates are 5% and 5.5% respectively and a 3% adjustment is required for
the risks that the actual outflows be different from the estimate
What total amount should be reported as liability on December 31, 2022?

A. Php1,974,000
B. Php2,007,180
C. Php2,346,275
D. Php2,313,095
11) Objectivity Corporation bought shares of Integrity, Inc. in two batches as follows:
June 10, 2021 2,000 shares at P100 P200,000
December 5, 2021 3,000 shares at P120 360,000
P560,000
Objectivity designated the Integrity shares as at Fair Value through Other Comprehensive Income.
The Integrity shares were quoted at P125 on December 31, 2021. The following were the
transactions for 2022:
March 10 Received cash dividend at P10 per share.
June 20 Received 20% bonus issue. Shares sell at P120 after the
bonus issue
December 10 Sold 3,000 shares at P120 per share (coming from the
December 5, 2021 lot)
The Integrity shares were quoted at 125 at December 31, 2022. How much should Objectivity report
as cumulative other comprehensive income in the equity section of its statement of financial
position at December 31, 2022?
A. Php0
B. Php100,000
C. Php115,000
D. Php125,000
12) On January 1,2021, Financial Accounting Company began operations by issuing at P15 per share
one-half of the 950,000 ordinary shares of P1 par value that had been authorized for issue. In
addition, the entity had 500,000 authorized preference shares of P5 par value. During 2021, the
entity had P1,205,000 of net income and declared P410,000 of dividend. During 2022, 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 2023. The entity
restricted P300,000 of retained earnings for the purchase of the machine.
❖ Issued additional 50,000 preference shares for P9 per share.
❖ Reported P1,215,000 of net income and declared on December 31, 2020 a dividend of
P935,000 to shareholders of record on January 15,2023 to be paid on February 1, 2023.
What amount should be reported as total shareholders' equity on December 31, 2022?
A. Php11,850,000
B. Php11,550,000
C. Php12,485,000
D. Php10,635,000
13) On January 1, 2022, Third Year Corp. sold a machinery to Comprehensive Company for
P1,900,000. Because of the entity's commitment to its customers to provide their needs for the
6
next four years, Third Year Corp. simultaneously leased back the machinery. The transfer of the
asset to the buyer qualifies to be accounted for as a sale under IFRS 15. Information relating to this
transaction follows:
Fair value of machinery 2,200,000
Carrying amount of machinery 1,700,000
Remaining useful life of machinery 8 years
Lease term 4 years
Annual rent payable at the end of each year 400,000
Market rate of interest 10%
How much is the amount credited to gain on sale leaseback?
A. Php71,645
B. Php139,785
C. Php143,645
D. Php183,785
14) At the beginning of the current year, Integrity Company purchased 40% of the outstanding
ordinary shares of PUP CAF Company for P3,500,000 when the net assets of PUP CAF amounted
to P7,000,000. At acquisition date, the carrying amounts of the identifiable assets and liabilities
of PUP CAF were equal to their fair value, except for equipment for which the fair value was
P1,500,000 greater than carrying amount and inventory whose fair value was P500,000 greater
than cost. The equipment has a remaining life of 4 years, and the inventory was all sold during the
current year. PUP CAF Company reported net income of P4,000,000 and paid P1,000,000 cash
dividend during the current year. What is the carrying amount of the investment in associate at
year-end?
A. Php4,450,000
B. Php4,350,000
C. Php4,700,000
D. Php4,850,000
15) PUP CAF owns a hotel resort, which includes a casino, housed in a separate building that is part of
the premises of the entire hotel resort. Its patrons would be largely limited to tourists and non-
resident visitors only. The owner operates the hotel and other facilities on the hotel resort, with the
exception of the casino, which can be sold or leased out under an operating lease. The casino will
be leased to an independent operator. PUP CAF has no further involvement in the casino. The
casino operator will not be prepared to operate it without the existence of the hotel and other
facilities. On December 31, 2022, the following are relevant information for the purpose of
measuring the above assets:
Hotel P200,000,000
Casino 150,000,000
Other facilities 100,000,000
What amount of investment property should PUP CAF report in its December 31, 2022 statement
of financial position?
A. Php100,000,000
B. Php150,000,000
C. Php250,000,000
D. Php450,000,000
16) Third Year Company operates in several different industries. Total sales for Third Year Company
totaled P14,000,000, and total common costs amounted to P6,500,000 for the current year. For
internal reporting purposes, Third Year Company allocated common costs based on the ratio of a
segment’s sales to total sales. Segment BSA contributed 25% to the total sales and incurred specific
costs of P1,100,000. What is the profit of Segment BSA?
A. Php3,500,000
7
B. Php875,000
C. Php2,400,000
D. Php775,000
17) Honesty Company kept all cash in a checking account. An examination of the bank statement for
the month of December revealed a bank statement balance of P8,470,000. A deposit of P950,000
placed in the bank's night depository on December 29 does not appear on the bank statement.
Checks outstanding on December 31 amount to P270,000. The bank statement showed that on
December 25 the bank collected a note for Honesty Company and credited the proceeds of
P935,000 to the entity's account which included P35,000 interest.
Honesty Company discovered that a check written in December for P183,000 in payment of an
account had been recorded as P138,000. Included with the December 31 bank statement was an
NSF check for P250,000 that Honesty Company had received from a customer on December 20.
The bank statement showed a P15,000 service charge for December. What is the unadjusted
balance per book on December 31?
A. Php8,480,000
B. Php8,525,000
C. Php8,435,000
D. Php9,150,000
18) The FAR Corporation granted 100 share options to each of its 200 employees on January 1, 2020.
The option plan allows the employees to purchase a share of the entity's P100 par value ordinary
at P180 per share. Based on the pricing model used by the company, the fair value of each option
on January 1, 2020 is P30. The option plan requires the employees receiving the options to be in
the employ of the company for the next three years. Options are exercisable from January 1 to
December 31, 2023.
On January 1, 2020, it was estimated that 20% of the employees will leave during the next three
years. Actual and revised estimate of employees leaving the company during 2020, 2021 and 2022
are as follows:
2020: 8 employees left; additional 10 employees in 2021 and 2022.
2021: 12 employees left; additional 7 employees in 2022.
2022: 8 employees left.
During 2023, 140 employees exercised their options while the remaining employees allowed their
options to lapse. How much is the compensation expense for each of the year 2022?
A. Php172,000
B. Php516,000
C. Php170,000
D. Php156,000
19) Integrity Company, a calendar-year entity, reported the following income before income tax and
effective tax rate for the first three quarters of the current year:
Income before tax Effective tax rate
First quarter 6,000,000 30%
Second quarter 7,000,000 30%
Third quarter 8,000,000 25%
What is the income tax expense for the third quarter?

A. Php5,250,000
B. Php1,350,000
C. Php2,400,000
D. Php2,000,000
20) Objectivity Corporation has a pre-tax income of P200,000. The following information was
gathered:
8
Fines, surcharges and penalties during the period 70,000
Non-deductible premium on life insurance of key employees 12,000
Interest income received on government securities subject to final tax 10,000
Excess of accelerated depreciation used in taxation over straight-line
depreciation used in financial reporting 20,000
Warranty expense accrued for financial reporting purposes but is tax
deductible only when actually paid 30,000
Rent received in advance 16,000
Income tax payments made in the first three quarters 40,000
Tax rate 30%
Beginning balance of taxable temporary differences 24,000
Beginning balance of deductible temporary differences 18,000
Based on the above data, the amount of current income tax payable is
A. Php89,400
B. Php81,600
C. Php49,400
D. Php41,600
21) Data regarding the defined benefit plan of Comprehensive Exam Company follow:
Fair value of plan assets, Jan. 1 1,000,000
Return on plan assets 500,000
Contributions to the fund 200,000
Present value of defined benefit obligation, Jan. 1 1,700,000
Current service cost 1,100,000
Benefits paid during the period 300,000
Discount rate 12%
Settlement price of DBO 60,000
Present value of DBO settled 25,000
How much is the net benefit asset (or liability) to be recognized in the statement of financial
position on December 31 of the current year?
A. Php1,000,000
B. (Php1,000,000)
C. Php1,339,000
D. (Php1,339,000)
E. Answer not given
22) BSA Company's net income last year was P292,000 and cash dividends declared and paid to the
company's stockholders totaled P56,000. Changes in selected balance sheet accounts for the year
appear below:
Increase
Debit balances: (Decrease)
Accounts receivable 40,000
Prepaid expenses (12,000)
Credit balances:
Accumulated depreciation 64,000
Accounts payable (16,000)
Bonds payable 320,000
Based solely on this information, the net cash provided by operations under the indirect method
on the statement of cash flows would be
A. Php312,000
B. Php340,000
9
C. Php368,000
D. Php392,000
23) BSMA Enterprises uses leases as a method of selling its products. On April 1, 2022, an asset was
leased to Third year Enterprises. on a contract specifying that ownership of the asset will transfer
to the lessee at the end of the lease period. The asset is expected to be economically useful for 25
years. Annual lease payments do not include executory costs. Other terms of the agreement are
as follows:
Cost of the asset P1,500,000
Lease payment P225,000
Estimated residual value P78,000
Implicit rate 10%
Date of first lease payment April 1, 2022
Lease period 20 years
Based on the given information, the profit on sale recognized by Third Year Enterprises. amounts
to (Round off present value factors to four decimal places.)
A. Php415,560
B. Php427,151
C. Php607,103
D. Php618,694
24) On January 1, 2022, PUP CAF Corporation purchased a tract of land with a building for
P1,800,000. Additionally, PUP CAF paid a real state broker's commission of P108,000, legal fees
of P18,000 and title guarantee insurance of P54,000. Shortly after acquisition, the building was
razed at a cost of P225,000.
PUP CAF entered into a P9,000,000 fixed-price contract with Cabanatuan Builders, Inc. on March
1, 2022 for the construction of an office building on the land site. The building was completed and
occupied on September 30, 2023. Additional construction costs were incurred as follows:
Plans, specifications and blueprints P36,000
Architect's fees for design and supervision 285,000
The building is estimated to have a forty-year life from date of completion and will be depreciated
using the 150%-declining-balance method. To finance the construction cost, PUP CAF borrowed
P9,000,000 on March 1, 2022. The loan is payable in ten annual installments of P900,000 plus
interest at the rate of 14%. PUP CAF used part of the loan proceeds for working capital
requirements. PUP CAF average amounts of accumulated building construction expenditures were
as follows:
For the period Mar. 1 to Dec. 31, 2022 P2,700,000
For the period Jan. 1 to Sept. 30, 2023 6,900,000
Based on the given information, determine the amount of depreciation expense of the office
building for the year 2023
A. Php87,384
B. Php97,130
C. Php99,239
D. Php102,094
25) On January 1, 2022, FAR Co. acquired a 5-year bonds with a total face value of P5,000,000 and
stated interest of 12% per year payable annually on December 31. The bonds were acquired to yield
10%. The bonds are to be appropriately classified as financial asset at amortized cost. On January
3, 2023, the ½ of the bonds were sold at 105.
On November 1, 2023, FAR Co. changed its business model. It was determined that the remaining
financial asset at amortized cost should be reclassified to held for trading securities on
reclassification date. On December 31, 2023, the bonds are quoted at 102. On January 1, 2024, the
10
bonds were quoted at 104. Based on the above data, how much is the realized gain (loss) on sale in
2023 to be recognized in the profit or loss?
A. Php0
B. Php25,000
C. (Php33,494)
D. (Php64,540)
26) Financial Accounting Company owns about one million hectare of forest land. Biological assets
are measured at their fair value at each balance sheet date. The fair value of biological assets is
determined based among other estimates on growth potential, harvesting, price development and
discount rate. Changes in estimates could lead to recognition of significant fair value changes in
the statement of comprehensive income. The following relevant data are made available involving
the company's biological assets:
Fair value - January 1, 2022 - P20,740,000; Fair value of acquisitions during the year - 20,000;
Sales (at fair value) - 400,000; Fair value of harvest during the year - 2,320,000; Translation
differences (credit) - 40,000; Fair value, December 31, 202221,900,000
What amount of gain due to change in fair value should the company report in its December 31,
2022 statement of comprehensive income?
A. Php0
B. Php1,160,000
C. Php1,200,000
D. Php3,900,000
27) BSMA Corporation pays Its outside salespersons fixed annual salaries and commissions on net
sales. Sales commissions are computed and paid on an annual basis (to be paid in the month after
year end), and the fixed salaries are treated as advances against commissions. However, if the
fixed salaries for salespersons exceed their sales commissions, such excess is not charged back to
them. Pertinent data for the three salespersons are as follows:
Salesperson Fixed Salary Net Sales Commission Rate
ABM P10,000 P200,000 4%
STEM 14,000 400,000 6%
HUMSS 18,000 600,000 6%
Totals P42,000 P1,200,000
BSMA Corporation sells its products in reusable, expensive containers. The customer charged a
deposit for each container delivered and receives a refund for each container returned within two
years after the year of delivery. BSMA accounts for the containers not returned within the time
limit as being retired by sale at the deposit amount. Information for 2022 is as follows:
Deposits for containers at December 31, 2021 from deliveries in:
2020 150,000
2021 430,000
Deposits for containers delivered in 2022 780,000
Deposits for containers returned in 2022 from deliveries in:
2020 90,000
2021 250,000
2022 286,000
What amount should BSMA Corporation report as Liability on December 31, 2022?
A. Php494,000
B. Php522,000
C. Php528,000
D. Php702,000
11
28) On December 31, 2021, Comprehensive Exam Company reported a deferred tax liability of
P700,000 and a deferred tax asset of P200,000. At the end of 2022, Comprehensive Exam
Company reported a deferred tax liability of P875,000, and a deferred tax asset of zero. Based on
the given data, the deferred tax expense to be reported by Comprehensive Exam Company for
2022 is
A. Php175,000
B. Php200,000
C. Php375,000
D. Php875,000
E. Answer cannot be determined.
29) On January 1, 2019, Objectivity Co. received a P16,000,000 note receivable from BSA Inc. The
principal is due on December 31, 2023 while interest at 10% is due annually at the end of each year
for five (5) years. BSA Inc. made the required payments during 2019 and 2020. However, during
2021, BSA Inc. began to experience financial difficulties, requiring Objectivity Co. to reassess the
collectability of the note. Interest was accrued in 2021. On December 31, 2021, Objectivity Co.
determined that the note has been impaired and projects future cash flows as follows:
Expected date of collection Amount of cash flow
December 31, 2022 P1,600,000
December 31, 2023 3,200,000
December 31, 2024 4,800,000
How much is the loan impairment in 2021?

A. Php9,894,720
B. Php8,294,720
C. Php7,705,280
D. Php2,189,440
30) On January 1, 2021, Financial Accounting Co. decided to sell a machinery with a cost of P1,200,000
and accumulated depreciation of P480,000. Depreciation of P10,000 per month has been
provided by the company since it was acquired. The machinery will continue to be operated until
sold. The company undertook all the necessary actions to be able to classify the asset as held for
sale. On the same date, the fair value of assets amounted to P620,000 while the costs to sell total
P20,000.
On February 28, 2021, the plant had not been sold but there has been objective evidence that the
fair value went up to P810,000. On July 1, 2021, Financial Accounting Co. sold the machinery for
P800,000 after incurring selling costs of P50,000. How much is the impairment loss to be
recognized on January 1, 2021?
A. Php0
B. Php100,000
C. Php120,000
D. Php500,000
31) BSA Corporation purchased a new equipment on December 31, 2020 for the purpose of leasing it.
The equipment was delivered the same day (by prior arrangement) to PUP CAF Company, a lessee.
Details about the lease are given below:
Cost of equipment to BSA Corporation P550,000
Estimated useful life and lease term 8 years
Expected residual value (unguaranteed) P40,000
BSA Corporation's implicit rate of interest 12%
PUP CAF's incremental borrowing rate 14%
Date of first lease payment Dec. 31, 2020
Additional information:
12
a) At the end of the lease, the equipment will revert to BSA Corporation.
b) PUP CAF is aware of BSA Corporation's rate of implicit interest.
c) The lease rental consists of equal annual payments.
Based on the information above, determine the total interest income earned by the lessor over the
lease term (Round off present value factors to four decimal places.)
A. Php183,312
B. Php257,600
C. Php271,320
D. Php335,736
32) Integrity Company used the retail inventory method to estimate inventory at year-end.
Cost Retail
Beginning inventory 720,000 1,000,000
Purchases 4,080,000 6,300,000
Net markups 700,000
Net markdowns 500,000
Sales 6,820,000
Estimated normal shoplifting losses 80,000
Under the average cost retail method, what is the estimated cost of ending inventory?
A. Php408,000
B. Php600,000
C. Php360,000
D. Php384,000
33) BSA Company has incurred P200,000 of research expenditure on a project to develop a new type
of fuel and has expensed these costs. On January 2, 2022, CPA Company purchases the research
project, including certain patents that have been registered by BSA Company for P300,000 and
recognizes the costs as an intangible asset. Subsequently, CPA Company incurred P400,000 of
expenditure on completing the research phase and decides to develop the product commercially.
It incurs a further cost of P600,000 in bringing the product to a stage where the conditions for
recognizing development costs of an internally generated intangible asset are met. Further costs
of P2,000,000 are incurred in bringing the product into a condition where it is ready for use in
the manner the management intend. Initial marketing costs and losses are incurred of P400,000
before the product was successfully launched. What total amount should CPA Company recognize
as an asset related to the above costs?
A. Php300,000
B. Php2,300,000
C. Php2,700,000
D. Php3,300,000
34) The capital accounts of CAF, Inc. on December 31, 2019 were as follows:
Preference Share Capital, P20 par, 20,000 shares P400,000
Share Premium - Preference 160,000
Ordinary Share Capital, P80 par, 50,000 shares 4,000,000
Share Premium - Ordinary 600,000
Retained Earnings 360,000
During the year ending December 31, 2020. The following summarizes the transactions affecting
the shareholders' equity:
April 30 1,000 preference shares were retired at P25 per share.
June 15 2,000 treasury shares were purchased at P85 per share.
June 30 A 2-for-1 share split of the company's ordinary share was
declared.
July 31 800 treasury shares were reissued at P50 per share.
Dec. 31 Profit for 2020 was P900,000.
13
What was the total shareholders' equity on December 31, 2020?
A. 6,294,000
B. 6,270,000
C. 6,265,000
D. 5,520,000
35) Honesty Corporation's transactions for the year ended December 31, 2021 included the following:
❖ Purchased real estate for P550,000 cash which was borrowed from a bank.
❖ Sold investment securities for P500,000.
❖ Paid dividends of P600.000.
❖ Issued 500 ordinary shares for P250,000 cash.
❖ Purchased machinery and equipment for P125,000 cash.
❖ Paid P450,000 toward a bank loan.
Honesty's net cash used in financing activities for 2021 was

A. Php50,000
B. Php250,000
C. Php450,000
D. Php500,000
36) FAR, Inc. had outstanding 10%, P1,000,000 face value, convertible bonds maturing on December
31, 2022 on which interest is paid June 30 and December 31. After amortization through June 30,
2020, the unamortized balance in the bond discount account was P30,000. The share premium
from bond conversion privilege had a balance of P50,000. On that date, all these bonds were
converted into 40,000 ordinary shares with P20 par value. At that time, each share of CAF
ordinary share capital sells for P23. FAR incurred expenses of P10,000 in connection with the
conversion. The conversion of the bonds to ordinary shares shall result to an increase in share
premium - ordinary by
A. Php160,000
B. Php170,000
C. Php180,000
D. Php210,000
37) A building was acquired on January 1, 2010 at an original cost of P4,000,000 (no residual value).
Depreciation on the building is computed on a straight-line basis and the annual depreciation on
cost is P160,000. An impairment loss of P500,000 was recognized on December 31, 2018 and
depreciation for year 2019 was computed based on the asset's recoverable amount at December
31, 2018. On December 31, 2019, the entity decided to measure its building accounts using the
revaluation model. This building was then appraised at a fair market value of P3,240,000. What is
the revaluation surplus recorded in this building account on December 31, 2019?
A. Php1,340,000
B. Php840,000
C. Php340,000
D. Php0
38) On July 1, 2020, Integrity Company purchased P500,000 face value Objectivity Company 8%
bonds for P455,000 plus accrued interest to yield 10%. The bonds were designated as at fair value
through profit or loss. The bonds mature on January 19, 2024 and pay interest annually on January
1. On December 31, 2020, the bonds had a fair value of P472,500. On February 14, 2021, Integrity
sold the bonds for P460,000 plus accrued interest. On its December 31, 2020 statement of
financial position, what amount should Integrity Company report as debt investments?
A. 455,000
B. 457,750
C. 460,000
D. 472,500
39) Comprehensive Company started business at the beginning of current year. The entity established
an allowance for doubtful accounts estimated at 12% of total credit sales. During the year, the
entity wrote off P60,000 of uncollectible accounts. Further analysis showed that merchandise
14
purchased amounted to P8,000,000 and ending merchandise inventory was P2,000,000. Goods
were sold at 50% above cost. The total sales comprised 70% sales on account and 30% cash sales.
Total collections from customers, including cash sales, amounted to P6,500,000. What is the net
realizable value of accounts receivable at year-end?
A. Php1,980,000
B. Php1,744,000
C. Php2,980.000
D. Php2,744,000
40) Third Year Ka Na Company and its subsidiaries have a provided you with a list of property items
they own:
Land held by Third Year Ka Na for undetermined future use P10,000,000
A vacant building owned by Third Year Ka Na and to be leased out under 20,000,000
an operating lease
Property held by a subsidiary of Third Year Ka Na, a real estate firm, in 50,000,000
the ordinary course of business
Property held by Third Year Ka Na for use in production 12,000,000
A hotel owned by Third Year Ka Na’s subsidiary; the subsidiary also 60,000,000
provides security services to its guests
A building owned by Third Year Ka Na being leased out to Congrats, one 25,000,000
of Third Year Ka Na’s subsidiaries, under operating leases
What amount shall be shown as Investment Property in the consolidated statement of financial
position of Third Year Ka Na and its subsidiaries?
A. Php20,000,000
B. Php30,000,000
C. Php85,000,000
D. Php90,000,000
15
ANSWER KEY
THEORIES
1) A
II is false. The total cost should be allocated based on the individual assets’ relative fair values
instead of the carrying amounts.
III is false. The enterprise is usually recorded at the fair market value of shares/securities issued, or
the fair market value of asset acquired, whichever is more clearly evident.
V is false. If an asset is acquired under a deferred payment plan and there is no available cash price,
the asset is recorded at an amount equal to the present value of all payments using an implied
interest rate.
VI is false. Impairment loss is the carrying amount of the asset exceeding the fair market value.
2) D
The cumulative balance recognized in the OCI as a result of measuring the equity investment at fair
value through other comprehensive income shall not be recycled to profit or loss but may be
transferred to retained earnings.
3) C
Statement 1 is correct. The allocation of the transaction price is based on the stand-alone selling
prices of the products sold and premiums.
Statement 2 is incorrect. In the case of premiums as a component of the transaction price, cash
received from the customer during the redemption of premiums shall be recorded as sales revenue.
Statement 3 is incorrect. The transaction price on the contract shall be apportioned to the
performance obligation. The allocation shall be based on the relative stand-alone selling prices of
each distinct good or service promised in the contract. Thus, when an entity provided customer
loyalty awards on the principal goods or service sold, the consideration received or receivable by
the entity is apportioned between the product or service sold and the customer loyalty awards
redeemable in the future.
4) C
Lease receivable in a direct-financing lease is the present value of minimum lease payments.
5) D
If there is a subsequent increase in the fair value less cost of disposal of a previously impaired non-
current asset classified as held for sale, IFRS 5: Non-Current Asset Held for Sale and Discontinued
Operations provides that the gain shall be recognized only to the extent of cumulative impairment
losses previously recognized.
6) C
Statement 2 is incorrect. The prior period errors are shown as an adjustment of the beginning
balance of retained earnings to arrive at the corrected beginning balance.
Statement 3 is incorrect. If the entity does have the discretion to refinance or roll over an obligation
for a period of at least 12 months after the reporting period under an existing loan facility, the
obligation is classified as noncurrent even if it would otherwise be due within a shorter period.
Statement 4 incorrect. The following are examples of investing activities: (a) Cash advances and
loans to other parties (other than advances and loans made by financial institution, (b) Cash
payment for future contract, forward contract, option contract and swap contract, (c) Cash
receipts from sales of equity instruments of other entities and interests in joint venture.
7) C
The principles for recognizing and measuring losses from inventory write-downs, restructurings,
or impairments in an interim period are the same as those that an entity would follow if it prepared
only annual financial statements. However, if such items are recognized and measured in one
interim period and the estimate changes in a subsequent interim period of that financial year, the
original estimate is changed in the subsequent interim period either by accrual of an additional
amount of loss or by reversal of the previously recognized amount.
8) D
A bank reconciliation is a schedule that accounts for the differences between cash balance shown
on the bank statement and the cash balance shown on the general ledger.
9) D
16
The amount of cash paid by the investor would be increased by accrued interest from May 1 to June
1.
10) D
Offsetting in financial statements is accomplished when gain or loss from disposal of a noncurrent
asset is reported by deducting from the proceeds the carrying amount of asset and the related
disposal costs.
11) B
Statement 1 is incorrect. The retail method uses similar margins for measuring inventories.
Statement 3 is incorrect. The cost flow assumption does not necessarily match the actual flow of
goods (if that were the case, most companies would use the FIFO method). Instead, it is allowable
to use a cost flow assumption that varies from actual usage.
12) A
Under the concept of financial capital maintenance where capital is defined in terms of nominal
monetary units, increases in the prices of assets held over the period, conventionally referred to as
holding gains, are conceptually profits but they may not be recognized as such until the assets are
disposed of in an exchange transaction.
13) B
Segment liabilities is not a criterion used to determine reportable segments under PFRS 8.
14) A
An appropriate funding must be established to ensure that enough fund would be available at
retirement.
15) B
Statement III is incorrect. Appropriation for retained earnings does not affect the total amount of
retained earnings.
Statement IV is incorrect. A callable preference share has no definite redemption date as this is
dependent on the call of the issuer.
Statement V is incorrect. In the event that there is no bidder for the delinquent shares, the shares
will be issued in the name of the corporation and will be placed in treasury.
Statement VI is incorrect. If treasury shares are subsequently retired, the treasury shares account
is credited at cost.
Statement VII is incorrect. Gain on reissuance of treasury shares will not affect the balance of
retained earnings.
16) A
The FRSC recognizes that in a limited number of cases there may be a conflict between the
Conceptual Framework and a Philippine Financial Reporting Standard. In those cases where there
is a conflict, the requirements of the Philippine Financial Reporting Standard prevail over those of
the Conceptual Framework.
17) A
Transfers from investment property to property, plant, and equipment are appropriate when there
is change of use.
18) B
Taxable temporary differences are differences that will result in future taxable amount in
determining taxable income of future periods.
19) E
Statement I is incorrect. The management of an entity has the primary responsibility for the
preparation and presentation of financial statements.
Statement II is incorrect. Materiality of an item depends on the relative size rather than absolute
size thus what is material for one entity may be immaterial for another.
Statement III is incorrect. IAS 10 prohibits the preparation of financial statements on a going
concern basis if the management determines after reporting period that it intends to liquidate the
entity or cease trading or that it has no realistic alternative but to do so.
17
Statement IV is incorrect. Retrospective adjustments and retrospective restatements are presented
in the statement of changes in equity as adjustment to the beginning balance of retained earnings
rather than as changes in equity during the period.
20) B
Charging bad debts as accounts are written off as uncollectible is the method of determining bad
debt expense least likely to properly match expense and revenue.
21) C
Total net income over the life of an entity is the same under the cash basis and accrual basis.
22) B
Statement 1 is incorrect. The agricultural produce growing on bearer plant is classified as biological
asset. Once harvested, the agricultural produce is measured at fair value less cost of disposal at the
point of harvest. The fair value less cost of disposal at point of harvest is the deemed cost of
inventory.
Statement 3 is incorrect. The presumption can be rebutted only on initial recognition for a biological
asset for which quoted market prices are not available and for which alternative fair value
measurements are determined to be clearly unreliable.
23) C
When the options are immediately exercisable, compensation expense is immediately recognized
under a share option plan.
24) A
If an entity neglected to amortize the discount on outstanding bonds payable, the interest expense
is understated and the bond carrying amount is also understated.
25) D
All statements are correct except that in Statement V, if finite, either the useful lives or the
amortization rate should be used.
18
PROBLEMS
1) A. Php559,700
Cash (360,000 + 40,000) 400,000
Equity investments at fair value through profit or loss (at fair value) 120,000
Notes receivable 257,000
Trade accounts receivable, net (69,000-5,800+4,600+15,000) 82,800
Merchandise inventory 198,500
Liability from bank overdraft (40,000)
Trade accounts payable (85,000 + 15,000 + 25,000 ) (129,600)
Employees income tax withheld (73,000)
Notes payable (290,000 - 150,000) (140,000)
Bonds payable (450,000/5) (90,000)
Income tax payable (26,000)
Working Capital 559,700
2) D. Php30,000
Increase in cash 250,000.00
Increase in merchandise inventory 130,000.00
Increase in prepaid expense 10,000.00
Decrease in earned rentals 15,000.00
Total increase in net assets 405,000.00
Decrease in accounts receivable 150,000.00

Increase in accounts payable 50,000.00
Increase in accrued expense 20,000.00
Net increase in notes payable 100,000.00
Increase in accrued interest 15,000.00
Total decrease in net assets 335,000.00
Total increase in net assets 405,000.00

Total decrease in net assets (335,000.00)
Net effect to equity 70,000.00
Transferred trading securities (125,000.00)
Withdrawal 25,000.00
Net loss (30,000.00)
3) A. Php75,885
Salary in year 2022 1,200,000

Multiplied by future value factor 1.4641
Expected final salary 1,756,920
Multiplied by benefit rate 3%
Multiplied by number of employees 5
Expected annual benefits - 2022 263,538
Salary in year 2023 1,320,000

Multiplied by future value factor 1
Expected final salary 1,756,920
Multiplied by benefit rate 4%
Multiplied by number of employees 5
Expected annual benefits - 2023 351,384
Expected annual benefit at 4% 351,384

Expected annual benefit at 3% (263,538)
Increase in annual benefits 87,846
Multiplied by past years earned 1
Past cost recognized in 2023 87,846
19
Multiplied by present value factors 0.8638
Past service cost 75,885
4) C. Php35,100
Physical
Current Previous FV-CTS on FV-CTS on
change per
age age current age previous age
unit
Existing, January 1 3 2 P12,000 P10,500 P1,500
Acquired, July 1 3 2.5 P12,000 P11,100 P900
Born, July 1 0.5 0 P8,000 P7,200 P800
Existing, January 1 (P1,500 * P17) P25,500

Acquired, July 1 (P900 * 2) 1,800
Born, July 1 (P800 * 1) 800
Initial recognition of new born (P7,000 * 1) 7,000
Increase in FV-CTS due to physical changes P35,100
5) A. Php3,938,000
Accounts payable P650,000
Notes payable – trade 190,000
Notes payable – bank 300,000
Wages and salaries payable 15,000
Interest payable 143,000
Mortgage note payable (with breach of covenant) 600,000
Mortgage note payable – 12% (P220,000 – 180,000) 40,000
Bonds payable, due 07/01/22 2,000,000
Total current liabilities, 12/31/21 P3,938,000
6) B. Php293,760
Original cost P428,400
Amortization from 01/01/19 to 01/01/2022 (P428,400 × 3/15) (85,680)
Carrying value on January 1, 2022 P342,720
Amortization for 2022 (P342,720 ÷ 7 years) (48,960)
Carrying value, December 31, 2022 P293,760
New life from acquisition 10 years

Less: expired life from acquisition to date of change 3 years
Remaining new life as of January 1, 2022 7 years
7) B. Php29,800,000
Cash on hand (400,000 - 80,000) 320,000
Cash in bank - current account (1,400,000 + 240,000 + 160,000) 1,800,000
Cash in bank - peso savings account (9,000,000 - 2,360,000) 6,640,0000
Cash in bank - unrestricted dollar deposit ($400,000 x P40) 16,000,000
Treasury bills 4,680,000
Investment in preference shares (60% x 600,000) 360,000
Cash and Cash Equivalents 29,800,000
8) C. 43,500 Units
Inventory quantity, November 30 145,730
December purchases:
Purchase order - 12/05/20 3,600
Purchase order - 12/18/20 8,000
Units available for sale 157,330
Units sold in December:
Consignment sales (15,200)
Other sales (138,630 – 40,000) (98,630)
Inventory quantity, December 31 43,500
20
9) A. Php100,000
Carrying amount equal to fair value 5,500,000.00
Fair value less cost of disposal (5,500,000 - 100,000) (5,400,000.00)

Impairment loss for 2022 100,000.00
10) B. Php2,007,180
Compensated absences, beginning 555,000
Divided by number of leaves carried over to 2022 (300 + 625) 925
Salary rate during 2021 600
Multiplied by increase in salary rate 1.07
Salary rate during 2022 642
Number of leaves, beginning 925

Number of leaves, earned in 2022 600
Total number of leaves during 2022 1,525
Leaves used in 2022 (720)
Leaves expired in 2022 (300 - 285) (15)
Leaves to carry over to 2023 790
Multiplied by salary rate for 2022 642
Liability for compensated absences 507,180
Coupons to be redeemed (200,000 * 80%) 160,000

Multiplied by cash rebate per coupon 25
Rebate expense 4,000,000
Rebate paid (100,000*25) (2,500,000)
Rebate liability 1,500,000
Liability for compensated absences 507,180

Rebate liability 1,500,000
Total amount reported as liability 2,007,180
11) C. Php115,000
June 10 lot:
Fair value, 12/31/2022 (2,400 shares * 125) P300,000
Original cost (200,000) P100,000
December 5 lot:
Fair value, 12/31/2022 (600 shares * 125) P75,000
Original cost (360,000 * 600/3,600) (60,000) 15,000
Cumulative other comprehensive income, December 31, 2022 P115,000
12) B. Php11,550,000
Issuance of ordinary shares on January 1, 2021 (950,000 * 1/2 * 15) 7,125,000
Net income in 2021 1,205,000
Dividends declared in 2021 (410,000)
Shareholders' equity - December 31, 2021 7,920,000
Issuance of ordinary shares (100,000 *17) 1,700,000
Issuance of preference shares (150,000 * 8) 1,200,000
Issuance of preference shares (50,000 * 9) 450,000
Net income in 2022 1,215,000
Dividends declared in 2022 (935,000)
Total shareholders' equity - December 31, 2020 11,550,000
13) C. Php143,645
Annual lease payments 400,000

21
Present value factor 3.1699
Fair value of rights retained 1,267,960
Fair value of rights retained 1,567,960

Divided by fair value of equipment 2,200,000
Multiplied by carrying value 1,700,000
Carrying value of right retained 1,211,605
Carrying value of equipment 1,700,000

Carrying value of right retained (1,211,605)
Carrying value of right transferred 488,395
Total proceeds 1,900,000

Fair value of rights retained (1,267,960)
Selling price of rights transferred 632,040
Carrying value of right transferred (488,395)
Gain on sale lease back 143,645
14) A. Php4,450,000
Cost 3,500,000
Carrying amount of interest acquired (7,000,000 * 40%) (2,800,000)
Excess of cost over carrying amount 700,000
Excess of applicable to equipment (1,500,000 * 40%) (600,000)
Excess of applicable to inventory (500,000 * 40%) (200,000)
Excess of fair value over cost (100,000)
Acquisition cost 3,500,000

Excess of fair value over cost 100,000
Share in net income (4,000,000 * 40%) 1,600,000
Amortization of excess of cost - equipment (600,000/4) (150,000)
Amortization of excess of cost - inventory (200,000)
Cash dividends (1,000,000 * 40%) (400,000)
Carrying amount of investment in associates 4,450,000
15) B. Php150,000,000
Management should classify the hotel and other facilities as property, plant and equipment
and the casino as investment property since it can be sold separately or leased out under an
operating lease. If the casino could not be sold or leased out separately on an operating lease,
because the owner- occupied portion is not insignificant, the whole property would be treated
as an owner-occupied property.
16) D. Php775,000
Sales – Segment BSA (25% ×14,000,000) 3,500,000
Specific costs (1,100,000)
Allocated common costs (25% × 6,500,000) (1,625,000)
Segment profit 775,000
17) B. Php8,525,000
Balance per bank 8,470,000
Deposit in transit 950,000
Checks outstanding (270,000)
Adjusted balance per bank 9,150,000
Adjusted balance per bank 9,150,000

Service charge 15,000
NSF check 250,000
Book error (183,000 - 138,000) 45,000
22
Note collected by the bank for the depositor (935,000)
Unadjusted balance per book 8,525,000
18) C. Php170,000
2020 2021 2022
Number of stock options 100 100 100
Multiplied by employees entitled 182 173 172
Total stock option 18,200 17,300 17,200
Multiplied by fair value of stock option P30 P30 P30
Total fair value P546,000 P519,000 P516,000

Multiplied by vesting period ratio 1/3 2/3 3/3
Cumulative compensation Expense P182,000 P346,000 P516,000
Compensation expense - prior years - (182,000) (346,000)
Compensation expense - current P182,000 P164,000 P170,000
19) B. Php1,350,000
Cumulative income tax (25% x21,000,000) 5,250,000
First quarter (30% × 6,000,000) (1,800,000)
Second quarter (30% × 7,000,000) (2,100,000)
Third quarter income tax expense 1,350,000
20) C. Php49,400
Accounting income 200,000
Permanent differences:
Interest income received on government securities subject to final tax (10,000)
Fines, surcharges and penalties during the period 70,000
Non-deductible premium on life insurance of key employees 12,000
Accounting income subject to tax 272,000
Temporary differences:
Excess of depreciation for tax purposes (20,000)
Warranty expense accrued 30,000
Rent received in advance 16,000
Taxable income 298,000
Taxable income 298,000

Current tax rate 30%
Current income tax expense 89,400
Income tax payments made in the first three quarters (40,000)
Income tax payable 49,400
21) D. (Php1,339,000)
Fair value of plan asset, January 1 1,000,000
Return on plan asset 500,000
Contributions to the fund 200,000
Benefits paid during the period (300,000)
Settlement Price of DBO (60,000)
Fair value of plan asset, December 31 1,340,000
Defined benefit obligation, January 1 1,700,000

Interest on DBO (1,700,000 * 12%) 204,000
Current service cost 1,100,000
23
Present value of DBO settled (25,000)
Benefits paid (300,000)
Defined benefit obligation, December 31 2,679,000
Fair value of plan asset, December 31 1,340,000

Defined benefit obligation, December 31 (2,679,000)
Net benefit asset (liability) in December 31 (1,339,000)
22) A. Php312,000
Net income 292,000
Increase in accounts receivable (40,000)
Decrease in prepaid expenses 12,000
Increase in accumulated depreciation - depreciation expense 64,000
Decrease in accounts payable (16,000)
Net cash provided by operating activities 312,000
23) E. Answer not given.

None. The lessee does not recognize profit on sale. The profit on sale in this problem that will
be recognized by the lessor (BSMA Enterprises) is Php607,103.
24) C. Php99,239
Cost of razing the existing building 225,000
Fixed-price contract cost 9,000,000
Plans, specifications, and blueprints 36,000
Architect's fees and design supervision 285,000
Capitalizable borrowing costs:
March 1 to December 31, 2022 (P2,700,000 * 14% * 10/12) 315,000
January 1 to September 31, 2023 (P6,900,000 *14% * 9/12) 724,500
Total cost of the office building 10,585,500
Cost of building 10,585,500

Multiplied by depreciation rate (1/40 * 1.5) 3.75%
Multiplied by depreciation period in 2023 3/12
Depreciation expense in 2023 99,239
25) C. (Php33,494)
Present value of principal (5,000,000 * 0.6209) 3,104,500
Present value of interest (600,000 * 3.7908) 2,274,480
Present value of the investment bonds 5,378,980
Premium amortization (600,000-537,908) (62,092)
Carrying value 5,316,888
Net selling price (5,000,000 * 1/2 * 105) 2,625,000

Carrying value (5,316,988 * 1/2) (2,658,494)
Gain/Loss on sale (33,494)
26) D. Php3,900,000
Fair value - January 1, 2022 P20,740,000

Acquisitions 20,000
Harvest (2,320,000)
Sales (400,000)
Translation adjustment (40,000)
Fair value, December 31, 2022 (21,900,000)
Increase in fair value – recognized as a gain P3,900,000
27) D. Php702,000
Commissions payable
24
Commission
Salesperson Commission Fixed Salary Rate
ABM (P200,000 × 4%) P8,000 P10,000 P0
STEM (P400,000 × 6%) 24,000 14,000 10,000
HUMSS (P600,000 × 6%) 36,000 18,000 18,000
Total P28,000
Liability for deposits on returnable containers

Deposits Returned Balance
2020 P150,000 P90,000 P60,000
2021 430,000 250,000 180,000
2022 780,000 286,000 494,000
The total amount of liability for deposits on returnable containers is P674,000 (2021 and 2022
balances), because the company's policy is to refund deposits only if containers are returned
within the two-year prior from the year of delivery, as a result, the P 60,000 balance from
2020 delivery not returned at the end of 2022 is no longer an accounting liability for the reason
that the 2-year expiration period had elapsed.
Commissions payable P28,000

Liability for deposits on returnable containers 674,000
Total liabilities P702,000
28) C. Php375,000
Increase in Deferred Tax Liability (875,000 - 700,000) 175,000
Decrease in Deferred Tax Assets 200,000
Deferred Tax Expense 375,000
29) A. Php9,984,000
Amount of cashflow PVF Present value
1,600,000 0.9091 1,454,560
3,200,000 0.8264 2,644,480
4,800,000 0.7513 3,606,240
Total 7,705,280
Principal 16,000,000
Accrued interest receivable 1,600,000
Present value of expected cash flows (7,705,280)
Loan impairment 9,894,720
30) C. Php120,000
Cost 1,200,000
Accumulated Depreciation (480,000)
Carrying amount 720,000
Fair value less cost to sell (600,000)
Impairment Loss 120,000
31) B. Php257,600
Cost of equipment 550,000
Present value of unguaranteed residual value (40,000 * 0.4039) (16,156)
Net investment to be recovered from lease payments 533,844
Divided by the present value of annuity due 5.5638
Annual lease payment 95,950
Gross investment of the lease:

Lease payments (95,950 * 8) 767,600
Unguaranteed residual value 40,000
Less net investment in the lease
PV of lease payments (533,844)
PV of unguaranteed residual value (16,156)
25
Unearned interest income 257,600
32) D. Php384,000
Cost Retail
Beginning inventory 720,000 1,000,000
Purchases 4,080,000 6,300,000
Net markups 700,000

Available for sale – conservative
4,800,000 8,000,000
Cost ratio (4,800,000/8,000,000) 60%
Net markdowns (500,000)
Available for sale - average 4,800,000 7,500,000
Cost ratio (4,800,000/7,500,000) 64%
Sales 6,820,000
Estimated shoplifting losses (80,000)
Ending inventory at retail 600,000
Conservative cost (600,000 × 60%) 360,000
Average cost (600,000 x 64%) 384,000
33) B. Php2,300,000
Cost to purchase of research 300,000
Development cost 2,000,000
Total cost to be capitalized 2,300,000
34) C. Php6,265,000
Total shareholders' equity, December 31, 2019 5,520,000
4/30 Retirement of preference shares (1,000 *25) (25,000)
6/15 Purchase of treasury shares (2,000 * 85) (170,000)
6/30 2-for-1 share split -
7/31 Reissue of treasury shares (800 * 50) 40,000
12/31 Profit for 2020 900,000
Total shareholders' equity, December 31, 2020 6,265,000
35) B. Php250,000
Issued 500 ordinary shares 250,000
Cash borrowed from the bank 550,000
Paid dividends (600,000)
Paid toward a bank loan (450,000)
Net cash used in financing activities (250,000)
36) D. Php210,000
Carrying value of bonds converted (1,000,000 - 30,000 + 50,000) 1,020,000
Par value of shares issued upon conversion (40,000 shares * 20) (800,000)
Expenses incurred in connection with the conversion (10,000)
Share premium upon conversion 210,000
37) B. Php840,000
Cost 4,000,000
Accumulated depreciation (160,000 * 9) (1,440,000)
Carrying value 2,560,000
Impairment loss (500,000)
Recoverable amount 2,060,000
Depreciation expense for 2018 (2,060,000/16) (128,750)
Carrying value, December 31, 2018 1,931,250
26
Fair market value (3,240,000)
Increase in value 1,308,750
Unrecovered impairment loss (500,000 * 15/16) (468,750)
Revaluation surplus, December 31, 2019 840,000
38) D. Php472,500
Carrying amount is equal to Fair Value.
39) B. Php1,744,000
Goods available for sale 8,000,000
Ending inventory (2,000,0000)
Cost of goods sold 6,000,000
Mark up on cost (6,000,000 * 50%) 3,000,000
Total sales 9,000,000
Cash sales (9,000,000 * 30%) (2,700,000)
Credit sales (9,000,000 * 70%) 6,300,000
Collections from credit customer (6,500,000 – 2,700,000) (3,800,000)
Accounts written off (60,000)
Accounts receivable – gross 2,440,000
Allowance for bad debts [(6,300,000 *12%) – 60,000] (696,000)
Net realizable value 1,744,000
40) B. Php30,000,000
Land for undetermined future use 10,000,000
Vacant building to be leased out under operating lease 20,000,000
Total investment property in the consolidated statement 30,000,000
27
REFERENCES
Robles, N.S. and Empleo, P.M. (2021). The Intermediate Accounting Series, Volume 1, Millennium Books
Inc.
Inc.
Inc.
Valix, C., Peralta, J. and Valix, C., (2021). Intermediate Accounting Volume One. GIC Enterprises & Co., Inc.
Valix, C., Peralta, J. and Valix, C. (2021). Intermediate Accounting Volume Two. GIC Enterprises & Co., Inc.
Valix, C., Peralta, J. and Valix, C., (2021). Intermediate Accounting Volume Three. GIC Enterprises & Co.,
Inc.
Various CPA Review Center Preboard Examinations (2021)
28

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THEORIES

14) In accounting for a defined benefit plan

Which of the following is correct?

21) Total net income over the life of an entity is

22) Statement 1: Produce harvested from bearer plants is a biological asset.

25) Minimum disclosure requirements for intangibles are as follows:

An analysis of the above accounts disclosed the following:

Cash - P250,000 increase; Accounts receivable - P150,000 decrease; Merchandise inventory -

The following additional information pertains to these liabilities.

What total amount should be reported as liability on December 31, 2022?

What is the income tax expense for the third quarter?

E. Answer not given

E. Answer cannot be determined.

How much is the loan impairment in 2021?

E. Answer not given.

Honesty's net cash used in financing activities for 2021 was

Decrease in accounts receivable 150,000.00

Total increase in net assets 405,000.00

Salary in year 2022 1,200,000

Salary in year 2023 1,320,000

Expected annual benefit at 4% 351,384

Existing, January 1 (P1,500 * P17) P25,500

New life from acquisition 10 years

Fair value less cost of disposal (5,500,000 - 100,000) (5,400,000.00)

Number of leaves, beginning 925

Coupons to be redeemed (200,000 * 80%) 160,000

Liability for compensated absences 507,180

Annual lease payments 400,000

Fair value of rights retained 1,567,960

Carrying value of equipment 1,700,000

Total proceeds 1,900,000

Acquisition cost 3,500,000

Adjusted balance per bank 9,150,000

Number of stock options 100 100 100

Multiplied by employees entitled 182 173 172

Total stock option 18,200 17,300 17,200

Multiplied by fair value of stock option P30 P30 P30

Total fair value P546,000 P519,000 P516,000

Cumulative compensation Expense P182,000 P346,000 P516,000

Compensation expense - prior years - (182,000) (346,000)

Compensation expense - current P182,000 P164,000 P170,000

Taxable income 298,000

Defined benefit obligation, January 1 1,700,000

Fair value of plan asset, December 31 1,340,000

23) E. Answer not given.

Cost of building 10,585,500

Net selling price (5,000,000 * 1/2 * 105) 2,625,000

Fair value - January 1, 2022 P20,740,000

Liability for deposits on returnable containers

Commissions payable P28,000

Gross investment of the lease:

Beginning inventory 720,000 1,000,000

Purchases 4,080,000 6,300,000

Net markups 700,000

Available for sale - average 4,800,000 7,500,000

Cost ratio (4,800,000/7,500,000) 64%

Estimated shoplifting losses (80,000)

Ending inventory at retail 600,000