INSTRUCTIONS: Select the best answer. No erasures allowed.

1) What is the underlying concept that supports estimating a fixed asset

impairment charge?
a. Substance over form.
b. Consistency.
c. Matching.
d. Faithful representation.
2)The financial statements most frequently provided include all of the
following except the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. statement of retained earnings.
3)What is the objective of financial reporting?
a. Provide information that is useful to management in
making decisions.
b. Provide information that clearly portray nonfinancial
transactions.
c. Provide information about the reporting entity that is
useful to present and potential equity investors,
lenders, and other creditors.
d. Provide information that excludes claims to the
resources.
4) Debit always means
a.
b.
c.
d.

right side of an account.

increase.
decrease.
none of these.

5) Which of the following organizations is responsible

International Financial Reporting Standards?
a. Financial Accounting Standards Board.
b. International Accounting Standards Committee.
c. Financial Accounting Committee.
d. International Accounting Standards Board.

for

setting

6) A series of equal receipts at equal intervals of time when each receipt is

received at the beginning of each time period is called an
a. ordinary annuity.
b. annuity in arrears.
c. annuity due.

d. unearned receipt.
7) Accounting is an art because
a. of the existence of a body knowledge governing
accounting practice
b. of accounting theory
c. the necessity of applying creative skill and ability
d. None of the above
8) How should trade discounts be dealt with when valuing inventories at the
lower of cost and net realizable value (NRV) according to IAS2
Inventories? (select one answer)
a. Added to cost
b. Ignored
c. Deducted in arriving at NRV
d. Deducted from cost
9) OJ Inc. decided to extend its reporting period from a year (12-month
period) to a 15-month period. Which of the following is(are) not required
under PAS in case of change in reporting period?
I. XYZ Inc. should disclose the reason for using a longer period
than a period of 12 months
II. XYZ Inc. should change the reporting period only if other
similar entities in the geographical area in which it generally
operates have done so in the current year; otherwise its financial
statements would not be comparable to others
III. XYZ Inc. should disclose that comparative amounts used in
the financial statements are not entirely comparable
a. I and II
b. II and III
c. III only
d. II only
10) An entity purchases a building and the seller accepts payment partly in
equity shares and partly in debentures of the entity. This transaction
should be treated in the cash flow statement as follows:
a. The purchase of the building should be investing cash outflow and
the issuance of shares and the debentures financing cash outflows.
b. The purchase of the building should be investing cash outflow and
the issuance of debentures financing cash outflows while the issuance
of shares investing cash outflow.
c.
This does not belong in a cash flow statement and should be
disclosed only in the notes to the financial statements.

d. Ignore the transaction totally since it is a non-cash transaction. No

mention is required in either the cash flow statement or anywhere else
in the financial statements
11) What is the measurement
non-monetary exchange

basis

of an

asset

that is acquired in

With commercial substance

With no
commercial substance
a. Fair value of asset given up
Carrying amount of asset
given up
b. Carrying amount of asset given up
Carrying amount of asset
received
c. Carrying amount of asset received
Fair value of asset received
d. Fair value of asset given up
Fair value of asset given up
12)

What is the valuation basis used in conventional financial statements?

a. Replacement c. Original cost
cost
b. Market value d. A mixture of costs and values

13)

Which of the following information is not specifically required by PAS 1?

a. Name of the reporting entity or other means of
identification and any change in that information
from the previous year
b. Names of major shareholders of the entity
c. Level of rounding used in the financial statements
d. Whether the financial statements cover the
individual entity or a group of entities

14) An entity has a non-current asset that was previously classified as held
for sale. However, the criteria for the said asset to remain as held for sale
no longer apply. The entity should
a. Remeasure the noncurrent asset at fair value
b. Leave the noncurrent asset in the financial
statements at fair value
c. Recognize the noncurrent asset in its carrying
amount prior to its classification as held for sale as
adjusted for subsequent depreciation, amortization
or revaluation
d. Measure the noncurrent asset at the lower of its
carrying amount before the asset was classified as
held for sale (as adjusted for subsequent
depreciation, amortization, or revaluation) and its
recoverable amount at the date of the decision not to
sell.

15) An entity owns a number of farms that harvest produce seasonally.

Approximately 80% of the entitys sales are in the period August to
October. Because the entitys business is seasonal, PAS 34 suggests
a. Additional disclosure in the accounting policy note
b. Additional disclosure in the notes about the seasonal
nature of the business
c. Disclosure of the seasonal nature of the business and
disclosure of financial information for the latest
comparative 12-month period in addition to the
interim report
d. No additional disclosure
16)

Which of the following statements is false?

a. A certified check should not be included in the
outstanding checks
b. A certified check is a liability of the bank certifying it
c. A certified check is one drawn by a bank upon itself
d. A certified check will be accepted by many persons
who would not otherwise accept a personal check

17) An entity factored its accounts receivable without recourse with a

bank. The entity received cash as a result of the transaction which is best
described as
a. Sale of the entity's accounts receivable to the bank
with the risk of uncollectible accounts transferred to
the bank.
b. Sale of the entity's accounts receivable to the bank
with the risk of uncollectible accounts retained by the
entity
c. Loan from bank collateralized by the entity's
accounts receivable.
d. Loan from bank to be repaid by the proceeds from
the entity's accounts receivable
18) According to IFRS 13 Fair Value Measurement, the market used to
determine fair value should be
a. either the principal market, or, in the absence of a
principal market, the most advantageous market
b. the relevant market
c. the principal market, or, in the absence of a principal
market, the relevant market
d. the most advantageous market
19)

In relation to an asset revaluation surplus, an entity

a. is not able to transfer this surplus to any other

reserve account
b. is not able to use this surplus for the payment of
future dividends
c. can transfer the surplus to current period profit or
loss when the asset is disposed of
d. is able to use this surplus for the payment of future
dividends
20) An entity has been served a legal notice at year-end by the DENR to fit
smoke detectors in its factory on or before middle of next year. The cost
of fitting smoke detector can be measured reliably. How should the entity
treat this in its financial statements at year-end?
a. Recognize a provision for the current year equal to one half only of the
estimated amount
b. Recognize a provision for the current year equal to the estimated
amount
c. No provision is recognized at year end because there is no present
obligation for the future expenditure since the entity can avoid the
future expenditure by changing the method of operations but
disclosure is required
d. Ignore this for purposes of the financial statements at year-end.
21)

Ignoring tax effects, accelerated depreciations

a. Provide funds for the earlier replacement of fixed
assets
b. Increase funds provided by operations
c. Tend to offset steadily increasing repair and
maintenance costs
d. Tend to decrease the fixed assets turnover ratio

22) A sale and leaseback transaction involves the sale of an asset that is
leased back to the
a. Lessor
b. Purchaser
c. Original owner
d. Acquiring entity
23) Which of the following should be reported as a prior period
adjustment?
Change in
Change from
Estimated Lives
Unaccepted Principle
of Depreciable Assets to Accepted Principle
a.
Yes
Yes
b.
No
Yes
c.
Yes
No

d.

No

No

24) Largo Corporation prepares its financial statements in accordance with

IFRS. Which of the following items is required disclosure on the income
statement?
a. Revenues, cost of goods sold, and advertising expense.
b. Finance costs, tax expense, and income.
c. Operating expenses, non-operating expenses, and extraordinary items.
d. Gross profit, operating profits, and net profits.
25) Which of the following may not be disclosed on the income statement
for a company that prepares its financial statements in accordance with
IFRS?
a. Gain or loss.
b. Tax expense.
c. Gain or loss from extraordinary items.
d. Gain or loss from discontinued operations.
26) Under IFRS, which of the following inventory items are not valued at
the lower of cost or net realizable value?
a. Manufactured inventory items.
b. Retail inventory items.
c. Biological inventory items.
d. Industrial inventory items.
27) Under IFRS, the specific identification method of accounting for
inventory is required for
a. All inventory items.
b. Inventory items which are interchangeable.
c. Inventory items that are not interchangeable and goods that are
produced and segregated for specific projects.
d. Biological (agricultural) inventories.
28) For companies that prepare financial statements in accordance with
IFRS, plant, property, and equipment should be valued using which
models?
a. The cost model or the revaluation model.
b. The cost model or the fair value model.
c. The cost model or the fair value through profit or loss model.
d. The revaluation model or the fair value model.
29) Which is true about the revaluation model for valuing plant, property,
and equipment?
a. Revaluation of assets must be made on the last day of the fiscal year.
b. Revaluation of assets must be made on the same date each year.
c. There is no rule for the frequency or date of revaluation.
d. Revaluation of assets must be made every two years.

30) When the revaluation model is used for reporting plant, property, and
equipment, the gain or loss should be included in
a. Income for the period.
b. Gain from revaluation on the income statement.
c. A revaluation surplus account is other comprehensive income.
d. An extraordinary gain or loss on the income statement.
SITUATIONAL PROBLEM 1
31) A property developer constructs commercial housing units on hilly
area. It has complied with all regulatory requirements for construction of
real estates on hilly areas, including developing the necessary bunkers
and contours to prevent soil erosion. On October 30, 2015, some of the
support bunkers and contours collapsed after an unusual heavy rain. This
caused extensive damages to houses at the foothill. The owners of those
damaged houses have commenced legal proceedings against the
company for damages. However, the developer disputes the claim
because it believes it has complied with the regulations and taken the
necessary steps to prevent soil erosion. The lawyers of the developer are
of the opinion that it is possible the developer may have to pay damages,
based on settlement of similar court cases in the past. The lawyers
estimate that the case may only be concluded in 2 years time,
considering any appeal to a higher court, if necessary.
The estimate of the possible outcomes, excluding legal costs, with the
associated probabilities are as follows:
Possible Outcome

Estimated

outflows
High
P 20,000,000
Medium
10,000,000
Low
5,000,000
Legal fees and other costs to defend the case are estimated at P
1,000,00. The current one--year and two-year risk-free rates of interest
are 4% and 5% respectively. The risk adjustment for errors in estimates of
outflows is 10% as there are significant uncertainties in the estimates of
possible outcomes and their related outflows. The developer is currently
negotiating with the plaintiffs for an out-of-court settlement for P
8,000,000. The plaintiffs have not decided on this offer but their
responses have been generally positive. The developer estimated that the
50% out-of-court settlement will materialize within a year.
What amount of provision should the company recognize?
a. None
b. P 8,862,070

c. P 9,088,828
d. P 9,748,277

SITUATIONAL PROBLEM 2
The following cases relate to different companies:

On January 1, 2016, Ego Company owned an asset with a book

value of P 200,000. On this date, the asset was sold for P 300,000 to
a lessor and immediately leased back for a period of 5 years. The
leaseback is an operating lease.

At December 31, 2014 Raymond Corporation reported a deferred

tax liability of P 90,000 which was attributable to a taxable
temporary difference of P 300,000. The temporary difference is
scheduled to be reversed in 2018. During 2015, a new tax law
increased the corporate tax rate from 30% to 40%.

Bronson company has a defined benefit plan for its employees. It

presented the following balances in its financial statements:
Present value of benefit obligation, January
P 15,000,000
1, 2014
Current service cost
800,000
Benefits paid during the year
1,500,000
Discount rate
6%
Present
value
of
benefit
obligation,
17,410,000
December 31, 2014

On December 31, 2015, Nolte Company is in financial difficulty

and cannot pay a note due that day. It is a P 600,000 note with P
60,000 accrued interest payable to Piper Inc. Piper agrees to
accept from Nolte a building that has a fair value of P 590,000,
an original cost of P 530,000, and accumulated depreciation of P
130,000.

32) If the fair value of the asset is P 240,000, what amount of realized gain
from sale should the Ego Company recognize on January 1, 2016?
a. none
b. P 40,000
33)

c. P 60,000
d. P 100,000

Raymond Corporation should record this change by debiting

a.

Retained earnings for P c. Retained earnings for P 30,000

9,000
b. Income

tax

expense

for

P d. Income tax expense for P 30,000

9,000
34) Ignoring income tax, what amount of remeasurement gain or loss that
should be included in the other comprehensive income of Bronson
Company?
a. none
b. P 900,000
35)

Nolte should recognize a gain or loss on the disposal of the building of

a. P 0
b. P 60,000 gain

36)

c. P 1,700,000
d. P 2,210,000

c. P 70,000 loss
d. P 190,000 gain

Nolte should recognize a gain on the settlement of the debt of

a. P 0
b. P 60,000 gain

c. P 70,000
d. P 190,000

SITUATIONAL PROBLEM 3
You are given the following information about different entities:

Cynthia Corporation prepares its financial statements in

accordance with PFRS. Ronnie acquired equipment by issuing
5,000 shares of its common stocks.

Lewis Companys usual sales terms are net sixty days, FOB
shipping point. Sales, net of returns and allowances, totaled P
2,300,000 for the year ended December 31, year 2, before
yearend adjustments. Additional data are as follows:
o On December 27, year 2, Lewis authorized a customer to return,
for full credit, goods shipped and billed at P 50,000 on December
15, year 2. The returned goods were received by Lewis on
January 4, year 3, and a P 50,000 credit memo was issued and
recorded on the same date.
o Goods with an invoice amount of P 80,000 were billed and
recorded on January 3, year 3. The goods were shipped on
December 30, year 2.
o Goods with an invoice amount of P 100,000 were billed and
recorded on December 30, year 2. The goods were shipped on
January 3, year 3.

Cranston Inc. reported an impairment loss of P150,000 on its income

statement for the year ended December 31, year 3. This loss was

related to long-lived assets which Cranston intended to use in its

operations. On the companys December 31, year 3 balance sheet,
Cranston reported these long-lived assets at P920,000 and, as of
December 31, year 3, Cranston estimated that these long-lived assets
would be used for another five years. On December 31, year 4,
Cranston determined that the fair values of its impaired long-lived
assets had increased by P25,000 over their fair values at December 31,
year 3. Assume straight line depreciation and no salvage value for the
impaired assets.

During 2016, Ryth Jay Corp. had the following activities related to its
financial operations:
o Carrying value of convertible preference shares in Ryth Jay Corp.,
converted into ordinary shares of Stout, P 360,000
o Payment in 2016 of cash dividend declared in 2015 to preference
shareholders, P 186,000
o Payment for the early retirement of long-term bonds payable
(carrying amount: P 2,220,00), P 2,250,000
o Proceeds from the sale of treasury stocks (on books at cos of P
258,000), P300,000

Nikkies Llamas Company purchased 1,000 llamas on January 1, 2015.

These llamas will be sheared semiannually and their wool sold to
specialty clothing manufacturers. The llamas were purchased for P
148,000. During 2015 the change in fair value due to growth and price
changes is P 9,400, the wool harvested but not yet sold is valued at net
realizable value of P 18,000, and the change in fair value due to
harvest is (P 1,150).

37) How should Cynthia Corporation report the above transaction in its
statement of cash flows?
a. In the notes to the financial statements as a
significant noncash transaction
b. At the bottom of the statement of cash flows as a
significant noncash transaction
c. As an outflow of cash from investing activities and an
inflow of cash from financing activities
d. As an inflow of cash from financing activities and an
outflow of cash from operating activities
38)
a.
b.
c.
d.

Lewis adjusted net sales for year 2 should be

P 2,330,000
P 2,280,000
P 2,250,000
P 2,230,000

39) On the Cranston Incs December 31, year 4 balance sheet, what
amount should be reported as the carrying amount for these long-lived
assets? Assume straight line depreciation and no salvage value for the
impaired assets.
a. P761,000
b. P736,000
c. P945,000
d. P756,000
40) The amount of net cash used in financing activities to appear in Ryth
Jay Corps statement of cash flows for 2016 should be
a. P 1,590,000
b. P 1,776,000
c. P 2,136,000
d. P 2,148,000
41) What is the value of the llamas on Nikkies Llamas Company statement
of financial position on June 30, 2015?
a. P 128, 850
b. P 146, 850

c. P 148,000
d. P 156,250

42) On Nikkies Llamas Company income statement for the year ending
December 31, 2015, what amount of unrealized gain on biological assets
will be reported?
a. P 8,250
b. P 9,400

c. P 26,250
d. P 27,400

SITUATIONAL PROBLEM 4
Presented below are independent cases in the current asset section of
different companies:

Delta Corporation has supplied you with the following list of its
bank accounts and cash at December 31, 2014: Checking
account (compensating balance of P 15,000 with no restriction),
P 48,000; Savings account, 2%, P 30,000; Certificate of deposit, 6
months, 10%, due April 20, 2015, P 60,000; Money market (30dat certificate), current rate, 9.75%, P 40,000; Payroll account, P
20,000; Certificate of deposit, 3 months, 10%, due February 15,
2015, P 75,000; and Petty cash, P 1,500.

Sun Inc. factors P 2,000,000 of its accounts receivable with

guarantee for a finance charge of 3%. The finance company
retains an amount equal to 10% of the accounts receivable for
possible adjustments.

On January 2, 2014, Journal Company purchased goods from

Times Company, a company in Singapore for an invoice amount
of S$ 100,000 if paid within the normal credit period of 10 days.
However, payment maybe deferred up to 3 months subject to a
revised invoice in the amount of S$ 102,000. On January 2, 2014
the exchange rate was P 34.00 to S$ 1.00. Import duties and
transport charges amounted to P 500,000 and P 300,000
respectively. Journal Company paid the invoiced amount on April
1, 2014, on this date the exchange rate was P 35.00 to S$ 1.00.

Poe, Inc. had the following bank reconciliation at March 31, year
2:
Balance per bank statement, 3/31/Y2 P46,500
Add deposit in transit
10,300
56,800
Less outstanding checks
12,600
Balance per books, 3/31/Y2
P44,200
Data per bank for the month of April year 2 follow:
Deposits
P58,400
Disbursements
49,700

All reconciling items at March 31, year 2, cleared the bank in April.
Outstanding checks at April 30, year 2, totaled $7,000. There were
no deposits in transit at April 30, year 2.
43) What should be the balance to
Equivalents in Delta Corporations
financial position?
a. P 139,500
b. P 199,500

be reported as Cash and Cash

December 31, 2014 statement of
c. P 214,500
d. P 274,500

44) In the financial statements of Sun Inc., what would be recorded as a

gain (loss) on the transfer of receivables?
a. P 0
c. P 60,000 loss
b. P 60,000 gain
d. P 260,000 loss
45) In Journal Companys books, what amounts should the goods be
initially recorded?
a. P 3,400,000
c. P 4,200,000

b. P 3,570,000

d. P 4,370,000

46) In Journal Companys books, what total amount of exchange loss and
interest costs should the company recognize?
a. P None
c. P 102,000
c. P 68,000
d. P 170,000
47) What is the cash balance per books at April 30, year 2 in the books of
Poe Inc.?
a. P48,200
b. P52,900
c. P55,200
d. P58,500
SITUATIONAL PROBLEM 5
Presented below are cases in the noncurrent asset section of dissimilar
companies:

On April 1, Mooney Corporation purchased for P 855,000 a tract of land

on which a warehouse and office building were located. The following
data were collected concerning the property:
Current Assessed
Vendors Original Cost
Valuation
Land
P 300,000
P 280,000
Warehouse
200,000
180,000
Office building
400,000
340,000
P 900,000
P 800,000

Storm Corporation purchased a new machine on October 31, 2015. A P

12,000 down payment was made and three monthly installments of P
36,000 each are to be made beginning on November 30, 2015. The
cash price would have been P 116,000. Storm paid no installation
charges under the monthy payment plan but a P 2,000 installation
charge would have been incurred with a cash purchase.

On July 1, 2014, Wanton Mining Company purchased the rights to a

mine. The total purchase price was P 7,920,00, of which P 240,000 was
allocated to land. Estimated reserves were 1,600,000 tons. Wanton
expects to extract and sell 25,000 tons per month. Wanton purchased
new equipment on July 1, 2014. The equipment cost P 3,960,000 and
have a useful life of 8 years. However, after all the resources are
removed, the equipment will be of no use and will be sold for P
120,000.

On December 31, 2012, Jezanne Corp, a manufacturing plant with a

carrying amount of P 40,000,000 (cost of P 50,000,000 less
accumulated depreciation of P 10,000,000) was tested for impairment.
An impairment loss of P 12,000,000 was recognized and the basis of
the recoverable amount was the estimated fair value less costs to sell
of P 28,000,000. The plant had a remaining useful life of 10 years. On
December 31, 2014, there are indications that the impairment loss
recognized in 2012 may be reversed. The value in use is estimated at P
35,000,000 whilst the fair value less costs to sell is estimated at P
30,000,000.

Mini Corp. acquires a patent from Maxi Co. in exchange for 2,500
shares of Mini Corp.s P 5 par value ordinary shares and P 85,000 cash.
When the patent was initially issued to Maxi Co., Mini Corp.s shares
were selling at P 7.50 per share. When Mini Corp. acquired the patent,
its shares were selling for P 9 a share.

On January 1, 2014, Bingham Inc. purchased a patent with a cost P

2,320,000, a useful life of 5 years. The company uses a straight-line
depreciation. At December 31, 2015, the company determines that
impairment indicators are present. The fair value less costs to sell the
patent is estimated to be P 1,080,000. The patents value-in-use is
estimated to be P 1,130,000. The assets remaining useful life is
estimated to be 2 years.

Cole Co. began constructing a building for its own use in January year
4. During year 4, Cole incurred interest of P50,000 on specific
construction debt, and P20,000 on other borrowings. Interest computed
on the weighted-average amount of accumulated expenditures for the
building during year 4 was P40,000.

48) What ere the appropriate amounts that Mooney should record for the
land, warehouse, and office building, respectively?
a. Land, P 280,000; warehouse, P 180,000; office
building, P 340,000
b. Land, P 300,000; warehouse, P 200,000; office
building, P 400,000
c. Land, P 299,500; warehouse, P 192,375; office
building, P 363,375
d. Land, P 285,000; warehouse, P 190,000; office
building, P 380,000
49) The amount to be capitalized by Storm Corporation as the cost of the
machine on October 31, 2015 would be
a. P 116,000
c. P 120,000

b. P 118,000

d. P 122,000

50) If sales and production conformed to expectations, what amount of

depletion and depreciation should Wanton Mining Company recognize in
2014, respectively?
a. P 720,000 & 240,000
c. P 1,440,000 & 240,000
b. P 720,000 & 360,000
d. P 1,440,000 & 360,000
51) What is the amount of impairment reversal should be recognized on
December 31, 2014 in the financial statements of Jezanne Corp?
a. None
c. P 9,600,000
b. P 2,400,000
d. P 12,000,000
52)

Mini Corp should record the patent at what amount?

a. P 85,000
c. P 103,750
b. P 97,500
d. P 107,500

53)

Binghams 2015 income statement will report Loss on Impairment of

a. P 0
c. P 312,000
b. P 262,000
d. P 1,190,000

54) Binghams 2016 income statement will report amortization expense for
the patent of
a. P 377,000
c. P 565,000
b. P 464,000
d. P 1,190,000
55)

What amount of interest cost should Cole capitalize?

a. P20,000
b. P40,000
c. P50,000
d. P70,000

SITUATIONAL PROBLEM 6
The following company has investment assets in its books. Assess the f
ollowing case by applying either PAS 39 or PFRS 9 as indicated in the
questions.

Grand Company has 60,000 ordinary shares of Brand Corporation that

has been designated as fair value to other comprehensive income.
These shares were acquired at fair market value, which was P 80 per
share on May 2, 2011. On December 31, 2011, the market value of
these shares is P 90 per share. On January 22, 2012, Grand Company
sold 42,000 shares of its investment in Brand Corporation for P 85 per
share.

56) Applying PAS 39, what amount of loss should Grand Company
recognize in selling those shares?
a. None
c. P 300,000
b. P 210,000
d. P 420,000
57) Applying PFRS 9, what amount of unrealized gain or loss that should be
transferred to retained earnings by Grand Company?
a. None
c. P 210,000
b. P 180,000
d. P 420,000
58) Applying PFRS 9, what amount of unrealized gain or loss should Grand
Company carry over to the next measurement date?
a. None
c. P 210,000
b. P 180,000
d. P 420,000
SITUATIONAL PROBLEM 7
On January 1, 2014, Sun Company purchased the debt instruments of Silk
Company with a face value of P 5,000,000 bearing interest rate of 8% for P
4,621,006 to yield 10% interest per year. The bonds mature on January 1,
2019 and pay interest annually on December 30.
On December 31, 2014, the fair value of the investment is P 4,384,014 which
is based on the prevailing market rate of 9%.
59) If the companys business model has the objective of trading and
making a profit from the changes in the fair value of the securities, what
amount of unrealized gain or loss should the company disclose in their
December 31, 2014 profit or loss?
a. None
c. P 154,907 unrealized gain
b. P 26,559 unrealized gain
d. P 217,008 unrealized gain
60) If the companys business model has the objective of collecting all the
contractual cash flows including interest and principal, at what amount
should the investment be reported in the companys statement of
financial position for the year ended December 31, 2014?
a. P 4,621,006
c. P 4,751,418
b. P 4,683,107
d. P 4,838,014
61) If the companys business model has the objective of trading and
collecting all the contractual cash flows including interest and principal,
what amount of unrealized gain or loss should the company disclose in

the statement of comprehensive income for the year ended December 31,
2014?
a. None
c. P 154,907
b. P 26,559
d. P 217,008
SITUATIONAL PROBLEM 8
The following cases pertain to different companies who are having a difficulty
in classifying their assets and liabilities.

The accounts and balances shown below were gathered from Clown
Companys trial balance on December 31, 2014. All adjusting entries
have been made.
Cash and cash equivalents, P 200,000; Loans and receivables, P
300,000; Prepaid expenses, P 100,000; Merchandise inventory, P
800,000; Financial asset at fair value to profit or loss P 500,000;
Financial assets at fair value to other comprehensive income, P
300,000; Investment in associate, P 1,000,000; Investment property, P
900,000; Long-term fund investments, P 500,000; Property, plant and
equipment-net, P 8,000,000; Patents and trademarks-net, P 600,000;
Goodwill, P 800,000; Accounts payable, P 150,000; Notes payable, P
300,000; Unearned revenues, P 250,000; Bonds Payable, P 1,000,000;
Dividends payable, P 140,000; Premium on bonds payable, P 100,000;
Taxes payable, P 250,000 and Advances from shareholders, P 500,000.

Presented below are account balances and related information on

December 31, 2015 for Decoy Company:
o Cash on hand and in bank, P 1,200,000; Accounts receivable, P
950,000; Notes receivable, P 1,000,000; Merchandise inventory,
P 1,500,000; Prepaid expenses, P 400,000.
o The following are relevant information related to the above
accounts
Included in the cash in bank account is a time deposit of P
200,000 with a term of six months
Provisions of P 50,000 is to be made on the account
receivable for future returns and discounts which were
considered probable
The account receivable includes a P 500,000 assigned
receivable, and P 300,000 factored to a finance company
for which the company has transferred significant amount
of risks and rewards of ownership.
The note receivable does not include a P 200,000
discounted to a finance company for which the company is

contingently liable in case the maker fails to settle on

March 31, 2016 (maturity date)
The merchandise inventory includes a P 100,000 from a
consignor
The prepaid expense is the total cost of a two year
insurance premium expiring on June 30, 2017.

62) How much should be the amount of current asset in Clowns December
31, 2014 balance sheet?
a. P 1,400,000
c. P 1,900,000
b. P 1,700,000
d. P 2,200,000
63) How much should be the amount of current liabilities in Clowns
December 31, 2014 balance sheet?
a. P 840,000
c. P 1,450,000
b. P 1,090,000
d. P 1,590,000
64) What amount of current asset should be reported in the December 31,
2015 statement of financial position of Decoy Company?
a. P 4,100,000
c. P 4,700,000
b. P 4,600,000
d. P 4.900,000
65) What amount of account receivable (net) should be reported in the
December 31, 2015 statement of financial position of Decoy Company?
a. P 950,000
c. P 600,000
b. P 900,000
d. P 650,000
SITUATIONAL PROBLEM 9
The following information relating to different companies pertain to
statement of comprehensive income:

X Company, a car rental company, acquires vehicles with the intention

of holding them as rental cars for limited period and then selling them.
As of December 20, 2014, car A was sold for P 120,000 and car B was
also sold for P 100,000. The carrying values of cars A and B were P
80,000 and P 70,000 respectively.
Diesel fuel held as inventory at November 1, 2014 was P 125,000 and
there were invoices awaited for P 17,000. During the year to October
31, 2015, diesel fuel invoices of P 854,000 were paid and a delivery
worth P 13,000 had yet to be invoiced. At October 31, 2015, diesel fuel
inventory was valued at P 98,000.

66) What total amount should X company disclose in the profit or loss of
2014 in relation to the above cars?
a. P None
c. P 150,000

b. P 70,000

d. P 220,000

67) The diesel fuel to be charged to expense in the profit or loss of the year
to October 31, 2015 is (Diesel Company)
a. P 851,000
b. P 877,000

c. P 885,000
d. P 911,000

SITUATIONAL PROBLEM 10

On January 1, 2010, Nobel Corporation acquired machinery at a cost of

P 800,000. Nobel adopted the straight-line method of depreciation for
this machine and had been recording depreciation over an estimated
life of ten years, with no residual value. At the beginning of 2013, a
decision was made to change to the double-declining balance method
of depreciation for this machine.

68) Assuming a 30% tax rate, the cumulative effect of this accounting
change on beginning retained earnings, is (Nobel)
a.
P 89,600.
b.
P 0.
c.
P 105,280.
d.
P 150,400.
69)
is
a.
b.
c.
d.

The amount that Nobel should record as depreciation expense for 2013
P 80,000.
P 112,000.
P 160,000.
none of the above.

70) We had better ___ an umbrella when we go out. It looks like its going to
rain.
a. took
b. to take
c. taken
d. take