1.

The physical inventory of Pangasinan Company on December 31, 2009 showed

merchandise with a cost of P 4,000,000 was on hand at that date. You also discovered the
following items were all excluded from the count:
a. Merchandise costing P160,000 , which was held by Pangasinan on consignment. The
consignor is a subsidiary.
b. A special machine, fabricated to order for a customer costing P 400,000 was finished
and specifically segregated in the back part of the shipping room on December 31, 2009.
The customer was billed on that date and the machine excluded from inventory although
it was shipped on January 4, 2010.
c. Merchandise costing P 80,000 which was shipped by Pangasinan f.o.b destination to a
customer on December 31, 2009. The customer expects to receive the merchandise on
January 3, 2010.
d. Merchandise costing P 120,000 which was shipped by Pangasinan f.o.b shipping point
to a customer on December 29, 2009
e. Merchandise costing P 50,000 shipped by a vendor F.O.B shipping point on December
28, 2009 and receive by Pangasinan on January 10, 2010.
The corrected balance of Pangasinans inventory should be
a. P 4,530,000
c. P 4,480,000
b. P 4,130,000
d. P 4,690,000
2. On January 2004, Entity A issued a 10 percent convertible debenture with a face value
of P 1,000,000 maturing on 31 December 2013. The debenture is convertible into
ordinary shares of Entity A at a conversion price of P25 per share. Interest is payable half
yearly in cash. At the date of issue, Entity A could have issued non convertible debt with
a ten year term bearing a coupon interest rate of 11 percent.
On January 1 2009, to induce the holder to convert the convertible debenture promptly,
Entity A reduces the conversion price to P20 if the debenture is converted before 1 March
2009 (ie within 60 days). The market price of Entity As ordinary shares on the date the
terms are amended is P 40 per share.
Compute the amount to be recognize in profit or loss as a result of the amendment of the
terms
a. P 400,000
b. P 200,000

c. P 50,000
d. P 0

3. Cookie Company is negotiating a loan with Excel Bank. Cookie needs P 3,600,000. as
part of the loan agreement Excel Bank will require Cookie to maintain a compensating
balance of 15% of the loan amount on deposit in a checking account at the bank. Cookie
currently maintains a balance of 200,000 in the checking account. The interest rate
Cookie is required to pay on the loan is 12%. Excel bank pays 1% interest on checking
accounts. the amount of the loan is

a. P 4,000,000
b. P 3,800,000

c. P 3,600,000
d. P 3,400,000

4. On January 1, 2009, the lending company made a P 200,000 8% loan. The interest is
receivable at the end of each year, with the principal amount to be received at the end of
5 years. As of December 31, 2009, the interest for the current year has not been received
nor recorded because the borrower is experiencing financial difficulties. The lending
company negotiated a restructuring of the loan. The payment of all of the interest based
on the original will be delayed until the end the 5 year loan term. In addition, the amount
of principal repayment will be dropped from P 200,000 to P 100,000. The prevailing
interest rate for similar type of the loan as of December 31, 2009 is 10%.
The loan impairment loss to be recognize in 2009 profit or loss is
a. P 67,700
c. P 77,492
b. P 73,506
d. P 0
5. Windom Corp. on January 1, 2007 granted share options for 100,000 share of its P10
par value ordinary shares to its key employees. The market price of the ordinary share on
that date was P 23 per share and the option price was P 20. The Black Scholes option
pricing model determines total compensation expense to be P 600,000. The options are
exercisable beginning January 1, 2010 provided those key employees are still in
Windoms employ at the time the options are exercised. The options expire on January 1,
2011.
On January 1, 2010 when the market price of the share was P29 per share, all 100,000
options were exercised. The amount of compensation expense Windom should record for
2009 is.
a. P 100,000
b. P 200,000

c. P 150,000
d. P 700,000

6. An entity prepares quarterly interim financial reports in accordance with PAS 34. The
entity sells electrical goods, and normally 5% of customer claims on their warranty. The
provision in the first quarter was calculated as 5% of sales to date, which was
P20,000,000. However, in the second quarter, a design fault was found and warranty
claims were expected to be 10% for the whole year. Sales in the second quarter were
P30,000,000 . What would be the provision charged in the second quarters income
statement?
a. P 3,000,000
b. P 4,000,000

c. P 2,250,000
d. P 5,000,000

7. An entity has granted share option to its employees. The total expense to the vesting
date of December 31, 2010, has been calculated as P 8 million. The entity has decided to
settle the award early, on December 31, 2009. The expense charge in the income
statement since the grant date of January 1, 2007, had been year to December 31, 2007, 2
million, and year to December 31, 2008, 2.1 million. The expense that would have been
charge in the year to December 31, 2009 was P 2.2 million. What would be the expense
charged in the income statement for the year December 31, 2009?
a. P 2.2 million
b. P 8.0 million

c. P 3.9 million
d. P 2.0 million

8. An entity has spent P 600,000 in developing a new product. These cost meet the
definition of an intangible asset under PAS 38 and have been recognize in the balance
sheet. These costs have been recognized as an expense for tax purposes. At the year end
the intangible asset is deemed to be impaired by P 50,000. The tax base of intangible
asset at year end is
a. P 600,000
b. P 550,000

c. P 50,000
d. P 0

9. House Publishers offered a contest in which the winner would receive P 1 million
payable over 20 years. On December 31, 2009, House announced the winner of the
contest and signed a note payable to the winner for P 1 million, payable in P 50,000
installments every January 2. Also on December 31, 2009 House purchased an annuity
for P 418,000 to provide the P 950,000 prize monies remaining after the first P 50,000
installment which was paid on January 2, 2010. In its 2009 income statements, what
should House report as contest prize expense?
a. P 0
b. P 418, 250

c. P 468, 250
d. P 1,000,000

10. Atkins bought five identical plots of development land for P 2 million in 2007. On
January 2009 Atkins sold three of the plots of land to an investment company, Landbank,
for a total of 2.4 million. This price was based on 75% of the fair market value of 3.2
million as determined by an independent surveyor at the date of sale. The terms of the
sale contained 2 clauses:

. Atkins can re purchased the plots of land for the full fair value of 3.2 million (the
value determined the date of sale) any time until 31 December 2011 and;
On 1 January 2012, Landbank has the option to require Atkins to re-purchase the
properties for 3.2 million. You may assume that Landbank seeks a return o its
investment of 10% per annum.

If Atkins recorded the legal form of the transaction instead of its substance, the profit for
2009 will be overstated by

a. P 1,440,000
b. P 1,200,000

c. P 640, 000
d. P 400, 000

11. Quitino, Inc. and its subsidiaries have provided you, their PFRS specialist, with a list
of the properties they own:
Land held by Quirino, Inc. for undetermined future use, P 5,000,000.
A vacant building owned by Quirino, Inc. and to be leased out under an operating
lease, P 20, 000, 000.
Property held by a subsidiary of Quirino, Inc., a real estate firm, in the ordinary
course of its business, P 30, 000, 000.
Property held by Quirino, Inc. for use in production, P 1, 000, 000.
A hotel owned by Sugo Inc, a subsidiary of Quirino, Inc., and for which Sugo,
Inc. provides security services for its guests belongings P 50,000,000.
A building owned by Quirino, Inc being leased out to Status Inc, a subsidiary of
Quirino Inc., P 20,000,000.
How much will be reported as investment properties in Quirino, Inc. and its subsidiaries
consolidated financial statements?
a. P 75,000,000
b. P 25,000,000

c. P 95,000,000
d. P 45,000,000

12. Roxy Company had the following information relating to its account receivble:
Accounts receivable at 12/31/2008
Credit sales for 2009
Collection from customers for
2009, excluding recovery
Accounts written off 9/30/2009
Collection of accounts written off in
prior year ( customer credit was
not re established)
Estimated uncollectible receivables
per aging of receivables at
12/31/2009

P 1,300,000
5,400,000
4,750,000
125,000
25,000
165,000

On December 31, 2009 the amortized cost of accounts receivables is

a. P 1,825,000
c. P 1,635,000
b. P 1,800,000
d. P 1,600,000

Suggested Answers:
1. b
2. a
3. a
4. a
5. b
6. b
7. c
8. d
9c
10. a
11. a
12. d