CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
FINANCIAL ACCOUNTING AND REPORTING PREWEEK LECTURE
MAY 2023 CPALE BATCH 93

1. An entity provided the following account balances at year-end which had been adjusted except for income
tax expense:
Cash 3,600,000
Accounts receivable 3,500,000
Cost in excess of billings on long-term contracts 1,500,000
Billings in excess of cost on long-term contracts 700,000
Prepaid taxes 1,000,000
Property, plant and equipment, at carrying amount 4,000,000
Note payable - noncurrent 3,500,000
Share capital 2,000,000
Share premium 1,000,000
Retained earnings unappropriated 1,400,000
Retained earnings restricted for note payable 1,000,000
Earnings from long-term contracts 9,000,000
Costs and expenses 5,000,000
All receivables on long-term contracts are considered to be collectible with 12 months. During the year,
estimated tax payments of P1,000,000 were charged to prepaid taxes. The entity has not recorded income
tax expense. The rate is 25%. At year-end, what amount should be reported as
1. Total retained earnings?
a. 2,400,000
b. 5,400,000
c. 6,400,000
d. 4,400,000
2. Total current assets?
a. 9,400,000
b. 7,900,000
c. 8,600,000
d. 7,100,000
3. Total noncurrent liabilities?
a. 3,500,000
b. 4,200,000
c. 4,500,000
d. 5,200,000

2. An entity reported the following liabilities on December 31, 2023:

Accounts payable, after deducting debit balances in suppliers’ accounts of P500,000 2,000,000
Short-term borrowings 1,500,000
Bonds payable due December 31, 2024 3,000,000
Discount on bonds payable 200,000
Bank loan due June 30, 2024 1,000,000
Credit balances in customers’ accounts 400,000
Share dividend payable 600,000
Claims for increase in wages by employees covered in pending lawsuit 700,000
Estimated expenses in redeeming prize coupons 800,000
Deferred tax liability 1,200,000
The P1,000,000 bank loan was refinanced with a 5-year loan on January 31, 2024. The financial statements
were issued on March 1, 2024. What total amount should be shown as current liabilities?
a. 8,600,000
b. 9,000,000
c. 8,000,000
d. 8,700,000

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3. Dean Company acquired 100% of Morey Company in the prior year. During the current year, the individual
entities included in their financial statements the following:
Dean Morey
Key officers’ salaries 750,000 500,000
Officers’ expenses 200,000 100,000
Loans to officers 1,250,000 500,000
Intercompany sales 1,500,000
What total amount should be reported as related party disclosures in the notes to Dean Company’s
consolidated financial statements for the current year?
a. 1,500,000
b. 1,550,000
c. 1,750,000
d. 3,000,000
4. Tanzania Company reported operating expenses other than interest expense for the year at 40% of cost of
goods sold but only 20% of sales. Interest expense is 5% of sales.
The amount of purchases is 120% of cost of goods sold. Ending inventory is twice as much as the beginning
inventory. The net income for the year is P2,250,000. The income tax rate is 25%. What amount should be
reported as sales for the year?
a. 10,000,000
b. 15,000,000
c. 18,000,000
d. 12,000,000
5. An entity reported income before tax of P5,000,000 for the current year which included the following
amounts income before tax:
Equity in earnings of an associate 1,600,000
Dividend received from associate 300,000
Adjustment of profit of prior year for arithmetical error in depreciation (1,400,000)
Gain on sale of equity investment at FVOCI 1,000,000
Unrealized loss on foreign currency translation ( 500,000)
What amount should be reported as income before tax?
a. 5,600,000
b. 4,700,000
c. 5,100,000
d. 6,600,000
6. An entity purchased an equipment for P7,500,000 on January 1, 2023. The equipment had a useful life of
5 years with no residual value. On December 31, 2023, the entity classified the equipment as held for sale.
On such date, the fair value less cost of disposal of the equipment was P5,250,000. On December 31, 2024,
the entity believed that the criteria for classification as held for sale can no longer be met. Accordingly, the
entity decided not to sell the equipment but to continue to use it. On December 31, 2024, the fair value less
cost of disposal of the equipment was P4,050,000.
1. What amount should be recognized as impairment loss for 2023?
a. 1,250,000
b. 1,500,000
c. 750,000
d. 600,000
2. What amount should be recognized as gain or loss from reclassification of the equipment for 2024?
a. 1,200,000 loss
b. 1,200,000 gain
c. 750,000 loss
d. 750,000 gain

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7. The entity had the following account balances on December 31, 2023:

Petty cash fund 50,000

Philippine Bank – current account 4,000,000
Manila Bank – current account (overdraft) (1,200,000)
Cash on hand 500,000
Asia Bank – savings account for plant addition in 2024 1,500,000
Treasury bills 1,000,000
Treasury bonds 700,000
The petty cash fund included unreplenished December 2023 petty cash expense vouchers P5,000 and
employee IOU P5,000. The cash on hand included a P100,000 customer check payable to the entity dated
January 15, 2024. In exchange for a guaranteed line of credit, the entity had agreed to maintain a minimum
balance of P500,000 in the unrestricted current bank account. Check of P400,000 drawn against
Philippine Bank current account dated and recorded on December 31, 2023 was mailed to creditor on
January 15, 2024. What total amount should be reported as cash and cash equivalents on December 31,
2023?
a. 5,840,000
b. 5,440,000
c. 6,540,000
d. 7,340,000
8. Marjorie Company reported an imprest petty cash fund of P50,000 with the following details:
Currencies 20,000
Coins 2,000
Petty cash vouchers:
Gasoline 3,000
Medical supplies 1,000
Repairs 1,500
IOU from an employee 3,500
A check drawn by the entity payable to the order of Anne Cruz, petty cash custodian,
representing her salary 15,000
An employee check returned by the bank marked NSF 3,000
A sheet of paper with names of several employees together with contribution for a
birthday gift to a co-employee. Attached to the sheet of paper is a currency of 5,000
What amount of petty cash fund should be reported in the statement of financial statement position?
a. 42,000
b. 27,000
c. 37,000
d. 22,000
9. An entity provided the following information on December 31:
Credit memo for November recorded in December 600,000
Credit memo for December not yet recorded 800,000
Deposit in transit – December 1 1,200,000
Erroneous bank charge in December corrected by bank in December 200,000
Erroneous receipt by the entity in December not corrected until the following year 100,000
Total book receipts for December 8,500,000
Total bank credits in December 8,000,000
What amount should be reported as deposit in transit on December 31?
a. 2,000,000
b. 2,100,000
c. 1,800,000
d. 1,000,000

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10. An entity provided the following information for October and November:
Checks and charges recorded by bank in November, including a November service
charge of P5,000 and NSF customer check of P20,000 550,000
Service charge made by bank in October and recorded by depositor in November 10,000
Total credits to cash in all journals during November 620,000
Customer NSF check returned in October and redeposited in November but no entry
made by depositor in either October or November 40,000
Outstanding checks on October 31 that cleared in November 230,000
What amount should be reported as outstanding checks on November 30?
a. 275,000
b. 300,000
c. 315,000
d. 290,000
11. Effective with the current year, Hall Company adopted a new accounting method for estimating the
allowance for doubtful accounts at the amount indicated by the year-end aging of accounts receivable.
Allowance for doubtful accounts, January 1 250,000
Provision for doubtful accounts during the current year at 2% of credit sales of P10,000,000 200,000
Accounts written off 205,000
Estimated uncollectible accounts per aging on December 31 220,000
What amount should be reported as doubtful accounts expense for the current year?
a. 220,000
b. 205,000
c. 200,000
d. 175,000
12. Horus Company provided for doubtful accounts expense monthly at 3% of credit sales. The balance in the
allowance for doubtful accounts was P1,000,000 on January 1, 2023. During the 2023, credit sales totaled
P20,000,000, interim provisions for doubtful accounts were made at 3% of credit sales, P200,000 accounts
were written off, and recoveries of accounts previously written off amounted to P50,000. An aging of
accounts receivable was made on December 31, 2023.
1 - 60 days 6,000,000 10% uncollectible
61 - 180 days 2,000,000 20% uncollectible
181 - 360 days 1,500,000 30% uncollectible
More than one year 500,000 50% uncollectible
10,000,000
Based on the review of the “more than one year” category, additional accounts of P100,000 are to be
written off on December 31, 2023. What amount should be reported as doubtful accounts expense for the
current year?
a. 2,250,000
b. 1,650,000
c. 900,000
d. 850,000
13. An entity factored without recourse P2,000,000 of accounts receivable with a bank. The bank charged
factoring fee of 5% and withheld 10% to cover sales discounts, sales returns and sales allowances. What
amount should be recognized as loss on factoring?
a. 100,000
b. 200,000
c. 300,000
d. 0

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14. On June 30, 2023, Ray Company discounted at the bank a customer P6,000,000, 6-month, 10% note
receivable dated April 30, 2023. The bank discounted the note at 12% without recourse.
1. What amount of cash was received from the note receivable discounting?
a. 5,640,000
b. 5,760,000
c. 6,048,000
d. 6,174,000
2. What amount should be recognized as loss on note receivable discounting?
a. 252,000
b. 152,000
c. 52,000
d. 48,000
15. National Bank granted a 10-year loan to Abbo Company in the amount of P1,500,000 with stated interest
rate of 6%. Payments are dur monthly and are computed to be P16,650. National Bank incurred P40,000
of direct loan origination cost and P20,000 of indirect loan origination cost. In addition, National Bank
charged Abbo Company a 4-point nonrefundable loan origination fee.
1. What is the initial carrying amount of the loan receivable on the part of National Bank?
a. 1,440,000
b. 1,480,000
c. 1,500,000
d. 1,520,000
2. What is the initial carrying amount of the loan payable on the part of Abbo Coompany?
a. 1,440,000
b. 1,480,000
c. 1,500,000
d. 1,520,000
16. Empire 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 31, 2023 was
received on January 5, 2024.
• Merchandise costing P380,000 shipped to a customer FOB destination on December 28, 2023 arrived
at the customer location on January 6, 2024.
• Merchandise costing P120,000 was being held on consignment by a consignee of Empire Company.
What amount should be reported as inventory on December 31, 2023?
a. 3,650,000
b. 3,630,000
c. 4,050,000
d. 3,550,000
17. An entity determined the following information for an inventory at year-end.
Historical cost 2,000,000
Current replacement cost 1,400,000
Net realizable value 1,800,000
Net realizable value less normal profit margin 1,700,000
Fair value 1,900,000
What amount should be reported as inventory at year-end?
a. 1,400,000
b. 1,700,000
c. 1,800,000
d. 1,900,000

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18. An entity reported accounts payable on December 31, 2023 at P900,000 before any necessary year-end
adjustments relating to the following:
• Goods were in transit from a vendor on December 31, 2023. The invoice cost was P50,000 and the
goods were shipped FOB shipping point on December 29, 2023. The goods were received on January
4, 2024.
• Goods shipped FOB shipping point on December 20, 2023 from a vendor were lost in transit. The
invoice cost was P25,000. On January 5, 2024, the entity filed a P25,000 claim against the common
carrier.
• Goods shipped FOB destination on December 21, 2023 from a vendor were received on January 6,
2024. The invoice cost was P15,000.
What amount should be reported as accounts payable on December 31, 2023?
a. 925,000
b. 940,000
c. 950,000
d. 975,000

19. Based on a physical inventory taken at year-end, Chewy Company determined the chocolate inventory on
a FIFO basis at P5,200,000 with a replacement cost of P4,000,000. The entity estimated that after further
processing costs of P2,400,000, the chocolate could be sold as finished candy cars for P8,000,000. The
normal profit margin is 10% of sales. Using the measurement at the lower of cost and net realizable value,
what amount should be reported as chocolate inventory at year-end?
a. 5,600,000
b. 4,000,000
c. 5,200,000
d. 4,800,000

20. On November 15, 2023, Diamond Company entered into a commitment to purchase 10,000 ounces of gold
on February 15, 2024 at a price of P310 per ounce. On December 31, 2023, the market price of gold is
P270 per ounce. On February 15, 2024, the price of gold is P300 per ounce. What amount should be
recognized as gain on purchase commitment in 2024?
a. 400,000
b. 100,000
c. 300,000
d. 0

21. An entity reported the following information for the current year:
Beginning inventory 5,000,000
Purchases 26,000,000
Freight in 2,000,000
Purchase returns and allowances 3,500,000
Purchase discounts 1,500,000
Sales 40,000,000
Sales returns 3,000,000
Sales allowances 500,000
Sales discounts 1,000,000
A physical inventory taken at year-end resulted in an ending inventory of P4,000,000. At year-end, unsold
goods out on consignment with selling price of P1,000,000 are in the hands of a consignee. The gross profit
rate is 40%. What is the estimated cost of inventory shortage?
a. 1,800,000
b. 2,700,000
c. 1,200,000
d. 2,100,000

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22. An entity used the retail inventory method to estimate inventory at year-end.
Cost Retail
Beginning inventory 720,000 1,000,000
Purchases 4,080,000 6,300,000
Net markups 700,000
Net markdowns 500,000
Sales 6,800,000
Estimated normal shoplifting losses 100,000
Under the average cost retail method, what is the estimated cost of ending inventory?
a. 448,000
b. 600,000
c. 360,000
d. 384,000
23. An entity is engaged in raising dairy livestock. The entity provided the following information during
current year:
Carrying amount on January 1 5,000,000
Increase due to purchases 2,000,000
Gain arising from change in fair value less cost of disposal attributable to price change 400,000
Gain arising from change in fair value less cost of disposal attributable to physical change 600,000
Decrease due to sales 850,000
Decrease due to harvest 200,000
What is the carrying amount of the biological asset on December 31, 2022?
a. 6,950,000
b. 6,000,000
c. 8,000,000
d. 7,150,000
24. On January 1, 2023, Purl Company purchased as a long-term investment P5,000,000 face amount of Shaw
Company’s 8% bonds for P4,562,000. The bonds were purchased to yield 10% interest. The bonds mature
on January 1, 2028 and pay interest annually on December 31. The interest method of amortization is used.
What is the carrying amount of the bond investment on December 31, 2024?
a. 4,680,020
b. 4,662,000
c. 4,618,200
d. 4,562,000
25. At the beginning of current year, Bliss Company acquired 20% of the outstanding ordinary shares of an
investee for P7,000,000. This investment gave Bliss Company the ability to exercise significant influence
over the investee. The carrying amount of the acquired shares was P6,000,000.
The excess of cost over carrying amount was attributed to an identifiable intangible asset which was
undervalued on the investee’s statement of financial position and which had a remaining useful life of ten
years. The investee reported net income of P1,800,000 and paid cash dividends of P600,000 and thereafter
issued 5% share dividend during the current year.
1. What amount should be reported as investment income for current year?
a. 360,000
b. 260,000
c. 120,000
d. 380,000
2. What is the carrying amount of the investment in associate at year-end?
a. 6,780,000
b. 7,140,000
c. 7,000,000
d. 6,900,000

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26. An entity commenced construction of a building on March 1, 2023. The construction was completed on
September 1, 2023. The cost of the building P30,000,000 was paid in full to the contractor on March 1,
2023. The entity had outstanding during 2023 P16,000,000 note payable bearing interest at 10% and
P20,000,000 note payable bearing interest at 5.5%. None of the borrowings were specified for the
construction of the building. What amount of interest should be capitalized for 2023?
a. 1,125,000
b. 2,250,000
c. 2,700,000
d. 1,350,000
27. An entity incurred the following costs in relation to property, plant and equipment:
Cash paid for purchase of land and an old building 2,500,000
Mortgaged assumed on the land purchased, including interest accrued P100,000 1,000,000
Realtor commission 300,000
Legal fees, realty taxes and documentation expenses 50,000
Amount paid to relocate persons squatting on the property 100,000
Cost of tearing down an old building on the land to make room for construction
of new building 200,000
Salvage value of old building demolished 50,000
Cost of fencing the property after construction 250,000
Amount paid to contractor for the building constructed 5,000,000
Building permit fee 50,000
Excavation 50,000
Architect fee 200,000
1. What amount should be capitalized as cost of land?
a. 3,950,000
b. 4,100,000
c. 3,850,000
d. 3,800,000
2. What amount should be capitalized as cost of building?
a. 5,300,000
b. 5,700,000
c. 5,450,000
d. 5,550,000
28. At the beginning of the current year, Vorst Company purchased a mineral mine for P26,400,000 with
removable ore estimated at 1,200,000 tons. After it has extracted all the ore, the entity will be required by
law to restore the land to its original condition at an estimated cost of P2,100,000. The present value of the
estimated restoration cost is P1,800,000. The entity believed that it will be able to sell the property
afterwards for P3,000,000. During the current year, the entity incurred P3,600,000 of development cost
preparing the mine for production, removed 80,000 tons of ore and sold 60,000 tons. What amount of
depletion should be included in cost of goods sold for the current year?
a. 1,920,000
b. 1,440,000
c. 1,940,000
d. 1,455,000
29. At the end, Zoe Company reported equipment at the cost of P9,000,000 and accumulated depreciation of
P3,000,000. Due to obsolescence and physical damage, the equipment is found to be impaired. The entity
has determined the fair value less cost of disposal of the equipment at P4,500,000, value in use at
P4,000,000 and undiscounted net cash inflows at P5,500,000. What amount should be reported as
impairment loss for current year?
a. 1,500,000
b. 2,000,000
c. 500,000
d. 400,000

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30. Zephyr Company reported the following calculation relating to an impairment loss suffered on December
31, 2023:
Goodwill Other assets
Carrying amount 3,000,000 9,000,000
Impairment loss (3,000,000) (2,000,000)
Adjusted carrying amount - 7,000,000
There has been a favorable change in the estimate of the recoverable amount of the net assets. The
recoverable amount is now P8,000,000 on December 31, 2024. The carrying amount of the net assets
would have been P7,200,000 on December 31, 2024 if there was no impairment loss recognized on
December 31 2023. Assets are depreciated at 20% of reducing balance. What amount of gain on reversal
of impairment should be recognized in 2024?
a. 1,000,000
b. 2,400,000
c. 1,600,000
d. 0
31. An entity operates a customer loyalty program. The entity grants program members loyalty points when
they spend a specified amount of purchases. Program members can redeem the points for further purchases.
The points have no expiry date. During 2022, the customer earned 60,000 points. Management expects the
100% of these points will be redeemed. The stand-alone selling price of each loyalty point is P20. The
sales during 2022 amounted to P6,800,000 based on stand-alone selling price. On December 31, 2022,
28,800 points have been redeemed in exchange for purchases. In 2023, the management revised
expectations and now expects 90% of the points to be redeemed. In 2023, the entity redeemed 9,000 points.
What is the revenue earned from loyalty points for 2023?
a. 224,400
b. 714,000
c. 170,000
d. 0
32. On December 31, 2023, an entity leased a machine for a five-year period. Equal annual payments under
the lease are P1,050,000 including P50,000 annual executory cost and are due on December 31 of each
year. The first payment was made on December 31, 2023, and the second payment was made on December
31, 2024. The five lease payments are discounted at 10% over the lease term. The present value of
minimum lease payments at the inception of the lease and before the first annual payment was P4,170,000.
On December 31, 2023, what amount should be reported as current lease liability?
a. 1,000,000
b. 1,050,000
c. 683,000
d. 738,000
33. An entity leased equipment to a lessee on January 1, 2023 for an eight-year period. Equal payments under
the lease are P500,000 and are due on January 1 of each year. The first payment was made on January 1,
2023. The selling price of the equipment is P2,900,000 and the carrying amount is P2,000,000. The lease
is appropriately accounted for as a sales type lease. The lessor incurred an initial direct cost of P100,000.
The present value of the lease payments at an implicit interest rate of 12% is P2,780,000.
1. What amount should be reported as gross profit for 2023?
a. 900,000
b. 800,000
c. 780,000
d. 680,000
2. What amount should be reported as interest revenue for 2023?
a. 333,600
b. 348,000
c. 273,600
d. 288,000

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34. At the beginning of current year, an entity sold an equipment with remaining life of 20 years and
immediately leased it back for 5 years at the prevailing market rental.
Sale price at fair value 5,000,000
Carrying amount of equipment 6,000,000
Annual rental payable at the end of each year 500,000
Implicit interest rate 6%
Present value of an ordinary annuity of 1 at 6% for 5 periods 4.21
1. What is the cost of right of use asset?
a. 2,105,000
b. 2,526,000
c. 2,895,000
d. 1,500,000
2. What is the loss on right transferred to the buyer-lessor?
a. 508,200
b. 500,000
c. 579,000
d. 0
35. An entity reported pretax financial income of P6,000,000 in the income statement for the current year. The
tax rate is 25%.
Tax return Accounting record
Rent received in advance 800,000 0
Depreciation 1,500,000 1,000,000
Payment of penalty 0 250,000
Premiums on officers’ life insurance 0 150,000
Doubtful accounts expense 200,000 300,000
Warranty cost 400,000 600,000
1. What amount should be reported as current provision for income tax for the current year?
a. 1,750,000
b. 1,850,000
c. 1,875,000
d. 2,000,000
2. What amount should be reported as total tax expense for the current year?
a. 1,500,000
b. 1,600,000
c. 1,400,000
d. 1,537,500
3. What amount should be reported respectively as deferred tax asset and deferred tax liability?
a. 275,000 and 125,000
b. 125,000 and 275,000
c. 250,000 and 150,000
d. 150,000 and 250,000
36. Knob Company transferred real state to the creditor pursuant to a debt restructuring in full settlement of a
liability.
Carrying amount of liability liquidated 1,500,000
Carrying amount of real estate transferred 1,000,000
Fair value of real estate transferred 900,000
What amount should be recognized as gain or loss on extinguishment of debt?
a. 600,000 gain
b. 600,000 loss
c. 500,000 gain
d. 500,000 loss

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37. An entity provided the following information for the current year:
January 1 Projected benefit obligation (10% discount rate) 3,500,000
During the year Pension benefits paid to retired employees 250,000
Past service cost 500,000
Actuarial loss 200,000
Current service cost 700,000
What amount should be reported as projected benefit obligation on December 31?
a. 4,600,000
b. 5,000,000
c. 4,250,000
d. 4,650,000
38. During the current year the entity reported fair value of plan assets on January 1 P3,500,000, market related
value of plan assets P2,800,000, contribution to plan P280,000, actual return on plan asset P370,000 and
benefits paid to retirees P250,000. The discount rate is 10%. What amount should be reported as fair value
of plan assets on December 31?
a. 3,200,000
b. 3,900,000
c. 4,250,000
d. 3,550,000
39. At the beginning, Vey Company had 125,000 shares issued which included 25,000 shares held as treasury.
October 31 13,000 treasury shares were distributed to officers as part of a share compensation plan.
November 1 A 3-for-1 share split took effect
December 1 The entity purchased 5,000 of its own shares to discourage an unfriendly takeover.
How many shares were outstanding at year-end?
a. 334,000
b. 324,000
c. 300,000
d. 285,000
40. At the beginning of current year, King Company had 400,000 shares with P15 par value. During the current
year, the entity revealed the following transactions affecting treasury shares:
March 31 Purchased 50,000 treasury shares at P30 per share
June 30 Issued a 4-for-1 share split
July 31 Reissued 20,000 treasury shares at P20 per share
What amount should be reported as remaining cost of treasury shares?
a. 1,100,000
b. 1,350,000
c. 900,000
d. 600,000
41. An entity began operations on January 1, 2020 and reported during the first three years net income of
P1,500,000 for 2020, P2,500,000 for 2021, P3,000,000 for 2022, dividend declared of P1,000,000 for 2021
and P1,000,000 for 2022. The entity provided the following information for 2023:
Income before income tax 5,000,000
Prior period error – understatement of 2022 depreciation before tax 500,000
Cumulative decrease in income from change in inventory method before tax 1,000,000
Dividend declared 2,000,000
Income tax rate 25%
What amount should be reported as retained earnings on December 31, 2023?
a. 5,625,000
b. 5,250,000
c. 6,500,000
d. 6,150,000

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42. On January 1, 2023, an entity had 200,000 ordinary shares outstanding. The following transactions
occurred during the year:
March 1 120,000 ordinary shares were issued.
May 1 6,000 ordinary shares were reacquired as treasury.
October 1 100,000 cumulative preference shares were issued. Each preference share can be
converted into 3 ordinary shares. The preference dividend per share is P5.
November 1 A 10% bonus issue on the ordinary shares was distributed.
December 31 Net income for the year is P3,500,000.
1. What amount of basic EPS should be presented on December 31, 2023?
a. 10.71
b. 10.13
c. 8.69
d. 9.21
2. What amount of diluted EPS should be presented on December 31, 2023?
a. 7.35
b. 8.58
c. 8.74
d. 5.34
43. An entity provided the following shareholders’ equity on December 31, 2023:
Cumulative preference share capital, P100, 8% 500,000
Ordinary share capital, P100 par 1,100,000
Share premium 200,000
Retained earnings 260,000
Treasury ordinary shares – 1,000 at cost ( 150,000)
Dividends on preference shares are in arrears for 2022 and 2023. What is the book value per ordinary share
on December 31, 2023?
a. 125
b. 191
c. 133
d. 141
44. An entity had retained earnings of P3,300,000 at the beginning of 2023. Throughout 2023, the entity had
20,000 ordinary shares of P100 par value that are issued and outstanding. During 2023, the entity reported
net income of P5,500,000, purchased treasury shares for P600,000, declared cash dividends of P1,800,000,
reissued all treasury shares at a gain of P150,000, and declared and issued a 10% ordinary share bonus
issue when the market value was P150 per share. What amount should be reported as retained earnings on
December 31, 2023?
a. 7,150,000
b. 6,750,000
c. 6,800,000
d. 6,700,000
45. On January 1, 2023, an entity issued share appreciation rights to its president exercisable for one year
beginning January 1, 2025 provided that the president is still in the employ of the company at that date of
exercise. Each right provides for a cash payment equal to the excess of the entity’s share price over P50.
The equivalent number of shares for share appreciation rights will be based on the level of sales at the date
of exercise. The number of equivalent shares is 20,000 if the level of sales is P4,000,000 to P6,000,000
and 30,000 shares if the level of sales is over P6,000,000. The actual sales achieved totaled P5,000,000 in
2023 and P7,000,000 in 2024. The share prices are P90 in 2023 and P85 in 2024. What amount should be
reported as compensation expense for 2024?
a. 250,000
b. 650,000
c. 525,000
d. 850,000

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46. An entity provided the following data:
December 31, 2023 December 31, 2024
Accounts receivable 840,000 780,000
Inventory 1,500,000 1,400,000
Accounts payable 950,000 980,000
Total sales were P12,000,000 for 2024 and P11,000,000 for 2023. Cash sales were 20% of total sales each
year. Cost of goods sold was P8,400,000 for 2024. Variable general and administrative expenses for 2024
were P1,200,000. The variable expenses have varied in proportion to sales. Variable expenses have been
paid 50% in the year incurred and 50% the following year. Fixed expenses, including P350,000
depreciation and P50,000 bad debt expense, totaled P1,000,000 each year. Eighty percent of fixed expenses
involving cash were paid in the year incurred and 20% the following year. Each year there was a P50,000
bad debt estimate and a P50,000 writeoff.
1. What amount was collected by an entity from customers during 2024?
a. 12,010,000
b. 12,060,000
c. 11,960,000
d. 11,890,000
2. What amount was disbursed by an entity for purchases during 2024?
a. 8,500,000
b. 8,270,000
c. 8,300,000
d. 8,200,000
3. What total amount was disbursed by an entity for fixed and variable expenses during 2024?
a. 2,200,000
b. 2,500,000
c. 1,750,000
d. 2,250,000
47. Beal Company reported the following changes in the statement of financial position accounts for the current
year.
Increase
(Decrease)
Assets
Cash and cash equivalent 120,000
Short-term investments 300,000
Accounts receivable, net -
Inventory 80,000
Long-term investments ( 100,000)
Property, plant and equipment 700,000
Accumulated depreciation -___
1,100,000
Liabilities and Shareholders’ Equity
Accounts payable and accrued liabilities ( 5,000)
Dividend payable 160,000
Short-term bank debt 325,000
Long-term debt 110,000
Ordinary share capital, P10 par 100,000
Share premium 120,000
Retained earnings 290,000
1,100,000
The following additional information relates to the current year:
• Net income for the current year was P790,000.
• Cash dividend of P500,000 was declared.
• Equipment costing P600,000 and having a carrying amount of P350,000 was sold for P350,000.
• Equipment costing P110,000 was acquired through issuance of long-term debt.
• A long terms investment was sold for P135,000. There were no other transactions affect long-term
investments.
• 10,000 ordinary shares were issued for P22 a share.

Compute net cash provided by operating activities, net cash used in investing activities and net cash provided
by financing activities.

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Solution 47

Operating activities

Net income 790,000

Increase in inventory ( 80,000)
Gain on sale of investments (135,000 – 100,000) ( 35,000)
Depreciation 250,000
Decrease in accounts payable and accrued liabilities ( 5,000)
Net cash provided by operating activities 920,000

Accumulated depreciation – net change -

Add back: Accumulated depreciation on equipment sold 250,000
Total increase – Depreciation for current year 250,000

Cost of equipment sold 600,000

Carrying amount 350,000
Accumulated depreciation on equipment sold 250,000

Investing activities

Purchase of short-term investments ( 300,000)

Sale of long-term investments 135,000
Purchase of property, plant and equipment (1,190,000)
Sale of equipment 350,000
Net cash used in investing activities 1,005,000

Property plant and equipment - net increase 700,000

Add Back: Cost of equipment sold 600,000
Total 1,300,000
Less: Equipment acquired through issuance of long-term debt 110,000
Cash paid for property, plant and equipment 1,190,000

Financing activities

Cash dividend paid (340,000)

Proceeds from short-term debt 325,000
Proceeds from issue of ordinary shares (10,000 x 22) 220,000
Net cash provided by financing activities 205,000

Increase in ordinary share capital 100,000

Increase in share premium 120,000
Proceeds from issue of ordinary shares 220,000

Dividend declared during the year 500,000

Dividend payable (160,000)
Dividend paid 340,000

E n d

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