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1. It is the body authorized by law to promulgate rules and regulations affecting the practice
of the accountancy professions in the Philippines.
a. Philippine Institute of Certified Public Accountants
b. Board of Accountancy
c. Securities and Exchange Commission
d. Professional Regulation Commission
b. Board of Accountancy
d. Going concern
4. An item cannot be recognized in the balance sheet or the income statement unless it
meets the two criteria of
Criterion 1 Criterion 2
a. Completeness Measurement reliability
b. Probable economic benefits Measurement reliability
c. Materiality Relevance to others
d. Neutrality Relevance to others
Assumption 1 Assumption 2
a. Accrual basis of accounting Relevance and reliability
b. Cash basis of accounting Insolvency assumption
c. Accrual basis of accounting Going concern assumption
d. Cash basis of accounting Perpetual life concept
8. Information about the sources and uses of an enterprise’s cash and cash equivalents is
provided in the
a. Balance sheet c. Statement of changes in equity
b. Income statement d. Cash flow statement
a. P 4,334,000 c. P 4,404,000
b. P 4,384,000 d. P 4,409,000
10. You noted the following composition of Hiyas Company’s “cash account” as of
December 31, 2016
The cash and cash equivalent to be shown on the December 31, 3016 balance sheet is
a. P 5,010,000 c. P 6,550,000
b. P 6,510,000 d. P 6,250,000
Demand deposit P 3,000,000
Time deposit 2,000,000
Petty cash fund 10,000
Undelivered check (payment to suppliers) 100,000
Post dated check (payment to suppliers) 300,000
Window dressing (400,000)
a. P 5,010,000
13. The bookkeeper of Sambisig Company recently prepared the following bank
reconciliation on December 31, 2016:
Sambisig has P 1,000,000 cash on hand on December 31, 2016. The amount to be
reported as cash on the balance sheet as of December 31, 2016 should be:
a. P 19,600,000 c. P 20,600,000
b. P 18,600,000 d. P 19,750,000
14. Reconciliation of Adliwa Corporation’s bank account at November 30, 2016 follows:
IV. Receivables
16. Hirayag Company provided the following transactions affecting accounts receivable
for the year 2016:
The entity provided for uncollectible account losses by crediting allowance for doubtful
accounts in the amount of P70,000 for the current year.
What are the balances of accounts receivable and allowance for doubtful expense on
December 31, 2016?
a. 1,300,000; 200,000 c. 1,426,000, 300,000
b. 1,300,000, 130,000 d. 1,476,000, 200,000
Accounts Receivable
Beg. bal 950,000
Credit sales *3,800,000 **3,150,000 Collections
50,000 Written off
250,000 Credit memo
a. 1,300,000
V. Inventories
17. On December 31, 2016, a storm surge damaged the warehouse of Siuala Company.
The following pertains to the data recovered.
January 1 December 31
Inventory 1,500,000
Purchases 5,500,000
Cash sales 900,000
Collections of accounts receivable 8,400,000
Accounts receivable 700,000 1,100,000
Gross profit on sales 40%
18. Fradejas Company acquired an equity financial instrument for P4,000,000 on June 15,
2016. The financial instrument is classified as financial asset at fair value through other
comprehensive income. Direct acquisition cost amounted to P700,000. On December
31, 2016, the fair value of the instrument was P5,500,000 and the transaction costs that
would be incurred on the sale of the investment are estimated at P640,000. What gain
should be recognized in profit or loss for the year ended December 31, 2016?
a. P900,000
b. P800,000
c. P0
d. P200,000
c. P0
a. P540,000
Cash dividend from William Company 500,000
Cash dividend from Gonzales Company (2,000,000*.02) 40,000
540,000
The revaluation model means that the PPE are carried at the fair value at the date of
revaluation less any subsequent accumulated depreciation and subsequent
accumulated impairment loss
a. Both statements are false
b. Both statements are true
c. Only the first statement is true
d. Only the first statement is false.
22. On January 1, 2016, Thor Company took out a loan of P12,000,000 in order to finance
specifically the renovation of a building. The loan carried annual interest at 10%. Work
on the building, started from January 1, was substantially completed on October 31 of
the same year. The load was repaid on December 31, 2016 and P150,000 investment
income was earned in the period to October 31 on the proceeds of the loan not yet
used for the renovation. Compute for the amount of borrowing cost to be included in
the cost of the building.
a. P1,050,000
b. P1,350,000
c. P1,200,000
d. P850,000
d. P850,000
23. Coulson Company reported the following assets on December 31, 2016
On December 31, 2016, what amount should be reported as total current assets?
a. P15,000,000
b. P17,000,000
c. P17,500,000
d. P16,600,000
24. Benedict Company provided the following data for the current year
Income from continuing operations 5,000,000
Income from discontinued operations 600,000
Unrealized gain on available for sale securities 900,000
Unrealized gain on futures contract designated as a cash flow 400,000
hedge
Actuarial loss during the year fully recognized in the other 300,000
comprehensive income
Foreign translation adjustment - debit 100,000
Revaluation surplus during the year 2,500,000
26. How would cash received from the sale of shares in another company be classified in a
cash flow statement?
a. Operating activities c. Financing activities
b. Investing activities d. None of the above
b. Investing activities
30. When converting from cash basis to accrual basis of accounting, which of the following
adjustments should be made to cash collections from customers to arrive at the accrual
bases of sales?
a. Add beginning accounts receivable
b. Subtract beginning accounts receivable
c. Subtract ending account receivable
d. Add ending accounts receivable
31. Sy Company reported sales revenue of P2,300,000 in its income statement for the year
ended December 31, 2016. Additional information are as follows:
12/31/2015 12/31/2016
Accounts receivable 2,000,000 2,600,000
Allowance for uncollectible accounts 70,000 120,000
During the year. Sy wrote off uncollectible accounts totalling P30,000. Under cash basis
of accounting, Sy would have reported 2016 sales of
a. P1,670,000 c. P1,720,000
b. P1,620,000 d. None of the above
Accounts Receivable
Beg. bal. 2,000,000
Sales 2,300,000
Write-off 30,000
Collections a. 1,670,000
Ending bal. 2,600,000
32. Ferrer Company kept its records on a cash basis. At the end of 2016, the accountant
prepared the following cash basis income statement:
Revenue 1,910,000
Expenses 809,000
Net income 1,101,000
In preparing the income statement, the following amounts of accrued, prepaid and
unearned items were ignored at the end of 2015 and 2016:
2015 2016
Accrued revenue 91,000 73,000
Unearned revenue 66,000 108,000
Accrued expenses 49,000 65,000
Prepaid expenses 46,000 56,000
The net income on the accrual basis for 2016 should be:
a. P1,167,000
b. P1,067,000
c. P1,035,000
d. P1,103,000
33. On January 1, 2016. Madrid Company issued 9% bonds in the face amount of
P4,000,000, which mature on January 2, 2025. The bonds were issued for P3,756,000
to yield 10% resulting in bond discount of P244,000. Using the effective interest method,
compute for the unamortized bond discount if the interest is payable annually on
December 31.
a. P259,600 c. P15,600
b. P228,400 d. P375,600
34. On January 1, 2016, Delos Santos Company issued 3 year bonds with face value of
P5,000,000 at 98. Additionally, the entity paid bond issue cost of P140,000. The nominal
rate is 10% and the effective rate is 12%. The interest is payable annually on December
31. The entity used the effective interest method in amortizing bond discount and issue
cost.
35. Which of the following are the essential characteristics of an intangible asset?
a. Identifiability, controlled by the enterprise, expected future economic benefits and
indefinite useful life.
b. Identifiiability, controlled by the enterprise, and indefinite useful life.
c. Identifiability, owned by the enterprise, expected economic benefits and definite
useful life.
d. Identifiability, controlled by the enterprise and expected future economic benefits
36. Which of the following are considered as research and development activity?
i. Laboratory research aimed at discovery of new knowledge
ii. Design, construction and testing of pre-production prototypes and models
iii. Routine design of tools, jigs, molds and dies.
iv. Conceptual formulation and design of product or process alternatives.
a. i, ii, iii and iv
b. ii, iii and iv only
c. i, ii and iv only
d. i and iv only.
c. i, ii and iv only
Ingat Yemen company has a herd of 10 2 year old animals on January 1, 2015. One
animal aged 2.5 years was purchased on July 1, 2015 for P108, and one animal was
born on July 1, 2015. No animals were sold or disposed of during the year. The fair
value less cost of disposal per unit is as follows:
2 year old animal on January 1 100
2.5 year old animal on July 1 108
New born animal on July 1 70
2 year old animal on December 31 105
2.5 year old animal on December 31 111
New born animal on December 31 72
3 year old animal on December 31 120
0.5 year old animal on December 31 80
37. What is the fair value of the biological assets on December 31?
a. 1,400 c. 1,440
b. 1,320 d. 1,360
Fair value of 3 y/o animals on December (11x120) 1,320
Fair value of 0.5 y/o animal on December (1 x 80) 80
a. 1,400
38. What is the gain from change in fair value due to price change?
a. 292 c. 237
b. 222 d. 55
39. Queen Tela Company owned an equipment costing P5,200,00 with original residual
value of P400,000. The life of the asset is 10 years and was depreciated using the
straight line method.
The equipment has a replacement cost of P8,000,000 with residual value of P200,000.
The age of the asset is 4 years.
The appraisal of the equipment showed a total revised useful life of 12 years and the
entity decided to carry the equipment at revalued amount.
Before income tax, what amount should be initially reported as revaluation surplus?
a. 6,680,000 c. 2,600,000
b. 1,680,000 d. 1,600,000
40. Bane Company had earnings per share of P120 for the current year, before taking any
dilutive securities into consideration. No conversion or exercise of dilutive securities took
place during the year. However, possible conversion of convertible preference shares
would have reduced earnings per share to P119. The effect of possible exercise of
ordinary share warrants would have reduced earnings per share by an additional P2.
What amount should be reported as diluted earnings per share?
a. 121 c. 117
b. 120 d. 119