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Financial Accounting and Reporting (FAR) OCAMPO/OCAMPO

FINAL PRE-BOARD EXAMINATION CPA Review MAY 5, 2024

Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of 70 items and the
exam is good for three (3) hours. Good luck!

1. Which of the following is represented in the Philippine d. Included in inventory was merchandise received
Interpretations Committee? from OhTee on Dec. 31 with an invoice price of
a. Bureau of Internal Revenue P156,300. The merchandise was shipped f.o.b
b. Commission on Audit destination. The invoice, which has not yet
c. Insurance Commission arrived, has not been recorded.
d. None of these e. Not included in inventory is P85,400 of
merchandise purchased from Break Industries.
2. Which statement is correct? The merchandise was received on Dec. 31 after
a. The IFRS Interpretations Committee members are the inventory had been counted. The invoice was
appointed by the International Accounting received and recorded on Dec. 30.
Standards Board (IASB). f. Included in inventory was P104,380 of inventory
b. The ‘Bologna Accord’ formalized the Financial held by UwianNa on consignment from Budol
Accounting Standards Board and IASB’s Corp.
commitment to convergence of U.S. GAAP and g. Included in inventory is merchandise sold to a
IFRS. customer f.o.b. shipping point. This merchandise
c. U.S. GAAP is considered to be ‘rules-based’ and was shipped after it was counted. The invoice
less detailed than IFRS. was prepared and recorded as a sale for
d. Better information for decision-making, leading to P189,000 on Dec. 31. The cost of this
broader investment opportunities is one of the merchandise was P105,200, and the customer
perceived benefits associated with convergence to received the merchandise on Jan. 5.
IFRS. h. Excluded from inventory was a box labeled
“Please accept for credit.” This box contains
3. Which of the following applies to inventories? merchandise costing P15,000 which had been
I. Are monetary assets. sold to a customer for P25,000. No entry had
II. Are financial assets. been made to the books to reflect the return, but
III. Should have physical form. none of the returned merchandise seemed
IV. Are reported as a separate line item in the damaged.
statement of financial position.
The adjusted inventory cost of UwianNa Corp. at Dec.
a. I and II only c. IV only 31 should be
b. III and IV only d. None of these a. P2,217,620 c. P2,396,320
b. P2,373,920 d. P2,411,320
4. UwianNa Corp. asks you to review its Dec. 31
inventory values and prepare the necessary 5. Compute for the cost of inventory lost in fire using the
adjustments to the books. The following information data below:
is given to you. Inventory, Jan. 1 P 51,600
a. UwianNa uses the periodic method of recording Purchases 368,000
inventory. A physical count reveals P2,348,900 Sales 583,000
inventory on hand at Dec. 31. Purchase returns 11,200
b. Not included in the physical count of inventory is Purchase discounts taken 5,800
P134,200 of merchandise purchased on Freight in 3,800
December 15 from Standing. This merchandise Sales returns 8,600
was shipped f.o.b. shipping point on Dec. 29 and
arrived in Jan. The invoice arrived and was A fire destroyed the entire inventory except for
recorded on Dec. 31. purchases in transit, FOB shipping point, of P2,000
c. Included in inventory is merchandise sold to Dipa and goods having selling price of P4,900 that were
on Dec. 30, f.o.b. destination. This merchandise salvaged from the fire. The average gross profit rate
was shipped after it was counted. The invoice on net sales is 40%.
was prepared and recorded as a sale on account a. P56,820 c. P59,760
for P128,000 on Dec. 31. The merchandise cost b. P56,940 d. P62,660
P73,500, and Dipa received it on Jan. 3.

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Use the following information for the next two questions. The equipment consisted of two machines, machine A
and machine B. Machine A had cost P3,000,000 and
An entity is engaged in agricultural activity. Its trial
had a carrying amount of P1,800,000 at June 30,
balance at Dec. 31 presents the following assets related
2024, while machine B had cost P2,000,000 and was
to its farmland:
carried at P1,700,000. Both machines are measured
• Two tractors (P500,000 each)
using the cost model, and depreciated on a straight-
• Four computers (P25,000 each)
line basis over a ten-year period.
• Computer software (P50,000)
• Fruit-bearing trees (estimated value, P20 million of On Dec. 31, 2024, the directors of the entity decided
which P3 million is attributed to the fruits attached to to change the basis of measuring the equipment from
the trees). the cost model to the revaluation model. Machine A
• Harvested fruits (estimated value, P2 million) was revalued to P1,800,000 with an expected useful
• Trees grown for use as lumber (estimated value, P10 life of six years, and machine B was revalued to
million) P1,550,000 with an expected useful life of five years.
• Trees that are cultivated both for their fruit and their
The amount to be recognized in profit or loss as a
lumber (estimated value, P8 million)
result of the revaluation of assets on Dec. 31, 2024 is
• Maize and wheat (estimated value, P4 million)
a. P150,000 c. (P150,000)
b. P100,000 d. (P 50,000)
6. How much should be accounted for as biological
assets?
11. An entity owns the following properties at Jan. 1,
a. P25 million c. P7 million
2024:
b. P17 million d. P3 million
Property A
7. How much should be accounted for as property, plant
An office building used by the entity for administrative
and equipment?
purposes with a depreciated historical cost of P2
a. P17.525 million c. P26.100 million
million. At Jan. 1, 2024 it had a remaining life of 20
b. P18.100 million d. P30.100 million
years. After a re-organization on July 1, 2024, the
property was leased to a third party and reclassified
8. An entity is an antivirus software company in the
as an investment property applying the entity’s policy
cybersecurity industry. 95% of the entity’s sales are
of the fair value model. An independent valuer
software but it also sells some hardware products. For
assessed the property to have a fair value of P2.3
the hardware products, the entity uses some units as
million at July 1, 2024, which had risen to P2.34
‘proof of concept’ stock. The entity ships the hardware
million at Dec. 31, 2024.
products to customers for a trial period and then it
receives them back, inspect them, and then store until Property B
needed for the next trial. These particular units are Another office building sub-leased to a subsidiary of
not sold to customers. They are exclusively for trial the entity. At Jan. 1, 2024, it had a fair value of P1.5
purposes. How should the entity classify the hardware million which had risen to P1.65 million at Dec. 31,
products used as ‘proof of concept’ stock? 2024. At Jan. 1, 2024 it had a remaining life of 15
a. Inventories years.
b. Property, plant and equipment
c. Marketing supplies In relation to these properties, determine the net
d. Prepaid expenses amount to be recognized in profit or loss in the entity’s
separate financial statements for the year ended Dec.
9. An entity takes a full year’s depreciation in the year of 31, 2024.
an assets acquisition, and no depreciation in the year a. P140,000 c. P490,000
of disposition. Data relating to one depreciable asset b. P190,000 d. P540,000
acquired in 2022, with residual value of P400,000 and
estimated useful life of 8 years, at Dec. 31, 2023 are: 12. An entity purchased a number of computers for its
employees. When the computers arrived, the entity
Cost P5,400,000
made an online purchase of corresponding number of
Accumulated depreciation 2,362,500
licenses for the latest Windows operating system to
Using the same depreciation method in 2022 and run the computers. The entity also purchased a license
2023, how much depreciation should the entity record to use the specific accounting software. On top of the
in 2024 for this asset? purchase cost the entity is required to pay the annual
a. P625,000 c. P703,125 fee for upgrades of the software. The entity can
b. P659,375 d. P759,375 continue using the license for accounting software also
without annual upgrade fees, but it won’t receive any
10. In the June 30, 2024 annual report of an entity, the updates. Which of the following should be recognized
equipment was reported as follows: as intangible assets?
Equipment (at cost) P5,000,000 I. Operating system
Accumulated depreciation 1,500,000 II. Accounting software license
P3,500,000 III. Annual upgrade

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a. I and II only c. II only The total expense to be recognized in the entity’s 2024
b. II and III only d. None of these profit or loss in relation to the patent is
a. P235,000 c. P260,000
13. An entity acquired a broadcasting license for b. P250,000 d. P305,000
P60,000,000. The license is renewable every 10 years
if the entity provides at least an average level of 16. Which of the following borrowing costs may be
service to its customers and complies with the capitalized?
relevant legislative requirements. The license may be I. Interest in respect of lease liabilities recognized in
renewed indefinitely at little cost and has been accordance with PFRS 16.
renewed twice before the most recent acquisition. The II. Exchange differences arising from foreign
acquiring entity intends to renew the license currency borrowings to the extent that they are
indefinitely and evidence supports its ability to do so. regarded as an adjustment to interest costs.
Historically, there has been no compelling challenge to III. Dividends on preference shares classified as a
the license renewal. liability.
IV. Increase in carrying amount of decommissioning
At the time of acquisition, the technology used in
liability due to passage of time.
broadcasting is not expected to be replaced by
another technology at any time in the foreseeable a. I, II, III and IV c. I, II and IV only
future. Therefore, the license is expected to contribute b. I, II and III only d. I and II only
to the entity’s net cash inflows indefinitely. The license
is valid for six years before the next renewal. 17. An entity reported cash and cash equivalents of
P12,000,000 in its statement of financial position as
On Jan. 1, 2024, the licensing authority decides that
of Dec. 31, 2024. This amount includes the following:
it will no longer renew broadcasting license, but rather
• Customer’s check for P100,000 returned by bank
will auction the license. At the time the licensing
on Dec. 29, 2024 due to insufficient fund but
authority’s decision is made, the entity’s broadcasting
subsequently redeposited and cleared by the
license has three years until it expires. The entity
bank on Jan. 3, 2025.
expects that the license will continue to contribute to
• Customer’s check for P200,000 dated Jan. 2,
net cash inflows until the license expires.
2025, received on Dec. 29, 2024.
The carrying amount of the license at Dec. 31, 2024 • Cash earmarked for bonds payable due on June
should be 30, 2025, P5,000,000.
a. Nil c. P40,000,000 • P1,000,000 of compensating balance against
b. P20,000,000 d. P60,000,000 short-term borrowing arrangement at Dec. 31,
2024. The compensating balance is legally
14. On Jan. 1, 2021, an entity acquired a gold mine restricted as to withdrawal.
property for P10,000,000. In 2021 and 2022, the • Check written and dated Dec. 29, 2024 and
entity spent P4,000,000 on exploration and delivered to payee on Jan. 2, 2025, P500,000.
development. It expects to be able to mine 35,000 • Check written on Dec. 27, 2024, dated Jan. 2,
ounces of gold over the 10-year life of the mine. The 2025, delivered to payee on Dec. 29, 2024,
entity uses the output method to account for its gold P800,000.
costs and expects to be able to sell the property to a • One-year certificate of deposit, P2,000,000.
real estate developer for P2,000,000 at the end of the
Compute for the adjusted cash and cash equivalents.
10 years. It mined 3,100 ounces in 2023 and 2,800 in
a. P3,700,000 c. P 8,700,000
2024. How much depletion would be recorded related
b. P5,700,000 d. P10,000,000
to the gold in 2024?
a. P 960,000 c. P1,200,000
18. The following information is available for an entity
b. P1,120,000 d. P1,400,000
relative to its current year operations:
15. On Jan. 2, 2023, an entity purchased a patent with a Accounts receivable, Jan. 1 P40,000
cost P940,000 a useful life of 4 years. At Dec. 31, Accounts receivable collected
2023, and Dec. 31, 2024, the entity determines that during the year 84,000
impairment indicators are present. The following Cash sales during the year 20,000
information is available for impairment testing at each Inventory, Jan. 1 48,000
year end: Inventory, Dec. 31 44,000
12/31/2023 12/31/2024 Purchases of inventory during the year 80,000
Fair value less Gross margin on sales 42,000
costs of disposal P715,000 P420,000
Value-in-use P750,000 P445,000 What is balance of the entity’s accounts receivable at
Dec. 31?
No changes were made in the asset's estimated useful a. P20,000 c. P 82,000
life. b. P62,000 d. P146,000

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19. On Jan. 1, 2019, an entity sold a machine with a 24. On Jan. 1, 2024, Totga Co. purchased 20,000 ordinary
carrying amount of P300,000 and accepted in shares of FZ Co. at P100 per share. At the time of the
exchange a promissory note with a face value of purchase, FZ Co. had 100,000 ordinary shares
P500,000, a due date of Dec. 31, 2028, and a stated outstanding. For the year ended Dec. 31, 2024, FZ Co.
rate of 4%, with interest receivable at the end of each reported profit of P2,400,000 and paid cash dividends
year. The fair value of the machine is not readily of P600,000. The shares of FZ are selling at P110 per
determinable and the note is not readily marketable. share on Dec. 31, 2024.
Under the circumstances, the note is considered to
Totga is entitled to appoint two directors to the board,
have an appropriate imputed rate of interest of 8%.
which consists of eight members. The remaining of the
The interest income to be recognized in 2024 is voting rights are held by two other companies, each
a. P20,000 c. P32,604 of which is entitled to appoint three directors. The
b. P29,264 d. P33,612 board makes decisions on the basis of simple majority.
Because board meetings are often held at very short
20. In accordance with PFRS 9, at what stage is interest notice, Totga does not always have representation on
revenue calculated based on the amortized cost of the the board. Often the suggestions of the representative
financial asset? of Totga are ignored, and the decisions of the board
a. Stage 1 and 2 c. Stage 3 seem to take little notice of any representations made
b. Stage 2 and 3 d. All stages by the director from Totga.
The carrying amount of the investment in FZ Co. as of
21. On Dec. 28, 2023, an entity commits itself to purchase
Dec. 31, 2024 should be
a financial asset to be classified as FA at AC for
a. P2,000,000 c. P2,360,000
P1,000,000, its fair value on commitment (trade)
b. P2,200,000 d. P2,480,000
date. This security has a fair value of P1,002,000 and
P1,005,000 on Dec. 31, 2023 (the entity's financial
25. On Apr. 1, 2024, Mariko Corp. purchased 25,000
year-end), and Jan. 5, 2024 (settlement date),
ordinary shares of Anjin Corp. at P180 per share which
respectively. If the entity applies the settlement date
reflected book value as of that date. At the time of the
accounting method to account for regular-way
purchase, Anjin had 100,000 ordinary shares
purchases of its securities, the financial asset should
outstanding. The entity paid transaction costs of
be recognized on Jan. 5, 2024 at
P67,500. The first quarter statement ending Mar. 31,
a. Nil c. P1,002,000
2024 of Anjin recorded profit of P480,000. For the
b. P1,000,000 d. P1,005,000
year ended Dec. 31, 2024, Anjin reported profit of
P2,400,000. Anjin paid the entity dividends of P60,000
22. Which of the following is recognized in profit or loss if
on June 1, 2024 and again P60,000 on Dec. 31, 2024.
the equity investment is designated as a financial
The shares of Anjin are selling at P190 per share on
asset at fair value through other comprehensive
Dec. 31, 2024.
income?
a. Changes in fair value The carrying amount of the investment in Anjin Corp.
b. Impairment loss as of Dec. 31, 2024 should be
c. Transaction costs to sell a. P4,860,000 c. P4,980,000
d. None of these b. P4,927,500 d. P5,047,500

23. An entity carries the following marketable equity 26. An entity issued a note payable for P5,000,000. The
securities on its books at Dec. 31, 2023 and 2024. note is designated a financial liability designated at
FVTPL. The entity paid P50,000 transaction costs and
Fair value
P600,000 interest. At the end of the reporting period,
Purchase price 12/31/23 12/31/24
the fair value of the financial liability decreased by
C Corp. P 300,000 P 260,000 P 310,000
P500,000. Of the decrease in fair value, P125,000 is
P Corp. 250,000 300,000 290,000
attributable to the liability’s credit risk.
A Corp. 700,000 660,000 640,000
Total P1,250,000 P1,220,000 P1,240,000 Compute for the net amount to be recognized in profit
or loss.
All securities were purchased during 2023. a. P150,000 c. P 275,000
Transaction costs paid on each acquisition is 1% of the b. P225,000 d. P1,025,000
purchase price. The securities were not designated as
at fair value through other comprehensive income. 27. An entity is indebted under a P5,000,000, 10% three-
The amount to be recognized as fair value adjustment year note dated Dec. 31, 2021. Because of financial
gain or loss in the entity’s 2024 profit or loss is difficulties, the entity owed accrued interest of
a. P10,000 loss c. P20,000 gain P500,000 on the note at Dec. 31, 2024. Under a debt
b. P10,000 gain d. P22,500 loss restructuring on Dec. 31, 2024, the entity and the
lender agreed to settle the note and accrued interest
for a tract of land having a fair value of P3,500,000.
The acquisition cost of the land is P1,000,000. The
income tax rate is 30%.

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In its 2024 income statement, the entity should report 32. A lessee decreased the carrying amount of a right-of-
gain on extinguishment of debt at use asset and recognized a gain in profit or loss. This
a. P2,000,000 c. P4,000,000 is the accounting for which type of lease modification?
b. P3,150,000 d. P4,500,000 a. A lease modification accounted for as a separate
lease.
28. An entity paid P400,000 cash and issued 80,000, P1 b. A lease modification that decreased the scope of
par value, ordinary shares to its unsecured creditors the lease and accounted for as a separate lease.
on a pro rata basis pursuant to a reorganization plan. c. A lease modification that decreased the scope of
The entity owed these unsecured creditors a total of the lease and not accounted for as a separate
P1,200,000. The entity’s ordinary share was trading lease.
at P1.25 per share. The income tax rate is 30%. The d. A lease modification that increased the scope of
entity should report gain on extinguishment of debt at the lease and not accounted for as a separate
a. Nil c. P700,000 lease.
b. P490,000 d. P720,000
33. Lessor Corp. purchased a machine on Jan. 1, 2024, for
29. An entity has negotiated a restructuring of its P1,250,000 for the express purpose of leasing it. The
P5,000,000 note payable to a bank. The bank has machine was expected to have a 10-year life from Jan.
agreed to reduce the face value of the note to 1, 2024, no salvage value, and to be depreciated on a
P4,000,000 and extend the due date three years from straight-line basis. On Mar. 1, 2024, Lessor leased the
the date of restructuring. However, the interest rate machine to Lessee Corp. for P300,000 a year for a 4-
was increased from 15% to 21%. The restructuring year period ending Feb. 28, 2028. The appropriate
will occur on Dec. 31, 2024. There is no unpaid interest rate is 12% compounded annually. Lessor
interest on the restructured loan at this time. The tax paid a total of P 15,000 for maintenance and insurance
rate is 30%. Compute for the gain to be recognized in on the machine for the year ended Dec. 31, 2024.
profit or loss. Lessee paid P300,000 to Lessor on Mar. 1, 2024.
a. Nil c. P 452,112 Lessor retains title to the machine and plans to lease
b. P316,478 d. P1,000,000 it to someone else after the 4-year lease period.
How much depreciation expense would Lessor Corp.
30. On Mar. 1, 2023, an entity issued P700,000 of 10
record for the year ended Dec. 31, 2024?
percent bonds to yield 8 percent. Interest is payable
a. Nil c. P125,000
semiannually on Feb. 28 and Aug. 31. The bonds
b. P104,167 d. P260,417
mature in ten years. The entity is a calendar-year
corporation. The interest expense to be recognized in
34. Remeasurements of the net defined benefit liability
2024 profit or loss is
(asset) exclude
a. P47,294 c. P63,042
a. Actuarial gains and losses.
b. P52,925 d. P63,223
b. The return on plan assets excluding amounts
included in net interest on the net defined benefit
31. An entity has a long-standing policy of acquiring
liability (asset).
company equipment by leasing. The entity entered
c. Any change in the effect of the asset ceiling,
into a lease for a new equipment on Jan. 1, 2024. The
excluding amounts included in net interest on the
lease stipulates that annual payments will be made for
net defined benefit liability (asset).
5 years. The payments are to be made in advance on
d. The difference between the present value of the
Dec. 31 of each year. At the end of the 5-year period,
defined benefit obligation being settled, as
the entity may purchase the equipment. The
determined on the date of settlement and the
estimated economic life of the equipment is 12 years.
settlement price, including any plan assets
The entity uses the calendar year for reporting
transferred and any payments made directly by
purposes and straight-line depreciation for other
the entity in connection with the settlement.
equipment. In addition, the following information
about the lease is also available:
35. An entity sponsors a defined benefit pension plan. For
Annual lease payments P55,000 the current year ended Dec. 31, the following
Purchase option price P25,000 information relevant to the plan has been
Estimated fair value of accumulated:
equipment after 5 years P75,000 Defined benefit obligation, 1/1 P10,000,000
Implicit rate 10% Fair value of plan assets, 1/1 9,000,000
Date of first lease payment Jan. 1, 2024 Current service cost 3,000,000
Gain on settlement 500,000
Compute for the lease-related expenses for 2024. Actual return on plan assets 630,000
a. P34,809 c. P44,893 Increase in defined benefit
b. P39,393 d. P67,961 obligation due to changes in 800,000
actuarial assumptions
Market yield on high quality 6%
corporate bonds
Yield on bonds issued by the entity 8%
Expected return on plan assets 9%

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What amount should the entity contribute in order to The entity estimates the discounted cost of repairs at
report an accrued pension liability of P500,000 in its P400,000 in the first 2 years and P500,000 in the
Dec. 31 statement of financial position? second 2 years (years 3 and 4 after purchase).
a. P2,060,000 c. P3,060,000
How much should the entity recognize as provision for
b. P2,770,000 d. P3,770,000
warranty?
a. Nil c. P450,000
36. At the beginning of year 1, Addo Corp. grants 100
b. P400,000 d. P900,000
share options to each of its 200 employees. Each
grant is conditional upon the employee remaining in
39. Which of the following is accounted for as a
service over the next three years. The entity
performance obligation in accordance with PFRS 15?
estimates that the fair value of each option is P21. On
I. Assurance-type warranty
the basis of a weighted average probability, the entity
II. Customer option to acquire additional goods or
estimates that 60 employees will leave during the
services for free or at a discount
three-year period and therefore forfeit their rights to
III. Customer loyalty program
the share options.
IV. Gift certificates issued
Suppose that 15 employees leave during year 1. Also
a. I, II, III and IV c. II and III only
suppose that by the end of year 1, the entity’s share
b. II, III and IV only d. III and IV only
price has dropped, and the entity reprices its share
options, and that the repriced share options vest at
40. An entity should recognize deferred tax asset on a
the end of year 3. The entity estimates that a further
non-taxable government grant related to assets when
35 employees will leave during years 2 and 3. During
the grant is
year 2, a further 10 employees leave, and the entity
a. Treated as deferred income.
estimates that a further 10 employees will leave
b. Deducted in arriving at the carrying amount of the
during year 3. During year 3, a total of 8 employees
asset.
leave.
c. Either a or b.
The entity estimates that, at the date of repricing, the d. Neither a nor b.
fair value of each of the original share options granted
(ie before taking into account the repricing) is P10 and
that the fair value of each repriced share option is P13. Use the following information for the next three questions.
The amount to be recognized as expense by Addo The accounting profit before tax for the year ended Dec.
corp. in year 3 is 31, 2024 for Oki Corp. amounted to P18,500 and included:
a. P136,800 c. P150,750 Depreciation – motor vehicle (25%) P 4,500
b. P145,050 d. P400,800 Depreciation - equipment (20%) 20,000
Rent revenue 16,000
37. An entity operates a customer loyalty program. The Royalty revenue (exempt from tax) 5,000
entity grants program members loyalty points when Doubtful debts expense 2,300
they spend a specified amount on the entity’s Entertainment expense
products. Program members can use the points to buy (non-deductible) 1,500
products from the entity for free. The points have no Proceeds on sale of equipment 19,000
expiry date. Carrying amount of equipment sold 18,000
The entity provided the following details in relation to Annual leave expense 5,000
this program: The draft statement of financial position at Dec. 31, 2024
• Proceeds from sale of products, P4,750,000 contained the following assets and liabilities:
• Stand-alone selling price of the points issued,
P250,000 2024 2023
• Points redeemed, 60% Assets
Cash P 11,500 P 9,500
The entity does not expect to be entitled to a breakage Receivables 12,000 14,000
amount. However, at the end of the current year, the Allow. for doubtful debts (3,000) (2,500)
likelihood of customers’ exercising 10% of the points Inventory 19,000 21,500
issued becomes remote. Rent receivable 2,800 2,400
Compute the total amount to be recognized as Motor vehicle 18,000 18,000
revenue from the customer loyalty program for the Acc. Dep. - motor
current year. vehicle (15,750) (11,250)
a. P150,000 c. P166,250 Equipment 100,000 130,000
b. P158,333 d. P175,000 Acc. Dep. - equipment (60,000) (52,000)
Deferred tax asset ? 5,550
38. An entity sells refrigerators for and the legal warranty P135,200
period is 2 years. During these 2 years, the entity Liabilities
must remove all the defects that existed at the time Accounts payable 15,655 21,500
of sale. The customers can extend this warranty for a Provision for annual
fee for another 2 years. leave 4,500 6,000

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2024 2023 45. If the contract will be settled net in shares, Entity A
Current tax liability ? 7,600 shall record
Deferred tax liability ? 2,745 a. Decrease in equity of P104,000 on Feb. 1, 2023
37,845 b. Gain of P10,000 on Dec. 31, 2023
c. Gain of P2,000 on Jan. 31, 2024
Additional information
d. Loss of P4,300 on Jan. 31, 2024
a) The entity can claim a deduction of P15,000
(15%) for depreciation on equipment, but the
46. If settlement will be made by delivering a fixed
motor vehicle is fully depreciated for tax purposes.
amount of cash and receiving a fixed number of Entity
b) The equipment sold during the year had been
A’s shares, Entity A shall record a decrease in equity
purchased for P30,000 two years before the date
on Feb. 1, 2023 at
of sale.
a. Nil c. P104,000
c) The entity is subject to 30% tax rate.
b. P100,000 d. P106,000
41. Oki Corp.’s current tax expense for 2024 is
47. An entity’s outstanding share capital at Dec. 15, 2024,
a. P6,030 c. P7,500
consisted of the following:
b. P6,930 d. P8,040
• 30,000 5% cumulative preference shares, par
value P10 per share, fully participating as to
42. Oki Corp.’s deferred tax expense (benefit) for 2024 is
dividends. No dividends were in arrears.
a. P6,570 c. P(2,430)
• 200,000 ordinary shares, par value P1 per share.
b. P(3,270) d. P(1,080)
On Dec. 15, 2024, the entity declared dividends of
43. An entity issued bonds with face value of P3,000,000 P100,000. What was the amount of dividends payable
together with 60,000, P50 par value, ordinary shares to the entity's ordinary shareholders?
and 20,000, P100 par value, preference shares for a a. P10,000 c. P40,000
total consideration of P10,000,000. If the bonds were b. P34,000 d. P47,500
issued separately, they would have sold for
P2,500,000. At the date of issuance, the ordinary 48. Equity balances of an entity as of the end of the
share was selling for P100 per share and the reporting period follow:
preference share was selling for P150 per share. 12% preference share capital,
What amount of the proceeds should the entity 200,000 shares, par P100 P20,000,000
allocate to the ordinary shares? Ordinary share capital, 500,000
a. P2,500,000 c. P5,000,000 shares, par P100 50,000,000
b. P4,500,000 d. P5,217,391 Share premium 10,000,000
Retained earnings 15,000,000
The preference shares have a call price of 130, a
Use the following information for the next three questions. liquidation price of 115 and dividends have not been
On Feb. 1, 2023, Entity A enters into a contract with Entity paid for 3 years.
B to receive the fair value of 1,000 of Entity A’s own Compute the book value per share of ordinary shares.
outstanding ordinary shares as of Jan. 31, 2024 in a. P127.00 c. P139.20
exchange for a payment of P104,000 in cash (i.e., P104 b. P133.20 d. P144.00
per share) on Jan. 31, 2024.
Market price per share: 49. An entity’s capital structure was as follows:
Feb. 1, 2023 P100 2023 2024
Dec. 31, 2023 P110 Outstanding securities:
Jan. 31, 2024 P106 Ordinary 1,000,000 1,000,000
Fair value of forward: Convertible preference 100,000 100,000
Feb. 1, 2023 P0 10% convertible bonds
Dec. 31, 2023 P6,300 payable P30,000,000 P30,000,000
Jan. 31, 2024 P2,000 During 2024, the entity paid dividends of P15 per
Additional information: share on its preference shares. The preference shares
Fixed forward price to be paid on Jan. 31, 2024 P104 are convertible into 150,000 ordinary shares and the
Present value of forward price on Feb. 1, 2023 P100 10% bonds are convertible into 300,000 ordinary
Number of shares under forward contract 1,000 shares. Profit for 2024 was P10,000,000. The income
tax rate is 35%. The diluted earnings per share for
44. If the contract will be settled net in cash, Entity A shall 2024 should be
record a. P7.50 c. P8.24
a. Decrease in equity of P104,000 on Feb. 1, 2023 b. P8.04 d. P8.50
b. Gain of P10,000 on Dec. 31, 2023
c. Gain of P2,000 on Jan. 31, 2024 50. PAS 1 requires disclosure of
d. Loss of P4,300 on Jan. 31, 2024 a. Significant accounting policies
b. Material accounting policies

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c. Immaterial accounting policies a. I, II, III and IV c. I and IV only

d. All accounting policies b. I, II and IV only d. IV only

51. Information about income and expenses is 57. The general ledger trial balance of an entity includes
a. Less important as information about assets and the following accounts for the current year:
liabilities.
Sales revenue P975,000
b. More important as information about assets and
Interest income 20,000
liabilities.
Share of profit of associates 15,000
c. Just as important as information about assets and
Other income 8,000
liabilities.
Decrease in inventories of
d. Not important.
finished goods 25,000
Raw materials used 350,000
52. Which of the following may be classified as current
Employee benefit expenses 150,000
assets?
Loss on translation of foreign
a. Biological assets
operations 30,000
b. Property, plant and equipment
Depreciation of property and
c. Investment in associate
equipment 45,000
d. Deferred tax assets
Impairment of property 80,000
Finance costs 35,000
53. Which of the following financial liabilities due to be
Other expenses 45,000
settled within twelve months after the reporting period
Income tax expense 75,000
should be classified as current liability?
a. Financial liability with original term longer than
How much should be reported as profit for the year?
twelve months.
a. P183,000 c. P263,000
b. Financial liability refinanced on a long-term basis
b. P213,000 d. P288,000
after the reporting period and before the financial
statements are authorized for issue.
58. The following information relates to the activities of an
c. Both a and b.
entity. Income tax may be ignored.
d. Neither a nor b.
Net cash inflows from operating activities P720,000
Decrease in trade payables 23,000
Use the following information for the next two questions. Decrease in inventory 11,500
Increase in trade receivables 24,600
An entity is considering the following items for inclusion in
Cash proceeds from sale of plant
its statement of financial position:
(book value of P25,000) 14,000
Sinking fund P4,500,000 Increase in allowance for doubtful debts 1,000
Bonds payable 5,000,000
What is the profit for the period?
Discount on bonds payable 200,000
a. P698,100 c. P744,100
Decommissioning liability 3,400,000
b. P730,100 d. P767,100
Interest in decommissioning fund 3,100,000
Fair value of plan assets 1,500,000
59. A diversified entity, which is listed in the Philippine
Defined benefit obligation 1,800,000
Stock Exchange, is in the process of determining its
Equipment acquired by way of
reportable segments for purposes of complying with
government grant 750,000
PFRS 8. The performance of the segments reflects the
Government grant 500,000
impact of the corona virus pandemic. The following
Dividends payable 620,000
data pertain to the entity’s eight operating segments:
Cash fund for payment of dividends 830,000
Segment Profit Loss
Compute for the total amount to be reported as part of: 1 P14,000,000 -
2 9,000,000 -
54. Total assets 3 P16,000,000
a. P5,580,000 c. P8,680,000 4 12,500,000
b. P6,080,000 d. P9,180,000 5 6,000,000 -
6 - 3,200,000
55. Total liabilities 7 2,000,000 -
a. P6,020,000 c. P9,120,000 8 - 1,500,000
b. P6,520,000 d. P9,620,000 P31,000,000 P33,200,000
56. In accordance with PAS 1, the statement of profit or In the entity’s segment information, which is(are)
loss shall present reportable segment(s)?
I. Gross profit a. Segments 1, 2, 3, 4, 5 & 6
II. Operating profit b. Segments 1, 2, 3, 4 & 5
III. Profit before financing and income taxes c. Segments 1, 2, & 5
IV. Profit d. Segments 3 & 4

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60. Which of the following are related parties? a. Finance lease liability
I. An entity with a director or key manager in b. Purchase commitment liability
common with the reporting entity. c. Investment in associate carried at fair value
II. Two venturers who share joint control over a d. None of these
joint venture.
III. Both entities are associates of the same third Use the following information for the next two questions.
party.
An entity, required to apply the PFRS for Small Entities,
IV. One entity is a joint venture of a third entity and
acquired an investment in ordinary shares for P600,000 on
the other entity is an associate of the third
June 30, 2024. The direct acquisition costs incurred were
entity.
P25,000.
a. I, II, III and IV c. II and IV only
On Dec. 31, 2024, the fair value of the investment was
b. II, III and IV only d. IV only
P700,000 and the transaction costs that would be incurred
on sale were estimated at P30,000.
61. In applying PAS 29, which of the following should be
restated?
66. If the shares are traded in an active market, the
a. Notes receivable
investment should be reported on the Dec. 31, 2024
b. Bonds payable
statement of financial position at
c. Inventory carried at net realizable value
a. P600,000 c. P670,000
d. Land carried at revalued amount; last revaluation
b. P625,000 d. P700,000
made in a prior year
67. If the shares are not traded in an active market, the
62. In preparing its interim financial statements for the
investment should be reported on the Dec. 31, 2024
quarter ended Apr. 30, 2024, the entity’s accountant
statement of financial position at
is considering the accounting treatment for the
a. P600,000 c. P670,000
following:
b. P625,000 d. P700,000
• In February 2024, the entity, which is a restaurant
in Boracay Island spent P100,000 on advertising
68. An entity acquires patent rights from other enterprises
campaign for subscriptions to tourist magazines in
and pays advance royalties in some cases and in
preparation for the summer. There are only two
others, royalties are paid within ninety days after
issues: one in March and another in April. The
year-end. The following data are included in the
magazine is sold only on subscription basis to
entity’s Dec. 31 statements of financial position:
travel agencies all over the world. The fiscal year
2023 2024
of the entity ends July 31, 2024.
Prepaid royalties P55,000 P45,000
• The accountant estimated that its current fiscal
Royalties payable 80,000 75,000
year-end bonus to executives would be P480,000.
The actual amount paid for the last fiscal year was During 2024 the entity remitted royalties of P300,000.
P440,000. The estimate is subject to year-end In its income statement for the year ended Dec. 31,
adjustment. 2024, the entity should report royalty expense of
a. P295,000 c. P310,000
How much is the total amount that should be included
b. P305,000 d. P330,000
in the quarterly income statement of the entity which
ends Apr. 30, 2024?
69. An entity's total equity increased by P32,000 during
a. P160,000 c. P210,000
2024. New shareholder investment during the year
b. P170,000 d. P220,000
totaled P65,000. Revenues during the year were
P500,000 and expenses were P460,000. Cash on hand
63. Which of the following classification of assets is not
decreased by P10,000 during the year. What amount
applicable to SMEs?
of dividends did the entity declare during 2024?
a. Biological assets
a. P7,000 c. P57,000
b. Investment property
b. P8,000 d. P73,000
c. Goodwill
d. Noncurrent asset held for sale
70. The accountant of an entity made the following
adjusting entry on Dec. 31.
64. An entity, required to apply the PFRS for SMEs,
accepted subscriptions for 1,000 of its P100 par value Rent Income P60,000
ordinary shares at P110 per share. The contract called Unearned Rent Income P60,000
for 50% down payment with the balance within six
If annual rent is received in advance every June 1, the
months. This transaction increased the entity’s equity
original transaction entry made included a credit to
by how much?
a. Rent income, P120,000.
a. Nil c. P 55,000
b. Rent income, P144,000.
b. P50,000 d. P110,000
c. Unearned rent income, P120,000.
d. Cash, P144,000.
65. Which of the following may appear in the statement of
financial position of an entity prepared in accordance
Thank you for participating in Team PRTC
with the PFRS for Small Entities?
Nationwide Open Final Pre-Board Examination.

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