1. The September 30 trial balance of ABC Co.

shows the following information:

Accounts receivable 8,060 Equipment 42,120
Accounts payable 6,370 Other expense 4,940
Accumulated depreciation 21,060 Owner's drawings 5,460
Advertising expense 390 Owner's equity 28,600
Cash 7,540 Sales 12,480

Depreciation expense of ₱702 is not yet recorded. In an after-closing trial balance prepared on September 30, the total of the credit
column will be
a. 57,270 b. 62,660 c. 57,720 d. 57,018

2. Princess Co.’s checkbook balance on December 31, 20x3, was ₱5,000. In addition, Princess held the following items in its safe on that
date:
 Check payable to Princess, dated January 2, 20x4, in payment of a sale made in December 20x3, not included in December 31
checkbook balance…………………………………………..₱2,000
 Check payable to Princess, deposited December 15 and included in December 31 checkbook balance, but returned by bank on
December 30 stamped “NSF.” The check was redeposited on January 2, 20x4, and cleared on January 9………………₱500
 Check drawn on Princess’s account, payable to a vendor, dated and recorded in ABC’s books on December 31 but not mailed
until January 10, 20x4……………………………………………..₱300

The proper amount to be shown as Cash on Princess’s statement of financial position at December 31, 20x3 is
a. 4,800 b. 5,300 c. 6,500 d. 6,800

3. May Tuesday, Co. had the following bank reconciliation at March 31, 20x1:
Balance per bank statement, 3/31/x1 46,500
Add deposit in transit 10,300
56,800
Less outstanding checks 12,600
Balance per books, 3/31/x1 44,200

Data per bank for the month of April 20x1:

Deposits………………………………………...….58,400
Disbursements ……………………………………49,700

All reconciling items at March 31, 20x1, cleared the bank in April. Outstanding checks at April 30, 20x1, totaled ₱7,000. There were
no deposits in transit at April 30, 20x1. What is the cash balance per books at April 30, 20x1?
a. 48,200 b. 52,900 c. 55,200 d. 58,500

4. In its December 31, 20x4, balance sheet, Karyl Co. reported accounts receivable of ₱100,000 before allowance for uncollectible
accounts of ₱10,000. Credit sales during 20x5 were ₱611,000, and collections from customers, excluding recoveries, totaled
₱591,000. During 20x5, accounts receivable of ₱45,000 were written off and ₱17,000 were recovered. Karyl estimated that ₱15,000 of
the accounts receivable at December 31, 20x5, were uncollectible. In its December 31, 20x5, balance sheet, what amount should Karyl
report as accounts receivable before allowance for uncollectible accounts?
a. 58,000 b. 67,000 c. 75,000 d. 82,000

5. On December 31, 20x6, Jet Co. received two ₱10,000 notes receivable from customers in exchange for services rendered. On both
notes, interest is calculated on the outstanding principal balance at the annual rate of 3% and payable at maturity. The note from Hart
Corp., made under customary trade terms, is due in nine months and the note from Maxx, Inc., is due in five years. The market interest
rate for similar notes on December 31, 20X6, was 8%. The compound interest factors to convert future values into present values at
8% follow:
Present value of P1 due in nine months: .944
Present value of P1 due in five years .680

At what amounts should these two notes receivable be reported in Jet’s December 31, 20X6, balance sheet?
Hart Maxx
a. 9,440 6,800
b. 9,652 7,820
c. 10,000 6,800
d. 10,000 7,820

6. On December 30, 20X4, Chang Co. sold a machine to Door Co. in exchange for a noninterest bearing note requiring ten annual
payments of ₱10,000. Door made the first payment on December 30, 20X5. The market interest rate for similar notes at date of
issuance was 8%. In its December 31, 20X4, balance sheet, what amount should Chang report as note receivable?
a. 45,000 b. 46,000 c. 62,500 d. 67,100

7. Devin Co. sold to Andre Co. a ₱20,000, 8%, 5-year note that required five equal annual year-end payments. This note was discounted
to yield a 9% rate to Andre. What should be the total interest revenue earned by Andre on this note?
a. 9,000 b. 8,000 c. 5,560 d. 5,050

Use the following information for the next two questions:

Duff, Inc. borrowed from Martin Bank under a ten-year loan in the amount of ₱150,000 with a stated interest rate of 6%. Payments are due
monthly, and are computed to be ₱1,665. Martin Bank incurs ₱4,000 of direct loan origination costs and ₱2,000 of indirect loan origination
costs. In addition, Martin Bank charges Duff, Inc. a four-point nonrefundable loan origination fee.

8. Martin Bank, the lender, has a carrying amount of

a. 144,000 b. 148,000 c. 150,000 d. 152,000
9. What is the effective interest rate of the loan?

10. Bigco, Inc. transferred long-term receivables with a carrying value of ₱500,000 to Banco for ₱425,000 cash. Banco will collect
interest on the receivables during the life of the receivables. What amount of receivables has Bigco surrendered control of for
accounting purposes?
a. 0 b. 75,000 c. 425,000 d. 500,000

11. Roth, Inc. received from a customer a one-year, ₱500,000 note bearing annual interest of 8%. After holding the note for six months,
Roth discounted the note at Regional Bank at an effective interest rate of 10%. What amount of cash did Roth receive from the bank?
a. 540,000 b. 523,810 c. 513,000 d. 495,238

12. On December 1, 2002, Bain Company received a ₱10,000, 60-day, 6 percent note from a customer. On December 31, 2002, the
company discounted the note at the bank. The bank's discount rate was 9 percent. How much were the proceeds received by Bain from
the bank?
a. 10,024.25. c. 9,924.25.
b. 9,700.00. d. 10,050.00.

13. The following information applied to Landon Company for 2002:

Merchandise purchased for resale ..................... ₱300,000
Freight-in ........................................... 7,500
Interest on notes payable to vendors ................. 3,000
Purchase returns ..................................... 1,500

Landon's inventoriable cost for 2002 was

a. 309,000 b. 307,500 c. 306,000 d. 301,500

14. Compute for the freight-in using the following information:

Beginning Inventory ................................... ₱20,000
Purchases ............................................. 41,000
Purchase Returns and Allowances ....................... 3,000
Purchase Discounts .................................... 4,000
Freight-In ............................................ ?  
Cost of Goods Available for Sale ...................... 55,000
Ending Inventory ...................................... ?  
Cost of Goods Sold .................................... 22,000
a. 3,000 b. 4,000 c. 2,000 d. 1,000

15. Holdaway Co., a manufacturer, had inventories at the beginning and end of its current year as follows:
Beginning End
Raw materials 11,000 15,000
Work in process 20,000 24,000
Finished goods 12,500 9,000

During the year, the following costs and expenses were incurred:
Raw materials purchased 150,000
Direct labor cost 60,000
Indirect factory labor 30,000
Taxes and depreciation on factory building 10,000
Taxes and depreciation on sales room and office 7,500
Sales salaries 20,000
Office salaries 12,000
Utilities (60% applicable to factory, 20% to sales room, and 20%
25,000
to office)

Holdaway's cost of goods sold for the year is

a. 257,000 b. 260,500 c. 261,000 d. 269,500

16. Miller Inc. is a wholesaler of office supplies. The activity for Model III calculators during August is shown below:
Balance/
Date Transaction Units Cost
Aug. 1 Inventory 2,000 ₱36.00
7 Purchase 3,000 37.20
12 Sales 3,600
21 Purchase 4,800 38.00
22 Sales 3,800
29 Purchase 1,600 38.60

If Miller Inc. uses a FIFO PERPETUAL inventory system, the ending inventory of Model III calculators at August 31 is reported as
a. 150,080 b. 150,160 c. 152,288 d. 152,960

17. Stephens Inc. is a wholesaler of photography equipment. The activity for the VTC cameras during July is shown below:
Balance/
Date Transaction Units Cost
July 1 Inventory 2,000 ₱36.00
7 Purchase 3,000 37.00
12 Sales 3,600
21 Purchase 5,000 37.88
 22 Sales 3,800
29 Purchase 1,600 38.11

If Stephens Inc. uses a moving average perpetual inventory system, the ending inventory of the VTC cameras at July 31 is reported as
a. 153,400 b. 156,912 c. 158,736 d. 159,464

18. With LIFO, cost of goods sold is ₱195,000, and ending inventory is ₱45,000. If FIFO ending inventory is ₱65,000, how much is FIFO
cost of goods sold?
a. 215,000 b. 195,000 c. 175,000 d. 65,000

19. Gordon Company's inventory at June 30, 2002, was ₱75,000 based on a physical count of goods priced at cost, and before any
necessary year-end adjustment relating to the following:
 Included in the physical count were goods billed to a customer FOB shipping point on June 30, 2002. These goods had a cost of
₱1,500 and were picked up by the carrier on July 10, 2002.
 Goods shipped FOB destination on June 28, 2002, from a vendor to Gordon were received on July 3, 2002. The invoice cost was
₱2,500.

What amount should Gordon report as inventory on its June 30, 2002, balance sheet?
a. 73,500 b. 74,000 c. 75,000 d. 76,500

20. The balance in Master Company's accounts payable account at December 31, 2002, was ₱1,100,000 before considering the following
information:
 Goods shipped FOB shipping point on December 20, 2002, from a vendor to Master were lost in transit. The invoice cost of
₱20,000 was not recorded by Master. On January 6, 2003, Master filed a ₱20,000 claim against the common carrier.
 On December 27, 2002, a vendor authorized Master to return, for full credit, goods shipped and billed at ₱35,000 on
December 2, 2002. The returned goods were shipped by Master on December 27, 2002. A ₱35,000 credit memo was
received and recorded by Master on January 6, 2003.

What amount should Master report as accounts payable in its December 31, 2002, balance sheet?
a. 1,120,000 c. 1,085,000
b. 1,115,000 d. 1,065,000

21. Martin Co. purchased the following portfolio of held for trading securities during 2002 and reported the following balances at
December 31, 2002. No sales occurred during 2002. All declines are considered to be temporary.
Security Cost Fair Value at 12/31/02
X ₱ 80,000 ₱ 82,000
Y 140,000 132,000
Z 32,000 28,000

The carrying value of the portfolio at December 31, 2002, on Martin Co.'s balance sheet would be
a. 222,000 b. 240,000 c. 242,000 d. 252,000

22. Jent Corp. purchased bonds at a discount of ₱12,000. Subsequently, Jent sold these bonds at a premium of ₱14,000. During the period
that Jent held this investment, amortization of the discount amounted to ₱2,000. What amount should Jent report as gain on the sale of
bonds?
a. 12,000 b. 22,000 c. 24,000 d. 26,000

23. In January 2002, Henry Corporation acquired 20 percent of the outstanding ordinary shares of Davis Company for ₱1,120,000. This
investment gave Henry the ability to exercise significant influence over Davis. The book value of the acquired shares was ₱840,000.
The excess of cost over book value was attributed to an identifiable intangible asset that was undervalued on Davis' balance sheet and
that had a remaining useful life of ten years. For the year ended December 31, 2002, Davis reported profit of ₱252,000 and paid cash
dividends of ₱56,000 on its ordinary shares. What is the proper carrying amount of Henry's investment in Davis at December 31,
2002?
a. 1,080,800 b. 1,131,200 c. 1,092,000 d. 1,181,600

24. Grant, Inc. acquired 30% of South Co.’s voting stock for ₱200,000 on January 2, 20x2. Grant’s 30% interest in South gave Grant the
ability to exercise significant influence over South’s operating and financial policies. During 20x2, South earned ₱80,000 and paid
dividends of ₱50,000. South reported earnings of ₱100,000 for the six months ended June 30, 20x3, and ₱200,000 for the year ended
December 31, 20x3. On July 1, 20x3, Grant sold half of its stock in South for ₱150,000 cash. South paid dividends of ₱60,000 on
October 1, 20x3.

In its 20x3 income statement, what amount should Grant report as gain from the sale of half of its investment?
a. 24,500 b. 30,500 c. 35,000 d. 45,500

25. When examining the accounts of Brute Company, you ascertain that balances relating to both receivables and payables are included in a
single controlling account called receivables control that has debit balance of P4,850,000. An analysis of the make-up of this account
revealed the following:

Accounts receivable-customers 7,800,000

Accounts receivable-officers 500,000
Debit balances-creditors 300,000
Postdated checks from customers 400,000
Accounts payable for merchandise 4,500,000

26. The following are given to you for assessment for any impairment loss of an item of Investment Property:
Investment Property – Building P1,500,000
Accumulated Depreciation – Investment Property, Building (5 years) P450,000
 Residual Value 10% of cost
Fair Value P1,100,000
Costs to Sell P175,000
Annual rentals received P100,000
Annual expenses relating to the IP P20,000
Prevailing interest rate 2%
What is the amount of impairment loss?
a. P118,515.10 b. P125,000 c. P 0 d. none of the choices\
27. Which of the following is least likely to be included in the costs of inventory?
a. Freight in b. Costs to store goods
c. Purchase costs of goods d. Excise tax on goods purchased

28. Which of the following statements is (are) true regarding biological assets and agricultural produce?
I. The gain or loss on value change of a biological asset due to price change and physical change is taken to profit or loss.
II. A gain is recognized in the income statement when agricultural produce are harvested for sale.
III. An entity that owns a mango orchard reports both the land and the fruit trees at fair value as biological assets.
a. I and II only b. I and III only
c. II and III only d. I, II, and III

Use the following information to answer the next three questions:

TIFARC produces milk to sell to local and national ice cream producers. TIFARC began operations on January 1, 2017 by purchasing 840
milk cows for P1,176,000. The agency’s controller had the following information available at year end relating to the cows:
Carrying value, January 1, 2017 P1,176,000
Increase in fair value due to growth and price changes P365,000
Decrease in fair value due to harvest P42,000
Milk harvested during 2017 but not yet sold P54,000

29. At December 31, 2017, what is the value of the milking cows on TIFARC’s statement of financial position?
a. P1,583,000 b. P1,533,000
c. P1,499,000 d. P1,445,000

30. On TIFARC’s income statement for the year ending December 31, 2017, what amount of Unrealized Gain on biological asset will be
reported?
a. P461,000 b. P407,000 c. P377,000 d. P323,000

31. On TIFARC’s income statement for the year ending December 31, 2017, what amount of unrealized gain on harvested milk will be
reported?
a. No gain is reported until the milk is sold b. P12,000
c. P54,000 c. P377,000

32. Using the information in the previous number, how much is the annual depreciation of the investment property after the recognition of
impairment loss?
a. P78,148.49 b. P77,500 c. P93,185.19 d. none of the choices

After further analysis of the aged accounts receivable, you determined that the allowance for doubtful accounts should be P200,000. What
is the correct total of current net receivables?
a. 8,950,000 b. 8,800,000 c. 8,600,000 d. 8,850,000

33. Of the following items, compute for the total amount of items compute for the amount of items to be given accounting treatment under
PAS 2 Inventories.
Finished Goods P4,000,000
Work-in-process 1,000,000
Raw Materials 2,500,000
Manufacturing Supplies 3,500,000
Goods Purchased for resale 9,000,000
Construction in Progress 19,500,000
Investment in Bonds 3,800,000
Agricultural produce at point of harvest 1,900,000
Stocks held by a stock brokerage firm 11,600,000
a. 33,500,000 b. 21,900,000 c. 20,000,000 d. 53,000,000

34. Ashe Co. recorded the following data pertaining to raw material X during January 200A:

Units
Date Received Cost Issued On hand
1/1/200A – Inventory P8.00 3,200
1/11/200A – Issue 1,600 1,600
1/22/200A - Purchase 4,800 9.60 6,400

The moving-average unit cost of X inventory at January 31, 200A, is

a. 8.80 b. 8.96 c. 9.20 d. 9.60

35. On January 1, 2008, Philip Company classified its property interest under operating lease from Anselmo Company, the lessor, as
investment property. The asset was recognized at P8,000,000 with an estimated remaining useful life of 15 years. The fair value of such
asset is P8,100,000 on December 31, 2008. Philip adopts the Fair value model in valuing its investment properties subsequent to initial
recognition. The Investment property account of Philip, excluding the transaction described above, is composed of the following:

Carrying amount Remaining Fair Value

Asset Jan. 1, 2008 Useful Life Dec. 31, 2008
A P 4,500,000 N/A P 5,000,000
B 6,550,000 16 4,890,000
C 10,600,000 20 11,050,000

If Philip uses the straight-line method in computing for depreciation expense, how much is the net amount of Investment property to
be reported on the face of the 2008 balance sheet?
a. 29,040,000 b. 29,650,000 c. 28,177,292 d. 29,220,000

36. Budi Company appropriately classified its property interest under an operating lease from Maharlika Company as investment property
on January 1, 2008. The amount which was appropriately recognized as investment property is P16,000. The net cost the leased
property as of that date of is P60,000 with a remaining 10-year useful life. Budi Company uses the fair model in valuing its investment
property. At year-end, the fair value of the asset leased property is P90,000 and the cost of the most recent similar lease transaction is
P18,000. How much depreciation expense will be recognized and how much unrealized gain from changes in fair value will be
recognized in the income statement of Budi Company?
Depreciation Expense Unrealized Gain

a. 43,250 118,250
b. 47,000 28,000
c. 43,250 0
d. 0 2,000

37. On 1 January 20X1 an entity acquired a building for ₱95,000, including ₱5,000 non-refundable purchase taxes. The purchase
agreement provided for payment to be made in full on 31 December 20X1. Legal fees of ₱2,000 were incurred in acquiring the
building and paid on 1 January 20X1. The building is held to earn lease rentals and for capital appreciation. An appropriate discount
rate is 10 per cent per year. The entity shall measure the initial cost of the building at:
a. ₱88,364 b. ₱97,000 c. ₱102,000 d. ₱107,000

38. On 1 January 20X1 an entity acquired an investment property (building) in a remote location for ₱100,000. After initial recognition, the
entity measures the investment property using the cost-depreciation-impairment model, because its fair value cannot be measured reliably
without undue cost or effort on an ongoing basis. At 31 December 20X1 management:
 assessed the building’s useful life at 50 years from the date of acquisition
 presumed the residual value of the building to be nil (given that the fair value cannot be determined reliably)
 assessed that the entity will consume the building’s future economic benefits evenly over 50 years from the date of acquisition
 declined an unsolicited offer to purchase the building for ₱130,000. This is a ‘one-off’ offer that is unlikely to be repeated in the
foreseeable future.
The entity should measure the carrying amount of the building on 31 December 20X1 at:
a. ₱98,000 b. ₱100,000 c. ₱130,000 d. ₱127,400

39. On 31 December 20X2 the entity reassessed the remaining useful life of the investment property described in the preceding question as
73 years from the date of acquisition. The revised assessment is supported by new information that became available in late 20X2. The
entity should measure the carrying amount of the building on 31 December 20X2 at:
a. ₱130,000 b. ₱96,676 c. ₱126,533 d. ₱97,333

40. On 1 January 20X1 an entity acquired a building for ₱100,000. At 31 December 20X1 management:
 assessed the building’s useful life as 40 years from the date of acquisition
 assessed the building’s residual value as ₱20,000
 assessed the entity will consume the building’s future economic benefits evenly over 40 years from the date of acquisition
 assessed the fair value of the building at ₱130,000.
The building is occupied by the entity’s sales staff. The entity should measure the carrying amount of the building on 31 December 20X1
at:
a. ₱100,000 b. ₱98,000 c. ₱130,000 d. ₱127,250

41. The total credits in the statement of financial position columns of a worksheet amounted to P2,881,600 while the total debits in the
income statement columns is P987,200. If the total debits in the adjusted trial balance is P3,960,000, how much is the profit/(loss) for the
period?
a. 90,200 b. 89,200 c. 87,200 d. 91,200

Use the following information for the next four questions:

On January 1, 20x1, DRACONIAN FEEBLE-MINDED Co. received P240,000 advance rent covering 3 years starting January 1, 20x1.

42. If DRACONIAN Co. uses the liability method, the 20x1 year-end adjusting entry will include a
a. debit to cash for P240,000
b. credit to unearned rent for P80,000
c. credit to unearned rent for P160,000
d. credit to rent income for P80,000

43. If DRACONIAN Co. uses the income method, the 20x1 year-end adjusting entry will include a
a. debit to rent income for P80,000
b. debit to unearned rent for P160,000
c. debit to rent income for P160,000
d. credit to unearned rent for P80,000
44. If DRACONIAN Co. uses the liability method, the 20x1 rent income is
a. 80,000 b. 160,000 c. 240,000 d. 60,000
45. If DRACONIAN Co. uses the income method, the 20x1 unearned rent is
a. 80,000 b. 160,000 c. 240,000 d. 60,000

Use the following information for the next four questions:

PERSPICUOUS CLEAR Co. paid a one-year insurance on October 1, 20x1 amounting to P80,000.

46. If PERSPICUOUS Co. uses the asset method, the 20x1 year-end adjusting entry will include a
a. debit to insurance expense for P60,000
b. debit to insurance expense for P20,000
c. debit to prepaid insurance for P20,000
d. credit to prepaid insurance for P60,000

47. If PERSPICUOUS Co. uses the expense method, the 20x1 year-end adjusting entry will include a
a. debit to insurance expense for P60,000
b. debit to insurance expense for P20,000
c. debit to prepaid insurance for P60,000
d. credit to prepaid insurance for P20,000

48. The books of ADUMBRATE TO OUTLINE VAGUELY Co. show the following balances at December 31, 20x1:
Cash on hand P 400,000
Cash in Bank – current account 1,400,000
Cash in Bank – peso savings deposit 8,000,000
Cash in Bank – dollar deposit (unrestricted) $ 400,000
Cash in Bank – dollar deposit (restricted) 80,000
Cash in money-market account P1,000,000
6-month Time Deposit $ 240,000
Treasury bill, purchased 12/1/20x1, maturing 2/28/20x2 P3,200,000
Treasury bond, purchased 3/1/20x1, maturing 2/28/20x2 2,000,000
Treasury Note 800,000
Unused Credit Line 8,000,000
Redeemable preference shares, purchased 12/1/20x1,
due on 3/1/20x2 1,480,000
Treasury shares, purchased 12/1/20x1, to be reissued
on 3/5/20x2 200,000
Sinking fund 800,000

Additional information:
 Cash on hand includes a P80,000 check payable to ADUMBRATE Co. dated January 10, 20x2.
 During December 20x1, checks amounting to P240,000 and P160,000 were drawn against the current account in payment of accounts
payable. The P240,000 check is dated January 15, 20x2. The P160,000 check is dated December 31, 20x1 but was delivered to the
payee only on January 15, 20x2.
 The Cash in Bank – peso savings deposit includes a deposit in escrow in the amount of P1,360,000 and a compensating balance
amounting to P1,000,000 which is legally restricted.
 The Cash in Bank – dollar deposit (unrestricted) account includes interest of $8,000, net of tax, directly credited to ADUMBRATE
Co.’s account. The exchange rate as of year-end is $1 is to P40.

How much is the cash and cash equivalents to be reported in the 20x1 financial statements?
a. 21,440,000 b. 29,440,000 c. 29,120,000 d. 28,440,000

49. The cash balance of DELETERIOUS HARMFUL Co. comprises the following:
Cash on hand 400,000
Cash in bank – savings – BPI 800,000
Cash in bank – current – BPI (320,000)
Cash in bank – deposit in escrow – Metrobank 400,000
Cash in bank – current – Metrobank ( 80,000)
Cash in bank – current – BDO ( 120,000)
Total 1,080,000

Additional information:
 Cash on hand includes undeposited collections of P80,000.
 The cash in bank – savings maintained at BPI includes a P200,000 compensating balance which is not restricted.

How much is the amount of cash to be reported in the financial statements?

a. 1,200,000 b. 1,600,000 c. 1,080,000 d. 880,000

50. STULTIFY TO MAKE STUPID Company has the following information:

Balance per bank statement 1,600
Credit memos 840
Debit memos 600
Deposits in transit 520
Outstanding checks 320

How much is the cash balance per books?

a. 1,800 b. 1,600 c. 1,560 d. 2,040
51 A company that estimates uncollectible accounts as 2% of ending accounts receivable has accounts receivable, net of allowances, in the
amount of P98,000 as of the beginning of the year. Assuming there was a 200% increase in accounts receivable as of the year-end, how
much was the provision for doubtful accounts recognized?
a. 1,920 b. 6,000 c. 4,000 d. 2,000

Use the following information for the next two questions:

On January 1, 2009, LJ Bank extended a P1,000,000 loan to Susan Co. The loan is payable in 5 equal annual installments plus interest at
12% every January 1 starting on 2010. Susan made the required payment during 2010. However, at the middle part of 2010 Susan began to
experience financial difficulties, requiring LJ to reassess the collectibility of the loan. On December 31, 2010, LJ Bank determines that the
remaining principal payment will be collected but the collection of the interest is unlikely. The year-end current market rates in 2010 and
2011 are 14% and 13%, respectively.

52. How much is the impairment loss to be recognized on December 31, 2010?
a. 319,634
b. 392,530
c. 119,634
d. 0
53. How much interest income will be recognized in 2011?
a. 81,644
b. 88,448
c. 57,644
d. No interest will be recognized since the loan has already been impaired.

THEORIES
1. What is the authoritative status of the Conceptual Framework?
a. It has the highest level of authority. In case of a conflict between the Conceptual Framework and a Standard or Interpretation, the
Conceptual Framework overrides the Standard or Interpretation.
b. If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the Conceptual Framework. In the
absence of a Standard or an Interpretation that specifically applies, the Conceptual Framework should be followed.
c. If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the Conceptual Framework. In the
absence of a Standard or an Interpretation that specifically applies to a transaction, management should consider the applicability
of the Conceptual Framework in developing and applying an accounting policy that will result in information that is relevant and
reliable.
d. The Conceptual Framework applies only when IASB develops new or revised Standards. An entity is never required to consider
the Conceptual Framework.

2. The foundation of the Conceptual Framework is formed from

a. The qualitative characteristics that makes information useful to users
b. The objective of general purpose financial reporting
c. The concept of reporting entity
d. The various measurement requirements which results to fair presented financial information

3. In December 200A catalogs were printed for use in a special promotion in January 200B. The catalogs were delivered by the printer
on December 31, 200A, with an invoice for P70,000 attached. Payment was made in January 200B. The P70,000 should be reported as
a deferred cost at the December 31, 200A balance sheet because of the
a. Matching principle. c. Revenue recognition principle
b. Reliability principle d. Cost principle.

4. In addition to a statement of a financial position, statement of profit or loss and other comprehensive income, statement of changes in
equity, and statement of cash flows, a complete set of financial statements must include
a. notes c. an auditor’s opinion
c. net present value of expected future cash flows d. a ten-year summary of operations

5. What is the basic purpose of accounting?

a. To provide quantitative financial information about economic activities.
b. To provide all information that users need in making economic decisions.
c. To provide qualitative financial information about economic activities intended to be useful in making economic decisions.
d. To provide quantitative financial information about economic activities intended to be useful in making economic decisions.

6. The practice of accountancy in the Philippines is regulated under

a. R.A. 9892 b. R.A. 9298 c. R.A. 8992 d. RH bill

7. Which of the following errors may be revealed by a trial balance?

a. A debit to salaries expense was posted in the ledger as debit to insurance expense.
b. Expense already incurred was not recorded
c. The debit and credit posting of a credit sale were omitted
d. The credit posting of a payment of account payable was omitted

8. If an entity uses the income method of initial recording of income, the year-end adjusting entry involves
a. crediting an income account for the earned portion of the advance payment received
b. debiting a liability account for the earned portion of the advance payment received
c. debiting an income account for the earned portion of the advance payment received
d. crediting a liability account for the unearned portion of the advance payment received

9. The category "trade receivables" includes

a. advances to officers and employees.
b. income tax refunds receivable.
 c. claims against insurance companies for casualties sustained.
d. none of these.

10. Which of the following is not an acceptable balance sheet presentation of receivables?
a. the allowance for bad debts is not offset against the related receivables but rather shown in a parenthetical notation as deduction
to receivables
b. trade notes receivable are combined with trade accounts receivable
c. cash advances to officers which are due after one year but within the entity’s 18-month operating cycle, are reported as current
ass ets
d. unearned finance charges included in the face amount of receivables are presented as deduction from the related receivables

11. What is the effect upon the total assets of a business when an account receivable has been collected?
a. increase total assets c. decrease total assets
b. no change in total assets d. decrease of receivable only

12. Spongebob Squarepants lent P2,000 to Squidward for one year at 10% interest, all due at maturity. He insisted the terms of the
transaction be formalized in promissory note. In this situation:
a. the maturity value of the note is P2,000
b. Spongebob Squarepants is considered the maker of the note and records the note as an asset in his accounting records
c. Spongebob Squarepants is considered the maker of the note and records the note as a liability in his accounting records
d. Squidward is considered the maker of the note and records the note as a liability in his accounting records

13. Which of the following statements regarding interest methods of allocations is not true?
a. The term “interest methods of allocation” refers both to the convention for periodic reporting and to the several approaches to
dealing with changes in estimated future cash flows.
b. Interest methods of allocation are reporting conventions that use present value techniques in the absence of a fresh-start
measurement to compute changes in the carrying amount of an asset or liability from one period to the next.
c. Interest methods of allocation are grounded in the notion of current cost.
d. Holding gains and losses are generally excluded from allocation systems.

14. A company received two one-year notes in payment for merchandise sold. One note has a face amount of P6,000 and was interest-
bearing at an annual rate of 18 percent. The other note has a face amount of P7,080 and was non-interest-bearing (its implied interest
rate was 18 percent)
a. The total amount of cash ultimately to be received will be more for the interest-bearing note.
b. Both notes will cause the same total interest to be recognized.
c. The amount of interest revenue which should be recognized is more for the interest-bearing note.
d. The amount which should be credited to sales revenue is more for the noninterest-bearing note

15. When testing loans and note receivables for impairment, the rate that should be used is
a. the current market rate as of date of impairment testing
b. the weighted average rate on the remaining term before maturity of note
c. the original effective rate of the note
d. the weighted average rate over the total life of the note

16. After impairment testing, interest income on the impaired note is computed by
a. multiplying the present value of the note by the current market rate at year-end
b. multiplying the present value of the note by the rate used in impairment testing
c. multiplying the face value of the note by the rate used in impairment testing
d. no interest income will be recognized since the note is already impaired

17. Which of the following is not objective evidence of impairment of a financial asset?
a. Significant financial difficulty of the issuer or obligor.
b. A decline in the fair value of the asset below its previous carrying amount.
c. A breach of contract, such as a default or delinquency in interest or principal payments.
d. Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets
although the decrease cannot yet be associated with any individual financial asset.

18. Which of the following would indicate that a note receivable or other loan is impaired?
a. when it is written off
b. when it is probable that principal payments will be delayed
c. when the maker of the note experiences financial difficulties
d. when the market value of the note falls below its book value due to interest rate changes

19. The reversal of impairment loss

a. shall not result in a carrying amount of the financial asset that exceeds what the amortized cost would have been had the
impairment not been recognized at the date the impairment is reversed.
b. is recognized in profit or loss without any limit
c. is recognized in directly in equity
d. causes the debtor’s credit rating to increase

20. Which of the following describes the carrying value of an impaired note immediately following the recognition of the impairment?
a. normal sum of the remaining cash flows to be received.
b. present value of remaining cash flows to be received, discounted at the current market rate of interest.
c. present value of the remaining cash flows to be received, discounted at the original interest rate implicit in the note.
d. the book value before the impairment is recognized less accrued interest.

21. Inventory should be stated at

a. Lower of cost and fair value.
b. Lower of cost and net realizable value.
c. Lower of cost and nominal value.
 d. Lower of cost and net selling price.
e. Choices b and d.

22. Which of the following costs of conversion cannot be included in cost of inventory?
a. Cost of direct labor.
b. Factory rent and utilities.
c. Salaries of sales staff (sales department shares the building with factory supervisor).
d. Factory overheads based on normal capacity.

23. Generally speaking, biological assets relating to agricultural activity should be measured using
a. Historical cost.
b. Historical cost less depreciation less impairment.
c. A fair value approach.
d. Net realizable value.

24. Where the fair value of the biological asset cannot be determined reliably, the biological asset should be measured at
a. Cost.
b. Cost less accumulated depreciation.
c. Cost less accumulated depreciation and accumulated impairment losses.
d. Net realizable value.

25. An unconditional government grant related to a biological asset that has been measured at fair value less cost to sell should be
recognized as
a. Income when the grant becomes receivable.
b. A deferred credit when the grant becomes receivable.
c. Income when the grant application has been submitted.
d. A deferred credit when the grant has been approved.

26. If a government grant is conditional on certain events, then the grant should be recognized as
a. Income when the conditions attaching to the grant are met.
b. Income when the grant has been approved.
c. A deferred credit when the conditions attached to the government grant are met.
d. A deferred credit when the grant is approved.