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PAS 1: PRESENTATION OF FINANCIAL STATEMENTS

1. Financial statements must be prepared at least

a. Annually

b. Quarterly

c. Semiannually

d. Every two years

2. The primary responsibility for the preparation of financial statements is reposed

a. Management of the entity

b. Internal auditor

c. External auditor

d. Chief accountant

3. Which of the following cannot be considered fair presentation?

a. To select and apply accounting policies in accordance with applicable IFRS.

b. To present information in a manner that provides relevant, reliable, comparable


and understandable information.

c. To provide additional disclosures when compliance with specific IFRS is insufficient


to understand the entity’s financial position and financial performance.

d. To rectify inappropriate accounting policies either by disclosure of the accounting


policies used or by notes or explanatory information.

4. When an entity changes the end of the reporting period longer or shorter than
one year, an entity shall disclose all of the following, except

a. Period covered by the financial statements.

b. The reason for using a longer or shorter period.

c. The fact that amounts presented in the financial statements are not entirely
comparable.
d. The fact that similar entities in the geographical area in which the entity operates
have done so.

5. Which information is not specifically a required disclosure in relation to financial


statements?

a. Name of the reporting entity or other means of identification

b. Names of major shareholders of the entity

c. Level of rounding used in presenting the financial statements

d. Whether the financial statements cover the individual entity or a group of


entities.

6. An entity must disclose comparative information for

a. The previous comparable period for all amounts reported

b. The previous comparable period for all narrative and descriptive information.

c. The previous comparable period for all amounts reported, and for all narrative
and descriptive information when it is relevant to an understanding of the current
period’s financial statements.

d. The previous two comparable periods for all amounts reported.

7. In presenting a statement of financial position, an entity

a. Must make the current and noncurrent presentation.

b. Must present assets and liabilities in the order of liquidity.

c. Must choose either the current and noncurrent or the liquidity presentation.

d. Must make the current and noncurrent presentation except when a presentation
based on liquidity provides information that is reliable and more relevant.

8. An entity shall classify an asset as current under all of the following conditions,
except
a. The entity expects to realize, or intends to sell or consume it within normal
operating cycle.

b. The entity holds the asset primarily for the purpose of trading.

c. The entity expects to realize the asset within twelve months after the reporting
period.

d. The asset is cash or cash equivalent restricted to settle a liability for more than
twelve months

after the reporting period.

9. An entity shall classify a liability as current under all of the following conditions,
except

a. The entity expects to settle the liability within the normal operating cycle.

b. The entity holds the liability primarily for the purpose of trading

c. The liability is due to be settled within twelve months after the reporting period.

d. The entity has an unconditional right to defer settlement of the liability for at
least twelve months after the reporting period.

10. A financial liability that is due to be settled within twelve months after the
reporting period shall be classified as noncurrent

a. When it is refinanced on a long-term basis before the issue of financial


statements.

b. When the entity has no discretion to refinance for at least twelve months.

c. When it is refinanced on a long-term basis after the end of reporting period.

d. When it is refinanced on a long-term basis on or before the end of reporting


period.

11. When an entity breaches under a long-term loan agreement on or before the
end of the reporting period with the effect that the liability becomes payable on
demand, the liability is classified as

a. Current under all circumstances

b. Noncurrent under all circumstances


c. Current if the lender has agreed after the reporting period and before the
issuance of the statements not to demand payment as a consequence of the
breach.

d. Noncurrent if the lender agreed after the end of the reporting period to provide a
grace period for at least twelve months after the reporting period.

12. All of the following components of OCI should be reclassified to profit or loss,
except

a. Gain and loss arising from translating the financial statements of a foreign
operation.

b. Gain and loss on remeasuring debt investment at FVOCI.

c. The effective portion of gain or loss on hedging instrument in a cash flow hedge.

d. Gain or loss on remeasuring equity investment at FVOCI.

13. All of the following components of OCI are reclassified to retained earnings,
except

a. Revaluation surplus

b. Remeasurements of defined benefit plan

c. Gain or loss attributable to credit risk of a financial liability designated at FVPL

d. All of these are reclassified to retained earnings

14. Which is not acceptable in reporting other comprehensive income?

a. Separate statement of comprehensive income

b. Single statement of comprehensive income

c. Note to financial statements

d. Statement of changes in equity

15. An entity shall present an analysis of expenses using a classification based on

a. The nature of expenses.


b. The function of expenses.

c. Either the nature of expenses or the function of expenses within the entity,
whichever provides information that is reliable and more relevant.

d. Either the nature of expenses or the function of expenses within the entity,
whichever the entity would prefer to present.

16. Under International Financial Reporting Standards, notes to financial statements

a. Must be quantifiable.

b. Must qualify as an element.

c. Amplify or explain items presented in the main body of the financial statements.

d. All of the choices are correct regarding notes to financial statements.

17. What is the “first item” presented in the notes to financial statements?

a. Statement of compliance with IFRS.

b. Summary of significant accounting policies.

c. Supporting information for items presented in the financial statement.

d. Other disclosures, including contigent liabilities, unrecognized contractual


commitments and nonfinancial disclosures.

18. An entity shall disclose in the summary of significant accounting policies

a. The measurement basis used in preparing financial statements.

b. All the measurement basis specified in IFRS irrespective of whether used or not.

c. The measurement basis and the accounting policies used.

d. All of the accounting policy choices specified in IFRS irrespective of whether used
or not.

19. The presentation of notes to financial statements in a systematic manner

a. Is voluntary

b. Is mandatory
c. Is mandatory, as far as practicable

d. Depends on the industry

20. Disclosure of information about key sources of estimation uncertainty and


judgement

a. Is voluntary

b. Is mandatory

c. Is mandatory, as far as practicable

d. Depends on the industry

21. The disclosure of accounting policies is important to financial statement readers


in determining

a. Net income for the year

b. Whether accounting policies are consistently applied from year to year.

c. The value of obselete items included in ending inventory.

d. Whether the working capital position is adequate for future operations.

PAS 10- EVENTS AFTER REPORTING PERIOD

22. Events after the end of the reporting period are favorable or unfavorable events
that

a. Occur between the end of the reporting period and the date of the next annual
financial statements.

b. Occur between the end of the reporting period and the date of the next interim or
annual financial statements.

c. Occur between the end of the reporting period and the date when the financial
statements are authorized for issue.

d. Occur between the end of reporting period and the date of the next interim
statements.
23. Financial statements are said to be authorized for issue when

a. The financial statements are filed with the SEC.

b. The shareholders approve the financial statements at their annual meeting.

c. The management is required to submit the financial statements to a supervisory


body made up solely of nonexecutives and the supervisory body approves the
financial statements.

d. The management reviews the financial statements and authorizes them for issue.

24. Which event after the reporting period would require adjustment before
issuance of the financial statements?

a. Loss of plant as a result of fire

b. Changes in the quoted market prices of securities held as an investment

c. Loss on inventory resulting from major flood Ioss

d. Loss on a lawsuit the outcome of which was deemed uncertain at year end.

25. Which subsequent event would generally require disclosure but no adjustment
of the financial statements?

a. Retirement of the company president

b. Settlement of litigation when the event that gave rise to the litigation occurred
prior to the statement of financial position date

c. Employees strike

d. Issue of a large amount of ordinary shares

PAS 24 RELATED PARTY DISCLOSURES

26. Related parties include all of the following, except

a. Parent, subsidiary and fellow subsidiaries

b. Associate
c. Key management personnel and close family members of such individuals

d. Two ventures simply because they share joint control over a joint venture

27. Close family members of an individual include all of the following, except

a. The individual’s spouse and children

b. Children of the individual’s spouse

c. Dependents of the individual or the individual’s spouse

d. Brother or sister of the individual

28. Unrelated parties include which of the following?

a. Two entities simply because they have a common director

b. Providers of finance simply by virtue of their normal dealing with an entity.

c. Customers with whom an entity transacts a significant volume of business,


merely by virtue of the resulting economic dependence

d. All of these are unrelated parties.

29. All of the following are related party transactions, except

a. Transferred inventory to a shareholder owning 40% of the ordinary shares

b. Sold an entity car to the wife of the managing director

c. Sold an asset to an associate

d. Took out a huge bank loan

PAS 8- ACCOUNTING POLICIES ESTIMATES AND ERRORS

30. Which is the first step within the hierarchy of guidance when selecting
accounting policies?

a. Apply a standard from IFRS if it specifically relates to the transaction

b. Apply the requirements in IFRS dealing with similar and related issue
c. Consider the applicability of the definitions, recognition criteria and measurement
concepts in the Conceptual Framework

d. Consider the most recent pronouncements of other standard setting bodies

31. Which of the following is not classified as an accounting change?

a. Change in the accounting policy

b. Change in accounting estimate

c. Error in the financial statements

d. All of these are classified as an accounting change

32. Which is the reason why entities are permitted to change accounting policy?

a. The change would allow the presentation of a more favorable profit picture

b. The change would result in providing more reliable and relevant information
about financial position, financial performance and cash flows.

c. The change is made by the internal auditor.

d. The change is required by law.

33. Which method is required for reporting a change in accounting policy?

a. Cumulative effect approach

b. Retrospective approach

c. Prospective approach

d. Averaging approach

34. A change in accounting policy requires that the cumulative effect of the change
for priOr periods be shown as an adjustment to

a. Beginning retained earnings for the earliest period presented.


b. Net income for the period in which the change occurred.

c. Comprehensive income for the earliest period presented.

d. Shareholders’ equity for the period in which the change occured.

35. Which of the following is not treated as a change in accounting policy?

a. A change from FIFO inventory valuation to average cost

b. A change from direct write-off method of recognizing bad debt expense to


allowance method

c. A change from cost model to fair model in measuring investment property

d. A change to a new IFRS requirement

36. Which is the proper time period to record the effect of a change in accounting
estimate?

a. Current period and prospectively

b. Current period and retrospectively

c. Retrospectively

d. Current period

37. Why is retrospective treatment of changes in accounting estimate prohibited?

a. Changes in estimate are normal recurring corrections and adjustments which are
the natural result of the accounting process.

b. The retrospective treatment for any type of presentation is not allowed.

c. Retrospective treatment of changes in accounting estimate is required by IFRS.

d. The IFRS is silent on the issue.

38. When it is difficult to distinguish a change in an accounting policy from a change


in an accounting estimate, the change is treated as
a. Change in accounting estimate with appropriate disclosure

b. Change in accounting policy

c. Correction of an error

d. Initial adoption of an accounting policy

39. An example of a correction of an error in previously issued financial statements


is a change

a. From FIF0 method of inventory valuation to average cost method.

b. In the service life of plant asset based on change in the economic environment.

c. From cash basis of accounting to accrual basis of accounting.

d. In the tax assessment related to a prior period.

40. What is the treatment if an entity has included in the consolidation this year a
subsidiary that was appropriately excluded from consolidation last year?

a. An accounting change that should be reported prospectively.

b. An accounting change that should be reported retrospectively

c. A correction of an error

d. Neither an accounting change nor a correction of an error.

PFRS 5 DISCONTINUED OPERATION AND ASSET HELD FOR SALE

41. A noncurrent asset or disposal group shall be classified as held for sale when

a. The sale is highly probable.

b. The asset is available for immediate sale in the present condition.

c. The sale is probable and the asset is available for sale in the present condition.

d. The sale is highly probable and the asset is available for immediate sale in the
present condition.
42. Which is not a criterion for the sale of a noncurrent asset held for sale to be
highly probable?

a. Management must be committed to a plan to sell the asset.

b. An active program to locate a buyer and complete the plan must have been
initiated.

c. The asset must be actively marketed for sale at a reasonable price.

d. The sale should be expected to qualify for recognition as a completed sale within
one year from the end of reporting period.

43. An entity shall classify a noncurrent asset or disposal group as “held for sale”
when

a. The carrying amount of the asset or disposal group is recovered through a sale.

b. The carrying amount of the asset or disposal group is recovered through


continuing use.

c. The noncurrent asset or disposal group is to be abandoned.

d. The noncurrent asset or disposal group is idle or retired from active use.

44. A noncurrent asset that is to be abandoned should not be classitied as held for
sale because

a. The carrying amount is recovered principally through continuing use.

b. It is difficult to value.

c. It is unlikely that the noncurrent asset will be sold within 12 months.

d. It is unlikely that there will be an active market for the noncurrent asset.

45. How should the assets and liabilities of a disposal group held for sale be
reported?

a. The assets and liabilities should be offset and presented as a single amount.
b. The assets of disposal group should be reported separately as current assets and
the liabilities should be shown as current liabilities separately.

c. The assets and liabilities should offset and presented as a deduction from equity.

d. There should be no separate disclosure of assets and liabilities of the disposal


group.

46. An entity shall recognize any subsequent increase in fair value less cost of
disposal of a noncurrent asset or disposal group classified as held for sale as

a. Deferred gain as component of equity

b. Deferred gain as component of liability

c. Gain entirely to be included in profit or loss

d. Gain to be included in profit or loss but not in excess of the cumulative


impairment loss previome recognized

47. An entity classified a noncurrent asset accounted for under the cost model as
held for sale at the current year-end. The entity decided at the end of the following
year not to sell the asset but to continue to use it. The asset should be measured at
the end of the following year at

a. The lower of carrying amount and recoverable amount

b. The higher of carrying amount .and recoverable amount

c. The lower of carrying amount on the basis that it had never been classified as
held for sale and recoverable amount

d. The recoverable amount

48. Which is not a criterion for an operation to be classified as discontinued?

a. The operation should represent a separate major line of business or geographical


area.

b. The operation is part of a single plan to dispose a separate major line of business
or geographical area.
c. The operation is a subsidiary acquired exclusively with a view to resale.

d. The operation must be sold within three months of the year-end.

49. The results of the discontinued operation should be reported net of tax as

a. A prior period adjustment.

b. Another income and expense item.

c. A single amount after continuing operations and before net income.

d. A bulk sale of plant assets included in income from continuing operations.

PFRS 8 -OPERATING SEGMENT

50. If financial report contains both the consolidated financial statements of a


parent and the parent’s separate financial statements, segment information is
required in

a. The separate financial statements only

b. The consolidated financial statement only

c. Both the separate and consolidated financial statements

d. Neither the separate nor the consolidated financial statements

51. Which statement is not true with respect to a chief operating decision maker?

a. The term chief operating decision maker identifies a function and not necessarily
a manager with a specific title.

b. In some cases, the chief operating decision maker could be the chief operating
officer.

c. The board of directors acting collectively could qualify as the chief operating
decision maker.

d. The chief internal auditor who reports to the board of directors usually plays a
very important role and would generally qualify as chief operating decision maker.
52. When is an operating segment is reportable?

a. The segment external and internal revenue is 10% or more of the combined
external and internal revenue of all operating segments.

b. The segment profit or loss is 10% or more of the greater between the combined
profit of all profitable operating segments and the combined loss of all unprofitable
operating segments.

c. The assets of the segment are 10% or more of the total assets of all operating
segments.

d. Under all of these circumstances

53. Operating segments that do not meet any of the quantitative thresholds

a.Cannot be considered reportable.

b. May be considered reportable and separately disclosed if management believes


that information about the segment would be useful to the users of the financial
statements.

c. May be considered reportable if the information is for internal use only.

d. May be considered reportable and separately disclosed if this is the practice


within the economic environment in which the entity operates.

54. Which is true concerning the 75% overall size test for operating segments?

a. The total external and internal revenue of all reportable segments is 75% or more
of the entity’s external revenue.

b. The total external revenue of all reportable segments is 75% or more of the
entity’s external and internal revenue.

c. The total external revenue of all reportable segments is 75% or more of the
entity’s external revenue.

d. The total internal revenue of all reportable segments is 75% or more of the
entity’s internal revenue.

55. Which of the following statements about major customer disclosure is true?
a. A major customer is defined as one providing revenue which amounts to 10% or
more of the combined external revenue of all operating segments.

b. The identities of major customers need not be disclosed.

c. The entity shall disclose the total amount of revenue from major customers and
the identity of the segment reporting the revenue.

d. All of these statements are true about major customer disclosure

PAS 34- INTERIM FINANCIAL REPORTING

56. Interim financial reports shall be published

a. Once a year at any time in that year.

b. Within a month of the half year-end.

c. On a quarterly basis.

d. Whenever the entity wishes.

57. Interim financial reports should include as a minimum

a. A complete set of financial statements.

b. A condensed set of financial statements and selected notes

c. A condensed statement of financial position and a condensed income statement.

d. A condensed statement of financial position and a condensed statement of cash


flows.

58. Interim financial reporting should be viewed

a. As a special type of reporting that need not follow IFRS

b. As useful only if activity is evenly spread throughout the year.

c. As reporting for an integral part of an annual period.


d. As reporting for a separate accounting period.

59. The accounting profession indicates that

a. All entities that issue an annual report should issue interim financial reports.

b. The integral view is the more appropriate approach for interim financial reports.

c. A complete set of financial statements must be presented for an interim period.

d. The same IFRS used for the annual reports should be employed for interim
reports.

60. Which statement is true regarding interim reporting?

a. Comprehensive income is not reported

b. Each statement must be marked “unaudited.”

c. Interim in reporting is required under IFRS.

d. Permanent inventory decline should not be recorded in the period but rather at
year-end.

INVENTORY
1. An entity reported inventory on. December 31, 2019 at P6,000,000 based on a
physical count of goods priced at cost and before any necessary year-end
adjustments relating to the following:

•Included in the physical count were goods billed to a customer FOB shipping point
on December 30, 2019. These goods had a cost of P125,000 and were picked up by
' e carrier on January 15, 2020.

•Goods shipped FOB shipping point on December 31, 2019 which are being held for
the customer to call at the customer’s convenience with a cost of P200,000 were
included in the count.

• Goods with invoice cost of P300,000 shipped FOB shipping point on December 31,
2019 from a vendor were received on January 15, 2020

What amount should be reported as inventory on December 31, 2019?

a.5,875,000

b. 6,100,000

c. 6,175 ,000

d. 6,300,000

2. An entity incurred the following costs during the current year:

Cost of purchases based on invoices


5,000,000

Trade discount already deducted from invoices


500,000

Import duties
400,000

Freight and insurance on purchases


600,000

Other handling costs on imports


100,000

Commission paid to agents for arranging imports


200,000

Sales commission paid to sales agents


300,000
Salaries of accounting department
1,000,000

After sales warranty costs


250,000

What is the total cost of purchases?

a. 6,300,000

b. 5,800,000

c. 6,100,000

d. 6,600,000

3. An entity included the following items in inventory at year-end:

Goods out on consignment at sale price, including, 40% markup on cost


1,400,000

Goods purchased in transit, shipped FOB destination


1,200,000

Goods held on consignment by the entity


900,000

At what amount should the inventory at year-end be reduced?

a. 1,460,000

b. 2,660,000

c. 1,300,000

d. 2,500,000

4. On June 1, 2019, an entity sold merchandise with a list price of P5,000,000 to a


customer. The entity allowed trade discounts of 20% and 10%. Credit terms were
5/10, n/30 and the sale was made FOB shipping point. The entity prepaid P100,000
of delivery cost for the customer as an accommodation. On June 11, 2019, what is
the full remittance from the customer?

a. 3,600,000

b. 3,420,000
c. 3,700,000

d. 3,520,000

5. On July 1,2019, an entity recorded purchases of P3 ,000, 000 and P2, 000, 000
under credit terms of 2/15, net 30. The payment on the P3, 000, 000 purchase was
remitted on July 16.The payment on the P2, 000, 000 purchase was remitted on July
31. What amount of purchases 3 should be included in the determination of cost of
goods available for sale?

1. Under gross method?

a. 5,000,000

b. 4,900,000

c. 4,940,000

d. 4,960,000

2. Under net method?

a. 5,000,000

b. 4,900,000

c. 4,940,000

d. 4,960, 000

6. An entity reported accounts payable of P4, 000, 000 on December 31, 2019
before considering the following data:

* Goods shipped to the entity on December 31,2019 FOB shipping point were lost in
transit. The invoice cost of P100, 000 was not recorded, On January 15, 2020, the
entity filed a P100 ,000 claim against the common carrier.

* On December 31, 2019, a vendor authorized the entity to return for full credit
goods shipped and billed at P150,000 on December 15, 2019. The returned goods
were shipped by the entity on December 31, 2019. A P150,000 credit memo was
received and recorded by the entity on January 15, 2020.

* On December 31, 2019, the entity has a P500,000 debit balance in accounts
payable to a supplier resulting from an advance payment for goods to be
manufactured to the entity’s specifications.
What amount should be reported as accounts payable on December 31, 2019?

a. 4,350,000

b. 3,950,000

c. 4,500,000

d. 4,450,000

7. An entity had usual sales terms of net 60 days, FOB shipping point. Sales, net of
returns and allowances totaled P5, 000, 000 for 2019 before year-end adjustment.

* Goods with an invoice amount of P200, 000 were billed to a customer on January
15,2020. The goods were shipped on December 31,2019.

* On January 5, 2020, a customer notified the entity that goods billed and shipped
on December 31, 2019 were lost in transit. The invoice amount was P50,000.

* On December 31, 2019, the entity authorized a customer to return, for full credit
goods shipped . and billed at P300, 000 on December 15,2019. The retuned goods
were received by the er1tity on January 15,2020 and P300, 000 credit memo was
issued on the same date.

What amount should be reported as net sales for 2019?

a. 4,700,000

b. 4,900,000

c. 4,850,000

d. 5,200,000

8. On October 1, 2019, an entity sold 100,000 gallons of heating oil at P50 per
gallon. Fifty thousand gallons were delivered on December 15, 2019 and the
remaining 50,000 gallons were delivered on January 15, 2020. Payment terms were
50% due on October 1, 2019, 25% on the first delivery and the remaining 25% due
on the second delivery. What amount of sales revenue should be recognized in
2019?

a. 5,000,000

b. 2,500,000

c. 3,750,000
d. 1,250,000

PROPERTY, PLANT AND EQUIPMENT

1.An entity had the following property acquisitions during the current year:

* Received land as donation from a major shareholder as an inducement to locate a


plant in the city. No payment was required but the entity paid P50,000 for legal
expenses for land transfer. The land is fairly valued at P1,000,000.

* Acquired land and building in exchange for 30,000 ordinary shares with P100 par
value and quoted price of P150. The land had a fair value of P2,000,000 but the fair
value of the building cannot be reliably measured.

* Purchased warehouse building and the land on which it is located for P400,000
including appraiser fee of P50,000. The land had an appraised value P2,000,000 and
the building P3,000,000.

1. What is the total cost of land?

a. 5,160,000

b. 5,660,000

c. 5,210,000

d. 5,000,000

2. What is the total cost of building?

a. 4,240,000

b. 5,740,000

c. 5,500,000
d. 4.000.000

2. Athena Company and Anna Company are fuel oil distributors. To facilitate the
delivery of oil to customers, the two entities exchanged ownership of barrels of oil
without physically moving the oil. Athena paid Anna P500,000 to compensate for a
difference in the grade of oil. It was reliably determined that the configuration of the
cash flows of the asset received does not differ from the configuration of the cash
flows of the asset transferred.

On the date of exchange, the oil inventory of Athena has a carrying amount of
P5,000,000 and fair value of P7,000,000. The oil inventory of Anna has a carrying
amount of P6,000,000 and fair value of P8,500,000.

1. What amount should Athena record as cost of the oil inventory received in
exchange?

a. 4,500,000

b. 6,500,000

c. 7,000,000

d. 8,500,000

2.What amount should Anna record as cost of oil inventory received in exchange?

a. 4,500,000

b. 6,000,000

c. 7,500,000

d. 8,500,000

3. An entity owns a tract of land purchased for P2,000,000 and with fair value of
P2,800,000 on the date of exchange.

Another entity also owns a tract of land acquired for P3,600,000 and with fair value
of P3, 800,000 on the date of exchange.

On the date of exchange, the entity exchanged its land and paid P1,000,000 for the
land owned by the other entity.
The configuration of cash flows from the land acquired is expected to be
significantly different from the configuration of cash flows of the land exchanged.

1. At what amount should the entity record the land acquired in exchange?

a. 2,800,000

b. 3,000,000

c. 3,200,000

d. 3.800,000

2. What amount of gain on exchange should be recognized by the entity?

a. 800,000

b. 400,000

c. 200,000

d. 0

4. An entity had the following machinery acquisitions during the year:

* Acquired a machine with an invoice price of P3, 000, 000 subject to a cash
discount of 10% which was not taken. The entity incurred cost of P50, 000 in
removing the old machine prior to the installation of the new one. Machine supplies
were acquired at a cost of P150,000.

* During the early part of current year, the entity purchased a machine for P500,000
down and four monthly installments of P1,250,000. The cash price of the machine
was P4, 700 000.

* At the beginning of current year, the entity purchased a machine for P2, 000, 000
in exchange for a noninterest bearing note requiring four payments of P500, 000.
The first payment was made at the end of current year

*The implicit rate of interest for this note at date of issuance was 10%. The present
value I of an ordinary annuity of 1 at 10% is 3.17 for four periods. The present value
of an annuity of l in advance at 10% is 3.49 for four periods.
* At the beginning of current year, the entity acquired a machine by issuing a four-
year, noninterest-bearing note for P2,000,000. The entity has an implicit 10%
interest for this type of note. The present value of 1 at 10% for 4years is 0.68.

1. What is the total cost of machinery acquired?

a. 10,505,000

b. 10,345,000

c. 10,045,000

d. 10,645,000

2. What amount of interest expense should be reported for the current year as a
result of machinery acquisition?

a. 1,094,500

b. 1,110,500

c. 294,500

d. 800,000

5. An entity fabricated equipment for office use during the current year. The
following data were taken from the accounting records:

Materials Direct labor

Finished goods 1,000,000 1,500,000

Office Equipment 600,000 500,000

Factory overhead amounted to P1,200,000. Normal production of finished good is


50,000 units. Due to the fabrication of the office equipment, finished goods
produced totaled 40,000 units only in the current year. The office equipment is to be
charged with the overhead which would have been apportioned to the 10,000 units
which were not produced.

What is the total cost of the office equipment?


a. 1, 100.000

b. 1,400.000

c. 1,340,000

d. 2,340,000

6. An entity purchased a machine for P3,000,000 on January 1, 2019. The entity


received a government grant of P500,000 in respect of this asset. The policy is to
depreciate the asset over 5 years on a straight line basis and to treat the grant as
deferred income. On January 1, 2020, the grant became fully repayable because of
noncompliance with conditions. What is the loss on repayment of grant in 2021?

a. 500,000

b. 300.000

c. 200,000

c. 100,000

7. An entity purchased a machine for P6,600,000 on January 1, 2019 and received a


government grant of P600,000 towards the capital cost. The policy is to treat the
grant as a reduction in the cost of the asset. The machine is to be depreciated on a
straight line basis over 5 years with a residual value of P500, 000. On January 1,
2021, the grant became fully repayable because of noncompliance with conditions.

1. What is the depreciation for 2021?

a. 1,460,000

b. 1,200,000 .

c. 1,220,000

d. 1,560,000

2. What is the depreciation for 2022? a. 1.100,000

b. 1,320,000
c. 1,200,000

d. 1,220,000

8. On January 1, 2019, an entity received from the government a P5,000,000 three-


year, zero-interest loan evidenced by a promissory note. The prevailing rate of
interest for a loan of this type is 10%. The present value of 1 at 10% is .75 for three
periods. What is included in the journal entry to record the loan and grant?

a. Debit discount on note payable P1,250,000

b. Credit note payable P5,000,000

c. Credit deferred grant income P1,250,000

d. All of these are included in the journal entry


DEPLETION

1. On January 1. 2019, a entity purchased a mineral mine for P26,400,000 with


removable ore estimated at l,200,000 tons. After it has extracted all the ore, the
entity will be required by law to restore the land to the original condition at an
estimated cost of P2,200,000.

The present value of the estimated restoration cost is P1,800,000. The property can
be sold afterwards for P3,000,000.

During 2019 the entity incurred P2,000,000 exploration cost and P1,600,000
development cost preparing the mine for production. The entity removed 80,000
tons of ore and sold 60,000 tons of ore in the current year.

1. What is the depletion for the current year?

a. 1,920,000

b. 1,440,000

c. 1,940,000

d. 1,455,000

2. What amount of depletion should be included in cost of goods sold for the current
year?

a. 1,920,000

b. 1,440,000

c. 1,500,000

d. 1,590,000
2. In 2018, an entity purchased property with mineral resources for P28,000,000.
The property had a residual value of P5,000,000. However, the entity is required to
restore the property to the original condition at a discounted amount of P2,000,000.

In 2018, the entity spent P1,000,000 in development cost and P3,000,000 in


building. In 2019, an amount of P4,000,000 was spent for additional development
on the mine.

Production began in 2019 and the tons extracted totaled P 3,000,000, in 2019 and
2,500,000 in 2020. The remaining tons totaled 7,000,000 on December 31, 2019
and 3,500,000 on December 31,

1. What is the depletion base?

a. 35,000,000

b. 30,000.000

c. 38,000,000

d. 33,000,000

2. What amount of depletion should be recognized in 2019?

a. 7,800,000

b. 9,900,000

c. 8,400,000

d. 9,000,000

3. What amount of depletion should be reported for 2020?

a. 10,500,000

b. 12,250,000

c. 9,625,000

d. 8,750,000
4. What is the carrying amount of the mineral property on December 31, 2020?

a. 12,250,000

b. 17,250,000

c. 13,475,000

d. 18,475,000

3. On July 1. 2019, an entity purchased the rights to a mine for P20,000,000, of


which P2,000,000 was allocable to the land. Estimated reserves were 1,500,000
tons. The entity expected to extract and sell 25,000 tons per month.

The entity purchased mining equipment on July 1. 2019 for P8,000,000. The mining
equipment had a useful life 8 years. However, after all the resource is removed, the
equipment will be of no use and will be sold for P500,000.

1. What is the depletion for 2019?

a. 3,600,000
b. 1,800,000
c. 2,500,000
d. 1,250,000

2. What is the carrying amount of the mineral property on December 31, 2019?

a. 18,200,000
b. 16,400,000
c. 16,200,000
d. 14,400,000

3. What is the depreciation for 2019?.

a. 1,500.000
b. 1,000,000
c. 750,000
d. 468,750
4. An entity acquired a tract of land containing an extractable natural resource.The
entity is required by the purchase contract to restore the land to a condition suitable
for recreational use after it has extracted the natural resource.

Geological survey indicated that the recoverable reserves would be 2,500,000 tons
and that extraction will be completed in five years.

Land
9,000,000

Exploration and development cost


1,000,000

Expected cash flow for restoration cost


1,500,000

Credit-adjusted risk free interest rate


10%

PV of 1 at 10% for 5 periods


0.62

What is the depletion charge per ton of extracted material?

a. 4.00
b. 4.37
c. 3.97
d. 3.60

5. During the current year a mining entity incurred. P5,000,000 in exploration cost
for each of 15 oil wells drilled. Of the 15 wells drilled, 5 wells were dry holes. The
entity used the successful effort method of accounting. The entity depleted 30% of
the oil discovered in the current year.

What amount is exploration cost should be reported in the current year-end


statement of financial position?

a. 35,000,000

b. 15,000,000

c. 25,000,000

d.17,500,000
PAS 32 FINANCIAL INTRUMENTS PRESENTATION

1. A financial asset is any of the following, except

a. Cash

b. An equity instruments of another entity.

c. Contractual right to receive cash or another financial asset from another entity.

d. Contractual right to exchange financial assets or financial liabilities with another


entity under conditions that are potentially unfavorable to the entity.

2. Financial assets include all of the following, except

a. Cash in bank

b. Trade accounts and notes receivable

c. Loan receivable

d. Inventories, property, plant and equipment, intangible assets and prepaid


expenses

3. A financial liability
a. Must be classified as noncurrent liability.

b. Is a contractual obligation to deliver cash or another financial asset to another


entity

c. Is a contractual obligation to exchange financial asset or financial liabilities with


another entity under the conditions that are potentially favorable to the entity

d. Is a contractual obligation to deliver cash or any assets to another entity.

4. Financial liabilities include all of the following, except

a. Trade accounts and notes payable

b. Bonds payable

c. Loans payable

d. Income taxes payable and deferred revenue

5. How should preference shares that are redeemable mandatorily be presented in


the statement of financial position?

a. Noncurrent financial liability

b. Current financial liability

c. Equity

d. Either current or noncurrent financial liability depending on the redemption date

PFRS 9 FINANCIAL INSTRUMENTS

6. IFRS requires entities to measure financial assets based on all of the following,
except

a. The entity’s business model for managing financial assets.

b. Whether the financial asset is a debt or equity investment.

c. The contractual cash flow characteristic of the financial asset.

d. All of the choices are IFRS requirements.


7. Debt investments that meet the business model and contractual cash flow tests
are reported at

a. Net realizable value

b. Fair value

c. Amortized cost

d. The lower of amortized cost or fair value

8. What is the correct valuation approach for financial asset?

a. Not held for collection at fair value and held for collection at fair value.

b. Not held for collection at amortized cost and held for collection at amortized cost.

c. Not held for collection at fair value and held for collection at amortized cost.

d. Not held for collection at amortized cost and held for collection at fair value.

9. Debt investments that are reported at amortized cost are

a. Managed and evaluated based on a documented risk-management strategy

b. Trading debt investment

c. Held for collection debt investments

d. All of the above are correct

10. Which statement is correct in regard to trading investments?

a. Trading investments are held with the intention of selling them in a short period
of time.

b. Unrealized holding gains and losses are reported as part of net income.

c. Any discount or premium is not amortized.

d. All of these statements are correct.

11. An entity may make an irrevocable election to present in other comprehensive


income changes in fair value of
a. An investment in equity instrument that is held for trading.

b. An investment in equity instrument that is not held for trading.

c. A financial asset measured at amortized cost.

d. A financial asset measured at fair value through profit or loss.

12. Equity investments accounted for by recognizing unrealized holding gains or


losses as component of other comprehensive income are

a. Non-trading where an entity has holding of less than 20%

b. Trading investment where an entity has holding of less than 20%

c. Investment where an entity has holdings of between 20% and 50%.

d. Investment where an entity has holdings of more than 50%.

13. A debt investment shall be measured subsequently at amortized cost

a. By irrevocable designation

b. When the debt investment is managed and evaluated on a document risk-


management strategy.

c. When the debt investment is held for trading.

d. When the business model is to collect contractual cash flows that are solely
payments of principal and interest.

14. Amortized cost is the initial recognition amount of investment minus

a. Repayments and net of any reduction for uncollectibility.

b. Cumulative amortization and net of any reduction for uncollectibility.

c. Repayments plus or minus cumulative amortization and net of any reduction for
uncollectibility.

d. Repayments plus or minus cumulative amortization.

15. A debt investment shall be measured at fair value through other comprehensive
income
a. When the debt investment is held for trading

b. When the debt investment is not held for trading.

c. By irrevocable designation

d. When the business model is to collect contractual cash flows that are solely
payments of principal and interest and also to sell the financial asset.

16. Which statement is correct about the effective interest method of amortization?

a. The effective-interest method applied to bond investments is different from that


applied to bonds payable.

b. Amortization of discount decreases from period to period.

c. Amortization of premium decreases from period to period.

d. The effective interest method applies the effective interest rate to the beginning
carrying amount for each interest period.

17. Under the fair value option, an entity may

a. Irrevocably designate a debt investment as measured at fair value through profit


or loss even if the amortized cost measurement is satisfied.

b. Irrevocably designate a debt investment as measured at fair value through other


comprehensive income.

c. Revocably designate a debt investment as measured at fair value through profit


or loss even if the amortized cost measurement is satisfied.

d. Designate all instruments as measured at fair value through profit or loss.

18 Under IFRS, the fair value option

a. Must be applied to all instruments the entity holds.


b. May be selected as a valuation method at any time.
c. Reports all gains and losses in income.
d All of the choices are correct.

19. The fair value option allows an entity to

a. Record income when the fair value of investment increases.

b. Value debt investment at fair value in some years but not others years.
c. Report most financial instruments at fair value by recording gains and losses as a
component of shareholders’equity.
d. All of the statements are true of the fair value option.

20. Entities account for transfers of investments between categories

a. Prospectively, at the end of the period after the change in the business model.
b. Prospectively, at the beginning of the period after the change in the business
model. c. Retroactively, at the end of the
period after the change in the business model.
d. Retroactively, at the beginning of the period after the change in the business
model.

21. Transfers between categories

a. Result in entities omitting recognition of fair value in the year of the transfer
b. Are accounted for at fair value for all transfers.
c. Are considered unrecognized if transferred out of held for collection into fair value
d. Always result in an impact on net income.

22. When a debt investrnent at amortized cost is reclassified to FVPL, the difference
between the previous carrying amount and fair value at reclassification date is

a. Recognized in profit or loss

b. Not recognized
c. Recognized in other comprehensive income
d. Included in retained earnings

23. Which statement is true when a debt investment at FVPL is reclassified


amortized cost?

a. The new carrying amount at amortized cost is equal to the fair value on
reclassificaton date.

b. A new effective rate is computed based on the fair value on reclassification date.
c. Interest income is determined using the effective interest method
d. All of these statements are true for reclassification from FVPL to amortized cost.

24. Which statement is not true when a debt investment at amortized cost is
reclassified to FVOCI?

a. The debt investment is measured at fair value at reclassification date.


b. The difference between the previous carrying amount and fair value at
reclassification date is recognized in other comprehensive income
c. A new effective rate is computed.

d. Interest income is completed using effective interest method.


25. Which statement is true when a debt investment at FVOCI is reclassified to
amortized cost?

a. The fair value at reclassification date becomes the new carrying amount.
b. The cumulative gain or loss previously recognized in OCI is removed from equity
and adjusted against the fair value at reclassification date.

c. The original effective rate is not adjusted.


d. All of these statements are true.

26. Which statement is true when a debt investment at FVPL is reclassified to


FVOCI?

a. The new carrying amount is equal to the fair value at reclassification date.
b. A new effective rate is computed based on the fair value at reclassification date
c. Interest income is determined using the effective interest method.
d. All of these statements are true.

27. Which statement is not true when a financial asset at FVOCI is reclassified to
FVPL?

a. The financial asset continues to be measured at fair value.

b. The fair value at reclassification date becomes the new carrying amount.

c. The cumulative gain or loss previously recognized in 0CI is reclassified to profit or


loss

d. Interest income is determined using the effective interest method.

28. What financial assets are assessed for impairment?

a. Equity investments at FVPL

b. Equity investments at FVOCI

c. Debt investments at FVPL

d. Debt investments at amortized cost and debt investments at FVOCI

29. Impairments of debt investments are

a. Based on discounted contractual cash flow.

b. Recognized as component of other comprehensive income.


c. Based on fair value for non-trading investment and on negotiated value for held
for collection investments.

d. Evaluated at each reporting date for every held for collection investment.

30. Under IFRS, an entity

a. Should evaluate every investment for impairment.

b. Accounts for an impairment as an unrealized loss as a part of other


comprehensive income.

c. Calculates the impairment loss on debt i vestments as the difference between the
carrying amount plus accrued interest and the expected discounted future cash
flows.

d. All of the choices are correct.

31. The characteristics of a derivative include all of the following, except

a. The value changes in response: to the change in a specified underlying.

b. It requires a large investment at the inception of the contract.

c. It is settled at a future date.

d. All of these are characteristics

32. Which statement regarding derivatives is not true?

a. The derivatives should be recognized as assets and liabilities.

b. The derivatives should be reported at fair value.

c. Gains and losses resulting from speculation should be deferred.

d. Gains and losses resulting from fair value hedge are reported immediately.

33. An embedded derivative shall be “bifurcated “from the host contract when all of
the following conditions are satisfied, except

a. The economic characteristics and risks of the host contract and the embedded
derivative are not closely related.
b. A separate instrument with the same terms as the embedded feature would meet
the definition of a derivative

c. The host contract is measured at fair value through other comprehensive income.

d. The host contract is measured at fair value through profit or loss.

34. An option to convert a convertible bond into ordinary shares

a. Embedded derivative

b. Host security

c. Hybrid security

d. Fair value hedge

INVESTMENTS IN ASSOCIATES

35. Which statement is true when an entity holds between 20% and 50% of the
voting shares?

a. The investor must use the equity method.


b. The investor should use the equity method unless circumstances indicate that it
is unable to exercise significant influence over the investee.
c. The investor must use the fair value method.
d. The investor should use the fair value or cost method.

36. Under equity method, cash dividend received is recorded as

a. A reduction of the carrying amount of the investment

b. Share premium
c. An addition to the carrying amount of the investment

d. Dividend income

37. Under the equity method, an investor recognizes its share of the earnings of the
investee in the period in which the

a. Investor sells the investment.


b. Investee declares a dividend.
c. Investee pays a dividend.
d. Earnings are reported by the investee in the financial statements.

38. Goodwill arising from an investment in associate is

a. Included in the carrying amount of the investment and amortized over the useful
life.

b. Included in the carrying amount of the investment and not amortized.


c. Excluded from carrying amount of the investment but charged to retained
earnings. d. Excluded from carrying
amount of the investment but charged to expense immediately.

39. How is the impairment test carried out for an investment in associate?

a. The goodwill is impairment tested individually.


b. The entire carrying amount of the investment is tested for impairment by
comparing the recoverable amount with the carrying amount.
c. The carrying amount of the investment should be compared with market value.
d. The recoverable amounts of all investments associates should be assessed
together.

40. The excess of the investor’s share of the net fair value of the associate’s net
assets over the cost of the investment is

a. Included in the determination of the investor’s share of the associate’s profit or


loss in the period , in which the investment is acquired.
b. Credited to retained earnings directly.
c. Included in other comprehensive income.
d. A deferred gain.

41. What should happen when the financial statements of an associate are not
prepared at the same date as that of the investor?
a. The associate should prepare financial statements for use by the investor at the
same date as that of the investor.

b. The financial statements of the associate prepared at a different date will be used
c. Any major transactions between the date of the financial statements of the
investor and that of the associate should be accounted for.

d. As long as the gap is not greater than three months, there is no problem.

42. When investment ceases to be an associate and is accounted for in accordance


with IFRS 9, the fair value of the investment at the date when it ceases to be an
associate

a. Is regarded as its cost on initial recognition as a financial asset.


b. Is regarded as its fair value on initial recognition as a financial asset
c. Is regarded as its fair value on initial recognition as a financial liability

d. Is regarded as its amortized cost on initial recognition

INVESTMENT PROPERTY

43. Which statement best describes investment property?

a. Property held for sale in the ordinary course of business.


b. Property held for use in the production and supply of goods or services and
property held for administrative purposes
c. Property held to earn rentals or for capital appreciation
d. Property held for capital appreciation

44. The applicable standard for a property being constructed or developed for future
use as investment property is

a. IAS 2 Inventories

b. IAS 40 Investment property


c. IAS 16 Property, plant and equipment
d. IAS 38 Intangible assets

45. Which statement is true about measurement of investment property using fair
value model?

a. The investment property is shown at cost less accumulated depreciation


b. The increase in fair value is recognized in other comprehensive income
c. The investment property is depreciated using normal depreciation policy.
d. The investment property is not depreciated.
46. Which statement regarding investment property is correct?

a. If the entity elects the fair value method, no depreciation expense is taken
b. Gains and losses from fair value adjustments are reported in the income
statement.
c. If the entity elects the cost model, depreciation should be recognized.
d. All of these statements are correct regarding investment property.

47. Which of the following additional disclosures must be made when an entity
chooses the cost model as accounting policy for investment property?

a. The fair value of the property


b. The present value of the property

c. The value in use of the property


d. The net realizable value of the property

48. Which of the following disclosures should be made when the fair value modeI
has been adopted for investment property?

a. Depreciation method used


b. The amount of impairment loss recognized
c. Useful life or depreciation rate used
d. Net gains or losses from fair value adjustments

49. Transfers from investment property to property, plant and equipment are
appropriate.

a. When there is change of use


b. Based on the entity's discretion
c. Only when the entity adopts the fair value model

d. The entity can never transfer property into another classification once classified
as investment property.

50. An investment property is derecognized when,

a. It is disposed of to a third party.


b. It is permanently withdrawn from use.
c. No future economic benefits are expected from disposal

d. In all of the above cases


CURRENT LIABILITIES

1. An entity includes one coupon in each box of laundry soap it sells. A towel is
offered as a premium to customers who send 10 coupons and a remittance of P10.
Distribution cost of premium is P5. Experienced indicates that only 30% of the
coupons will be redeemed.

2019 2020

Boxes of soap sold 2,000,000 2,500,000

Number of towels purchased at P50 each 50,000


80,000

Coupons redeemed 400,000 700,000


1. What is the premium expense for 2019?

a. 2,500,000

b. 2,400,000

c. 1,800,000

d. 2,700,000

2. What is the estimated premium liability on December 31, 2019?

a. 1,000,000

b. 1,100,000

c. 800,000

d. 900,000

3. What is the premium expense for 2020?

a. 3,000,000

b. 3,750,000

c. 3,375,000

d. 4,000,000

4. What is the estimated premium liability on December 31, 2020?

a. 1,000,000

b. 1,250,000

c. 1,125,000

d. 1,375,000

2. An entity, a grocery retailer, operates a customer loyalty program. The entity


grants program members loyalty points when they spend a specified amount on
groceries. Program members redeem the points for further groceries. The points
have no expiry date. During 2019, the sale amounted to P7,000,000 based on
stand-alone selling price. During the year, the entity granted 10,000 points. But
management expected that only 80% or 8,000 points will be redeemed. The stand-
alone selling price of each loyalty point is estimated at P100.

On December 31, 2019, 4,800 points have been redeemed. In 2020, management
revised its expectations and now expected that 90% or 9,000 points will be
redeemed altogether. During 2020, the entity redeemed 2,400 points.

1. What amount should be reported as sales revenue including the revenue earned
from points for 2019?

a. 7,000,000

b. 6,125,000

c. 6,650,000

d. 7,525,000

2. What is the revenue earned from loyalty points for 2020?

a. 700,000

b. 175,000

c. 210,000

d. 200,000

3. During 2019, an entity introduced a new product carrying a two-year warranty


again defects. The estimated warranty costs related to peso sales are 4% within 12
months following sale and 6% 1n the second 12 months following sale. The entity
reported sales of P5,000,000 for 2019 and P6 ,000, 000 for 2020. The actual
expenditures incurred and paid amounted to P150,000 for 2019 and P550, 000 for
2020.

1. What is the warranty expense for 2020?

a. 650,000

b. 600,000

c. 500,000

d. 550,000
2. What is the estimated warranty liability on December 31,2020?

a. 260,000

b. 400,000

c. 240,000

d. 100,000

4. During 2019, an entity is the defendant in a patent infringement lawsuit. The


lawyers believe there is a 30% chance that the court will dismiss the case and the
entity will incur no outflow of economic benefits.

However, if the court rules in favor of the claimant, the lawyers believe that there is
a 20% chance that the entity will be required to pay damages of P200, 000 and an
80% chance that the entity will be required to pay damages of P100, 000.

Other outcomes are unlikely. The count is expected to rule in late December 2020.
There is no indication that the claimant will settle out of court.

A 7% risk adjustment factor to the probability-weighted expected cash flows is


considered appropriate to reflect the uncertainties in the cash flow estimate. An
appropriate discount rate is 5% per year. The present value of 1 at 5% for one
period 0.95.

1. What is the undiscounted provision before risk adjustment on December 31,


2019?

a. 200,000

b. 100,000

c. 150,000

d. 84,000

2. What amount should be reported as provision for lawsuit on December 31, 2019?

a. 79,800

b. 95,000
c. 89,880

d. 85,386

5. On January 15, 2019, an explosion occurred at an entity plant causing extensive


property damage to area buildings. By March 1, 2020, no claims had been asserted
against the entity but management and counsel concluded that it is likely that
claims will be asserted and that it is probable that the entity will be responsible for
damages. Management believed that P1,250,000 would be a reasonable estimate of
the liability. The entity’s P5,000,000 comprehensive public would be a reasonable
estimate of the liability. The comprehensive public liability policy has a P250,000
deductible clause. The financial statements for 2019 were issued on March 31,
2020.

What amount of provision should be reported on December 31. 2019?

a. 5,000,000

b. 2,500,000

c. 1,250,000

d. 0

6. During 2019, an entity filed suit against another entity seeking damages for
patent infringement. On December 31, 2019, the legal counsel believed that it was
probable that the entity would be successful against the other entity for an
estimated amount of P1,500,000. On March 31, 2020, the entity was awarded
P1,000,000 and received full payment thereof. The 2019 financial statements were
issued on March 1, 2020. How should this award be reported in the 2019 financial
statements?

a. As receivable and revenue P 1,000,000

b. As receivable and deferred revenue P 1,000,000

c. As disclosure of contingent asset P1,000,000

d. As disclosure of contingent asset P1,500,000

7. An entity sells magazine subscriptions for a 1-year, 2-year or 3-year period. Cash
receipts from subscribers are credited to unearned subscription revenue and this
account had a balance of P1,700,000 on January 1, 2019. The entity provided the
following information for the year ended December 31, 2019:

Cash receipts from subscribers 2,300,000

Subscription revenue credited on December 31, 2019


1,500,000

On December 31, 2019, what amount should be reported as unearned subscription


revenue?

a. 1,100,000

b. 2,500,000

c. 1,500,000

d. 2,300,000

8. An entity sells equipment service contracts that cover a two-year period. The sale
price of each contract is P800. The entity sold 1,000 contracts evenly throughout
2019.

The past experience is that, of the total pesos spent for repairs on service contracts,
40% is incurred evenly during the first contract year and 60% evenly during the
second contract year.

1. What is the contract revenue for 2019?

a. 320,000

b. 160,000

c. 400,000

d. 640,000

2. What is the unearned contract revenue on December 31, 2019?

a. 480,000

b. 640,000

c. 240,000
d. 560,000

3. What is the contract revenue for 2020?

a. 480,000

b. 240,000

c. 400, 000

d. 500, 000

INVESTMENT PROPERTY AND OTHER INVESTMENT

1. A parent and its subsidiaries provided the following properties owned by the
group.
Land held for undetermined future use
1,000,000

Vacant building to be leased out under an operating lease


2,000,000

Property held for use in production


4,000,000

Property held by a subsidiary, a real estate firm, in the ordinary course of business
3,000,000

Building owned by subsidiary and the subsidiary provides

security and maintenance services to the lessees


2,500,000

Land leased to a subsidiary under an operating lease


1,500,000

Equipment leased to an unrelated party under an operating lease


500,000

Building under construction for use as investment property


3,500,000

1. In the consolidated statement of financial position of the parent and its


subsidiaries, what total-amount should be reported as investment property?

a. 6,500,000

b. 5,500,000

c. 8,000,000

d. 9,000,000

2. What total amount should be included in property, plant and equipment in the
consolidated statement of financial position of the parent and its subsidiaries?

a. 9,500,000

b. 4,000,000

c. 6,000,000

d. 4,500,000
2. An entity purchased an investment property on January 1, 2019 at a cost of
P4,000,000. The property had a useful life of 20 years and on December 31, 2020
had a fair value of P4,800,000.

On December 31, 2020 the property was sold for net proceeds of P4, 500, 000. The
entity used the cost model to account for investment property. What 1s the gain to
be recognized for 2020 regarding the disposal of the property?

a. 900,000

b. 500,000

c. 800,000

d. 700,000

3. On January 1, 2019, an entity acquired three investment properties.

Fair value Fair value

Initial cost December 31, 2019 December


31, 2020

Property 1 2,700,000 3,200,000 4,000,000

Property 2 3,450,000 3,000,000 2,100,000

Property 3 3,300,000 3,900,000 3,600,000

Each property had an estimated useful life of 10 years. The accounting policy is to
use the fair value model for investment pr0perty. What is the gain or loss to be
recognized for the year ended December 31, 2020?

a. 900,000loss

b. 400,000loss

c. 650,000gain

d. 300,000loss
4. On January 1, 2019, an entity adopted a plan to accumulate funds for a new
building to be erected beginning January 1, 2023 at an estimated cost of
P20,000,000. The entity intends to make four equal annual deposits in a fund
beginning December 31, 2019 that will earn interest at 12% compounded annually.
The future value of an ordinary annuity of 1 at 12% for 4 periods is 4.78, and the
future value of an annuity of l in advance at 12% for 4 periods is 5.35. What is the
annual deposit to the fund?

a. 5,000,000

b. 4,184,100

c. 3,738,318

d. 3,149,606

5. An entity purchased P2,000,000 ordinary life policy on its president. The entity is
the beneficiary under the life insurance policy. The entity reported the following
data for the current year:

Cash surrender value, January 1


50,000

Cash Surrender value, December 31


60,000

Annual advance premium paid on January 1


100,000

Dividend received on July 1 5,000

What amount should be reported as life insurance expense for the current year?

a. 1 00,000

b. 105,000

c. 85,000

d. 90,000
6. An entity purchased a P2,000,000 life insurance policy for its president and the
entity is the beneficiary. The entity provided the following data for current year:

Cash surrender value January 1 180,000

Cash surrender value December 31


220,000

Annual advance premium paid on January 1


90,000

During the current year, dividend of P10,000 was applied to increase the cash
surrender value. What amount should be reported as life insurance expense for the
current year?

a. 90,000

b. 50,000

c. 40,000

d. 60,000

7. An entity insured the life of its president for P2,000,000, the entity being the
beneficiary under the life insurance policy. The entity reported the following data for
the current year:

Cash surrender value January 1


80,000

Cash surrender value December 31


100,000

Annual premium paid on January 1


160,000

The president died on October 1 and the policy was settled on December 31.

1. What amount should be reported as life insurance expense the current year?
a. 120,000

b. 100,000

c. 100,000

d. 105,000

2. What amount should be reported as gain on life insurance settlement for the
current year?

a. 2,000,000

b. 1 ,865,000

c. 1,860,000

d. 1 ,900,000

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