1. On January 1, 20x1, ABC Co.

sold machinery costing ₱3,000,000 with accumulated

depreciation of ₱1,100,000 in exchange for a 3-year, ₱900,000 noninterest-bearing note
receivable due as follows:
Date​ ​ ​ Amount of installment
December 31, 20x1 ​ ​ ​ 400,000
December 31, 20x2 ​ ​ ​ 300,000
December 31, 20x3 ​ ​ ​ 200,000
Total ​ ​ ​ ​ ​ 900,000

The prevailing rate of interest for this type of note is 10%. How much is the carrying amount of
the receivable on December 31, 20x1?
a. 467,354
b. 438,016
c. 376,345
d. 428,346

​ ​ ​ ​ PV of P1 @10%, ​ ​
Date​ Collections n=1 to 3​ Present Value .
Dec. 31, 20x1​ ​ 400,000 ​ 0.90909​ 363,636
Dec. 31, 20x2​ ​ 300,000 0.82645 247,935
Dec. 31, 20x3​ ​ 200,000​ 0.75131​ 150,262
​ ​ ​ 900,000​ ​ ​ 761,833

Date​ ​ ​ Collections​ Interest income​ Amortization​ ​ Present value

Jan. 1, 20x1 ​ ​ ​ ​ ​ ​ ​ ​ 761,833
Dec. 31, 20x1​ ​ 400,000​ 76,183​ ​ 323,817​ ​ 438,016
Dec. 31, 20x2​ ​ 300,000​ 43,802 ​ 256,198​ ​ 181,818
Dec. 31, 20x3​ ​ 200,000​ 18,182​ ​ 181,818 ​ ​ ​ 0
(Use the following information for the next three questions)
On January 1, 20x1, ABC Co. purchased 1,000 shares of XYZ, Inc. for P250,000. Commission
paid to broker amounted to P10,000. The equity securities were designated by management to
be measured at fair value through profit or loss. On December 31, 20x1, the shares are quoted
at P200 per share. It was estimated that transaction cost of P20 per share will be incurred if the
shares were sold on that date.

2. How much is the unrealized gain (loss) on change in fair value recognized in the 20x1 profit
or loss?
a. (70,000)
b. (50,000)
c. (40,000)
d. 60,000

Carrying amount – Dec. 31, 20x1 (1,000 x 200 sh.) ​​ ​ (200,000)

Purchased price – Jan. 1, 20x1​ ​ ​ ​ ​ 250,000
Unrealized loss​ ​ ​ ​ ​ ​ ​ (50,000)

On January 3, 20x2, all of the shares were sold at P300 per share. Commission paid for the
sale amounted to P60,000. How much is the realized gain (loss) from the sale?
a. 60,000
b. (10,000)
c. 40,000
d. (40,000)

Sale price (1,000 shares x 300) ​ ​ ​ ​ ​ 300,000

Commission paid on the sale​​ ​ ​ ​ ​ (60,000)
Net disposal proceeds ​ ​ ​ ​ ​ ​ 240,000
Carrying amount – Dec. 31, 20x1 (1,000 x 200 sh.) ​​ ​ (200,000)
Realized gain on sale ​ ​ ​ ​ ​ ​ 40,000

If ABC Co. uses an allowance account to account for changes in fair values, how much is the
balance of this account on December 31, 20x1?
a. 70,000 debit
b. 50,000 debit
c. 40,000 credit
d. 50,000 credit

Dec 31, 20x1 Unrealized loss on trading securities ​ ​ 50,000

Allowance for Decline in Value - Trading ​ ​ 50,000
3. On January 1, 20x1, Santa Co. acquired 10%, ₱1,000,000 bonds at 92. Commission paid to
brokers amounted to ₱9,100. The bonds are classified as investment measured at amortized
cost. Principal is due on December 31, 20x3 but interest is due annually every December 31.
The carrying amount of the investment on December 31, 20x1 is most approximately equal to
a. 949,883
b. 958,364
c. 973,368
d. 938,341

Acquisition cost (1M x 92%)​ ​ P920,000

Transaction costs​ ​ ​ 9,100
Initial carrying amount ​ ​ P929,100

TAE “Trial and error” approach:

Future cash flows x PV factor at x% = Present value
(1M x PV of ₱1 @ x%, n=3) + (1M x 10% x PV of an ordinary annuity of ₱1 @ x%, n=3) =
929,100

First trial: (using 13%)

Future cash flows x PV factor at x% = PV or initial carrying amount
➢ (1M x PV of ₱1 @ 13%, n=3) + (1M x 10% x PV of an ordinary annuity of ₱1 @ 13%, n=3) =
929,100
➢ (1M x 0.69305016227) + (100,000 x 2.36115259792) = 929,100
➢ (693,050 + 236,115) = 929,165 approximates 929,100

If the difference of ₱65 is deemed immaterial, the effective interest rate that will be used is
13%. The amortization table using this rate is prepared as follows:

Date ​ ​ Collections ​ Interest income Amortization Present value

Jan. 1,20x1 ​ ​ ​ ​ ​ ​ ​ ​ 929,100
Dec. 31,20x1 ​​ 100,000 ​ ​ 120,783 ​ 20,783 ​ ​ 949,883
Dec. 31,20x2 ​ ​ 100,000 ​ ​ 123,485 ​ 23,485 ​ ​ 973,368
Dec. 31,20x3 ​ ​ 100,000 ​ ​ 126,538 ​ 26,538 ​ ​ 999,906
4. On March 31, 20x1, Bogart Co. received from its investment in equity securities 10,000 stock
rights to subscribe to new shares at ₱60 per share for every 4 rights held. Immediately after
issuance of stock rights, the shares were selling at ₱80 per share. How much is the initial
carrying amount of the stock rights?
a. 20,000
b. 40,000
c. 50,000
d. cannot be determined

Ex Rights = Market Value of Stock Ex Right – Subscription Price

# of rights required to purchase 1 share

Theoretical/Parity value = (80 – 60) / 4 = 5; 10,000 x 5 = 50,000

5. Which of the following pairs of inventory terms would not usually go together?
a.Periodic inventory system <> freight-in account
b.Perpetual inventory system <> cost of goods sold account
c.Gross method <> purchase discount taken account
d.Net method <> purchase discount taken account

6. According to PAS 2 Inventories, inventories shall be measured at

a. Cost
b. Net realizable
c. Lower of cost and net realizable value
d. Lower of cost and market

7. A method that ignores residual value in calculating periodic depreciation expense in the
earlier part of an asset’s useful life is the
a. Productive-output method.
b. Group composite method.
c. Sum-of-the-years'-digits method.
d. Double-declining-balance method

9. What amount should be reported as accumulated depreciation on December 31, 2022?

a. 450,000
b. 900,000
c. 768,000
d. 960,000

Straight line (100% / 10 years) 10%

Fixed rate (10% x 2) 20%

2022 (5,000,000 x 20% x 6/12) 500,000

2023 (5,000,000 - 500,000 x 20%) 900,000
10. An intangible asset shall be recognized initially at :
Statement I: It is probable that future economic benefits attributable to the asset will flow to the
entity.
Statement II: The cost of the intangible asset can be measured reliably.

a. Both
b. Neither I nor I
c. I only
d. II only

11. Farm lots held by entity engaged in agriculture are classified as

a. Agricultural assets
b. Biological assets
c. Agricultural produce
d. Property, plant and equipment

12. A non current asset classified as held for sale shall be presented
a. Current asset
b. Other non current asset
c. Non current asset investment
d. Property, plant and equipment

14. When the effective interest method is used the periodic amount would
a. Has no effect on the interest expense in any period
b. Increases interest expense each period
c. Increases interest expense in some periods and decreases interest expense in others
d. Decreases interest expense each period

15. One of the 4 criteria for a finance lease specifies that the lease term be at least
a. The major part of the remaining economic life of the leased property.
b. The entire amount of the remaining economic life of the leased property.
c. A meaningful part of the remaining economic life of the leased property.
d. A non-insignificant part of the remaining economic life of the leased property.

16. One of the four determinative criteria for a finance lease specifies that the lease term of the
minimum lease payments equals or exceeds
a. The economic life of the property
b. 90 percent of the economic life of the property
c. 75 percent of the economic life of the property
d. 50 percent of the economic life of the property
17. According to PFRS 2, a share-based compensation payment transaction is
a. Equity-settled
b. Cash-settled
c. Choice between equity-settled and cash-settled
d. Any of the foregoing

18. The date on which compensation is determined in a stock option plan

a. has performed all conditions precedent to exercising the option.
b. exercises the option.
c. can first exercise the option.
d. is granted the option.

19. Under this plan, both employer and employee share in the retirement benefit cost
a. Contributory plan
b. Non-contributory plan
c. Funded plan
d. Chip-in plan

21. Baritone Company counted and reported the ending inventory on December 31, 2017. None
of the following items were included when the total amount of the ending inventory was
computed:

● 150,000 in goods located in the entity’s warehouse that are on consignment from another
entity.
● 200,000 in goods sold by the entity and shipped on December 30 and were in transit on
December 31, 2017. The goods were received by the customer on January 2, 2018. Terms were
FOB destination.
● P300,000 in goods that were purchased by the entity and shipped on December 30 and were
in transit on December 31, 2017. The goods were received by the entity on January 2, 2018.
Terms were FOB shipping point.
● P400,000 in goods that were sold by the entity and shipped on December 30 and were in
transit on December 31, 2017.
● The goods were received by the customer on January 2, 2018. Terms were FOB shipping
point.
● The entity’s reported inventory before any corrections was P 2,000,000.

What is the correct amount of inventory on December 31, 2011?

a. P2,500,000
b. P2,350,000
c. P2,900,000
d. P2,750,000
Reported inventory ​ ​ ​ ​ ​ ​ 2,000,000
Goods sold in transit, FOB destination ​ ​ ​ 200,000
Goods purchased in transit, FOB shipping point ​ ​ 300,000
Correct amount of inventory​ ​ ​ ​ ​ 2,500,000

22. January 2, 2010, Ares Company purchased a patent for a new consumer product for
$450,000. At the time of purchase, the patent was valid for 15 years; however, the patent's
useful life was estimated to be only 10 years due to the competitive nature of the product. On
December 31, 2013, the product was permanently withdrawn from the market under
governmental order because of a potential health hazard in the product.
What amount should Koll charge against income during 2013, assuming amortization is
recorded at the end of each year?

a. $45,000
b. $270,000
c. $315,000
d. $360,000

Purchase price​ ​ ​ ​ ​ ​ $450,000

Less: Acquisition cost $450,000
Estimated useful life /10 yrs
Amortization for 2010 to 2013 x 3 yrs ​ 135,000
Total​ ​ ​ ​ ​ ​ ​ ​ $315,000

23. On April 1, 2023, Star Company recorded purchases of inventory of P640,000 and P800,00
under credit terms of 2/15, net 30.

The payment due on the P640,000 purchase was remitted on April 16. The payment due on the
P800,000 purchase was remitted on May 1.

Under the net method and gross method, these purchases should be included at what
respective amounts in the determination of cost of goods available for sale?

​ ​ Net method ​ ​ Gross method

a.​ 1,427,200​ ​ 1,411,200
b.​ 1,411,200​ ​ 1,440,000
c.​ 1,411,200 ​ ​ 1,427,200
d.​ 1,440,000​ ​ 1,411,200
Gross method
Payment within the discount period (P640,000 - 2%) = P627,200
Purchase not discounted 800,000
Total ​ ​ ​ ​ ​ ​ ​ P1,427,200

Net method
Total gross amount​ ​ ​ ​ ​ P1,427,200
Less: (P800,000 x 2%)​ ​ ​ ​ 16,000
​ ​ ​ ​ ​ ​ ​ P1, 411,200

24. The Jones Company enjoys profitable operations for its past ten years of existence. The
company president proposed to the Board of Directors an incentive compensation plan where
the general manager would be entitled to a year-end bonus under the following alternative
schemes.
Alternative 1: 8% bonus based on profit before bonus and income tax in excess of P5,000,000.
Alternative 2: 5% bonus based on profit after both bonus and income tax.
Alternative 3: 3% bonus based on profit after bonus but before income tax.

Jones Company’s profit before bonus and income tax for the year ended December 31, 2023 is
P8,000,000. Assume an income tax rate of 30%.

How much is the general manager’s bonus for 2023 under Alternative 1?
a. P240,000
b. P320,000
c. P400,000
d. P640,000

P8,000,000 - P5,000,000 = P3,000,000 x 8% = P240,000

25. Any instrument representing ownership shares and the right to acquire ownership shares is
a. Debt security
b. Equity security
c. Shareholders equity
d. Marketable security

26. The person who signs a note receivable and promises to pay the principal and interest is
the:
a. Payee
b. Maker
c. Holder
d. Receiver
27. Why would a company sell receivables to another company?
a. To improve the quality of its credit granting process.
b. To limit its legal liability.
c. To accelerate access to amounts collected.
d. To comply with customer agreements.

28. Deposits held as compensating balances

a. Usually do not earn interest
b. If legally restricted and held against short-term credit may be included as cash
c. If legally restricted and held against long-term credit may be included among current assets
d. None of these

In preparing the bank reconciliation for the month of December, Case Company provided the
following information:
Balance per bank statement 3,800,000
Deposit in transit 520,000
Amount erroneously credited by bank to Case’s account 40,000
Bank service charge for December 5,000
NSF check 50,000
Outstanding checks 675,000

29. What is the adjusted cash in bank?

a. 3,685,000
b. 3,645,000
c. 3,600,000
d. 3,605,000

30. What is the unadjusted cash balance per book?

a. 3,550,000
b. 3,660,000
c. 3,610,000
d. 3,655,000

Balance per bank statement 3,800,000

Deposit in transit 520,000
Outstanding checks​ ​ ​ (675,000)
Bank error – erroneous bank credit​ ​ (40,000)
Adjusted bank balance​ ​ 3,605,000

Unadjusted book balance (SQUEEZE) 3,660,000

Bank service charge (5,000)
NSF check (50,000)
Adjusted cash in book balance 3,605,000
31. This data was taken from Valenz Company's records for the fiscal year ended November 30.
Direct materials used 600,000
Direct labor 200,000
Variable factory overhead 100,000
Fixed factory overhead 160,000
Selling and admin. costs-variable 80,000
Selling and admin. costs-fixed 40,000

If Valenz Company uses variable (direct) costing, the inventoriable costs for the fiscal year are
A. 800,000.
B. 900,000. Not sure
C. 980,000.
D. 106,000

DM+DL+VFO (P600,000+200,000+100,000) = P900,000