NATIONAL FEDERATION OF JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

FINANCIAL ACCOUNTING

1. Which of the following statements is true?

I. When insignificant influence exists, the investment should be accounted for by the equity
method.
II. When the investor has insignificant influence, the receipt of cash dividends is recorded as
dividend revenue
A. I C. Both I & II
B. II D. None of the above.

2. IFRS stands for:

A. Independent Financial Reporting System.
B. International Financing Reform System.
C. International Financial Reporting Standards.
D. International Financial Regulation of Securities

3. Suppose a company has research costs of 100,000 and development costs of P200,000 for the year.
Under IFRS, what amount would be reported as an expense in the current year's income statement?
A. 100,000. C. 200,000.
B. 150,000. D. 300,000.

4. Most businesses earn revenues

A. when they collect accounts receivable.
B. through sales of goods or services to customers.
C. by borrowing money from a bank.
D. by selling shares of stock to stockholders.

5. Inventories
A. are an asset.
B. result from paying for a product that has now been sold to a customer.
C. will result in a liability being charged sometime in the future.
D. are an expense.

6. At the beginning of 2009, Kou Corporation had assets of 540,000 and liabilities of 320,000. During
the year, assets increased by 50,000 and liabilities decreased by 10,000. What was the total amount of
stockholders' equity at the end of 2009?
A. 220,000 C. 380,000
B. 280,000 D. 500,000

7. Which of the following would increase retained earnings?

A. an increase to an expense C. an increase to a revenue
B. a cash dividend D. issuance of additional common stock

8. Which of the following transactions would cause retained earnings to increase?

A. Collection of a customer's account. C. Loan from a bank.
B. Sale of service to a customer. D. Wage costs owed to employees

9. The effect on total assets of the purchase of land for cash is

A. an increase in total assets. C. a decrease in total assets.
B. total assets remain unchanged. D. an increase in total assets and total liabilities.

10. The revenue principle requires four conditions to be met. Which of the following is one of the four
conditions?
A. The customer has paid for the goods or services.

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 B. Delivery of goods or performance of service has occurred or is scheduled to occur.
C. The price is fixed or determinable.
D. The customer has signed a contract.

11. Which of the following ratios is not a test of solvency?

A. Debt to equity ratio. C. Cash coverage ratio.
B. Times interest earned. D. Earnings per share ratio.

12. Alhex Co. reported the following data at year-end. Sales, 500,000; beginning inventory, P40,000;
ending inventory, 45,000; cost of goods sold, 350,000; and gross margin, 150,000. What was the
amount of merchandise purchased during the year?
A. P370,000 C. P355,000
B. P348,000 D. P341,000

13. The following information was taken from the 2010 income statement of Milburn Company: Pretax
income, P12,000; Total operating expenses (not including income taxes), P20,000; Sales revenue,
P120,000; Beginning inventory, P8,000; and Purchases, P90,000. Compute the amount of the ending
inventory.
A. P88,000 C. P10,000
B. P 8,000 D. P18,000

14. On January 1, 2009, Madison Company had P60,000 of Retained Earnings. During 2009 Madison
earned net income of P100,000 and declared and paid dividends of P15,000. In addition, the company
received cash of P25,000 as an additional investment by its owners. Therefore, the ending balance in
Retained Earnings at December 31, 2009 would be
A. P 90,000. C. P170,000.
B. P130,000. D. P145,000.

15. Oakwood Company had accounts receivable of P750,000 and an allowance for doubtful accounts of
the P21,500 just prior to writing off as worthless an account receivable for Hyland Company of
P5,000. The net realizable value of accounts receivable as shown by the accounting record before and
after the write-off was as follows:
Before After
A. 750,000 750,000
B. 721,500 733,500
C. 728,500 723,500
D. 728,500 728,500

16. SALIMBAY Company reported the following amounts on its 2009 income statement: Purchases,
P100,000; Beginning inventory, P20,000; and Cost of goods sold, P110,000. Therefore, the 2009
ending inventory was
A. P10,000. C. P25,000.
B. P15,000. D. P27,000

17. Which statement is false?

A. Shortening the estimated useful lives of operational assets will lead to a higher fixed asset
turnover.
B. Using accelerated depreciation method instead of straight-line will lead to reporting a higher fixed
asset turnover.
C. Acquiring more long-lived, productive assets when a company is growing will lead to a lower
fixed asset turnover.
D. Selling off long-lived, productive assets while maintaining sales will lead to a lower fixed asset
turnover
18. Tiffany Corporation had the following bank account balances at Dec. 31 2016:
Cash on hand in banks P 1,025,000
Cash restricted for additions to plant (expected to

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 (be disbursed in 2017) P 600,000
Bank certificate of deposit (due January 16, 2017) P 300,000
A. 1,025,000 C. 1,625,000
B. 1,925,000 D. 1,325,000
19. On January 1, 2013, Luffy Co. Purchased a machine for 264,000 and depreciated it by straight line
method using an estimated useful life of eight years with no salvage value. On January 2, 2016,
Luffy Co. determined that the machine had a useful life of six years from the date of acquisition and
will have a salvage value of p 24,000. An accounting change was in 2016 to reflect the additional
data. The accumulated depreciation for this machine should have a balance at December 31, 2015 of:
A. 176,000 C. 160,000
B. 154,000 D. 146,000
20. Nestly Company incurred the following costs during 2016 in connection with its research and
development activities:
Cost of equipment acquired that will have alternative uses in future P1,400,000
r&D projects over 5years
Materials consumed in research and development projects 295,000
Consulting fees paid to outsiders for r&d projects 600,000
Personnel costs of persons involved in r&d projects 640,000
Indirect costs reasonably allocable to r&d projects 250,000
Materials purchased for future research and developments 270,000

How much will be expensed as research and development cost?

A. 1,685,000 C. 2,065,000
B. 1,465,000 D. 1,965,000
21. Brown Corporation reported the following amounts at the end of the first year of operations,
December 31, 20A: share capital $20,000; sales revenue $95,000; total assets $85,000, no dividends,
and total liabilities $35,000. What would shareholders' equity and total expenses be?
A. Shareholders' equity, $50,000 and expenses $65,000.
B. Shareholders' equity, $60,000 and expenses $75,000.
C. Shareholders' equity, $80,000 and expenses $40,000.
D. Shareholders’ equity, P85,000 and expenses P50,000.

22-25. Danny Company plans to dispose of a group of its assets as held for sale. The assets form a
disposal group, and are measured as follows:
Carrying amount Remeasured Amount
Before Immediately before
Classification as Classification as
Held for Sale Held for sale
Goodwill P 3,000,000 P 3,000,000
Property, plant & Equipment
(revalued amount) 9,200,000 8,000,000
Property, plant and Equipment
(historical amount) 11,200,000 11,200,000
Inventory 4,800,000 4,400,000
Investment in available for sale 3,600,000 3.000,000
Total P 32,000,000 P 29,800,000

Danny Company estimates that fair value less costs to sell of the disposal group amounts to 26,000,000.

22. Immediately before classification as held for sale, what amount of loss should the company
recognize?
A. 2,000,000 C. 2,200,000
B. 3,800,000 D. None.

23. When the disposal group was initially classified as held for sale, what amount of loss should
Danny Company Recognize?

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 A. 2,000,000 C. 2,200,000
B. 3,800,000 D. None.

24. What amount of the loss before classification is charged against goodwill?
A. 330,000 C. 470,000
B. 3,000,000 D. 800,000

25. What of the loss before classification is charged against the property, plant and equipment?
A. 330,000 C. 470,000
B. 3,000,000 D. 800,000
26. On January 1, 2015, Saitama Company purchased a P300,000 machine with a five-year useful life and
no salvage value. The machine was depreciated by an accelerated method for book and tax purposes.
The machine’s carrying amount was P120,000 on December 31, 2016. On January 1, 2017, Saitama
changed to the straight-line method for financial statement purposes. Saitama’s income tax rate is
40%.

Assuming that Saitama can justify the change, in its 2017 statement of retained earnings, what
amount should Saitama report as the cumulative effect of this change?

A. 62,000 C. 24,000
B. 36,000 D. Not Given

27. Aldub is preparing its bank reconciliation for Account 001 in Eat Bulaga Bank for the month of
December with the following information:

-Cash balance of Account 001 per bank statement on Dec. 31 P763,234

-Cash receipts entered twice in the books of Aldub 35,236
-Interest earned by the company and credited by the Bank on account 001 23,623
but not yet recorded by Aldub
-Deposit in transit on December 31 84,345
-NSF check returned by the bank on December 10 but recorded
by the company 74,345
On December 25
-Checks of Aldub not yet enchased by the payees 29,123

How much is the Unadjusted Book balance of Account 001 on Dec 31?

A. P830,069 B. P803,069 C. P 830,096 D. P 803,906

28. The following audited balances pertain to Nidora Company.

Account payable:
January 1, 2016 P286,924
December 31, 2016 737,824
Inventory balance:
January 1, 2016 815,386
December 31, 2016 488,874
Cost of goods sold 1,859,082

How much was paid by Nidora Company to its suppliers in 2016?

A. P2,636,494
B. P1,081,670
C. P1,734,694
D. P1,983,470

29. IAS 24 requires disclosure of compensation of key management personnel. Which of the following
would not be considered "compensation" for this purpose?
A. Short-term benefits
B. Share-based payments
C. Termination benefits

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 D. Reimbursement of out-of-pocket expenses

30. How realized gains and losses for Available-for-sale securities are reported on the income statement?

a. Realized gains and losses not already recognized as unrealized components are
recognized.
b. Realized gains and losses are recognized (which include unrealized holding gains and
losses recognized previously as unrealized)
c. Realized gains and losses are recognized in accordance with amortized cost method
d. All of the above.

31. Naruto Company has a 12-month accounting period ending December 31. On April 1, 2016, it
introduced a new contractual bonus scheme covering the year to March 31 each year. It is reasonably
anticipated that the bonuses for the year to March 31, 2017 will amount to P900,000. What liability
for bonuses should be recorded on December 31, 2016?

A. 225,000 c. 900,000
B. 675,000 d. 0

32. On the December 31, 2016 balance sheet of Vanoy Co., the current receivables consisted of the
following:
Trade accounts receivable 75,000
Allowance for uncollectible accounts (2,000)
Claim against shipper for goods lost in transit (November 2010) 3,000
Selling price of unsold goods sent by Vanoy on consignment
at 130% of cost (not included in Vanoy 's ending inventory) 26,000
Security deposit on lease of warehouse used for storing
some inventories 30,000
Total $132,000
At December 31, 2016, the correct total of Vanoy's current net receivables was
a. 76,000. c. 102,000.
b. 106,000. d. 132,000.

33. During January 2014, Haze Company won a litigation award for P1,500,000 which was tripled to
P4,500,000 to include punitive damages. The defendant, who is financially stable, has appealed only
the P3,000,000 punitive damages. Haze was awarded P5,000,000 in an unrelated suit it filed, which is
being appealed by the defendant. Counsel is unable to estimate the outcome of these appeals.

In its 2014 financial statements, Hazel should report what amount of pre-tax gain?
a. P1,500,000 c. P4,500,000
b. P5,000,000 d. P9,500,000

34. Agricultural produce is measured at

a. Cost
b. Fair value less cost of disposal from the point of harvest
c. Lower of cost and net realizable value
d. Fair value less cost of disposal

35. What is major objective of financial reporting?

a. to provide useful information that useful to management in making decisions.
b. to provide information that clearly portrays nonfinancial transactions.
c. to provide information that is useful to assess the amount, timing, and uncertainty of
prospective cash receipts.
d. to provide information that excludes claims against the resources.

36. Which if the following is usually considered as cash?

a. Certificate of deposit c. Checking Account
b. Money market saving certificate d. Postdated check

37. A company would report a net loss when

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 A. retained earnings decreased due to paying dividends to stockholders.
B. its assets decreased during an accounting period.
C. its liabilities increased during an accounting period.
D. its expenses exceeded its revenues for an accounting period.

38. Liabilities are defined as

A. possible debts or obligations of an entity as a result of future transactions which will be paid
with assets or services.
B. possible debts or obligations of an entity as a result of past transactions which will be paid
with assets or services.
C. probable debts or obligations of an entity as a result of future transactions which will be paid
with assets or services.
D. probable debts or obligations of an entity as a result of past transactions which will be paid
with assets or services.

39. On a balance sheet, assets are listed in the order of

A. Peso amount (largest first).

B. date of acquisition (earliest first).
C. ease of conversion to cash.
D. importance to the operation of the business

40. In what order are current assets usually reported on the balance sheet?

A. From the most liquid to the least liquid.

B. From the least liquid to the most liquid.
C. In alphabetical order of accounts.
D. From the largest balance to the smallest balance.

41. On January 1, 2013, Lena Corporation decided to dispose of an item of plant that is carried in its
records at a cost of P900,000, with accumulated depreciation of P160,000. Depreciation on the plant
since it was originally acquired has been charged of P10,000 per month. The plant will continue to be
operated until it is sold, at which time the operations of the plant will be outsourced. The company
undertook all the necessary actions to be able to classify the asset as held for sale. It is estimated that
it could sell the plant for its fair value, P720,000, incurring P20,000 selling costs in the process. The
plant has been depreciated at an amount of P10,000 per month.

On March 31, 2013, the plant had not been sold but, due to shortage of this type of plant, there had
been an increase in the fair value to P770,000. On June 30, 20X6, Lena sold the plant for P785,000
incurring P25,000 selling costs.

The depreciation expense to be recognized in 2013 is

A. P60,000
B. P56,760
C. P58,380
D. P0

42. On June 2, 2013, Problems Company sold merchandise with an invoice price of P960,000 to No
Problem Company, a customer. The entity allowed trade discounts of 20% and 10%. Credit terms
were 5/10, n/30 and the sale was made FOB shipping point. The Problems Company paid P50,300 for
delivery cost.

On June 10, the costumer paid all his liabilities to Problems Company as a result of purchase on June
2. How much is the cash received by Problems Company on June 10?
A. P912,000
B. P861,700
C. P962,300
D. P960,000

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43. On Jan. 1, 2013, Problems Company sold land with carrying amount of 1,234,678 in exchange for 9-
month, 12% note with face value of P3,000,0000. Problems Company discounted the note and it
received 3,065,625. The bank discount rate is 15%. The discounting is accounted for as secured
borrowing.

When did Problems Co. discount the note?

A. March 1, 2013
B. April 1, 2013
C. May 20, 2013
D. May 1, 2013

44. Dagsinkala Company discounted its 1 year note receivable to Salimbay Company on July 1, 2014.
The note was received on May 1, 2014 by Problem Company. The Problem company received
P980,000 from discounting. The discount rate is 15% while the stated rate on the note is 12%. The
loss on discounting is recorded by P40,000. What is the face value of the Note.
A. P 1,200,000
B. P 1,020,000
C. P 1,000,000
D. P 1,100,000

45. The following information is from ABC Co.’s first year of operations:

 Merchandised purchased, P450,000

 Ending merchandise inventory, P123,000
 Collections from customers, P150,000
 All sales are on account and good sell at 30% above cost

What is the accounts receivable balance at the end of the company’s first year of operations?
a) P275,100
b) P78,900
c) P595,000
d) P435,000

46. Problems Company reported depreciation of P2,500,000 in its 2011 tax return. However, in its 2011
income statement, Problems Co. reported depreciation of P1,000,000. The difference in depreciation
is temporary difference that will reverse over the time. The tax rate is constant at 30%. What amount
should be added to the deferred tax liability in Problems Company’s December 31, 2011 statement of
financial position?
A. P300,000
B. P400,000
C. P350,000
D. P450,000

47. Bonus Company gives bonus to his employees. The total percent for bonus of the all employees is
10%. The bonus is computed as percent of income after bonus and tax. The tax rate is 25%. The net
income bonus and tax is P1,245,000. Manong is an employee of Bonus company and his share in total
bonus of all employees is 35%.

What is the share of Manong in bonus? No decimal places.

A. P 30,410
B. P 30,401
C. P 30,140
D. P 30,440

48. What is the formal document containing the contractual agreement between an investor and the bond
issuer?

a. contract of debt c. bond indenture

b. Bond certificate d. Bond agreement

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49. The useful life of property, plant and equipment is
I. The period of time over which an asset Is expected to be used by the entity
II. The number of production or similar units expected to be obtained from the asset by the entity.

a. I only c. II only
b. Both I & II d. Neither I nor II

50. A leased incurred cost to construct walkway and landscaping to improve leased property. The useful
life of the walkway and landscaping cost is fifteen years. The remaining term of the nonrenewable lease is
twenty years. The walkway and landscaping cost should be

A. Capitalized as leasehold improvement and depreciated over twenty years

B. Capitalized as leasehold improvement and depreciated over fifteen years
C. Capitalized as leasehold improvement and expensed in the year in which the lease expires
D. Expensed when incurred.

-End of Examination-

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