ACCOUNTINIK- THEORIES

1. The records of A travel hotel show the following, net of VAT

No. of Rooms Ave, Monthly Rent per Room Annual Rent per Room
10 Php 12,000 Php 1,440,000
10 15,000 1,800,000
20 20,000 4,800,000

The output tax for the year is

a. Php 964,800
b. Php 792,000
c. Php 576,000
d. Php 388,800
Answer: A
2. On February 14, 2014, A donated to B, a residential land with a fair market value of Php
2M. On February 14, 2018, A dies. At the time of A’s death, the residential land has a
fair market value of Php 3M. As a resulet, the estate of A
a. Will include the residential land at Php 2M as a part of A’s Gross estate
b. Will claim a vanishing deduction rate of 40%
c. Will claim a vanishing deduction rate of 20%
d. Cannot claim deduction for property previously taxed
Answer: D
3. A stock corporation was merged with B Corporation C, a stockholder of A corporation
was asked to surrender his shares of stock of A corporation which C acquired for Php
400,000 and in exchange, he received shares of stock of B Corporation with a fair market
value of Php 440,000 plus cash of Php 60,000. C will recognize a gain of
a. Php 60,000
b. Php 100,000
c. Php 0
d. Php 50,000
Answer: A
4. On January 2 2019, A acquired 1,000 shares of F Corporation, a resident corporation for
Php 100,000. On April 10, 2019, A sold the shares for Php 80,000. On May 8 2019, A
acquired 800 shares of F Corporation for Php 85,000. On September 12, 2019, A sold the
shares he acquired on May 8 2019 for Php 110,000. The gain or (loss) on the second sale
is
a. Php 25,000
b. Php 5,000
c. Php 9,000
 d. Php 4,500
Answer: C
5. MAGNOLIA CORP. invested the excess cash in equity securities during 2018. The
business model for these investments is to profit from trading on price changes.
(a) As of December 31, 2018, the equity investment portfolio consisted of the following:
INVESTMENT QUANTITY COST FAIR VALUE
LJ, Inc. 1,000 shares P 90,000 P 126,000
Polland Co. 2,000 shares 240,000 252,000
Alabang Corp. 3,000 shares 432,000 360,000
Totals 762,000 738,000

In the December 31 2018, statement of financial position, what should be reported as

carrying amount of investments?
a. P738,000
b. P690,000
c. P762,000
d. P810,000
Answer: A
6. During 2014, the total net amount paid for the salaries and wages amounted to
p9,000,000 after affecting the following deductions for the employees:
SSS premiums contributions P420,000
Philhealth premiums contributions 100,000
Pag-ibig premiums contribution 180,000
Creditable withholdings tax 300,000
In addition, the corporation provided its vice-president for operations P340,000 cash as
fridge benefit. The allowable deduction for the salaries and benefitsnis
a. P9,340,000
b. P10,500,000
c. P10,340,000
d. P10,000,000
Answer: B
7. DODC Airlines, an international air carrier showed the following gross receipts:

POINT OF ORIGIN DESTINATION GROSS RECEIPT

Philippines China P2,000,000
Philippines Singapore 1,600,000
 Singapore Japan 3,000,000

Twenty-five percent of the shipment from the Philippines to Singapore were later shipped
from Singapore to Japan. The percentage tax due is
a. P198,000
b. P186,000
c. P108,000
d. P96,000
Answer: D
8. A, a VAT taxpayer, sold the following:

Selling Price Book Value

Old factory warehouse P3,000,000 P4,000,000
Old factory 6,000,000 5,000,000
Old residential house 8,000,000
The output of VAT is
a. P1,080,000
b. P1,200,000
c. 2,040,000
d. P 0
Answer: A
9. Flor company consumed P450,000 worth of direct materials during May, 20x9. At the
end of the month, the direct materials during May, P25,000 lower than the May 1
inventory level. How much was the direct materials procured during May 20x9?
a. P475,000
b. 375,000
c. P400,000
d. 425,000
Answer: D

10. A, a VAT registered taxpayer had the following during the month
EXPORT SALES AMOUNT ATTRIBUTE INPUT VAT
Sardines & Mackerel US $400,000 Php 45,000
Fruits and vegetables Jap Yen $ 200,000 50,000
Refined sugar Sing $ 100,000 20,000

Which of the following is correct?

 a. All sales are subject to zero rated VAT
b. Only the sales of sardines, mackerel and refined sugar shall be subject to VAT
c. The sales of fruit and vegetables is exempt from VAT
d. The attributable input VAT shall not be creditable against output VAT but claimable
as cost or expense
Answer: A
11. ABC airways, a resident international carrier had the following receipts during the
month:
FROM PASSENGER FROM CARGOES
Outgoing flights PHP 40,000,000 PHP 10,000,000
Incoming flights 60,000,000 50,000,000
Assuming there is reciprocity, which of the following is correct?
a. ABC Airways is exempt from percentage tax
b. Only Php 40,000,000 receipt from outgoing transport of passengers is exempt from
percentage tax
c. The Php 10,000,000 receipt from outgoing cargoes is subject to percentage tax
d. Only the receipt from incoming flights of passenger and cargoes is exempt from
percentage taxes
Answer: C
12. Technically, offsetting in financial statements is accomplished when
a. The allowance for doubtful account is deducted from accounts receivable
b. The accumulated depreciation is deducted from property, plant and equipment.
c. Total liabilities are deducted from total assets to arrive at net assets.
d. Gains and losses from disposal of noncurrent assets are reported by deducting from
the proceeds the carrying amount of the assets and the related disposal cost.
Answer: D
13. Which obligations are classified as current even if these are due to be settled after more
than twelve months from the end of reporting period?
a. Trade payables and accruals for employees and other operating cost.
b. Current portion of interest-bearing liabilities.
c. Bank overdrafts
d. Dividends Payable
Answer: A
14. Which statement about the statement of financial position is not true?
a. Biological assets should be reported in the statement of financial position
b. The number of shares authorized for issue should be reported in the statement of
financial position or the statement of changes in owner’s equity, or in the notes.
c. Provisions should be recognized on the statement of financial position.
 d. A revaluation surplus on a non-current assets in the current year should be
recognized in the income statement.
Answer: D
15. The notes to financial statements should not be used to
a. Describe significant accounting policies.
b. Describe depreciation methods employed.
c. Describe the principles and methods peculiar to the industry in which the entity
operates.
d. Correct an improper presentation in the financial statements.
Answer: D
16. The summary of significant accounting policies should disclose
a. Proforma effect of retroactive application of an accounting change.
b. Basis of profit recognition on long term construction contracts.
c. Adequacy of pension plan assets in relation to vested benefits.
d. Future lease payments.
Answer: C
17. Related parties include all of the following except:
a. Affiliates
b. Associates
c. Individuals owning, directly or indirectly, an interest in voting power of the
reporting entity that gives them significant influence over the entity.
d. Two entities that have a common director.
Answer: D
18. Which of the following is not a related party of an entity?
a. The son of the chief executive officer of the entity.
b. A bank providing loan to the entity.
c. An associate of the entity.
d. Director of the entity.
Answer: B
19. Non-adjusting events after reporting period that require disclosure include all of the
following except:
a. A major business combination after reporting period.
b. Announcing a plan to discontinue an operation.
c. Expropriation of major assets after the reporting period.
d. Destruction of a major production plant by a fire before the end of reporting period.
Answer: D
 20. Events after the reporting period that provide evidence about conditions that existed at
the current year-end and effect the realizability of accounts receivable should be
a. Disclosed only in the management commentary.
b. Disclosed only in the notes
c. Used to record an adjustment to doubtful accounts expense.
d. Used to record an adjustment to retained earnings.
Answer: C
21. Under IFRS, the extraordinary item presentation
a. Has not changed from current rules.
b. Has been eliminated.
c. Has been eliminated from the net tax presentation
d. Has been eliminated from EPS reporting.
Answer: B

22. All of the following are component of other comprehensive income, except
a. Foreign currency translation adjustment.
b. Unrealized gain and loss on financial asset held for trading
c. Deferred loss on derivative financial instrument designated as cash flow hedge.
d. Change in revaluation surplus.
Answer: C
23. Which of the following would appear first in the statement of retained earnings?
a. Net income
b. Prior period error
c. Cash Dividends.
d. Share Dividends
Answer: B
24. Which capital maintenance concept is applied respectively to net income and
comprehensive income?
a. Financial Capital and Financial Capital
b. Physical Capital and Physical Capital
c. Financial Capital and Physical Capital
d. Physical Capital and Financial Capital
Answer: A
25. A non-current asset that is to be abandoned shall not be classified as held for sale because
a. The carrying amount is recovered principally through continuing use.
b. It is difficult to value.
c. It is unlikely that the non-current assets is sold within twelve months.
 d. It is unlikely that there is an active market for the non-current assets.
Answer: A