REVIEW 105 DAY 14
assets at the balance sheet date.
TOA
1. Which is correct concerning the recognition and measurement of an intangible
asset?
a. If an intangible asset is acquired separately, the cost comprises its purchase
price, including import duties and taxes and any directly attributable expenditure
of preparing the asset for its intended use.
b. If an intangible asset is acquired in a business combination that is an
acquisition, the cost is based on its carrying value at the date of acquisition.
c. If an intangible asset is acquired free of charge or by way of government grant,
the asset is not recognized.
d. If payment for an intangible asset is deferred beyond normal credit terms, its
cost is equal to the total payments over the credit period.
2. Which statement is incorrect regarding recognition of intangible assets?
a. An intangible asset should be recognized if, and only if, it is probable that the
future economic benefits that are attributable to the asset will flow to the
enterprise; and the cost of the asset can be measured reliably.
b. The recognition criteria apply only to intangible assets generated internally.
c. The probability of future economic benefits must be based on reasonable and
supportable assumptions about conditions that will exist over the life of the asset.
d. The probability recognition criterion is always considered to be satisfied for
intangible assets that are acquired separately or in a business combination.
3. Which statement is incorrect concerning internally generated intangible asset?
a. To assess whether an internally generated intangible asset meets the criteria
for recognition, an enterprise classifies the generation of the asset into a
research phase and a development phase.
b. The cost of an internally generated asset comprises all expenditure that can
be directly attributed or allocated on a reasonable and consistent basis to
creating, producing and preparing the asset for its intended use.
c. Internally generated brands, mastheads, publishing titles, customer lists and
items similar in substance should not be recognized as intangible assets.
b. Internally generated goodwill may be recognized as an intangible asset.
4. Which statement is incorrect regarding defined benefit plans?
a. The amount recognized in the balance sheet should be the present value of
the defined benefit obligation, as adjusted for unrecognized actuarial gains and
losses and unrecognized past service cost, and reduced by the fair value of plan
b. The present value of the defined benefit obligation should be determined using
the Accrued Benefit Valuation Method.
c. Valuations should be carried out with sufficient regularity such that the
amounts recognized in the financial statements do not differ materially from those
that would be determined at the balance sheet date.
d. The rate used to discount estimated cash flows should be determined by
reference to market yields at the balance sheet date on high quality corporate
shares.
5. Which statement is incorrect concerning government grants?
a. Grants in recognition of specific expenses should be recognized as income
over the period of the related expense.
b. Grants related to depreciable assets should be recognized as income over
the periods and in proportion to the depreciation of the related assets.
c. Grants related to nondepreciable assets requiring fulfillment of certain
conditions should be recognized as income immediately.
d. Grants that become receivable as compensation for expenses or losses
already incurred should be recognized as income of the period in which the
grants become receivable.
6. Government grants related to assets should be presented in the balance
sheet
I. By setting the grant as deferred income
II. By deducting the grant in arriving at the carrying amount of the assets.
a. I only b. II only c. Both I and II d.
Neither I nor II
7. Government grants related to income are presented preferably as
a. Other income in the income statement
b. Deduction from the related expense
c. Addition to the beginning balance of retained earnings
d. Additional paid in capital
8. When computing the amount of interest cost to be capitalized, the concept of
avoidable interest refers to
a. The total interest cost actually incurred.
b. A cost of capital charge for stockholders equity.
c. That portion of total interest cost which would not have been incurred if
expenditures for asset construction had not been made.
 d. That portion of average accumulated expenditures on which no interest
cost was incurred.
9. The period of time during which interest must be capitalized ends when
a. The asset is substantially complete and ready for its intended use.
b. No further interest cost is being incurred.
c. The asset is abandoned, sold or fully depreciated.
d. The activities that are necessary to get the asset for its intended use have
begun.
10. As to land, capitalizable incidental costs include all, except
a. Attorneys fees for establishing clean title
b. Special assessments for local improvement which benefits the property
c. Cost of relocation or reconstruction of property belonging to others in order
to acquire possession
d. Expenditures for sidewalks, pavements, parking lot and driveways
11. The cost of the plant asset building should usually include all, except
a. Cost of renovation or remodeling required to prepare the building for its
intended use
b. Expenditures for service equipment and fixtures made as permanent part
of the building
c. Property taxes related to the period prior to acquisition that are assumed by
the buyer
d. Costs incurred to have existing building removed to make room for the
construction of new building
12. Improvements which result to increased future economic benefits include all,
except
a. Modification of an item of property to extend its useful life or increase its
capacity.
b. Upgrade of machine parts to improve quality of output
c. Adoption of a new production process leading to large reduction in
operating cost
d. Expenditure on repair or maintenance of property, plant and equipment,
such as cost of servicing or overhauling plant and equipment.
13. Which is incorrect concerning the concept of the depreciation?
a. The depreciable amount of an item of property, plant and equipment
should be allocated on a systematic basis over its useful life.
b. The depreciation method should not reflect the pattern in which the assets
economic benefits are consumed by the enterprise.
c. The depreciation charge for each period should be recognized as an
expense, unless it is included in the carrying amount of another asset.
d. The estimation of the useful life of an item of property, plant and equipment
is a matter of judgment based on experience of the enterprise with similar
assets.
14. Which is incorrect concerning the residual value of an item of property, plant
and equipment?
a. The depreciable amount of an asset is determined after deducting the
residual value of the asset.
a. In practice, the residual value of an asset is often insignificant and
therefore is immaterial in the calculation of the depreciable amount.
b. The residual value of an asset may increase to an amount equal or
greater than the assets carrying amount.
c. The residual value of an asset shall be reviewed at least at each financial
year-end and if expectation differs from previous estimate, the change
shall be accounted for as a change in accounting policy.
15. The useful life of an item of property, plant and equipment is
I. The period of time over which an asset is expected to be used by the
enterprise.
II. The number of production or similar units expected to be obtained from the
asset by the enterprise.
a. I only b. II only c. Both I and II d. Neither I nor II
MAS
1. A company used 30 hours to produce the first batch of units. The second batch took an
additional 18 hours. How many total hours will the first four batches require?
a. 76.80
b. 96.20
c. 120
d. 61.44
2. If both the supply and the demand for a good increase, the market price will
a. Rise only in the case of an inelastic supply function.
b. Fall only in the case of an inelastic supply function.
c. Not be predictable with only these facts.
d. Rise only in the case of an inelastic demand function.
 8. A supply curve illustrates the relationship between
3. Which of the following is not a function of financial management? a. Price and quantity supplied.
a. Financing. b. Price and consumer tastes.
b. Risk-management. c. Price and quantity demanded.
c. Internal control. d. Supply and demand.
d. Capital budgeting.
9. As a business owner you have determined that the demand for your product is inelastic.
4. All of the following statements in regard to working capital are correct except Based upon this assessment you understand that
a. Current liabilities are an important source of financing for many small firms. a. Increasing the price of your product will increase total revenue.
b. Profitability varies inversely with liquidity. b. Decreasing the price of your product will increase total revenue.
c. The hedging approach to financing involves matching maturities of debt with specific c. Increasing the price of your product will have no effect on total revenue.
financing needs. d. Increasing the price of your product will increase competition.
d. Financing permanent inventory buildup with longterm debt is an example of an
aggressive working capital policy. 10. If an investment is expected to be held for a long period of time the preferred method of
calculating the expected return is
5. Determining the appropriate level of working capital for a firm requires a. Arithmetic average.
a. Evaluating the risks associated with various levels of fixed assets and the types of debt b. Median.
used to finance these assets. c. Geometric average.
b. Changing the capital structure and dividend policy of the firm. d. Subjective estimate.
c. Maintaining short-term debt at the lowest possible level because it is generally more
expensive than long-term debt. 11. Which of the following expresses the relationship between risk and return?
d. Offsetting the benefit of current assets and current liabilities against the probability of a. Inverse relationship.
technical insolvency. b. Direct relationship.
c. Negative relationship.
6. Which of the following actions is likely to reduce the length of a firms cash conversion d. No relationship.
cycle?
a. Adopting a new inventory system that reduces the inventory conversion period. 12. The expected return of a portfolio is measured by the
b. Adopting a new inventory system that increases the inventory conversion period. a. Variance.
c. Increasing the average days sales outstanding on its accounts receivable. b. Weighted average.
d. Reducing the amount of time the firm takes to pay its suppliers. c. Standard deviation.
d. Beta.
7. Eagle Sporting Goods has $5 million in inventory and $2 million in accounts receivable. Its
average daily sales are $100,000. The firms payables deferral period is 30 days. What is the 13. What is the most important purpose of a balanced scorecard?
length of the firms cash conversion period? a. Develop strategy.
a. 100 days b. Measure performance.
b. 60 days c. Develop cause-and-effect linkages.
c. 50 days d. Set priorities.
d. 40 days
14. Which of the following is not one of the four perspectives of the balanced scorecard?
a. Investment in resources perspective.
b. Customer perspective. 89,000 86,000 91,500 87,000 5,000
c. Learning and growth perspective.
d. Financial perspective. Mahogany siding 94,000 92,000 93,000 85,000 7,000

Louvered glass
15. The balanced scorecard generally uses performance measures with four different door
perspectives. Which of the following performance measures would be part of those used for 125,000 135,000 129,000 111,000 10,000
the internal business processes perspective?
a. Cycle time. Glass windows 194,000 114,000 205,000 197,000 20,000
b. Employee satisfaction.
Total 502,000 427,000 518,500 480,000 32,000
c. Hours of training per employee.
d. Customer retention.
The correct balance of the raw materials inventory after any allowance for
P1 write down is
a. P427,000 c. P480,000
1. On July 1, 2005, Mila Company purchased as a long term investment 50,000 b. P486,500 d. P477,000
shares of Lucky Corporation common stock for P80 per share. This purchase
represents a 2% interest in Lucky. On August 1, 2005, Lucky Corporation 3. Mira Company received dividends from its common stock investments during the
declared its annual dividend on its common stock of P10 per share payable on year 2005 as follows:
September 10 to stockholders of record at August 31, 2005. A retirement of an
issue of Milas serial bonds payable on August 25, 2005 required additional A stock dividend of 20,000 shares from A Company when the market price of
working capital and Mila sold all 50,000 shares of Luckys stock for P5,200,000 As shares was P30 per share.
including the accrued dividend. For the year ended December 31, 2005, the gain A cash dividend of P2,000,000 from B Company in which Mira owns a 20%
on disposal to be reported by Mila on this transaction should be interest.
a. P 200,000 c. P500,000 A cash dividend of P500,000 from C Company in which Mira owns a 10%
interest.
b. P1,200,000 d. P700,000 10,000 shares of common stock of D Company in lieu of cash dividend of
P20 per share. The market price of D Companys shares was P180. Mira
holds originally 100,000 shares of D Company common stock. Mira owns 5%
2. Claveria Company installs replacement siding, windows, and louvered glass doors interest in D Company.
for family homes. At December 31, 2005, the balance of raw materials inventory
account was P502,000, and the allowance for inventory writedown was P33,000. What amount of dividend revenue should Mira report in its 2005 income
The inventory cost and market data at December 31, 2005, are as follows: statement?

a. P2,500,000 c. P2,300,000
Cost Replacement Sales Net Normal
Cost Price Realizable Profit b. P4,300,000 d. P 500,000
value

Aluminum siding 4. On January 2, 2004, Aquil Company purchased 10,000 shares of P100 par value
common stock of Diwata Corporation at P110 per share. The Diwata Corporation
was expanding and on March 2, 2005 it issued stock rights to its stockholders. Each
right entitles Aquil to purchase one fourth () share of common stock at par. The Aggregate cost December 31, 2005 9,000,000
market value of the stock on that date was P140 per share. There was no quoted Unrealized gains December 31, 2005 500,000
price for the rights. On April 2, 2005, Aquil exercised all its stock rights. What is the Unrealized losses December 31, 2005 2,000,000
total cost of the shares acquired on April 2, 2005? Net unrealized gains during 2005 300,000

a. P323,333 c. P312,857 On January 1, 2005 Ifugao reported an unrealized loss of P400,000 as a

component of stockholders equity. In its December 31, 2005 stockholders
b. P250,000 d. P350,000 equity, Ifugao should report what amount of unrealized loss?
a. 2,000,000
5. Banawe Company was organized on January 1, 2005. At December 31, 2005, b. 1,500,000
Banawe had the following investments: c. 1,100,000
d. 1,200,000
Trading Available for sale
Aggregate cost 10,000,000 10,000,000
Aggregate market value 9,000,000 8,500,000
The declines are judged to be nontemporary. In 2005, what amount of 8. Lasam Company sells one product, which it purchases from various suppliers.
unrealized loss should be shown as component of income and stockholders The trial balance at December 31, 2005, included the following accounts:
equity? Sales (100,000 units at P150) P15,000,000
Income Stockholders equity Sales discount 1,000,000
a. 2,500,000 0 Purchases 9,300,000
b. 0 2,500,000 Purchase discount 400,000
c. 1,000,000 1,500,000 Freight in 100,000
d. 1,500,000 1,000,000 Freight out 200,000
The inventory purchases during 2005 were as follows:
6. Lagawe Company purchased trading equity securities. The cost and market value Units Unit cost Total cost
at December 31, 2004 were: Beginning inventory, January 1 20,000 P60 P 1,200,000
Purchases, quarter ended March 31 30,000 65 1,950,000
Security Cost Market_
Purchases, quarter ended June 30 40,000 70 2,800,000
A 20,000 shares 2,000,000 2,500,000
Purchases, quarter ended Sept. 30 50,000 75 3,750,000
B 40,000 shares 4,000,000 3,000,000
Purchases, quarter ended Dec. 31 10,000 80 800,000
C 60,000 shares 6,000,000 5,500,000
150,000 P10,500,000
Lagawe sold 60,000 shares of Security C on January 31, 2005, for P5,000,000,
Lasams accounting policy is to report inventory in its financial statements at the
incurring P100,000 in brokerage commission and taxes. On the sale, Lagawe
lower of cost or market, applied to total inventory. Cost is determined under the
should report a realized loss of
first-in, first-out method.
a. 1,100,000
b. 1,000,000 Lasam has determined that, at December 31, 2005, the replacement cost of its
c. 600,000 inventory was P70 per unit and the net realizable value was P72 per unit. The
d. 500,000 normal profit margin is P10 per unit.
What should Lasam report as cost of goods sold for the year 2005?
7. Information about Ifugao Companys portfolio of available for sale securities is:
a. P6,400,000 c. P6,700,000 12. On August 30, 2005, Sta. Ana Company purchased a tract of land for
b. P6,600,000 d. P7,100,000 P12,000,000. Sta. Ana incurred additional cost of P3,000,000 during the remainder
of 2005 in preparing the land for sale. The tract was subdivided into residential lots
as follows:
9. On January 1, 2004 Eugenie Company bought 15% of Celie Corporation common
stock for P5,000,000. During 2004, Celie reported net income of P3,000,000 and Lot class Number of lots Sales price per lot
paid no dividends on its common stock. In 2005 Celie reported net income of A 100 240,000
P5,000,000 and paid a total amount of P10,000,000 as dividends to common B 100 160,000
stockholders. Changes in fair value of Celie were insignificant during both years. In C 200 100,000
its income statement for the year ended December 31, 2005, how much should
Using the relative sales value method, what amount of cost should be allocated
Eugenie report as income from this investment?
to Class C lots?
a. P1,500,000 c. P750,000
a. P6,000,000 c. P7,500,000
b. P1,200,000 d. P450,000
b. P5,000,000 d. P4,000,000
10. The following quarterly cost data have been accumulated for Pamplona Mfg. Inc.
Raw materials beginning inventory (Jan. 1, 2005) 10,000 units @P6.00
13. Bayambang Company sells to wholesalers on terms of 5/15, net 30.
Purchases 8,500 units @P7.00
Bayambang has no cash sale but 50% of customers take advantage of the
11,000 units @P7.50
discount. Bayambang uses the gross method of recording sales. An analysis
Transferred 21,500 units of raw materials to work in process: of trade receivables at December 31, 2005 revealed the following:

Work in process beginning inventory (Jan. 1, 2005) 5,600 units @P13.50 Age Amount _
Direct labor P250,000 Collectible
Manufacturing over head P325,000 0 - 15 days 15,000,000 100%
Work in process ending inventory (Mar. 31, 2005) 4,200 units @P13.75 16 - 30 days 3,000,000 95%
Over 30 days 2,000,000
If Pamplona uses the FIFO method for valuing raw materials inventories,
compute for the cost of goods manufactured for the quarter ended Mar. 31 2005 1,500,000
a. P699,150 c. P734,850 On the December 31, 2005 balance sheet, what amount should be
b. P717,000 d. P746,850 reported as allowance for discounts?
a. P750,000 c. P375,000
b. P650,000 d. P500,000
11. On January 1, 2005 Maria Company purchased 30% interest in Venus Company
for P5,000,000. On this date Venus stockholders equity was P10,000,000. The
14. On December 31, 2005, Frankie Company purchased as a long-term investment
carrying amounts of Venus identifiable net assets approximated their fair values,
P10,000,000 face amount, 10% bonds of Love Joy Corporation to yield 8% per year.
except for land whose fair value exceeded its carrying amount by P4,000,000. Any
The bonds mature on January 1, 2010 and pay interest semiannually on June 30 and
implied goodwill has an indefinite life. Venus reported net income of P3,000,000 for
December 31. The relevant present value factors are as follows:
2005 and paid dividends of P1,000,000. Maria accounts for this investment using the
equity method. In its December 31, 2005 balance sheet, what amount should Maria The carrying amount of this investment on December 31, 2005 is
report as investment in associate? a. P10,872,000 c. P9,189,000
a. P5,560,000 c. P5,500,000 b. P10,811,000 d. P9,128,000
b. P5,600,000 d. P5,540,000
15. The following accounts appear in the adjusted trial balance of Vicky Company on Sales price was determined by adding 30% to cost. Assume the consigned machines
December 31, 2005: are sold the following year.
Petty cash fund 20,000
Change fund 150,000 c. On March 30, 2009, two machines were shipped to a customer on a C.O.D. basis.
Bond sinking fund securities 1,000,000 The sale was not entered until April 5, 2009, when cash was received for P12,200.
Preferred redemption fund securities 1,500,000 The machines were not included in the inventory at March 31, 2009. (Title passed on
Dividend receivable-sinking fund securities 100,000 March 30, 2009.)
Plant expansion fund 400,000
Cash surrender value 120,000 d. All machines are sold subject to a five year warranty. It is estimated that the expense
Investment property 1,200,000 ultimately to be incurred in connection with the warranty will amount to of sales.
Advances to subsidiary 600,000 The company has charged an expense account for a warranty costs incurred.
Held to maturity securities 2,100,000
Treasury notes purchased 1 year ago, maturing on May 1, 2006 750,000 Sales per books and warranty costs were:

How much should be reported as long term investments on December 31, 2005? Year Ended Warranty Expense For Sales Made In
a. P6,920,000 c. P7,070,000 March 31 Sales 2008 2009 2010 Total
b. P7,020,000 d. P7,820,000 2008 P1,880,000 P1,520 P1,520
2009 2,020,000 720 P2,620 3,340
2010 3,590,000 640 3,240 P3,820 7,700
AP
You have been asked by a client to review the records of Rappu Co., a small manufacturer of
e. Bad debts have been recorded on a direct write-off basis. Experience of similar
precision tools and machines. Your client is interested in buying the business, and
enterprises indicated that losses will approximate of 1 % of sales. Bad debt written
arrangements have been made for you to review the accounting records.
off were:
Your explanation reveals the following:
Bad Debts Incurred on Sales Made In
2008 2009 2010 Total
a. Rappu commenced business on April 1, 2007, and has been reporting on a fiscal
2008 P1,500 P1,500
year ending March 31. The company has never been audited, but the annual
2009 1,600 P1,040 2,640
statements prepared by the bookkeeper reflect the following income before closing
2010 700 3,600 P3,400 7,700
and before deducting income taxes:
Year Ended March 31 Income Before Taxes
f. Commissions on sales have been entered when paid. Commissions payable on
2008 P 143,200
March 31 of each year were:
2009 222,800
2008 P2,800
2010 207,160
2009 1,600
2010 2,240
b. A relatively small number of machines have been shipped on consignment. These
transactions have been recorded as ordinary sales and billed as such. On March 31 g. A review of the corporate minutes reveals the manager is entitled to a bonus of of
of each year, machines billed and in the hands of consignees amounted to: 1% of the income before deducting income taxes and the bonus. The bonuses have
2008 P 13,000 never been recorded or paid.
2009 none
2010 11,180 Based on the preceding information, calculate the following:
1. Correct sales for the year ended March 31, 2009 Grace Company has an overdue note receivable from Ngitngit Company for P300,000. The
a. P2,035,200 c. P2,042,200 note was dated January 1, 2008. It has an annual interest rate of 9%, and interest is paid
b. P2,032,200 d. P2,045,200 December 31 of each year. Ngitngit paid the interest on the note on December 31, 2008, but
Ngitngit did not pay the interest due in December of 2009. The current effective interest rate
2. Correct sales for the year ended March 31, 2010 is 6%.
a. P3,569,200 c. P3,578,820
b. P3,566,620 d. P3,590,000 On January 1, 2010, Grace agrees to the ff restructuring arrangement:
Reduce the principal to P250,000.
3. Additional warranty expense for the year ended March 31, 2010 Forgive recorded accrued interest.
a. P10,133 c. P6,866 Reduce the interest rate to 6%.
b. P24,834 d. P17,833 Extend the maturity date of the note to December 31, 2012.

4. Additional bad debt expense for the year ended March 31, 2009 Based on the above and the result of your audit, answer the ff: (Round off present value
a. P2,473 c. P8,917 factors to four decimal places)
b. P1,217 d. P6,858
11. The present value of the future cash flows of the restructured loan is
5. Allowance for bad debt at March 31, 2010 a. P250,000 c. P233,145
a. P8,917 c. P6,858 b. P231,020 d. P238,613
b. P7,700 d. P4,668 12. The loss on impairment of loan to be recognized by Grace in 2010 is
a. P95,980 c. P88,387
6. Additional commission expense for the year ended March 31, 2010 b. P77,000 d. P93,855
a. P1,600 c. P4,640 13. The valuation allowance for impaired loans to be recognized on January 1, 2010 is
b. P2,240 d. P640 a. P16,855 c. P88,387
7. Managers bonus expense for the year ended March 31, 2010 b. P 11,387 d. P18,890
a. P902 c. P2,683 14. The interest income to be recognized in 2010 is
b. P1,781 d. P1,149 a. P20,792 c. P21,475
8. Correct income before income taxes for the year ended March 31,2008 b. P20,983 d. P15,000
a. P229,841 c. P125,785 15. The carrying amount of the loan as of December 31, 2010 is
b. P228,692 d. P126,417 a. P239,128 c. P236,812
9. Correct income before income taxes for the year ended March 31,2009 b. P 245,088 d. P250,000
a. P228,692 c.P125,785
b. P179,488 d.P126,417
10. Correct income before income taxes for the year ended March 31,2010 P2
a.P179,488 c. P180,390
b. P229,841 d. P126,417
1. The following data were taken from the Statement of Affairs of ABC Company:
Assets pledged for fully secured liabilities P125,000
Assets pledged for partially secured liabilities 90,000
Free assets 87,000
 Fully secured liabilities 100,000 c. Total income earned by H is P2,300
Partially secured liabilities 110,000 d. Cash settlement received by G is P4,775
Unsecured liabilities without priority 90,000
Unsecured liabilities with priority 13,000
Which of the following is correct? Problem 4. J, K and L formed a joint venture in 2008 and agreed to divide profits equally. K
Types of Liabilities Estimated amount to be paid is designated to act as the manager. The venture is terminated on December 31, 2008 even
a. Fully secured liabilities P125,000 though there is still unsold merchandise. On this date, Ks trial balance shows the following
b. Partially secured liabilities 110,000 account balances before profit or loss distribution.
c. Unsecured liabilities with priority 11,700 Debit Credit
d. Unsecured liabilities without priority 81,000 Joint venture cash P45,000
Joint venture P9,000
J, capital 8,000
Problem 2. D, E and F formed a joint venture. F is to act as a manager and is designated to L, capital 9,000
record the joint venture transactions in his books. As a manager, he is allowed a salary of
P17,000. Remaining profit (loss) is to be divided equally. K receives P7,000 for his share in the venture profit. Furthermore, he agrees to be charged
The following balances appear the end of 2008 before adjustment for venture inventory for the unsold merchandise as of December 31, 2008. Determine which of the following is
and profit. correct
Debit Credit a. Cost of unsold merchandise charged to K is P7,000
b. Net profit of the venture is P9,000
Joint venture cash P50,000
c. Amount due to K in the final settlement is P14,000
D, capital P30,000 d. Total income earned by J is P15,000
E, capital 4,000
The venture is to terminate on December 31, 2008 with unsold merchandise costing
P14,100. Problem 5. On December 1, 2008, M company made a credit sale to N company. The
Assuming the joint venture loss is P7,200, what is the balance of the joint venture amount of sale was 200,000 Korean won. M will collect the account on January 01, 2009. On
account before distribution of profit? December 1, the spot rate was 25 Korean won for one Philippine peso. Also on December 1,
a. P6,900 (debit) b. P21,300 (debit) c. P38,300 (debit) d. P6,900 (credit) M entered into a futures contract to sell 200,000 Korean won on January 01, 2009 at a
forward rate of 50 Korean won for one Philippine peso. If the spot rate and forward rate for
one Philippine peso on December 31, 2008 is 40 Korean won, how much is the foreign
exchange gain or loss on hedging instrument forward contract?
Problem 3. During the year 2008, I has been the manager of a joint venture with G and H. It a. P3,000 gain b. P3,000 loss c. P1,000 gain d. P1,000 loss
was agreed that on the completion of the joint venture, I will receive a fee of 12% of the
venture gain after the deduction of the fee as an expense. The venture is terminated on
November 30, 2008. On this date, Is trial balance contains the following account balances.
Debit Credit Problem 6. O company purchased merchandise for 150,000 pounds from a vendor in
Joint venture P8,400 London on November 01, 2008. Payment in British pounds was due on January 30, 2009. On
G, capital 2,900 the same date, O entered into a 90 day futures contract to buy 150,000 pounds from a bank.
H, capital P700 Exchange rate for pound on different dates are as follows:
The net profit after the deduction of the fee has been agreed to be divided as follows: 25% to Nov. 1 Dec. 31 Jan. 31
G, 40% to H and 35% to I. Which of the following is not correct? Spot rate P71.0 P73.0 P72.2
a. The net profit of the venture after the fee to I is P7,500 30 day futures 72.0 71.9 73.2
b. The fee of I is P900
 60 day futures 71.8 72.8 72.6 d. Forex loss on the purchase transaction on the Balance Sheet date is P10,000
90 day futures 70.9 72.9 73.1
How much is the net forex gain or loss on January 30, 2009? Problem 10. On November 1, S company entered into a firm commitment to acquire a
a. P165,000 loss b. P165,000 gain c. P150,000 loss d. P150,000 gain machinery. Delivery and passage of title would be on February 28, 2009 at the price of
HK$2,000. On the same date, to hedge against unfavorable changes in the exchange rate, S
Problem 7. On November 1, 2008, P company sold goods on account to a Thai corporation entered into a 120 day forward contract with China bank for HK$2,000. Exchange rate were
for 5,000 Baht. The billing date is December 1, 2008 and payment is due on January 30, as follows:
2009. Exchange rates were as follows:
BID rate OFFER rate Spot Rate Forward Rate
Nov. 01, 2008 P38 P36 Nov. 01, 2008 P26 P24
Dec. 01, 2008 39 38 Dec. 31, 2008 28 26
Dec 31, 2008 42 40 Feb. 28, 2008 29 29
Jan. 30, 2009 41 39 How much is the forex gain or loss recognized by the S company on the firm commitment?
How much is the forex gain or loss to be recognized on December 31, 2008? a. P6,000 gain b. P10,000 loss c. P6,000 loss d. P10,000 gain
a. P15,000 gain b. P10,000 gain c. P10,000 loss d. P20,000 gain
Problem 11. The following are taken from the records of T Company, a foreign subsidiary in
Problem 8. On December 1, Q company took merchandise worth 10,000 Swiss francs. New Zealand.
Payment is due on January 30, 2009. On the same date, Q paid P5,000 cash to acquire a 60 NZ dollar
day call option for 10,000 Swiss francs. Total Assets 12/31/08 146,000
Spot Rate Strike Price Fair value of Option Forward Rate Total Liabilities 12/31/08 45,000
Common Stock 12/31/08 60,000
12/01/08 P23 P23 P 5,000 P24 Retained Earnings 01/01/08 29,000
12/31/08 27 23 8,000 26 Net Income 2008 15,000
01/30/09 25 23 10,000 25 Dividends paid 12/31/08 3,000
How much is the forex gain or loss upon exercising the call option? (Assume the option was
exercised on December 31, 2008) Exchange rates:
a. P5,000 loss b. P32,000 gain c. P48,000 loss d. P35,000 gain Current rate P10
Historical rate 11
Weighted Average Rate 12

Problem 9. On October 1, 2008, R corporation purchased goods from a U.S. based The peso balance of retained earnings on December 31, 2007 is P325,000.
corporation worth $2,500. Payment is due in 120 days on January 30, 2009. In view of the
sale, R corporation enters into a forward contract to buy $2,500 from Philippine National Bank What amount of Cumulative Translation Adjustment is to be reported in the Consolidated
(PNB) in 120 days. The relevant exchange rates are as follows: Balance Sheet on December 31, 2008?
10/01/08 12/31/08 01/30/09 a. P119,000 debit b. P119,000 credit c. P125,000 debit d. P125,000
Spot Rate P43 P47 P50 credit
Forward Rate 44 46 50
Which of the following is correct?
a. Forward Contract Receivable on Dec. 31, 2008 is P110,000 Problem 12. The approved appropriation of Department U for 2008 is P15,000,000. Eighty
b. Net forex loss on settlement date is P2,500 five percent of this appropriation was released by the Department of Budget and
c. Forex gain on the forward contract on the transaction date is P5,000 Management (DBM) accompanied by Notice of Cash allocation (NCA). During the year, the
amount of obligations incurred was equivalent to ninety percent of the NCA but only seventy A. The P100,000.00 portion of the donation is exempt since given in consideration of
percent of these obligations were paid by checks. Determine which of the following is marriage.
incorrect B. A P10,000.00 portion of the donation is exempt being a donation in consideration
of marriage.
a. Department U records the receipt of NCA by debiting an amount equivalent to
C. Celia shall pay a 30% donors tax on the P110,000.00 donation.
P12,750,000
D. The P100,000.00 portion of the donation is exempt under the rate schedule for
b. The receipt of the allotment is recorded by means of a memorandum entry
donors tax.
c. At the end of the year, Subsidy Income from National Government would be
2.Real property taxes should not disregard increases in the value of real property occurring
credited by P6,967,500
over a long period of time. To do otherwise would violate the canon of a sound tax system
d. None of the above
referred to as
A. theoretical justice.
B. fiscal adequacy.
Problem 13. Bank charges per bank statement, P1,500 C. administrative feasibility.
Interest expense upon receipt of Bill, P2,000 D. symbiotic relationship.
Based on the given information, which of the following is not correct? 3. Dondon and Helena were legally separated. They had six minor children, all qualified to be
a. Entry to record the bank charges in the regular agency books would include a claimed as additional exemptions for income tax purposes. The court awarded custody of two
credit to Cash NT MDS of the children to Dondon and three to Helena, with Dondon directed to provide full financial
b. Receipt of bill for interest is entered in the RAOFE support for them as well. The court awarded the 6th child to Dondons father with Dondon
c. Payment of interest expense would include a credit to Cash NT MDS also providing full financial support. Assuming that only Dondon is gainfully employed while
d. Agency enters the obligation for bank charges in the RAOFE Helena is not, for how many children could Dondon claim additional exemptions when he files
his income tax return?
A. Six children.
B. Five children.
Problem 14. Which of the following would be included in an entry to record the remittance of
C. Three children.
income taxes to the Bureau of Treasury (BTR) collected by the Bureau of Internal Revenue D. Two children.
(BIR)? The BIR has no authority to use the collections. 4. Income from dealings in property (real, personal, or mixed) is the gain or loss derived
a. Debit to Cash Collecting officer A. only from the cash sales of property.
b. Debit to Cash NT MDS B. from cash and gratuitous receipts of property.
c. Credit to Cash Collecting officer C. from sale and lease of property.
d. Credit to Cash NT MDS D. only from the sale of property.
Ka Pedring Matibag, a sole proprietor, buys and sells kumot at kulambo both of which 5. are
subject to value-added tax. Since he is using the calendar year as his taxable year, his
Problem 15. Agency V collected cash of P50,000 for services rendered. The collection was taxable quarters end on the last day of March, June, September, and December. When
deposited to the Bank of the Philippine Islands (BPI). What is the entry to record the deposit? should Ka Pedring file the VAT quarterly return for his gross sales or receipts for the period of
June 1 to September 30?
a. Debit, Cash in Bank LCCA and Credit, Cash Disbursing officer for P50,000
A. Within 25 days from September 30
b. Debit, Cash - NT - MDS and Credit, Cash Collecting officer for P50,000
B. Within 45 days from September 30
c. Debit, Cash in Bank LCCA and Credit, Cash Collecting officer for P50,000
C. Within 15 days from September 30
d. Debit, Cash NT MDS and Credit, Cash Disbursing officer for P50,000
D. Within 30 days from September 30
6. Tong Siok, a Chinese billionaire and a Canadian resident, died and left assets in China
valued at P80 billion and in the Philippines assets valued at P20 billion. For Philippine estate
tax purposes the allowable deductions for expenses, losses, indebtedness, and taxes,
BLT property previously taxed, transfers for public use, and the share of his surviving spouse in
their conjugal partnership amounted to P15 billion. Tongs gross estate for Philippine estate
1.Celia donated P110,000.00 to her friend Victoria who was getting married. Celia gave no tax purposes is
other gift during the calendar year. What is the donors tax implication on Celias donation? A. P20 billion.
B. P5 billion.
C. P100 billion.
D. P85 billion.
7. Keyrand, Inc., a Philippine corporation, sold through the local stock exchange 10,000
PLDT shares that it bought 2 years ago. Keyrand sold the shares for P2 million and realized a
net gain of P200,000.00. How shall it pay tax on the transaction?
A. It shall declare a P2 million gross income in its income tax return, deducting its cost of
acquisition as an expense.
B. It shall report the P200,000.00 in its corporate income tax return adjusted by the holding
period.
C. It shall pay 5% tax on the first P100,000.00 of the P200,000.00 and 10% tax on the
remaining P100,000.00.
D. It shall pay a tax of one-half of 1% of the P2 million gross sales.
8. The proceeds received under a life insurance endowment contract is NOT considered part
of gross income
A. if it is so stated in the life insurance endowment policy.
B. if the price for the endowment policy was not fully paid.
C. where payment is made as a result of the death of the insured.
D. where the beneficiary was not the one who took out the endowment contract.
9. Pierre de Savigny, a Frenchman, arrived in the Philippines on January 1, 2010 and
continued to live and engage in business in the Philippines. He went on a tour of Southeast
Asia from August 1 to November 5, 2010. He returned to the Philippines on November 6,
2010 and stayed until April 15, 2011 when he returned to France. He earned during his stay
in the Philippines a gross income of P3 million from his investments in the country. For the
year 2010, Pierres taxable status is that of
A. a non-resident alien not engaged in trade or business in the Philippines.
B. a non-resident alien engaged in trade or business in the Philippines.
C. a resident alien not engaged in trade or business in the Philippines.
D. a resident alien engaged in trade or business in the Philippines.
10. There is no taxable income until such income is recognized. Taxable income is
recognized when the
A. taxpayer fails to include the income in his income tax return.
B. income has been actually received in money or its equivalent.
C. income has been received, either actually or constructively.
D. transaction that is the source of the income is consummated.
11. In a special meeting called for the purpose, 2/3 of the stockholders representing the
outstanding capital stock in X. Co. authorized the companys Board of Directors to amend its
By-laws. By majority vote, the Board then approved the amendment. Is this amendment
valid?
A. No since the stockholders cannot delegate their right to amend the By-laws to the
Board.
B. Yes since the majority votes in the Board was sufficient to amend the By-laws.
C. No, because the voting in the Board should have been by majority of a quorum.
D. Yes since the votes of 2/3 of the stockholders and majority of the Board were secured.
13. A promissory note states, on its face: I, X, promise to pay Y the amount of Php 5,000.00
five days after completion of the on-going construction of my house. Signed, X. Is the note
negotiable?
A. Yes, since it is payable at a fixed period after the occurrence of a specified event.
B. No, since it is payable at a fixed period after the occurrence of an event which may
not happen.
C. Yes, since it is payable at a fixed period or determinable future time.
D. No, since it should be payable at a fixed period before the occurrence of a specified event
14. D draws a bill of exchange that states: One month from date, pay to B or his order
Php100,000.00. Signed, D. The drawee named in the bill is E. B negotiated the bill to M, M
to N, N to O, and O to P. Due to non-acceptance and after proceedings for dishonor were
made, P asked O to pay, which O did. From whom may O recover?
A. B, being the payee
B. N, as indorser to O
C. E, being the drawee
D. D, being the drawer
If the drawer and the drawee are the same person, the holder may present the instrument for
payment without need of a previous presentment for acceptance. In such a case, the holder
treats it as a
A. non-negotiable instrument.
B. promissory note.
C. letter of credit.
D. check.
15. X, Co., a partnership, is composed of A (capitalist partner), B (capitalist partner) and C
(industrial partner). If you were partner A, who between B and C would you have an insurable
interest on, such that you may then insure him?
A. No one, as there is merely a partnership contract among A, B and C.
B. Both B and C, as they are your partners.
C. Only C, as he is an industrial partner.
D. Only B, as he is a capitalist partner.