CFAS_REVIEWER_1

1. Which of the following statement(s) is/are correct?

I. An increase in inventory balance would be reported in a statement of cash
flows using the indirect method as a deduction from net income in arriving
at net cash flow from operating activities.
II. Declaration and distribution of a stock dividend is classified as financing
activity.
III. borrows P10,000 and signs a 90-day nontrade note payable is an
operating activity.
IV. Dividend received being a return of investment is a financing activity.
V. Payment for a bank loan is an investing activity.
a. One statement is correct c. Three statements are correct
b. Two statements are correct d. Four statements are correct

2.Tobias Company sold some of its plant assets during 2018. The original cost of the
plant assets was P750,000 and the accumulated depreciation at date of sale was
P700,000. The proceeds from the sale of the plant assets were P105,000. The
information concerning the sale of the plant assets should be shown on Tobias’
statement of cash flows (indirect method) for the year ended December 31, 2018,
as a(n)
a. subtraction from net income of P55,000 and a P50,000 increase in cash
flows from financing activities.
b. addition to net income of P55,000 and a P105,000 increase in cash flows
from investing activities.
c. subtraction from net income of P55,000 and a P105,000 increase in cash
flows from investing activities.
d. addition of P105,000 to net income.

3. All of the following are correct except.

a. Change in the method of inventory pricing is a change in accounting policy
b. Change from cost model to fair value model in measuring investment property
is a change in accounting estimate.
c. Change in residual value of a machinery is a change in accounting estimate
d. Change in the loss rate on warranty costs is a change in accounting estimate

4.A company changes from straight-line to an accelerated method of calculating

depreciation, which will be similar to the method used for tax purposes. The entry
to record this change should include a
a. debit to Accumulated Depreciation
b. debit to Retained Earnings in the amount of the difference on prior years.
c. debit to Depreciation Expense
d. debit to loss account

5. Which of the following events after reporting period need adjustment?

I. Bankruptcy of customer
II. Commencing major litigation
III. Discovery of fraud that show the financial statement is incorrect
IV. Loss on earthquake
V. Issuance of ordinary shares
VI. Settlement of a court case
 a. Two statements need c. Four events need adjustment
adjustment d. Five statements are correct
b. Three events need
adjustment

6. Equipment with a carrying amount of 500,000 was destroyed by fire on December

31, 2019 and on January 31, 2020, the investigation shows that a guard left a
cigarette butt which caused the fire. On the other hand, the entity recorded a
receivable from the insurance company for the amount of 300,000 but the entity
will not receive any claim as the casualty is not covered by the insurance.
a. The entity won’t have any adjustment since it already recorded a receivable of
300,000.
b. The insurance company will recognize a liability.
c. The entity will credit the claim receivable because the event is an adjusting
event in 2019.
d. There would be an adjustment, but it needs to be recorded in 2020 right after
the investigation.

7. A property acquired by issuing a 30,000 shares with par value of P50. At the time
of acquisition, the fair value of the property is P2,000,000 and share is quoted at
P80 per share. The entry to record the acquisition using the first order of priority
would include.
a. Debit property P2,400,000 and credit share capital P1,500,000
b. Debit property P1,500,000 and credit share capital P2,400,000
c. Debit property P2,000,000 and credit share capital P2,000,000
d. Debit property P2,000,000 and credit share capital P1,500,000

8.9.1. Quento and Barbero exchanged equipmet.

Quento Barbero
Equipment 1,500,000 2,000,000
Accumulated depreciation 800,000 1,500,000
Fair value 500,000 800,000
Cash paid by Quento 100,000 100,000

8. If the exchange is without commercial substance, the entry would include,

a. Debit Equipment New P800,000 in the books of Quento
b. Debit Equipment New P600,000 in the books of Barbero
c. Credit Equipment Old P1,500,000 and Debit loss P200,000 in the books of
Quento
d. Credit Equipment Old P2,000,000 and Debit gain P200,000 in the books of
Barbero

9. If the exchange is with commercial substance, the entry would include,

a. Debit Equipment New P800,000 in the books of Quento
b. Debit Equipment New P600,000 in the books of Barbero
c. Credit Equipment Old P1,500,000 and Debit loss P200,000 in the books of
Quento
d. Credit Equipment Old P1,500,000 and Debit gain P200,000 in the books of
Barbero
10.11. On July 1, the entity purchased a building for 12,000,000 with a residual
value of 2,000,000 and useful life of 50 years. The government granted 3,000,000
related to the asset.
10. The entry to record a government grant using asset deduction and deferred grant
approach respectively.
a. Debit Building 3,000,000 and Debit Deferred Grant Income 3,000,000
b. Credit Building 3,000,000 and Credit Deferred Grant Income 3,000,000
c. Credit Building 3,000,000 and Debit Deferred Grant Income 3,000,000
d. Debit Building 3,000,000 and Credit Deferred Grant Income 3,000,000

11. For the purpose of depreciating the asset, entry would include
a. Debit Depreciation expense 70,000 if using asset deduction approach
b. Debit Depreciation expense 70,000 if using deferred grant income approach
c. Debit Depreciation expense 100,000 if using asset deduction approach
d. Debit Depreciation expense 200,000 if using deferred income approach

12.Use of the double-declining balance method

a. results in a decreasing charge to depreciation expense.
b. means salvage value is not deducted in computing the depreciation base.
c. means the book value should not be reduced below salvage value.
d. none of these are incorrect
13. During 2017, Geiger Co. sold equipment that had cost P98,000 for P58,800. This
resulted in a gain of P4,300. The balance in Accumulated Depreciation—
Equipment was P325,000 on January 1, 2017, and P310,000 on December 31. No
other equipment was disposed of during 2017. Depreciation expense for 2017 was
a. P15,000. c. P28,500.
b. P19,300. d. P58,500.

14. Which of the following statement(s) is/are correct about borrowing cost?
I. Capitalization of borrowing cost for the qualifying asset is discretion of the
entity.
II. For funds borrowed specifically for the purpose of acquiring the asset,
actual borrowing costs incurred less any investment income must be
capitalized.
III. Investment income from general borrowings is deducted from capitalized
borrowing costs.
IV. Actual borrowing cost shall not exceed capitalizable borrowing cost.
V. The difference between the actual borrowing cost and capitalizable
borrowing cost is deferred aligned with the useful life of the qualifying
asset.
a. One statement is correct c. Three statements are correct
b. Two statements are correct d. Four statements are correct

15. Which of the following assets do not qualify for capitalization of interest costs
incurred during construction of the assets?
a. Assets under construction for an enterprise's own use.
b. Assets intended for sale or lease that are produced as discrete projects.
c. Assets financed through the issuance of long-term debt.
d. Assets not currently undergoing the activities necessary to prepare them
for their intended use.
16. Beyond the mere 20% threshold, which of the following is not an evidence of
existence of significant influence.
a. Representation in the board of directors
b. Interchange of rank and file employees
c. Participation in policy making process
d. Material transaction between the investor and investee

17. If a business entity entered into certain related party transactions, it would be
required to disclose all of the following information except the
a. nature of the relationship between the parties to the transactions.
b. nature of any future transactions planned between the parties and the terms
involved.
c. peso amount of the transactions for each of the periods for which an income
state-ment is presented.
d. amounts due from or to related parties as of the date of each balance sheet
presented.

18. On the part of the investor which holds 25% equity interest, the investee’s
declaration of 200,000 cash dividend and reporting of net loss of 500,000 would
include
a. Debit Investment in Associate P50,000 for the declaration of cash dividend
and debit Investment in Associate P125,000 reporting of net loss
b. Debit Investment in Associate P50,000 for the declaration of cash dividend
and credit Investment in Associate P125,000 reporting of net loss
c. Credit Investment in Associate P50,000 for the declaration of cash divided
and debit Investment in Associate P125,000 reporting of net loss
d. Credit Investment in Associate P50,000 for the declaration of cash divided
and Credit Investment in Associate P125,000 reporting of net loss

19. If the investor pays less than the equity interest on the net assets acquired, a
journal would include
a. Credit Income on the part of investee
b. Credit Income on the part of investor
c. Debit loss on the part of the investor
d. Debit Excess would be attributed to undervaluation of investee’s assets and
goodwill.

20. On July 31 of the current year, Mejopasadoh Company purchased 25% of Laglag
Company outstanding shares for 5,000,000. During the year, Laglag Company
reported a net income of 3,000,000 and paid cash dividend of 1,000,000. What is
the carrying amount of the investment at year end?
a. P 5,062,500 c. P 5,312,500
b. P 5,208,333 d. P 5,416,667

21.Accounting policies are modified for the following at interim dates.

Revenue Losses
a. Yes Yes
b. Yes No
c. No Yes
d. No No
22. Lowkoh Company has historically reported bad debt expense of 5% of sales in
each quarter. For the current year, the company followed the same procedure in
the three quarters of the year. However, in the forth quarter, the entity determined
that the bad debt expense for the entire year should be 470,000. Sales on each
quarter were 1,000,000 (1 st), 2,500,000 (2nd), and 3,000,000 (3rd). What amount of
bad debt expense should be recognized in forth quarter?
a. P 325,000 c. P 795,000
b. P 145,000 d. P 615,000

23. Sloane, Inc. purchased equipment in the beginning of 2015 at a cost of P600,000
with 5 years life. Two years later it became apparent to Sloane, Inc. that this
equipment had suffered an impairment of value and it is estimated that the fair
value is now only P240,000 and value in use is 220,000. The entry to record the
impairment is
a. Loss on Impairment of Equipment........................... 380,000
Depreciation expense—Equipment.............. 380,000
b. Loss on Impairment of Equipment........................... 140,000
Depreciation expense—Equipment.............. 140,000
c. Loss on Impairment of Equipment........................... 120,000
Accumulated Depreciation—Equipment....... 120,000
d. Loss on Impairment of Equipment........................... 140,000
Accumulated Depreciation—Equipment....... 140,000

24. Which of the following statements are correct about impairment loss?
I. Recoverable amount is the fair value less cost of disposal and value in
use whichever is higher.
II. If the recoverable amount is higher that the carrying amount, the asset
suffered form impairment loss.
III. The reversal of impairment loss shall be recognized as a gain on reversal
on impairment loss aligned with the remaining useful life of the asset.
IV. Reversal of an impairment loss shall not exceed the carrying amount that
would have been determined as if there was no impairment loss has been
recognized in the prior years.
V. Impairment loss for goodwill can be reversed but to the extent only of the
impairment loss recognized.
a. Two statements are correct c. Four statements are correct
b. Three statements are correct d.All statements are correct

25.The intangible asset goodwill may be

a. capitalized only when purchased.
b. capitalized either when purchased or created internally.
c. capitalized only when created internally.
d. written off directly to retained earnings.

26. The general ledger of Vance Corporation as of December 31, 2018, includes the
following accounts:
Copyrights P 20,000
Deposits with advertising agency (will be used to promote goodwill) 27,000
Discount on bonds payable 67,500
Excess of cost over fair value of identifiable net assets of
Acquired subsidiary 390,000
Trademarks 90,000
 In the preparation of Vance's balance sheet as of December 31, 2018, what
should be reported as total intangible assets?
a. P594,500. c. P500,000.
b. P527,000. d. P460,000

27. Which of the following statements are correct about impairment loss?
I. Land held for undeterminable use is an investment property.
II. Land held for operating lease is an investment property.
III. Building lease out under finance lease is an investment property.
IV. Building held as real estate firm and in the ordinary course of business is
not an investment property.
V. In case of partly investment and partly owner-occupied property, the
property is an investment property if significant portion if help for
administration purposes.
VI. No depreciation is recorded for investment property if fair value model is
used.
a. Two statements are correct c. Four statements are correct
b. Three statements are correct d. Five statements are correct

28. Milagro Company acquire a building on January 1, 2018 for 8,000,000 with a
useful life of 50 years depreciated using straight line method. On December 31
2018, the fair value of the building is 8,500,000 and on December 31, 2019, the
fair value is 7,500,000. Using fair value model, 2019 entry would include
a. Debit depreciation expense 160,000
b. Debit loss 500,000
c. Credit gain 1,000,000
d. Debit loss 1,000,000

29. 50 milking cows were acquired at the beginning of the year. The milk harvested
would include
a. Debit biological asset
b. Debit gain in Agricultural Produce
c. Credit gain in Agricultural Produce
d. Credit gain from biological asset.

30. Which of the following statement(s) is/are correct about hyperinflation?

I. Only nonmonetary items are restated.
II. A decrease in general price index increased purchasing power.
III. It is more advantageous to incur fixed obligations when price increases.
IV. Retained earnings should not change its amount after reinstatement.
V. In restating share capital, the date of issuance is used as a denominator.
a. Two statements are c. Four statements are
correct correct
b. Three statements are d. Five statements are
correct correct

31. Information available prior to the issuance of the financial statements indicates that it
is probable that, at the date of the financial statements, a liability has been incurred
for obligations related to product warranties. The amount of the loss involved can be
reasonably estimated. Based on the above facts, an estimated loss contingency
should be
a. accrued.
 b. disclosed but not accrued.
c. neither accrued nor disclosed.
d. classified as an appropriation of retained earnings.

32. In 2019, Mormon Company received an advance payment of 1,000,000 which was
subject to tax but not reported in accounting income until 2020. The income
statement and tax return showed the following:
2019 2020

Income before tax per income statement 6,000,000 9,000,000

Income before tax per tax return 7,000,000 8,000,000
Income tax rate 30% 30%

In 2020, journal entry would include

a. Debit Deferred tax liability 300,000
b. Debit Deferred tax asset 300,000
c. Credit deferred tax liability 300,000
d. Credit deferred tax asset 300,000

33. Which of the following is incorrect about employee benefits?

a. Past service cost will form part in computing employee benefit expense as
well as in computing projected benefit obligation in year end.
b. Remeasurement gain/loss is the difference between actual return on plan
assets and interest income on fair value of plan asset at the beginning of the
year.
c. Benefits paid is always deducted in computing employee benefits expense
and projected benefit obligation
d. The same discount rate is used when computing interest expense on PBO
and interest income on Fair value of plan assets.

34. A decrease in projected benefit obligation

a. will decrease remeasurement c. will increase remeasurement
gain gain
b. will increase remeasurement d. will not affect remeasurement
loss gain

35. Maya Company reported a net income of 10,000,000. Shareholder’s equity shows
that 400,000 shares of 7% Preference share capital, noncumulative P50 par value,
200,000 share of ordinary share capital with P80 par value including 25,000
treasury shares. Dividends were declared for the current year. What is the basic
earnings per share?
a. 49.41
b. 49.00
c. 49.14
d. 56.00

36. RA Corp. reported a pretax financial income of 2,000,000 for the year ended
December 31, 2019. The taxable income was 1,500,000. The difference is due to
accelerated depreciation for income tax purposes.
The income tax rate is 30% and JB Corp. made estimated tax payment of 200,000
during the current year.
1. What amount should be reported as income tax payable as of December 31,
2019?
 A. 150,000
B. 250,000
C. 450,000
D. 600,000

37. How many statements is/are correct?

I. Accumulating paid absences may be either vesting or non-vesting.
II. A defined contribution plan is a postemployment benefit plan under which an
entity pays variable contributions into a separate entity known as the fund.
III. PAS 19, paragraph 120, provides that and entity shall recognize the following
components of defined benefit cost as service costs, net interest and asset
ceilings.

A. One
B. Two
C. Three
D. None

38. Which statement best describes prospective application?

A. Recognizing a change in accounting policy in the current and future periods
affected by change.
B. Correcting the financial statements as if a prior period error had never occurred.
C. Applying a new accounting policy to transactions occurring after the date at
which the policy is changed.
D. Applying a new accounting policy to transactions as if that policy had always
been applied.

39. How many statements is/are incorrect?

I. Adjusting events are events that are indicative of conditions that arose after
the end of the reporting period.
II. Non-adjusting events are events that provide evidence of conditions that
existed at the end of the reporting period.
III. Loss on a lawsuit in which the outcome was deemed uncertain at year-end
requires a note disclosure only.
IV. An entity announcement regarding discontinuance of an operations requires a
provision.

A. One
B. Two
 C. Three
D. Four

40. How many statements is/are correct?

I. Cash flows arising from trading securities are classified as investing activities.
II. Cash receipts from issuing shares are classified as financing activities.
III. Interest payments to lenders are classified as borrowing activities.
IV. Interest received may be classified alternatively as cash flow from operating
activities.

A. One
B. Two
C. Three
D. Four

41. In computing basic earnings per share, if the preference shares are cumulative, the
amount that should be deducted as an adjustment to the numerator is the
A. Preference dividends in arrears.
B. Preference dividends paid during the year.
C. Annual preference dividend.
D. Declared dividends.

You Will Pass Company had the following capital structure during 2019:
- Preference share capital, P10 par, 4% cumulative, 25,000 shares issued
and outstanding
- Ordinary share capital, P5 par, 200,000 shares issued and outstanding

The entity reported net income of 500,000 for the year ended December 31, 2020.
The entity paid no preference dividends during 2018 and paid 16,000 in preference
dividends during 2019.
42. What amount should be reported as basic earnings per share?
A. 2.52
B. 2.45
C. 2.54
D. 2.50

43. The total compensation expense in a share option plan is measured at

A. Fair value of the share options at the date of exercise.
 B. Fair value of the share options at the date of grant.
C. Intrinsic value of the share options at the date of exercise.
D. Intrinsic value of the share options at the date of grant.

44. Which statement is correct concerning the presentation of the discontinued

operation in the statement of financial position?
A. Assets of the component held for sale are presented separately under noncurrent
assets.
B. Assets of the component held for sale are measured at higher between fair value
less cost of disposal and carrying amount.
C. Liabilities of the component held for sale are presented separately under
noncurrent liabilities.
D. Depreciable assets of the component held for sale shall not be depreciated.

45. The overall size test of the total external revenue or reportable operating segments
should be at least
A. 65%
B. 75%
C. 85%
D. 95%

46. How many statements is/are correct?

I. In a finance lease, the cost of right of use asset comprises the present value of
lease payments, lease payments made to lessor, initial direct costs incurred by
the lessee and estimated dismantling and restoring costs of the underlying asset.
II. In a finance lease, the lessee shall measure the lease liability at the present
value of lease payments.
III. In an operating lease, the initial direct cost incurred by the lessor in an operating
lease shall be added to the carrying amount of the underlying asset.
IV. PFRS 16, paragraph 22, provides that at the commencement date, a lessee shall
recognize a right of use asset and a lease liability.

A. Four
B. Three
C. Two
D. One

47. PFRS 15 applies to all contracts with customers, except

A. Leases under PFRS 16.
 B. Insurance contracts under PFRS 17.
C. Financial instruments under PFRS 9.
D. All of these statements are exception to PFRS 15 application.

On July 1, 2020, Passer Company, a manufacturer of office furniture, supplied goods to

Qualifier Company for 1,200,000 on condition that this amount is paid in full on July 1,
2021.
Qualifier Company had earlier rejected an alternative offer from Passer Company
whereby it could have bought the same goods by paying cash of 1,080,000 on July 1,
2020.
48. What amount should be reported as interest income for 2019?
A. 120,000
B. 100,000
C. 60,000
D. 0

See Company purchased land as a factory site for 600,000. See paid 60,000 to tear
down two buildings on the land. Salvage was sold for 5,400. Legal fees of 3,480 were
paid for title investigation and making the purchase. Architect's fees were 31,200. Title
insurance cost 2,400, and liability insurance during construction cost 2,600. Excavation
cost 10,440. The contractor was paid 2,200,000. An assessment made by the city for
pavement was 6,400. Interest costs during construction were 170,000.
49. The cost of the land that should be recorded is?
A. 612,880
B. 612,280
C. 612,220
D. 612,802

50. The cost of the building that should be recorded is?

A. 2,468,840
B. 2,486,840
C. 2,468,400
D. 2,468,240