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a. Annually
b. Quarterly
c. Semiannually
b. Internal auditor
c. External auditor
d. Chief accountant
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
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.
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.
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
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
b. When the entity has no discretion to refinance for at least twelve months.
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
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.
c. The effective portion of gain or loss on hedging instrument in a cash flow hedge.
13. All of the following components of OCI are reclassified to retained earnings,
except
a. Revaluation surplus
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.
a. Must be quantifiable.
c. Amplify or explain items presented in the main body of the financial statements.
17. What is the “first item” presented in the notes to financial statements?
b. All the measurement basis specified in IFRS irrespective of whether used or not.
d. All of the accounting policy choices specified in IFRS irrespective of whether used
or not.
a. Is voluntary
b. Is mandatory
c. Is mandatory, as far as practicable
a. Is voluntary
b. Is mandatory
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
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?
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?
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
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
30. Which is the first step within the hierarchy of guidance when selecting
accounting policies?
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
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.
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
36. Which is the proper time period to record the effect of a change in accounting
estimate?
c. Retrospectively
d. Current period
a. Changes in estimate are normal recurring corrections and adjustments which are
the natural result of the accounting process.
c. Correction of an error
b. In the service life of plant asset based on change in the economic environment.
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?
c. A correction of an error
41. A noncurrent asset or disposal group shall be classified as held for sale when
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?
b. An active program to locate a buyer and complete the plan must have been
initiated.
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.
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
b. It is difficult to value.
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.
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
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
c. The lower of carrying amount on the basis that it had never been classified as
held for sale and recoverable amount
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.
49. The results of the discontinued operation should be reported net of tax as
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.
53. Operating segments that do not meet any of the quantitative thresholds
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.
c. The entity shall disclose the total amount of revenue from major customers and
the identity of the segment reporting the revenue.
c. On a quarterly basis.
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.
d. The same IFRS used for the annual reports should be employed for interim
reports.
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
a.5,875,000
b. 6,100,000
c. 6,175 ,000
d. 6,300,000
Import duties
400,000
a. 6,300,000
b. 5,800,000
c. 6,100,000
d. 6,600,000
a. 1,460,000
b. 2,660,000
c. 1,300,000
d. 2,500,000
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?
a. 5,000,000
b. 4,900,000
c. 4,940,000
d. 4,960,000
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.
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
1.An entity had the following property acquisitions during the current year:
* 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.
a. 5,160,000
b. 5,660,000
c. 5,210,000
d. 5,000,000
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
a. 800,000
b. 400,000
c. 200,000
d. 0
* 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.
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:
b. 1,400.000
c. 1,340,000
d. 2,340,000
a. 500,000
b. 300.000
c. 200,000
c. 100,000
a. 1,460,000
b. 1,200,000 .
c. 1,220,000
d. 1,560,000
b. 1,320,000
c. 1,200,000
d. 1,220,000
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.
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.
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,
a. 35,000,000
b. 30,000.000
c. 38,000,000
d. 33,000,000
a. 7,800,000
b. 9,900,000
c. 8,400,000
d. 9,000,000
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
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.
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
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
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.
a. 35,000,000
b. 15,000,000
c. 25,000,000
d.17,500,000
PAS 32 FINANCIAL INTRUMENTS PRESENTATION
a. Cash
c. Contractual right to receive cash or another financial asset from another entity.
a. Cash in bank
c. Loan receivable
3. A financial liability
a. Must be classified as noncurrent liability.
b. Bonds payable
c. Loans payable
c. Equity
6. IFRS requires entities to measure financial assets based on all of the following,
except
b. Fair value
c. Amortized cost
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.
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.
a. By irrevocable designation
d. When the business model is to collect contractual cash flows that are solely
payments of principal and interest.
c. Repayments plus or minus cumulative amortization and net of any reduction for
uncollectibility.
15. A debt investment shall be measured at fair value through other comprehensive
income
a. When the debt investment is 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?
d. The effective interest method applies the effective interest rate to the beginning
carrying amount for each interest period.
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.
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.
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
b. Not recognized
c. Recognized in other comprehensive income
d. Included in retained earnings
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 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.
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?
b. The fair value at reclassification date becomes the new carrying amount.
d. Evaluated at each reporting date for every held for collection investment.
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. 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.
a. Embedded derivative
b. Host security
c. Hybrid security
INVESTMENTS IN ASSOCIATES
35. Which statement is true when an entity holds between 20% and 50% of the
voting shares?
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. Included in the carrying amount of the investment and amortized over the useful
life.
39. How is the impairment test carried out for an investment in associate?
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
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.
INVESTMENT PROPERTY
44. The applicable standard for a property being constructed or developed for future
use as investment property is
a. IAS 2 Inventories
45. Which statement is true about measurement of investment property using fair
value model?
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?
48. Which of the following disclosures should be made when the fair value modeI
has been adopted for investment property?
49. Transfers from investment property to property, plant and equipment are
appropriate.
d. The entity can never transfer property into another classification once classified
as investment property.
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
a. 2,500,000
b. 2,400,000
c. 1,800,000
d. 2,700,000
a. 1,000,000
b. 1,100,000
c. 800,000
d. 900,000
a. 3,000,000
b. 3,750,000
c. 3,375,000
d. 4,000,000
a. 1,000,000
b. 1,250,000
c. 1,125,000
d. 1,375,000
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
a. 700,000
b. 175,000
c. 210,000
d. 200,000
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
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. 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
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?
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:
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.
a. 320,000
b. 160,000
c. 400,000
d. 640,000
a. 480,000
b. 640,000
c. 240,000
d. 560,000
a. 480,000
b. 240,000
c. 400, 000
d. 500, 000
1. A parent and its subsidiaries provided the following properties owned by the
group.
Land held for undetermined future use
1,000,000
Property held by a subsidiary, a real estate firm, in the ordinary course of business
3,000,000
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
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:
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:
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:
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