THE ACCOUNTANCY PROFESSION, CONCEPTUAL FRAMEWORK (ASSUMPTIONS)

1. 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 the FRSC

a. I and II only c. III and IV only

b. I, II, and III only d. All are correct

2. Which of the following government agency is represented in FRSC?

a. Bureau of Fisheries c. Bureau of Internal Revenue
b. CHED d. Bureau of Customs

3. Due process for projects of FRSC normally INCLUDES the following:

i. Consideration of pronouncements of the IASB
ii. Formation of task force, when deemed necessary to give advice the FRSC
iii. Issuing for comment an exposure draft approved by at least eight members of the Council comment period will
be at least sixty days
iv. Approval of a standard or an interpretation by majority of the Council members

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

b. I, III and IV only d. All are included

4. Which statement(s) is(are) CORRECT regarding the Philippine Financial Reporting Standards (PFRSs)?
a. PFRSs set out recognition, measurement, presentation, and disclosure requirements dealing with transactions and
events that are important in general purpose financial statements
b. PFRSs are designed to apply to the special purpose financial statements and other financial reporting of all profit-
oriented entities
c. PFRSs are designed to apply to not-for-profit activities in the private sector
d. All of the choices

5. PFRSs approved by the FRSC include paragraphs in bold type and plain text. In relation to the PFRS paragraphs in bold
type, are the following statements true or false?
i. Bold-type paragraphs should be given greater authority than the paragraph in plain text
ii. Bold-type paragraphs indicate the main principles of the standard

a. False; True b. True; True c. False; False d. True; False

6. General purpose financial statements are the product of

a. General purpose financial statements to be used by parties internal to the entity only
b. Financial statements to be used by investors
c. General purpose financial statements to be used by parties both internal and external to the entity
d. Financial statements to be used primarily by the management

7. Financial accounting is concerned with

a. General purpose reports on financial position and financial performance
b. Specialized reports for inventory management and control
c. Specialized reports for income tax computation and recognition
d. General purpose reports on changes in stock prices and future estimates of market position

8. Which of the following statements concerning the provisions of the updated FRSC Framework are CORRECT?
i. It sets out the concepts that underlie the preparation and presentation of financial statements for external users
ii. It is not an PFRS and hence does not define standards for any particular measurements or disclosure issue
iii. Nothing in the Framework overrides any specific PFRS
iv. Where there is a conflict, the requirements of the PFRS prevail over those of the Framework

a. I and II only c. III and IV only

b. I, II and III only d. All are correct

9. The Framework for the Preparation and Presentation of Financial Statements services to guide the FRSC in:
A B C D
i. Developing accounting standards No Yes Yes No
ii. Resolving accounting issues not addressed in PFRS Yes Yes No No
iii. Preparing auditing standards Yes No Yes No
 10. The Conceptual Framework deals with
i. Concepts of capital and capital maintenance
ii. The definition, recognition and measurement of the elements from which financial statements are constructed
iii. The qualitative characteristics of useful financial information
iv. The objective of financial reporting

a. I and II only c. III and IV only

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

11. Which of the following is not a purpose of the conceptual framework of accounting?
a. To assist preparers of financial statements in applying PFRSs and in dealing with topics that have yet to form the
subject of an PFRS
b. To provide those who are interested in the work of the FRSC with information about its approach to the formulation
of PFRSs
c. To assist users of financial statements in interpreting the information contained in financial statements prepared in
compliance with PFRSs
d. To assist auditors in forming an opinion on whether financial statements comply with PFRSs
e. None of the above

12. What chapter of the Conceptual Framework is still in progress?

a. Chapter 1 The objective of General Purpose Financial Reporting
b. Chapter 2 The reporting Entity
c. Chapter 3 Qualitative Characteristics of Useful,Financial Information
d. Chapter 4 The Framework (1989): The Remaining Text
e. None of the above because all are already published

CONCEPTUAL FRAMEWORK (QUALITATIVE CHARACTERISTICS, ELEMENTS OF FINANCIAL

STATEMENTS)
For items 13 and 14:
The FRSC Framework identifies fundamental and enhancing qualitative characteristics that make the financial
information in the financial statements useful to the users. These characteristics are the following:
i. Relevance iv. Timeliness
ii. Comparability v. Understandability
iii. Verifiability vi. Faithful Representation

13. Determine the fundamental qualitative characteristics

a. I and II only c. I and VI only
b. I, II, IV and V only d. I, II, IV and VI only

14. Determine the enhancing qualitative characteristics

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

15. Which of the following statements is INCORRECT regarding Relevance?

a. Financial information can make a difference in decisions if it had predictive value, confirmatory value, or both
b. Financial information has predictive value if it can be used as an input to process employed by users to predict future
outcomes
c. Financial information has confirmatory value if it confirms about previous evaluations
d. Materiality is an entity-specific aspect of relevance based on the nature or magnitude, or both, of the items to which
the information relates in the context of an individual entitys financial report
e. The Framework specify a uniform quantitative threshold for materiality or predetermine what could be material in a
situation

16. Which of the following is INCORRECT regarding Comparability?

a. Comparability is the qualitative characteristic that enables users to identify and understand similarities in, and
differences among items
b. Comparability is not the same with Consistency because the latter refers to the use of the same methods for the same
items, either from period to period within a reporting entity or in a single period across entities
c. Consistency is the goal; Comparability helps to achieve that goal
d. For information to be comparable, like things must look alike and different things must look different, Comparability
of financial information is not enhanced by making unlike things look alike any more than it is enhanced by like
things look different. Thus, effectively saying that Comparability is not Uniformity
e. A single economic phenomenon can be faithfully represented in multiple ways, permitting alternative accounting
methods for the same economic phenomenon diminishes comparability
 17. Which of the following DOES NOT relate to Verifiability?
a. It means that different knowledgeable and independent observers could reach consensus, although not necessarily
complete agreement, that a particular depiction is a faithful representation
b. Quantified information need not be a single point estimate to be verifiable. A range of possible amounts and the
related probabilities can also be verified
c. Generally, the older the information is the less useful it is. However, some information may continue to be useful
long after the end of a reporting period because, for example, some users may need to identify and assess trends
d. Direct verification means verifying a representation through direct observation, for example, by counting cash
e. An example indirect verification is verifying the carrying amount of inventory by checking the inputs and
recalculating the ending inventory using the same cost flow assumption

18. Which is(are) CORRECT concerning the qualitative characteristics of useful financial information?
i. Classifying, characterizing, and presenting information clearly and concisely makes it understandable
ii. Excluding inherently complex information from financial reports might make the information in those financial
reports easier to understand. However, the reports would be incomplete and therefore potentially misleading
iii. Financial reports are prepared for users who have a reasonable knowledge of business and economic activities
and who review and analyze the information diligently
iv. Appropriate disclosures may partially compensate for non-comparability

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

b. I, II, and III only d. All are correct

19. Which of the following statements is INCORRECT regarding Faithful Representation?

a. Financial reports represent economic phenomena in words and numbers
b. Financial information should be complete, neutral and free from error
c. Complete depiction includes all information necessary for a user to understand the phenomenon being depicted,
including all necessary descriptions and explanations
d. A neutral depiction is slanted, weighted, emphasized, de-emphasized or otherwise manipulated to increase the
probability that financial information will be favourably or unfavorably by users
e. Free from error means, there are no errors or omissions in the description of the phenomenon, and the process used
to produce the reported information has been selected and applied with no errors in the process

20. This assumption was formerly considered as an underlying assumption on the previous Conceptual Framework
a. Going Concern Assumption c. Cost Assumption
b. Accrual Assumption d. Entity Assumption

21. According to the FRSC Conceptual Framework for Preparation and Presentation of Financial Statements, which two of
the following are examples of expenses?
i. Loss on disposal of a noncurrent asset
ii. A decrease in equity arising from distribution to equity participants
iii. A decrease in economic benefit during the accounting period
iv. A reduction in income for the accounting period

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

CASH AND CASH EQUIVALENTS

22. The amount reported as Cash on a companys balance sheet normally include
a. Received Postdated Checks c. Petty cash
b. Payroll account d. Undelivered checks

23. Material bank overdraft should be

a. Netted with current assets c. Reported as liability
b. Netted with cash d. Considered as current liability

24. Which of the following items would normally require an adjusting entry on the companys books for the current period?
a. Outstanding checks c. Deposits in transit
b. NSF checks d. Cash on Hand

25. In most situations, the petty cash fund is reimbursed just prior to the year-end and an adjusting entry is made to avoid:
a. The misstatement of revenue
b. The overstatement of cash and the understatement of expenses
c. The understatement of cash with the appropriate statement of expenses
d. The understatement of cash and the overstatement of expenses
26. Cash on hand and in bank on the balance sheet EXCLUDES
a. US dollars deposited in a foreign currency depository account
b. Checks drawn before the balance sheet date but held for later delivery to creditors
c. Time deposits
d. Cash reserved for acquisition of fixed assets

27. Croconaw Companys checkbook balance at December 31, 2009 was P 50,000. In addition, Croconaw had the following
items on that date:

Check payable to Croconaw dated December 31, 2009 in payment made in December 2009,
included in December 31, 2009 checkbook balance P 20,000
Check payable to Croconaw, deposited December 15 but returned by the bank on December 30
marked NSF. The return was not reflected on the checkbook. 5,000
Check drawn on Croconaws account, payable to a vendor, dated and recorded December 30,
but not yet mailed as of December 31, 2009 3,000

The amount to be shown as cash on Crocnaws balance sheet at December 31, 2009 is:
a. P 48,000 b. P 65,000 c. P 68,000 d. P 70,000

28. The Cash account shows a balance of P 450,000 before reconciliation. The bank statement does not include a P 23,000
made on the last day of the month. The bank statement shows a collection by the bank of P 9,400 and a customers check
for P 3,200 was returned because it was NSF. A customers check for P 5,400 was recorded on the books at P 4,500, and
a check written for P 790 was recorded as P 970. The correct balance in the Cash account was:
a. P 455,120 b. P 455,480 c. P 457,280 d. P 478,480

29. Deposits in foreign countries which are subject to a foreign exchange restriction should be
a. Valued at current exchange rates and shown as current assets
b. Valued at historical exchange rates and presented as noncurrent assets
c. Valued at current exchange rates and presented as noncurrent assets
d. Valued at historical exchange rates and presented as current assets

30. If material, deposits in foreign bank which are subject to foreign exchange restriction should be classified
a. Separately as current asset with appropriate disclosure
b. Separately as noncurrent asset with appropriate disclosure
c. Be written off as an extraordinary loss
d. As part of cash and cash equivalent

31. When a petty cash is used, which of the following is TRUE?

a. The petty cashiers summary of petty cash payments serves as journal entry that is posted to the appropriate general
ledger account
b. The reimbursement of the petty cash fund should be credited to the cash account
c. Entries that include a credit to the cash account should be recorded at the time the payments from the petty cash
funds are made
d. All are true

32. Unreleased checks are checks drawn before balance sheet date but held for later delivery to creditors
a. Should be treated as outstanding checks
b. Should be treated to the cash balance
c. Should be treated as outstanding if the date is shortly after balance sheet date
d. Should be treated as outstanding checks if they are ultimately encashed

33. At October 31, 2008, Pumpakaboo Co. had cash accounts at three different banks. One account balance segregated solely
for a November 15, 2008 payment into a bond sinking fund. A second account, used for branch operations, is overdrawn.
The third account, used for regular corporate operations, had a positive balance. How should the accounts be reported in
the October 31, 2008 classified balance sheet?
a. The segregated account should be reported as a noncurrent asset, the regular should be reported as a current asset,
and the overdraft should be reported as a current liability
b. The segregated and regular accounts should be reported as current assets, and the overdraft should be segregated as a
current liability
c. The segregated account should be reported as a noncurrent asset, and the regular account should be reported as a
current asset net of the overdraft
d. The segregated and regular accounts should be reported as current asset net of the overdraft
34. Postage stamps and IOUs found in petty cash drawer should be reported as
a. Supplies and receivables c. Petty cash
b. Cash because they represent the equivalent of d. Investment
money

35. The one item that should be EXCLUDED from Cash and Cash Equivalents on the December 31, 2008 balance sheet of
Spoink Company is
a. A P 100,000 minimum balance in the firms current account which is maintained to avoid service charges
b. A check issued by Spoink Company on December 27, 2008 but dated January 15, 2009
c. A time deposit which matures in one year
d. A customers check demanded in a foreign currency

36. Patrat Company placed a P 1.5 M in the money market for 60 days subject to pre-termination. The P 1.5 M should be
a. Included as part of Cash and Cash Equivalents with the appropriate disclosures in the notes to the financial
statements
b. Recorded as part of its marketable financial assets without need of any disclosures
c. Treated as short-term receivable with the appropriate disclosure in the note of financial statements
d. Considered as part of its marketable financial assets with appropriate disclosure in the notes to financial statement

37. As of December 31, of the current year, Squirtle Company had various checks and papers in its safe. Which item
SHOULD NOT BE INCLUDED in its Cash account in the current year-end balance sheet?
a. US $ 20,000 cash
b. Past due promissory notes issued in favour of Squirtle by its President
c. Bulbasaur Companys December 15, of the current year, P 150,000 check payable to Squirlte
d. Squirtle Companys December 28, of the current year, check payable to Charmander, a supplier

38. On December 31, 2010, Chimeco Company had the following cash balance
Cash in bank P 3,000,000
Petty cash fund (unreplenished expenses, P 5,000 on 12/31/10) 20,000
Time deposit, due March 1, 2011, six months 500,000

Cash in bank included P 200,000 of compensating balance against short-term borrowing arrangement at December 31,
2010. The compensating balance is legally restricted as to withdrawal of Chimeco. In the current asset section of the
December 31, 2010 balance sheet, what total amount should be reported in the Cash and Cash Equivalents?
a. P 3,315,000 b. P 3,320,000 c. P 2,815,000 d. P 2,820,000

39. Minun Co. had the following account balances at December 31, 2003:
Cash in Banks P 2,250,000
Cash on Hand 125,000
Cash legally restricted for additions to plant (expected to be disbursed in 2005) 1,000,000

Cash in Banks included P 600,000 of compensating balance against short-term borrowing arrangements which is not
legally restricted as to withdrawal by Minun.

On the Current Assets section of Minuns December 31, 2003 balance sheet, total Cash should be
a. P 2,375,000 b. P 2,250,000 c. P 1,775,000 d. P 3,975,000

40. Smeargle Company provided the following information with respect to its Cash and Cash Equivalents on December 31,
2010:
Checking account at Nimbasa (P 100,000)
Checking account at Slateport 3,500,000
Treasury savings bond at Tapu 1,000,000
Payroll account 500,000
Sales tax account 400,000
Foreign bank account Restricted (in equivalent pesos) 2,000,000
Employees postdated checks 300,000
IOUs from Presidents brother 750,000
Credit memo from a vendor for a purchase return 80,000
Travellers check 300,000
NSF check 150,000
Petty cash fund 50,000
Money order 200,000

What amount should be reported as Unrestricted Cash on the balance sheet?

a. P 4,860,000 b. P 4,650,000 c. P 4,950,000 d. P 6,950,000
LOANS AND RECEIVABLES
41. Long-term notes receivable which normally bears no interest or an interest rate that is to may be stated at
a. Face value c. Maturity value
b. Discounted value d. Future value

42. If a note receivable is exchanged for a PPE and no interest rate is stated, the note is to be recorded at
a. Book value of PPE c. Notes maturity value
b. Notes face value d. Fair value of PPE or note

43. Under PAS 39 Recognition and Measurement, Loans and Receivables are defined as
a. Non-derivative financial asset with fixed maturity date and has fixed or determinable payments but is not quoted in
an active market
b. Non-derivative financial asset without fixed maturity date and has fixed or determinable payments and is not quoted
in an active market
c. Non-derivative financial asset with fixed maturity date but without fixed or determinable payments but is quoted in
an active market
d. Non-derivative financial asset without fixed maturity date, without fixed or determinable payments but is quoted in
an active market

44. If the allowance method of recording uncollectible accounts expense is used, the entries at the time of collection of a
previously written-off account would
a. Have no effect on profit or loss of the entity
b. Increase profit of the entity
c. Have no effect on the contra account of the receivable
d. Decrease the contra account of the receivable

45. Hitmonchan Company received a 60-day, 15% note for P 3,000 on June 16. Which of the following is TRUE?
a. At maturity, Hitmonchan will receive P 3,075 c. Principal and interest is due on August 16
b. Total receivable of P 3,075 should be recorded d. The maturity value of this note is P 3,000

46. Rapidash Company received a seven-year, zero-interest-bearing note on February 22, 2012, in exchange for property is
sold to Mudsdale Company. There was no established exchange price for this property and the note has no ready market.
The prevailing rate of interest for note of this type was 7% on February 22, 2012, 7.5% on December 31, 2012, 7.7% on
February 22, 2013, and 8% on December 31, 2013. What interest rate should be used to calculate interest revenue from
this transaction for years ending December 31, 2012 and 2013, respectively?
a. 0% and 0% b. 7% and c. 7% and 7% d. 7.5% and
7.7% 8%
47. Which of the following is NOT a required disclosure for loans and receivables?
a. The nature and amount of impairment loss recognized in profit or loss
b. Material items of income and expenses and gains and losses resulting from receivables
c. The names of the debtors who defaulted on the payments of their loans or accounts
d. The criteria for recognition and basis of measurement applied

48. The account credited when a note receivable is discounted with recourse is
a. Liability on discounted on notes c. Accounts receivables
b. Notes receivable d. Allowance for discounted notes

49. Vanillish Company found itself in financial difficulties and decided to use its accounts receivable at obtaining cash to
continue operations. On July 1, 2009, Vanillish factored P 750,000 of accounts receivable for each proceeds of P
695,000. No bad debt allowance was associated with these accounts. On December 17, 2009, Vanillish assigned the
remainder of its accounts receivable P 2,500,000 as of that date, its collateral on a P 1,250,000, 12% interest rate loan
from Bank of Nimbasa. Vanillish received P 1,250,000 less 2% finance charge:

Additional information is as follows:

Allowance for doubtful accounts, 12/31/09 P 32,000
Estimated uncollectible, 12/31/09 3% of accounts receivable
Accounts receivable (excluding factored and assigned accounts) 12/31/09 P 500,000

None of the assigned accounts had been collected by the end of the year. How much were the proceeds from general
assignment of the accounts receivable?
a. P 1,225,000 b. P 1,895,000 c. P 1,920,000 d. P 3,145,000

50. Using the information given in #33, how much is the amortized cost of accounts receivable to be shown on Vanillishs
December 31, 2009 balance sheet?
a. P 500,000 b. P 2,910,000 c. P 2,968,000 d. P 3,000,000
51. On Darkrais April 30, 2008 balance sheet, a note receivable was reported as a noncurrent asset and its acquired interest
for eight months was reported as a current asset. Which of the following terms WOULD FIT Darkrais note receivable?
a. Both principal and interest amounts are payable on August 31, 2008 and August 31, 2009
b. Principal and interest are due on December 31, 2008
c. Both principal and interest amounts are payable on December 31, 2008 and December 31, 2009
d. Principals due August 31, 2009, and interest is due on August 31, 2008 and August 31, 2009

52. On July 1, of this year, Baltoy Company received a one-year receivable bearing interest at the market rate. The face
amount of the note receivable and the entire amount of the interest are due on June 30 of next year. At December 31 of
this year, the company should report in its balance sheet
a. A deferred credit for interest applicable to the next year
b. No interest receivable
c. Interest receivable for the entire amount of the interest due on June 30 of the next year
d. Interest receivable for the interest accruing this year

53. Accounts receivable are reported at

a. Cost c. Fair market value
b. Current value d. Net realizable value

54. What is the proper accounting for credit card sales if the credit card company is
Affiliated with a bank Not affiliated with a bank
a. Sale on account Cash sales
b. Sale on account Sale on account
c. Cash sales Cash sales
d. Cash sales Sale on account

55. If accounts receivable is pledge against borrowings, the amount of Accounts Receivable Pledge should be
a. Excluded from total receivable with disclosure c. Included in total receivable with disclosure
b. Excluded from total receivable without d. Included in total receivable without disclosure
disclosure

56. Gliscor Company, which has an adequate amount in its Allowance for Doubtful Accounts, writes off and uncollectible an
accounts receivable from a bankrupt customer. This action will
a. Have no effect on total current assets c. Reduce net income for the period
b. Reduce total current assets d. Reduce the amount of owners equity

57. Celadon City Cycle Shop sells a bicycle to Saffron City, a customer who uses Express Charge (a notional credit card, but
not issued by the bank). In recognizing the sale, Celadon City Cycle Shop should report
a. An accounts receivable from Saffron c. An accounts receivable from Express Charge
b. A cash receipts d. A small increase I the allowance for bad debts

58. Magmar Company received a 60-day, 15% note for P 3,000 on June 16. Which f the following is NOT TRUE?
a. Magmar will receive P 3,000 plus interest of P 75 at maturity
b. Magmar will should record a total receivable due of P 3,075 on June 16
c. The principal of the notes plus interest is due on August 15
d. The maturity value of this note is P 3,075

59. Discounting a note receivable creates

a. Protest fee c. Contingent liability
b. Interest expense d. Cash disbursement

60. Kirlia Company accepted from a customer a P 5,000,000, 90-day, 12% note dated, August 31, 2010. On September 30,
2010, Kirlia discounted the note at 12%. However, the proceeds were not received until October 1, 2010. In September
30, 2010 balance sheet, the amount receivable from the bank includes interest revenue of
a. P 103,000 b. P 150,000 c. P 100,000 d. P 47,000

61. Swellow Company determined that the net realizable value of its accounts receivable at December 31, 2010, based on an
aging of the receivable, was P 3,700,000. Additional information is as follows:
Allowance for Uncollectible Accounts 1/1/10 P 100,000
Uncollectible accounts written off during 2010 80,000
Uncollectible accounts recovered during 2010 20,000
Accounts receivable - December 31, 2010 4,000,000

For the year 2010, what would be the Uncollectible Accounts Expense?
a. P 300,000 b. P 260,000 c. P 200,000 d. P 380,000
62. You are given the following information relating to Tangela Co., a general merchandising company:
Rate of gross profit on sales 20%
Accounts Receivable, December 31, 2009 P 80,000
Collections on Accounts Receivable in 2010 430,000
Cost of Goods Available for Sale in 2010 460,000
Merchandise Inventory, December 31, 2010 100,000

Assuming all sales were on account, what was the companys Accounts Receivable balance on December 31, 2010?
a. P 100,000 b. P 120,000 c. P 50,000 d. P 90,000

63. During 2010, the Delibird Co. wrote off uncollectible accounts of P 7,500 and recovered accounts of P 3,700 that had
been written off in 2009. In addition, the following information is available:
Accounts Receivable Net Realizable Value
December 31, 2009 P 375,000 P 362,500
December 31, 2010 P 500,000 P 480,000

The Bad Debts Expense for the year 2010 is:

a. P 8,700 b. P 16,200 c. P 11,300 d. P 20,000

64. Keldeo Company used the balance sheet approach in estimating Doubtful Accounts Expense. The company prepares an
adjusting entry to recognize this expense at the end of each month. During the month of July, the company wrote-off a P
1,000 receivable and made no recoveries of previous write-offs. Following the adjusting entry for July, the credit balance
in the Allowance for Doubtful Accounts was P 2,500 larger than it was on July 1. What amount of Doubtful Accounts
Expense was recorded for July?
a. P 2,500 b. P 1,000 c. P 1,500 d. P 3,500

65. Hippodown Corp. decided that the Allowance for Bad Debts should be adjusted to equal the estimated amount required
based on aging the accounts as of December 31. Following data were gathered:
Allowance for Bad Debts, January 1, 2010 P 120,000
Provision for Bad Debts during 2010 (2% of P 3,000,000 sales) 60,000
Bad Debts written-off in 2010 75,000
Estimated Bad Debts per aging of accounts on December 31, 2010 80,000

The Bad Debts Provision should be adjusted by

Debit Credit
a. Bad Debts Expense P 15,000 Allowance for Bad Debts P 15,000
b. Allowance for Bad Debts 45,000 Accounts Receivable 45,000
c. Allowance for Bad Debts 25,000 Bad Debts 25,000
d. Bad Debts Expense 80,000 Allowance for Bad Debts 80,000

66. Before year-end adjusting entries, Feebas Companys account balances at December 31, 2010, for Accounts Receivable
and the related Allowance for Uncollectible Accounts were P 500,000 and P 45,000, respectively. An aging of Accounts
Receivable indicated that P 62,500 of the December 31, receivables are expected to be uncollectible. The net realizable
value of Accounts Receivable after adjustments is
a. P 482,500 b. P 437,500 c. P 392,500 d. P 455,000

67. Simisage Co. assigned P 500,000 of Accounts Receivable to Ledian Co as security for a loan of P 420,000. Ledian
charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month,
Simisage collected P 110,000 on assigned accounts after deducting P 380 of discounts. Simisage accepted returns worth
P 1,350 and wrote off assigned accounts totalling P 3,700. The amount of cash Simisage received from Ledian at the time
of the transfer was
a. P 378,000 b. P 410,000 c. P 411,600 d. P 420,000

68. On October 31, 2010, Beldum Company engaged in the following transactions:
Obtained a P 500,000, six-month loan from Heahen Cith Bank, discounted at 12%. The company pledged P 500,000
of Accounts Receivable as security for the loan.
Factored P 1,000,000 of Accounts Receivable without recourse on a non-notification basis with Hypno Company.
Hypno charged a factoring fee of 2% of the amount of receivables factored and withheld 10% of the amount
factored.

What is the total Cash received from the financing of receivable?

a. P 1,320,000 b. P 1,350,000 c. P 1,380,000 d. P 1,470,000
 69. On March 31, 2003, Graveler Company had an adjusted credit balance of P 100,000 in its Allowance for Doubtful
Accounts. An analysis of trade accounts receivable at that date revealed the following:
Age Amount Estimated uncollectible
0-30 days P 6,000,000 5%
31-60 days 400,000 10%
Over 60 days 200,000 140,000

What amount should Graveler report as Allowance for Doubtful Accounts in its March 31, 2003 because sheet?
a. P 480,000 b. P 400,000 c. P 380,000 d. P 300,000

70. Claydol Companys Allowance for Bad Debts had a credit balance of P 250,000 at January 1, 2003. Claydol accrues Bad
Debts Expense at 2% of credit sales. During 2003, Claydol credit sales amounted to P 40,000,000 and uncollectible
accounts totalling P 400,000 were written off. The aging of Accounts Receivable indicated that a P 1,000,000 Allowance
for Bad Debts was required at December 31, 2003. What is the Bad Debts Expense to be reported in 2003?
a. P 1,150,000 b. P 1,000,000 c. P 800,000 d. P750,000

71. Based on aging of receivables at December 31, 2003, Silcoon Co. has determined that its collectible trade receivables
were P 6,500,000. Following information pertaining to Silcoons trade receivable in 2003; Trade Receivables, 12/31 P
7,000,000; Allowance for Bad Debts, 01/01 P 600,000; Uncollectible accounts written off P 360,000 and Uncollectible
accounts recovered, P 40,000. What would be Silcoons Provision for Bad Debts for 2003?
a. P 420,000 b. P 220,000 c. P 100,000 d. P 300,000

72. Certain information relative to the 2001 operations of Murkrow Company follows:
Accounts Receivable, January 1 P 600,000
Accounts Receivable collected 900,000
Cash Sales 100,000
Inventory, January 1 500,000
Inventory, December 31 300,000
Purchases 800,000
Gross margin on Sales 500,000

What is the balance of Accounts Receivable on December 31, 2001?

a. P 1,400,000 b. P 1,200,000 c. P 1,100,000 d. P 1,300,000

INVENTORIES
73. According to PAS 2 Inventories, net realizable value is
a. The estimated selling price (SP)
b. The current replacement costs
c. The estimated SP less estimated cost to complete
d. The estimated SP less estimated cost to complete & sell

74. Musharna Inc. manufactures and sells paper envelopes. The stock of envelopes was included in the closing inventory as
of December 31, 2012, at a cost of P 50 each pack. During the final audit, the auditors noted that the subsequent sales
price of the price of the inventory at January 15, 2013, was P 40 each per pack. Furthermore, inquiry reveals that during
the physical stock take, a water leakage has created damages to the paper and the glue. Accordingly, in the following
week, Musharna Inc. has spent a total of P 15 per pack for repairing and reapplying glue to the envelopes. The net
realizable value and inventory write-down (loss) amount to?
a. P 40 and P b. P 45 and P c. P 25 and P d. P 35 and P
30 10 25 25

75. Cash discounts permitted on the purchased direct materials (DM) are theoretically
a. Deducted from DM, whether taken or not c. Added to other income, whether taken or not
b. Deducted from DM, only if taken d. Ignored

76. Which statement is INCORRECT regarding cost formula?

a. Specific identification of cost means that specific costs are attributed to identified inventory
b. The FIFO assumes that the items of inventory that were purchased last are sold first, and consequently, the items
remaining in the inventory at the end of the period are those earlier purchased or produced
c. Under the weighted average cost formula, the cost of each item is determined from weighted average of similar
items at the beginning of a period and the cost similar to items purchased or produced during the period
d. The average method may be calculated on a periodic basis, or each shipment is received, depending upon the
circumstances of the entity
77. Which statement is TRUE about gross profit method?
a. It may not be used to estimate the inventories for external interim reports
b. It may not be used to estimate the inventories for external annual reports
c. It may not be used to by the insurers of inventories
d. It may not be used for internal estimation of inventory

78. A gain or loss arising on the initial recognition of a biological asset and from a change at the fair value less costs to sell
of a biological asset should be included in
a. In P/L for the period c. Capital reserve in equity
b. Revaluation reserve d. None of the choices

79. Which of the following is NOT DEALT with by PAS 41 Agriculture?

a. The accounting for biological assets
b. Initial recognition of agricultural produce harvested
c. Processing the agriculture produce after harvesting
d. Government grant accounting for biological assets

80. Agricultural activity

a. Is the harvested product of the entitys biological assets
b. Comprises the process of growth, degeneration, production, and procreation that cause qualitative or quantitative
changes in a biological asset
c. Is the management by an entity of the biological transformation and harvest of biological assets for sale or for
conversion into agricultural produce or into biological assets
d. Is the detachment of produce from a biological asset or the cessation pf biological assets life processes

81. Agricultural activity includes all of the following except

a. Noriculture & aquaculture c. Annual perennial cropping
b. Raising livestock d. Ocean fishing

82. Which of the following cannot be regarded as an agricultural produce

a. Cheddar cheese c. Piglets
b. Racing pony d. Calves

83. An entity had a plantation forest that is likely to be harvested and sold in 30 years. The income should be accounted for
in which of the following?
a. The plantation forest shall be valued every 5 years and the increase in value should be shown in the statement of
recognized gains and losses
b. The eventual sales proceeds should be estimated and matched to the profit and loss account over 30-year period
c. Income should be measured annually and reported using the fair value approach that recognizes and measures
biological growth
d. No income should be reported annually until first harvest and sale in 30 years

84. The following are excluded from the cost of inventories EXCEPT:
a. Selling costs
b. Freight charges on goods acquire FOB Destination
c. Abnormal amounts of wasted materials, labor or other production costs
d. Storage costs that are necessary in the production process prior to a further production stage

85. Which of the following is NOT TRUE about the perpetual inventory method?
a. Purchases are recorded as debits to Inventory account
b. After a physical inventory count, Inventory is credited for any missing inventory
c. The entry to record a sale includes a debit to Cost of Goods Sold and a credited to Inventory
d. Purchases returns are recorded by debiting Accounts Payable and crediting Purchase Returns and Allowances

86. The change in fair value less estimated point of sale costs of a biological asset shall be
a. Taken to equity such date that the asset is disposed of, at which date, any balance in the equity shall be taken to
profit or loss
b. Ignored
c. Taken to profit or loss during the period in which the change arises
d. Taken to equity under the heading comprehensive income
87. Which of the following statements is incorrect regarding biological assets and agricultural produce?
a. The price in an active market is considered to be the best basis for determining the fair value of biological assets and
agricultural produce
b. Agricultural produce shall be measured at cost less accumulated depreciation and impairment loss in the income
statement in the period in which the change arises
c. The change in fair value less estimated point of sale costs of biological assets is reported as income or loss in the
Income Statement in the period in which the change arises
d. Biological assets whose fair value cannot be determined reliably shall be measured at cost less accumulated
depreciation and impairment losses

88. The following information is available for the Geninja Company for the three months ended March 31, 2009:
Inventory, January 1 P 450,000
Purchases 1,700,000
Freight-in 100,000
Sales 2,400,000

The gross margin is estimated for the 25% on cost. What is the estimated Cost of Goods Sold at March 31, 2009?
a. P 2,400,000 b. P 2,250,000 c. P 1,920,000 d. P 1,800,000

89. Using the information given in #36, assume gross margin is estimated to be 25% of sales, what is the estimated Cost of
Goods Sold at March 31, 2009?
a. P 2,400,000 b. P 2,250,000 c. P 1,920,000 d. P 1,800,000

90. Inventories DO NOT encompass

a. Merchandise purchased by a retailer and held for resale
b. Land and other property held for resale by subdivision company or real estate developer
c. Finished goods produced
d. Abnormal amounts of wasted materials, labor and other production cost.

91. Which of the following items SHOULD NOT BE INCLUDED in the inventory at year end?
a. Goods held but awaiting return to vendor due to wrong specifications
b. Goods returned by a customer
c. Goods out on consignment
d. Goods held on consignment fir sale on commission

92. When a periodic inventory system is used

a. Cost of goods sold is a residual amount
b. Ending inventory is transferred to expense and the beginning inventory is transferred to assets
c. Two entries must be made when gods are purchased
d. A Purchases account is not used; all inventory purchased entries are debits to Inventory account

93. Losses which are expected to arise from firm and non-cancellable commitments for the purchase of inventory items, if
material should be
a. Recognized in the accounts by debiting loss on purchase commitments and crediting estimated liability for loss on
purchase commitments
b. Disclosed in the notes
c. Ignored
d. Charged to Retained Earnings

94. Which of the following costs of conversion CANNOT BE INCLUDED in cost of inventory?
a. Cost of direct labor
b. Factory rent and utilities
c. Salaries of sales staff (sales department shares the building with factory)
d. Factory overhead based on normal capacity

95. Bill and Hold Sales, in which delivery is delayed at the buyers request but the buyer assumes title and accepts
invoicing, should be recognized when
a. The buyer makes an order
b. The seller starts manufacturing the goods
c. The title has been transferred but the goods are kept on the sellers premises
d. It is probable that the delivery will be made, payment terms have been established, and the buyer has acknowledged
the delivery instructions
96. An entity using the perpetual inventory method, returned defective merchandise to one of its suppliers. The entry to
record this transaction will INCLUDE A CREDIT to
a. Accounts Receivable c. Purchase Returns and Allowances
b. Inventory d. Accounts Payable

97. The retail method has been used by a retail department store during its first year of operations. As of the end of the year,
compare (A) the mark-downs with (B) mark-down cancellations
a. A will be equal to B c. A will be greater than or equal to B
b. A will be less than or equal to B d. A cannot be equal to B

98. The Gross Method of recording purchases VIOLATES which of the following principles?
a. Conservatism b. Recognition c. Matching d. Realization

99. Under the Retail Inventory Method, which of the following SHOULD BE ADDED OR DEDUCTED from the affected
account at cost and at retail?
a. Freight In b. Shortage c. Purchase Discount d. Purchase Returns

100. The reason for approximation or estimation of inventory

a. The inventory is destroyed by fire and other catastrophe
b. Interim financial statements are prepared and physical count is not necessary for various reasons
c. To prove the correctness or reasonableness of physical count
d. All are reasons

101. When a portion of inventory has been pledged to secure the payments of indebtedness
a. The fact of a portion having pledged should be disclosed in the financial statements or notes and an amount equal to
the value of the inventories pledged should be appropriated from retained earnings
b. The value of the portion pledged should be deducted from the value of the inventories shown in the current asset
section of the balance sheet
c. The value of the portion pledged should be transferred from current assets to noncurrent assets
d. The value of the inventories shown in the current assets section of the balance sheet remains the same but the fact of
having been pledged a portion of the inventories should be disclosed in the financial statements or notes

102. Generally, which inventory costing method approximates closely the current cost for cost of goods sold?
a. FIFO c. Weighted average
b. LIFO d. Specific identification

103. Meditite Companys inventory at December 31, 2010 was P 4,000,000 based on physical count priced at cost before any
necessary adjustments for the following:
Merchandising costing P 200,000 shipped FOB Destination from a vendor on December 30, 2010 was received and
recorded on January 5, 2011.
Goods in the shipping area were excluded from inventory although shipment was not made until January 4, 2011.
The goods billed to the customer: FOB Shipping point on December 30, 2010, had a cost of P 300,000.

What amount should Meditite report as inventory on December 31, 2010?

a. P 4,600,000 b. P 4,200,000 c. P 4,300,000 d. P 4,000,000

104. The closing inventory of Meganium Company amounted to P 284,000 at December 31, 2010. This total includes two
inventory lines about which the inventory taker is uncertain.
Item 1 500 items which had cost P 15 each and which were included at P 7,500. These items were found to have been
defective at the balance sheet date. Remedial work after the balance sheet date cost P 1,800 and they were then sold for P
20. Selling expenses were P 400.
Item 2 100 items that had cost P 10 each but after the balance sheet date, these were sold for P 8 each with selling
expenses of P 150.

What figure should appear in Meganiums balance sheet for inventory?

a. P 283,650 b. P 283,950 c. P 284,000 d. P 284,300

105. A listing of the Golem Companys inventory items at the ned of 2010 totals P 95,000. Included in this amount are the
following items:
Merchandising in transit as of 12/21/2010, purchased FOB Shipping point P 6,800
Goods held by Golem as consignee from Registeel 5,000
Goods out on consignment, at cost plus 50% mark-up on cost 6,000

What is the peso amount of Golems 2010 ending inventory that should be reported on the balance sheet?
a. P 83,100 b. P 86,200 c. P 87,900 d. P 88,000
106. The inventory records of Sneasel Company show the following purchases
Units Cost
January 15,000 190,000
February 20,000 240,000
March 12,500 165,000

The March 31 inventory using FIFO is valued at P 285,000. What is the March 31 LIFO inventory?
a. P 225,000 b. P 120,000 c. P 280,000 d. P 285,000

107. On June 1, 2010, Slowbro Corp. sold merchandise with a list price of P 15,000 to Seadra on account Slowbro allowed
trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made FOB Shipping point. Slowbro
prepaid P 300 of delivery costs for Seadra as an accommodation. On June 12, 2010, Slowbro received from Seadra a
remittance in full payment amounting to:
a. P 8,232 b. P 8,526 c. P 8,532 d. P 8,397

108. An extract from Zweilous Companys unadjusted trial balance on December 31, 2010 appears below, Zweilous uses
perpetual method to record inventory transactions:
Inventory P 1,900,000
Sales 6,500,000
Sales Return 150,000
Cost of Goods Sold 4,600,000
Inventory Losses 120,000

On December 24,2010, Zweilous recorded a P 150,000 credit sales of goods costing P 100,000. These goods were sold
on FOB Destination terms and were in transit on December 31, 2010. The goods were included in the physical count.

The inventory on hand on December 31, 2010 determined by physical count had a cost of P 2,000,000 and net realizable
value of P 1,700,000. All inventory write-down and losses shall be included in the cost of goods sold.

How much should be reported as Cost of Goods Sold for 2010?

a. P 4,600,000 b. P 4,500,000 c. P 4,720,000 d. P 4,920,000

109. A physical count of inventory on December 31, 2010 revealed that Crobat Company had inventory on hand at that date
with a cost of P 4,410,000. The annual examination identified that the following items were excluded from this amount:
Merchandise of P 610,000 is held by Crobat on consignment.
Merchandise costing P 380,000 was shipped by Crobat, FOB Destination point to a customer on December 31, 2010.
The customer was expected to receive the goods on January 5, 2011.
Merchandise costing P 460,000 was shipped by Crobat, FOB Shipping point to a customer on December 29, 2010.
The customer was expected to receive the goods on January 5, 2011.
Merchandise costing P 830,000 shipped by a vendor FOB Destination on December 31, 2010 was received by
Crobat on January 5, 2011.
Merchandise costing P 510,000 purchased FOB Shipping point was shipped by the supplier on December 31, 2010
and received by Crobat on January 5, 2011.

What amount must appear for inventory on December 31, 2010?

a. P 5,300,000 b. P 4,690,000 c. P 3,800,000 d. P 4,920,000

110. Magmortar Company has determined its December 31, 2010, inventory on a FIFO basis to be P 4,000,000. Information
pertaining to that inventory follows:
Estimated selling price P 4,050,000
Estimated cost of disposal 200,000
Normal profit margin 500,000
Current replacement cost 3,500,000

Magmortar records losses that result from applying the lower of cost or market rule. At December 31, 2010, what should
be the net carrying value of Magmortars inventory?
a. P 4,000,000 b. P 3,850,000 c. P 3,350,000 d. P 3,500,000
 111. Popplio Company uses the FIFO retail inventory method. The following information pertains to the current accounting
period:
Cost Retail
Inventory - January 1 P 1,200,000 P 1,800,000
Purchases 5,600,000 7,200,000
Freight in 400,000
Net mark-up 1,400,000
Net mark-down 600,000
Sales 7,600,000

What is the Cost of Goods Sold for the year ended December 31, 2010?
a. P 5,550,000 b. P 5,594,000 c. P 5,682,000 d. P 4,350,000

112. Mareanie Sales Company had a beginning balance in inventory as of January 1, 2010 of P 750,000. Purchases during the
year amounted to P 3,750,000, while sales totalled P 4,800,000. Ending inventory based on a physical inventory taken on
December 31, 2010, was P 863,500. Mareanie Sales has a gross profit on sales of 25% in recent years. There were
indications of inventory losses due to pilferages.

What is the estimated cost of inventory losses at December 31, 2010?

a. P 262,300 b. P 37,500 c. P 130,000 d. P 337,500

113. The following information was taken from Pidove Companys accounting records for the year ended December 31, 2010:
Increase in goods in process inventory P 200,000
Decrease in raw materials inventory 100,000
Increase in finished goods inventory 300,000
Raw materials purchased 4,000,000
Direct labor payroll 2,000,000
Factory overhead 3,000,000
Freight out 400,000

The 2010 cost of goods sold is:

a. P 8,900,000 b. P 9,000,000 c. P 8,600,000 d. P 9,400,000

114. Natu Companys inventory at December 31, 2010 was P 4,000,000 based on physical count priced at cost and before any
adjustment for the following:
Merchandise costing P 200,000, shipped FOB Destination form a vendor on December 31, 2010 was received and
recorded on January 5, 2011
Goods in the shipping area were excluded from inventory although shipment was not made until January 4, 2011.
The goods billed to the customer FOB Shipping point on December 31, 2010, had a cost of P 300,000.

What amount should Natu report as inventory on December 31, 2010?

a. P 4,600,000 b. P 4,200,000 c. P 4,300,000 d. P 4,000,000

PROPERTY, PLANT AND EQUIPMENT

115. PAS 16 Property, Plant and Equipment shall NOT apply to the following, except
i. The recognition and measurement of exploration and evaluation assets
ii. Property, plant and equipment classified as held for sale
iii. Biological assets related to agricultural activity
iv. Mineral rights and, mineral reserves such as oil, natural gas and similar nonregenerative resources
v. Property, plant and equipment used for the extraction of minerals, oil or natural gas

a. I and II only d. V only

b. I, II and IV only e. IV and V only
c. IV only

116. 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 costs
ii. Costs of training staff on new asset
iii. Appointed general overhead costs
iv. Installation and assembly costs

a. All are included c. II and IV only

b. I, II, and III only d. I and IV only
117. Allocation of the purchase price in a lump-sum acquisition of different assets may be based on all of these except
a. Book values of the assets to the seller c. Tax assessments values
b. Relative market values d. Appraised values

118. Which of the following statements regarding depreciation is true, according to PAS 16 Property, Plant and Equipment?
a. An asset must be depreciated from the date of its purchase to the date of sale
b. The annual depreciation charge should be constant over the life of the asset
c. The total cost of an asset must eventually be depreciated
d. Of the carrying amount of an asset is less than the residual value, depreciation is not charged
e. All of the choices

119. Which statement(s) is(are) correct regarding the scope of PAS 36 Impairment of Assets?
i. PAS 36 applies to some financial assets (i.e. investment in subsidiaries, associates, and joint ventures).
ii. PAS 36 does not apply to inventories, asset arising from construction contracts, deferred tax assets, assets
arising from employee benefits, or assets classified as held for sale because existing PFRSs applicable to these
assets contain requirements for recognizing and measuring these assets
iii. PAS 36 applies to investment property that is measured at cost

a. II only c. II and III only

b. I and III only d. All are correct

120. PAS 36 Impairment of Assets provides that the following elements shall be reflected in the calculation of an assets
value in use EXCEPT
a. An estimate of the future cash flows the entity expects to derive from the asset
b. Expectations about possible variations in the amount or timing of those future cash flows
c. The time value of money, represented by the current market risk-free rate of interest
d. The price for bearing the uncertainty inherent in the asset
e. Other factors, such as illiquidity, that market participants would reflect in pricing the future cash flows the entity
expects to derive from the asset

121. Under PAS 36 Impairment of Assets, when calculating estimates of future cash flows for value in use, which of the
following should NOT be included?
a. Cash flow from disposal
b. Income tax receipts or payments
c. Cash flow from the sale of assets produced by the asset
d. Cash outflows on the maintenance of the asset

122. Which of the following is NOT an indication of possible asset impairment under PAS 36 Impairment of Assets?
a. Significant decrease or decline in the market value of the asset
b. Use of accelerated method of depreciation of the asset
c. Evidence of obsolescence or physical damage of an asset
d. Evidence that economic performance of an asset will be worse than expected

123. Corporate assets are

a. Are assets other than goodwill that contribute to the future cash flows of both the cash-generating until under review
and other cash-generating units
b. Is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets
c. Is measured at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date
d. Are incremental costs directly attributable to the disposal of an asset or cash-generating unit, excluding finance costs
and income tax expense

124. An impairment loss shall be recognized for a cash-generating unit if, and only if, the recoverable amount if the unit is
less than the carrying amount of the unit. The impairment loss shall be allocated to reduce the carrying amount of the
assets of the unit. Which of the following is INCORRECT regarding the allocation of the impairment loss of the CGU?
a. Reduce the carrying amount of any goodwill allocated to the cash-generating unit first
b. After changing goodwill, allocate the balance to the other assets of the unit pro rata on the basis of the carrying
amount
c. The entity shall not reduce the carrying amount of an asset below the highest of its fair value less cost to sell (if
determinable), value in use (if determinable) and zero
d. The amount of the impairment loss that would otherwise have been allocated to the assets but not allocated because
of the limitation shall be allocated pro rata to the other assets of the unit
e. These reductions in carrying amounts shall not be treated as impairment losses on individual assets
125. Which of the following statements is(are) true regarding reversal of impairment loss under PAS 36 Impairment of
Assets?
i. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss
shall not exceed the carrying amount that would have been determined had no impairment loss been recognized
for the asset in prior years
ii. An impairment loss recognized for goodwill shall not be reversed in a subsequent period
iii. A reversal of an impairment loss for a cash-generating unit, shall be allocated to the assets of the unit, except for
goodwill, pro rata with the carrying amounts of those assets
iv. In allocating a reversal of an impairment loss for a cash-generating unit, the carrying amount of an asset shall
not be increased above the lower of its recoverable amount (if determinable), and the carrying amount that
would have been determined had no impairment loss been recognized for the asset in prior periods

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

b. I, II, and III only d. All are true

126. Which is NOT an essential characteristic of property, plant, and equipment?

a. The PPE are subject to depreciation
b. The PPE are tangible assets
c. The PPE are used in production or supply of goods and services, for rental purposes and administrative purposes
d. The PPE are expected to be used over a period of one more than one year

127. When payment for item of property, plant, and equipment is deferred beyond credit terms, the difference between the
cash price equivalent and the total payments should be recognized as
a. Interest expense over the credit period
b. Interest expense of the current year
c. Component of cost of the property, plant, and equipment
d. Interest expense over the life of the asset

128. Subsequent cost relating to an item of property, plant, and equipment should be added to the carrying amount of the asset
when
a. It is probable that future economic benefits will flow in the entity and the subsequent cost can be measured reliably
b. It is possible that future economic benefits will flow to the entity
c. It is possible that future economic benefits will flow to the entity and the subsequent cost can be measured reliably
d. It is probable that future economic benefit will flow to the entity

129. Rampardos Company purchased land, land improvements and building from Cryogonal Company for P 14.4 M and from
Crustle Company furniture and equipment for P 18.6 M. The total cash outlay for the transactions amounted to P 33.0 M,
the appraised value of the assets are as follows:
Building P 5,000,000 Furniture P 1,000,000
Land P 13,500,000 Equipment P 3,000,000
Land Improvement P 1,500,000

The allocated cost of the Furniture is:

a. P 6,875,000 b. P 6,785,000 c. P 4,650,000 d. P 3,600,000

130. Jolteon Company borrowed P 4,000,000 on a 10% note payable to finance a new warehouse Jolteon is constructing for it
own use. The only other debt on Jolteons books is a P 6,000,000, 12% mortgage payable on an office building. The
construction of the warehouse was completed during the year and the average accumulated expenditures amounted to P
4,750,000. What is the amount of interest that Jolteon Company should capitalize?
a. P 200,000 b. P 237,500 c. P 245,500 d. P 490,000

131. Beautifly Company imported an equipment at a peso equivalent to P 330,000. The company has to pay additional cost of
importing the asset such as P 10,000 import duties and P 15,000 nonrefundable purchase taxes. Costs of bringing and
preparing the asset for its intended use include P 2,000 transportation costs, P 3,000 installation and P 1,000 testing and
trial run costs. How much is the initial costs of the equipment?
a. P 330,000 b. P 336,000 c. P 346,000 d. P 361,000

132. On August 1, 2009, Breloom purchased a new machine on a deferred payment basis. A down payment of P 100,000 was
made and 4 monthly instalments of P 250,000 each are to be made beginning on August 1, 2009. The terms of the
agreement are not considered normal. The cash equivalent price of the machine was P 950,000. Breloom incurred and
paid installation costs amounting to P 30,000. How much should be capitalized as cost of the machine?
a. P 950,000 b. P 980,000 c. P 1,100,000 d. P 1,130,000
 133. On January 4, 2009, Garbodor Corp. replaced its broiler with a more efficient one.

The following information was available on that date:

Purchase price of new broiler P 600,000
Carrying amount of old broiler 50,000
Fair value of old broiler 20,000
Installation cost of new broiler 16,000

The old broiler was sold for P 20,000, what amount should Garbodor capitalize as the cost of the new broiler?
a. P 600,000 b. P 616,000 c. P 620,000 d. P 636,000

134. During 2009, rattata Company had the following transactions pertaining to its new office building:
Purchase price Land P 420,000
Legal fees for contracts to purchase land 14,000
Architects fees 56,000
Demolition of old building on site 35,000
Sale of scrap from old building 21,000
Construction of new building (completed) 2,450,000

At what amount should the cost of land and of the building capitalized at its December 31, 2009 balance sheet?
Land Building
a. P 420,000 P 2,520,000
b. P 434,000 P 2,520,000
c. P 448,000 P 2,506,000
d. P 455,000 P 2,534,000

INVESTMENT PROPERTY
135. The costs of a purchased investment property comprise its purchase price and
a. Start-up cost
b. Operating losses incurred before the investment property achieves the planned level of occupancy
c. Abnormal amounts of wasted material, labor or other resources incurred in constructing or developing the property
d. Directly attributable expenditures, for example, professional fees for legal services transfer taxes and other
transaction costs

136. Jynx Inc. and its subsidiaries provided you with a list of property they own, as follows:
i. Land held by Jyxn Inc. for undeterminable future use
ii. A vacant building owned by Jynx Inc. and to be leased out under operating lease
iii. Property held by Jynxs subsidiary, a real estate firm, held for sale in the ordinary course of business
iv. Property held by Jynx Inc. for use in manufacturing production

Which of the above enumerated items would be shown as investment property in the consolidated balance sheet?
a. All are included c. I and II only
b. I, II and III only d. I and III only

137. An investment property should be measured initially at

a. Cost
b. Cost less accumulated impairment losses
c. Depreciated cost less accumulated impairment losses
d. Fair value less accumulated impairment losses

138. Which of the following is INCORRECT regarding PAS 40 Investment Property?

a. PAS 40 requires all entities to determine measure the fair value of investment property
b. An entity is encouraged, but not required, to determine measure the fair value of investment property on the basis of
a valuation by an independent valuer who holds a recognized and relevant professional qualification and has recent
experience in the location and category of the investment
c. With the reference in PFRS 13 Fair Value Measurement, Fair Value is derived as the amount for which an asset
could be exchanged between knowledgeable, willing parties in an arms length transaction
d. An investment property shall be derecognized on disposal or when the investment property is permanently
withdrawn from use and no future economic benefits are expected from its disposal

139. After initial recognition, investment property are measured using

a. Fair value model c. Either A or B
b. Cost model d. Neither A or B
 140. Which of the following assets held by an entity would NOT CLASSIFY as investment property as defined by IAS 40?
a. Land held for capital appreciation c. Land for sale in the ordinary course of business
b. Building held to earn rentals d. Land held for undetermined future use

141. Under the cost model, a building held by an entity as an investment property shall be valued at
a. Cost c. Cost less accumulated depreciation
b. Cost less accumulated and impairment loss d. Current loss

INTANGIBLE ASSETS
142. Identifiability is seen as the characteristic that conceptually distinguishes other intangible assets from
a. Copyright b. Franchise c. Goodwill d. Patent

143. Which of the following items QUALIFY as an INTANGIBLE ASSET under PAS 38 Intangible Assets
a. Advertising and promotion on the launch of a huge product
b. College tuition fees paid to employees who decided to enrol in an executive MBA program while working with the
company
c. Operating losses during the initial stages of the project
d. Legal costs paid to intellectual property lawyers to register a patent

144. Under PAS 38 Intangible Assets, should be carried at

a. Cost less accumulated depreciation
b. Revalued amount less accumulated depreciation
c. Cost plus notional increase in fair value since acquisition
d. Cost less accumulated amortization and impairment loss

145. When intangible asset is acquired by exchange of assets, which of the following measures is needed to be considered in
the determination of the cost?
a. Fair value of the asset given up c. Carrying amount of the asset received
b. Initial cost of the asset received d. Replacement cost of the asset received

146. An intangible asset with an indefinite life is accounted for as follows

a. No amortization but tested for impairment annually
b. Amortized and impairment tests annually
c. Amortized and tested for impairment when triggered
d. Amortized and no impairment test

147. Which of the following note disclosure is NOT REQUIRED by PAS 38 Intangible Assets?
a. Useful lives of the intangible assets
b. Reconciliation of the carrying amount at the beginning and end of the year
c. Contractual commitments for the acquisition of intangible assets
d. Fair value of similar intangible assets used by competitors
148. The term intangible assets is used in accounting to denote
a. Properties without physical characteristics that have long-term effects on a business enterprise
b. Assets with lesser economic significance because of the nature of such assets
c. Current or noncurrent property items without physical characteristics
d. Such items as patents, copyrights, and claims against customers that can be valued on a monetary basis

149. A purchased patent that has a remaining legal life of 15 years should be
a. Amortized over its useful life if less than 15 years
b. Amortized over its useful life
c. Expensed in the year of acquisition
d. Amortized over 15 years regardless of the asset useful life

150. An intangible asset shall be recognized if it is probable that the expected future economic benefits that are attributable on
the asset will flow to the enterprises and,
a. The cost of the asset can be controlled by the c. The cost of the asset can be reliably measured
entity d. The cost of the asset is inseparable from the
b. The cost of the asset can be measured reliably entity

151. After initial recognition, an intangible asset may be recorded at

a. At revalued amount, being its fair value at the date of the evaluation less any subsequent accumulated amortization
and any subsequent accumulated impairment losses
b. At cost
c. At revalued amount, without any subsequent amortization
d. At revalued amount, being it fair value at the date of the evaluation plus any subsequent accumulated amortization
and any subsequent accumulated impairment losses
 152. A consideration not relevant in determining the useful life of an intangible asset is the
a. Technical, technological, commercial or other types of obsolescence
b. Initial cost
c. Period of control over the asset and legal or similar limits on the use of the asset
d. Expected actions of competitors or potential competitors

153. On October 1, 2009, Ursaring Inc. has exchanged 2,000 shares of its P 300 par value ordinary shares held in treasury for
a patent owned by Marshtomp Company. The treasury shares were acquired in 2006 at a cost of P 800,000. At the time
of exchange, ordinary shares were quoted at P 550 per share and the patent had a carrying value of on Marshtopms
books of P 900,000. At what amount should Ursaring record the patent?
a. P 800,000 b. P 900,000 c. P 1,000,000 d. P 1,100,000

154. Gourgeist purchased a patent on January 1,2006 for P 428,400. The patent was being amortized over its remaining legal
life of 15 years expiring on January 1, 2021. Early 2009, Gourgeist determined that the economic benefits of the patent
would not last longer than 10 years from the date of acquisition. What amount should be reported in the balance sheet as
patent, net of accumulated amortization at December 31, 2009?
a. P 257,040 b. P 293,760 c. P 302,400 d. P 314,160

155. Shelmet Company spent P 288,000 in developing a new product with a patent being granted on January 2, 2007. Due to
the competitive nature of the product, the patent was estimated to have a useful life of 10 years. Cost of licensing and
registering was P 36,000. On July 1, 2009, a competitor obtained rights to patent, which made the Shelmets patent
obsolete. How much is the loss from patent obsolescence?
a. P 6,000 b. P 16,200 c. P 27,000 d. P 36,000

156. On January 2, 2009, Duskull Company bought a trademark from Sharpedo Company for P 600,000. Duskull retained an
independent consultant, who estimated the trademarks remaining life to be 20 years. Its amortized cost on Sharpedo
accounting records was P 456,000. What amounts should the trademarks be initially recorded?
a. P 456,000 b. P 570,000 c. P 585,000 d. P 600,000

RESEARCH AND DEVELOPMENT COST

157. A newly set up dotcom entity has engaged you as its financial advisor. The entity has recently completed on of its highly
publicized research and development projects and seeks your advice on the accuracy of the following statements made by
one of its stakeholders. Which of the following statements is ACCURATE?
a. Costs incurred during the research phase can be capitalized
b. Costs incurred during the development phase can be capitalized if criteria such as technical feasibility of the
project being established are met
c. Training costs of technicians used in research can be capitalized
d. Designing the jigs and tools qualify as research activities

158. Which is NOT CONSIDERED a research and development activity?

a. Conceptual formulation and design of product or process alternatives
b. Laboratory research aimed at discovery of new knowledge
c. Routine design of tools, jigs, molds, and dies
d. Design, construction, and testing of pre-production prototypes and models

FINANCIAL ASSETS
159. In accordance with PAS 39 Financial Instruments: Recognition and Measurement, which of the following terms best
describes a compound financial interest component of a hybrid instrument that also includes a non-derivative host
contract?
a. AFS financial asset c. Financial asset held for trading
b. Embedded derivative d. HTM investment

160. Are the following statements concerning the measurement of financial instruments after initial recognition true or false,
according to PAS 39 Financial Instruments: Recognition and Measurement and PFRS 9 Financial Instruments?
i. Under PAS 39, held-for-trading financial assets are measured at amortized cost
ii. Under PAS 39, held-to-maturity investments are measured at fair value
iii. Under PAS 39, if an entity holds an investment to collect contractual cash flows but would sell the investment
circumstances (e.g., entity needs to fund capital expenditures, among others), the investments should be
classified as fair value through profit or loss (FVPL) investment because the business model test was not
satisfied
iv. Under PFRS 9, there is no recycling between other comprehensive income (OCI) or profit or loss

a. True, False, True, True c. False, False, False, True

b. False, False, True, True d. False, False, False, False
161. In accordance with PFRS 7 Financial Instruments: Disclosures, 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 c. Financial risk
b. Credit risk d. Payment risk

162. In accordance with PFRS 7 Financial Instruments: Disclosures, which of the following best describes credit risk?
a. The risk that one party to a financial instrument will cause a financial loss for the other party by falling to discharge
an obligation
b. The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities
c. The risk that the fair value associated with an instrument will vary due to changes in the counterpartys credit rating
d. The risk that an entitys credit facilities will be withdrawn due to cash flow sensitivities

163. The Victini Company acquired 30,000, 4% Government Bonds redeemable in 2013 at the quoted market price of P 200.
Victini has no current intention to sell the bonds and has a policy to hold them as investments unless certain corporate
criteria are met and the bonds are sold to maintain liquidity.

In accordance with PAS 39 Financial Instruments: Recognition and Measurement, which one of the following is the
most appropriate classification for Victinis investment in the Government Bonds?
a. Held for trading c. Hold to maturity
b. Available for sale d. Loans and receivables

164. Under PFRS 9 Financial Instruments, if an entity used its fair value option for equity instruments, which of the
following statements is INCORRECT?
a. Dividends are to be recognized in profit or loss if said dividend are considered return on investment
b. No recycling of fair value changes to profit or loss on impairment, disposal or in any other circumstances
c. Impairment testing is required for this equity investment
d. Additional disclosures are required for this equity investment

165. Which of the following is INCORRECT regarding the scope of PFRS 7 Financial Instruments: Disclosures?
a. PFRS 7 applies to recognized and unrecognized financial instruments
b. PFRS 7 applies to contracts to buy or sell a nonfinancial item that are within the scope of PFRS 9
c. Unrecognized financial instruments include some financial instruments that are within the scope of PFRS 9
d. Recognized financial instruments include financial assets and liabilities that are within the scope of PFRS 9

166. Which of the following is INCORRECT regarding the classification of financial assets in PFRS 9 Financial
Instruments?
a. One of the conditions that should be met before measuring the financial asset at amortized cost is that the asset is
held within a business model whose objective is to hold assets in order to collect contractual cash flows
b. For a financial asset to be classified as one measured at amortized cost, the contractual terms of the financial asset
should give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding
c. Interest is consideration for the time value of money and for the credit risk associated with the principal amount
outstanding during a particular period of time
d. At initial recognition, revocable designation of a financial asset as measured at fair value through profit or loss
(FVPL) is allowed. This is called the fair value option to designate debit instrument
e. PFRS 7 requires the entity to provide disclosures about financial assets that was designated as at FVPL.

167. Which of the following circumstances WILL REQUIRE reclassification under PFRS 9?
i. A change in intention to particular financial assets particularly in circumstances of significant changes in market
conditions
ii. An entity has a portfolio of commercial loans that it holds to sell in the short term. The entity requires a
company that manages commercial loans and has business model that holds the loans in order to collect the
contractual cash flows. The portfolio of commercial loans is no longer for sale, and the portfolio is now
managed together with the acquired commercial loans and all are held to collect contractual cash flows
iii. A temporary disappearance of a particular market for financial assets
iv. A financial services firm decides to shut down its retail mortgage business. That business no longer accepts new
business and the financial services firm is actively marketing its mortgage loan portfolio for sale
v. A transfer of financial assets between parts of the entity with different business models

a. I, II and IV only c. II and IV only

b. I and IV only d. All are required
168. Which of the following statements is(are) TRUE regarding impairment of assets under PFRS 9?
i. An entity shall apply the impairment requirements in PAS 39 to financial assets measured at amortized cost
ii. An entity shall assess at the end of each reporting period whether there is any objective evidence that a financial
asset or group of financial assets measured at amortized cost is impaired
iii. The amount of the loss is measured as the difference between the assets carrying amount and the present value
of estimated future cash flows excluding future credit losses that have not been incurred
iv. The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The
amount of the loss shall be recognized to profit or loss
v. Reversal of impairment loss is allowed for financial assets measured at amortized cost. However, the reversal
shall not result in a carrying amount of the financial asset that cost would have been had the impairment not
been recognized at the date the impairment is reversed

a. I, II, III and V only c. I, II, IV and V only

b. I, II, and III only d. All are true

169. An unrealized holding gain or loss on a companys available-for-sale securities should be reflected in the current year
financial statements as
a. Other comprehensive income in the equity section of the balance sheet
b. Direct adjustment to retained earnings
c. Income or loss in the income statement
d. A disclosure in the notes to the financial statements

170. A correct valuation is

a. Investment in associate at market value
b. Available for sale equity securities at cost
c. Available for sale debt securities at amortized cost
d. Held to maturity securities at amortized cost
171. An investor purchased a bond classified as long-term investment the bond dates at a premium. At purchase date, the
carrying value of the bond by
a. Less than the face value of the bond c. Equal to the cash paid to the seller
b. More than the cash paid to the seller d. More than the face value of the bond

172. How is the premium or discount on bonds purchased as available for sale securities accounted for?
a. As part of the cost until the disposal of asset
b. As part of the amortized cost and amortized over the life of the bond
c. As expense or revenue in the period the bonds are purchased
d. All of the above

173. A noncurrent asset classified as held for sale must be presented on the financial statements
a. Among the noncurrent nonmonetary assets
b. Separately from the other assets on the Statement of Financial Position
c. Among the current assets on the statement of Financial Position
d. Only in the notes

174. Gallade Company purchased investment for P 500,000 and pays brokers commission of P 20,000. If Gallade classified
the investment as Trading Securities, the amount debited to Trading Securities should be:
a. P 520,000 b. P 500,000 c. P 480,000 d. P 20,000

175. Using the information given in #55, if Gallade classified the investment as available-for-sale securities, the amount
debited to Available-For-Sale Securities should be:
a. P 520,000 b. P 500,000 c. P 480,000 d. P 20,000

176. Medicham Company acquired the following portfolio of trading securities during 2008 and reported the following
balances at December 31, 2008. No sales occurred during 2008. All declines are considered to be temporary:
Security Cost 12/31/08 Market Value
BPI P 1,400,000 P 1,440,000
BDO 1,700,000 1,600,000
PNB 2,100,000 2,560,000

What is the carrying value of the securities on December 31, 2008 on Medichams balance sheet?
a. P 5,100,000 b. P 5,200,000 c. P 5,600,000 d. P 5,750,000

177. During 2008, Karrablast Corporation purchased marketable equity securities as Available-For-Sale Securities and carried
at fair value. Pertinent data follow:
 Poison Common Fairy Common Normal Common
Cost P 360,000 P 800,000 P 1,800,000
Market Value, 12/31/08 400,000 600,000 1,860,000

What should be the amount of unrealized loss on these securities in Karrablasts 2008 Income Statement?
a. P 0 b. P 60,000 c. P 100,000 d. P 200,000

INVESTMENT IN ASSOCIATE
178. According to the revised PAS 28 Investments in Associates and Joint Ventures, which one of the following statement
best describes the term significant influence?
a. The holding of a significant proportion of the share capital in another entity
b. The contractually agreed sharing of control over an economic entity
c. The having participation in the policy-making process of an entity
d. The mutual sharing in the risks and benefits of a combined entity

179. Which of the following investments in an associate is NOT within the scope of PAS 28 Investment in Associates, prior
to the issuance of the revised PAS 28?
a. An associate held by a subsidiary and measured at amortized cost
b. An associate held by a venture capital organization and measured at amortized cost
c. An associate held by a venture capital organization and measure at fair value with changes in fair value recognized
in profit or loss
d. An associate held by a subsidiary and measured at fair value with changes in fair value recognized in profit or loss

180. Which of the following is INCORRECT regarding the loss of significant influence under the revised PAS 28?
a. An entity loses significant influence over an investee when it loses the power to partake in the financial and
operating policy decisions of that investee
b. The loss of significant influence can occur with or without a change in absolute or relative ownership levels
c. When an associate becomes subject to the control of a government, court, administrator or regulator, significant
influence is unaffected because of the potential rights on the investment in associate
d. Loss of significant influence could occur as a result of a contractual agreement

181. Which of the following statements is(are) TRUE regarding equity method under the revised PAS 28?
i. Under the equity method, on initial recognition the investment in an associate or a joint venture is recognized at
cost.
ii. Distributions received from an investee reduce the carrying amount of the investment
iii. Adjustments to the carrying amount may also be necessary for changes in the investors proportionate interest in
the investee arising from changes in the investees other comprehensive income (e.g., revaluation surplus)
iv. When potential voting rights exist, an entitys interest in an associate or a joint venture is determined by
reflecting the possible exercise or conversion of potential voting rights
v. An entity need not apply the equity method to its investment in an associate or a joint venture if the entity is a
subsidiary that is exempt from preparing consolidated financial statements by the scope exception in PFRS 10
Consolidated Financial Statements

a. I, II, III and V only c. I, II, III and IV only

b. I, II, and III only d. All are true

182. Which of the following statement(s) is(are) TRUE regarding accounting for investment in associates and joint venture
the revised PAS 28?
i. Recycling of other comprehensive income top profit or loss is not allowed
ii. Gains and losses resulting from upstream and downstream transactions between the entity (excluding its
consolidated subsidiaries) and its associate or join venture are recognized in the entitys financial statements
only to the extent of unrelated investors interests in the associate or joint venture. Thus, the investors share in
the associates or joint ventures gains or losses resulting from these transaction is eliminated
iii. Upstream transactions are, for example, sales of assets from the investor to its associate or its joint venture
iv. Downstream transactions are, for example, sales or contributions of assets from an associate or a joint venture
to the investor
v. In any case, the difference between the end of the reporting period of the associate or joint venture and that of
the entity shall be no less than three months

a. I, III, and IV only c. All are true

b. I, II, III, and IV only d. Nothing is true
 183. Which statement is INCORRECT concerning the equity method?
a. The investment is associate is increased or decreased by the investors share of the profit or loss of the investee after
the date of acquisition
b. The investment is associate is initially recorded at cost
c. Distributions received from the investee reduce the carrying amount of the investment
d. The investors share of the profit or loss of the investee is not recognized in the investors profit or loss

BORROWING COST
184. What is the benchmark treatment for the borrowing cost?
a. Borrowing costs should be deferred and subsequent amortized over the term of the borrowing
b. Borrowing costs should be capitalized regardless of how borrowings are applied
c. Borrowing costs that are directly attributable to the acquisition, construction, and production of a qualifying asset
should be capitalized as cost of the asset
d. Borrowing costs should be recognized as expense in the period in which they are incurred regardless of how
borrowing is applied

185. On January 2, 2009, Scolipede Company was granted a loan of P 2,000,000 at an interest rate of 10% specifically to
finance the construction of its new building. Availments from the loan were made quarterly in equal amounts. Total
borrowing costs amounted to P 125,000. Prior to their disbursements the proceeds of the loan were temporarily placed in
a special savings account and earned interest income amounting to P 20,000. The building was completed on December
31 of the current year. Using the alternative treatment, how much should Scolipede capitalize as borrowing costs?
a. P 105,000 b. P 125,000 c. P 195,000 d. P 200,000

DEPRECIATION
186. The goal of a depreciation method is to provide reasonable, consistent matching of revenue and expense by
a. Measuring the decline in the value of depreciable asset
b. Determining the impairment in value of the depreciable asset
c. Measuring the depreciable asset at current value
d. Systematically allocating the cost of the depreciable asset over its estimated useful life

187. On January 1, 2007 Tapu Lele purchased a mabhine for P 504,000 that was placed in service on May 1, 2009. Additional
costs incurred to bring the asset to its location and prepare for its intended use were: Shipping P 4,000; Installation P
4,000, and; Testing P 2,000. The setimated useful life of the assetwas 10 years and has an estimated salvage value of P
34,000. What amount of depreciation should be recognized for the year ended December 31, 2009?
a. P 40,000 b. P 42,000 c. P 44,000 d. P 48,000

188. On January 1, 2007, Gengar Company purchased a transportation equipment costing P 2,400,000. The new asset has an
estimated life of 8 years with no salvage value. Gengar depreciates this type of asset using the straight-line method. On
January 1, 2009 Gengar determined that the equipment has a useful life of 6 years from the date of acquisition with no
salvage value with the result of the change in the estimated useful life of the asset, what is the carrying amount of the
equipment as of December 31, 2009?
a. P 1,200,000 b. P 1,350,000 c. P 1,500,000 d. P 1,800,000

189. On January 4, 2007, Lairon Company acquired equipment to be used in its manufacturing operations. The equipment has
an estimated useful life of 10 years and an estimated salvage value of P 50,000. The depreciation applicable to this
equipment was P 240,000 for 2009 computed under the sum-of-the-years digits method. What was the acquisition cost
of the equipment?
a. P 1,650,000 b. P 1,700,000 c. P 2,400,000 d. P 2,450,000

190. Beedrill Company acquired an asset that had a cost of P 390,000. The asset is being depreciated over a 5-year period
using the sum-of-the-years digit method. It has a salvage value estimated at P 30,000. If the asset is sold for P 114,000 at
the end of the third year, how much would be the gain/loss on sale?
a. P 12,000 gain c. P 204,000 loss
b. P 60,000 loss d. P 276,000 loss

191. Carvanha Company purchased a building on January 1, 2005 for a total of P 10,000,000 the building has been
depreciated using the straight-line method with a 25 years useful life and no residual value. As of January 1, 2009,
Carvanha is evaluating the building for possible impairment. The building has a remaining useful life of 15 years and is
expected to generate cash inflows of P 450,000 per year. The estimated recoverable amount of the building on January 1,
2009 is P 5,310,000. How much is the impairment loss that should be recognized on January 1, 2009?
a. P 0 b. P 2,100,000 c. P 3,090,000 d. P 5,200,000

192. Using the information in #49, what is the amount of depreciation to be recognized in year 2009?
a. P 340,000 b. P 354,000 c. P 400,000 d. P 550,000
REVALUATION
193. When an assets carrying amount is decreased as a result of a revaluation, the decrease shall be
a. Debited to extraordinary loss c. Recognized as expense
b. Charged to retained earnings d. Charged to revaluation surplus

FUNDS AND OTHER INVESTMENTS

194. Which of the following funds held by an entity is normally classified as a current asset?
a. Funds for payment of a long-term liability
b. Funds for payment of payroll
c. Funds for acquisition of additional plant facilities
d. Funds for redemption of preference share

DEPLETION
195. Umbreon Company acquired a tract of land containing an extractable natural resource. The company is required by its
purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resources.
Geological surveys estimate that the recoverable reserves will be 2,000,000 tons and that the land will have a value of P
1,200,000 after restoration. Relevant cost information follows:
Land P 9,000,000 Estimated restoration Cost P 1,800,000

How much should be charged to depletion expense per ton of extracted material?
a. P 3.90 b. P 4.50 c. P 4.80 d. P 5.40

BANK RECONCILIATION AND PROOF OF CASH

196. Delcatty Co. prepares a four-column bank reconciliation. Check #859 was written for P 5,670 on the books, but it was
written and cleared by the bank correctly, P 6,570. The correct treatment on the reconciliation would be
a. On the bank side, deduct P 900 from the payments and add P 900 to ending balance
b. On the book side, deduct P 900 from the payments and add P 900 to ending balance
c. On the book side, add P 900 to payments and deduct P 900 to ending balance
d. On the bank side, add P 900 to receipts and P 900 to ending balance

197. A bank reconciliation is

a. A formal financial statement that list all of the bank account balance of an entity
b. A merger of two banks that previously were competitors
c. A statement sent by the bank to depositor monthly
d. A schedule that accounts for the differences between an entitys cash balances as shown on its bank statement and
the cash balance shown in its general ledger

198. What is the effect of holding the cash book open for a few days after the closing of the accounting period and recording
as of the last day of the period remittance received after the close of the period?
a. Cash is understated and accounts receivable overstated
b. Cash is overstated and accounts receivable understated
c. Current assets are overstated
d. Answer not given

199. In preparing proof of cash under adjusted balance method

a. NSF check of a previous month is deducted both from the previous months balance and the current periods
disbursements
b. NSF check of the current month is deducted from the current months disbursements and current months balance
c. Outstanding checks of the previous month are deducted from the previous months balance and added to the current
months disbursements
d. Outstanding checks of the current month are added both to the current months disbursements and current months
balance

200. The cash counted on December 31, 2010 included two customers checks amounting to P 5,000 both dated in January
2011. These checks were recorded in the book in December and were accepted for deposit by the bank on due dates.

The adjusting entry is:

Debit Credit
a. Cash in Bank P 5,000 Cash on Hand P 5,000
b. Accounts Receivable 5.000 Cash 5,000
c. Cash 5,000 Accounts Receivable 5,000
d. Accounts Receivable 5,000 Sales 5,000
 201. Customers checks amounting to P 4,500 were returned during December 2010 by the bank with the notation NSF. Of
these checks P 3,000 had been redeposited and cleared by the banks during the month. No entries were made for the
return of deposit.

The adjusting entry is

Debit Credit
a. Cash P 3,000 Accounts Receivable P 3,000
b. Accounts Receivable 4,500 Cash 4,500
c. Cash 1,500 Accounts Receivable 1,500
d. Accounts Receivable 1,500 Cash 1,500

202. Lampent Co. uses a four-column bank reconciliation. The bank statement reports May payments of P 13,150, including
service charge of P 200. At the beginning of May, there were P 900 of checks outstanding. At the end of May, there were
P 1,200 of checks outstanding. Before recording bank service charge, Lampent must have recorded May payments of?
a. P 13,250 b. P 12,650 c. P 13,050 d. P 13,650

203. In reconciling the Cash in Bank of Tynamo Company with the bank statement balance for the month of November 2008,
the following data are summarized:
Book debits for November, including October CM for note collected, P 60,000 P 600,000
Book credits for November, including NSF of P 20,000 and service charge of P 800 for October 620,000
Bank credits for November, including CM for November for bank loan of P 100,000 and 700,000
October deposit in transit for P 80,000
Bank debits for November, including October outstanding checks of P 170,800 and November 600,000
service charge of P 200

What is the amount of OUTSTANDING CHECKS for November?

a. P 20,000 b. P 170,200 c. P 171,000 d. P 191,000

204. Information pertaining Granbull Company appears below:

Balance per bank statement, July 31 P 6,200,000
Balance per ledger, July 31 3,750,000
Deposit of July 30 not received by the bank 1,400,000
Debit memo Service Charges 50,000
Credit memo Collection of not by bank for Granbull 1,500,000
Outstanding checks ?

An analysis of the cancelled checks returned with the bank statement reveals the following:
Check for purchase of supplies was drawn for P 300,000 but was recorded as P 200,000.
The management wrote a check for travelling expense of P 500,000 while out of town. The check was not recorded.

What is the amount of OUTSTANDING CHECKS on July 31?

a. P 4,600,000 b. P 2,500,000 c. P 2,800,000 d. P 3,000,000

Use the following information for items 179-182.

You are provided the following information by the Corsola Company for the year ended December 31, 2010. The
internal control procedures surrounding cash transactions were not adequate. Ash Ketchum, the bookkeeper-cashier,
handles cash receipts, maintains accounting records, and prepares the monthly reconciliations of the bank account.

The bookkeeper-cashier prepared the following reconciliation at the end of the year:
Balance per bank statement P 350,000
Add: Deposit in Transit P 175,250
Note collected by the Bank 15,000 190,250
Balance P 540,250
Less: outstanding Checks 246,750
Balance per general ledger P 293,500

In the process of your audit, you gathered the following:

a. At December 31,2010, the bank statement and the general ledger showed balances of P 350,000 and P 293,500.
b. The cut-off bank statement showed a bank charge on January 2, 2011 for P 30,000 representing a correction of an
erroneous hand credit
c. Included in the list of the outstanding checks were the following:
A check payable to a supplier, dated December 29, 2010, in the amount of P 14,750, released on January 5,
2011.
A check representing advance payment to a supplier in the amount of P 37,210, the date of which is January 4,
2011.
 d. On December 31, 2010, the company received and recorded customers postdated check amounting to P 50,000.

205. The adjusted Deposit in Transit as at December 31, 2010 is?

a. P 175,250 d. P 125,000
b. P 125,250 e. Answer not given
c. P 225,250

206. The adjusted Outstanding Checks as at December 31, 2010 is?

a. P 298,710 d. P 194,790
b. P 232,000 e. Answer not Given
c. P209, 540

207. The adjusted Cash to be presented in the balance sheet as at December 31, 2010?
a. P 235,460 d. P 310,460
b. P 250,460 e. Answer not given
c. P 265,460

208. The Cash Shortage is?

a. P 45,000 d. P 8,040
b. P 58,040 e. Answer not given
c. P 60,000

209. The net adjustment to the Cash account is?

a. P 43,040 d. P 45,000
b. P 60,000 e. Answer not given
c. P 58,040

210. The bookkeeper of Barboach Company recently prepared the following bank reconciliation on December 31, 2010:
Balance per bank statement P 9,000,000
Add: Deposit in Transit 1,500,000
Checkbook and other bank charges 50,000
Error made by Barboach in recording check #42378 150,000
Customer check marked DAIF 500,000 P 2,200,000
Total P 11,200,000
Deduct: Outstanding Check P 1,900,000
Note collected by bank (includes P 200,000 interest) 2,300,000 4,200,000
Balance per book P 7,000,000

Barboach has P 500,000 Cash on Hand on December 31, 2010.

The amount to be reported as Cash on the balance sheet as of December 31, 2010 should be
a. P 8,600,000 b. P 9,100,000 c. P 8,750,000 d. P 9,250,000

211. The balance sheet of Paras Company showed a cash balance of P 91,750. An examination of the books disclosed the
following:

Cash sales of P 12,000 from 1/7/11 were pre-dated as of 12/28-31/10 and charged to the Cash account. Customers
checks totalling P 4,500 deposited with and returned by the bank marked NSF on 12/27/10 were not recorded in the
books, but withheld by the treasurer. Posdtdated checks totalling P 3,400 are being held by the cashier as part of Cash.
The companys experience shows that postdated checks are eventually realized. The Cash account includes P 20,000
being reserved for the purchase of mini-computer which will be delivered soon. Personal check of officers, P 2,700 were
redeemed on 12/31/10, but returned to the cashier on 1/2/11.

How much is the Cash balance that should be shown in the 12/31.10 balance sheet?
a. P 91,750 b. P 69,150 c. P 54,750 d. P 43,550