1.

In presenting a statement of financial position, an entity

a. Must make the current and noncurrent presentation.

b. Must present assets and liabilities in order of liquidity.
c. Must choose either the current and noncurrent or the liquidity presentation, meaning
free choice of presentation.
d. Must make the current and noncurrent presentation, except when a presentation based
on liquidity provides information that is reliable and more relevant.
2. An entity has loan due for repayment in six months’ time but the entity has the option to
refinance for repayment two years later. The entity plans to refinance this loan. In which
section of the statement of financial position should this loan be presented?
a. Current liabilities
b. Current assets
c. Noncurrent liabilities
d. Noncurrent assets
3. When classifying asset as current and noncurrent for reporting purposes
a. The amounts at which current assets are carried and reported must reflect realizable
cash value.
b. Prepayments for items such as insurance or rent are included in other assets rather
than as current assets.
c. The time period by which current assets are distinguished from noncurrent assets is
determined by the seasonal nature of the business.
d. Assets are classified as current if these are reasonably expected to be realized in cash
or consumed during the normal operating cycle.
4. An entity records all sales using the installment method of accounting. Installment sales
contracts call for 36 equal monthly cash payments. The amount of deferred gross profit
relating to collections 12 months beyond the reporting period shall be reported in the
a. Current liability section as a deferred revenue
b. Noncurrent liability section as a deferred revenue
c. current asset section as a contra account
d. Noncurrent asset section as a contra account
5. The term “deficit” refers to
a. An excess of current assets over current liabilities
b. An excess of current liabilities over current assets
c. A debit balance in retained earnings
d. A prior period error
6. Which of the following characteristics may result in the classification of a liability as
current?
a. Short-term obligation refinanced with long-term debt at the end of reporting period
b. Debt to be liquidated from fund that has been accumulated and reported as noncurrent
asset
c. Violation of provisions of a debt agreement
 d. Obligation for advance collection that involves long-term determent of the delivery of
good
7. Which of the following accounting bases may be used to prepare financial statements in
conformity with a comprehensive basis of accounting other than generally accepted
accounting principles?
a. Income tax basis of accounting
b. Cash receipts and disbursements basis of accounting
c. Income tax basis and cash receipts and disbursements basis of accounting
d. Neither income tax basis nor cash receipts and disbursement basis of accounting

8. Total comprehensive income for the period is presented

a. Showing separately the total amount attribute to owners of the parent and the
noncontrolling interest.
b. Showing separately an analysis of expenses by function.
c. Showing separately an analysis of expenses by nature.
d. Showing separately profit or loss and the total of other comprehensive income.
9. Separate line items in an analysis of expenses by function include
a. Purchases, transport costs, employee benefits, depreciation, extraordinary items.
b. Purchases, distribution costs, administrative costs, employee benefits, depreciation,
taxes.
c. Depreciation, Purchases, transport costs, employee benefits and advertising costs.
d. Cost of sales, administrative and distribution costs.
10. What is the purpose of reporting comprehensive income?
a. To report transactions with owners.
b. To report a measure of overall entity performance.
c. To replace net income with a better measure.
d. To combine income from continuing operations with income from discontinued
operations.
11. Which of the following changes during a period is not a component of other
comprehensive income?
a. Remeasurement of defined benefit plan
b. Treasury share, at cost
c. Foreign currency translation adjustment
d. Unrealized gain on equity instrument measured at fair value through other
comprehensive income
12. Accumulated other comprehensive income should be reported as component of
a. Retained earnings
b. Share premium
c. Retained earnings and share premium
d. Neither retained earnings nor share premium
13. Which of the following would represent the least likely use of an income statement?
 a. Use by customers to determine an entity’s ability to provide needed goods and
services.
b. Use by labor unions to examine earnings closely as a basis for salary discussions.
c. Use by government agencies to formulate tax and economic policy.
d. Use by investors interested in the financial position of the entity.

14. The income statement would help in which of the following?

a. Evaluate liquidity
b. Evaluate solvency
c. Estimate amount, timing and uncertainly of future cash flows
d. Estimate future financial flexibility
15. A transaction that is material in amount, unusual in nature and infrequent in occurrence
shall be presented separately as
a. Component of income from continuing operations, but not net of applicable income
tax
b. Component of income from continuing operations, net of applicable income tax
c. Component of income from discontinued operation, net of applicable income tax.
d. Prior period error, net of applicable income tax.

16. Items of dissimilar nature or function

a. Must always be presented separately.

b. Must not be presented separately.
c. Must be presented separately in financial statements if these items are material.
d. Must be presented separately in financial statements even if these items are
immaterial.

17. Materiality depends on

a. The nature of the omission or misstatement.

b. The absolute size of the omission or misstatement.
c. The relative size and nature of the omission or misstatement judged in the
surrounding circumstances.
d. The judgement of management.

18. An entity must disclose comparative information for

a. The previous comparable period for all amounts reported.

b. The previous comparable period for all amounts reported and for all narrative and
descriptive information.
c. The previous comparable period for all amounts reported and for all narrative and
descriptive information when it is relevant to an understanding of the financial
statements of the current period.
 d. The previous two comparable periods for all amounts reported.

19. When the classification of items in the financial statements is changed, the entity
a. Must not reclassify the comparative amounts.
b. Can choose whether to reclassify the comparative amounts.
c. Must reclassify the comparative amounts, unless it is impracticable to do so.
d. Must reclassify the current year amounts only.

20. An entity shall present

a. The statement of cash flows more prominently than the other statements.
b. The statement of financial position more prominently than the other statements.
c. The statement of comprehensive income more prominently than the other statements.
d. Each financial statement with equal prominence.

21. In order for a noncurrent asset to be classified as held for sale, the sale must be highly
probable. What is the meaning of highly probable?
a. The future sale is likely to occur.
b. The future sale is more likely than not to occur.
c. The sale is certain.
d. The probability is higher than more likely than not.

22. How should the assets and liabilities of a disposal group classified as held for sale be
reported in the statement of financial position?
a. The assets and liabilities shall be offset and presented as a single amount?
b. The assets of the disposal group shall be reported separately from other assets and the
liabilities of the disposal group shall be reported separately from other liabilities.
c. The assets and liabilities shall be presented as a single amount and as a deduction
from equity
d. There should be no separate disclosure of assets and liabilities that form part of a
disposal group.

23. An entity acquired a subsidiary exclusively with a view to selling it. The subsidiary met
the criteria to be classified as held for sale. At the end of reporting period, the subsidiary
has not yet been sold and six months have passed since the acquisition. How will the
subsidiary be measured in the statement of financial position at the date of the first
financial statements after acquisition?
a. At fair value
b. At the lower of cost and fair value less cost of disposal
c. At carrying amount
d. In accordance with applicable PFRS
24. Which of the following statements in relation to an asset classified as held for sale is
true?
 I. An asset that meets the criteria for classification as held for sale after the end of
the reporting period but before the authorization of the financial statements shall
be measured at the lower of carrying amount and fair value less cost of disposal.

II. To be classified as an asset held for sale, the sale must be expected to be
completed within twelve months from the end of the financial year.

a. I only
b. II only
c. Both I and II
d. Neither I or II

25. An entity classified a noncurrent asset accounted for under the cost model as held for sale
at the current year-end. Because no offers were received at an acceptable price, the entity
decided at the end of next year not to sell the asset but to continue to use it. The asset
shall be measured at the end of next year at what amount?

a. The lower of carrying amount and recoverable amount

b. The higher of carrying amount and recoverable amount
c. The lower of carrying amount on the basis that the asset had never been classified
as held for sale and recoverable amount.
d. The higher of carrying amount on the basis that the asset had never been classified
as held for sale and recoverable amount.

26. which of the following statements in relation to discontinued operations is true?

a. Discontinued operations are reported as the item in the income statement.

b. The discontinued operations consist only of the gain or loss on disposal of the
discontinued component.
c. The discontinued operations consist only of the income or loss from operating the
discontinued component.
d. The discontinued operations consist of the income or loss from operating the
discontinued component as well as the gain or loss on disposal of the discontinued
component.

27. The results of operations of a component of an entity that either has been disposed of or
classified as held for sale shall be reported in discontinued operations when
a. The operations and cash flows of the ongoing operations of the entity as a result of
the disposal transactions.
b. The entity continues to have a significant continuing involvement in the operations of
the component after the disposal transaction.
 c. The entity outsources the manufacturing operations of a component and sells the
manufacturing facility of the component but continues to sell the product previously
manufactured by the facility sold.
d. All of these would quality as discontinued operation.

28. When an entity discontinued an operation and disposed of the discontinued operation, the
transaction should be reported in the income statement as
a. A prior period error
b. Other income and expense item
c. An amount after income from continuing operation and before net income
d. A bulk sale of plant assets included in income from continuing operations
29. A single amount should be disclosed within the income statement for
a. The post-tax profit or loss on discontinued operation and the pre-tax gain or loss on
the disposal of discontinued operation assets.
b. The pre-tax profit or loss on discontinued operation and the post-tax gain or loss on
the disposal of discontinued operation assets.
c. The pre-tax profit or loss on discontinued operation and the pre-tax gain or loss on the
disposal of discontinued operation assets.
d. The post-tax profit or loss on discontinued operation and the post-tax gain or loss on
the disposal of discontinued operation assets.

30. Which of the following most likely would be considered a discontinued operation?
a. Shifting production or marketing function from one location to another.
b. A sporting goods manufacturer that has a bicycle division decided to outsource the
manufacture of the bicycles.
c. The unprofitable brands of a beauty products component of an entity that
manufacturers and sells consumer products are discontinued.
d. An entity that is a franchisor in the quick-service restaurant business also operates
entity-owned restaurants that are unprofitable in a certain region and, as a result, the
entity decides to exit both the quick-service business as well as the entity-owned
restaurants in that region.
31. ABC Co. a seller of concrete aggregates, enters into the following contracts:
i. A contract with Delta Co. to deliver goods. Payment is due one month after
delivery.
ii. A contract with Echo Co. for sale of 300 units of each of products X and Y. The
contracts states that the price of product Y will be retrospectively reduces by 50%
if Echo Co. makes a cumulative purchase of at least 1,000 units of Product X
within 6 months.
iii. A contract with Fafa Co. to deliver goods. At contract inception, Fafa Co. is
broke. ABC Co. expects that it can only collect 50% of the consideration.
iv. A contract with Gamma Co. an entity which is also engaged in the concrete
aggregates business, to exchange inventory of facilitate sales of customers in
different geographical areas of operations.
Identify the contracts to which PFRS 15 revenue from contract with customers may not
be applied.
A. Delta and Echo
B. Fafa and Gamma
C. Fafa
D. Gamma

32. Certain criteria must met before a contract with a customer is accounted for under PFRS
15. Which of the following precludes a contract from being accounted for under PFRS
15?
A. The consideration is collected in advanced
B. The contract is made orally
C. The contract does not result to a change in the risk, timing or amount of the entity’s
future cash flows.
D. The contact is neither oral nor written but rather implied by the entity’s business
practices.

33. ABC Co. enters into a contract with XYZ. Inc. to deliver 2 apples, 3 mangoes, and 5
potatoes for a total consideration of ₱100. In accounting for the contract, which of the
following is probably not true?
A. ABC Co. identifies three performance obligations in the contract.
B. ABC Co. allocates the ₱100 transaction price over the promises to deliver the apples,
mangoes and potatoes on the basis of relative stand-alone selling prices of those
goods
C. The allocation of the transaction price may result to the identification of a discount.
D. No revenue is recognized until all of the 2 apples, 3 mangoes and 5 potatoes are
delivered even though the 2 apples were delivered first before the mangoes and
potatoes.
34. ABC Co. a manufacturer and dealer of printing machines, had the following transactions
during the period.
I. ABC Co. receives an order for the manufacture of a customized machine for a
customer. The customer pays half of the consideration at contract inception. The
manufacturing lead time is 1 year. ABC Co. subcontracts a portion of the
manufacturing to XYZ, inc. another manufacturer.
II. ABC Co. receives an order for a standard machine. Payment is due only after
ABC Co. has delivered and installed the machine. Additionally, the contract
requires ABC Co. to perform free maintenance services over a 3-month period
after the machine is installed ABC Co. completes the delivery and installation by
the end of the reporting period: however the maintenance period is not yet over.
III. ABC Co. receives an order for 2 machines. The first machine is delivered at
contract inception but the second machine will be delivered after two months.
Payment is due only after both machines are delivered. By the end of the
reporting period. the second machine is not yet delivered and the consideration is
not yet collected.
Identify the contracts to which PFRS 15 revenue from contract with customers may be
applied.
A. Contract 1
B. Contract 3
C. Contract 1, 2 and 3
D. None of these

35. It is an agreement between two or more parties that creates enforceable rights and
obligations.
a) Obligation
b) Contract
c) Revenue
d) Any of these

36. According to PFRS 15 revenue from contracts with customers’ contracts with customers
are.
a) Written
b) Oral
c) Implied
d) Any of these

37. The best evidence for the stand-alone selling price of a good or service is
a) The list price of the good and service
b) The contractually stated price of the good or service
c) The observable price at which the good or service can be sold separately under
similar circumstances and to similar customers
d) The entity’s estimate of the stand-alone selling price
38. Revenue is recognized when (or as) the entity satisfies a performance obligation.
According to PFRS 15 revenue from contracts with customers. Revenue is measured at
a) The fair value of the consideration received or receivable
b) The transaction price
c) The stand-alone selling price of the good or service transferred
d) The amount of the transaction price allocated to the performance obligation
satisfied.

39. During the period ABC Co. transfers good to XYZ, Inc. Which of the following does not
indicate that the transaction is a consignment arrangement?

a) ABC Co. retains legal over the goods until XYZ, Inc sells them to third parties.
b) ABC Co. can require the return of any unsold goods within 60 days.
c) If XYZ, Inc. is not satisfied with the goods, XYZ, Inc. has the right to return them
to ABC Co.
d) ABC Co. can require XYZ, Inc. to transfer the goods to 123 corporation.
e) XYZ, Inc. is not obligated to remit any payment to ABC Co. unless XYZ, Inc.
sells the goods

40. A non-refundable upfront fee that relates to administrative tasks to set up a contract is
most likely accounted for as

a) A prepayment and recognized as revenue only when the related goods or services
are transferred to the customer.
b) A contract asset that is presented separately from contact liability in the statement
of financial position
c) As an outright expense
d) All of these

41. One of the conditions that must be satisfied in order to recognize revenue in a transaction
involving the rendering of services over a contractual period is that the stage of
completion of the transaction at the end of the reporting period can be measured reliably.
Which of the following methods for determining the stage of completion of a contract
involving the rendering of services are specifically referred to in PFRS 15 as being
acceptable?
I. Costs incurred to date as a percentage of the estimated total costs of the
transaction
II. Advances received to date as a percentage of the total amount receivable
III. Surveys of work performed
IV. Revenue to date divided by total contract revenue

A. I. III, IV
B. I, III
C. I, II, IV
D. I, II, III

42. The Grand Company placed an order with The Little Company for new specialist
machinery. The order was non-cancellable once signed and Grand agreed to pay for the
machinery at the time the order was signed on 1 February 20X1. Little held the
machinery to Grand's order from 1 June 20X7, the date on which it was completed.
Grand commenced using the machinery on 1August 20X7 when Little completed the
installation process. The installation is not distinct. Little had staff on standby to deal
with any operating problems until the warranty period ended on 1 November 20x7. The
warranty does not provide service in addition to assurance that the machinery complies
with agreed-upon specifications. Under PFRS15 Revenue, Little should recognize the
revenue from the sale of this specialist machinery on

1 August 2007
1 November 20X7
1 February 20X7
1 June 20X7

43. Which is incorrect concerning recognition of revenue?

Revenue from rendering of services over an extended contractual period shall be recognized
by reference to the stage of completion of the transaction at balance sheet date.
Interest revenue shall be recognized on time proportion basis that does not take into account
the effective yield on the asset.
Royalty revenue shall be recognized on an accrual basis in accordance with the substance of
the relevant agreement,
Dividend revenue shall be recognized when the stockholder's right to receive payment is
established.

44. In a normal sale, generally the most uncertain factor in the revenue recognition process is

the seller's fulfillment of its responsibility in the transaction

the measurability of the resource or item received by the seller
the realizability of the resource or item received by the seller
the relevance of the resource or item received by the seller

45. Which of the following methods of service revenue recognition usually would be most
appropriate for a business engaged in packing, loading? transporting and delivering
 freight (where each of the processes is an input to a combined output specified by the
customer)?

Proportional performance method (i.e., over time as the entity progresses towards the
complete satisfaction of the performance obligation)
Completed performance method (ie, at a point in time when the entity completes the output
specified contract)
Specific performance method (i.e., when the customer pays for the completion of a single
specific activity)
Collection method (ie when cash is collected)

46. An entity is a large manufacturer of machines. A major customer has placed an order for
a special machine for which it has given a deposit to the entity. The parties have agreed
on a price for the machine. As per the terms of the sale agreement, it is FOB (tree on
board) contract and the title passes to the buyer when goods are loaded into the ship at the
port. When should the revenue be recognized by the entity?

When the customer orders the machine.

When the deposit is received
When the machine is loaded on the port
When the machine has been received by the customer

47. A company manufacturing and selling consumable products has come out with an offer
to refund the cost of purchase within one month of sale the customer is not satisfied with
the product. When should the company recognize the revenue?

When goods are sold to the customers

After one month of sale.
Only if goods are not returned by the customers after the period of one month
At the time of sale along with an offset to revenue for the refund liability for the products
expected to be returned.

48. A computer chip manufacturing company sells its products to its distributors for onward
sales to the ultimate customers. Due to frequent fluctuations in the market prices for these
goods, the company has a "price protection clause in the distributor agreement that
entities it to raise additional billings in case of upward price movement, Another clause in
the distributor's agreement is that the company can at any time reduce its inventory by
buying back goods at the cost at which it sold the goods to the distributors. Distributors
pay for the goods within 60 days from the sale goods to them. When should the company
recognize revenue on sale of goods to the distributors?
When the goods are sold to the distributors.
When the distributors pay to the company the cost of the goods.
When goods are sold to the distributors provided estimated additional revenue is also booked
under the "protection clause" based on past experience.
When the distributors sell goods to the ultimate customers and there is no uncertainty with
respect to the price protection clause or the buyback of goods.

49. An entity manufactures and sells standard machinery. One of the conditions in the sale
contract is that installation of machinery will be undertaken by the entity. During
December of the current year, the entry received a special onetime contract from a
customer to manufacture install and maintain customized machinery. It is the first time
the entity will be producing this kind of machinery, and it is expecting numerous changes
that would need to be made to the machine after the installation is completed, which one
period is described in the contract of sale as the maintenance period. The maintenance
services are an input to a combined output specified in the contract. The total cost of
making the changes during the maintenance period cannot be reasonably estimated at the
time of the installation. Costs incurred are not recoverable if, during the maintenance
period, the machinery is discovered as non-compliant with agreed-upon specifications
and the non-compliance is beyond remediation. The customer shall signify its acceptance
of the machinery at the end of the maintenance period. When should revenue from the
sale of the special machine most likely be recognized?

When the machinery is produced.

When the machinery is produced and delivered.
When the installation is complete.
When the maintenance period as per the contract of sale expires.

50. Revenue is recognized at the time of sale under the

a cost recovery method (i.e., the outcome of a performance obligation cannot be reasonably
measured but the entity expects to recover the costs incurred in satisfying the performance
obligation)
collection method (i.e., when cash is collected)
percentage-of-completion method (i.e. the performance obligation is satisfied over time)
sales method when goods are sold on credit (i e., the performance obligation is satisfied when
the goods are transferred to the customer)
Problems

Problem 1
Arlene Company accounted for noncurrent assets using the cost model. On October 30, 2018, the entity
classified a noncurrent asset as held for sale.

At that date, the carrying amount was P1,500,000, the fair value was estimated at P1,100,000 and the cost
of disposal P150,000.

On November 20, 2018, the asset was sold for at proceeds of P800,000.

1. What meant should be reported us impairment loss for 2018?

a) 550,000
b) 400,000
c) 700,000
d) 0

2. What amount should be included as loss on disposal in the statement of comprehensive income for the
year ended December 31, 2018? -bonus
a) 550,000
b) 700,000
c) 150,000
d) 0

Solution

Question Answer a

Carrying amount 1,500,000

Fair value les cost of disposal (1,100,000 - 150,000) 950,000
Impairment loss 550,000

Question 2 Answer c

Sale price 800,000

Carrying amount on November 20, 2018, date of sale 950,000
Loss on disposal (150.000)

Problem 2
On April 1, 2018, Brandy Company bad a machine with a cost of P5,000,000 and accumulated
depreciation of P3,750,000.
On April 1, 2018, the entity classified the machine as held for sale and decided to sell the machine within
one year.

On April 1, 2018, the machine had an estimated selling price of P500,000 and a remaining useful life of 2
years.

It is estimate that selling cost associated with the disposal of the machine will be P50,000.

On December 31, 2018, the estimated selling price of the machine had increased to P750,000 with estimated
selling cost of P100,000.

1. What amount of impairment loss should be recognized in 2018?

a) 1,250,000
b) 800,000
c) 750,000
d) 0

2. What amount should be recognized as gain on reversal of impairment on December 31, 2018?
a) 468,750
b) 368,750
c) 300,000
d) 200,000

Solution

Question 1 Answer b

Cost 5,000,000
Accumulated depreciation 3,750,000
Carrying amount - April 1, 2018 1,250,000
Fair value less cost of disposal - April 1, 2018
(500,000 - 50,000) 450,000
Impairment loss - April 1, 2018 800,000

Impairment loss 800,000

Machine held for sale 800,000

Question 2 Answer d

Fair value less cost of disposal - December 31, 2018

(750,000 - 100,000) 650,000
Fair value less cost of disposal - April 1, 2018 450,000
Gain or reversal of impairment 200,000

Machine held for sale 200.000

Gain on reversal of impairment 200,000
Note that there is no depreciation from April 1, 2018 to December 31, 2018.

PFRS 5. paragraph 25, provides that an entity shall not depreciate a noncurent asset while it is classified as
held for sale or while it is part of a disposal group classified as held for sale.

Problem 3
In 2018, Isuzu Company decided to discontinue the Electronics Division, a separately identifiable
component of Isuzu's business. On December 31, 2018, the division has not been completely sold.

However, negotiations for the final and complete sale are progressing in a positive manner and it is probable
that the disposal will be completed within a year.

Analysis of the records for the year disclosed the following relative to the Electronics Divsision:

Operating loss for the current year 8,000,000

Loss on disposal of some Electronics Division assets
during 2018 500,000
Expected operating loss in 2019 preceding final disposal 1,000,000
Expected gain in 2019 on disposal of division 2,000,000

What amount should be reported as pretax loss from discontinued operation in 2018?
a) 8,000,000
b) 8,500,000
c) 9,500,000
d) 7,500,000

Solution Answer b

Operating loss for the current year 8,000,000

Loss on disposal in 2018 500,000
Pretax loss from discontinued operation 8,500,000

The expected operating loss in 2018 and expected gain on disposal in 2019 are not recognized in 2018.

Problem 4
Vemon Company had two operating divisions, one manufacturing farm equipment and the other office
supplies. Both divisions are considered separate components.

The farm equipment component had been unprofitable and on September 1, 2018, the entity adopted a plan
to sell the assets of the division.

The actual sale was effected on December 15, 2018 at a price of P3,000,000. The carrying amount of the
division's assets was P5,000,000.
The division incurred before-lax operating loss of P1,500,000 from the beginning of the year through
December 15, 2018.

The entity's after-tax income from continuing operations is P9,000,000. The income tax rate is 30%.

What amount should be reported as net income for the current year?
a) 5,500,000
b) 6,550,000
c) 6,300,000
d) 7,600,000

Solution Answer b

Income from continuing operations 9,000,000

Loss from discontinued operation (2,450,000)
Net income 6,550,000

Sale price of division assets 3,000,000

Carrying amount of assets 5,000,000
Loss on disposal (2,000,000)
Division operating loss (1,500,000)
Total loss from discontinued operation (3,500,000)

Loss after tax (3,500,000 x 70%) (2,450,000)

7. On July 20X7, The Pyretus Company, a manufacturer of office furniture supplied goods
to the Natiso Company for ₱120,000 on condition that this amount was paid in full on 1
July 20X8. Natiso had ealier rejected an alternative offer from Pyretus whereby they
could have bought the same goods by paying cash of ₱108,000 on 1 July 20X7. Under
PFRS 15, how much relating to this transaction should Pyretus recognize in profit or loss
in respect of revenue and interest income for the year ended 30 June 20X8?

Revenue Interest income

A. 108,000 12,000
B. 120,000 Nil
C. 108,000 Nil
D. 120,000 12,000
8. On October 1, 20x3, ABC Co. sold 100,000 gallons of heating oil to DEF Co. at ₱3 per
gallon. Fifty thousand gallons were delivered on December 15 20x3, and the remaining
50,000 gallons were delivered on January 15, 20x4. Payment terms were 50% due on
October 1 ,20x3, 25% due on first delivery, and the remaining 25% due on second
delivery what amount of revenue should ABC recognize from this sale during 20x3?
a) 75,000
b) 150,000
c) 225,000
d) 300,000

9. In 20x2, Super Comics Corp. sold a comic strip to fantasy, Inc. and will receive royalties
of 20% of future revenues associated with the comic strip. At December 31, 20x3, Super
reported royalties’ receivable of ₱75,000 from Fantasy. During 20x4, Super received
royalty payments of ₱200,000. Fantasy reported revenues of ₱1,500,000 in 20x4 from the
comic strip. In its 20x4 income statement, what amount should Super Report as royalty
revenue?

a) 125,000
b) 175,000
c) 200,000
d) 300,000

10. Lin Co. a distributor of machinery, bought a machine from the manufacturer in
November 20x3 for ₱10,000. On December 30, 20x3, Lin sold this machine to Zee
Hardware for ₱15,000, under the following terms: 2% discount if paid within thirty days,
1% discount if paid after thirty days but within sixty days, or payable in full within ninety
days if not paid within the discount periods. However, Zee had the right to return this
machine to Lin if Zee was unable to resell the machine before expiration of the ninety-
day payment period, in which case Zee’s obligation to Lin would be canceled, in Lin’s
net sales for the year ended December 31, 20x3, how much should be included for the
sale of this machine to Zee?

a) 0
b) 14,700
c) 14,850
d) 15,000
ABC Supermarket, Inc awards customers’ loyalty points for their purchases. A customer is entitled to one
point for every P400 purchase. The points accumulated may be redeemed for awards in the form of
appliances, electronics, groceries and other household items. ABC estimated the stand-alone selling
price of each point at P4.00. During the period, ABC made total sales of P40M to cardholders.

11. How much sales revenue is recognized?

400,000
40,000,000
39,600,000
0

12. How much is the deferred revenue from loyalty points?

A. 400,000
B. 40,000,000
C. 39,600,000
D. 0

13. Wren Corp.'s trademark was licensed to Mont Co. for royalties of 15% of sales of the
trademarked items. Royalties are payable semiannually on March 15 for sales in July
through December of the prior year, and on September 15 for sales in January through
June of the same year. Wren received the following royalties from Mont:

March 15 September 15
20x2 10,000 15,000
20x3 12,000 17,000

Mont estimated that sales of the trademarked items would total P60, 000 for July through
December 20x3.In Wren's 20x3 income statement, the royalty revenue should be

A. 26,000
B. 29,000
C. 38,000
D. 41,000

14. Rill Co. owns a 20% royalty interest in an oil well. Rill receives royalty payments on
January 31 for the oil sold between the previous June 1 and November 30, and on July 31
for oil sold between December 1 and May 31. Production reports show the following oil
sales:
June 1, 20x2 - November 30, 20x2 300,000
 December 1, 20x2 - December 31, 20x2 50,000
December 1, 20x2 - May 31, 20x3 400,000
June 1, 20x3 - November 30, 20x3 325,000
December 1, 20x3 - December 31, 20x3 70,000
What amount should Rill report as royalty revenue for 20x3?

A. 140,000
B. 144,000
C. 149,000
D. 159,000

Problem 8

15. What is the amount of total Noncurrent Liabilities?

5,700,000
6,200,000
5,500,000
5,650,000

16. What is the retained earnings account balance on December 31, 2021?
6,500,000
2,500,000
1,000,000
5,000,000

17. What is the total Shareholders’ equity on December 31, 2021?

15,000,000
13,500,000
 9,500,000
8,500,000

Problem 9

18. What net amount should be recognized in other comprehensive income for the year?

2,600,000
3,100,000
3,400,000
800,000

19. What amount should be reported as net income?

2,900,000
2,300,000
3,100,000
2,400,000

20. What amount should be reported as comprehensive income?

5,500,000
2,900,000
2,600,000
6,100,000