Page 1 of 6 Finals DRILL # 67_September 29, 2015

NAME:______________________________________________SCORE:________________

INSTRUCTIONS: Read the items that follow and write the letter of your choice, in CAPITAL
LETTERS, or the amount required, if any, on the space provided below. Strictly NO ERASURES
allowed.
REMEMBER: Youre doing this to train yourself and contribute to having a 100% Passing Rate
on the October 2016 CPA Licensure Examination. GOOD LUCK!!!
PREPARED BY: Jhon Vincent P. Bolima & Sarah Mae D. Pelovello

TO P P TA
A 1 2 X
1 11 1 1 1
2 12 2 2 2
3 13 3 3 3
4 14 4 4 4
5 15 5 5 5
6 6 6 6
7 7 7 7
8 8 8 8
9 9 9 9
10 1 1 10
0 0

THEORY OF ACCOUNTS

1. Which of the following is/are not true:

I. Retrospective adjustments and restatements are changes in equity.
II. Owner and non-owner changes in equity shall be presented in the
statement of changes in equity.
III. Reclassification adjustments to profit or loss are always made at gross
of tax.
a. I, II and III b. I and II c. II and III d. III

2. I. International Financial Reporting Standards (IFRS) are standards and

interpretations adopted by the International Accounting Standards Board (IASB)
II. IFRS comprise the IFRS, IAS, and Interpretations made by IFRIC or the
former SIC.
III. The current chairman of IASB is Hans Hoogervorst.
a. Only I is true c. Only I and III are true
b. Only I and II are true d. I, II and III are true

3. The life of a business is

a. a series of income statements
b. a series of balance sheets
c. a and b
d. perpetual

4. When alternative acceptable accounting methods exist, a better quality of

earnings generally is produced from selecting an accounting method that has the
effect of reporting the
a. lowest amount of future earnings
b. greatest amount of assets currently
c. lowest amount of current earnings
d. greatest amount of retained earnings currently

5. The balance sheet allows investors to assess all of the following except
a. how efficient the companys assets are used
b. the liquidity and financial flexibility of the company
c. the capital structure of the company
d. the net realizable value of the company

6. Which of the following is incorrect?

a. Comprehensive income includes all revenues, expenses, gains and losses, and
prior period adjustments.
b. An entity may present components of other comprehensive income gross of tax
or net of tax on the face of statement of profit or loss and OCI
c. The presentation of disclosures on dividends in the statement of profit or
loss and other comprehensive income is not permitted.
Page 2 of 6 Finals DRILL # 67_September 29, 2015

d. PAS 1 requires an entity to disclose income tax relating to each component

of other comprehensive income.
7. Which of the following items would cause earnings to differ from comprehensive
income for an enterprise in an industry not having specialized accounting
principles?
a. loss on exchange of similar assets
b. loss on exchange of dissimilar assets
c. unrealized loss on investments classified as held-for-trading securities
d. unrealized loss on investments classified as FVOCI securities

8. Reclassification adjustments will not arise on all of the following, except

a. changes in revaluation surplus
b. on derecognition of foreign operation
c. changes in remeasurements of the net defined benefit liability (asset)
d. on derecognition of FVOCI

9. According to PAS 1, the notes within the financial statements contain

information in addition to that presented in which of the following?
I. Chairmans statement
II. Report on sustainability
III. Statement of financial position
IV. Statement of financial performance
a. II,III and IV b. III and IV c. III d. II and III

10. ALPHABETS Co. made a correction of prior period error during the current
year. When ALPHABETS prepares financial statements for the current year, it
shall present SFP as at the
I. end of the current period
II. end of the preceding period
III. beginning of the preceding period
a. I b. I and II c. I and III d. I, II, and III

11. A public utility reports noncurrent assets as the first item on its balance
sheet. This is an example of
a. industry practice c. substance over form
b. improper statement presentation d. conservatism

12. An operating cycle

a. is the average time for a company to collect its receivables
b. is twelve months or less in length
c. is used to determine current assets when it is longer than one year
d. starts with inventory and ends with cash

13. The income statement line item gross profit will appear on which income
statement format?
a. single-step b. double-step c. multiple step d. no-step

14. Which of the following statements is/are true?

I. An entity should not present any items of income or expenses as
extraordinary items in the statement/s presenting profit or loss and
OCI or in the notes.
II. Reclassification adjustments do not arise on changes in revaluation
surplus recognized in accordance with PAS 16 or PAS 36.
III. Revaluation surplus is transferred directly to retained earnings when
the revalued asset is derecognized.
a. I and III b. I, II and III c. II and III d. none are true

15. When preparing financial statements, a management of an entity assessed that

a specific disclosure required by a PFRS is immaterial and thus, such disclosure
was omitted from the financial statements. The financial statements prepared
a. are misstated and a rectification should be made in the notes
b. are misstated
c. are not misstated but additional disclosures should be made in the notes
d. are not misstated
Page 3 of 6 Finals DRILL # 67_September 29, 2015

PRACTICAL ACCOUNTING 1

1. The Little Couples Co. began operation on January 1, 2014 with P1000000 from
the issuance of shares and borrowed funds of P450000. Net income for 2014 was
P300000 and The Little Couples Co. paid a P225000 cash dividend on December 19,
2014. No additional transactions affected owners equity in 2014. At December 31,
2014 liabilities of the company had increased to P597000. In the statement of
financial position, how much should be reported as its total assets?

2. The following information pertains to Starworld Co. on December 31 of the

current year:

Property, Plant and Equipment P 33,000,000

Accounts receivable 15,500,000
Allowance for doubtful accounts 3,500,000
Bonds payable 20,000,000
Available for sale 10,000,000
Merchandise inventory 13,500,000
Short term note payable 3,500,000
Premuim on bonds payable 1,500,000
Dividends payable 2,045,000
Cash 5,550,000
Held for trading securities 1,005,000
Wages payable 2,500,000
Accrued expenses 1,550,000

What is the working capital?

3. TLC Company had the following information for 2015:

Accounts receivable turnover 10:1

Total assets turnover 2:1
Average receivables during the year P 200,000
Total assets, January 1, 2015 400,000

Compute for the total assets as of December 31, 2015.

4. The records of Mnet(This is KPOP) Co. showed the following information:

Decrease in accounts payable P 30000

Disbursement for purchases 220000
Increase in raw materials 50000
Direct labor is 50% of RM used in production
Manufacture overhead is 20% of prime cost
Increase in Work in process 20000
Decrease in finished goods inventory 25000

What is the cost of goods sold?

5. Cake Divas Co. had the following expenses(amounts in 000):

Interest expense P 12
Cost of inventories sold 300
Insurance expenses 50
Advertising expense 10
Freight out 5
Freight in 2
Loss on sale of equipment 1
Legal and other professional fees 6
Rent expenses (one half occupied by
sales department) 4
Sales commission expense 7
Doubtful accounts expense 8

What are the amounts of expenses classified as distribution costs or selling

expenses and administrative expenses?
Page 4 of 6 Finals DRILL # 67_September 29, 2015

6. Project Runway Co. reported income before tax of P 5,000,000 for the current
year. The auditor questioned the following amounts that had been included in
income before tax:

Equity in earnings of Zalora Co. -40% P 1,600,000

Dividends received from Zalora Co. 320,000
Adjustments of profit of prior year for
arithmetical error in depreciation (1,400,000)

What amount should be reported as income before tax?

7. CsiNewYorkFinalSeason Co. reported net assets totaling P8,750,000 on December

31,2014. Included in the net assets were the following:

Treasury shares at cost P 250,000

Idle machinery 100,000
Trademark 150,000
Allowance for inventory writedown 200,000

What amount should be reported as net assets on December 31,2014?

For items 8, 9 and 10 refer to the following data:

The ledger of Starmovies Co. in 2015 found in page #27 of Millan Book Financial
Accounting Part 3 includes the following:
Cash P 100,000
Accounts receivable 200,000
Inventory 500,000
Accounts payable 150,000
Notes payable 50,000

During the audit of Starmoviess financial statement, the following were noted by
the auditor:
Cash sales in 2016 amounting to P 10,000 were inadvertently included
in the sales in 2015. Starmovies recognized gross profit of P 3,000 on
the sales.
A collection of a P 20,000 accounts receivable in 2016 was recorded as
collection in 2015. A cash discount of P 1,000 was given to the
customers.
During January 2016, a short term bank loan of P 25,000 obtained in
2015 was paid together with P 2,500 interest accruing in January 2016.
The payment transaction in 2016 was inadvertently included in 2015
transaction.
8. What is the adjusted current assets?
9. What is the working capital December 31, 2015?
10. What is the adjusted cash balance?

PRACTICAL ACCOUNTING 2

1. On June 1, LITTLE BEING Co. received a contract to sell inventory for 500,000
yens. The sale would take place in 90 days. LITTLE BEING immediately signed a 90-
day forward contract to sell the yen as soon as they are received. The spot rate
on June 1 was P1=240 yens and the 90-day forward rate was P1=234 yens.
At what amount would LITTLE BEING record the forward contract on June 1?

2. On Nov. 1, 2013, HAHA Co. entered into a firm commitment to acquire machinery
from PEACE Co., a company in Spain. Delivery and passage of title would be on
Feb. 28, 2014 at the price of 37800 euros, accounted for as fair value hedge. On
the same date, to hedge against unfavourable changes in the exchange rate, HAHA
entered into a 120-day forward with China Bank for 37800 euros. Forward rates for
Nov. 1, 2013, Dec. 31, 2013 and Feb. 28, 2014 are 94.3, 96.5 and 99.7
respectively.
The Firm Commitment account balance as shown in Dec. 31, 3013 Statement of
Financial Position amounted to: (indicate whether asset or liability)
Page 5 of 6 Finals DRILL # 67_September 29, 2015

3. On April 4, 2011, BALIW Co. delivered to a Pakistan firm inventory it sold for
100,000 rupees. Payment is due to be received on Aug. 2, 2011. The companys
fiscal year ends June 30. Also on April 4, BALIW entered into a foreign exchange
forward to sell 100,000 rupees on Aug. 2, 2011.
4/4/11 6/30/11 8/2/11
Spot rate (rupee) P0.80 P0.84 P0.82
Forward rate (rupee) 0.77 0.83 0.82
What was the net impact on BALIWs income in 2011 as a result of this hedge?

4. On Oct. 1, 2011, THE WILL OF D Co. ordered some equipment from a supplier for
200,000 baht. Delivery and payment is to occur on Nov. 30, 2011. The spot rates
on Oct. 1 and Nov. 30 are P1.5 and P1.3. The Oct. 1,2011 forward rate for Nov. 30
settlement is P1.35. If THE WILL OF D acquires on Oct. 1, 2011 a forward contract
to hedge any unfavourable changes in fair value of the equipment, at what amount
is the equipment recorded on the books?

5. oN Oct. 17, 2011, SUBSTANCE OVER FORM Co. PuRCHAsed fRoM a thAILand fIrM aN
iNvEnToRy cOsTiNg 10,000 Baht. PaYmEnT iS dUe on Jan. 15, 2012. AlSo oN Oct. 17,
SUBSTANCE OVER FORM eNtEred iNtO a fOrEiGn eXcHaNgE fOrWaRd tO bUy 10,000 baht oN
Jan. 15, 2012.
10/17/11 12/31/11 1/15/12
Spot rate (baht) P1.3 P1.42 P1.4
Forward rate (baht) 1.36 1.43 1.4
wHaaT amOuNt wIlL SUBSTANCE OVER FORM dIscLoSe As ThE fAiR vAlUe Of ThE fOrWaRd
CoNtRaCt on Dec. 31, 2011?

6. True or False : A foreign currency exposed net asset position is the excess of
assets denominated in foreign currency over the liabilities denominated in the
same foreign currency and translated at the current rate.

7. Type of Hedged Item Type of Hedge

I. Unrecognized firm commitment Fair Value hedge (w/ exception)
II. Net investment in foreign
Operation Cash Flow hedge
a. I is false b. II is false c. I and II are true d. I and II are false

8. True or False : When a derivative is designated as fair value hedge,

adjustments on the hedged item are recognized in profit or loss.

9. True or False : Hedging relationships are of three types: fair value hedge,
cash flow hedge, and hedge of a net investment in a foreign operation.

10. Related standard/s with regard to accounting for derivatives and hedging
transactions include/s:
a. PFRS 9 c. PAS 39 e. PAS 21 g. a to e, except c
b. PAS 32 d. PFRS 7 f. a to d h. a to e

TAX

1. T/F. Personal use of inventory by a VAT-registered owner of a business is not

subject to VAT.

2. Coro realty business sold a commercial lot amounting to 1900000. This

transaction is
a. Vat-exempt c. Subject to VAT
b. Zero-rated d. Subject to OPT

3. T/F. All agricultural and marine products exempt from VAT and OPT for as long
as they are sold in their original state.

4. What is the business tax rate imposed on sales of services to BOI-registered

export enterprise with 100% export sales and PEZA-registered enterprise?

5. T/F. Sales of P100000 and below per year is not VAT taxable, but subject to 3%
business tax.
Page 6 of 6 Finals DRILL # 67_September 29, 2015

6. Villas Realty Corporation sold the following real properties during the
taxable year:
2 units of residential house and lot at P2000000 each P4000000
3 residential lots at P1000000 each P3000000
5 commercial lots at P1000000 each P5000000
The amount of VAT exempt transaction/s would be:

7. BC Cooperative accredited with CDA shows the following revenues and expenses
during the year:
Interest income form members P1800000
Sales of groceries and farm supplies P2600000
Dividend income P200000
How much is subject to Vat?

8. Mac Caroni is a consultant officer of Italy assigned at Italys Consular

Office in the Philippines. During a period , his total purchases covered by VAT
invoice amounted to P2000000. How much is the VAT refund that Mac Caroni could
claim?

For items 9 and 10

Mario reported the following transactions during the year:
Sales of his family home P1000000
Sale of his car P200000
Sale of agricultural and marine products (original state) P500000
Sale of fresh water P10000
Sale of equity shares investment through the local
stock exchange(P120000) P100000
Long distance call to USA P10000
9. The amount of VAT-exempt transaction would be?
10. How much is the total business tax on the above transactions?

=================================================================================

BONUS QUESTIONS

Notes: 1. One additional point in your score for every correct answer. If your score plus bonus
points exceed 45, total score would only be 45. This is basic.
2. NO CHEATING (in any form). This, too, is basic. Cheaters WONT PASS the board
exam. :-p :-p :-p
3. Wrong spelling is wrong. This goes without saying.
4. All the best! \(^o^)/

1. What is the speed of light in m/s? (Give exact digits, not approximate.)
Answer:_______________________________
2. Best-selling manga by series first half of 2015
Answer:_______________________________
3. In NATO Phonetic Alphabet, what is the codename of letter V?
Answer:_______________________________
4. What is the binomial nomenclature of domestic cat?
Answer:_______________________________
5. Who is the author of Dragon Ball Z (whom we owe a part of our childhood, at least for many)?
Answer:_______________________________
6. An optical phenomenon where color looks different depending on the angle of reflection
Answer:_______________________________
7. What is the second-to-the-last letter of the Greek alphabet?
Answer:_______________________________

=========================================END OF
DILEMMA==========================================

Napansin mo ba yung pattern? Haha.

- Dr. Jose P. Rizal