Which of the following is not listed under the “faithful representation” characteristic of financial

information based on the Conceptual Framework of Financial Reporting?

a. Prudence
b. Neutrality
c. Completeness
d. Freedom from error

At the inception of the lease, the lease term is determined to be equivalent to 55% of the economic life
of the leased property but the lease contract contains a bargain purchase option. The lessee should
record the lease as

a. Neither asset nor liability

b. Asset but not liability
c. Asset and liability
d. Expense

For equity-settled share-based payment transactions, the entity shall measure the goods or services
received and the corresponding increase in equity:

Statement I: Directly at fair value of the goods or services received

Statement II: Indirectly, by reference to the fair value of the equity instruments granted, if the fair value
of the goods or services received cannot be estimated reliably

a. True, true
b. True, false
c. False, true
d. False, false

In a debt extinguishment in which the debt is continued with modified terms and the carrying value of
the debt is more than the fair value of the debt:

a. A gain should be recognized by the debtor

b. A loss should be recognized by the debtor
c. A new effective-interest rate must be computed
d. No interest expense should be recognized in the future

The following are based on PAS 24 (Related Party Disclosure)

Statement I: Items of a similar nature may be disclosed in aggregate except when separate disclosure is
necessary for an understanding of the effects of related party disclosure transactions on the financial
statements of the entity

Statement II: Disclosures that related party transactions were made on terms equivalent to those that
prevail in arm’s length transactions are made only if such terms can be substantiated

a. True, true
b. True, false
c. False, true
 d. False, false

Under section 5 of RA 9298, who shall appoint the members of the Professional Regulatory Board of
Accountancy?

a. The chairman of the Board of Accountancy

b. The president of the Republic of the Philippines
c. The chairperson of the Professional Regulatory Commission
d. Thee president of the Philippine Institute of Certified Public Accountants

The following statements are based on PFRS 5 (Non-current Assets Held for Sale and Discontinued
Operations):

Statement I: An entity shall classify a non-current asset or disposal group as held for sale if its carrying
amount will be recovered principally through a sale of transaction rather than through continuing use.

Statement II: An extension of the period required to complete a sale does not preclude an asset or
disposal group from being classified as held for sale if the delay is caused by events or circumstances
beyond the entity’s control and there is sufficient evidence that the entity remains committed to its plan
to sell the asset (or disposal group).

Statement III: An entity shall measure a non-current asset or disposal group classified as held for sale at
the lower of its carrying amount and fair value less costs to sell.

a. Only Statement I is false

b. Only Statement II is false
c. Only Statement III is true
d. All of the statements are true

Earnings per share disclosures are required only for:

a. Public entities
b. Private entities
c. Entities with complex capital structure
d. Entities that change their capital structure during the reporting period

The following statements are based on PAS 28 (Investment in Associates):

Statement I: An investment in an associate shall be accounted for using the equity method (benchmark)
or cost method (alternative)

Statement II: An investor shall discontinue the use of equity method from the date when it ceases to
have significant influence over an associate and shall account for the investment in accordance with PAS
39.

Statement III: On the loss of significant influence the investor shall measure at historical cost any
investment the investor retains in the former associate.

a. Only Statement I is false

b. Only Statement II is true
c. Only Statement III is true
 d. All of the statements are false

The following statements are based on PFRS 3 (Business Combinations):

Statement I: An entity shall account for each business combination by applying the acquisition method

Statement II: The acquirer shall measure identifiable assets acquired and liabilities assumed at their
acquisition date fair values.

Statement III: For each business combination, the acquirer shall measure any non-controlling interest’s
proportionate share of the acquiree’s identifiable net assets.

a. All of the statements are true

b. Only Statement I is true
c. Only Statement II is false
d. Only Statement III is false

Land improvements

a. Are subject to depreciation

b. Should be included in the cost of land
c. Should be deducted from the cost of land
d. Should be charged as an expense in the year purchased

Accounting for the interest in a noninterest bearing note receivable is an example of what aspect of
accounting theory?

a. Substance over form

b. Verifiability
c. Matching
d. Accrual

MAS

Espana company produces a single product. Last year, Espana’s net operating income under absorption
costing was P3,600 lower than under variable costing. The company sold 10,000 units during the year,
and its variable costs were P9 per unit, of which P1 was variable selling expense.

If production cost was P11 per unit under absorption costing, then how many units did the company
produce during the year?

a. 11,200
b. 8,800
c. 8,200
d. 11,800

A learning curve is a function:

a. That measures the decline in labor-hours per unit due to workers becoming better at a job
b. That increases at a greater rate as workers become more familiar with their tasks
c. Where unit costs increase as productivity increases
 d. That is linear

All of the following are benefits of decentralization EXCEPT that it:

a. Creates greater responsiveness to local needs

b. Decreases management and worker morale
c. Leads to quicker decision making
d. Sharpens the focus of managers

Penny’s TV and Appliance store is a small company that has hired you to perform some management
advisory services. The following information pertains to 2015 operations:

Sales (2,000 televisions) P900,000

Cost of goods sold 400,000
Store manager’s salary per year 70,000
Operating costs per year 157,000
Advertising and promotion per year 15,000
Commissions (4% of sales) 36,000

What was the variable cost per unit sold for 2015?

a. P18
b. P218
c. P339
d. P200

The Zeron Corporation recently purchased a new machine for its factory operations at a cost of
P921,250. The investment is expected to generate P250,000 in annual cash flows for a period of 6 years.
The required rate of return is 14%. The old machine has a remaining life of 6 years. The new machine is
expected to have zero value at the end of the six-year period. The disposal value of the old machine at
the time of replacement is zero. What is the internal rate of return?

a. 15%
b. 16%
c. 17%
d. 18%

At the end of last year, Lebron James Company had 30,000 units in its ending inventory. James’ variable
production costs are P10 per unit and its manufacturing overhead costs are P5 per unit every year. The
company’s net income for the year was P12,000 higher under variable costing than under absorption
costing. Given these facts, the number of units of product in inventory at the beginning of the year must
have been?

a. 32,400
b. 28,800
c. 27,600
d. 31,200
The capital budgeting method that calculates discount rate at which the present value of expected cash
inflows from a project equals the present value of expected cash outflows is the:

a. Net present value method

b. Accrual accounting rate-of-return method
c. Payback method
d. Internal rate of return

The method that measures the time it will take to recoup, in the form of future cash inflows, the total
pesos invested in a project is called:

a. The accrued accounting rate-of-return method

b. Payback method
c. Internal rate of return method
d. Book value method

The Alpha Beta Corporation disposes a capital asset with an original cost of P85,000 and accumulated
depreciation of P54,500 for P25,000. Alpha Beta’s tax rate is 40%. Calculate the after-tax cash inflow
from the disposal of the capital asset.

a. P2,200
b. (P2,200)
c. P27,200
d. P31,500

Eagle Sporting Goods has P2.5 million in inventory and P2 million in accounts receivable. Its average
daily sales are P100,000. The firm’s payables deferral period is 30 days and average daily cost of sales
are P50,000. What is the length of firm’s cash conversion period?

a. 100 days
b. 60 days
c. 50 days
d. 40 days

Selected costs associated with a product are as follows:

Total standard hours for units produced 5,000

Total actual direct labor cost P111,625
Actual per hour labor rate P23.50
Standard per hour labor rate P24.00
What amount is the total direct labor price variance?

a. P2,375 unfavorable
b. P2,375 favorable
c. P2,500 unfavorable
d. P2,500 favorable

A company invested in a new machine that will generate revenues of P35,000 annually for seven years.
The company will have annual operating expenses of P7,000 on the new machine. Depreciation
expense, included in the operating expenses, is P4,000 per year. The expected payback period for the
new machine is 5.2 years. What amount did the company pay for the new machine?

a. P145,600
b. P161,200
c. P166,400
d. P182,000

On January 1, 2015 prior to PAS 19R, Gracia Company provided the following data in connection with its
defined benefit plan:

Fair value of plan assets 9,000,000

Unamortized past service cost 2,000,000
Projected-benefit obligation (15,000,000)
Prepaid/accrued benefit cost (4,000,000)
The remaining vesting period for employees covered by the past service cost is 5 years. The entity
adopted PAS 19R on January 1, 2015. Transactions affecting the plan for 2015 are:

Current service cost 1,800,000

Contribution to the plan 3,000,000
Benefits paid to retirees 900,000
Decrease in PBO due to changes in actuarial assumptions 300,000
Actual return on plan assets 1,400,000
Present value of benefits settled in advance 1,000,000
Settlement price of benefits settled in advance 1,100,000
Discount rate 10%
Expected rate of return 12%
What amount should be reported as employee benefit expense for 2015?

a. 2,500,000
b. 2,400,000
c. 2,300,000
d. 4,500,000

Stephan Company provided the following information on December 31, 2015:

Share Capital 5,000,000

Share Premium 1,000,000
Treasury shares, at cost 500,000
Retained earnings 2,000,000
Cumulative translation adjustment-debit 400,000
Cumulative unrealized gain-available for sale 600,000
What is the total shareholders’ equity?

a. 6,000,000
b. 5,500,000
c. 8,000,000
d. 7,700,000
On January 1, 2015, Windae Company had 200,000 ordinary shares and 10,000 4%, P100 par value
cumulative preference shares outstanding. No dividends were declared on either the preference or
ordinary shares in 2014 or 2015. On February 10, 2016, prior to the issuance of the financial statements
for the year ended December 31, 2015, the entity declared a 2-for-1 share split on ordinary shares. Net
income for 2015 was P720,000. In the 2016 comparative financial statements, what amount of basic EPS
should be reported for 2015?

a. 3.40
b. 3.20
c. 1.70
d. 1.00

Krisanne Company had 200,000 ordinary shares outstanding on January 1. In addition, on January 1, the
entity had issued 4,000 convertible 10% bonds with P1,000 face amount. The entity had no other
potentially dilutive securities. Each bond can be converted into 40 ordinary shares. Net income for the
year was P5,000,000 and the income tax rate is 30%. What is the amount of diluted earnings per share?

a. 25.00
b. 15.00
c. 14.67
d. 13.89

On December 1, 2015, Camille Company committed to a plan to dispose of a business component’s

assets. The disposal met the requirements to be classified as discontinued operations. On such date, the
entity estimated that the loss from disposition of the assets would be P700,000 and the component’s
operating loss for 2015 was P200,000. What amount of pretax loss should be reported for discontinued
operations in the income statement for 2015?

a. 900,000
b. 700,000
c. 200,000
d. 0

Christine Company revealed the following accounts in the unadjusted trial balance on December 31,
2015:

Debit Credit
Accounts receivable 5,000,000
Allowance for doubtful accounts 50,000
Net credit sales 20,000,000
The entity estimated that 3% of net credit sales will become uncollectible. What amount of allowance
for doubtful accounts should be recognized on December 31, 2015?

a. 600,000
b. 650,000
c. 550,000
d. 200,000
Timothy Company provided the following transactions for the year ended December 31, 2015:

 Acquired 50% of Carlo Company’s shares for P1,800,000 cash which was borrowed from a bank
 Issued 5,000 shares for land having a fair value of P3,200,000
 Issued 5,000 11% debenture bonds with P1,000 face amount, due 2020, for P3,920,000 cash.
 Purchased a patent for P2,200,000 cash
 Paid P1,200,000 toward a bank loan
 Sold financial asset at FVOCI for P800,000
 Had a net increase in advances from customer of P880,000

What amount should be reported as net cash from financing activities?

a. 4,520,000
b. 5,400,000
c. 2,720,000
d. 6,600,000

Henry Company reported the following liabilities on December 31, 2015:

Accounts Payable 3,000,000

Short-term borrowings 1,500,000
Bonds payable, current portion P500,000 4,000,000
Note Payable, due June 30,2016 2,000,000
The P2,000,000 note payable was refinanced with a 5-year loan on January 15, 2016. The financial
statements were issued February 28, 2016. What total amount should be reported as current liabilities
on December 31, 2015?

a. 5,000,000
b. 7,000,000
c. 4,500,000
d. 3,500,000

Allysa Company reported in the income statement for the first year of operations pretax income of
P6,000,000. The current year tax rate is 30% and the enacted rate for future years is 40% The following
differences existed between the tax return and accounting record:

Tax Return Accounting Record

Bad debt expenses 500,000 750,000
Depreciation expense 1,000,000 600,000
Tax-exempt interest revenue 200,000

What is the total tax expense?

a. 1,695,000
b. 1,755,000
c. 1,635,000
d. 1,740,000
The Corporation Code requires that:

a. At least a majority of the directors are residents of the Philippines.

b. All of the directors or trustees are residents of the Philippines.
c. All of the directors or trustees are citizens of the Philippines.
d. Majority of the directors are citizens of the Philippines.

The following are elements of an obligation, except

a. Active and passive subjects

b. Efficient cause
c. Prescription
d. Vinculum

A, B, and C owe W, X, Y, and Z the sum of P120,000. If the obligation is due, which of the following is not
correct?

a. A is liable only for a total of P40,000.

b. W can only collect P10,000 from C
c. B can be required to pay P40,000 to any of the creditors
d. Y can only collect a total of P30,000

The following pertains to facultative obligations, except:

a. Comprehends only one object or prestation which is due

b. Choice pertains only to the debtor
c. Fortuitous loss of all prestations will extinguish the obligation
d. Not given.

S1: The debtor shall lose the right to make use of the period when he does not furnish any guaranty or
security to the creditor.

S2: In an obligation subject to a suspensive period, what is suspended is birth of the obligation.

a. True;true b. true;false c. false;false d. false;true

It is the voluntary administration of the property of another without his consent.

a. Negotiorum Gestio c. Quasi-delict

b. Solutio Indebiti d. Contract

Delia borrowed from Celia a sum of money with a stipulated rate of interest to be paid in three equal
monthly installments from January to March. Delia paid an amount for which the latter issue a receipt
stating that the payment is for the month of February. In this case,

a. The installment for the month of March is also considered paid.

b. The installment for the month of January is conclusively presumed to have been paid.
c. The installment for the month of January is distributably presumed paid.
 d. The installment for the month of January is not presumed paid.

A defective contract where damage or lesion is essential is

a. Rescissible c. Unenforceable
b. Voidable d. Void

The following even if not in public instrument are valid, binding and enforceable except

a. Negotiable instruments
b. Sale of land, either by the owner or agent with written authority
c. Agency, pledge, mortgage
d. Partnership contract wherein immovables are contributed

A owes B P20,000 which became due and payable last June 23, 2010. On that date, A offered B P10,000,
the only money he then had, but B refused to accept the payment. A, thereafter met C, B’s 23 year old
son, to whom he gave the P10,000 with the request that he turn the money over to B. The money was
stolen while C’s possession. How much may B still recover from A?

a. P20,000 c. P15,000
b. P10,000 d. P -0-

A passenger on a truck was hurt but in a criminal case against the driver, said driver was acquitted. The
victim now sues the owner of the truck for culpa contractual. May the suit still prosper?

a. No, this will constitute double jeopardy

b. No, the acquittal means that the guilt of the accused was not proven by proof beyond reasonable
doubt
c. Yes, it is sufficient for him to prove the existence of the contract of carriage and the injuries
suffered
d. Yes, provided he can prove the negligence of the driver

If the obligation of the debtor is “I will pay you my debt after I have arrived from abroad.” The obligation
is

a. Valid c. voidable
b. Void d. unenforceable

This is a real defense

a. Fraud is inducement c. Want of delivery of an incomplete instrument

b. Want of consideration d. Duress in the absence of physical pressure

Dacion en pago as distinguished from sale

a. The cause is the price

b. The object exists and is specific
c. There is no pre-existing obligation
 d. There is a greater degree of freedom in fixing the price

S1: As a general rule, the extrajudicial expenses required by the payment shall be for the account of the
creditor.

S2: If there is no stipulation and the thing to be delivered is specific, the place of payment shall be the
domicile of the debtor.

a. True;true b. true;false c. false;true d. false;false

S1: As a general rule, the extrajudicial expenses required by the payment shall be for the account of the
creditor.
S2: If there is no stipulation and the thing to be delivered is specific, the place of payment shall be the
domicile of the debtor.
a. True;true b. true;false c. false;true d. false;false

On December 31, 2009, the balance of accounts receivable of Jalena Company was P6,000,000 and the
January 1, 2009 balance of allowance for doubtful accounts was P800,000. The following data were
gathered:
Credit Sales Write offs Recoveries

2006 9,000,000 400,000 30,000

2007 13,000,000 600,000 70,000

2008 15,000,000 700,000 120,000

2009 20,000,000 650,000 150,000

Doubtful accounts are provided for a percentage of credit sales. The accountant calculates the percentage
annually by using the experience of the three years prior to the current year. How much should be
reported as allowance for doubtful accounts on December 31, 2009?

a. 1,100,000 b. 800,000 c. 1,300,000 d. 1,250,000

Kaperahan Corporation had the following account balances on December 31, 2012:

Cash in bank - current account 4,000,000

Cash in bank - payroll account 2,000,000
Cash on hand - 400,000
Cash in bank - reserved 2,000,000
Treasury bills 2,500,000

The cash on hand includes a 100,000 check payable to the Company, dated January 2, 2013. The cash in
bank reserved is established for the purchase of custom-made equipment that is expected to be
consummated in 2012. Treasury bills were purchased on November 30, 2012 and are due on March 1,
2013.

What amount should be reported as "cash and cash equivalents" on December 31, 2012?

a. 10,800,000
b. 8,800,000
c. 8,900,000
d. 10,900,000

La0 Tze Co. had net cash provided by operating activities of P351,000; net cash used by investing
activities of P420,000; and cash provided by financing activities of P250,000. La0 Tze’s cash balance was
P27,000 on January 1. During the year, there was a sale of land that resulted in a gain of P25,000 and
proceeds of P40,000 were received from the sale. What was La0 Tze’s cash balance at the end of the
year?

A cost driver
a. causes fixed costs to rise because of production changes
b. has a direct cause-effect relationship to a cost
c. can predict the cost behavior of a variable, but not a fixed, cost
d. is an overhead cost that causes distribution costs to change in distinct increments with
changes in production volume

Which of the following costs is an internal failure cost?

a. Packaging inspection c. quality engineering
b. Rework d. lost sales

The cost management function is usually under

a. the chief information officer c. purchasing manager
b. controller d. treasurer

The network below describes the interrelationships of several activities necessary to complete a project.
The arrows represent the activities. The numbers between the arrows indicate the number of months to
complete each activity.

2
2 4
4

4
1 5
Start 6 End

2
3 5
6 4
The shortest time to complete the project is

10 months b. 12 months c. 16 months d. 28 months

As a company becomes more conservative with respect to working capital policy, it would tend to have
a(n)
a. Increase in the operating cycle.
b. Decrease in the operating cycle.
c. Increase in the ratio of current assets to current liabilities.
d. Increase in the ratio of current liabilities to noncurrent liabilities.