AFAR

1. Agency A received an unconditional donation of a piece of land with a fair value of P2,000,000. What is the
journal entry to recognize the receipt of donated land?
a. Debit Land, P2,000,000 and Credit Contribution Revenue P2,000,000.
b. Debit Land P2,000,000 and Credit Income from Grants and Donation in Kind P2,000,000
c. Debit Investment Property, Land P2,000,000 and Credit Income from Grants and Donation in Kind
P2,000,000
d. Debit PPE P2,000,000 and Credit Contribution Revenue P2,000,000
2. The Department of Foreign Affairs remitted P300,000 cash to the Bureau of Treasury from its various collections.
What is the journal entry of Department of Foreign Affairs to record the remittance of collections to the BTr?
a. Debit Cash in Bank, Local Currency-BSP and Credit Cash-Treasury/Agency Deposit, Regular
b. Debit Cash Treasury/Agency Deposit, Regular and Credit Cash in Bank, Local Currency-BSP
c. Debit Cash-Treasury/Agency Deposit, Regular and Credit Cash-Collecting Officer
d. Debit Cash in Bank, Local Currency-BSP and Credit Cash-Collecting Officer
3. Under Government Accounting Manual, it refers to an authorization issued by the DBM to NGAs to incur
obligations for specified amounts contained in a legislative appropriation in the form of budget release
documents.
a. Appropriation
b. Allotment
c. Obligation
d. Disbursement
4. LOVER BOY, a not for profit organization, managed by CRISTIAN, received the following:

Restricted for capital additions 1,050,000

Unrestricted pledges 1,400,000

All pledges are legally enforceable; however, the organization experience indicates that 10% of all pledges prove
to be uncollectible.

What amount should the organization report as pledges receivable, net of any required allowance account?
a. 2,450,000
b. 945,000
c. 1,260,000
d. 2,205,000
5. What is the proper classification in the statement of financial position of nonprofit organization of a current fund
designated by the Board of Trustees for the construction of building to be used for charitable purposes when
construction will start after a period of three years?
a. Permanently restricted net assets
b. Temporarily restricted net assets
c. Unrestricted net assets
d. Board of Trustees’ net assets
6. Under IFRIC 12; Service Concession Arrangements, what is the proper classification of the infrastructure asset
on the part of the operator if the latter receives a right or license to charge users of the public service and such a
right to charge users of the public service is not an unconditional right to receive cash because the amounts are
contingent on the extent that the public uses the service?
a. Intangible Asset in accordance with PAS 38
b. Property, Plant and Equipment in accordance with PAS 16
c. Investment Property in accordance with PAS 40
d. Financial Asset under PFRS 9
7. It refers to the extinguishment of the judicial personality of a corporation for causes expressly provided
by law.
a. Corporate liquidation
b. Corporate dissolution
c. Corporate rehabilitation
d. Corporate termination
8. It refers to process of winding up the affairs of the corporation by setting its corporate debts and
distributing the remainder to the stockholders.
a. Corporate liquidation
b. Corporate dissolution
c. Corporate rehabilitation
d. Corporate termination
9. After the date of corporate dissolution, what is the maximum period allowed by law to a dissolved
corporation to complete its liquidation process?
a. 1 year
b. 2 years
c. 3 years
d. 4years
10. What is the term used when the total stockholders’ equity has debit balance?
a. Deficit
b. Deficiency
c. Delinquency
d. Default
11. Which of the following unsecured debts with priority shall be paid first during corporate liquidation?
a. Corporate liabilities to employees
b. Obligations arising from corporate crime
c. Corporate liabilities arising from taxes to government
d. Obligations arising from corporate tort or quasi-delict
12. Which of the following creditors can always fully recover its claim from a dissolved corporation during
corporate liquidation?
a. Fully secured creditors
b. Partially secured creditors
c. Unsecured creditors with priority
d. Unsecured creditors without priority
13. Which of the following items is not being considered in the computation of recovery percentage of
unsecured creditors without priority?
a. Assets reserved for fully secured credits
b. Assets reserved for partially secured credits
c. Unsecured portion of partially secured liabilities
d. Assets not used as collateral for any liability
e. All of the above

14. The following balances were ascertained in NOMONEY Corp. which is experiencing insolvency:

Cash 8,000 Accounts Payable 80,000

Notes receivable 120,000 Accrued expenses 30,000
Inventories 80,000 Salaries payable 15,000
Prepaid expense 10,000 Mortgage payable 155,000
Equipment, net 150,000 Ordinary shares 100,000
Deficit (12,000)
Total 368,000 Total 368,000

Additional Information:
 Estimated net realizable value of the notes receivable was P105,000 and was pledged
to the mortgage payable.
 80% of the book value of the inventories can be sold at P45,000 and was pledged to
60% of the accounts payable.
 The remaining book value of the inventories have as estimated fair value of P20,000.
 80% of the remaining unpaid accounts payable were secured by the equipment having
an estimated fair value of P60,000.
 Prepaid expense has no estimated fair value.
 Liquidation and administration expenses were estimated in the amount of P8,000
 Income tax payable had been accrued in the amount of P2,000 (the account recorded
it using the accrued expense account)
 Interest on the notes receivable and mortgage payable have not been accrued in the
amount of P10,000 and P15,000 respectively.
How much is the estimated deficiency?
b. 61,400
c. 40,000
d. 55,000
e. 46,400
15. How much are the net free assets?
a. 52,400
b. 37,400
c. 31,000
d. 46,000
16. How much is the estimated payment to the mortgage payable?
a. 137,264
b. 146,191
c. 133,453
d. 142,379
17. How much is the estimated recovery percentage to the partially secured accounts payable?
a. 97.29%
b. 98.85%
c. 96.28%
d. 96.86%
18. Cagayan Company is experiencing financial problems which resulted to ultimate bankruptcy. The
statement of financial position of the entity before liquidation is presented below:

Cash 100,000 Income tax payable 200,000

Inventory 300,000 Salaries payable 300,000
Land 200,000 Note payable 800,000
Mortgage payable 100,000
Accounts payable 400,000
Contributed capital 500,000
Deficit (1,700,000)

 The note payable is secured by the inventory with net realizable value of P250,000.
 The mortgage payable is secured by the land with fair value of P120,000.
What is the amount received by the holder of the note payable at the end of corporate liquidation?
b. 320,000
c. 300,000
d. 250,000
e. 260,000
19. What is the amount received by the holder of mortgage payable at the end of corporate liquidation?
a. 120,000
b. 200,000
c. 150,000
d. 100,000
20. What is the amount received by the employees at the end of corporate liquidation concerning their
salaries?
a. 100,000
b. 120,000
c. 72,000
d. 300,000
21. Bancarote Inc. is under court-supervised liquidation due to its insolvency. The court appointed
liquidator has provided the following data after conducting an inventory of Bancarote’s assets and
liabilities:

 The total assets which are not used as security for any liability amounted to P5M while
the total unsecured liabilities amounted to P20M.
 The total assets which are uses as collateral or security for corporate obligations
amounted to P10M. ¾ of these assets secure a mortgage payable with book value of
P2M including interest while the remainder secure a note payable with book value of
P3.5M including interest.
 Salaries payable amounted to 2M while taxes due government amounted to P1M.

What is the estimated recovery percentage of unsecured creditors without priority?

a. 25%
b. 37.5%
c. 41.67%
d. 52.5%
22. What is the amount received by partially secured creditors?
a. 2,750,000
b. 2,875,000
c. 2,916,700
d. 3,025,000
23. Liberty Corporation provided the following balances in July 1, 20,20:

Cash 5,500 Accounts payable 59,500

Accounts receivable 35,000 Wages payable 25,000
Inventories 60,000 Tax payable 35,000
Notes receivable 78,000 Note payable 65,000
Equipment 256,000 Mortgage payable 175,000
Share capital 120,000
Deficit (45,000)P
Total 434,500 Total 434,500

In the statement of realization and liquidation the following data are ascertained for the month of July:

 The note payable and mortgage payable together with their respective interests are
paid.
 Only 7/8 is collected from the existing accounts receivable at the beginning of the
month.
 Half of the inventories were sold for P45,000
 Only P68,500 of the notes receivable is collected/
 Equipment is sold for P225,000.
  Administrative expenses of P13,800 are paid.
 Additional credit sales amounting to P10,500 are made for the remaining inventories.
 Interests not accrued for the month are note receivable P1,500, note payable P5,500
and mortgage payable P10,500.
 All existing noncash assets at the beginning of the month are sold or collected during
the month.

How much is the profit or loss in the statement of realization and liquidation?

a. (42,475)
b. 27,975
c. (77,675)
d. 75,175
24. How much is the estate equity at July 31, 2020?
a. (102,975)
b. 32,525
c. 150,175
d. (2,675)
25. Finish Corporation has been undergoing liquidation since January 1. Its condensed statement of
realization and liquidation for the month of June presented below:

Interest received in cash on investment 10,500

Purchases on account 105,00
Liabilities liquidated 2,450,000
Assets realized 2,100,000
Payment of expense of trustee 525,000
Liabilities to be liquidated, June 1 4,574,500
Sales on account 50,000
Assets to be realized, July 1 2,940,000
Liabilities not liquidated June 30 2,229,500
Sales for cash 1,750,000
Assets not realized, May 31 6,650,000

What is the net gain (loss) on realization and liquidation?

a. 1,225,000
b. (479,500)
c. (1,225,000)
d. 479, 500
26. Fatima of the Philippines, a private not-for-profit health care entity located in Aroceros, Manila,
charged a patient of P8,600 for services. It actually billed this amount to the patient’s third party payor.
The third-party payor submitted a check for P7,900 with a note stating that “the reasonable amount is
paid in full per contract”. Which of the following statements is true?
a. The patient is responsible for paying the remaining P700.
 b. The health-care facility will rebill the third-party payor for the remaining P700.
c. The health-care facility recorded the P700 as a contractual adjustment that it will not collect
d. The third-party payor retained the P700 and will convey it to the health-care facility at the start
of the next fiscal period.
27. A non-for-profit hospital provides its patients with services that would normally be charged to P1
million. However, it estimates a P200,000 reductions because of contractual adjustments. It expects
another P100,000 reductions because of bad debts. Finally, the hospital loss does not expect to collect
P400,000 because this amount is deemed to be charity care. Which of the following is correct?
a. Patient service revenue = P600,000; net patient service revenues = P300,000
b. Patient service revenue = P600,000; net patient service revenues = P400,000
c. Patient service revenue = P1,000,000; net patient service revenues = P300,000
d. Patient service revenue = P1 million; net patient service revenues = P400,000
28. Which of the following is FALSE?
a. Voluntary Health Welfare Organization must also provide a Statement of Functional Expenses.
b. Contributed services are recognized on the Statement of Activities if either the services create
enhance a non financial asset or the services required specialized skills, are provided by
individual processing those skills and would typically need to be purchased it not provided by
donation.
c. Donation medicines for hospital use should be recorded as an increase in Other Operating
Revenue
d. A regular endowment fund is used to account for funds received from donors where the
principal and earnings is non-expendable
29. Which of the following statements is FALSE?
a. Collection of income taxes from individuals by the BIR shall be credited to a liability account of
collecting agency
b. In the construction of building by contract, Advances to Contractor account may be credited
when bill are received
c. It is the policy of the Department of Budget and Management that the NCA will only be used for
the year it was issued.
d. For agencies which are authorized to use income collected for their operations, Cash in Bank –
LCA account is credited upon use of collection for repairs and maintenance
30. Which of the following statements is FALSE?
a. A budget is defined as a sum of money or other resources set aside for the purpose of carrying
specific activities.
b. Budget authorization includes the formulation of an appropriation bill to be forwarded to the
president approval and signature.
c. Maintenance and other operating expenses are expenses which are not used in the actual
operating the agency, examples an interest expense and bank changes.
d. National Government books shall be used to record the receipt of Notice of Cash Allocation and
other income/receipts for which the agencies are authorized to use.
31. Which of the following statement is FALSE?
 a. The unused NCA is to be reverted to the Commission on Audit by crediting the Cash-National
Treasure-DS account.
b. Borrowings, taxes, grants and donations are sources of income and collections made by the
agency
c. In the construction of building by contract, Construction in Progress account is credited to
recognize the building account.
d. Upon issuance of purchase order for the office equipment it requires only a memo entry in
RAOCO.
32. Which of the following statements is TRUE?
a. Appropriate entries are made in the regular agency books upon receipt of budgetary allotments
from the DBM as well as the incurrence of obligations.
b. In the construction of the building, the obligation for the contract price is entered in the
RAOCO. Up payment of the first billing less withholding tax, a liability account and an asset
account are credited.
c. In an interagency upon issuing the completion report to the source agency.
d. All collections, which are recorded in the national government books requires a debit to an
asset account upon remittance to bureau of treasury.
33. PFRS 11 Joint Arrangements provide that joint control exists where:
a. One party alone has power has power to control the strategic operating decisions of the joint
arrangement
b. No single party is in a position to control the activity unilaterally.
c. The decisions in areas essential to the goals of the joint arrangement do not require the
consent of the parties.
d. No one party may be appointed as the manager of the joint arrangement.
34. Which of the following is correct?
a. Where the joint operators have designed the joint arrangement so that its activities primarily
aim provide the parties with an output it will be classifies as joint control?
b. All joint arrangements are not structured through a separate vehicle are classifies as joint
ventures
c. For a joint venture, the rights pertain to the rights and obligations associated with individual
assets are liabilities, whereas wit a joint operation, the rights and obligations pertain to the net
assets
d. In considering the legal form of separate vehicle if the legal form establishes rights to individual
assets and obligations, the arrangement is a joint operation. If the legal form establishes rights
to the net assets of the arrangement, then the arrangement is a joint venture.
35. Which of the following statements is not true in relation to the joint control?
a. Joint control exists only where there is contractually agreed sharing control
b. Entities over which a party has joint control are accounted for an accordance with PFRS 11 Joint
Arrangements
c. Joint control requires the unanimous consent of the parties sharing control.
d. Each party must have an equal interest for join control exist.
36. In relation to the supply of a service to a joint operation by one of the joint operators. Which of the
following statements is correct?
a. A joint operator cannot earn a profit on supplying service itself
b. A joint operator is not able to recognize the service revenue or service cost for the services
supplied to the joint operation.
c. A joint operator can recognize 100% of the earned through the supply of services to the joint
operation.
d. A joint operator is entitled to recognize a profit from the supply of services to itself.
37. When eliminating any unrealized profit arising when a joint operator provides services to a joint
operation, the profit is eliminated against:
a. Retained earnings
b. Cost of good sold
c. The investment in the joint operation
d. Work in progress, finished goods and other inventory related accounts
38. Which of the following statements is correct?
a. All joint arrangements are accounted for under PAS 28
b. Joint arrangements classified as joint joint ventures are accounted for under PAS 28
c. Joint arrangement classified as joint operations are accounted for under PAS 28
d. Joint arrangements classified as joint ventures are accounted for under PFRS 11
39. For the purposes of equity accounting for an investment in an associate, it is presumed that the
investor has significant influence over the entity where the inventors holds:
a. 20% more of the voting power of the investee
b. 50% or more of the voting power of the investee
c. between 1% and 5% of the voting power of the investee
d. between 5% and 10% of the voting power of the investee