BANK RECONCILIATION

1. The books of Hotsilog Service Inc. disclosed a cash balance of P48,757 on June 30.
The bank statement as of June 30 showed a balance of P54,780. Additional
information that might be useful in reconciling the two balances follows:
How much is the correct cash balance at the end of the month?
A. 57,720
B. 57,270
C. 58,920
D. 58,290

2. Valix revealed the bank statement balance on December 31 at P8,500,000.

• A deposit of P950,000 placed in the bank’s night depository on December 29 does not
appear on the bank statement. Checks outstanding on December 31 amount to
P400,000, including P100,000 certified check.
• The bank statement showed that on December 25 the bank collected a note for Valix
and credited the proceeds of P935,000 to Valix’s account which included P35,000
interest. Valix discovered that a check written in December for P200,000 in payment of
an account had been recorded as P20,000.
• Included with the December 31 bank statement was an NSF check for P250,000 that
Valix had received from a customer on December 20. The bank statement showed a
P15,000 service charge for December.
a. What it the adjusted cash in bank on December 31?
A. 9,150,000
B. 8,660,000
C. 8,970,000
D. 8,200,000
b. What is the cash in bank per ledger on December 31?
A. 8,560,000
B. 8,660,000
C. 8,990,000
D. 8,270,000
c. What is the net adjustment to cash in bank on December 31?
A. 935,000 debit
B. 490,000 debit
C. 445,000 credit
D. 900,000 debit
3. At the end of the month, the bank statement of Dior Company showed a balance of
P102,000, service charges of P6,000, a customer’s no sufficient fund check of
P20,000 and the proceeds of note collected by the bank for Dior company. The note
had a face value of P15,000 Dior Company reported a balance of P128,000 in its cash
account at the end of the month. At this time, there were P28,300 deposits in transit
and P12,000 of outstanding check.
How much is the interest on the note collected by the bank?
A. 13,000
B. 8,700
C. 3,000
D. 1,300
Fino Company banks with ABCDE Bank and prepares reconciliation of the bank and book
balances on a
regular monthly basis. The December 31, 2021 reconciliation shows a balance per bank of
P581,050, balance
per books of P627,000, outstanding checks of P84,300, deposit in transit of P120,000,
interest earned on
the bank balance of P1,250, and service charges of P400. Included in the bank statement
was a canceled
check which the company failed to record. The check was in payment of accounts payable.
What is the amount of the unrecorded check issued by the company in payment of accounts
payable?
A. 8,600
B. 11,000
C. 11,100
D. 11,900
MODULE 03:
1) A bank reconciliation is
A. A statement sent by bank to depositor on a monthly basis
B. A merger of two previously competing banks currently in the process of
reconciliation
C. A formal financial statement that lists all of a firm’s bank account balances and
previously closed bank accounts.
D. A schedule that accounts for the difference between a firm’s bank statement
balance and the balance shown it its general ledger.

2) Which is normally added to the cash balance per ledger in order to determine the correct
cash balance?
A. Service charge
B. NSF customer check
C. Erroneous bank debit
D. Note receivable collected by bank in favor of the depositor and credited to
depositor’s account.
3) Which is normally deducted from the bank statement balance in preparing bank
reconciliation?
A. Certified checks
B. Deposits in transit
C. Outstanding checks
D. Reduction of loan charged to the account of the depositor
4) If the cash balance shown in an entity’s accounting records is less than the correct
cash balance and
neither the entity nor the bank has made any errors, there must be
A. Deposits credited by the bank but not yet recorded by the entity.
B. Deposits in transit.
C. Outstanding checks
D. Bank charges not yet recorded by the entity.
5) If the cash balance in an entity’s bank statement is less than the correct cash balance
and neither the entity
nor the bank has made any errors, there must be
A. Deposits credited by the bank not yet recorded by the entity
B. Outstanding checks
C. Bank charges not yet recorded by the entity
D. Deposits in transit
6) Bayani Corp has the following information relating to cash at December 31, 2011:
Bank statement balance
2,500,000
Checkbook balance
2,600,000
Deposits in transit
700,000
Outstanding checks
200,000
Bayani's December 31, 2011 Balance Sheet should report cash as:
A. 3,400,000
B. 3,500,000
C. 3,100,000
D. 3,000,000
7) The books of Son of Gun Inc. disclosed a cash balance of P45,700 on June 30. The bank
statement as of
June 30 showed a balance of P50,300. Additional information that might be useful in
reconciling the two
balances follows:
• Check payable to creditors for P3,000 was erroneously recorded on the books as P4,500.
• Outstanding checks totaled P9,800 including a certain check of P2,000 payable to supplier
recorded on
June 25 but not yet mailed as of June 30.
• There were bank service charges for June of P200 not yet recorded on the books.
• Son of Gun’s account had been charged on June 26 for a customer’s NSF check for P1,200.
No entry
has been made for the return of NSF check.
• Undeposited collections as of June 30 for P13,400 including post-dated check of P1,300
from customer
recorded on June 29.
• A bank memo stated that a customer’s note for P7,500 had been collected on June 27 but
not yet
recorded on the books.
How much is the correct cash in bank balance as of June 30?
A. 52,000
B. 53,300
C. 54,000
D. 55,300

PETTY CASH

DISCUSSION:
1. On January 1, 2022, Jayree Corporation established a petty cash fund of P400. On
December 31, 2022,
the petty cash fund was examined and found to have receipts and documents for
miscellaneous expenses
amounting to P364. In addition, there was cash amounting to P44.
What entry would be required to record the replenishment for the petty cash fund on
December 31, 2022?
A. Petty Cash 364
Cash Short or Over 8
Cash in Bank 356
B. Miscellaneous expense 364
Cash Short or Over 8
Petty Cash 356
C. Miscellaneous expense 364
Cash Short or Over 8
Cash in Bank 356
D. Miscellaneous expense 356
Cash Short or Over 8
 Cash in Bank 356
2. On December 1, 2021, Babe Corporation established a petty cash fund of P5,000. On
December 31, 2021,
the petty cash fund was examined and found to have receipts and documents for
miscellaneous expenses
amounting to P2,740 and a petty cash voucher for P1,250 signed by an employee as an IOU.
In addition,
there was cash amounting to P860.
Assuming that no replenishment was made at year end, what entry would be required to
record adjustment
of the petty cash fund on December 31, 2021?
A. Miscellaneous Expense.......... ..........2,740
Petty Cash Fund.......... .......... ............860
Receivable from Employees..............1,250
Cash Short or Over.......... .......... ........150
Cash in Bank.......... .......... ..........5,000
B. Miscellaneous Expense.......... ..........2,740
Receivable from Employees.......... ...1,250
Cash Short or Over.......... .......... ........150
Petty Cash Fund.......... .......... ....4,140
C. Miscellaneous Expense.......... ..........2,740
Receivable from Employees.......... ...1,250
Cash Short and Over.......... .......... .....150
Cash in Bank.......... .......... ..........4,140
D. Miscellaneous Expense.......... ..........2,740
Receivable from Employees.......... ...1,250
Cash in Bank.......... .......... ..........3,990Page 4 of 6
Numbers 3-4
You were hired by Zandra Corporation to examine their accounts for the year ended
December 31, 2021 and the
following are the items disclosed in your examination of Petty Cash account. A surprise
count of cash and cash
items was conducted on January 5, 2022. The company has a petty cash fund of P55,000
which is maintained
on an Imprest. The cash count sheet disclosed the following:
Bills and Coins
28,750
Date
Petty Cash Vouchers: Description
Amount
December 27
Transportation expense
9,800
December 31
Postage stamps
2,700
January 2
Repair and sound system
3,200
January 4
Representation expense
1,250
3. What is the correct amount of petty cash fund on December 31, 2021?
A. 33,200
B. 28,750
 C. 42,500
D. 55,000
4. What is the amount of shortage/overage?
A. 12,500
B. 21,800
C. 9,300
D. 0
Numbers 5-6
The petty cash fund of Hellflower Trading at the end of December 31, 2022 is composed of
the following:
Currencies and coins
3,200
Unreplenished paid vouchers:
Supplies
600
Transportation
100
IOU from employee
300
Unused supplies
50
Check drawn by a sales staff dated January 2, 2023
500
Check dawn by a customer dated December 26, 2022
1,450
Check drawn by an office director dated December 30, 2022
1,900
Envelope containing cash contributions from employees for a thanksgiving party
800
The general ledger balance of the imprest petty cash fund at December 31, 2022 is
P10,000.
5. How much is the correct petty cash fund at December 31, 2022?
A. 8,500
B. 5,100
C. 3,200
D. 6,550
. How much is the cash shortage/overage?
A. 3,400
B. 1,100
C. 3,350
D. 1,100
MODULE 02:
1) The internal control feature that is specific to petty cash is
A. Separation of duties
C. Proper authorization
B. Assignment of responsibility
D. Imprest system
2) What is the petty cash fund?
A. Restricted cash.
B. Set aside for the payment of payroll.
C. Separately classified as a current asset.
D. Money kept on hand for making minor disbursements of coins and
currency.
3) In most situations the petty cash fund is reimbursed just prior to the year end and an
adjusting entry is made
to avoid
A. The overstatement of cash and the understatement of expenses
B. The understatement of cash and the overstatement of expenses
C. The misstatement of revenues
D. The understatement of cash with appropriate statement of expense
4) Which of the following statements is incorrect in relation to imprest petty cash fund?
A. The imprest petty cash system in effect adheres to the rule of disbursement by
check.
B. Entries are made to the petty cash account only to increase or decrease the size of
the fund or to adjust the balance if not replenished at year-end.
C. The petty cash account is debited when the fund is replenished.
D. The petty cash fund is reported as part of current asset
5) Which of the following statements in relation to petty cash fund is false?
A. Each disbursement from petty cash should be supported by a petty cash voucher.
B. Creation of a petty cash fund requires a journal entry to reflect the transfer of fund
out of the general cash account.
C. At any time, the sum of the cash in the petty cash fund and the total of petty cash
vouchers should equal the amount for which the imprest petty cash fund was
established.
D. With the establishment of an imprest petty cash fund, one person is
given the authority and responsibility for issuing checks to cover minor
disbursements.

Use the following information for the next two (2) questions:
A surprise count of the petty cash fund of Jing Trading on July 4, 2021 showed the following:
Currencies
5,600
Coins
450
Paid vouchers for:
Office supplies (dated July 2, 2021)
1,750
Newspaper subscription for two weeks (dated June 29, 2021)
300
Loans to employees
3,000
Company check representing replenishment of petty cash fund
3,850
The company’s fiscal year ends of June 30. The petty cash fund was established for an
amount of P15,000.
6) What is the correct amount of petty cash fund at June 30, 2021?
A. 6,050
B. 9,900
C. 11,650
D. 15,000
7) How much is the shortage or overage in the petty cash fund at June 30, 2021?
A. 50 shortage
B. 50 overage
C. 1,800 shortage
D. 1,800 overage
8) Nicole Ocampo Company established a petty cash fund of P10,000 on July 1, 2021. At the
end of the month,
the count of cash on hand indicated that P3,557.40 remained in the fund. A review of petty
cash vouchers
disclosed the following expenses had been incurred during the month:
Office supplies – P841.60;
Postage – P780.00;
Representation – P1,000,00;
Transportation – P1,321.40; and
Miscellaneous – P837.60
Other items found in the petty cash drawer were as follows:
• A sympathy envelope containing P3,500, representing employees’ contributions for the
death of the
mother of the company’s messenger.
• An employee’s check for P1,100 dated August 15, 2021.
The given information indicates that there is a
A. 562 shortage
B. 562 overage
C. 538 shortage
D. 538 overage
9) The petty cash fund account of Magiting Company showed the following:
Coins and currency
5,500
Paid vouchers:
Transportation
200
Gasoline
150
Office supplies
250
Postage stamps
200
800
Due from employees
1,200
Digging deeper into the records, you realized that there is a Manager's check returned by
bank marked
"NSF" for 1,000. There is also a check drawn by company to the order of petty cash
custodian amounting
to 3,500. What is the amount of the petty cash fund for balance sheet purposes?

A. 10,000
B. 9,000
C. 11,000
D. 5,800
10) If a petty cash fund is established in the amount of P250, and contains P150 in cash and
P95 in receipts for
disbursements when it is replenished, the journal entry to record replenishment should
include credit (s) to
the following account (s):
A. Petty cash, P75
C. Cash, P95; cash short and over, P5
B. Petty cash, P100
D. Cash, P100

The following items were reported as inventories by Sugar Company as of December 31,
2022:
Goods displayed in the store
100,000
Goods stocked in the warehouse, not covered by any sales contract 50,000
Goods purchased, in transit, shipped FOB seller 250,000
Goods sold, in transit, shipped FOB buyer 80,000
Goods held on consignment 20,000
Goods sent out to customers awaiting approval 40,000
Goods in the hands of traveling salesmen 30,000
Storage cost of goods completed
Goods manufactured to customer’s specification waiting for delivery by the customer
150,000
Freight paid on goods sold 10,000
Unused office supplies 5,000
Goods sold with a buyback agreement 55,000
All amounts are stated at cost
How much is the total correct amount of inventories as of December 31, 2022?
A. 605,000
B. 755,000
C. 550,000
D. 715,000
2. On December 31, 2024, Punch Company reported inventory per physical count at
P1,500,000. The
entity revealed the following information:
• Goods in transit by Dec. 31, 2024 purchased FOB shipping point, total price P100,000
including
freight of P20,000.
• Goods held on consignment included in the count, costing P30,000.
• Goods in transit by December 31, 2024 sold FOB destination, costing P45,000
including freight of
P5,0000.
• Goods purchased in transit by December 31, 2024, “Ex-ship”, costing P50,000.
• Goods purchased in transit by December 31, 2024, “Cost, Insurance, Freight”, costing
P75,000.
What is the correct amount of inventory on December 31, 2024?
A. 1,765,000
B. 1,735,000
C. 1,715,000
D. 1,685,000

3. Jasmine Company’s inventory on December 31, 2020 was P6,000,000 based on a

physical count of
goods priced at cost and before any necessary year-end adjustments relating to the
following:
• Included in the physical count were goods billed to a customer FOB shipping point on
December
31, 2020. These goods had a cost of P125,000 and were picked up by the carrier on
January 15,
2021.
• Goods shipped FOB shipping point on December 31, 2021 from a vendor were
received on January
15, 2021. The invoice cost was P300,000.
• Goods sold to a customer on December 31, 2020 which are being held for the
customer to call at
the customer’s convenience with a cost of P200,000 were included in the count.
What amount should be reported as inventory on December 31, 2020?
A. 5,875,000
B. 6,100,000
C. 6,175,000
D. 6,300,000
4. In examining the December 31, 2021 financial statements of Hemera Company, the
following errors
were discovered:
• Ending inventory was overstated by P10,000.
• Beginning inventory was understated by P4,000.
• P100,000 worth of merchandise was purchased and received in 2021 and included in
inventory.
The purchase was recorded in 2022.
• The net income reported in 2021 income statement before adjustment for the above
items is
P600,000.
What is the adjusted net income for the year ended December 31, 2021?
A. 494,000
B. 490,000
C. 586,000
D. 486,000
5. Madel Company revealed inventory on December 31, 2023 at P3,250,000 based on a
physical count
priced at cost, and before any necessary adjustment for the following:
• Merchandise costing P300,000 shipped FOB shipping point from a vendor on
December 30, 2023,
was received on January 5, 2024.
• Merchandise costing P220,000 shipped FOB destination from a vendor on December
28, 2023 was
received on January 3, 2024.
• Merchandise costing P380,000 was shipped to a customer FOB destination on
December 28, 2023
arrived at the customer’s location on January 6, 2024.
• Merchandise costing P120,000 was being held on consignment by Trisha Company.
What amount should be reported as inventory on December 31, 2023?
A. 3,670,000
B. 3,930,000
C. 4,050,000
D. 3,250,000
6. Anderson Company’s year-end inventory balance on December 31, 2023 is
P1,650,000 based on
physical count and before considering the following transactions:
a. Goods shipped to Anderson f.o.b. destination on December 20, 2023, were
received on January 4, 2024. The invoice cost is P300,000.
b. Goods shipped to Anderson f.o.b. shipping point on December 28, 2023, were
received on January 5, 2024. The invoice cost is P170,000.
c. Goods shipped from Anderson to customer f.o.b. destination on December 27,
2023 received by the customer on January 3, 2024. The sale price is P400,000
and the cost is P220,000.
 d. Goods shipped from Anderson to a customer f.o.b. destination on December
26, 2023 were received by the customer on December 30, 2023. The sale price is
P200,000 and the cost is P130,000.
e. Goods shipped from Anderson to a customer f.o.b. shipping point on December
28, 2023 were received by the customer on January 4, 2024. The sale price is
P250,000 and the cost is P120,000.
What is the correct inventory balance on December 31, 2023?
A. 2,170,000
B. 2,160,000
C. 2,290,000
D. 2,040,000
7. Merly Company provided the following information during the current year:
Product 1
Product 2
Materials and conversion cost
3,000,000
3,600,000
Estimated selling price
4,000,000
6,000,000
Estimated selling cost
1,200,000
1,400,000
General administration cost
600,000
1,600,000
Normal profit margin on sales
1,000,000
1,500,000
At year-end, the manufacture of the products has been completed but no selling cost
has yet been
incurred.
What amount should be reported as ending inventory using the LCNRV individual
approach?
A. 6,400,000
B. 6,600,000
C. 4,900,000
D. 5,800,000
Use the following for the next two (2) questions:
Rick Corporation uses the lower of cost or net realizable value inventory. Data regarding
the items in work in-process inventory are presented below:
Markers
Pens
Pencils
Historical cost
24,000
18,880
30,000
Selling price
36,000
21,800
38,000
Estimated cost to complete
3,000
2,620
6,200
Replacement cost
20,800
16,800
16,800
Normal profit margin as a % of selling price
20%
20%
20%
Cost to sell based on selling price
5%
10%
10%
8. What is the gain on recovery of previous write-down under the allowance method,
assuming that the unadjusted balance of the allowance for inventory write-down is at
P5,000?
A. None
B. 1,120
C. 3,680
D. 1,380
9. What is the correct carrying value of inventories as of December 31?
A. 72,880
B. 76,200
C. 69,000
D. 67,200
10. Oreo Company started operations in 2021. The following data are abstracted from
the purchases and sales records:
2021
2022
2023
Number of units purchased
160,000
155,000
135,000
Number of units sold
100,000
145,000
130,000
Unit cost
40
50
60
The entity used FIFO method. What amount should be reported as cost of goods sold for
2023?
A. 7,100,000
B. 7,800,000
C. 7,700,000
D. 8,300,000
11) PAS 2 – Inventories, applies to all inventories, except:
A. Work in progress arising under construction contract, including directly related
service contracts
 B. Financial instruments
C. Biological assets related to agricultural activity and agricultural produce at the
point of harvest
D. All of the above
12) Inventories are defined as:
A. Assets held for sale in the ordinary course of business, in the process
of production for such sale, or in the form of materials or supplies to be
consumed in the production process or in the rendering of services
B. Assets held for sale, in the process of production, or in the form of materials or
supplies to be consumed in the production process
C. Tangible assets held for sale in the ordinary course of business, in the process
of production, or in the form of materials or supplies to be consumed in the
production process or in the rendering of service
D. Property (land or a building, or part of a building, or both) held to earn rentals
or for capital appreciation or both.
13) The following are costs excluded from the cost of inventories, except
A. Abnormal amounts of wasted materials, labor or other production costs
B. Storage costs, unless those costs are necessary in the production process
before a further production stage
C. Administrative overheads that do not contribute to bringing inventories to
their present location and condition
D. Import duties
14) Which of the following is not considered as inventory under PAS 2?
A. Land and other property purchased and held for resale.
B. Supplies and materials awaiting use in the production process.
C. Abnormal amounts of wasted materials, labor and other production
costs.
D. Costs of service for which a service provider has not yet recognized the
related revenue.
15) An entity shall include in its inventory all goods
A. Owned and possessed by the entity at the balance sheet date.
B. Owned but not possessed by the entity at the balance sheet date.
C. Possessed but not owned by the entity at the balance sheet date.
D. Owned by the entity at the balance sheet date, regardless of location.
16) Goods on consignment should be included in the inventory of
A. The consignor but not the consignee
C. Both the consignor and the consignee
B. The consignee but not the consignor
D. Neither the consignor nor the consignee
17) Freight and other handling charges incurred in the transfer of goods from consignor
to consignee are
A. Inventoriable by the consignor
C. Expense on the part of the consignor
B. Inventoriable on the part of the consignee
D. Expense on the part of the consignee

18) FOB destination point means that

A. The freight charges are actually to be paid by the seller
B. The freight charges are actually to be paid by the buyer
C. The ownership of goods is transferred upon receipt of the goods by
the buyer and the seller is the owner of the goods while in transit.
 D. The ownership of goods is transferred upon receipt of the goods by the seller
and the buyer is the owner of the goods while in transit.
19) The seller actually paid the freight charges but is not legally responsible for the
same.
A. FOB destination, freight prepaid
C. FOB shipping point, freight prepaid
B. FOB destination, freight collect
D. FOB shipping point, freight collect
20) An entity should include one of the following items in its merchandise inventory
A. goods held for pick-up by the buyer
C. goods purchased FOB destination still en route
B. goods sold FOB shipping point still en route
D. goods purchased FOB shipping point still en route

TRADE RECEIVABLES

DISCUSSION:
1. The books of Hotsilog Service Inc. disclosed a cash balance of P48,757 on June 30. The
bank statement as of June 30 showed a balance of P54,780. Additional information that
might be useful in reconciling the two balances follows: Which of the following is a trade
receivable?
a. Claims against shipping company for damaged goods or lost goods.
b. Advances to officers and employees.
c. Receivable arising from legal service rendered by a law firm.
d. Accrued interest on notes receivable.
2. Which of the following items is not a trade receivable?
a. Customer’s accounts on which post-dated checks are held.
b. Claims from employees representing selling price of goods sold under normal
condition.
c. Claims from employees representing cash advances.
d. None of the above.
3. The credit balance in customer’s accounts should be
a. Netted against the debit balances in other customer’s accounts.
b. Presented separately as currently liability.
c. Reported as a loss contingency.
d. Reported as a valuation account to receivables.
4. Presented below are unaudited balances of selected accounts of Drain Company as of
December 31, 2020:
Debit
Credit
Cash
500,000
Accounts receivable
1,300,000
Allowance for uncollectible accounts
8,000
Goods amounting to P50,000 were invoiced for the account of a customer recorded in
January 2, 2021 with
terms of net 60 days, FOB Shipping point. The goods were shipped to customer on
December 30, 2020. The bank returned on December 29, 2020, a customer’s check for
P5,000 marked “No sufficient funds” but no entry was made.
What is the correct balance of accounts receivable account at December 31, 2020?
a. 1,355,000
 c. 1,300,000
b. 1,347,000
d. 1,350,000
Numbers 5-6
Starboy Company has the following data relating to accounts receivable for the year ended
December 31,
2020:
Accounts receivable, January 1, 2020
480,000
Allowance for doubtful accounts, 1/1/20
19,200
Sales during the year, all on account, terms: 2/10, 1/15, n/30
2,400,000
Cash received from customers during the year
2,560,000
Accounts written off during the year
17,600
An analysis of cash received from customers during the year revealed that P1,411,200 was
received from
customers availing the 10-day discount period, P792,000 from customers availing the 15-
day discount period,
P4,800 represented recovery of accounts written off, and the balance was received from
customers paying beyond the discount period. Starboy’s year-end balance of allowance for
doubtful accounts was estimated to be 5% of the outstanding accounts receivable as at
December 31, 2020.
5. What was the balance of accounts receivable as at December 31, 2020?
a. 265,600
c. 288,000
b. 270,400
d. 307,200
6. How much was Starboy’s doubtful accounts expense for the year ended December 31,
2020?
a. 8,000
c. 7,360
b. 7,120
d. 2,320
7. Estimation of uncollectible accounts receivable based on a percentage of sales
a. Emphasizes measurement of net realizable value of accounts receivable
b. Emphasizes measurement of bad debt expense
c. Emphasizes measurement of total assets
d. Is only acceptable for tax purposes
8. Which of the following methods of determining annual bad debt expense best achieves
the matching
concept?
a. Percentage of sales
b. Percentage of ending accounts receivable
c. Percentage of average accounts receivable
d. Direct write off
9. On December 31, 2019, the balance of accounts receivable of Jalena Company was
P6,000,000 and the January 1, 2019 balance of allowance for doubtful accounts was
P800,000. The following data were
gathered:
Credit Sales Write off
Recoveries
2016 9,000,000
400,000
30,000
2017
13,000,000
600,000
70,000
2018
15,000,000
700,000
120,000
2019 20,000,000
650,000
150,000
Doubtful accounts are provided for a percentage of credit sales. The accountant calculates
the percentage annually by using the experience of the three years prior to the current year.
How much should be reported as allowance for doubtful accounts on December 31, 2019?
a. 1,100,000
c. 1,300,000
b. 800,000
d. 1,250,000
10. JSC reported accounts receivable P8,000,000 on December 31, 2020 and allowance for
doubtful accounts P1,000,000 on January 1, 2020. During the year, accounts P400,000 were
written off and recoveries written off totaled P100,000.
Category
Amount
Uncollectible
Under 30 days
5,000,000
10%
31 – 180 days
1,500,000
20%
181 – 360 days
1,000,000
50%
More than one year
500,000
100%
What amount should be reported as doubtful accounts expense for the current year?
a. 1,800,000
c. 1,000,000
b. 1,100,000
d. 1,400,000
11. A method of estimating doubtful accounts that emphasizes asset valuation rather than
income measurement is the allowance method based on
a. Aging of accounts receivable
b. Direct write off
c. Gross sales
d. Credit sales less sales returns and allowance
12. On December 31, 2022, Sohee company estimated the allowance for doubtful accounts
using the year-end aging of accounts receivable. The following data for are available:
Allowance for doubtful accounts, 1/1/22
250,000
Provision for uncollectible accounts recorded during 2022 (2% on credit sales of
P30,000,000) 600,000
Uncollectible accounts written off
150,000
Recovery of accounts previously written off
80,000
Estimated uncollectible accounts per aging, 12/31/22
900,000
What is the year-end adjustment to doubtful accounts expense?
a. 120,000
c. 900,000
b. 720,000
d. 600,000Page 7 of 7
13. Accounts receivable are normally reported at the
A. Present value of future cash receipts
B. Current value plus accrued interest
C. Expected amount to be received
D. Current value less expected collection cost
Numbers 14-15
Packers Company sold goods to wholesalers on terms 2/15, net 30. The entity had no cash
sales but 50% of the customers took advantage of the discount. The entity used the gross
method of recording sales and accounts receivable. An analysis of the trade accounts
receivable at year-end revealed the following:
Age
Amount
Collectible
0 – 15 days
10,000,000
100%
16 – 30 days
7,000,000
90%
31 – 60days
2,000,000
80%
Over 60 days
1,000,000
50%
20,000,000
14. What amount should be reported as allowance for sale discount at year-end?
a. 100,000
c. 300,000
b. 200,000
d. 0
15. What is the net realizable value of accounts receivable?
a. 20,000,000
c. 18,300,000
b. 18,400,000
d. 18,200,000
16. An entity uses the allowance method for recognizing doubtful accounts. The entry to
record the write off of specific uncollectible account.
a. Affects neither net income nor working capital
b. Affects neither net income nor account receivable
c. Decreases both net income and working capital
d. Decreases both net income and accounts receivable
17. Which of the following is not permitted for material amount of uncollectible accounts
receivable?
 a. Percentage of accounts receivable using allowance method
b. Percentage of sales using allowance method
c. Direct write-off method
d. All of the choices are acceptable
18. When the direct write off method is used, the entry to write off a specific customer
account would
A. Increase both accounts receivable and net income
B. Decrease both accounts receivable and net income
C. Increase net income
D. Have no effect on net income
19. When examining the accounts of Medved Company, you ascertain that balances relating
to both receivables and payables are included in a single controlling account called
receivables control that has a debit balance of P4,850,000. An analysis of the composition of
this account revealed the following:
Debit
Credit
Account receivable customers P7,800,000
Accounts receivable – officers 500,000
Debit balances – creditors 300,000
Postdated checks from customers 400,000
Subscriptions receivable 800,000
Accounts payable for merchandise P4,500,000
Credit balances in customers’ accounts 200,000
Cash received in advance from customers for goods not yet shipped 100,000
Expected bad debts 150,000
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
c. 8,600,000
b. 8,800,000
d. 8,850,000
20. The following are normally included in the line item trade and other receivables’, except
a. Advances to officers and employees
b. Advances to subsidiaries and affiliates
c. Receivables from sale of securities or property other than inventory.
d. Dividends and interest receivable.

Numbers 1-2
Construction stated on January 1, 2021 and the asset was Arcana Company self-constructed
an asset for its own use. completed on December 31, 2021. The company had a two-year,
18% loan of P500,000,
specifically obtained to finance the asset construction. Funds not yet needed during the
construction were temporarily invested in a short-term debt securities yielding a P10,000
interest revenue.
Costs incurred during the year were as follows:
January 1 – P400,000
August 1 – P480,000
April 1 – P500,000
December 1 – P180,000
1. What is the capitalized interest added to the cost of the
self-constructed asset?
 A 90,000
C. 180,000
B. 80,000
D. 0
2. How much is the total cost of the self-constructed asset?
A 1,650,000
C. 1,640,000
B. 1,560,000
D. 1,070,000
3. Investment income on specific borrowing for qualifying asset
A. Reduces the cost of the qualifying asset
B. Reduces interest expense report in the income statement
C. Should be credited to an income account
D. Should be credited to retained earnings
4. It is permissible to capitalize interest on
A. Assets that are not being used in earnings activities of the entity and that are not
undergoing the activities necessary to get them ready for such use.
B. Inventories that routinely manufactured in large quantities on a repetitive basis.
C. Assets that already are in use or are ready for their intended use in the earning
activities on the entity.
D. Assets under construction.
5. Which of the following may not be considered a “qualifying asset”?
A. A power generation plant that normally takes two years to construct.
B. An expensive private jet that can be purchased form a local vendor.
C. A tool bridge that usually takes more than a year to build.
D. A ship that normally takes one to two years to complete.
6. A company constructed machinery for its own use. A bank loan specifically financed this
property both during and after the construction. How much of the interest incurred should be
reported as interest expense?
A. Interests incurred before completion
B. Interests incurred after the completion
C. All interest incurred
D. Zero

Numbers 7-10
On January 1, 2023, Florida Company purchased a tract of land with an old building which
was razed shortly after acquisition. The costs incurred in connection with the acquisition
were:
Total purchase price (the old building has a fair value of P300,000) 3,000,000
Agent commission 100,000
Legal fees for the purchase contract 50,000
Guarantee insurance 10,000
Cost of razing the old building 150,000
Salvage value of the old building materials 25,000
Cost of relocating squatters on the land 5,000
Florida had the following borrowings during 2023. The borrowings were made for general
purposes but the proceeds were used in part to finance the construction of anew building:
Principal Interest 12% bank loan
10,000,000
1,200,000
15% long term loan
20,000,000
3,000,000
The construction began on January 1, 2023 and was completed on December 31, 2023.
Expenditures on the building were made as follows:
January 1 5,000,000
June 30 8,000,00
December 31 2,000,000
7. What amount of interest is capitalized for 2023?
A 4,200,000
C. 2,940,000
B. 1,200,000
D. 1,260,000
8. What amount is recognized as interest expense for 2023?
A 2,940,000
C. 4,200,000
B. 3,240,000
D. 4,500,000
9. What is the total cost of the building on December 31, 2023?
A 16,385,000
C. 16,260,000
B. 10,385,000
D. 10,260,000
10. What is the cost of the land?
A 2,865,000
C. 2,860,000
B. 3,165,000
D. 2,990,000
Numbers 11-13
Arclight Company self-constructed an asset for its own use. Construction started on January
1, 2021 and the asset was completed on December 31, 2021. The company had a two-year,
18% loan of P500,000, specifically obtained to finance the asset construction. Funds not yet
needed during the construction were temporarily invested in a short-term debt securities
yielding a P10,000 interest revenue. The company also had a general borrowings amounting
to P600,000, 5-year term with interest of 20% and P1,000,000,
10-year term with interest of 18% were used in part in the self-construction. Cost incurred
during the year were as follows:
January 1 – P400,000
April 1 – P500,000
August 1 – P480,000
December 1 – P180,000
11. What is the average accumulated expenditures for the self-constructed asset?
A 1,560,000
C. 870,000
B. 990,000
D. 780,000
12. How much is the total capitalized interest?
A 171,875
C. 80,000
B. 165,000
D. 91,875
13. How much interest should be recognized as interest expense?
A 300,000
C. 135,750
B. 208,125
D. 0
Numbers 14-18
Dawn Company had a 10% P3,000,000 specific construction loan and 12% P25,000,000
general loan outstanding during 2020 and 2021. The entity began the self-construction
of a building on
January 1, 2020 and was completed on December 31, 2021. The following expenditures
were made during 2020 and 2021:
January 1, 2020 4,000,000
April 1, 2020 5,000,000
December 1, 2020 3,000,000
March 1, 2021 6,000,000
14. The interest capitalized at the end of December 31, 2023 is:
A 113,100
C. 150,000
B. 145,000
D. 200,000
15. The interest capitalized at the end of December 31, 2024 is:
A 145,132
C. 290,263
B. 159,632
D. 319,263
16. The total interest expense at the end of December 31, 2023 is:
A 780,000
C. 630,000
B. 635,000
D. 560,000
17. The total interest expense at the end of December 31, 2024 is:
A 460,737
C. 620,368
B. 489,737
D. 634,868
18. The total cost of the Building at December 31, 2024 is:
A 3,535,132
C. 4,480,263
B. 4,190,131
D. 4,535,263

PPE ACQUISITION
1. Which of these is not a major characteristic of a PPE?
A. Possesses physical substance
B. Acquired for use in operations
C. Yields services over a number of years
D. All of these are major characteristics of a PPE.
2. Plan assets may property include:
A. Idle equipment waiting sale
B. Property held for investment purposes
C. Land held for undetermined future use
D. Self-constructed asset currently in use
3. Property, plant, and equipment may properly include
A. deposits on machinery not yet received.
B. idle equipment classified as held for sale asset under PFRS 5.
C. land held for speculation, rather than for use in the entity’s normal business
activities.
D. none of these.
4. On January 1, 2022, Romania Company purchased a specialized factory equipment for
cash at a purchase price of P700,000. The company incurred P20,000 freight cost and
handling costs of P10,000.The company expects that it will incur dismantling cost amounting
to P80,000 at the end of the equipment’s 5-year useful life. The prevailing market interest
rate during the transaction date was 6%.
PV factory of 1 at 6% for five periods - 0.747
PV factory of annuity at 6% for five periods - 4.212
How much is the initial cost of the equipment?
A 730,000
C. 789,760
B. 810,000
D. 1,066,960
5. The debit for a non-refundable sales tax properly levied on the purchase of machinery
would be a charge to
A. the machinery account.
B. a separate deferred charge account.
C. miscellaneous tax expense (which includes all taxes other than those on income).
D. accumulated depreciation--machinery.
6. Marla Company acquired new equipment on account on March 1, 2021 with a 5% discount
if paid with in 15 days. The following information is available:
List price 3,500,000
Trade discount 20%
Removal of old equipment 100,000
Cost of installation 50,000
Insurance taken during delivery 20,000
Transportation costs 30,000
If the invoice was paid on March 31, 2021, what should be the cost of equipment?
A 2,760,000
C. 2,900,000
B. 3,425,000
D. 3,010,00
7. Discount given for early payment of credit purchases of operational asset should be:
A. Recorded as interest expense at purchase date.
B. Capitalized as a cost of the asset acquired and subsequently allocated to
depreciation expense
C. Recorded as interest revenue at purchase date
D. Deducted from the invoice price when determining the cost of the asset
8. Taylor Swift (TS) Company purchased machinery on December 31, 2020, paying P80,000
down and agreeing to pay the balance in four equal installments of P60,000 payable each
December 31. Implicit in the purchase price is an assumed interest of 12%. The following
data are abstracted from the present
value tables:
PV factory of 1 at 6% for five periods 0.63552
PV factory of annuity at 6% for five periods 3.03735
What is the cost of the machinery purchased on December 31, 2020?
A 182,241
C. 262,241
B. 320,000
D. 290,842
9. PPE purchased on long-term credit contracts should be initially recognized at
a. the total amount of the future payments.
b. the future amount of the future payments.
c. the present value of the future payments.
d. none of these.
10. Doug Airlines sold used jet aircraft to Adele Company for P800,000, accepting a five-year
6% note for the entire amount. Adele’s incremental borrowing rate was 14%. The annual
payment of principal and interest on the note was to be P189,930. The aircraft could have
been sold at an estimated cash price of P651,460. The present value of an ordinary annuity
of P1 at 8% for five periods is 3.99. The air craft should be capitalized on Adele’s books at
A 949,650
C. 757,820
B. 800,000
D. 651,460
11. When payment for is deferred beyond normal credit terms, the difference between the
cash price and total payment is
A. Capitalized as cost of PPE
B. Charged to retained earnings
C. Interest expense over the credit period
D. Interest expense over the useful life of the asset
12. In January 2022, Utah Corporation entered into a contract to acquire a new machine for
its factory. The machine, which had a cash price of P2,000,000, was paid for as follows:
Down payment 300,000
5,000 ordinary shares of Utah with an agreed-upon value of P370 per share 1,850,000
2,150,000
Prior to the machine’s use, installation costs of P70,000 were incurred. The machine has an
estimated useful life of 10 years and an estimated salvage value of P100,000. The straight-
line method of depreciation is used. The cost of the machinery purchased on January 2022 is

A 1,850,000
C. 2,070,000
B. 2,150,000
D. 2,300,000
13. When a closely held corporation issues equity shares in exchange for land, the land
should be recorded at the
A. Current market value of the land
B. Total par value of the shares issued
C. Current market value of the shares issued
D. Total book value of the shares issued
14. Tilt Company acquired land from Display Company which will be used as a plant site in
exchange for 20,000 newly issued shares of Tilt’s ordinary shares. At the date of acquisition,
Tilt’s ordinary shares had a par value of P20 per share and a fair value of P30 per share. The
fair value of the land was P500,000 when Cooper acquired this 2 years ago.
How much is the initial cost of the newly acquired land?
A 400,000
C. 600,000
B. 500,000
D. 200,000
Numbers 15-18
Below is the information relative to an exchange of asset by Mimi Bernan Company. The
exchange has commercial substance in Case 1 and without commercial substance in
Case 2.
Old Equipment
Book value
Fair value
Cash paid
Case 1
75,000
85,000
15,000
Case 2
50,000
75,000
7,000
15. The initial cost of the new equipment under Case 1 is
A 90,000
C. 70,000
B. 100,000
D. 60,000
16. What is the gain or loss in exchange should Mimi Bernan Company under Case 1?
A 10,000 gain
C. 15,000 gain
B. 10,000 loss
D. Zero
17. The initial cost of the new equipment under Case 2 is?
A 57,000
C. 43,000
B. 82,000
D. 68,000
18. What is the gain or loss in exchange should Mimi Bernan Company under Case 2?
A 25,000 gain
C. 7,000 loss
B. 25,000 loss
D. Zero

Numbers 19-20
On July 1, 2017, Banded Water Company traded in an old machine with a carrying amount of
P10,000 for a similar new machine having a cash price of P32,000, and paid a cash
difference of P19,000.
19. How much should the property be initially recognized?
A 32,000
C. 51,000
B. 29,000
D. 13,000
20. How much is the gain or loss from the trade in transactions?
A 22,000
C. 3,000
B. 10,000
D. Zer0
21. On April 1, 2022, Pacific Corporation purchased for P2,700,000 a tract of land, a
warehouse and an office building. The following data were collected regarding the property.
Fair values
Vendors’ book value
Land875,000 700,000
Warehouse375,000 400,000
Office building 1,000,000 975,000
The appropriate amounts that Pacific should record for the land?
A 700,000
C. 945,000
B. 875,000
D. 1,050,000
22. Apportionment of the purchase price in a lump-sum acquisition of various assets may be
based on all of these, except
A. Book values of the assets to the seller
B. Relative market values
C. Tax assessment values
D. Appraised values
Numbers 23-24
On June 1, Thick Company acquired a real property by issuing 35,360 shares of its P100 par
value ordinary shares. The shares were selling on the same date at P125. A mortgage of
P4,000,000 was assumed by Thick on the purchase. Moreover, the company paid P180,000
of real property taxes in the prior years. Twenty percent of the purchase price should be
allocated to the land and the balance to the building. In order to make the building suitable
for the use of Thick, remolding costs had to be incurred in the amount of P900,000. This
however necessitated the demolition of a portion of the building, which resulted in recovery
of salvage material sold for P30,000. Parking lot cost the company P320,000 while repairs in
the main hall were incurred at P45,000 prior to its use.
23. The correct cost of the land should be
A 1,664,000
C. 2,040,000
B. 1,720,000
D. 2,400,000
24. The correct cost of the building should be
A 6,330,000
C. 7,750,000
B. 7,795,000
D. 7,560,000
25. On July 1, 2017, Apprentice Company accepted an office equipment from a stockholder
which originally cost thestockholder P5,000,000. On the same date, the equipment had a fair
market value amounting to P3,300,000. The company paid P200,000 for payment of
registration and legal fees related to the transaction.

What should Apprentice Company initially recognize the donated equipment?

A 5,000,000
C. 3,500,000
B. 3,300,000
D. Zero
26. An entity purchased land an old hotel on which it is located with the plan to tear down
and build a new hotel on the site. Any allocated cost to the old hotel is
A. Depreciated over the period from acquisition to the date the hotel is to be torn
down
B. Written off as loss in the year the hotel is torn down
C. Capitalized as part of the cost of the land
D. Capitalized as part of the cost of the new hotel
27. Lorraine purchased a tract of land as an investment property. The entity razed an old
building on the property
Purchased price of land and an old building 4,000,000
Fair value of old building 300,000
Demolition of old building 200,000
Proceeds from sale of salvaged materials 20,000
Legal fees for purchase contract and recording ownership 150,000
Title guarantee insurance 50,000
Payment of property taxes in arrears on land 100,000
Option paid for an alternative land not acquired 30,000
Special assessment for city improvements 120,000
What is the cost of the land?
A 4,600,000
C. 4,330,000
B. 4,120,000
D. 4,300,000
Numbers 28-29
Secrets Inc. was incorporated on January 1, 2021. The following items relate to Secrets,
Inc.’s property, plant and equipment:
Cost of land, which included an old apartment building 6,160,000
Delinquent property taxes assumed by Secrets, Inc. 60,000
Payments to tenants to vacate the apartment building 40,000
Cost of razing the apartment building 80,000
Architects fee for new building 120,000
Building permit for new construction 80,000
Fee for title search 50,000
Survey costs 40,000
Excavation before construction of new building 200,000
Payment to building contractor 20,000,000
Assessment by city for drainage project 30,000
Cost of grading and leveling 100,000
Temporary quarters for construction crew 160,000
Temporary building to house tools and materials 100,000
Cost of changes during construction to make new building more energy efficient 180,000
Interest cost on specific borrowing incurred during construction 720,000
Payment of medical bills of employees injured while inspecting building construction 36,000
Cost of paving driveway and parking lot 120,000
Cost of installing lights in parking lot 24,000
Premium for insurance on building during construction 60,000
Cost of open house party to celebrate opening of new building 100,000
Cost of windows broken by vandals distracted by the celebration 24,000
28. What is the cost of land?
A 5,960,000
C. 6,540,000
B. 6,440,000
D. 6,410,000
29. What is the cost of building?
A 21,740,000
C. 21,790,000
B. 21,750,000
D. 21,720,000
30. The cost of land typically includes the purchase price and all of the following costs
except
A. improvements, such as grading, filling, draining, and clearing.
B. survey costs.
C. cost of private driveways and parking lots.
D. assumption of any liens or mortgages on the property.
31. If an entity demolishes an old building and construct a new building, any demolition cost
incurred is
A. Capitalized as cost of the land
B. Capitalized as cost of the new building
C. Expensed immediately
D. Charged to retained earnings

INVENTORIES

DISCUSSION:
1. Inventories are assets defined by all of the following, except
A. Held for sale in the ordinary course of business.
B. In the process of production for such sale.
 C. In the form of materials or supplies to be consumed in the production process or
the rending or
services.
D. Used in the production or supply of goods and services for
administrative purpose.
2. Which is incorrect concerning the maritime term FAS (free alongside)?
A. The seller must bear all expenses and risk in delivering the goods to the dock next
to the vessel on which they are to be shipped.
B. The buyer bears the cost of loading and cost if shipment.
C. Title passes to the buyer when the carrier takes possession of the goods.
D. Title passes upon receipt of the goods by the buyer.
3. A physical count on December 31, 2021 revealed that Valentina Company had inventory
with a cost
of P4,400,000. The following items were excluded from this amount:
• Merchandise of P600,000 is held on consignment by Valentina.
• Goods costing P400,000 was shipped by Valentina “Ex-ship” to a customer on December
31,
2024. The customer received the goods on January 3, 2022.
• Merchandise costing P500,000 was shipped by Valentina “Free alongside” to a customer on
December 29, 2024. The customer received the goods on January 6, 2022.
• Goods costing P800,000 shipped by a vendor FOB destination on December 31, 2021 was
received by Valentina on January 7, 2022.
• Goods costing P700,000 was shipped by a supplier “CIF” on December 30, 2021 and
received by
Valentina on January 10, 2022.
The true amount of inventory on December 31, 2021 is
A 4,900,000
C. 5,500,000
B. 5,400,000
D. 6,000,000
4. The following are costs excluded from the cost of inventories, except
A. Abnormal amounts of wasted materials, labor or other production costs
B. Storage costs, unless those costs are necessary in the production process before a
further
production stage
C. Administrative overheads that do not contribute to bringing inventories to their
present location
and condition
D. Import duties
5. Presented below is Seduco Company’s December 31, 2021 balance sheet:
Goods out on consignment at another company’s store 800,000
Goods purchased in transit, Free Alongside, including delivery cost alongside the vessel of
P2,000 but excluding the cost of shipment of P1,000 80,000
Goods purchased FOB shipping point that are in transit at December 31 120,000
Goods purchased FOB destination that are in transit at December 31 200,000
Goods sold and delivered on December 20. The goods were included in the
inventory because the sale was accompanied by a purchase agreement
requiring Seduco to buy back the inventory on February 2022 500,000
Goods sold FOB shipping point that are in transit December 31 120,000
Freight charges on goods purchased, FOB shipping point 80,000
Factory labor costs incurred on goods still unsold 50,000
Interest cost incurred for inventories that are routinely manufactured 40,000
Cost incurred to advertise goods held for resale 20,000
Materials on hand not yet placed into production 350,000
Office supplies 10,000
Raw materials which the company has started production, but which are not completely
processed 280,000
Factory supplies 20,000
Goods held on consignment from another company 450,000
Costs identified with units completed but not yet sold 260,000
Goods sold FOB destination that are in transit at December 31 40,000
How much of these items would typically be reported as inventory in the financial
statements?
A 2,079,000
C. 2,579,000
B. 2,580,000
D. 3,079,000
6. FOB destination point means that
A. The freight charges are actually to be paid by the seller
B. The freight charges are actually to be paid by the buyer
C. The ownership of goods is transferred upon receipt of the goods by the
buyer and the seller is the owner of the goods while in transit.
D. The ownership of goods is transferred upon receipt of the goods by the seller and
the buyer is the owner of the goods while in transit.
7. The seller actually paid the freight charges but is not legally responsible for the same.
A. FOB destination, freight prepaid
B. FOB destination, freight collect
C. FOB shipping point, freight prepaid
D. FOB shipping point, freight collect
8. The buyer paid the shipper freight charges and later asked for reimbursement from the
seller. The term
agreed must have been
A. FOB destination point freight prepaid
B. FOB destination point freight collect
C. FOB shipping point freight prepaid
D. FOB shipping point freight collect
9. The entry of the buyer to record the settlement of a purchase on account amounting to
P100,000 and
freight of P10,000 on a purchase transaction with terms of FOB destination, freight prepaid is
A. Dr. Freight-in P110,000
Cr. Cash P110,000
B. Dr. Accounts payable P100,000
Cr. Cash P100,000
C. Dr. Accounts payable P 100,000
Cr. Cash P 100,000
D. Dr. Freight-out P 10,000
Cr. Accounts receivable P 10,000
10. The entry of the buyer to record the settlement of a purchase on account amounting to
P100,000 and
freight of P10,000 on a purchase transaction with terms of FOB shipping point, freight collect
is
A. Dr. Freight-in P110,000
Cr. Cash P110,000
B. Dr. Accounts payable P100,000
Cr. Cash P100,000
C. Dr. Accounts payable P 90,000
Cr. Cash P 90,000
D. Dr. Freight-out P 10,000
Cr. Accounts receivable P 10,000
11. Under the gross method of recording purchases,
A. Cash discounts are initially ignored and are recorded only when taken.
B. Cash discounts are deducted from the cost of inventory on initial recognition.
C. Cash discounts lost are debited to “purchase discount lost” account
D. A and C
12. The use of purchase discounts account implies that the recorded cost of a purchased
inventory item
is its
A. Invoice price
B. Invoice price plus any purchase discount lost
C. Invoice price less the purchase discount taken
D. Invoice price less the purchase discount allowable whether taken or not
13. The use of a discount lost account implies that the recorded cost of an inventory is
A. Invoice price
B. Invoice price plus the purchase discount lost
C. Invoice price less the purchase discount taken
D. Invoice price less the purchase discount allowable whether taken or not
14. On December 3, Francis Company purchased inventory listed at P8,600 from Lyn
Corporation. Terms
of the purchase were 3/10, n/20.
Francis Company also purchased inventory from Duck Company on December 10 for a list
price of
P7,500. Terms of the purchase were 3/10, n/30. On December 16, Francis paid both suppliers
for
these purchases.
If Francis uses the net method of recording purchases, the journal entry to record the
payment on
December 16 will include
A. A debit to Accounts payable of P15,875
B. A debit to Purchase Discounts Lost of P258
C. A credit to Purchase Discounts of P258
D. A credit to Cash of P15,617
15. An entry debiting inventory and crediting cost of goods sold would be made when
A. Merchandise is sold and the perpetual inventory is used.
B. Merchandise is sold and the periodic inventory method is used.
C. Merchandise is returned and the periodic inventory method is used.
D. Merchandise is returned and the perpetual inventory method is used.
16. When a company uses the periodic inventory system in accounting for its merchandise
inventory,
which of the following is true?
A. Purchases are recorded in the cost of goods sold account.
B. The inventory account is updated after each sale.
C. Cost of goods sold is computed at the end of the accounting periods
rather than at each sale.
D. The inventory account is updated throughout the year as purchases are made.
17. Under this inventory system, a physical count is necessary before profit is determined
A. Perpetual
B. Periodic
C. FIFO
D. Both perpetual and periodic
18. Which of the following statements is incorrect about perpetual inventory system?
A. Inventory account is debited upon purchase
B. One of the entries made to make up return of goods sold on account is Dr.
inventory and Cr. cost of goods sold.
 C. Sales allowance granted to customer on account would require an entry debiting
sales returns
and allowance and crediting accounts receivable.
D. A physical inventory is made at year-end in order to set up the cost of
goods sold.
19. In a perpetual inventory system, recording a sale on account involves debiting which of
the following
accounts?
A. Only accounts receivable
B. Accounts receivable and inventory
C. Accounts receivable and cost of goods sold
D. Accounts receivable, cost of goods sold and inventory
20. When a company uses the perpetual inventory system in accounting for its merchandise
inventory,
which of the following is false?
A. Total cost of goods sold is computed by deducting ending inventory from
total goods available for sale.
B. The inventory account is updated after each sale.
C. One of the entries to record return of goods is debit inventory and credit cost of
goods sold.
D. None of the above.
21. Which of the following will result if the current year’s ending inventory amount is
understated?
A. Cost of goods sold will be understated
B. Gross profit will be understated
C. Net income will be overstated
D. Retained earnings will be overstated
22. A company discovered a P20,000 overstatement of its 2023 ending inventory after the
financial
statements for 2023 were prepared. The effect of this error on the 2023 financial statement
was:
A. Current assets were overstated and income was understated
B. Current assets were understated and income was overstated
C. Current assets were overstated and income was overstated
D. Current assets were understated and income was understated
23. The failure to record a purchase of merchandise on account even though the goods are
properly
included in the physical inventory results in:
A. An overstatement of assets and net income
B. An understatement of assets and net income
C. An understatement of cost of goods sold and liabilities and an overstatement of
assets
D. An understatement of liabilities and an overstatement of owner’s equity
24. Elrond Company began operations in 2021. During the first two years of operations,
Elrond made
undiscovered errors in taking its year-end inventories that overstated 2021 ending inventory
by
P50,000 and overstated 2022 ending inventory by P40,000. The combined effect of these
errors on
reported income is
2021
2022 2023
A. P50,000 over
P90,000 over
P40,000 under
B. P50,000 over
P40,000 over
not affected
C. P50,000 under
P90,000 under
not affected
D. P50,000 over
P10,000 under
P40,000 under
25. Inventories are required to be stated at the
A. Lower of cost and net realizable value
B. Lower of cost and fair value
C. Lower cost and recoverable value
D. Lower of FIFO cost and net realizable value
26. Net realizable value (NRV) is computed as
A. Estimated selling price less estimated cost to sell
B. Estimated selling price less estimated cost to complete
C. Estimated selling price less estimated cost to complete and estimated
cost to sell
D. Estimated selling price less estimated cost to complete, estimated cost to sell and
normal profit
margin

27. Inventories are usually written down to net realizable value

A. By classification
B. By total
C. By segment
D. Item by item
28. Reversals of inventory write-downs
A. Are not prohibited under the PFRSs.
B. Should not exceed the amount of write-downs previously recognized.
C. Are always recognized in profit or loss.
D. All of these.
29. Squat Company uses the lower of cost or net realizable value inventory. Data regarding
the items in
work-in-process inventory are presented below:
Product A Product B
Historical cost 24,000 18,800
Selling price 36,000 21,800
Estimated cost to complete 4,800 3,500
Estimated cost to sell 2,000 1,900
Replacement cost 20,800 16,800
Normal profit margin as a percentage of selling price
25%
25%
What amount should be reported as ending inventory using the LCNRV individual approach?
A 45,600
C. 42,800
B. 40,400
D. 48,000
30. Net realizable value of inventories may fall below cost for a number of reason/s
including:
I. Product obsolescence
II. Physical deterioration of inventories
III. An increase in the expected replacement costs of the inventory
IV. An increase in the estimated cost of completion
A. I, II and IV only
B. II, III and IV only
C. I, III and IV only
D. I and II only
Numbers 31-32
At year-end, Eagles Company reported ending inventory at P15,000,000 and the allowance
for inventory
writedown before any adjustment at P800,000.
Product 1
Product 2
Product 3
Product 4
Cost
4,000,000
5,000,000
3,500,000
2,500,000
Sales price
6,000,000
6,500,000
6,250,000
5,000,000
NRV
2,750,000
5,500,000
4,750,000
1,750,000
Normal profit
1,250,000
750,000
1,500,000
1,500,000
Replacement Cost
4,500,000
6,000,000
5,000,000
3,000,000
31. What is the measurement of inventory in the statement of financial position?
A 15,000,000
C. 14,750,000
B. 13,000,000
D. 18,750,000
32. What amount of loss on inventory writedown should be included in cost of goods sold?
A 2,000,000
C. 1,200,000
B. 2,800,000
D. 1,250,000
33. Jenny Company uses a periodic inventory accounting system and values its inventory by
using the
lower of cost or net realizable value method. The allowance method is used in applying the
lower of
cost or net realizable value.
The company adjusts and closes its book annually on December 31. Below are the cost and
market
values of the company’s year-end inventories for a three-year period:
Cost
NRV
December 31, 2021
700,000
700,000
December 31, 2022
560,000
460,000
December 31, 2023
640,000
580,000
Which of the following journal entries would be correct as of December 31, 2023, to apply
the lower of
cost or NRV?
A. Dr. Inventory 580,000
Cr. Income summary 580,000
B. Dr. Impairment loss 60,000
Cr. Allowance of inventory write down 60,000
C. Dr. Allowance of inventory write down 40,000
Cr. Gain on reversal of impairment 40,000
D. Dr. Cost of Goods Sold 60,000
Cr. Allowance of inventory write down 60,000
34. Raw materials and manufacturing supplies held for use in the production of inventories
are
A. Required under PAS 2 – Inventories, to be separately presented from the other
inventories.
B. Not disclosed since they are normally immaterial.
C. Not written down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost.
D. All of these

Numbers 35-36
The following figures relate to inventory of materials held by Axew Corporation at December
31:
Item X
Item Y
Cost
200,000 400,000
Replacement cost
180,000 370,000
Estimated cost to convert materials into finished goods
100,000 200,000
Estimated selling price of finished goods
320,000 610,000
Estimated cost to sell
10,000 15,000
35. What is the measurement of inventory in the statement of financial position?
Item X Item Y
A. 200,000 400,000
B. 180,000 370,000
C. 200,000 370,000
D. 210,000 395,000
36. Axew Corporation should recognize loss on write-down of inventory of materials of
A 50,000
C. 5,000
B. 30,000
D. 0
Numbers 37-39
On December 31, 2020, Roseland Company experienced a decline in the value of inventory
resulting in
writedown from P4,000,000 cost to P3,500,000 net realizable value. The entity used the
allowance method to record the necessary adjustment. In 2021, market conditions have
improved dramatically.
On December 31, 2021, the inventory had a cost of P5,000,000 and net realizable value of
P4,800,000. The entity made purchases of P20,000,000 in 2021?
37. What amount should be recognized as gain on reversal of inventory writedown in 2021?
A 200,000
C. 500,000
B. 300,000
D. 0
38. What amount should be reported as cost of goods sold in 2021?
A 19,000,000
C. 18,700,000
B. 19,300,000
D. 24,000,000
39. If the company is using direct write off method, what amount should be reported as cost
of goods
sold in 2021?
A 19,000,000
C. 18,700,000
B. 19,300,000
D. 24,000,000
40. The proper cost method for inventories that are not ordinarily interchangeable and
segregated for
specific projects is the
A. Specific identification
C. Last in, last out
B. First in, first out
D. Weighted average
41. If the specific identification of costing inventory is impracticable under the
circumstances, the cost of
inventories is assigned by using set of cost flow assumptions?
A. First in, first out or weighted average
B. Last in, last out or weighted average
C. First in, first out or last in last out
D. Last in, last out or last in, first out
42. During period of rising prices, when the FIFO inventory cost flow method is used, a
perpetual inventory system would
A. not be permitted
B. result in the same ending inventory as a periodic inventory system
C. result in a higher ending inventory than a periodic inventory system
D. result in a lower ending inventory than a periodic inventory system.
43. The FIFO inventory cost flow method may be applied to which of the following inventory
systems?
A. Periodic inventory system
 B. Perpetual inventory system
C. Either periodic or perpetual
D. Neither periodic or perpetual
Numbers 44-45
Seahawks used the perpetual system. The following information has been extracted from
the records
about one product:
Date
Transaction
Units
Unit cost
Total cost
January
1 Beginning bal.
8,000
70
560,000
6 Purchase
3,000
75
225,000
February
5 Sale
10,000
March
5 Purchase
11,000
80
880,000
March
8 Purchase return
800
80
64,000
April
10 Sale
7,000
April
30 Sale return
300
44. If the FIFO cost flow method is used, what is the cost of the inventory on April 30?
A 360,000
C. 337,500
B. 315,000
D. 400,000

45. If the weighted average cost flow method is used, what is the cost of the inventory on
April 30?
A 337,500
C. 353,430
B. 339,840
D. 348,750
46. The pricing of issues from inventory must be deferred until the end of the accounting
period under
which of the following method of inventory valuation?
 A. Moving average
C. Specific identification
B. Weighted average
D. FIFO
47. During a move to a new location, the inventory records of 98 Degrees were misplaced.
The
bookkeeper has been able to gather some data for the July purchases:
Units
Unit cost
Total cost
July
5
10,000
65
650,000
10
12,000
70
840,000
15
15,000
60
900,000
25
14,000
55
770,000
On July 31, 17,000 units were on hand. The sales for July amounted to P6,000,000 or 60,000
units at
P100 per unit.
The entity always used a perpetual FIFO inventory costing system. Gross profit on sales for
July was
P2,400,000.
What was the cost of inventory on July 1?
A 1,390,000
C. 950,000
B. 2,400,000
D. 760,000
48. White Farm Supply’s records for the first 3 months of its existence show purchases of
Commodity A
as follows:
Number of units
Cost
August
5,500
280,500
September
8,000
416,000
October
5,100
270,300
Total
18,600
966,800
The inventory of Commodity A at the end of October using FIFO is valued at P363,900.
Assuming that none of commodity A was sold during August and September, what value
would be
shown at the end of October if average cost was assumed?
A 351,900
C. 358,662
B. 353,300
D. 365,700
49. The following information was available from the inventory records of Bago Company for
January:
Units
Unit cost
Balance at January 1
30,000
9.77
Purchases:
January 6
20,000
10.30
January 26
27,000
10.71
Sales:
January 7
25,000
January 31
40,000
What amount of inventory should be reported under the moving average method? (use two
decimal
unit cost)
A 126,060
C. 123,120
B. 122,880
D. 124,370
50. Losses arising from firm and non-cancellable purchase commitments of inventory items,
if material
should be
A. Recognized in the accounts by debiting loss on purchase commitments
and crediting estimated liability for loss on purchase commitments.
B. Charged to retained earnings
C. Disclosed in the notes
D. Ignored
51. During 2020, Hella signed a non-cancellable contract to purchase 2,000 pounds of raw
materials at
P60 per pound in 2021.
On December 31, 2020, the market price of the raw material is P55 per pound, and the
selling price
of the finished product is expected to decline accordingly.
The financial statements prepared for 2020 should report
A. A note or memorandum describing the expected loss on the purchase
commitment.
B. An appropriation of accumulated profits for P10,000.
C. A loss of P10,000 in the statement of comprehensive income
D. Nothing regarding this matter
52. At the end of the fiscal year, Olympus Airlines has an outstanding non-cancellable
purchase
commitment for the purchase of 2 million gallons of jet fuel at a price of P4.50 per gallon for
delivery
during the coming summer.
If the market price of jet fuel at the end of the year is P4.00, how would this situation be
reflected in
the annual financial statements?
A. Report gain of P1,000,000 in the income statement.
B. Record loss and estimated liability of P1,000,000.
C. Record purchases and accounts payable amounting to P8,000,000.
D. Disclose only the existence of the purchase commitment in the notes to FS.
53. The credit balance that arises when a loss on purchase commitment is recognized should
be
A. Presented as a current liability
B. Subtracted from ending inventory
C. Presented as an appropriate of retained earnings
D. Presented in the income statement
Numbers 54-56
During 2021, Tartarus Company signed a noncancellable contract to purchase 500 sacks of
rice at P900
per sack with delivery to be made in 2022.
On December 31, 2021, the price of rice had fallen to P850 per sack. On May 9, 2022,
Tartarus Company
accepts delivery of rice when the price is P880 per sack.
54. In December 31, 2021 income statement, what amount of loss on purchase commitment
should be
recognized?
A 15,000
C. 25,000
B. 10,000
D. 0
55. What amount of recovery of loss on purchase commitment should Tartarus recognize on
May 9, 2022?
A 10,000
C. 25,000
B. 15,000
D. 0
56. What amount of purchases should be recorded on May 9, 2022?
A 450,000
C. 425,000
B. 440,000
D. 480,000
57. Under PAS 2, they are “individuals who buy or sell commodities for others or on their
own account.”
A. Commissioner
B. Broker-traders
C. Commoditers
D. Find seekers
58. Under PAS 2, commodities of broker-traders are measured at
A. Cost
B. Net realizable value
C. Fair value
D. Fair value less cost to sell
FINALS

1) Which is incorrect concerning the maritime term FAS (free alongside)?

A. The seller must bear all expenses and risk in delivering the goods to the dock next to the
vessel on which they are to be shipped.
B. The buyer bears the cost of loading and cost if shipment.
C. Title passes to the buyer when the carrier takes possession of the goods.
D. Title passes upon receipt of the goods by the buyer.
2) The use of a discount lost account implies that the recorded cost of an inventory is
A. Invoice price
B. Invoice price plus the purchase discount lost
C. Invoice price less the purchase discount taken
D. Invoice price less the purchase discount allowable whether taken or not
3) When a portion of inventory has been pledged as security on a loan
A. The value of the portion pledged should be subtracted from the debt.
B. An equal amount of retained earnings should be appropriated.
C. The fact should be disclosed but the amount of current assets should not be affected.
D. The cost of the pledged inventory should be transferred from current to noncurrent asset.
4) Which of the following is not considered as inventory under PAS 2?
A. Land and other property purchased and held for resale.
B. Supplies and materials awaiting use in the production process.
C. Abnormal amounts of wasted materials, labor and other production costs.
D. Costs of service for which a service provider has not yet recognized the related revenue.
5) Which of these inventory cost flow assumption favors the reporting of a higher current ratio in periods
of sustained inflation?
A. Last in last out
B. First in last out
C. First in first out
D. Weighted average
6) An entity shall include in its inventory all goods
A. Owned and possessed by the entity at the balance sheet date.
B. Owned but not possessed by the entity at the balance sheet date.
C. Possessed but not owned by the entity at the balance sheet date.
D. Owned by the entity at the balance sheet date, regardless of location.
7) Goods on consignment should be included in the inventory of
A. The consignor but not the consignee
C. Both the consignor and the consignee
B. The consignee but not the consignor
D. Neither the consignor nor the consignee
8) Freight and other handling charges incurred in the transfer of goods from consignor to consignee are
A. Inventoriable by the consignor
C. Expense on the part of the consignor
B. Inventoriable on the part of the consignee
D. Expense on the part of the consignee
9) FOB destination point means that
A. The freight charges are actually to be paid by the seller
B. The freight charges are actually to be paid by the buyer
 C. The ownership of goods is transferred upon receipt of the goods by the buyer and the seller is
the owner of the goods while in transit.
D. The ownership of goods is transferred upon receipt of the goods by the seller and the buyer is
the owner of the goods while in transit.
10) The seller actually paid the freight charges but is not legally responsible for the same.
A. FOB destination, freight prepaid
C. FOB shipping point, freight prepaid
B. FOB destination, freight collect
D. FOB shipping point, freight collect
11) An entity should include one of the following items in its merchandise inventory
A. goods held for pick-up by the buyer
C. goods purchased FOB destination still en route
B. goods sold FOB shipping point still en route
D. goods purchased FOB shipping point still en route
12) Inventories should be measured at
A. Cost or net realizable value, whichever is higher
C. Lower of cost or NRV, by total
B. Cost of fair value less costs to sell, whichever is lower
D. Lower of cost or NRV, item by item
13) Net realizable value is computed as
A. Estimated selling price less estimated cost to sell
B. Estimated selling price less estimated cost to complete
C. Estimated selling price less estimated cost to complete and estimated cost to sell
D. Estimated selling price less estimated cost to complete, estimated cost to sell and normal
profit margin
14) How should sales staff commission be dealt with when valuing inventories at LCNRV?
A. Ignored
C. Deducted form cost
B. Added to cost
D. Deducted in arriving at NRV
15) Under PAS 2, they are ‘individuals who buy or sell commodities for others or on their own account’.
A. Commission agents
C. Finders
B. Broker trader
D. Seekers
16) Under PAS 2, commodities of broker traders are measured at
A. Cost
C. Fair value
B. Net realizable value
D. Fair value less costs to sell
17) The proper cost method for inventories that are not ordinarily interchangeable and segregated for
specific projets is the
A. Specific identification
C. Last in, last out
B. First in, first out
D. Weighted average
18) If the specific identification of costing inventory is impracticable under the circumstances, the cost of
inventories is assigned by using set of cost flow assumptions?
 A. First in, first out or weighted average
C. First in, first out or last in last out
B. Last in, last out or weighted average
D. Last in, last out or last in, first out
19) Merly Company provided the following information during the current year:
Product 1
Product 2
Materials and conversion cost
3,000,000
3,600,000
Estimated selling price
4,000,000
6,000,000
Estimated selling cost
1,200,000
1,400,000
General administration cost
600,000
1,600,000
Normal profit margin on sales
1,000,000
1,500,000
At year-end, the manufacture of the products has been completed but no selling cost has yet been
incurred.
What amount should be reported as ending inventory using the LCNRV individual approach?
A. 6,400,000
B. 6,600,000
C. 4,900,000
D. 5,800,
20) Jasmine Company’s inventory on December 31, 2020 was P6,000,000 based on a physical count of
goods
priced at cost and before any necessary year-end adjustments relating to the following:
• Included in the physical count were goods billed to a customer FOB shipping point on December 31,
2020. These goods had a cost of P125,000 and were picked up by the carrier on January 15, 2021.
• Goods shipped FOB shipping point on December 31, 2021 from a vendor were received on January 15,
2021. The invoice cost was P300,000.
• Goods sold to a customer on December 31, 2020 which are being held for the customer to call at the
customer’s convenience with a cost of P200,000 were included in the count.
What amount should be reported as inventory on December 31, 2020?
A. 5,875,000
B. 6,100,000
C. 6,175,000
D. 6,300,000
21) Anderson Company’s year-end inventory balance on December 31, 2023 is P1,650,000 based on
physical
count and before considering the following transactions:
a. Goods shipped to Anderson f.o.b. destination on December 20, 2023, were received on January 4,
2024.
The invoice cost is P300,000.
b. Goods shipped to Anderson f.o.b. shipping point on December 28, 2023, were received on January 5,
2024. The invoice cost is P170,000.
c. Goods shipped from Anderson to customer f.o.b. destination on December 27, 2023 received by the
customer on January 3, 2024. The sale price is P400,000 and the cost is P220,000.
d. Goods shipped from Anderson to a customer f.o.b. destination on December 26, 2023 were received
by
the customer on December 30, 2023. The sale price is P200,000 and the cost is P130,000.
e. Goods shipped from Anderson to a customer f.o.b. shipping point on December 28, 2023 were
received
by the customer on January 4, 2024. The sale price is P250,000 and the cost is P120,000.
What is the correct inventory balance on December 31, 2023?
A. 2,170,000
B. 2,160,000
C. 2,290,000
D. 2,040,000
22) Angela Company reported the ending inventory on December 31, 2022 at P4,000,000. None of the
following
items were included when the total amount of the ending inventory was computed:
Goods that are on consignment to another entity
200,000
Goods sold by the entity and shipped FOB destination were in transit on December 31,
2022 and received by the customer on January 2, 2023
400,000
Goods purchased by the entity and shipped FOB seller in transit December 31, 2022 and
received by the entity on January 2, 2023
600,000
Goods sold by the entity and shipped FOB shipping point were in transit on December 31,
2022 and received by the customer on January 2, 2023
800,000
What is the correct amount of inventory on December 31, 2022?
A. 5,000,000
B. 5,200,000
C. 6,000,000
D. 4,600,000
23) Madel Company revealed inventory on December 31, 2023 at P3,250,000 based on a physical count
priced
at cost, and before any necessary adjustment for the following:
• Merchandise costing P300,000 shipped FOB shipping point from a vendor on December 30, 2023, was
received on January 5, 2024.
• Merchandise costing P220,000 shipped FOB destination from a vendor on December 28, 2023 was
received on January 3, 2024.
• Merchandise costing P380,000 was shipped to a customer FOB destination on December 28, 2023
arrived at the customer’s location on January 6, 2024.
• Merchandise costing P120,000 was being held on consignment by Trisha Company.
What amount should be reported as inventory on December 31, 2023?
A. 3,670,000
B. 3,930,000
 C. 4,050,000
D. 3,250,000
24) A company sells four products: AAAA, BBBB, CCCC, and DDDD. The company values all inventories
using
the lower-of-cost-or-net realizable value procedure. The company has consistently experienced a profit
margin of 20 percent of sales and expects this rate to hold for the future. Additional information, shown
below, is available for the most recent year as of December 31.
Product
Original cost
Cost to
replace
Estimated cost to
sell
Expected selling
prices
AAAA
60
70
10
100
BBBB
70
90
20
120
CCCC
80
60
10
60
DDDD
90
80
20
90
Using the lower-of-cost-or-net realizable value procedure, what is the reported inventory value at
December
31 for one unit of Product AAAA?
A. 60
C. 80
B. 70
D. 90
25) Richard Company carries four items in its inventory. The following per-unit data relate to these items
at the
end of 2021:
Units
Cost
Replacement
cost
Estimated
selling price
Selling
cost
Normal
profit
Product A 62 5
3,000 90 Product D
55 8 4,000
52 12 70
65 Product C 73
11 5,000 75
10 25 12
Product B 20 17
2,000 42
60 9
The proper amount of inventory to be presented by Richard on December 31, 2021 is
A. 690,000
C. 672,000
B. 743,000
D. 659,000
Use the following for the next two (2) questions:
On December 31, 2022, the Cost of Rick Corporation ending inventory account was P72,880, and the
allowance
for inventory writedown account before any adjustment was P2,000. Data regarding the items in work-in
process inventory are presented below:
Product A
Product B
Product C
Historical cost
24,000
18,880
30,000
Selling price
36,000
21,800
38,000
Estimated cost to complete
3,000
2,620
6,200
Cost to sell based on selling price
5%
10%
10%
26) What is the correct carrying value of inventories as of December 31?
A. 72,880
 B. 76,200
C. 69,000
D. 67,200
27) What is the loss on write-down?
A. None
B. 1,320
C. 1,880
D. 3,620
28) Information pertaining to the inventory of Mazomi Company as of December 31, 2022 follows:
Tabo
Timba
Balde
Historical cost
2,000,000
2,500,000
3,500,000
Estimated selling price
2,200,000
3,600,000
4,000,000
Estimated cost of disposal
300,000
800,000
600,000
Normal profit margin
440,000
720,000
800,000
Current replacement cost
2,500,000
3,000,000
2,700,000
What amount should the inventory be valued on December 31, 2022?
A. 8,000,000
C. 7,700,000
B. 8,100,000
D. 7,800,000
29) On December 31, 2022, Chew Company determined the following data regarding its chocolates.
These
chocolates could be sold as finished candy bars:
Historical cost of chocolates
P 5,200,000
Replacement cost of chocolates
4,000,000
Conversion cost to process the chocolates into candy bars
2,400,000
Estimated selling price of candy bards
8,000,000
Normal profit margin based on sales
10%
What amount should be reported as chocolate inventory on December 31, 2022?
A. 5,600,000
C. 5,200,000
B. 4,000,000
D. 4,800,000
30) Assume Chew can only sell the candy bars for P6,000,000, what amount should be reported as
chocolate
inventory on December 31, 2022?
A. 5,600,000
C. 5,200,000
B. 4,000,000
D. 4,800,000
31) The closing inventory at cost of a company at December 31, 2022 amounted to P284,700. The
following
items were included at cost in the total:
Original Case
Class A Case
Units
400 units
800 units
Historical cost per unit
P 80
P 20
Estimated selling price per unit
150
28
Cost to repair per unit
None
5
Normal profit margin based on sales
50%
25%
Selling expense based on sales
5%
5%
What should the inventory value be according to PAS 2 Inventories after considering the above items?
A. 281,200
C. 282,100
B. 282,100
D. 329,200
Use the following information for the next two (2) questions:
Lyra Company and Vera Company are fuel oil distributors. To facilitate the delivery of oil to customers,
the two
entities exchanged ownership of barrels of oil without physically moving the oil. Lyra paid Vera
P1,500,000 to
compensate for a difference in the grade of oil. It was reliably determined that the configuration of the
cash
flows of the asset received dies not differ from the configuration of the cash flows of the asset
transferred. On
the date of exchange, the oil inventory of Lyra has a carrying amount of P5,000,000 and fair value of
P7,000,000.
The oil inventory of Vera has a carrying amount of P6,000,000 and fair value of P8,500,000.
32) What amount should Lyra record as cos of the oil inventory received in exchange?
A. 4,500,000
B. 6,500,000
C. 7,000,000
D. 8,500,000
33) What amount should Vera record as cost of oil inventory received in exchange?
A. 4,500,000
B. 6,000,000
C. 7,500,000
D. 8,500,000
34) Katherine Company acquired the following of machinery:
• During 2020, the entity purchased a chine for P500.000 down and four monthly installments of
P1,250,000. The cash price of the machine was P4,700,000.
• On January 1, 2020, the entity purchased a machine for P2,000,000 in exchange for a non interest
bearing note requiring four payments of P500,000. The first payment was made on December 31, 2020.
The rate of interest for this note at the date of issuance was 10%. The present value of an ordinary
annuity of 1 at 10% is 3.17 for four periods. The present value of an annuity of 1 in advance at 10% is
3.49 for four periods.
• On January 1 , 2020, the entity acquired a machine by issuing a four-year, non interest-bearing note for
P2,000,000. The note is due on January 1, 2024. The entity has a 10% interest for this type of note. The
present value of 1 at 10% for 4 years is 0.68.
What is the total cost of the three machines?
A. 7,645,000
B. 7,805,000
C. 8,445,000
D. 8,605,000
35) Clarisse Company had the following property acquisitions during the current year:
• Acquired a tract of land in exchange for 50,000 ordinary shares of 100 par value with a market price of
P150 per share on the date of acquisition. The last property tax bill indicated assessed value of
P4,000,000 for the land. However, the land has a fair value of P6,000,000.
• Received land as a donation from a major shareholder as an inducement to locate a plant in the city.
No
payment was required but the entity paid P50,000 for legal expenses for land transfer. The land is fairly
valued P1,000,000.
• Acquired a machine with an invoice price of P3,000,000 subject to a cash discount of 10% which was
not
taken. The entity incurred cost of P50,000 in removing the old welding machine prior to the installation
to the new one. Machine supplies were acquired at a cost of P150,000.
What is the total increase in property, plant and equipment as a result of the acquisition?
A. 11,200,000
B. 10,000,000
C. 9,700,000
D. 9,750,000
Use the following information for the next two (2) questions:
Two independent companies, Buster Co. and Biter Co., are in the home building business. Each owns a
tract of
land held for development, but each would prefer to build on the other’s land. They agree to exchange
their
land. An appraiser was hired, and from her report and the company’s records, the following information
was
obtained:
Buster Co.
Biter Co.
Cost and book value
192,000
120,000
Fair value based upon appraisal
220,000
210,000
The exchange was made, and based on the difference in appraised fair values, Biter Co. paid P10,000 to
Buster
Co. The exchange has commercial substance.
36) For financial reporting purposes, Buster should recognize gain on this exchange of
A. 0
B. 10,000
C. 28,000
D. 90,000
37) The new land should be recorded on Buster’s books at
A. 168,000
B. 192,000
C. 210,000
D. 240,000
38) The new land should be recorded on Biter’s books at
A. 120,000
B. 150,000
C. 210,000
D. 220,000
Use the following information for the next two (2) questions:
During 2023, Yammy Bee constructed various assets at a total cost of P8,400,000. The weighted average
expenditures on assets qualifying for capitalization of interest during 2023 amounted to P5,600,000. The
entity
had the following debt outstanding at December 31, 2023:
• 10%, 5 year note to finance construction of various assets, dated January 1, 2023, with interest
payable
annually on December 31
3,600,000
• 12%, 10-year bonds issued at par on December 31, 2017, with interest payable annually on
December 31
4,000,000
• 9%, 3-year note payable, dated January 1, 2022, with interest payable annually on January 1
2,000,000
39) What is the capitalized borrowing cost for the year ended December 31, 2023?
A. 800,000
B. 580,000
C. 440,000
D. 360,000
40) What is the interest expense for the year ended December 31, 2023?
A. 480,000
B. 660,000
C. 580,000
D. 440,000