Question 3 - B

The correct answer is "The amount … in the statement of financial position …

EASY ROUND after accumulated depreciation and … impairment losses".
IAS16 para 6 defines the carrying amount.
1. Which ONE of the following statements best describes the term 'liability'? 6. Which ONE of the following statements best describes the term 'depreciation'?
A An excess of equity over current assets A The systematic allocation of an asset's cost less residual value over its useful life
B Resources to meet financial commitments as they fall due B The removal of an asset from an entity's statement of financial position
C The residual interest in the assets of the entity after deducting all its liabilities C The amount by which the recoverable amount of an asset exceeds its carrying amount
D A present obligation of the entity arising from past events D The amount by which the carrying amount of an asset exceeds its recoverable amount
Question 1 - D Question 5 - A
The correct answer is "A present obligation of the entity arising from past "The systematic allocation of an asset's cost…" is the correct answer.
events", as defined in para 49(b) of the Framework. See IAS16 para 6 for definitions.
2. Are the following statements true or false, according to IAS1 Presentation offinancial statements? 7. The Mirror Company classified a non-current asset accounted for under the cost model as held for sale on
(1) Dividends paid should be recognised in the statement of comprehensive income. 31 December 20X6. Because no offers were received at an acceptable price, Mirror decided on 1 July 20X7
(2) A loss on disposal of assets should be recognised in the statement of changes in equity. not to sell the asset, but to continue to use it. In accordance with IFRS5 Non-current assets held for sale and
Statement (1) Statement (2) discontinued operations, the asset should be measured on 1 July 20X7 at (select one answer)
A False False A the lower of its carrying amount and its recoverable amount
B False True B the higher of its carrying amount and its recoverable amount
C True False C the lower of its carrying amount on the basis that it had never been classified as held for sale and
D True True its recoverable amount
Question 3 - A D the higher of its carrying amount on the basis that it had never been classified as held for sale
A loss on disposal of assets is recognised in the statement of comprehensive and its recoverable amount
income because IAS16 Property, plant and equipment does not permit Question 2 - C
otherwise (IAS1 para 88). IFRS5 para 27 in effect requires an entity ceasing to classify an asset as held
Dividends paid are recognised in the statement of changes in equity (IAS1 for sale to remeasure it as if it had never been held for sale, subject to an
para 106). impairment test (the recoverable amount test) at that date.
3. The Oakes Company has a loan due for repayment in six months' time, but Oakes has the option to 8. A brand name that was acquired separately should initially be recognized , according to IAS38 Intangible
refinance for repayment two years later. Oakes plans to refinance this loan. assets, at (select one answer)
In which section of its statement of financial position should this loan be presented, according to IAS1 A recoverable amount
Presentation of financial statements? (select one answer) B either cost or fair value at the choice of the acquirer
A Current liabilities C fair value
B Current assets D cost
C Non-current liabilities Question 5 - D
D Non-current assets IAS38 para 24 states that an intangible asset should be recognised initially at
Question 12 - C cost.
Because Oakes both has the right to roll over the loan beyond 12 months for 9. The Naylor Company has determined that it needs to recognise an impairment loss on each of two non-
the end of the reporting period and intends to roll it over, it should be current assets; plant and land. The relevant amounts are as follows:
presented as a non-current liability per para 73 of IAS1. Plant Land
4. Which TWO of the following should be taken into account when determining the cost of inventories per Original cost CU700,000 CU1,400,000
IAS2 Inventories? Previous revaluations Nil CU450,000
A Storage costs of part-finished goods Existing carrying amount CU700,000 CU1,850,000
B Trade discounts Impairment loss to be recognised in year CU200,000 CU300,000
C Recoverable purchase taxes According to IAS36 Impairment of assets, how should each of the impairment losses be recognised?
D Administrative costs Plant Land
Question 1 - A & B A In profit or loss In profit or loss
The correct answers are trade discounts (deduct these from purchase costs) B In profit or loss In other comprehensive income
and storage costs for part-finished (but not finished) goods. C In other comprehensive income In profit or loss
See IAS2 paras 11 and 16. D In other comprehensive income In other comprehensive income
5. Which ONE of the following statements best describes the carrying amount of an asset? Question 9 - B
A The cost (or an amount substituted for cost) of the asset less its residual value IAS36 paras 60-61 state that impairment losses on assets that have not been
B The amount at which the asset is recognized in the statement of financial position after revalued are recognised in profit or loss. Impairment losses on revalued
deducting any accumulated depreciation and accumulated impairment losses assets are treated as a revaluation decrease.
C The higher of the asset's net selling price and its value in use 10. The Snowfinch Company is closing one of its operating divisions, and the conditions for making
D The fair value of the asset at the date of a revaluation less any subsequent accumulated impairment restructuring provisions in IAS37 Provisions, contingent liabilities and contingent assets have been met. The
losses closure will happen in the first quarter of the next financial year. At the current year end, the company
 has announced the formal plan publicly and is calculating the restructuring provision. Which ONE of the b False True
following costs should be included in the restructuring c True False
provision? d True True
A Retraining staff continuing to be employed Question 2 - C
B Relocation costs relating to staff moving to other divisions IAS20 para 20 requires grants for expenditure already incurred to be
C Contractually required costs of retraining staff being made redundant from the division being closed recognized immediately. Para 12 requires grants such as that for the software
D Future operating losses of the division being closed up to the date of closure to be matched against the related costs, so that grant would be recognized
Question 5 - C over the five-year period.
IAS37 paras 80-82 require provisions to be made for costs necessarily 4. The Scandium Company is commencing a new construction project, which is to be financed by
incurred by the restructuring, but not those relating to the future conduct of borrowing. The key dates are as follows: 15 May 20X8 Loan interest relating to the project starts to be
the business. incurred
3 June 20X8 Technical site planning commences
AVERAGE ROUND 12 June 20X8 Expenditures on the project start to be incurred
1. According to IAS29 Financial reporting in hyperinflationary economies, which TWO of the following are 18 July 20X8 Construction work commences
monetary items? According to IAS23 Borrowing costs, from what date can Scandium
a. Trade payables commence the capitalization of borrowing costs?
b. Inventories a 15 May 20X8
c. Administration costs paid in cash b 3 June 20X8
d. Loan repayable at par value c 12 June 20X8
Question 4 - A & D d 18 July 20X8
Monetary items are to be received (or settled) in fixed monetary terms (per Question 4 - C
IAS29 para 12). This includes trade payables and loans to be repaid at par All relevant conditions in IAS23 para 17 are fulfilled by the date when
value. expenditures on the project start to be incurred.
2. The Hopkins Company is a manufacturing company. The cost per unit of an item of inventory is shown 5. The Palila Company purchased a varnishing machine for PHP150,000 on 1 January 20X7.
on its card as follows: The company received a government grant of PHP13,500 in respect of this asset. Company policy was to
PHP depreciate the asset over 4 years on a straight-line basis and to treat the grant as deferred income. Under
Materials 30 IAS20 Government grants and government assistance, what should be the carrying amounts of the machine
Production labor costs 33 and the deferred income ("DI") balance at 31 December 20X8?
Production overheads 12 Carrying amount DI balance
General administration costs 10 a PHP75,000 PHP6,750
Marketing costs 5 b PHP112,500 PHP10,125
According to IAS2 Inventories, what is the value of one completed item of inventory in Hopkins's c PHP81,750 PHP6,750
statement of financial position? d PHP75,000 PHP13,500
a. PHP63 Question 5 - A
b. PHP85 Carrying amount PHP75,000, Deferred income PHP6,750 is the correct answer.
c. PHP75 See IAS20 para 26, where the grant is recognized as income on a systematic
d. PHP90 and rational basis over the life of the asset. The deferred income in the
Question 11 - C statement of financial position is reduced each year by the amount credited to
PHP75 is the correct answer. profit or loss.
IAS2 paras 10-12 define the cost of inventory. In this example the cost The asset is depreciated over its useful life per IAS16.
includes materials, production labor and production overheads, but not 6. The Coral Company accounts for non-current assets using the cost model. On 20 July 20X7 Coral
general administration or marketing costs. classified a non-current asset as held for sale in accordance with IFRS5 Non-current assets held for sale and
3. On 1 January 20X8 The Ebro Company commenced trading to provide key skills education facilities in a discontinued operations. At that date the asset's carrying amount was PHP14,500, its fair value was
region identified for technology development. Also on 1 January 20X8, the company received two grants estimated at PHP21,500 and the costs to sell at PHP1,450. The asset was sold on 18 October 20X7 for
from its government for setting up its operations in this location: PHP21,200. In accordance with IFRS5, at what amount should the asset be stated in Coral's statement of
Grant (a) – was paid to give financial assistance for start-up costs already incurred. financial position at 30 September 20X7?
Grant (b) – was paid to subsidize the costs of purchasing computer software over the five-year period. A PHP20,050
The company is almost certain to keep the facilities operational for the next five years. B PHP21,500
The company's accounting year end is 31 December. Are the following statements concerning recognition C PHP21,200
of the income from the two government grants true or false, according to IAS20 Government grants and D PHP14,500
government assistance? Question 8 - D
(1) Income from Grant (a) should be recognized in full on receipt in 20X8. IFRS5 para 15 requires that a non-current asset held for sale should be
(2) Income from Grant (b) should be recognized in full at the end of 5 years. stated at the lower of (i) the carrying amount and (ii) the fair value less costs
Statement (1) Statement (2) to sell.
a False False 7. The Markab Company has acquired a trademark relating to the introduction of
 a new manufacturing process. The costs incurred were as follows: According to IAS10 Events after the reporting period, which TWO amounts should be recognized in Pinder's
Cost of trademark PHP 3,500,000 profit or loss for the year to 31 May 20X7 to reflect adjusting events after the end of reporting period?
Expenditure on promoting the new product PHP 50,000 A PHP175,000 dividend
Employee benefits relating to the testing of the B PHP35,000 bonus
proper functioning of the new process PHP 200,000 C PHP34,000 allowance for uncollectible trade receivables
According to IAS38 Intangible assets, what is the total cost that should be capitalized as an intangible non- D PHP260,000 loss on manufacturing plant
current asset in respect of the new process? Question 7 - B & C
A PHP3,750,000 The correct answers are PHP35,000 bonus and PHP34,000 allowance.
B PHP3,700,000 See IAS10 paras 9, 12 and 22. Also, dividends are recognized in the
C PHP3,500,000 statement of changes in equity, not profit or loss
D PHP3,550,000
Question 11 - B DIFFICULT ROUND
IAS38 paras 27-29 specify the costs attributable to a separately acquired 11. During the year ended 31 December 20X8 the following events occurred at The Gosling Company:
intangible asset. This requires the trademark costs and costs of testing to be (1) It was decided to write off PHP80,000 from inventory which was over two years old as it was obsolete.
included. (2) Sales of PHP60,000 had been omitted from the financial statements for the year to 31 December 20X7.
8. The Dipper Company operates chemical plants. Its published policies include a commitment to making According to IAS8 Accounting policies, changes in accounting estimates and errors, how much should be
good any damage caused to the environment by its operations. It has always honored this commitment. shown as a prior period adjustment in Gosling's financial statements for the year to 31 December 20X8?
Which ONE of the following scenarios relating to Dipper would give rise to an environmental provision A PHP60,000
as defined by IAS37 Provisions, contingent liabilities and contingent assets? B PHP140,000
a. On past experience it is likely that a chemical spill which would result in Dipper having to pay fines C PHP80,000
and penalties will occur in the next year D PHP20,000
b. Recent research suggests there is a possibility that the company's actions may damage surrounding Question 7 - A
wildlife The correct answer is PHP60,000. IAS8 para 32's list of examples of changes
c. The government has outlined plans for a new law requiring all environmental damage to be rectified in accounting estimates includes inventory obsolescence.
d. A chemical spill from one of the company's plants has caused harm to the surrounding area and 12. One of the conditions that must be satisfied in order to recognize revenue in a transaction involving the
wildlife rendering of services is that the stage of completion of the transaction at the end of the reporting period
Question 11 - D can be measured reliably. Which TWO of the following methods for determining the stage of completion
The published policy creates a constructive obligation as defined by IAS37 of a contract involving the rendering of services are specifically referred to in IAS18 Revenue, as being
para 10. The spill is a past event which gives rise to a present obligation and acceptable?
the need for a provision under para 14. A Costs incurred to date as a percentage of the estimated total costs of the transaction
The government plans and any chemical spill relate to future events, while the B Advances received to date as a percentage of the total amount receivable
"possible" damage to wildlife gives rise to a contingent liability which should C Surveys of work performed
be disclosed. D Revenue to date divided by total contract revenue
9. The White Company set up a defined benefit post-employment plan with effect from 1 January 20X7. In Question 1 - A & C
the first year the expected return on plan assets was PHP5,000, the actual return on plan assets was IAS18 para 24 permits surveys of work performed and costs incurred to date
PHP4,000, the current service cost was PHP12,000 and White's contributions paid into the plan were as methods of apportioning revenue on service contracts.
PHP7,500. 13. How should trade discounts be dealt with when valuing inventories at the lower of cost and net
What is the net expense to be recognized in profit or loss for the year ended 31 December 20X7, according realizable value (NRV) according to IAS2 Inventories? (select one answer)
to IAS19 Employee benefits? A Added to cost
A PHP8,000 B Ignored
B PHP3,500 C Deducted in arriving at NRV
C PHP7,000 D Deducted from cost
D PHP2,500 Question 7 - D
Question 11 - C Trade discounts should be deducted from cost. See IAS2 para 11.
The amounts to be recognized as an expense in profit or loss are the current 14. The Polyphony Company had 100,000 equity shares in issue on 1 January 20X7. On 1 July 20X7 it issued
service cost less the expected return on plan assets. See IAS19 para 61. 20,000 new shares by way of a 1 for 5 bonus. On 1 October 20X7 it issued 28,000 new shares for cash at
Note that the difference between the expected and the actual return on plan full market price. When calculating basic earnings per share, how many shares should be divided into the
assets is an actuarial loss, while the employer contributions increase plan profit after tax, according to IAS33 Earnings per share?
assets. A 100,000
10. The Pinder Company is completing the preparation of its draft financial statements for the year ended 31 B 117,000
May 20X7. On 24 July 20X7, a dividend of PHP175,000 was declared and a contractual profit share C 148,000
payment of PHP35,000 was made, both based on the profits for the year to 31 May 20X7. On 20 June 20X7, D 127,000
a customer went into liquidation having owed the company PHP34,000 for the past 5 months. No Question 9 - D
allowance had been made against this debt in the draft financial statements. On 17 July 20X7, a The number of shares to be used is the weighted average in issue through
manufacturing plant was destroyed by fire, resulting in a financial loss of PHP260,000. the period. Bonus shares provide no additional consideration to the issuer, so
 they are related back to the beginning of the earliest period presented.
Shares issued for cash provide additional consideration, so they are time apportioned
from the date the cash was receivable. See IAS33 paras 19 and
26.
The weighted average is 100,000 + 20,000 + (28,000 × 3/12) = 127,000.
15. On 1 July 20X7 The Otakamiro Company handed over to a client a new computer system. The contract
price for the supply of the system and aftersales support for 12 months was PHP800,000. Otakamiro
estimates the cost of the after-sales support at PHP120,000 and it normally marks up such costs by 50%
when tendering for support contracts. Under IAS18 Revenue, the revenue Otakamiro should recognize in
its financial year ended 31 December 20X7 is
A PHP620,000
B PHP800,000
C PHP710,000
D Nil
Question 10 - C
Under IAS18 Appendix A para 11 a selling price which includes an amount for
after-sales support should be split into two components: the support
component (being the cost of such support plus a reasonable profit margin)
and the sale of goods component (measured as the balance). The support
component should be recognized as revenue over the service period.
The support component is PHP180,000 (PHP120,000 plus 50%), of which half
(PHP90,000) should be recognized in the year ended 31 December 20X7,
along with the PHP620,000 (PHP800,000 – PHP180,000) sale of goods
component.
16. The Tanager Company purchased a boring machine on 1 January 20X1 for PHP81,000.
The useful life of the machine is estimated at 3 years with a residual value at the end of this period of
PHP6,000. During its useful life, the expected units of production from the machine are:
20X1 12,000 units
20X2 7,000 units
20X3 5,000 units
What should be the depreciation expense for the year ended 31 December 20X2, using the most
appropriate depreciation method permitted by IAS16 Property, plant and equipment?
A PHP27,000
B PHP21,875
C PHP23,625
D PHP25,000
Question 17 - B
The correct answer is PHP21,875.
See IAS16 para 56, which indicates that assets are consumed principally
through their use. In this example the answer is calculated as (the original
cost less the residual value) divided by total units produced in 3 years
multiplied by total units produced in 20X2.
17. On 1 January 20X7 The Hamerkop Company borrowed PHP6 million at an annual interest rate of 10% to
finance the costs of building an electricity generating plant. Construction commenced on 1 January 20X7
and cost PHP6 million. Not all the cash borrowed was used immediately, so interest income of PHP80,000
was generated by temporarily investing some of the borrowed funds prior to use. The project was
completed on 30 November 20X7. What is the carrying amount of the plant at 30 November 20X7?
A PHP6,000,000
B PHP6,470,000
C PHP6,520,000
D PHP6,550,000
Question 6 - B
See IAS23 para 12. The asset's carrying amount in this example is the PHP6
million construction cost plus the interest charged on the loan for the 11
months of construction (PHP6 million x 10% x 11/12 = PHP550,000, less the
PHP80,000 interest earned prior to using the loan to finance construction.
18. The Bentham Company purchased an investment property on 1 January 20X5 for a cost of PHP220,000.
The property had a useful life of 40 years and at 31 December 20X7 had a fair value of PHP300,000.
On 1 January 20X8 the property was sold for net proceeds of PHP290,000. Bentham uses the cost model to
account for investment properties. What is the gain or loss to be recognized in profit or loss for the year
ended 31 December 20X8 regarding the disposal of the property,
according to IAS40 Investment property?
A PHP86,500 gain
B PHP81,000 gain
C PHP10,000 loss
D PHP70,000 gain
Question 6 - A
The correct answer is the PHP290,000 net disposal proceeds less the
PHP203,500 (PHP220,000 less 3/40ths thereof) carrying amount.
See IAS40 para 69.
19. The Minor Company leased a freehold building for 20 years, the useful life of the building, with effect
from 1 January 20X7. At that date the fair value of the leasehold interest was PHP7.5 million of which
PHP6.0 million was attributable to the building. Annual rentals of PHP800,000 are payable in advance on
1 January.
How much should Minor recognized as an operating lease expense in the year ended 31 December 20X7,
according to IAS17 Leases?
A Nil
B PHP640,000
C PHP160,000
D PHP800,000
Question 5 - C
A land and buildings lease should be separated into its two components: the
land component which will usually be classified as an operating lease; and
the buildings component which in this case extends to the end of the
building's estimated useful life and should be classified as a finance lease.
The annual rental is split between the two leases in proportion to the relative
fair values of the two leasehold interests. 20% ((PHP7.5 million –
PHP6.0 million) as a % of PHP7.5 million) of the rental is attributable to the land,
so PHP160,000. See IAS17 paras 14-16.
20. The Rattigan Company purchases PHP20,000 of bonds. The asset has been designated as one at fair value
through profit and loss. One year later, 10% of the bonds are sold for PHP4,000. Total cumulative gains
previously recognized in Rattigan's financial statements in respect of the asset are PHP1,000. In
accordance with IAS39 Financial instruments: recognition and measurement, what is the amount of the gain
on disposal to be recognized in profit or loss?
A PHP1,900
B PHP900
C PHP2,000
D PHP1,000
Question 27 - A
PHP1,900 (PHP4,000 – (10% × (PHP20,000 + PHP1,000))) is the correct answer.
IAS39 para 27 states that on derecognition of part of a financial instrument:
(a) there shall be an allocation of the carrying amount between the part derecognized and the part
retained
(b) the difference between the consideration received and the carrying
amount allocated to the part derecognized shall be recognized in profit or loss.
The previous gains had already been recognized in profit or loss and so are
not included in the calculation.
See IAS39 para 46 and AG67.
CLINCHER Number of employees 18,500
1. The Whitianga Company commenced the construction of a new packaging plant on 1 February 20X7. The According to IFRS8 Operating segments, which piece of information determines for Mackerel that the
cost of PHP1,800,000 was funded from existing borrowings. The construction was completed on 30 North American activities are a reportable segment?
September 20X7. Whitianga's borrowings during 20X7 comprised: A Revenue
Loan from Largo Bank: PHP800,000 at 6% per annum; B Profit
Loan from Andante Bank: PHP1 million at 6.6% per annum; and C Assets
Loan from Allegro Bank: PHP3 million at 7% per annum. D Number of employees
In accordance with IAS23 Borrowing costs, the amount of borrowing costs to be capitalized in relation to Question 8 - B
the packaging plant is The correct answer is profit, because it is the only criterion out of profits,
A0 revenue and assets that exceeds 10% of the total for all segments. The
B PHP121,500 number of employees is not one of the criteria.
C PHP81,000 See IFRS8 para 13.
D PHP91,125 5. According to IAS41 Agriculture, which TWO of the following items would be classified as biological
Question 8 - C assets?
The answer is PHP81,000. A Oranges
The weighted average is calculated as follows, per IAS23 para 12. B Chickens
(800,000 x 0.06) + (1,000,000 x 0.066) + (3,000,000 x 0.07) = 6.75% C Eggs
(800,000 + 1,000,000 + 3,000,000) D Trees
Borrowing costs to be capitalized: Question 6 - B & D
Cost of asset 1,800,000 x 6.75% x 8/12 = PHP81,000 The correct answers are "Chickens" and "Trees".
2. The Stone Company has an account receivable from The Knowles Company of PHP55,000. Stone also has IAS41 para 5 defines a biological asset as a living animal or plant.
an account payable to Knowles of PHP15,000. Local law allows the enforceable right of set-off of the
recognized amounts. It is not normal business practice to settle the amounts net. What amount for EASY ROUND
accounts receivable and accounts payable should be presented in Stone's statement of financial position, 1. Which ONE of the following statements best describes the term 'liability'?
according to IAS32 Financial instruments: presentation? A An excess of equity over current assets
Accounts receivable Accounts payable B Resources to meet financial commitments as they fall due
A PHP55,000 PHP15,000 C The residual interest in the assets of the entity after deducting all its liabilities
B PHP40,000 0 D A present obligation of the entity arising from past events
C PHP55,000 0 Question 1 - D
D 0 PHP15,000 The correct answer is "A present obligation of the entity arising from past events", as defined in para 49(b)
Question 22 - A of the Framework.
IAS32 para 42 allows the offset of financial assets and financial liabilities in
restricted circumstances where there is both a legally enforceable right of setoff 21. Are the following statements true or false, according to IAS1 Presentation offinancial statements?
and an intention to settle on a net basis. (1) Dividends paid should be recognised in the statement of comprehensive income.
3. In accordance with IAS7 Statement of cash flows, and treating it as a nonrecurring event, which (2) A loss on disposal of assets should be recognised in the statement of changes in equity.
classification of the cash flow arising from the proceeds from an earthquake disaster settlement would be Statement (1) Statement (2)
most appropriate? (select one answer) A False False
A Cash flows from operating activities B False True
B Cash flows from investing activities C True False
C Cash flows from financing activities D True True
D Does not appear in the cash flow statement Question 3 - A
Question 6 - A A loss on disposal of assets is recognised in the statement of comprehensive income because IAS16
The definition in IAS7 para 6 of operating activities includes "other activities Property, plant and equipment does not permit otherwise (IAS1 para 88). Dividends paid are recognised in
that are not investing or financing", so will include disaster settlements. the statement of changes in equity (IAS1 para 106).
4. Mackerel, a company listed on a recognized stock exchange, reports operating results from its North
American activities to its chief operating decision maker. The segment information for the year is: 22. The Oakes Company has a loan due for repayment in six months' time, but Oakes has the option to
Revenue PHP 3,675,000 refinance for repayment two years later. Oakes plans to refinance this loan.
Profit PHP 970,000 In which section of its statement of financial position should this loan be presented, according to IAS1
Assets PHP 1,700,000 Presentation of financial statements? (select one answer)
Number of employees 2,500 A Current liabilities
B Current assets
Mackerel's results for all of its segments in total are: C Non-current liabilities
Revenue PHP39,250,000 D Non-current assets
Profit PHP 9,600,000 Question 12 - C
Assets PHP17,500,000
 Because Oakes both has the right to roll over the loan beyond 12 months for the end of the reporting 28. The Naylor Company has determined that it needs to recognise an impairment loss on each of two non-
period and intends to roll it over, it should be presented as a non-current liability per para 73 of IAS1. current assets; plant and land. The relevant amounts are as follows:
Plant Land
23. Which TWO of the following should be taken into account when determining the cost of inventories per Original cost CU700,000 CU1,400,000
IAS2 Inventories? Previous revaluations Nil CU450,000
A Storage costs of part-finished goods Existing carrying amount CU700,000 CU1,850,000
B Trade discounts Impairment loss to be recognised in year CU200,000 CU300,000
C Recoverable purchase taxes According to IAS36 Impairment of assets, how should each of the impairment losses be recognised?
D Administrative costs Plant Land
Question 1 - A & B A In profit or loss In profit or loss
The correct answers are trade discounts (deduct these from purchase costs) and storage costs for part- B In profit or loss In other comprehensive income
finished (but not finished) goods. See IAS2 paras 11 and 16. C In other comprehensive income In profit or loss
D In other comprehensive income In other comprehensive income
24. Which ONE of the following statements best describes the carrying amount of an asset? Question 9 - B
A The cost (or an amount substituted for cost) of the asset less its residual value IAS36 paras 60-61 state that impairment losses on assets that have not been revalued are recognised in
B The amount at which the asset is recognized in the statement of financial position after deducting any profit or loss. Impairment losses on revalued assets are treated as a revaluation decrease.
accumulated depreciation and accumulated impairment losses
C The higher of the asset's net selling price and its value in use 29. The Snowfinch Company is closing one of its operating divisions, and the conditions for making
D The fair value of the asset at the date of a revaluation less any subsequent accumulated impairment restructuring provisions in IAS37 Provisions, contingent liabilities and contingent assets have been met. The
losses closure will happen in the first quarter of the next financial year. At the current year end, the company
Question 3 - B has announced the formal plan publicly and is calculating the restructuring provision. Which ONE of the
The correct answer is "The amount … in the statement of financial position after accumulated following costs should be included in the restructuring provision?
depreciation and impairment losses". IAS16 para 6 defines the carrying amount. A Retraining staff continuing to be employed
B Relocation costs relating to staff moving to other divisions
25. Which ONE of the following statements best describes the term 'depreciation'? C Contractually required costs of retraining staff being made redundant from the division being closed
A The systematic allocation of an asset's cost less residual value over its useful life D Future operating losses of the division being closed up to the date of closure
B The removal of an asset from an entity's statement of financial position Question 5 - C
C The amount by which the recoverable amount of an asset exceeds its carrying amount IAS37 paras 80-82 require provisions to be made for costs necessarily incurred by the restructuring, but
D The amount by which the carrying amount of an asset exceeds its recoverable amount not those relating to the future conduct of the business.
Question 5 – A "The systematic allocation of an asset's cost…" is the correct answer. See IAS16 para 6 for
definitions. AVERAGE ROUND

26. The Mirror Company classified a non-current asset accounted for under the cost model as held for sale on 1. According to IAS29 Financial reporting in hyperinflationary economies, which TWO of the following are
31 December 20X6. Because no offers were received at an acceptable price, Mirror decided on 1 July 20X7 monetary items?
not to sell the asset, but to continue to use it. In accordance with IFRS5 Non-current assets held for sale and a. Trade payables
discontinued operations, the asset should be measured on 1 July 20X7 at (select one answer) b. Inventories
A the lower of its carrying amount and its recoverable amount c. Administration costs paid in cash
B the higher of its carrying amount and its recoverable amount d. Loan repayable at par value
C the lower of its carrying amount on the basis that it had never been classified as held for sale and Question 4 - A & D
its recoverable amount Monetary items are to be received (or settled) in fixed monetary terms (per IAS29 para 12). This includes
D the higher of its carrying amount on the basis that it had never been classified as held for sale trade payables and loans to be repaid at par value.
and its recoverable amount
Question 2 - C 2. The Hopkins Company is a manufacturing company. The cost per unit of an item of inventory is shown
IFRS5 para 27 in effect requires an entity ceasing to classify an asset as held for sale to remeasure it as if it on its card as follows:
had never been held for sale, subject to an impairment test (the recoverable amount test) at that date. PHP
Materials 30
27. A brand name that was acquired separately should initially be recognized , according to IAS38 Intangible Production labor costs 33
assets, at (select one answer) Production overheads 12
A recoverable amount General administration costs 10
B either cost or fair value at the choice of the acquirer Marketing costs 5
C fair value According to IAS2 Inventories, what is the value of one completed item of inventory in Hopkins's
D cost statement of financial position?
Question 5 – D IAS38 para 24 states that an intangible asset should be recognised initially at cost. a. PHP63
b. PHP85
c. PHP75
 d. PHP90 Carrying amount PHP75,000, Deferred income PHP6,750 is the correct answer. See IAS20 para 26, where
Question 11 - C the grant is recognized as income on a systematic and rational basis over the life of the asset. The deferred
PHP75 is the correct answer. IAS2 paras 10-12 define the cost of inventory. In this example the cost income in the statement of financial position is reduced each year by the amount credited to profit or loss.
includes materials, production labor and production overheads, but not general administration or The asset is depreciated over its useful life per IAS16.
marketing costs.
6. The Coral Company accounts for non-current assets using the cost model. On 20 July 20X7 Coral
3. On 1 January 20X8 The Ebro Company commenced trading to provide key skills education facilities in a classified a non-current asset as held for sale in accordance with IFRS5 Non-current assets held for sale and
region identified for technology development. Also on 1 January 20X8, the company received two grants discontinued operations. At that date the asset's carrying amount was PHP14,500, its fair value was
from its government for setting up its operations in this location: estimated at PHP21,500 and the costs to sell at PHP1,450. The asset was sold on 18 October 20X7 for
Grant (a) – was paid to give financial assistance for start-up costs already incurred. PHP21,200. In accordance with IFRS5, at what amount should the asset be stated in Coral's statement of
Grant (b) – was paid to subsidize the costs of purchasing computer software over the five-year period. financial position at 30 September 20X7?
The company is almost certain to keep the facilities operational for the next five years. A PHP20,050
The company's accounting year end is 31 December. Are the following statements concerning recognition B PHP21,500
of the income from the two government grants true or false, according to IAS20 Government grants and C PHP21,200
government assistance? D PHP14,500
(1) Income from Grant (a) should be recognized in full on receipt in 20X8. Question 8 - D
(2) Income from Grant (b) should be recognized in full at the end of 5 years. IFRS5 para 15 requires that a non-current asset held for sale should be stated at the lower of (i) the
carrying amount and (ii) the fair value less costs to sell.
Statement (1) Statement (2)
a False False 7. The Markab Company has acquired a trademark relating to the introduction of
b False True a new manufacturing process. The costs incurred were as follows:
c True False Cost of trademark PHP 3,500,000
d True True Expenditure on promoting the new product PHP 50,000
Question 2 - C Employee benefits relating to the testing of the
IAS20 para 20 requires grants for expenditure already incurred to be recognized immediately. Para 12 proper functioning of the new process PHP 200,000
requires grants such as that for the software to be matched against the related costs, so that grant would According to IAS38 Intangible assets, what is the total cost that should be capitalized as an intangible non-
be recognized over the five-year period. current asset in respect of the new process?
A PHP3,750,000
4. The Scandium Company is commencing a new construction project, which is to be financed by B PHP3,700,000
borrowing. The key dates are as follows: 15 May 20X8 Loan interest relating to the project starts to be C PHP3,500,000
incurred D PHP3,550,000
3 June 20X8 Technical site planning commences Question 11 - B
12 June 20X8 Expenditures on the project start to be incurred IAS38 paras 27-29 specify the costs attributable to a separately acquired intangible asset. This requires the
18 July 20X8 Construction work commences trademark costs and costs of testing to be included.
According to IAS23 Borrowing costs, from what date can Scandium
commence the capitalization of borrowing costs? 11. The Dipper Company operates chemical plants. Its published policies include a commitment to making
a 15 May 20X8 good any damage caused to the environment by its operations. It has always honored this commitment.
b 3 June 20X8 Which ONE of the following scenarios relating to Dipper would give rise to an environmental provision
c 12 June 20X8 as defined by IAS37 Provisions, contingent liabilities and contingent assets?
d 18 July 20X8 a. On past experience it is likely that a chemical spill which would result in Dipper having to pay fines
Question 4 - C and penalties will occur in the next year
All relevant conditions in IAS23 para 17 are fulfilled by the date when expenditures on the project start to b. Recent research suggests there is a possibility that the company's actions may damage surrounding
be incurred. wildlife
c. The government has outlined plans for a new law requiring all environmental damage to be rectified
5. The Palila Company purchased a varnishing machine for PHP150,000 on 1 January 20X7. d. A chemical spill from one of the company's plants has caused harm to the surrounding area and
The company received a government grant of PHP13,500 in respect of this asset. Company policy was to wildlife
depreciate the asset over 4 years on a straight-line basis and to treat the grant as deferred income. Under Question 11 - D
IAS20 Government grants and government assistance, what should be the carrying amounts of the machine The published policy creates a constructive obligation as defined by IAS37 para 10. The spill is a past
and the deferred income ("DI") balance at 31 December 20X8? event which gives rise to a present obligation and the need for a provision under para 14. The
Carrying amount DI balance government plans and any chemical spill relate to future events, while the "possible" damage to wildlife
a PHP75,000 PHP6,750 gives rise to a contingent liability which should be disclosed.
b PHP112,500 PHP10,125 12. The White Company set up a defined benefit post-employment plan with effect from 1 January 20X7. In
c PHP81,750 PHP6,750 the first year the expected return on plan assets was PHP5,000, the actual return on plan assets was
d PHP75,000 PHP13,500 PHP4,000, the current service cost was PHP12,000 and White's contributions paid into the plan were
Question 5 - A PHP7,500.
 What is the net expense to be recognized in profit or loss for the year ended 31 December 20X7, according B Ignored
to IAS19 Employee benefits? C Deducted in arriving at NRV
A PHP8,000 D Deducted from cost
B PHP3,500 Question 7 - D
C PHP7,000 Trade discounts should be deducted from cost. See IAS2 para 11.
D PHP2,500 33. The Polyphony Company had 100,000 equity shares in issue on 1 January 20X7. On 1 July 20X7 it issued
Question 11 - C 20,000 new shares by way of a 1 for 5 bonus. On 1 October 20X7 it issued 28,000 new shares for cash at
The amounts to be recognized as an expense in profit or loss are the current service cost less the expected full market price. When calculating basic earnings per share, how many shares should be divided into the
return on plan assets. See IAS19 para 61. Note that the difference between the expected and the actual profit after tax, according to IAS33 Earnings per share?
return on plan assets is an actuarial loss, while the employer contributions increase plan assets. A 100,000
13. The Pinder Company is completing the preparation of its draft financial statements for the year ended 31 B 117,000
May 20X7. On 24 July 20X7, a dividend of PHP175,000 was declared and a contractual profit share C 148,000
payment of PHP35,000 was made, both based on the profits for the year to 31 May 20X7. On 20 June 20X7, D 127,000
a customer went into liquidation having owed the company PHP34,000 for the past 5 months. No Question 9 - D
allowance had been made against this debt in the draft financial statements. On 17 July 20X7, a The number of shares to be used is the weighted average in issue through the period. Bonus shares
manufacturing plant was destroyed by fire, resulting in a financial loss of PHP260,000. According to provide no additional consideration to the issuer, so they are related back to the beginning of the earliest
IAS10 Events after the reporting period, which TWO amounts should be recognized in Pinder's profit or loss period presented. Shares issued for cash provide additional consideration, so they are time apportioned
for the year to 31 May 20X7 to reflect adjusting events after the end of reporting period? from the date the cash was receivable. See IAS33 paras 19 and
A PHP175,000 dividend 26. The weighted average is 100,000 + 20,000 + (28,000 × 3/12) = 127,000.
B PHP35,000 bonus
C PHP34,000 allowance for uncollectible trade receivables 34. On 1 July 20X7 The Otakamiro Company handed over to a client a new computer system. The contract
D PHP260,000 loss on manufacturing plant price for the supply of the system and aftersales support for 12 months was PHP800,000. Otakamiro
Question 7 - B & C estimates the cost of the after-sales support at PHP120,000 and it normally marks up such costs by 50%
The correct answers are PHP35,000 bonus and PHP34,000 allowance. See IAS10 paras 9, 12 and 22. Also, when tendering for support contracts. Under IAS18 Revenue, the revenue Otakamiro should recognize in
dividends are recognized in the statement of changes in equity, not profit or loss its financial year ended 31 December 20X7 is
A PHP620,000
DIFFICULT ROUND B PHP800,000
C PHP710,000
30. During the year ended 31 December 20X8 the following events occurred at The Gosling Company: D Nil
(1) It was decided to write off PHP80,000 from inventory which was over two years old as it was obsolete. Question 10 - C
(2) Sales of PHP60,000 had been omitted from the financial statements for the year to 31 December 20X7. Under IAS18 Appendix A para 11 a selling price which includes an amount for after-sales support should
According to IAS8 Accounting policies, changes in accounting estimates and errors, how much should be be split into two components: the support component (being the cost of such support plus a reasonable
shown as a prior period adjustment in Gosling's financial statements for the year to 31 December 20X8? profit margin) and the sale of goods component (measured as the balance). The support component
A PHP60,000 should be recognized as revenue over the service period.
B PHP140,000 The support component is PHP180,000 (PHP120,000 plus 50%), of which half (PHP90,000) should be
C PHP80,000 recognized in the year ended 31 December 20X7, along with the PHP620,000 (PHP800,000 – PHP180,000)
D PHP20,000 sale of goods component.
Question 7 - A
The correct answer is PHP60,000. IAS8 para 32's list of examples of changes in accounting estimates 35. The Tanager Company purchased a boring machine on 1 January 20X1 for PHP81,000. The useful life of
includes inventory obsolescence. the machine is estimated at 3 years with a residual value at the end of this period of PHP6,000. During its
31. One of the conditions that must be satisfied in order to recognize revenue in a transaction involving the useful life, the expected units of production from the machine are:
rendering of services is that the stage of completion of the transaction at the end of the reporting period 20X1 12,000 units
can be measured reliably. Which TWO of the following methods for determining the stage of completion 20X2 7,000 units
of a contract involving the rendering of services are specifically referred to in IAS18 Revenue, as being 20X3 5,000 units
acceptable? What should be the depreciation expense for the year ended 31 December 20X2, using the most
A Costs incurred to date as a percentage of the estimated total costs of the transaction appropriate depreciation method permitted by IAS16 Property, plant and equipment?
B Advances received to date as a percentage of the total amount receivable A PHP27,000
C Surveys of work performed B PHP21,875
D Revenue to date divided by total contract revenue C PHP23,625
Question 1 - A & C D PHP25,000
IAS18 para 24 permits surveys of work performed and costs incurred to date as methods of apportioning Question 17 - B
revenue on service contracts. The correct answer is PHP21,875.
32. How should trade discounts be dealt with when valuing inventories at the lower of cost and net See IAS16 para 56, which indicates that assets are consumed principally through their use. In this
realizable value (NRV) according to IAS2 Inventories? (select one answer) example the answer is calculated as (the original cost less the residual value) divided by total units
A Added to cost produced in 3 years multiplied by total units produced in 20X2.
 D PHP1,000
36. On 1 January 20X7 The Hamerkop Company borrowed PHP6 million at an annual interest rate of 10% to Question 27 - A
finance the costs of building an electricity generating plant. Construction commenced on 1 January 20X7 PHP1,900 (PHP4,000 – (10% × (PHP20,000 + PHP1,000))) is the correct answer. IAS39 para 27 states that
and cost PHP6 million. Not all the cash borrowed was used immediately, so interest income of PHP80,000 on derecognition of part of a financial instrument:
was generated by temporarily investing some of the borrowed funds prior to use. The project was (a) there shall be an allocation of the carrying amount between the part derecognized and the part
completed on 30 November 20X7. What is the carrying amount of the plant at 30 November 20X7? retained
A PHP6,000,000 (b) the difference between the consideration received and the carrying amount allocated to the part
B PHP6,470,000 derecognized shall be recognized in profit or loss. The previous gains had already been recognized in
C PHP6,520,000 profit or loss and so are not included in the calculation. See IAS39 para 46 and AG67.
D PHP6,550,000
Question 6 - B DySAS Level 1
See IAS23 para 12. The asset's carrying amount in this example is the PHP6 million construction cost plus EASY
the interest charged on the loan for the 11 months of construction (PHP6 million x 10% x 11/12 = 1. If a transaction causes total liabilities to decrease but does not affect the owner’s equity, what
PHP550,000, less the PHP80,000 interest earned prior to using the loan to finance construction. change, if any, will occur in total assets?
(a) assets will be increased (c) no change in total assets
37. The Bentham Company purchased an investment property on 1 January 20X5 for a cost of PHP220,000. (b) assets will be decreased (d) none B
The property had a useful life of 40 years and at 31 December 20X7 had a fair value of PHP300,000. 2. A company has assets of P45,000, no liabilities, and stockholders’ equity of P45,000. It buys store
On 1 January 20X8 the property was sold for net proceeds of PHP290,000. Bentham uses the cost model to fixtures worth P5,000 on credit. What effect would this transaction have?
account for investment properties. What is the gain or loss to be recognized in profit or loss for the year (a) both assets and stockholders’ equity increase by P5,000
ended 31 December 20X8 regarding the disposal of the property, (b) both assets and stockholders’ equity decrease by P5,000
according to IAS40 Investment property? (c) assets remain the same and stockholders’ equity increases by P5,000
A PHP86,500 gain (d) both assets and liabilities increase by P5,000 D
B PHP81,000 gain 3. In accounting parlance, the sequence of the arrangements of the accounts in a ledger – that is, assets
C PHP10,000 loss first, followed by liabilities, owner’s equity accounts, revenues and expenses – is called:
D PHP70,000 gain (a) financial statement order (c) double entry method
Question 6 - A (b) account balance (d) accounting cycle A
The correct answer is the PHP290,000 net disposal proceeds less the PHP203,500 (PHP220,000 less 4. The recording phase of accounting covers the following steps, except:
3/40ths thereof) carrying amount. See IAS40 para 69. (a) business documents are received and prepared.
(b) transactions are journalized.
38. The Minor Company leased a freehold building for 20 years, the useful life of the building, with effect (c) transactions are posted to the ledger.
from 1 January 20X7. At that date the fair value of the leasehold interest was PHP7.5 million of which (d) financial statements are prepared. D
PHP6.0 million was attributable to the building. Annual rentals of PHP800,000 are payable in advance on 5. An accrued expense is an expense:
1 January. (a) incurred but not paid (c) paid but not incurred
How much should Minor recognized as an operating lease expense in the year ended 31 December 20X7, (b) incurred and paid (d) not reasonably estimable A
according to IAS17 Leases? 6. Balance sheet accounts that are not eliminated in the closing entries are called:
A Nil (a) nominal (c) positive
B PHP640,000 (b) private (d) real D
C PHP160,000 7. Entries prepared, as a step in the accounting process, to bring the books and accounts up-to-date, is
D PHP800,000 known as:
Question 5 - C (a) opening entries (c) closing entries
A land and buildings lease should be separated into its two components: the land component which will (b) adjusting entries (d) reversing entries B
usually be classified as an operating lease; and the buildings component which in this case extends to the 8. If a general partnership, whose partnership contract provides for interest on partners' capital
end of the building's estimated useful life and should be classified as a finance lease. The annual rental is account balances, incurs a net loss, the interest provision of the contract:
split between the two leases in proportion to the relative a. Must be enforced c. May be either enforced or disregarded
fair values of the two leasehold interests. 20% ((PHP7.5 million – PHP6.0 million) as a % of PHP7.5 b. Must be disregarded d. Must be rescinded by the partners A
million) of the rental is attributable to the land, so PHP160,000. See IAS17 paras 14-16. 9. A partner by estoppel:
a. Ostensible partner c. Dormant
39. The Rattigan Company purchases PHP20,000 of bonds. The asset has been designated as one at fair value b. Secret partner d. Nominal D
through profit and loss. One year later, 10% of the bonds are sold for PHP4,000. Total cumulative gains 10. The theory which viewed the assets of a business as belonging to the owner or proprietor, the
previously recognized in Rattigan's financial statements in respect of the asset are PHP1,000. In liabilities as debts of the owner, and the income of the business as an increase in the owner’s net
accordance with IAS39 Financial instruments: recognition and measurement, what is the amount of the gain worth or capital.
on disposal to be recognized in profit or loss? a. Proprietary theory c. Entity theory
A PHP1,900 b. Equity theory d. Funds theory A
B PHP900
C PHP2,000 AVERAGE
11. The income summary account:
(a) generally has a credit balance after all the accounts that should be closed have closed. DIFFICULT
(b) summarizes revenues, expenses, and net earnings or loss for the accounting period. 21. Accrued salaries payable of P5,000 were not recorded at December 31, 2006. Supplies on hand of
(c) summarizes changes in assets, liabilities, and net earnings or loss for the accounting period. P2,000 at December 31, 2007 were erroneously treated as expense instead of supplies inventory.
(d) is used to close the retained earnings account. B Neither of these errors were discovered nor corrected. The effect of these two errors would cause:
12. Reversing entries apply to: (a) 2007 net income to be understated by P7,000 and December 31, 2007 retained earnings to be
(a) all adjusting entries. (c) all accruals. understated by P2,000.
(b) all deferrals. (d) all closing entries. C (b) 2006 net income and December 31, 2006 retained earnings to be understated by P5,000 each.
13. Which of the following combinations of trial balance totals does not indicate a transposition? (c) 2006 net income to be overstated by P5,000 and 2007 net income to be understated by P2,000.
(a) P65,470 debit and P64,570 credit (c) P25,670 debit and P26,670 credit (d) 2007 net income and December 31, 2007 retained earnings to be understated by P2,000 each. A
(b) P32,540 debit and P35,420 credit (d) P14,517 debit and P15,471 credit C 22. Nick and Carter are partners who share profits and losses in the ratio of 7:3, respectively. Their
14. Which of the following errors would cause unequal totals in the trial balance? respective capital accounts are as follows:
(a) The company records a payment of P20,000 in advance of delivery of goods as a debit of P2,000 Nick P35,000 Carter P30,000
to purchases and a credit of P2,000 to cash. They agreed to admit Brian as a partner with a one-third interest in the capital and profits and
(b) The company fails to accrue salaries of P50,000 for the month of December. losses, upon an investment of P25,000. The new partnership will begin with a total capital of
(c) Both a and b. P90,000. Immediately after Brian’s admission, what are the capital balances of Nick, Carter, and
(d) None of the above. D Brian, respectively?
15. Which of the following errors would cause unequal totals in the trial balance? a. P30,000; P30,000; P30,000 c. P31,667; P28,333; P30,000
(a) The firm records P21,000 received from a customer in advance of delivery of goods as a debit b. P31,500; P28,500; P30,000 d. P35,000; P30,000; P25,000 B
of P1,000 to cash and a credit of P21,000 to sales. 23. At December 31, Miga and Migo are partners with capital balances of P40,000 and P20,000, and they
(b) The firm fails to enter the cost of electric current used during the month as an expense and fails share profits and losses in the ratio of 2:1, respectively. On this date Ami invests P17,000 in cash for
to recognize the P22,000 owed to DLPC. a one-fifth interest in the capital and profit of the new partnership. Assuming that goodwill is not
(c) All these errors will cause unequal trial balance totals. recorded, how much should be credited to Ami’s capital account on December 31?
(d) None of these errors will cause unequal trial balance totals. A a. P12,000 b. P15,000 c. P15,400 d. P17,000 C
16. Adjusting entries that should be reversed include those for prepaid or unearned items that: 24. If a bonus is traceable to the previous partners rather than an incoming partner, it is allocated among
(a) create an asset or a liability account the partners according to the:
(b) were originally entered in a revenue or expense account a. Profit-sharing percentages of the previous partnership.
(c) were originally entered in an asset or liability account b. Profit-sharing percentages of the new partnership.
(d) create an asset or a liability account and were originally entered in a revenue or expense c. Capital percentages of the previous partners.
account d. Capital percentages of the new partnership. A
17. The primary responsibility of an independent auditor who is a CPA is to: 25. The essential characteristics of an asset include (choose the incorrect one):
(a) Verify the accuracy of the amounts determined by the client. (a) The asset is the result of past transaction or event.
(b) Assess whether the management is honest. (b) The asset provides future economic benefits.
(c) Evaluate the “fair presentation” of the company’s eternal financial statements. (c) The cost of the asset can be measured reliably.
(d) Prepare current financial reports for the client. C (d) The asset is tangible. D
18. Loka and Moko formed a partnership on July 1, 2007 and contributed the following assets: 26. Immaterial amounts of similar nature and function should be grouped or condensed as one line item
Loka Moko in the financial statements.
Cash P65,000 P100,000 (a) consistency (c) offsetting
Realty 300,000 (b) aggregation (d) comparability B
The realty was subject to a mortgage of P25,000, which was assumed by the partnership. The 27. The “accounting policies section” of the notes to financial statements should describe:
partnership agreement provides that Loka and Moko will share profits and losses in the ratio of one- (a) only the measurement basis used in preparing the financial statements.
third and two-thirds respectively. Moko’s lcapital account at July 1, 2007 should be: (b) only the specific accounting policies followed by the enterprise.
a. P400,000 b. P391,667 c. P375,000 d. P310,000 C (c) both the measurement basis and accounting policies followed.
19. A, B and C are partners in an accounting firm. Their capital account balances at year-end were: A, (d) nature of the enterprise’s operations and its principal activities. C
P90,000; B, P110,000; C, P50,000. They share profits and losses in a 4:4:2 ratio, after the following 28. You are given the data as follows for CHIN UP CORPORATION:
special terms: Net Assets at the beginning of the year P130,000
a. Partner C is to receive a bonus of 10% of the net income after the bonus. Net Assets at the end of the year 175,000
b. Interest of 10% shall be paid on that portion of a partner’s capital in excess of P100,000. Dividends declared 8,000
c. Salaries of P10,000 and P12,000 shall be paid to partners A and C, respectively. Capital Stock Issued 70,000
The net income (loss) is:
Assuming a net income of P44,000 for the year, the total profit share of partner C would be: (a) Net loss – P107,000 (c) Net income – P107,000
a. P7,800 b. P16,800 c. P19,400 d. P19,800 C (b) Net income – P17,000 (d) Net loss – P17,000 D
20. The basic components of financial statements include (choose the incorrect one):
(a) statement of changes in equity (c) statement of retained earnings Net assets at the end of the year P 175,000
(b) statement of recognized gains and losses (d) cash flow statement C Net assets at the beginning of the year (130,000)
 Increase in net assets P 45,000 c. Depreciable cost less accumulated impairment losses
Dividends declared 8,000 d. Fair value less accumulated impairment losses
Capital Stock issued ( 70,000) 4. An asset is impaired when the carrying amount is
Net loss P 17,000 a. Higher than fair value less costs to sell but lower than value in use.
29. Kern and Pate are partners with capital balance of P60,000 and P20,000, respectively. Profits and b. Lower than fair value less costs to sell but higher than value in use.
losses are divided in the ratio of 60:40. Kern and Pate decided to form a new partnership with Grant, c. Higher than fair value less costs to sell and value in use.
who invested land valued at P15,000 for a 20% capital interest in the new partnership. Grant’s cost of d. Lower than fair value less costs to sell and value in use.
the land was P12,000. The partnership elected to use the bonus method to record the admission of 5. When it is difficult to distinguish between a change of estimate and a change in accounting policy,
Grant into the partnership. Grant's capital account should be credited for: then an entity should
a. P12,000 b. P15,000 c. P16,000 d. P19,000 a. treat the entire change as a change in estimate with appropriate disclosure
30. Partners Dado, Etoy, Fapo, and Gaga share profits 50%, 30%, 10%,and 10%. Accounts maintained b. Apportion, on a reasonable basis, the relative amounts of change in estimate and the change
with partners just prior to liquidation follow: in accounting policy and treat each one accordingly
Advances (Dr) Loans (Cr) Capitals (Cr) c. Treat the entire change as a change in accounting policy
Dado P 5,000 P40,000 d. Since this change is a mixture of two types of changes, it is best if it is ignored in the year of
Etoy 10,000 30,000 the change; the entity should then wait for the following year to see how the change
Fapo P4,500 15,000 develops and then treat it accordingly
Gaga 2,500 25,000 6. Interim financial reports should include as a minimum
At this point P18,000 is available for distribution to the partners. How much cash is to be distributed a. A complete set of financial statements complying with PAS 1
to Gaga? b. A condensed set of financial statements and selected notes
a. P6,625 b. P0 c. P11,375 d. P12,375 c. A balance sheet and income statement only
31. Working capital is: d. A condensed balance sheet, income statement, and cash flow statement only
(a) the group assets which enables the business to operate profitably. 7. XYZ Inc. owns a fleet of over 100 cars and 20 ships. It operates in a capital-intensive industry and
(b) capital which has been reinvested in the business. thus has significant other property, plant, and equipment that it carries in its books. It decided to
(c) unappropriated retained earnings. revalue its property, plant, and equipment. The company's accountant has suggested the
(d) current assets less current liabilities. alternatives that follow. Which one of the options should XYZ Inc. select in order to be in line with
32. John and Eddie form a partnership on March 1, 2002 with the following investments: the provisions of PAS 16?
John Eddie a. Revalue only one-half of each class of property, plant, and equipment, as that method is less
Cash P10,000 P 35,000 cumbersome and easy compared to revaluing all assets together
Land 105,000 b. Revalue an entire class of property, plant, and equipment
Furniture and fixtures 35,000 c. Revalue one ship at a time, as it is easier than revaluing all ships together
John and Eddie agree to divide profits and losses in the ratio of 70:30, respectively, and to assume d. Since assets are being revalued regularly, there is no need to depreciate
the P20,000 mortgage on the land of Eddie. If John is required to make his share in equity equal to 8. The following expenditures would qualify as an exploration and evaluation asset under PFRS 6
40% he must make an additional investment of: I. Expenditure for acquisition of rights to explore
a. P48,000 b. P35,000 c. P80,000 d. P45,000 B II. Expenditure for exploratory drilling
33. It presents an indication in conformity with GAAP of the financial status of the enterprise at a III. Expenditures related to the development of mineral resources
particular point in time. IV. Expenditure for activities in relation to evaluating the technical feasibility and commercial
(a) balance sheet (c) statement of retained earnings viability of extracting a mineral resource
(b) statement of earnings (d) cash flow statement A a. I and II c. I, II and IV
b. III and IV d. I, II, III and IV
9. Which statement is incorrect concerning internally generated intangible asset?
THEORY OF ACCOUNTS a. To assess whether an internally generated intangible asset meets the criteria for recognition, an
1. Which of the following is not a qualitative characteristic of financial reporting? entity classifies the generation of the asset into a research phase and a development phase.
a. Reliability c. Comparability b. The cost of an internally generated asset comprises all directly attributable costs necessary to
b. Going concern d. Relevance create, produce and prepare the asset for its intended use.
2. Which of the following statements about consistency is true? c. Internally generated brands, mastheads, publishing titles, customer lists and items similar in
a. The method of accounting can never be changed the entity has to follow the substance shall be recognized as intangible assets.
accounting method consistently period after period. d.Internally generated goodwill shall not be recognized as an intangible asset.
b. The method of accounting can be changed however, if the method is changed, it 10. Which of the following is true?
must be highlighted in the financial statement. a. Trading securities can be classified as current or noncurrent depending on management's
c. Method of accounting can be changed if standards require. No disclosure is required intent.
in the financial statements. b. Held-to-maturity securities should not be classified as current under any circumstance.
d. Companies must sell the same product consistently from one period to the next. c. Trading securities should not be classified as current under any circumstance.
3. An investment property should be measured initially at d. Available-for-sale securities can be classified as current or noncurrent depending on
a. Cost management's intent.
b. Cost less accumulated impairment losses PRACTICAL ACCOUNTING 1
 12/31/07 ( 800,000) 3,200,000
1. On November 15, 2008, Socrates entered in to a commitment to purchase 200,000 units of raw P4,200,000
material X for P8,000,000 on March 15, 2009. Socrates entered into this purchase commitment to
protect itself against the volatility in the price of raw material X. By December 31, 2008, the At the beginning of the current year, the company had an open market basis valuation of its
purchase price of material X had fallen to P35 per unit. However, by March 15, 2009, when properties. Land was valued at P1.2 million and the building at P4.8 million. The directors wish
Socrates took delivery of the 200,000 units, the price of the material had risen to P42 per unit. these values to be incorporated into the financial statements. The building had an estimated
How much will be recognized as gain on purchase commitment on March 15, 2009? remaining life of 20 years at the date of the valuation (straight-line depreciation is used). The
a. P1,400,000 c. P400,000 company makes a transfer to retained earnings in respect of the excess depreciation on revalued
b. P1,000,000 d. P 0 assets.
2. On September 30, 2008, the company completed the construction of a new warehouse. The The revaluation surplus as of December 31, 2008 is
construction was achieved using the company’s own resources as follows: a. P1,720,000 c. P1,800,000
b. P1,710,000 d. P 960,000
Purchased materials P150,000 6. Jenus owns a company called Klassic Kars. Extracts from Jenus' consolidated balance sheet relating
Direct labor 800,000 to Klassic Kars are:
Supervision 65,000 Goodwill P 80,000,000
Design and planning costs 20,000 Franchise costs 50,000,000
Restored vehicles (at cost) 90,000,000
Included in the above figures are P10,000 for materials and P25,000 for labor costs that were Plant 100,000,000
effectively lost due to the foundations being too close to a neighboring property. All the above Other net assets 50,000,000
costs are included in cost of sales. The building was brought into immediate use upon completion P370,000,000
and has an estimated useful life of 20 years (straight-line depreciation). The company’s policy for
all depreciation is that it is charged to cost of sales and a full year’s charge is made in the year of The restored vehicles have an estimated realizable value of P115 million. The franchise agreement
acquisition or completion and none in the year of disposal. contains a 'sell back’ clause, which allows Klassic Kars to relinquish the franchise and gain a
The carrying amount of the new warehouse as of December 31, 2008 is repayment of P30 million from the franchisor. An impairment review at December 31, 2008 has
a. P1,000,000 c. P950,000 estimated that the value of Klassic Kars as a going concern is only P240 million.
b. P 869,250 d. P987,500 How much is the carrying amount of Plant after impairment loss is recognized?
3. On January 1, 2007, Citimart Inc. was granted 5,000 acres of land in a village, located near the a. P66,666,667 c. P80,000,000
slums outside the city limits, by a local government authority. The condition attached to this b. P75,000,000 d. P82,800,000
grant was that the company should clean up this land and lay roads by employing laborers from 7. Joy Corp. is engaged in a research and development project to produce a new product. In the year
the village in which the land is located. The government has fixed the minimum wage payable to ended December 31, 2007, the company spent P1,200,000 on research and concluded that there
the workers. The entire operation will take three years and is initially estimated to cost P160 were sufficient grounds to carry the project on to its development stage and a further P750,000
million. The fair value of this land on the date of grant was P240 million and is expected to had been spent on development. At that date management had decided that they were not
increase by at least 20% annually because of the improvements to be done by the company. In sufficiently confident in the ultimate profitability of the project and wrote off all the expenditure
relation to the attached condition, the company incurred costs of P80 million in 2007 and P70 to date to the income statement. In 2008 further direct development costs have been incurred of
million in 2008. On December 31, 2008, the company estimated that it will incur additional cost of P800,000 and the development work is now almost complete with only an estimated P100,000 of
P30 million in 2009. costs to be incurred in the future. Production is expected to commence within the next few
How much should be recognized as income from government grant for the year ended December months. Unfortunately the total trading profit from sales of the new product is not expected to be
31, 2008? as good as market research data originally forecasted and is estimated at only P1,500,000.
a. P120,000,000 c. P80,000,000 Assuming the other criteria given in PAS 38 are met, how much should be capitalized as of
b. P105,000,000 d. P70,000,000 December 31, 2008?
4. Worn Company had purchased equipment for P10,000,000, on January 1, 2006. The equipment a. P1,650,000 c. P900,000
had a 5-year life and a salvage value of 10%. Worn Company depreciated the equipment using b. P1,550,000 d. P800,000
the straight line method. On December 31, 2008, Worn had doubts on the recoverability of the 8. Sayong Company bought 20% of Yobo Corporation’s ordinary shares on January 1, 2008 for
carrying amount of this equipment. On December 31, 2008, the discounted expected net future P11,400,000. Carrying amount of Yobo’s net assets at purchase date totaled P50,000,000. Fair
cash inflows related to the continued use and eventual disposal of the equipment totaled value and carrying amounts were the same for all items except for plant and inventory, for which
P4,300,000. The equipment’s fair value less costs to sell on December 31, 2008 is P4,500,000. After fair values exceed their carrying amounts by P10,000,000 and P2,000,000 respectively. The plant
any loss on impairment has been recognized, what is the carrying amount of the equipment? has a 5-year life. All inventory was sold during 2008. During 2007, Yobo reported net income of
a. P4,000,000 c. P4,500,000 P30,000,000 and paid a P10,000,000 cash dividend. What amount should Sayong report as net
b. P4,300,000 d. P4,600,000 income related to this investment in 2008?
5. The draft balance sheet of JJ Rapids Corporation as of December 31, 2008 reported the net a. P5,200,000 c. P5,400,000
property, plant and equipment at P4,200,000. Details of the amount follow: b. P6,200,000 d. P4,200,000
9. On January 2, 2008, Arjam Co. established a noncontributory defined benefit plan covering all
Land at cost P1,000,000 employees and contributed P450,000 to the plan. At December 31, 2008, Arjam determined that
Building at cost P4,000,000 the 2008 service and interest costs on the plan were P620,000. The expected and the actual rate of
Less accumulated depreciation at return on plan assets for 2008 was 10%. There are no other components of Arjam's pension
 expense. What amount should Arjam report in its December 31, 2008 balance sheet as accrued D. Customer retention.
pension expense? 5. Antlers, Inc. produces a single product that sells for P150 per unit. The product is processed
a. P575,000 c. P125,000 through the Cutting and Finishing departments. Additional data for these departments are
b. P170,000 d. P 80,000 follows:
10. The following facts relate to Mustafah Corporation for the year 2008: Cutting Finishing
 Accounting profit for the year, P500,000. Annual capacity (36,000 direct labor hours available in
 Cumulative temporary difference at December 31, giving rise to future taxable amounts, each department) 180,000 units 135,000 units
P230,000. Current production rate (annualized) 108,000 units 108,000 units
 Cumulative temporary difference at December 31, giving rise to the future deductible amounts, Fixed manufacturing overhead P1,296,000 P1,944,000
P95,000. Fixed selling and administrative expense P864,000 P1,296,000
 Deferred tax liability, January 1, P48,300. Direct materials cost per unit. P45 P15
 Deferred tax asset, January 1, P15,750.
 Tax rate for all years, 35%. The current production rate is the budgeted rate for the entire year. Direct labor employees earn
No permanent differences exist. The company is expected to operate profitably in the future. P20 per hour and the company has a “no layoff” policy in effect. What is the amount of the
What is the current tax expense? throughput contribution per unit as computed using the theory of constraints?
a. P160,300 c. P175,000 A. p90.00 C. P46.67
b. P127,750 d. P189,700 B. P76.67 D. P26.6
6. Management of Russell Corporation is considering the following two potential capital
MANAGEMENT ADVISORY SERVICES structures for a newly acquired business.
1. What is a major disadvantage of using economic value added (EVA) alone as a performance Alternative I
measure? Long-term debt, 6% interest P3,000,000
A. It fails to focus on creating shareholder value. Common equity P3,000,000
B. It promotes the acceptance of unprofitable projects. Cost of common equity, 10%
C. It fails to reflect all of the ways that value may be created. Marginal tax rate, 15%
D. It discourages cost cutting. Alternative 2
2. Associated Supply, Inc. is considering introducing a new product that will require a P250,000 Long-term debt, 7% interest P5,000,000
investment of capital. The necessary funds would be raised through a bank loan at an interest rate Common equity P1,000,000
of 8%. The fixed operating costs associated with the product would be P122,500 while the Cost of common equity, 12%
contribution margin percentage would be 42%. Assuming a selling price of P15 per unit, Marginal tax rate, 15%
determine the number of units (rounded to the nearest whole unit) Associated would have to sell
to generate earnings before interest and taxes (EBIT) of 32% of the amount of capital invested in Which of the following statements is not true if management decides to accept Alternative 1?
the new product. A. Alternative 1 is the more conservative capital structure.
A. 35,318 units. C. 25,575 units. B. Alternative 1 provides the greatest amount of financial leverage.
B. 32,143 units. D. 23,276 units C. Net income will be less variable under Alternative 1.
3. Following are the operating results of the two segments of Parklin Corporation D. Total interest expense
Sales P10,000 P15,000 P25,000 7. Para Co. is reviewing the following data relating to an energy saving investment proposal:
Variable cost of goods sold 4,000 8,500 12,500 Cost P50,000
Fixed cost of goods sold 1,500 2,500 4,000 Residual value at the end of 5 years 10,000
Gross margin 4,500 4,000 8,500 Present value of an annuity of 1 at 12% for 5 years 3.60
Variable selling and administrative 2,000 3,000 5,000 Present value of 1 due in 5 years at 12% 0.57
Fixed selling and administrative 1,500 1,500 3,000 What would be the annual savings needed to make the investment realize a 12% yield?
Operating income (loss) P1,000 P (500) P500 A. P 8,189 C. P12,306
B. P11,111 D. P13,889
Fixed costs of goods sold are allocated to each segment based on the number of employees. Fixed 8. Ethoy, Inc. has seasonal demand for its products and management is considering whether level
selling and administrative expenses are allocated equally. If Segment B is eliminated, P1,500 of production or sea-al production should be implemented. The firm’s short- term interest cost is 8%,
fixed costs of goods sold would be eliminated. Assuming Segment B is closed, the effect on and management has developed the following information to make the decision:
operating income would be Alternative 1 Alternative 2
A. An increase of P500. C. A decrease of P2,000. Level production Seasonal production
B. An increase of P2,000. D. A decrease of P2,500. Average inventory P2,000,000 P1,500,000
4. The balanced scorecard generally uses performance measures with four different perspectives. Production costs P6,000,000 P6,050,000
Which of the following performance measures would be part of those used for the internal
business processes perspective? At what rate of short-term interest rate would the two alternatives have the same cost?
A. Cycle time. A. 6% C. 10%
B. Employee satisfaction. B. 9% D. 12%
C. Hours of training per employee.
9. Roy Macho Company is budgeting sales of 53,000 units of product Nous for October 2008. The b. Oral donation of personal computer worth P15,000.
manufacture of one unit of Nous requires four kilos of chemical Loire. During October 2008, Roy c. Stipulation of interest in a contract of loan.
Macho plans to reduce the inventory of Loire by 50,000 kilos and increase the finished goods d. Contract of agency.
inventory of Nous by 6,000 units. There is no Nous work in process inventory. How many kilos 8. Which of these is not a conditional obligation?
of Loire is Roy Macho planning to purchase in October 2008? a. D is to pay C P1,000,000 if he finishes his LL.B. at the V.P. College of law.
A. 138,000 C. 186,000 b. D will pay C P500,000 as soon as his financial means will permit him to do so.
B. 162,000 D. 238,000 c. D is to pay C P2,000,000 ten days after his 80th birthday.
10. Anna Bonita Wheels purchases bicycle components in the month prior to assembling them into d. D will pay C P1,000,000 twenty days after he passes the C.P.A. exams for October 2008.
bicycles. Assembly is scheduled one month prior to budgeted sales. Anna pays 75% of 9. In the following cases, the debtor shall lose the benefit of the period – choose the exception.
component costs in the month of purchase and 25% of the costs in the following month. a. When after the contraction of the obligation the debtor becomes insolvent but he gives
Component cost included in budgeted cost of sales are collateral security or guaranty.
April May June July August b. When the debtor fails to furnish the collateral securities which has promised.
P5,000 P6,000 P7,000 P8,000 P8,000 c. When the collateral security is impaired whether through the debtor’s fault or by fortuitous
What is Anna’s budgeted cash payment for components in May? events.
A. P5,750 C. P7,750 d. When the debtor attempts to abscond.
B. P6,750 D. P8,000 10. A, B, & C obligated themselves to deliver to X a specific and determinate car valued at P600,000. Due
to the fault of A, the car was not delivered to X causing the latter damages in the amount of
BUSINESS LAW P9,000.
1. Juan de la Cruz signs a promissory note payable to Pedro Lim or Bearer, and delivers it personally a. By specific performance. X can compel B & C to deliver 1/3 each of the car and H to pay
to Pedro Lim. The latter somehow misplaces the said note and Carlos Ros finds the note lying damages.
around the corridor of the building. Carlos Ros endorses the promissory note to Juana Bond, for b. The action of X is converted into one for damages where he hold liable A, B & C for P203,000
value, by forging the signature of Pedro Lim. May Juana Bond hold Juan de la Cruz liable on the each.
note? c. The action of X is converted into one for damages where he can hold B & C liable for
a. No, because forgery is a real defense P200,000 each and A for P209,000.
b. Yes, because the forge signature is not necessary for the negotiation of the instrument. d. The action being solidary and indivisible only A can be held liable by X for P609,000.
c. No, because Juana Bond cannot become a holder because the indorsement is forged.
d. Yes, because forgery is just a personal defense.
2. The term of office of Mr. Carlito as member of the board is about to expire on December 10, 2007. On PRACTICAL ACCOUNTING 2
December 12, 2007 a special meeting was called to fill up the vacancy in the board. Mr. Vladimir 1. The condensed balance sheet of IVY Corporation as of December 31, 2007 is shown below:
got the highest number of votes; however Mr. Vladimir is not a shareholder. Book Values Fair Values
a. Mr. Carlito is no longer a director because Mr. Vladimir is qualified to be a director Current assets P200,000 P225,000
b. Mr. Vladimir is the new director because he got the highest number of votes.
Plant assets 300,000 400,000
c. Mr. Vladimir is entitled to office because he got the highest number of votes and the term of
Mr. Carlito is already expired. Total assets P500,000
d. Mr. Carlito is entitled to hold office despite that his term is already expired because Mr.
Vladimir is not qualified to be a director not being a shareholder. Hence, the incumbent Liabilities P150,000
director Mr. Carlito shall serve until his successor is elected and qualified. Capital stock, P10 par 50,000
3. Who among the following are liable for warranties as well as secondary liability?
Additional paid-in capital 100,000
a. Drawer c. Qualified indorser
Retained earnings 200,000
b. Maker d. Unqualified indorser
4. Which of the following transactions or contracts involving the sale or financing of real estate on Total equities P500,000
installment payments is not covered by Maceda law:
a. Residential c. Apartment On January 1, 2008, Vine Company issues 10,000 shares of its P10 par value stock with a market
b. Condominium d. Commercial Building value of P50 per share for the net assets of IVY Corporation.
5. These are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the How much is the increase in the stockholders' equity of Vine Company due to the business
defendant, may be vindicated or recognized: combination?
a. Moral damages c. Nominal damages A. P 100,000 C. P 350,000
b. Temperate damages d. Actual damages B. P 150,000 D. P 500,000
6. And B are debtors of C for P2,000,000. A’s consent was obtained by C thru fraud. 2. The following amounts were taken from the statement of affairs for Bagsak Company
a. C can collect the entire P2,000,000 from B
b. C can collect the entireP2,000,000 from B but the latter can recover from A P1,000,000. Unsecured liabilities without priority P90,000
c. A is liable only to C for P1,000,000 because he can interpose his defense of fraud. Stockholders' equity 36,000
d. B is liable to C for his share of P1,000,000.
Loss on realization of assets 45,000
7. Which of the following is a consensual contract:
a. Contract of partnership with capital contribution of real property amounting to P100,000. Estimated administrative expenses that have not been entered in the
accounting records 4,500
 Unsecured liabilities with priority 10,000 Plant assets 22,000,000 6,500,000
Total assets 40,000,000 8,000,000
The estimated payment for the unsecured liabilities without priority will be Liabilities 12,000,000 2,000,000
A. P76,500 C. P81,000 Common stock- P10 par 20,000,000 3,000,000
B. P77,850 D. P90,000 Additional paid-in capital 3,000,000 1,000,000
3. Rose Company which began operations on January 2, 2007, appropriately uses the installment Retained earnings 5.000,000 2.000.000
sales method of accounting. The following information is available for 2007: Installment accounts Total equities P40,000,000 P8,000,000
receivable, December 31, P800,000; Deferred gross profit, December 31, before recognition of
realized gross profit for 2007, P560,000; gross profit rate on sales, 40% Calculate the retained earnings Patter Corporation immediately after the combination:
For the year ended December 31, 2007, cash collections and realized gross profit on sales should be: A. P5,000,000 C. P7,000,000
A. P400,000;P320,000 C. P600,000;P320,000 B. P6,000,000 D. P8,000,000
B. P400,000;P240,000 D. P600,000;P240,000 8. An entity purchases plant from a foreign supplier for 3 million foreign currency units on January
31, 2007, when the exchange rate was 2fc = PI. At the entity's year-end of March 31, 2007, the
4. Buildquick Construction Company has entered into a fixed price contract to construct an amount has not been paid. The closing exchange rate for the mentioned foreign currency was 1.5fc
apartment building for P13,000,000. = PI. The entity's functional currency is the peso.
The details of the costs incurred to date in the first year are Which of the following statements is correct?
A. Cost of plant, P2 million, exchange loss P0.5 million, trade payable, PI.5 million.
Site labor cost P 1,000,000 B. Cost of plant, PI.5 million, exchange loss P0.6 million, trade payable, P2 million.
Cost of construction materials 3,000,000 C. Cost of plant, PI.5 million, exchange loss P0.5 million, trade payable, P2 million.
Depreciation of plant and D. Cost of plant, P2 million, exchange loss P0.5 million, trade payable P2 million.
equipment being used in project 500,000 9. On September 24, 2007 Bureau of Internal Revenue (BIR) collected taxes from individual
Marketing and selling costs to get taxpayers in the amount of P875,000 The BIR has no authority to use these collections in their
the exposure needed 200.000 operation and therefore deposited it to the Bureau of Treasury. What is the journal entry to record
Total P4,700,000 the collections in the National Government Books?
A. Cash-National Treasury -MDS 875,000
Estimated additional cost to Subsidy Income from NG 875,000
complete the building P 5,500,000 B. Cash-Collecting Officer 875,000
Calculate the amount of profit to be recognized by Buildquick for the first year of construction Income taxes-Individuals 875,000
activities. C. Cash-Collecting Officer 875,000
A. P 829,412 C. P1,350,000 Contributions Revenue 875,000
B. P 900,000 D. P1,800,000 D. Cash-National Treasury - MDS 875,000
5. The home office in Alabang shipped merchandise costing P55,500 to Davao branch, prepaid, the Income taxes-Individuals 875,000
freight amounting to P4,200. The home office transfers merchandise to the branch at a 20% mark-
up above cost. Davao branch was subsequently instructed to transfer the merchandise to Cebu 10. Darlin Hospital, a private not-for-profit hospital, had the following cash receipts for the year
branch wherein the latter paid for P2,800 freight. If the shipment was made directly from Alabang ended December 31, 2007:
to Cebu, the freight cost would have been P6,200. Patient service revenue P300,000
Which of the following is true as a result of the interbranch transfer of merchandise? Gift shop revenue 25,000
A. The home office will debit Branch Current - Cebu, P73,600 Interest revenue restricted by donor
B. Cebu branch will debit Home Office Current - P70,000 stipulation for acquisition of equipment 50,000
C. Davao branch credit Freight-in, P6,200
D. The home office will credit Branch Current - Davao, P70,800 As a result of these cash receipts, the hospital's statement of cash flows for the year ended
6. Job No. 41 (consisting of 5,000 units) was started in September, 2008 and it is special in nature December 31, 2007, would report an increase in operating activities of
because of its strict specifications. Factory overhead is charged at P 0.85 per unit and includes a a. P325,000
P.05 provision for defective work. The prime costs incurred in September are: Direct materials, P b. P375,000
9,000 and Direct labor, P 4,800. Upon inspection, 80 units were found with imperfections and c. P350,000
required the following reprocessing costs, Direct materials, P 2,000 and direct labor, P 1,000. d. P300,000
The unit cost of Job No. 41, upon completion, is:
A. P 4.22 C. P 3.98 THEORY OF ACCOUNTS
B. P4.17 D. P 3.69 1. Which of the following statements is (are) true, for purposes of financial reporting in the
7. Patter Corporation issues 500,000 shares of its own P10 par common stock for the net assets of Philippines?
Simpson Corporation in a merger consummated on July 1, 2007. On this date, Patter stock is I. Philippine practice is to present in the balance sheet current assets before non-current assets,
quoted at P20 per share. Summary balance sheet data for the two companies at July 1, 2007, just current liabilities before non-current liabilities; and equity accounts before liabilities
before combination, are as follows: II. Notes are normally presented in the following order: Significant accounting policies; statement of
Patter Simpson compliance of PRFSs; supporting information on items presented on the face of the financial
Current assets P18,000,000 P1,500,000 statements; and lastly, other disclosures
 III. The IAS term ”Reserves” in present Philippine practice, may refer to revaluation a. Price change
increment, translation adjustments recognized in equity; unrealized gains and losses from b. Physical change
available for sale securities recognized in equity. c. Both price change and physical change
a. I and II only b. I and III only c. II and III only d. I, II and III d. Neither price change nor physical change
2. An entity purchases a building and the seller accepts payment partly in equity shares and partly in 10. A company acquired some of its own common shares at a price greater than both their par value and
debentures of the entity. This transaction should be treated in the cash flow statement as follows: original issue price but less than their book value. The company uses the cost method of accounting
a. The purchase of the building should be investing cash outflow and the issuance of shares and the for treasury stock. What is the impact of this acquisition on total stockholders’ equity (TSE), and the
debentures financing cash outflows. net book value (NBV) per common share?
b. The purchase of the building should be investing cash outflow and the issuance of debentures a. SE – decrease ; NBV – increase c. SE – decrease; NBV – decrease
financing cash outflows while the issuance of shares investing cash outflow. b. SE – increase ; NBV – decrease d. SE – increase; NBV - increase
c. This does not belong in a cash flow statement and should be disclosed only in the notes to the 11. What is the measurement basis of an asset that is acquired in non-monetary exchange
financial statements. With commercial substance With no commercial substance
d. Ignore the transaction totally since it is a non-cash transaction. No mention is required in either a. Fair value of asset given up Carrying amount of asset given up
the cash flow statement or anywhere else in the financial statements b. Carrying amount of asset given up Carrying amount of asset received
3. The scope of PAS 39 includes all of the following except c. Carrying amount of asset received Fair value of asset received
a. Financial instruments that meet the definition of a financial asset d. Fair value of asset given up Fair value of asset given up
b. Financial instrument that meet the definition of a financial liability 12. Which of the following statements concerning borrowing costs is false?
c. Financial instruments issued by the entity that meet the definition of an equity a. Borrowing costs generally include interest costs, bank overdrafts, amortization of
instrument discounts or premiums related to borrowings, finance charges with respect to
d. Contracts to buy or sell non-financial items that can be settled net. finance leases.
4. Deposits in foreign countries which are subject to a foreign exchange restrictions should be b. Borrowing costs are interest and other costs incurred by an enterprise in relation to
a. Valued at current exchange rates and shown as current assets borrowed funds.
b. Valued at historical exchange rates and presented as noncurrent assets c. Per PAS 23, the benchmark treatment for borrowing costs is to capitalize it as part
c. Valued at current exchange rates and presented as noncurrent assets / of the cost of the asset to which it relates.
d. Valued at historical exchange rates and presented as current assets d. Borrowing costs include amortization of ancillary costs incurred in connection with the
5. What is the proper accounting for credit card sales if the credit card company is arrangement of borrowings, as well as exchange differences arising from foreign currency
Affiliated with a bank Not affiliated with a bank borrowings to the extent that they are regarded as an adjustment to interest cost.
a. Sale on account Cash sales 13. Easy Builders Inc. is in the middle of a two-year construction contract when it receives a letter from
b. Sale on account Sale on account the customer extending the contract by a year and requiring the construction company to increase its
c. Cash sale Cash sale output in proportion of the number of years of the new contract to the previous contract period.
d. Cash sale Sale on account This is allowed in recognizing additional revenue according to PAS 11 if
6. Losses which are expected to arise from firm and non-cancellable commitments for the future a. Negotiations have reached an advanced stage and it is probable that the customer will
purchase of inventory items, if material should be accept the claim
a. Recognized in the accounts by debiting loss on purchase commitments and b. The contract is sufficiently advanced and it is probable that the specified performance
crediting estimated liability for loss on purchase commitments standards will be exceeded or met.
b. Disclosed in the notes c. It is probable that the customer will approve the variation and the amount of revenue arising
c. Ignored from the variation, and the amount of revenue can be reliably measured.
d. Charged to retained earnings d. It is probable that the customer will approve the variation and the amount of revenue arising
7. Delta Corp. purchased 7,400 shares of Maiden Company’s common stock and classified it as from the variation, whether the amount of revenue can be reliably measured or not.
available-for-sale. The purchase price was P362,000, which is equal to 50% of Maiden Company’s 14. Under IAS 20, which of the following is permitted in recognizing an intangible asset acquired
retained earnings balance. Maiden Company’s 46,000 shares of common stock are actively traded. free of charge, or for nominal consideration, by way of a government grant?
Delta should account for this using the I. Recognize both the intangible asset and the grant initially at fair value.
a. Cost method II. Recognize the asset initially at a nominal amount plus any expenditure that is
b. Equity method directly
c. Cost method subject to fair value valuation in the balance sheet attributable to preparing the asset for its intended use
d. Market value method subject to fair value valuation in the balance sheet a. I only
8. Which of the following statements regarding Investment Property is (are) true b. Either I or II, at the option of the acquiring enterprise
I. An investment property shall be measured initially at its cost c. II only
II. Transaction cost shall be included in the initial measurement of investment property d. Neither I nor II
III. With certain exceptions, an entity shall choose as its accounting policy either the
fair value model or the cost model and shall apply such policy to all its investment 15. PAS 20, Government Grants provide two approaches to accounting for government grants :
property (1) capitalization approach and (2) income approach. Arguments in support of the income
a. I and II only b. I and III only c. II and III only d. I, II and III approach include the following except:
9. In determining the fair value of a biological asset for balance sheet purposes, which of the following a. Government grants are considered earned through compliance with the condition and
should be considered? meeting envisaged obligations
 b. Government grants are receipts from a source other than shareholders or capital providers
c. Government grants represent an incentive provided by the government without related costs. 22. In January 2008, Jenks Mining Corporation purchased a mineral mine for P4,200,000 with removable
d. Government grants are considered as extension of fiscal policies similar to income and other ore estimated by geological surveys at 3,000,000 tons. The property has an estimated value of
taxes P400,000 after the ore has been extracted. Jenks incurred P1,150,000 of development costs preparing
the property for the extraction of ore. During 2008, 340,000 tons were removed and 300,000 tons
were sold. For the year ended December 31, 2008, Jenks should include what amount of depletion in
PRACTICAL ACCOUNTING 1 its cost of goods sold?
a. P430,667 b. P380,000 c. P495,000 d. P561,000
16. In 2008, Paul Hypermarket awards loyalty points to customers who use Paul Hypermarket’s own
credit card to pay for purchases. The award is at the rate of one point for every P250 charged to the 23. Down Co. bought a trademark from Cater Corp. on January 1, 2008, for P112,000. An independent
card and each point entitles the customer to a certain credit against future purchases, without time consultant retained by Down estimated that the remaining useful life is 50 years. Its unamortized
limit. Paul Hypermarket estimates the fair value of each point at P4 and in 2008, P250,000,000 is cost on Cater's accounting records was P56,000. Down decided to write off the trademark over the
charged to the Paul Hypermarket’s credit card. None of the customers have claimed their maximum period allowed. How much should be amortized for the year ended December 31, 2008?
corresponding credit points during 2008. a. P1,120. b. P1,400. c. P2,240. d. P2,800.
The amount to be reported as revenue for 2008 by Paul Hypermarket is
a. P250,000,000 b. P249,000,000 c. P246,000,000 d. P245,000,000 Use the following information for questions 80 and 81
On January 2, 2008, Hernandez, Inc. signed a ten-year non-cancelable lease for a heavy duty drill press.
Use the following information for numbers 74 and 75 The lease stipulated annual payments of P70,000 starting at the end of the first year, with title passing to
On January 1, 2006 Luke Company, a financial services entity which is also involved in real estate Hernandez at the expiration of the lease. Hernandez treated this transaction as a capital lease. The drill
development, has purchased a plot of land in Makati City for P2,000,000 which it intends to develop and press has an estimated useful life of 15 years, with no salvage value. Hernandez uses straight-line
eventually sell. On July 1, 2006, Luke Company purchased 10 passenger vehicles for a total consideration depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value
of P2,500,000. Luke Company’s intention was to use the passenger vehicles to transport Luke Company’s of P420,000, based on implicit interest of 10%.
employees. Luke Company uses the straight-line depreciation method for the passenger vehicles with no 24. In its 2008 income statement, what amount of interest expense should Hernandez report from this
expected salvage value and an estimated useful life of 8 years. lease transaction?
On December 31, 2007, Luke Company entered in a lease agreement with John Company for its land in a. P0. b. P26,250 c. P35,000. d. P42,000.
Makati City and its passenger vehicles. Development cost incurred until December 31, 2007 was 25. In its 2008 income statement, what amount of depreciation expense should Hernandez report from
P700,000. The fair values of the land in Makati City and the 10 passenger vehicles were P2,950,000 and this lease transaction?
P2,181,250 respectively. Assets classified by Luke Company as investment properties are presented at a. P70,000. b. P46,667. c. P42,000. d. P28,000.
fair value.
At the end of 2008, the fair values of land and 10 passenger vehicles were 3,100,000 and P2,201,250 26. On October 31, 2008, Beta Company engaged in the following transactions:
respectively. Obtained a P500,000, six-month loan from City Bank, discounted at 12%. The company pledged
17. The gain (loss) to be reported in 2007 in relation to the reclassification to investment P500,000 of accounts receivable as security for the loan.
Factored P1,000,000 of accounts receivable without recourse on a non notification basis with Hype
property is Company. Hype charged a factoring fee of 2% of the amount of receivables factored and withheld
a. 0 b. 150,000 c. 250,000 d. 400,000 10% of the amount factored.
18. The revaluation surplus balance at December 31, 2008 is What is the total cash received from the financing of receivables?
a. 0 b. 15 c. 35 d. 48 a. P1,320,000 b. P1,350,000 c. P1,380,000 d. P1,470,000
0,000 5,577 2,500 27. The closing inventory of Gandhi Company amounted to P284,000 at December 31, 2008. This total
includes two inventory lines about which the inventory taker is uncertain.
19. Before year-end adjusting entries, Bass Company's account balances at December 31, 2001, for Item 1 - 500 items which had cost P15 each and which were included at P7,500. These
accounts receivable and the related allowance for uncollectible accounts were P500,000 and P45,000, items were found to have been defective at the balance sheet date. Remedial work
respectively. An aging of accounts receivable indicated that P62,500 of the December 31 receivables after the balance sheet date cost P1,800 and they were then sold for P20 each.
are expected to be uncollectible. The net realizable value of accounts receivable after adjustment is Selling expenses were P400.
a.P482,500. b. P437,500. c. P392,500. d. P455,000. Item 2 - 100 items that had cost P10 each but after the balance sheet date, these were sold
20. Isaac Co. assigned P500,000 of accounts receivable to Dixon Finance Co. as security for a loan of for P8 each with selling expenses of P150.
P420,000. Dixon charged a 2% commission on the amount of the loan; the interest rate on the note What figure should appear in Gandhi’s balance sheet for inventory?
was 10%. During the first month, Isaac collected P110,000 on assigned accounts after deducting P380 a. P283,650 b. P283,950 c. P284,000 d. P284,300
of discounts. Isaac accepted returns worth P1,350 and wrote off assigned accounts totaling P3,700. 28. In reconciling the Cash in bank of Yna Company with the bank statement balance for the
The amount of cash Isaac received from Dixon at the time of the transfer was
a. P378,000. b. P410,000. c. P411,600. d. P420,000. month of November 2008, the following data are summarized:
Book debits for November, including October CM for note collected, P60,000 P 800,000
21. On June 1, 2008, Oslo Corp. sold merchandise with a list price of P15,000 to Mead on account. Oslo Book credits for November, including NSF of P20,000 and service charge of P800
allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made f.o.b. for October 620,000
shipping point. Oslo prepaid P300 of delivery costs for Mead as an accommodation. On June 12, Bank credits for November including CM for November for bank loan of P100,000
2008, Oslo received from Mead a remittance in full payment amounting to and October deposit in transit for P80,000 700,000
a. P8,232 b. P8,526. c. P8,532. d P8,397. Bank debits for November including October outstanding checks of P170,800 and
 November service charge of P200 600,000 The year-end balances in the home office account’s allowance for unrealized gross margin in
What is the amount of outstanding checks for November ? branch inventory are P 48,750 for the QC Branch and P58,500 for the MC branch.
a. P 20,000 b. P170,200 c. P171,000 d. P191,000 The income from Branch, home office should record is:
a. P171,750 b. P97,500 c. P130,500 d. P74,250

32. On January 1, 2008, Ashley Corp. purchased 75% of the common stock of Racks Corp.
PRACTICAL ACCOUNTING 2 Separate balance sheet data for the companies at the combination date are given below:
Ashley Racks
29. Roel, Jekell and Mike, CPAs, decide to form a partnership and agree to distribute profits in the ratio Cash P 84,000 P 721,000
5:3:2. It is agreed, however, that Roel and Jekell shall guarantee fees from their own clients of Trade Receivable 504,000 91,000
P600,000 and P500,000 respectively, that any deficiency is to be charged directly against the account Merchandise Inventory 462,000 133,000
of the partner failing to meet the guarantee, and that any excess is to be credited directly to the Land 273,000 112,000
account of the partner with fees exceeding the guarantee. Fees earned during 20x4 are classified as Plant Assets 2,450,000 1,050,000
follows: Accumulated Depreciation (840,000) (210,000)
From clients of Roel P1,000,000 Investment in Racks 1,372,000
From clients of Jekell 400,000
Total Assets P4,305,000 P1,897,000
From clients of Mike 100,000
Operating expenses for 20x4 are P200,000. Determine the share of Roel on the operating results
Accounts Payable P 721,000 P 497,000
for the year 20x4.
Capital Stock 2,800,000 1,050,000
a. P900,000 b. P500,000 c. P200,000 d. P300,000
Retained Earnings 784,000 350,000
Total Equities P4,305,000 P 1,897,000
30. Caine, Osman, and Roberts formed a partnership on January 1, 20x4, agreeing to distribute profits
At the date of combination the book values of Racks net assets was equal to the fair value of the
and losses in the ratio of original capitals. Original investments were P625,000, P250,000 and
net assets except for Rack’s inventory which has a fair value of P210,000.
P125,000 respectively. Earnings of the firm and drawings by each partner for the period 20x4-20x6
follows:
On the date of acquisition in the consolidated balance sheet:
Drawings
How much is the total assets?
.
a. P 3,533,250 b. P4,984,000 c. P 6,543,250 d. P 5,171,250
Net income (loss) Caine Osman Roberts
33. The following data pertained to Pogi Company’s construction jobs, which commenced during 2008:
20x4 P440,000 P150,000 P78,000 P52,000
PROJECT 1
20x5 185,000 150,000 78,000 52,000
PROJECT 2
20x6 ( 105,000) 100,000 52,000 52,000
Contract Price P420,000 P300,000
At the beginning of 20x7, Caine and Osman agreed to permit Roberts to withdraw from the
Cost incurred during 2008 240,000 280,000
firm. Since the books for the firm had never been audited, the partners agreed to an audit in arriving
Estimated cost to complete 120,000 40,000
at the settlement amount. In withdrawing, Roberts was allowed to take certain furniture and was
Billed to customers during 2008 150,000 270,000
charged P15,000, although the book value was P45,000; the balance of Roberts’ interest was paid in
Received from customers during 2008 90,000 250,000
cash.
If Pogi company used the percentage of completion method, what amount of profit (loss) would Pogi
Company report in its 2008 income statement?
a. P(20,000) c. P22,500
The following items were revealed in the course of the audit.
b. P20,000 d. P40,000
End of 20x4 End of 20x5 End of 20x6
34. On April 1, 2008, Ringo Corp. entered into franchise agreement with Quart Corp. to sell their
Understatement of accrued expenses P 4,000 P 5,000 P 6,500
products. The agreement provides for an initial franchise fee of P4,218,750 payable as follows:
Understatement of accrued revenue 2,500 1,000 1,500
P1,181,250 cash to be paid upon signing of the contract and the balance in five equal annual payment
Overstatement of inventories 15,000 20,000 20,000
every December 31, starting at the end of 2008. Ringo signs 12% interest learning note for the
Understatement of depreciation expense
balance. The agreement further provides that the franchise must pay a continuing franchise fee
On assets still held 1,500 3,500 2,000
equal to 5% of its monthly gross sales. On August 30 the franchisor completed the initial services
How much must Roberts received from the partnership?
required n the contract at a cost of P1,350,000 and incurred indirect costs of P232,500. The franchise
a. P511,250 b. P156,500 c. P15,250 d. P11,250
commenced business operations on September 3, 2008. The gross sales reported to the franchisor are
September sales, P110,000; October sales, P125,000; November sales P138,000; and December sales,
31. At the beginning of 2008, S Video established a QC Branch and a MC Branch in order to provide
P159,000. The first installment payment was made on due date.
wider distribution of its merchandise. Merchandise is transferred to the branches at a pricd 30%
above cost. All branch merchandise is acquired from the home office. At the end of 2008, the QC
Assume the collectivity of the note is reasonably assured. In its income statement for the year ended
Branch and the MC Branch reported net income and ending inventory balances as follows:
December 31, 2008 how much is the realized gross profit?
Net income Ending inventory
a. P2,868,750 b. P2,936,225 c. P2,895,350 d. P3,168,725
QC Branch P45,500 P65,000
MC Branch 52,000 78,000
35. The trustee for John Corp. prepares a statement of affairs which shows that unsecured creditors Under Violeta’s accounting system, the cost of normal spoilage are treated as part of the cost of good
whose claims total P 540,000 may expect to receive approximately P 405,000 if assets are sold for the units produced. However, the cost of abnormal spoilage is charged to factory overhead. Using
benefit of creditors. weighted average method, what are the equivalent units for the materials unit cost calculation for
a. Danielle Corp. holds a note for P22,500 on which interest of P1,350 is accrued, the month of April?
property with a book value of P18,000 and a realizable amount of P 27,000 is pledged a. 47,000 b. 52,000 c. 55,000 d. 57,000
on the note.
b. Randolph, an employee is owed P6,750 for his salary. 39. Agency Makabayan received Notice of Cash Allocation (NCA) – P45,000,000 for the year 2008, the
c. Baltimore Corp. holds a note of P54,000 on which interest of P2,700 is accrued, entry would be:
securities with a book value of P 58,500 and a realizable amount of P45,000 is pledged a. No entry
on the note. b. Memorandum entry in Registry of Allotments
d. Nick Corp. holds a note for P9,000 on which interest of P500 is accrued, nothing has c. National Clearing Account 45,000,000
been pledged for the note. Appropriation Alloted 45,000,000
How much may each of the following creditors receive? Danielle Corp; Randolph Corp; Baltimore d. Cash-National Treasury, MDS 45,000,000
Corp.; Nick Corp., respectively. Subsidy Income from National government 45,000,000
a. P 27,000 ; P5,063; P53,775 ; P 0 c. P27,000 ; P6,750; P56,700 ; P 0 40. Save the Planet, a private nonprofit research organization, received a $500,000 contribution from Ms.
b. P 23,850; P 6,750; P56,700; P7,125 d, P23,850; P6,750; P53,775 ; P 7,125 Susan Clark. Ms. Clark stipulated that her donation be used to purchase new computer equipment
36. The following information was taken from H Company’s accounting records for the year for Save the Planet’s research staff. The contribution was received in August of 2001, and the
December 31, 2008: computers were acquired in January of 2002. For the year ended December 31, 2001, the $500,000
Increase in raw materials inventory P 15,000 contribution should be reported by Save the Planet on its
Decrease in finished goods inventory 35,000 a. Statement of activities as unrestricted revenue.
Raw materials purchased 430,000 b. Statement of activities as deferred revenue.
Direct labor cost 200,000 c. Statement of activities as temporarily restricted revenue.
Factory overhead control 260,000 d. Statement of financial position as deferred revenue.
Freight-in 45,000 41. On January 1, 20x3, Pike Company purchased 80% of the outstanding voting shares of Sword
company for P800,000. On that date, Sword had P300,000 of capital stock and P600,000 of retained
There was no work in process inventory at the beginning or end of the year. H’s 2008 earnings. All assets and liabilities of Sword had book values approximately equal to their fair market
cost of goods sold is if FOH is applied at 140% of labor costs: values. Goodwill, if any, is not amortized. Pike uses the complete equity method to account for its
a. P950,000 b. P965,000 c. P975,000 d. P995,000 investment in Sword.
On April 1, 20x3, Pike sold equipment with a book value of P40,000 to Sword for P60,000. The
37. C Company has underapplied factory overhead of P45,000 for the year ended December equipment is expected to have a useful life of five years from the date of the sale and no salvage
31, 2008. Before disposition of the underapplied overhead, selected December 31, 2008, value. Sword will use straight-line depreciation. For year 20x3, Sword reported net income of
balances from C’s accounting records are as follows: P200,000 and paid dividends of P40,000.
Sales P1,200,000 Determine the income from investment under the complete equity method.
Cost of goods sold 720,000 a. P143,000 b. P144,000 c. P163,00 d. P111,000

Inventories: 42. P Company owns controlling interests in S and T Corporations, having acquired an 80 percent
Direct materials 36,000 interest in S in 20x1 and a 90 percent interest in T on January 1, 20x2. P’s investments in S and T were
Work in process 54,000 at book value equal to fair value.
Finished goods 90,000 Inventories of the affiliated companies at December 31, 20x2 and December 31, 20x3 were as
follows:
Under C’s cost accounting system, over – or underapplied overhead is allocated to December 31, 20x2 December 31, 20x3
appropriate inventories and cost of goods sold based on year – end balances. In its 2008 P inventories P60,000 P54,000
income statement, C should report cost of goods sold of S inventories 38,750 31,250
a. P682,500 b. P684,000 c. P756,000 d. P757,500 T inventories 24,000 36,000
P sells to S at a 25 percent markup based on cost, and T sells to P at a markup of 20 percent. P’s
38. Violeta company adds materials at the beginning of the process in Department A. Information beginning and ending inventories for 20x3 consisted of 40% and 50%, respectively, of goods
concerning the materials used in April 2008 is as follows: acquired from T. All of S inventories consisted of merchandise acquired from P.
The inventory that should appear in the December 31, 20x3 consolidated balance sheet should
Units amount to:
Work in process April ………………………………………………............... P10,000 a. P109,600 b. P106,000 c. P110,500 d. P121,250
Started during April……………………………………………………………….. 50,000
Completed & Transferred to the next department during April…………. 36,000 43. In year 20x8, a 90 percent-owned subsidiary sold land to its parent at a gain. The parent still owns
Normal spoilage incurred………………………………………………………… 3,000 the land. In the consolidated balance sheet at December 31, 20x9, the minority interest in the
Abnormal spoilage incurred……………………………………………………… 5,000 subsidiary should be shown at:
Work in process at April 30………………………………………………………. 16,000 a. 10 percent of the subsidiary’s total equity.
b. 10 percent of the subsidiary’s total equity less 10 percent of the gain on the land sale.
c. 10 percent of the subsidiary’s total equity plus 10 percent of the gain on the land sale.
d. 10 percent of the subsidiary’s total equity less 100 percent of the gain on the land sale.