TOA

1. In reconciling net income on an accrual basis to net cash provided by operating activities. What adjustment
is needed to net income because of (1) an increase during the period in prepaid expenses, and (2) the
periodic depreciation expense of company properties?

a. (1) Add (2) Add b. (1) Add (2) Deduct c. (1) Deduct (2) Add d. (1) Deduct (2) Deduct

2. In calculating diluted earnings per share (EPS), which of the following should not be considered?
a. The weighted number of shares outstanding
b. The amount of cash dividends declared on ordinary shares
c. The amount of dividends declared on cumulative preference shares
d. The number of ordinary shares resulting from the assumed conversion of debentures outstanding

3. The following statements are based on PFRS for SMEs:

Statement I: If an entity has no items of other comprehensive income, it may present only an Income
Statement. Statement II: If an entity has no items of other comprehensive income, it may present a
Statement of Comprehensive Income in which the bottom line is “profit or loss.” Statement III: If only
changes to equity arise from profit or loss, payments of dividends, corrections of prior period errors, and
changes in accounting policy, the entity may present a single Statement of Income and Retained Earnings in
lieu of separate statements of comprehensive income and changes in equity.

a. True, true, true b. True, False, False c. True, False, True d. True, True, False

4. Which of the financial statement should an investor primarily use to assess the amounts, timing, and
uncertainty of investing and financing activities of ABC Company?
a. Statement of Comprehensive Income
b. Statement of Financial Position
c. Statement of Changes in Equity
d. Statement of Cash flows

5. Which of the following is not an appropriate basis for measuring the historical cost of fixed assets?
a. The purchase price, freight costs, and installation costs of a productive asset should be included in the
asset’s cost
b. Proceeds obtained in the process of readying land for its intended purpose, such as from the sale of
cleared timber, should be recognized immediately in income
c. The cost of improvement to equipment incurred after its acquisition should be added to the asset’s cost
if they provide future service potential
d. All costs incurred in the construction of a plant building, from excavation to completion of a plant
building, from excavation to completion, should be considered as part of the asset’s cost

6. The following statements are based on PAS 40 (Investment Property):

Statement I: An investment property is a property held to earn rentals or for capital appreciation or both.
Statement II: An investment property shall be measured initially at costs. Transaction costs shall be excluded
in the initial measurement.
Statement III: Under the cost model, a gain or loss arising from a change in the fair value of investment
property shall be recognized in profit or loss for the period in which it arises.

a. True, true, true b. True, False, False c. True, False, True d. True, True, False
7. In accordance with PFRS 7- Financial instruments: disclosure, which of the following best describes the risk
that an entity will encounter if it has difficulty in meeting obligations associated with its financial liabilities

a. Liquidity risk b. Credit risk c. Financial risk d. Payment risk

8. Under the principles of PAS 16 – Property, Plant and Equipment, which of the following should be included
in the cost of an item of property, plant and equipment?

I. Initial delivery and handling cost.

II. Cost of training staff on new asset.

III. Apportioned general overhead costs.

IV. Installation and assembly cost.

a. I, II, III and IV b. I, II, III only c. II and IV only d. I and IV only

9. If a note receivable is exchanged for a PPE an no interest rate is stated, the note is to be recorded at

a. Book value of PPE c. Note’s maturity value

b. Note’s face value d. Fair value of PPE or note

10. Which is(are) correct concerning the FRSC?

I. The FRSC replaces the ASC as the standard setting body in the Philippines
II. The FRSC is composed of 15 members with a Chairman and 14 representatives from various sectors
III. The Chairman and members of FRSC shall have a term of 2 years renewable for another term
IV. Any member of the ASC shall be disqualified from being appointed to FRSC

a. I and II only b. I, II, and III only c. III and IV only d. I, II, III, and IV
MAS
1. Which of the following will decrease the break-even point?
Margin of Safety Operating Leverage
A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease

2. What does a credit balance in a direct labor efficiency variance account indicate?

A. The average wage rate paid to direct labor employees was less than the standard rate.
B. Actual total direct labor costs incurred were less than standard direct labor costs allowed for the units
produced.
C. The standard hours allowed for the units produced were greater than actual direct labor hours used.
D. The number of units produced was less than the number of units budgeted for the period.

3. The high-low method of cost estimation

A. Uses two data points to predict the dependent variable

B. Uses judgment to plot the cost line on a graph
C. Uses two data points to predict the independent variable
D. Is considered more accurate than the least squares technique

4. In the cost of quality, which of the following is an example of internal failure?

A. Cost of inspecting products on the production line by quality inspectors

B. Labor cost of product designers whose task is to design components that will not break under
extreme temperature conditions
C. Cost of reworking defective parts detected by the quality assurance group
D. Cost of parts returned by customers

5. Sarah Company uses a standard cost system in which manufacturing overhead is applied to units of
product on the basis of machine hours. During February, the company used a denominator activity of
80,000 machine hours in computing its predetermined overhead rate. However, only 75,000 standard
machine hours were allowed for the month's actual production. If the fixed overhead volume variance
for February was P6,400 unfavorable, then the total budgeted fixed overhead cost for the month was:

A. P96,000.
B. P102,400.
C. P100,000.
D. P98,600.

6. The following activity and cost data were provided by Hammer Corp., which would like help in
estimating its future maintenance costs:
Units Maintenance Cost
3 P450
7 P530
11 P640
15 P700
 Using the least-squares regression method to estimate the cost formula, the expected total cost for an
activity level of 10 units would be closest to:
A. P612.50.
B. P581.82.
C. P601.50.
D. P595.84.

7. Old equipment with a book value of PhP15,000 will be replaced by new equipment with a purchase
price of PhP50,000, exclusive of freight charges of PhP2,000. The market value of the old equipment is
PhP11,000. Repair costs of PhP2,000 can be avoided if the new equipment is acquired. Assume a tax
rate of 35%. What is the initial (net) investment of the project?

A. Php 33,800 C. Php 39,700

B. Php 38,300 D. Php 52,000

8. North Korea Company produces three products with the following production and cost information:
Model A Model B Model C
Unit Produced 2000 6000 13000
Direct labor hours 4000 2000 4000
Number of setups 100 150 250
Number of shipments 200 225 275
Engineering change 15 10 5
orders

Overhead costs include setups of PhP45,000; shipping costs PhP70,000 and engineering costs,
PhP90,000. What would be the per unit overhead cost for Model C f activity based costing were used?

A. Php 5.00 C. Php 122.64

B. Php 16.25 D. Php 15.00

9. A company’s return on assets is determined to be 15% while debt ratio remains relative constant at
40%. What is the company’s return on equity?

A. 2.67% C. 25.00%
B. 6.00% D. 37.50%

10. Cost-volume-profit analysis is a technique available to management to understand better the

interrelationships of several factors that affect a firm's profit. As with many such techniques, the
accountant oversimplifies the real world by making assumptions. Which of the following is not a major
assumption underlying CVP analysis?

A. All costs incurred by a firm can be separated into their fixed and variable components.
B. The product selling price per unit is constant at all volume levels.
C. Operating efficiency and employee productivity are constant at all volume levels.
D. For multi-product situations, the sales mix can vary at all volume levels.
P1
1. Wonder Company is experiencing financial difficulty and is negotiating trouble debt restructuring with
its creditors to relieve its financial stress. Wonder has a P3,000,000 note payable to Megabank. The bank
is considering acceptance of an equity interest in Wonder Company in the form of 200,000 ordinary
shares with a fair value of P12 per share. The par value of the ordinary share is P10 per share. Wonder
Company incurred total transaction costs of P80,000 related to the issue of shares. What is the amount
of share premium to be reported by Wonder in its statement of financial position as a result of the
restructuring applying IFRIC 19?

A. P320,000 B. P400,000 C. P920,000 D. P1,000,000

Use the following information for the next two questions.

On December 31, 2015, Detty Inc. acquired Bernice Corporation’s P1,000,000 bonds for P927,880. The
market interest rate at that time was 12%. The stated interest rate was 10% payable annually. The
bonds mature in five years and met the requisites of being classified as financial asset measured at
amortized cost under PFRS 9. Unfortunately, because of lower sales, Bernice’s financial condition
worsened. On December 31, 2017 Detty Inc. determined that it was probable that the issuer would pay
back only P600,000 of the principal at maturity. In 2018, Ms. Bernice’s officers consulted a feng shui
expert to seek pieces of advice of advice to improve the company’s financial condition. Fortunately, the
company’s sales started to pick up and the credit rating of Bernice improved. At December 31, 2018,
Detty Inc. reassessed the collectability of the bonds and now expects to collect P1,300,000 from Bernice
at maturity.

2. Under PFRS 9, how much should be recognized as impairment loss on 2017?

A. P572,920 B. P524,900 C. P332,740 D. P284,720

3. Under PFRS 9, how much should be recognized as interest income in 2018?

A. P51,250 B. P 100,000 C. P114,232 D. P115,940

4. The shareholders’ equity of Joyful Corporation on December 31, 2012 shows the following account
balances:

10% Preference share, 5,000 shares, P100 par P500,000 12% Preference share, 6,000 shares, P100 par
600,000 Ordinary share, 10,000 shares, P40 par 400,000 Share premium 320,000 Accumulated profits
480,000 The 10% preference share is cumulative and fully participating, while the 12% preference share
is non-cumulative and fully participating. The last payment of dividends was on December 31, 2010.
What is the book value per share of ordinary shares?

A. P44.00 B. P59.68 C. P60.27 D.P102.80

5. The trial balance of Revenge Company showed inventories of P164,000. The inventories include some
goods that have a production cost of P18,000. These goods have a manufacturing defect that will cost
P6,000 to correct. The normal selling price for these goods would be P25,000, but after the remedial
work they will be sold through an agent as refurbished goods at a discount of 20% on the normal selling
price. The agent will receive a commission of 10% of the reduced selling price. In relation to the
defective goods, the company will recognize a loss on inventory write down of

A. P-0- B. P1,000 C. P4,000 D. P6,000

6. On July 31, 2012, American Idol Company discounted at the bank, a customer’s P1.2 million, 6-month,
10% notes receivable dated May 31, 2012. The bank discounted the note at 12%. How much net
proceeds did American Idol Company received from the discounted note?

A. P1,128,000 B. P1,152,000 C. P1,209,600 D. P1,234,800

7. The following information was included in the bank reconciliation for The Next, Inc., for June. Assume all
other reconciling items are listed:

Checks and charges recorded by bank in June (excluding a June service charge of P1,200) – P687,200;
Service charge made by bank in May and recorded in the books in June – P800; Total credits to Cash in
all journals during June – P792,080; Customer’s check marked NSF returned as a bank charge in June (no
entry made on books) – P4,000; Customer’s check marked NSF returned in May and re-deposited in June
(no entry made on books in either May or June) – P10,000; Outstanding checks at June 30 – P530,400;
Deposits in transit at June 30 – P24,000. What was the total outstanding checks at the beginning of
June?

A. P422,320 B. P426,320 C. P438,720 D. P638,480

8. On December 3, Oliver Company purchased inventory listed at P8,600 from Laurel Corp. Terms of the
purchase were 3/10, n/20. Oliver Company also purchased inventory from Tommy Company on
December 10 for a list price of P7,500. Terms of the purchase were 3/10, n/30. On December 16, Oliver
paid both suppliers for these purchases.

If Oliver uses the net method of recording purchases, the journal entry to record the payment on
December 16 will include

A. A credit to Purchase Discounts of P258

B. A credit to cash of P15,617
C. A debit to Accounts payable of P15,875
D. A debit to Purchase Discounts Lost of P258

9. Covenant Co. purchased land as a factory site for P1,000,000. Covenant paid P40,000 to tear down two
buildings on the land. Salvage was sold for P5,400. Legal fees of P3,480 were paid for the title
investigation and making the purchases. Income of P8,000 was earned through using the land as a car
park before construction started. Architect’s fees were P41,200. Title insurance cost P2,600. Excavation
cost P10,440. The contractor was paid P2,400,000. An assessment made by the city for pavement was
P6,400. Interest costs during construction were P170,000. Liability insurance cost during construction
amounted to P2,600. The cost of the building that should be recorded by Covenant Co. is

A. P2,622,640 B. P2,616,640 C.2,630,640 D. P2,624,640

10. On July 1, 2012, Piscor Corporation purchased factory equipment for P450,000. Residual value was
estimated to be P12,000. The equipment will be depreciated over ten years using the double-declining
balance method. Counting the year of acquisition as one-half year, Piscor should report depreciation
expense for 2013 on this equipment of:

A. P90,000 B. P81,000 C. P78,840 D. P72,000

P2
1. On June 1, 2013, FNBC Corporation, franchisor, receives P200,000 from PP Fad representing down
payment on the franchise agreement signed that PP Fad gave FNBC a 12% interest bearing note for the
balance of P1,000,000, payable in four semi-annual installments. Franchise services was substantially
completed by FNBC on November 15 at a cost of P900,000. On December 31, 2013, the first semi-annual
installment became due was accordingly paid by PP Fad. FNBC appropriately uses the accrual method of
recording franchise revenues. In its December 31, 2013 financial statements, how much will FNBC report
as realized franchise income for the year?

A. P112,500 B. P300,000 C. P250,000 D. 187,000

2. A municipality of the province of Cavite received the following operating and service income for the
month of January 2014:

Garbage Fees P300,000

Markets 200,000
Hospitals 100,000
Cemeteries 50,000
Slaughterhouse 50,000
All receipts and collections of operating and service income were deposited.
The entry to record the deposit of collections from operating and service income includes a:

A. Debit to Cash in Vault, P700,000

B. Debit to Cash in Bank, Local Currency – Current Account,
C. Credit to Cash in Vault, P700,000
D. Both b and c

3. The governing board of Samaritan Hospital, which is operated by a religious organization designated P
500,000 of cash for future expansion of the hospital. On the hospital's balance sheet, the cash
designated for future plant expansion would be disclosed in which of the following classes of net assets?

A. Temporarily restricted net assets

B. Plant replacement and expansion.
C. Board designated net assets
D. Unrestricted net assets

4. A private, not-for-profit geographic society received cash contributions which were restricted by the
donors for the acquisition of fixed assets. In which section of the statement of cash flows would these
cash contributions be reported?

A. Financing activities
B. Investing activities
C. Operating activities
D. Capital and related financing activities

5. Janine and Nicole formed a general professional partnership (practicing law) in the Philippines on
January 1, 2014. Their capital contributions were credited to their respective capital accounts as follows:
Janine, Capital – P600,000
Nicole, Capital – P1,000,000.
During the year, the partnership earned profit before tax of P4,000,000.
The income tax rate was 30%.
 How much is the share of Nicole in the partnership profit?

A. P1,750,000 B. P2,500,000 C. P1,500,000 D. P2,000,000

6. Partial list of accounts from the trial balances of the John Rey Corporation, Branch A and Branch B at
December 31, 2013 are as follows:
Home Office Branch A Branch B
Inventory, Jan 2013 34,000 5,500 8,800
Branch A 100,000 - -
Branch B 81,000 - -
Purchases 500,000 - -
Expenses 120,000 35,000 38,000
Shipments from home- 68,200 41,800
office
Home office 94,000 75,000
Sales 500,000 150,000 120,000
Shipments to Branch A 73,700
Shipments to Branch B 46,200
Loadings in Branch Inventory – Jan 1 1,300

Additional information:
Shipments to the branches are made at billed prices. Inventory on hand on December 31, 2013 – Home
office – P 31,000; Branch A – P 7,260; Branch B – P 8,250.

The merchandise inventory on the combined balance sheet as of December 31, 2013.

A. P 68,400 B. P 65,000 C. P 46,500 D. P 45,100

Use the following information for the next two items

Minor Corporation reports net assets of P300,000 at book value. These assets have an estimated market value
of P350,000. If Major Corporation buys 80 percent ownership of Minor for P275,000,
35.

7. Goodwill will be reported in the consolidated balance sheet in the amount of:

A. P0 B. P25,000 C. P35,000 D. P40,000

8. The non-controlling interest will be reported in the amount of:

A. P55,000 B. P60,000 C. P70,000 D. P71,250

9. A government agency ordered an office equipment for P1,000,000 on August 20, 2013. The equipment was
delivered to the government agency on September 11, 2013. The asset has an estimated useful life of 10 years.
The book value of the equipment on December 31, 2014 is:

A. P 787,500 B. P 977,500 C. P 887,500 D. P 857,500

10.
Answer Key:

TOA MAS

1. C 1. A
2. B 2. C
3. A 3. A
4. D 4. C
5. B 5. B
6. B 6. C
7. A 7. B
8. D 8. A
9. D 9. C
10. A 10. D

P1 P2

1. C 1. B
2. B 2. D
3. A 3. D
4. B 4. S
5. D 5. B
6. C 6. B
7. A 7. A
8. D 8. C
9. D 9. C
10. B