1. RM Company has two divisions, North and South. Both qualify as business components.

In 2019, the entity decided to dispose of the assets and liabilities of division South and
it is probable that the disposal will be completed early next year. The revenue and
expense of RM Company are as follows:
2019 2018
Sales-North 5,000,000 4,600,000
Total non-tax expenses-North 4,400,000 4,100,000
Sales-South 3,500,000 5,100,000
Total non-tax expenses-South 3,900,000 4,500,000
During the later part of 2019, the entity disposed of a portion of division South and
recognized a pretax loss of P2,000,000 on the disposal. What amount should be
reported as pretax loss from discontinued operations in 2019?
a. 2,000,000
b. 2,400,000
c. 1,400,000
d. 1,600,000
2. Accounting changes are often made and the monetary impact is reflected in the
financial statements of a company even though, in theory, this may be a violation of the
accounting concept of
a. Materiality
b. Consistency
c. Conservatism
d. Objectivity

3. Suga Company changed its method of pricing inventories from LIFO to FIFO. What type
of accounting change does this represent?
a. A change in accounting estimate for which the financial statements for prior
periods included for comparative purposes should be presented as previously
reported.
b. A change in accounting principle for which the financial statements for prior
periods included for comparative purposes should be presented as previously
reported.
c. A change in accounting estimate for which the financial statements for prior
periods included for comparative purposes should be restated.
d. A change in accounting principle for which the financial statements for prior
periods included for comparative purposes should be restated.
4. The equipment was purchased at the beginning of 2017 for P340,000. At the time of its
purchase, the equipment was estimated to have a useful life of six years and a salvage
value of P40,000. The equipment was depreciated using the straight-line method of
depreciation through 2019. At the beginning of 2020, the estimate of useful life was
 revised to a total life of eight years and the expected salvage value was changed to
P25,000. The amount to be recorded for depreciation for 2020, reflecting these
changes in estimates, is
a. P20,625
b. P33,000
c. P38,000
d. P39,375
5. An example of a correction of an error in previously issued financial statements is a
change
a. from the LIFO method of inventory valuation to the FIFO method
b. in the service life of plant assets, based on changes in the economic environment
c. from the cash basis of accounting to the accrual basis of accounting
d. in the tax assessment related to a prior period
6. J-Hope Inc. is a calendar-year corporation. Its financial statements for the years ended
December 31, 2018 and December 31, 2019 contained the following errors:
2018 2019
Ending inventory P20,000 overstatement P32,000 understatement
Depreciation expense P8,000 understatement P16,000 overstatement
Assume that the 2018 errors were not corrected and that no errors occurred in 2017. By
what amount will 2018 income before income taxes be overstated or understated?
a. P28,000 overstatement
b. P12,000 overstatement
c. P28,000 understatement
d. P12,000 understatement

7. Using the same information in No. 24, assume that no correcting entries were made at
December 31, 2018, or December 31, 2019. Ignoring income taxes, by how much will
retained earnings at December 31, 2019 be overstated or understated?
a. P32,000 overstatement
b. P28,000 overstatement
c. P40,000 understatement
d. P12,000 understatement

8. The following statement of financial position was prepared by the bookkeeper for Big
Hit Company as of December 31, 2019.
Big Hit Company
Balance Sheet
As of December 31, 2019

Cash P 85,000 Accounts payable P

90,000
Accounts receivable (net) 52,200 Long-term liabilities
100,000
 Inventory 57,000 Stockholders' equity
218,500
Investments 76,300
Equipment (net) 106,000
Patents 32,000
______
P 408,500 P
408,500
The following additional information is provided:
 Cash includes the cash surrender value of a life insurance policy P9,400, and a
bank overdraft of P2,500 has been deducted
 The net accounts receivable balance includes:
(a) Accounts receivable—debit balances P60,000
(b) Accounts receivable—credit balances P4,000
(c) Allowance for Doubtful Accounts P3,800
 Inventory does not include goods costing P3,000 shipped out on consignment.
Receivables of P3,000 were recorded on these goods.
 Investments include investments in common stock, trading P19,000 and available-
for-sale P48,300, and franchises P9,000
 Equipment costing P5,000 with accumulated depreciation P4,000 is no longer
used and is held for sale. Accumulated depreciation on the other equipment is
P40,000.
How much is the correct amount of total current assets?
a. P210,300
b. P220,700
c. P219,700
d. P211,300