FAR

What criterion is excluded in the definition of cash equivalents under PAS 7?

A. Investment in high-quality instruments

B. Readily convertible to known amounts of cash
C. Subject to an insignificant change in value
D. Short-term, highly liquid investments

Joy Company has the following information pertaining to its biological assets for the year 2017:

A herd of 250, 5-year old animals was held at January 1, 2017. Ten animals aged 4.5 were purchased on
July 1, 2017 for P14,900, and ten animals were born on July 1, 2017. No animals were sold or disposed of
during the period. Per unit fair values less estimated point-of-sale costs were as follows:

5-year old at 1/1/17 7,500

Newborn at 7/1/17 6,000
3.5-year old at 7/1/17 7,900
Newborn at 12/31/17 6,100
0.5-year old at 12/31/17 6,500
5.0-year old at 12/31/17 7,750
5.5-year old at 12/31/17 8,050
6.0-year old at 12/31/17 8,500

What is the fair value of the biological assets as of December 31, 2017?

The classification of a share-based payment has an impact on its measurement. What are the
classifications for share-based payment transactions under PFRS 2?

A. Equity-settled, cash-settled and share option-settled

B. Equity-settled, cash-settled, share-based payment transactions with a settlement choice
C. Equity-settled and group-settled
D. Vested, not vested

A herd of 20 five year-old animals was held on January 1, 2017. On July 1, 2017 a 5.50-year-old animal
was purchased. The fair market values less estimated point of sale costs were as follows: 5 y/o animal at
1/1/17- P20,000; 5.50 y/o animal at 7/1/17- P20,400; 6 y/o at 12/31/17- P24,550. What amount should
the company recognize in its December 31, 2017 statement of comprehensive income related to the
animals as a result of the change in their fair market value?
The following statements are based on PAS 28 (Investment in Associates):

Statement I: An investment in associate shall be accounted for using the equity method (benchmark) or
cost method (alternative).
Statement II: An investor shall discontinue the use of equity method from the date when it ceases to
have significant influence over an associate and shall account for the investment in accordance with PAS
39.
Statement III: On the loss of significant influence, the investor shall measure at historical cost any
investment the investor retains in the former associate

Which of the following is/are false?

Which is a fundamental quality of accounting information?

A. Understandability
B. Faithful representation
C. Comparability
D. Conservatism

Joy Company acquired 25% of JYJ Company’s ordinary shares on January 1, 2017 for P4,500,000. During
2017, the associate earned P2,000,000 and paid dividend of P1,400,000. During 2018, the associate
earned P2,600,000 and paid dividends of P800,000 on April 1 and P600,000 on October 1. On July 31,
2018, Joy sold half of the investment in associate for P3,160,000. The fair value of the retained
investment was P3,500,000 on July 1, 2018 and P3,800,000 on December 31, 2018. The investor
reclassified the retained investment to FVPL.

What is the gain on disposal on July 1, 2018?

The inventory on hand at December 31, 2017 for Joy Company is valued at cost of P5,000,000. The
following items were not included in this inventory amount:

 Good sold to another entity, FOB destination, invoiced P300,000 including P18,750 freight charge to
deliver the goods. Goods are in transit. The selling price of all goods sold is 150% of cost.
 Goods purchased in transit, FOB shipping point, invoiced at P125,000. Freight cost is P10,000
 Goods purchased in transit, FOB destination, invoiced at P250,000 including freight cost of P12,500.
 Goods out on consignment to another entity with sale price of 562,500. Freight cost of P37,500 is
paid by the consignor.

What is the adjusted cost of inventory on December 31, 2017?

Joy Company revealed the following balances on December 31, 2017:

Land 25,000,000
Building 130,000,000
Accumulated Depreciation 50,000,000

Property, plant, and equipment have been carried using the cost model since acquisition. The land was
acquired 15 years ago while the building’s construction was completed on January 1, 2008. The straight-
line method for depreciation was used. The totals life of the building is 26 years. On January 1, 2018, the
entity adopted the revaluation model. It was determined that the land’s current fair value is
P35,000,000 and the building’s current replacement cost is P160,000,000 on January 1, 2018.

What is the revaluation surplus on December 31, 2018?

Joy Company reported accounting income of P1,000,000 and taxable income of P1,200,000 for the year
ended December 31, 2017, its first year of operations. The disparity between accounting income and
taxable income is attributable to a temporary difference which will reverse in 2018. The enacted tax
rates are 35% in 2017 and 30% in 2018. What amount of deferred tax should be reported on December
31, 2017?

A B

2,275,000 772,500

B 5,735,000

95,150 27,307,692.31

I and II only 60,000

RFBT

One of the following does not have voting rights

A. Common Shares
B. Treasury Shares
C. Redeemable Shares
D. Preferred Shares

A and B entered into a contract to sell in private writing involving specific parcel of land for P2M. B paid
50% f the purchase price, the balance payable in 3 years. A delivered the land to B. What is the effect of
delivery of the land to B?

A. B is the owner because there was delivery already

B. B’s ownership before it is converted into real ownership must compel A to execute a deed of
sale in a public instrument.
C. The partial payment made B the owner of the land.
D. A is still the owner because the rice is not yet totally paid.

A borrowed P100,000 form B and as a security, A pledged his ring to B. After the obligation falls due, A
goes to B relinquishing ownership of the ring in favor of B. This is

A. Pactum commisorium
B. Pacto de retro
C. Dacion en pago
D. Caveat emptor
E. All of the above
F. None of the above

Will require stockholders 2/3 approval

A. Removal of a director
B. Management contract
C. Declaration of dividend
D. Amendment of By-Laws

The executive committee shall act by

A. At least 3 members
B. Majority vote
C. 2/3 vote
D. Unanimous vote
I. A corporation commences to have a juridical personality upon the execution of the Articles of
Incorporation unless a different date is set by the incorporators.
II. A partnership begins from the moment of the execution of the partnership contract unless a
different date is set by the partners

A. Both true
B. True, false
C. False, true
D. Both False

The common property of a universal partnership shall be:

A. All the properties which shall belong to each of the partners after the constitution of the
partnership
B. All the properties which belong to each of the partners at the time of the constitution of the
partnership
C. All the properties which belong to each of the partners at the time of the constitution of the
partnership as well as the profits which they may acquire therewith
D. All of the properties which belong to each of the partners at the time of the constitution of
the partnership as well as properties which each may acquire thereafter

Statement I- Holding out by certain persons to the public that they are partners when actually they are
not leads to the legal existence of partnership by estoppel in which case the liability that result is a
partnership liability and since there may be no partnership assets available, the partners in estoppels are
equally liable for the partnership debt with their separate properties.
Statement II- Consenting to or permitting another to act as partner of an actual partnership although
the person so action is not actually a partner of that existing partnership, in which case any of the actual
partners consenting to another person who is not a member of the partnership is liable but not the
partnership.

Which of the above statements is/are true?

A stock which has been issued by a corporation as fully paid up when in fact it is not, because it has been
issued as bonus or otherwise, without any consideration at all, or for less than par, or for property,
labor, or services at an overvaluation.
Subscriber Joy has a total 1,000 delinquent shares at P10 par value, to be sold at public auction sale.
Total amount recoverable includes: total amount of the delinquent shares, P10,000 and total expenses
of the sale, P5,000. Who will be declared the highest bidder among the following bidders in the public
sale?

A. Jeah who is willing to pay P15,000 for 970 shares

B. Angela who is willing to pay P15,000 for 900 shares
C. Bev who is willing to pay P15,000 for 920 shares
D. Gill who is willing to pay P15,000 for 950 shares

B C

C C

C Both true

D Watered Stock

B B
MAS

Joy Corporation is working on a project with the following cash flows:

Y0- (50,000)
Y1- 150,000
Y2- (75,000)
Y3- 100,000
Y4- 150,000
Y5- (60,000)

What is the difference of NPV at 9% and 5%?

Joy Corporation is considering an investment of P50,000,000 with expected after-tax cash inflows of
P20,000,000 per year for 14 years and additional after-tax salvage value of P3,000,000 in the 14th year.
The requires rate of return is 12%. What is the investments PI?

Inventory turnover rates for a company were 8.3x in year 1, 8.1x in year 2, and 7.6x in year 3. The
number of days of inventory for the industry averaged 50x in year 1, 49x in year 2, and 48x in year 3. The
company’s inventory management has been:

A. In line with the industry average in each year

B. Improving over the last three years
C. Worsening over the last three years
D. Does not follow a specific patter

The following market information relates to a company:

Market price per share P37.80

Number of shares outstanding 1,000,000
Net Income P5,250,000
Total common equity P35,000,000
Total annual dividend paid P1,512,000
Risk-free rate 2.6%
Market risk premium 8%
Beta 1.05

Using CAPM, the company’s cost of equity is

When considering two mutually exclusive capital budgeting projects with conflicting rankings, the most
appropriate conclusion is to choose the project with the:

A. Higher NPV
B. Shorter discounted payback
C. Higher IRR
D. Lower PI

Joy Company has the following information:

Break-even sales P852,000

Variable cost ratio 80%

At a net profit ratio of 12%, what is Joy’s degree of operating leverage?

Joy Company uses a predetermined factory overhead application rate based on direct labor cost. Joy’s
budgeted factory overhead was P900,000, based on a budgeted volume of 100,000 direct labor hours, at
standard direct labor rate of P12.00 per hour. Actual factory overhead amounted to P960,000, with
actual direct labor cost of P1,257,333.333. How much is the over-applied or under-applied overhead?

An investment project is expected to yield P75,000 in annual revenues, will incur P10,000 in fixed cost
per year, and required initial investment of P25,000. Given a cost of goods sold of 80% of sales and
ignoring taxes, what is the payback period in years?

The economic order quantity is the size of the order that minimizes total inventory costs, including
ordering and carrying costs. If the annual demand decreases by 26%, the optimal order size will (indicate
percentage increase or decrease)

If a firm is offered credit terms of 2/10, net 30 on its purchases, sound cash management practices
would mean that the firm would pay the account on which of the following days?

A. Day 30
B. Day 10
C. Day 2 and 10
D. Day 2 and 30
Joy Company recently reported the following information:

Net Income P3,500,000

ROA 15%
Interest expense P1,000,000

Joy’s average tax rate is 35%. What is Joy’s BEP?

18,632.57 17,000 under-applied

2.6635 5 years

C 14% decrease

11% B

A 27.36%

1.67x
AFAR

An enterprise uses a branch accounting system in which it establishes separate formal accounting
systems for its home office operations and its branch office operations. Which of the following
statements about this arrangement is false?

A. Unrealized profit from internal transfers between the home office and a branch must be
eliminated in the preparation of the enterprise’s financial statements that are presented in
accordance with GAAP
B. The branch office account on the books of the home office represents the equity interest of
the branch office in the net assets of the home office
C. The home office account on the books of a branch office represents the equity interest of
the home office in the net assets of the branch
D. The home office and branch office accounts are reciprocal accounts that must be eliminated
in the preparation of the enterprise’s financial statements that are presented in accordance
with GAAP

In identifying whether there is a contract with customer, all of the following criteria must be met to
account for the contract as within the scope of IFRS15, except:

A. The entity can identify each party’s rights regarding the goods or services to be transferred
B. The parties to the contract must have approved the contract in writing and are committed
to perform their respective obligations
C. It is probable that the entity will collect the consideration to which it will be entitled in
exchange for the goods or services that will be transferred to the customer
D. The entity can identify the payment terms for the goods or services to be transferred

On December 31, 2016, the Investment in Davao Branch account on the Australia Office’s (Home Office)
books has a balance of P150,000. Upon further inspection of the related documents and entries for
December, you noted the following discrepancies:

I. A P15,000 branch remittance to the home office on December 27, 2016 was only recorded on
the home office books on January 4, 2017
II. A home office inventory shipment worth P25,000 to the branch on December 29, 2016 was
recorded by the branch on January 3, 2017
III. The home office incurred P15,000 of advertising expenses. It was determined that 20% of this
amount should be allocated to the branch. As of December 31, 2016, the branch has not yet
recorded this transaction
IV. A customer of Davao branch erroneously remitted P5,000 to the home office. The home office
recorded this cash collection on December 31, 2016. Upon notification on December 28, 2017,
the branch appropriately recorded the transaction in their books
V. Inventory costing P45,000 was sent to the branch on December 10, 2016 but was recorded by
the branch at P40,000 only
Assuming that the home office bills its branch for merchandise shipments at cost, compute the
unadjusted balance of the Australia Office current account as of December 31, 2016?

The Joy Manufacturers plans to use ABC costing in its operations. The following budgeted overhead
costs and cost drivers have been determined for its first year of operations starting January 2, 2017.

Overhead Item Budgeted OH Cost Driver Budgeted Act.

Machine set-up P20,000 # of set-ups 200 set-ups

Inspection 130,000 # of inspections 6,500 insp.
Material 80,000 # of material move 8,000 moves
Engineering 50,000 # of Eng. hours 1,000 hours
Total Overhead P280,000

The following information was collected on three jobs processed in January 2017

Job 101 Job 102 Job 103 Total

Direct Materials P5,000 P12,000 P8,000 P25,000

Direct Labor 2,000 2,000 4,000 8,000
Units Completed 100 50 200 350 units
Number of set-ups 1 2 4 7 set-ups
Number of inspections 20 10 30 60 inspections
Number of material moves 30 10 50 90 moves
Number of eng. Hours 10 50 10 70 hours
Actual FOH in January P6,100

Assume Job 101 and 102 were both completed and delivered to customers during the month, which of
the following is correct?

A. The cost of goods sold, normal for Job 102 is P8,300

B. Total conversion cost for Job 101 and 103 is P11,000
C. Material move per unit and inspection cost per unit are P100 and P20, respectively
D. Total manufacturing cost, actual is P39,300
E. All are correct
F. None of the above
Joy Company manufactures a cleansing solvent. The company employs both skilled and unskilled
workers. To produce one 55-gallon drum of solvent requires Materials A and B as well as skilled and
unskilled labor. The standard and actual material and labor information is presented below:

Standard:
Material A: 30.25 gallons at P1.25 per gallon
Material B: 24.75 gallons at P2.00 per gallon
Skilled Labor: 4 hours at 12 per hour
Unskilled Labor: 2 hours at P7 per hour

Actual:
Material A: 10,716 gallons purchased and used at P1.50 per gallon
Material B: 17,484 gallons purchased and used at P1.90 per gallon
Skilled Labor: 1,950 hours at P11.90 per hour
Unskilled Labor: 1,300 hours at P7.15 per hours

During the current month, Joy Company manufactured 500 units of 55-gallon drums.

Which of the following is correct?

A. The total material price variance is P1,748.4F

B. The total material yield variance is P1,111F
C. The labor rate variance is P0.00
D. The total material mix variance is P3.596F

The work in process account of Joy Company which uses job order cost system follows:

Work-in-process

February 1 Balance P60,000 Finished Goods P375,550

Direct Materials 80,000
Direct Labor 100,000
Overhead Applied 175,000

Overhead is applied to production at a predetermined rate based on direct labor cost. The work-in-
process on February 28 represents the cost of Job No. 123, which has been charged with direct labor
cost of P7,000 and Job No. 124 which has been charges with overhead of P10,500.

The prime cost charged to Job Nos. 123 and 124 amounted to
Presented below is the unadjusted trial balance of Joy Products Corporation at December 31, 2017:

Debit Credit
Cash 5,000
Installment Accounts Receivable, 2016 40,000
Installment Accounts Receivable, 2017 340,000
Inventory, 12/31/17 200,000
Other Assets 497,000
Accounts Payable – Trade 50,000
Unrealized Gross Profit – 2015 10,000
Unrealized Gross Profit – 2016 86,000
Unrealized Gross Profit – 2017 300,000
Capital Stock 600,000
Retained Earnings 80,000
Gain on Repossession 6,000
Operating Expenses 50,000
Total 1,132,000 1,132,000

Cost of goods sold had been uniform over the years at 40% of sales.

Joy Products Corporation adopts perpetual inventory procedures. On installment sales, the corporation
charges installment accounts receivable and credits inventory gross profit accounts.

Repossessions of merchandise have been made during 2017 due to some customers’ failure to pay
maturing installments. Analyses of these transactions were summarized as follows:

Inventory 10,500
Unrealized Gross Profit, 2015 900
Unrealized Gross Profit, 2016 5,100
Installment Accounts Receivable – 2015 1,500
Installment Accounts Receivable – 2016 8,500
Gain on repossession 6,500

The repossessed merchandise was unsold at December 31, 2017. It was ascertained that they were
booked upon repossession at original costs. A fair valuation of these items would be a sale price of the
repossessed merchandise at P13,500 after incurring costs of reconditioning of P6,500 and cost to
dispose them in the market at P1,500.

What is the realized gross profit on 2017 sales and what is the gain/loss on repossession?
In 2017, Joy Builders agreed to construct a commercial building at a price of P10,500,000. Joy uses the
percentage of completion method. The information relating to the costs and billings for the contract
were as follows:

2017 2018 2019

Cost incurred 2,750,000 4,000,000 650,000

Estimated Cost to Complete 4,125,000 750,000 0
Progress Billings 1,680,000 2,100,000 6,720,000
Collections 1,344,000 1,680,000 7,476,000

How much is the CIP net of PB as of December 31, 2018?

The following data were extracted in the first department of three step process to complete the
company’s product and opted to use the FIFO method in accounting the process: Beginning inventory
units were 17,000 (25% to complete). Ending inventory units were 14,000 (15% to complete) Units
started were 29,000. Normal lost units were 3,500 and abnormal lost units were 1,000. Materials were
added when conversion process was 80% complete. Beginning Inventory cost: Conversion cost P50,000.
Cost during the year were as follows: Direct materials P500,000 and conversion P700,000. Units were
inspected when the process is at 70%. What is the cost of transferred-out goods to the next
department? Round cost per EUP to the nearest hundredths.

Which of the following procedures is not necessary step affecting a dissolution of a partnership?

A. Revaluing partnership assets

B. Revising partners’ equity
C. Closing partnership books
D. Recognizing undistributed profit or loss share of each partner at dissolution date

B 16,700

F 96,000; (1500)

B 5,670,000

102,000 754,829.30

C B