Professional Documents
Culture Documents
1
Under a royalty agreement with another company, W and Co. will pay
royalties for the assignment of a patent for three years. When should the
company recognize the royalty payment as an expense?
A
.
B
.
C
.
D
.
2015
P8,765,625
32%
P9,728, 125
3,025, 000
2014
P7,700,000
30%
2013
P4,950,000
28%
P8,387,500
1,512,500
P4,812,500
Answer: P3,044,250
From 2015 [(8,765,625/68%)9,728,125]*32%
From 2014 (8,387,500-3,025,000)*30%
From 2013 (1,512,500*28%)
Total
P1,012,000
1,608,750
423,500
P3,044,250
Php947,80
0
12,500
51,000
26,000
Php1,037,3
00
Answer: A
The law states that marginal utility declines as consumers acquire
more of a good. Therefore, answer (a) is correct. Answer (b) is incorrect
because total utility will not decline as more of a good is acquired.
Answer (c) is incorrect because the demand curve slopes downward.
Easy Question No. 6
(LW) Which of the followingterms is normally not associated
extinguishing an obligation through the process of novation?
D
a Expromission
.
b Subrogation
.
c Delegacion
.
d Remission
.
with
Solution: D
Answer: C
The short-cut breakeven point formula is calculated as follows:
2014
P3,000,000
12,000,000
2015
P15,750,000
-0-
3,600,000
2,500,000
15,400,000
15,500,000
costs
P3,000,000
15,000,000
20%
20,000,000
P4,000,000
1. The manager of a production line has the authority to order and receive
replacement parts for all machinery that require periodic maintenance. The
internal auditor received an anonymous tip that the manager ordered
substantially more parts than were necessary from a family member in the parts
supply business. The unneeded parts were never delivered. Instead, the
manager processed receiving documents and charged the parts to machinery
maintenance accounts. The payments for the undelivered parts were sent to the
supplier, and the money was divided between the manager and the family
member.
Which of the following tests would best assist the auditor in deciding
whether to investigate this anonymous tip further?
Solution: C
a) Incorrect. The current quarters expense would equal the prior periods
activity unless the manager just started this fraud. The auditor has no
information on how long this might have been occurring.
b) Incorrect. Physical testing would not locate nonexistent parts that have
already been charged to maintenance.
c) Correct. An analysis of repair parts charged to maintenance would
quantify the excessive number of items and detect that abuse may
be occurring.
d) Incorrect. Lack of segregation of duties allowed the fraud to occur. The
manager was authorized to process both the purchase and receipt, so the
test would only verify the fraudulent paperwork.
a.
b.
c.
d.
P8.00
P2.00
25,000
P5,850
In 2015, the company estimates that the selling price will be P9.50 per
piece, variable cost to manufacture will increase by 25%, and fixed costs
will increase by 20%. Income tax rate of 35% will not change.
How many units of handbags does McGraw Company must see in 2015 in
order to maintain the same net income after tax as in 2014?
Answer: 27,000 units
BEP in units =
Fixed Cost
(SP per unit - VC
per unit)
LAST YEAR
Contribution
Margin
Fixed cost
Net income
before tax
[(NI after tax /
35%)]
9,000
9,000
(3,150)
(3,150)
P5,850
P5,850
P189,0
00
P7
27,000
units
Market C
Php26
(3)
Market
B
Php25
(1)
(2)
(2)
(2)
21
22
20
Php23
(1)
P5,000
3,000
2,000
20,000
P21,750
P10,500
P32,000
P18,000
ANSWER: D
SOLUTION:
Input tax on sale subject to 12%
Input tax on zero-rated sale
Ratable portion of the input tax not
directly attributable to any activity:
Taxable sales (0% and 12%) X Amount of
Total Sales
input tax
not directly
attributable
200,000 X P20,000
400,000
Total creditable input tax for the month
P5,000
3,000
10,000
P18,000
B
.
C
.
D
.
Answer: C
PAS 38, Intangible Assets paragraph 63 states that internally generated
brands, mastheads, publishing titles, customer lists and items similar in
substance shall not be recognized as intangible assets.
Average Question No. 8
Spouses Ramsay and Sansa sold their family home, a capital asset for
P10,000,000. It was acquired in 1980 at P3,000,000. The fair market value as
determined by the BIR is P12,000,000 but the fair market shown in the
schedule of values of the City Assessor is P11,000,000. Later, the spouses
utilized P8,000,000 for the acquisition of their new family home. The capital
gains tax due is
a.
b.
c.
d.
P720,000
P576,000
P144,000
P120,000
ANSWER: C
Solution:
(12,000,000 x 6%) x (2,000,000/10,000,000) = P144,000
Answer: D
PAS 39, Financial Instruments: Recognition and Measurement, paragraph
86 provides that hedging relationships are of three types a sfollows:
a) fair value hedge: a hedge of the exposure to changes in fair value of a
recognised asset or liability or an unrecognised firm commitment, or an
identified portion of such an asset, liability or firm commitment, that is
attributable to a particular risk and could affect profit or loss.
b) cash flow hedge: a hedge of the exposure to variability in cash flows
that (i) is attributable to a particular risk associated with a recognised
asset or liability (such as all or some future interest payments on variable
rate debt) or a highly probable forecast transaction and (ii) could affect
profit or loss.
c) hedge of a net investment in a foreign operation as defined in PAS
21.
72
650
80
P 802
Solution: B
correctly or if employee files have been altered, but would not identify a
fictitious or terminated employee.
d) Incorrect. In this type of CAAT program, certain actual transactions are
tagged, and as they proceed through the system, a data file is created that
traces the processing through the system and permits an auditor to
subsequently review that processing. This would not, however, identify a
fictitious or terminated employee.
Number of
months
3
2
4
3
12
Each power outage results in an out-of-pocket costs of P400. For P500 per
month, Diana can lease an auxiliary generator to provide power during outages.
If Diana leases an auxiliary generator in 2015 the estimated savings (or
additional expenditures) for 2015 would be?
x
x
x
x
Number of
months
3
2
4
3
12
Number of
outages
0
2
8
9
19
Php115,0
00
20.91%
Php836
Solution:
Gross Income
Business expenses
Net Income from operations
Capital Gain
Capital Loss
Net Capital Loss
Taxable Income
P500,000
200,000
P300,000
P 50,000
(P100,000)
(50,000)
P300,000
Section 39(C) of the NIRC states that losses from sales or exchanges of
capital assets shall be allowed only to the extent of the gains from such
sales or exchanges.
Difficult Question No. 6
Sarah Company, a manufacturing entity, owns 75% of the ordinary shares of
Sandra Company, an investment entity. Sandra Company owns 60% of the
ordinary shares of Vanessa Company, an insurance entity. Sandra Company
has control over Vanessa Company. In Sarah Companys consolidated
financial statements, should consolidation accounting or equity method be
used for Sandra Company and Vanessa Company?
A
.
B
.
C
.
D
.
Consolidation used for Sandra and equity method used for Vanessa.
Consolidation used for both Sandra and Vanessa
Equity method used for Sandra and consolidation used for Vanessa
Equity method used for both Sandra and Vanessa
Answer: B
Sarah should use consolidation for both Sandra and Vanessa. Sarah has a
controlling financial interest in Sandra through a 75% direct ownership.
The intercorporate stock ownership of Sarah with respect to Vanessa is
45%. Sandra owns 60% of Vanessa and Sarah owns 75% of Sandra. Thus,
indirectly, Sarah owns 45% of Vanessa (75% x 60%). Further, Sandra
controls Vanessa.
Difficult Question No. 7
On April 1, 2014 a company engages in the development of a property,
which is expected to take five years to complete, at a cost of P6M. the
statements of financial position at December 31, 2013 and December 31,
2014, prior to capitalization of interest are as follows:
12/31/13
12/31/14
Development property
Other assets
Loans
5.5% debenture stock
Bank loan at 6% per
annum
Bank loan at 7% per
annum
Shareholders equity
6,000,000
P 6,000,000
P1,200,000
6,000,000
P7,200,000
P 2,500,000
-
P2,500,000
1,200,000
1,000,000
1,000,000
P 3,000,000
P4,700,000
2,500,000
2,500,000
The bank loan with effective interest rate at 6% was drawn down to match
the development expenditure on April 1, July 1, and October 1 2014. The
5.5% debenture stocks were irredeemable. Expenditure was incurred on the
development as follows: April 1 P600,000; July 1 P400,000; October 1
P200,000. If all the borrowing were general (i.e., the bank loan 6% was not
specific to the development) and would have been avoided but for the
development, then the amount of interest to be capitalized would be
(Round-off to 2 decimal % for the general borrowing rate)
Answer: P46,130
a) Require managers to provide detailed action plans with specific dates for
addressing audit observations and recommendations.
b) Require all managers to confirm when they have taken action.
c) Require the chief executive officer to report why action has not been taken.
d) Require the chief audit executive to establish procedures to monitor progress.
Solution: D
complete and it is not practical to expect that all will be resolved when an
audit committee meets.
b) Incorrect. See answer a.
c) Incorrect. See answer a.
d) Correct. The chief audit executive is responsible for establishing
appropriate procedures for monitoring the progress by management
on all internal audit observations and recommendations. This
responsibility should be written into its charter by the audit
committee, and progress should be reported at each audit
committee meeting.
P4 million
P5 million
P9 million
P10 million
Answer: C. P9 million
Solution: P10 million P1 million = P9 million