Rmbe Far

Financial Accounting and Reporting
National Federation of
Junior Institute of Accountants
Region 1 and Cordillera
In partnership with:
REGIONAL MOCK BOARD EXAMINATIONS

FINANCIAL ACCOUNTING AND REPORTING
1. Which of the following statements is true?
I. Trade Receivables are current asset if collectible within one year from balance sheet date, or
within one accounting cycle, whichever is shorter.
II. If installment sale is part of the normal operation of the business, receivables from it is
classified as current even if collectible beyond one year, as long this is not longer than normal
accounting cycle of the business.
III. Long term, non-interest bearing Note Receivable shall be reported at its face value.
IV. Long term, interest bearing Notes Receivable shall be reported at its face value less un-
amortized discount.
V. In Pledging of Accounts Receivable, the amount of Receivable pledged is deducted from the
gross amount of the Accounts Receivable to arrive at an amount reportable in the Balance
Sheet.
OPEN USING ADOBE READER AND PC.
VI. In Assignment of Accounts Receivable, the specific accounts assigned to the assignee bank are
removed from the assets of the borrower, and such is disclosed in the financial statements.
VII. Under the Receivable method of recording Credit Card, the credit card company requires the
seller to surrender the credit card receipts before it could receive payments from the credit
card company.
VIII. Under the Cash method of recording Credit Card, the bank increases the current
account of the seller upon deposit of credit card receipts directly into its checking account.
a. I, II, III b. II, IV, VII, VIII c. I, III, V, VI, VII d. I, II, III, IV, V, VI,
VII
2. Which of the following is correct treatment of bearer plants and bearer animals expected to bear
for more than 1 year?
Bearer Animals Bearer Plants
a. Property, plant and equipment Biological Assets
b. Biological Assets Biological Assets
c. Biological Assets Property, plant and equipment
d. Property, plant and equipment Property, plant and equipment
3. UNICUSPID Company began construction of its administration building at an estimated cost of
₱10,000,000 on January 1, 2016. The construction is expected to be completed by December 31,
2019. To finance the construction, UNICUSPID Company borrowed ₱10,000,000, 10%, 4-year
note dated January 1, 2016, both principal and interest are payable on December 31, 2019. In
the first phase of the construction, there were idle funds which the company invested for a period
of 6 months. Income from this investment was ₱50,000.
Assume the use of simple interest, the journal entry in 2016 will include?
a. Debit: Building under construction – ₱10,000,000.
b. Debit: Building under construction – ₱1,000,000.
c. Credit: Interest expense – ₱50,000.
d. Credit: Investment income – ₱50,000
nd
NFJPIA-R1CAR 2 Regional Mock Board Examinations · Nation’s Foremost CPA Review · SGV & Co. | 1
4. The following statements relate to cash. Which is false?

a. Depositing all receipts intact at the bank and making all cash disbursements by check are
important cash controls under an imprest system.
b. Neither the book balance nor the bank balance of cash usually represents the cash balance
shown on the statement of financial position.
c. A bank reconciliation is the statement sent monthly by a bank to a depositor that list all
deposits, checks paid and other credits and charges to the depositor’s account for the month.
d. All of the above.
5. Most methods of pricing inventories are in accordance with generally accepted accounting
principles and generally are permissible for income tax purposes. One method that does not fall
into this category is
a. Moving average. c. Weighted average.
b. FIFO. d. Variable costing.
6. If the company failed to record an in transit goods purchased under F.O.B. shipping point, the
effect will be a(n)
a. Overstatement in net income
b. No effect on income
c. Overstatement of liabilities
d. Understatement of administrative expenses
7. At the beginning of 2015, Stephie Company decided to change from the FIFO method of inventory
valuation to the weighted average method. Balances of Inventory under each method were:
FIFO Weighted Average
December 31, 2013 ₱ 1,000,000 ₱ 900,000
December 31, 2014 1,200,000 1,350,000
December 31, 2015 1,320,000 1,200,000
Which of the following is correct when preparing a comparative financial statement for the current
period 2015?
a. The amount of inventory reported as comparative in 2013 is ₱1,350,000.
b. The amount of inventory reported as comparative in 2013 is ₱1,200,000.
c. The amount of inventory reported as comparative in 2014 is ₱900,000.
d. The amount of inventory reported as comparative in 2014 is ₱1,350,000.
8. What is the effect on the ‘cash and cash equivalents’ if the company established a petty cash fund
amounting to P20,000 to be maintained at all times by the petty cash custodian?
a. Increase by P20,000.
b. Decrease by P20,000.
c. No effect.
d. Negligible effect.
9. When there is both physical growth in the asset as well as part unit price change then:
a. Only change as a result of physical growth is to be disclosed
b. Only change as a result of unit price change is to be reduced
c. Both the components should be disclosed separately
d. Both the components are not required to be disclosed
10. Paragraph 63 of IAS 38 Intangibles, prohibits the recognition of the following internally generated
identifiable intangibles:
I II III IV
Brands No No No Yes
Mastheads No Yes Yes Yes
Publishing titles No No Yes Yes
Customer lists No Yes No Yes
a. IV; b. II; c. III; d. I.
11. You were employed as an accountant in a company. One day your company changed its business
model on managing financial instrument. What will you do?
a. Immediately make journal entries to reclassify financial assets.
b. Make journal entries only if the boss is looking.
c. Procrastinate. Go back to your facebook account. Make journal entries next fiscal year.
nd
d. Read the revised risk management manual, identify the effect of the change in business model
on the current classifications of financial assets, identify which items should be reclassified and
to which classifications they will be reclassified, and then make the journal entries before you
go home.
12. The directors of The Ranger Company decided at a board meeting on February 28, 2013 that a
major machine tool should be sold. Trade magazines reported recent transactions in non-current
assets of a similar age at P500,000, but the board decided that the asking price should be
P750,000. The board also decided that as a programme of repairs to the tool needed to be carried
out, an agent should not be contracted with for the sale of the item until the repairs were
completed, which was on May 31, 2013. On July 31, 2013 the board agreed to reduce the asking
price to P500,000. A deal was agreed with a buyer on August 31, 2013 and completion of the sale
took place on November 30, 2013. In accordance with PFRS5 Non-current assets held for sale and
discontinued operations, the asset should be classified as held for sale on
a. February 28, 2013 b. May 31, 2013 c. July 31, 2013 d. August 31, 2013
13. Which of the following statements is correct in relation to PAS 38 Intangible Assets?
I. The nature of intangible assets is such that, in many cases, there are no additions to such an
asset or replacements of part of it.
II. Most subsequent expenditures are likely to maintain the expected future economic benefits
embodied in an existing intangible asset rather than meet the definition of an intangible asset
and the recognition criteria in PAS 38.
III. It is often difficult to attribute subsequent expenditures directly to a particular intangible asset
rather than to the business as a whole.
IV. Only rarely will subsequent expenditures (expenditures incurred after the initial recognition of
an acquired intangible asset or after completion of an internally generated intangible asset) be
recognized in the carrying amount of an intangible asset.
V. Internally generated brands, mastheads, publishing titles, customer lists, and items similar in
substance shall be recognized as intangible assets.
VI. Subsequent expenditures on brands, mastheads, publishing titles, customer lists and items
similar in substance (whether externally acquired or internally generated) are always
recognized in profit or loss as incurred. This is because such expenditures cannot be
distinguished from expenditures to develop the business as a whole
VII. If an intangible asset has been enhanced, for example, when a payment has been made to
extend the period of an existing license, then the cost should be capitalized.
a. Only one statement is incorrect. c. All of the statements are correct.
b. Two of the statements are incorrect. d. Four statements are correct.
14. On January 1, 2017, Bank Company granted a five-year term loan of ₱3,000,000 to Utangero
Company. If there were no possibility of credit losses, the coupon rate that Bank Company would
charge the borrower is 5% per annum. However, because of the borrower’s credit rating, Bank
Company estimates that there is a possibility the borrower might default on the payments and the
expected credit losses are estimated at ₱40,000 per year over the five-year term. Accordingly,
Bank Company charges the borrower 6% coupon rate to reflect the yield on the instrument to
include a return to cover those credit losses expected when the loan is first recognized. (Round off
present value factors to four decimal places)
What is the lifetime expected credit loss.
a. ₱168,496 b. ₱169,846 c. ₱200,000 d. ₱100,000
15. DMC, Inc. completed the construction of a shopping mall at the end of 2016 for a total cost of
₱100 million. The mall has an estimated economic life of 25 years. The mall was constructed for
the purpose of earning rentals by letting out space in the shopping mall to tenants. The company
opted to use the fair value model to measure the shopping mall. An independent valuation expert
was used by the company to fair value the shopping mall on an annual basis. According to the fair
valuation expert the fair values of the shopping mall at the end of 2017 and 2018 were ₱120
million and ₱115 million, respectively.
How much is the carrying amount of the shopping mall on December 31, 2018 if DMC used the
cost model?
a. ₱100,000,000 b. ₱96,000,000 c. ₱115,000,000 d. ₱92,000,000
nd
16. Alyson Company purchased a building on June 1, 2015 at a total cost of ₱4,000,000. Residual
value was estimated at ₱800,000. The building is being depreciated over 10 years by the double
declining balance method. On July 1, 2015, Alyson Company leased this building to Mark for a
period of 6 years at an annual rental payment of ₱450,000. Alyson Company incurred a direct cost
of ₱60,000 in finalizing the lease agreement. For the year 2015 how much depreciation expense
should Alyson record on this equipment?
a. ₱476,667 b. ₱471,667 c. ₱466,667 d. ₱373,333
17. Data for the December manufacturing cost of Alyson Company, a VAT registered company is as
follows:
Variable cost:
• 3 labor hours (at ₱3 per hour) and
• 1 kilogram of raw material X (at ₱2.24 per kg including VAT)
Fixed cost:
Budgeted fixed manufacturing cost ₱100,000
Normal expected production (units) 100,000
Assume the actual production is 80,000 units, how much should the finished goods recorded?
a. ₱1,224,000 b. ₱1,200,000 c. ₱1,183,333 d. ₱1,180,000
18. In 2014, Lepanto Mining Company purchased property with natural resources for ₱28,000,000.
The property had a residual value of ₱5,000,000. However, the company is required to restore
the property to its original condition for ₱2,000,000.
In 2014, Lepanto spent ₱1,000,000 in development costs and ₱3,000,000 in buildings on the
property. Lepanto does not anticipate that the buildings will have utility after the natural resources
are removed. In 2015, an amount of ₱1,000,000 was spent for additional development on the
mine. The tonnage mined and estimated remaining tons for years 2014 to 2016 are as follows:
Tons extracted Tons remaining
2014 0 10,000,000
2015 3,000,000 7,000,000
2016
3,500,000 2,000,000
The company should recognize depletion for 2016 at
a. ₱10,150,000 b. ₱14,245,000 c. ₱12,040,000 d. ₱ 9,450,000
19. In January 2016, ENBEEN TOORY began retailing product X. ENBEEN TOORY purchases and sales
of product X during 2016 are:
Date Units Unit cost Cost Sale units Revenue
January 1 5,000 ₱10.00 ₱50,000
February 1 2,000 ₱11.00 ₱22,000
February 28 2,000 ₱ 24,000
March 1 3,000 ₱11.00 ₱33,000
April 1 2,500 ₱12.00 ₱30,000
April 30 5,000 ₱ 70,000
June 30 4,000 ₱ 52,000
July 1 6,000 ₱12.50 ₱75,000
August 1 2,500 ₱13.50 ₱33,750
August 31 3,000 ₱ 39,000
October 31 1,000 ₱ 16,000
November 1 3,000 ₱14.00 ₱42,000
December 31 5,000 ₱100,000
Determine the cost of inventory for each of the sales made during 2016 using weighted average
periodic
Ending inventory Cost of goods sold
a. ₱42,000 ₱243,750
b. ₱47,625 ₱238,125
c. ₱52,026 ₱233,724
d. ₱47,625 ₱253,375
nd
20. On April 1, 2015, VOLKSMAN Co. purchased 25,000 common shares of RHAD Co. at ₱180 per
share which reflected book value as of that date. At the time of the purchase, RHAD had 100,000
common shares outstanding. The shares are intended as a long term investment. The first
quarter statement ending March 31, 2015 of RHAD recorded earnings of ₱480,000. For the year
ended December 31, 2015, RHAD reported net income of ₱2,400,000. RHAD paid VOLKSMAN
dividends of ₱60,000 on June 1, 2015 and again ₱60,000 on December 31, 2015. The shares of
RHAD are selling at ₱190 per share on December 31, 2015. On April 1, 2016, VOLKSMAN sold
10,000 common shares of RHAD for ₱200 per share. For the year ended December 31, 2016 the
reported net income of RHAD was ₱2,800,000 and dividends of ₱60,000 was paid to VOLKSMAN
on August 1, 2016. The shares of RHAD are selling at ₱205 per share on December 31, 2016.
How much is the net amount that should be recognized in 2016 profit or loss regarding the
investment in RHAD Co.?
a. ₱185,000 b. ₱221,000 c. ₱161,000 d. ₱173,000
21. On January 1, 2015, Blade Company purchased 25,000 shares of the 100,000 outstanding shares
of Razor Company for a total of ₱2,000,000. At the time of purchase, the book value of Razor
Company’s equity was ₱6,000,000. Razor Company assets having a market value greater than
book value at the time of the acquisition were as follows:
Book value Market value Remaining life
Inventory ₱ 800,000 ₱ 1,000,000 Less than 1 year
Equipment 4,000,000 4,500,000 5 years
Land 200,000 700,000 Indefinite
Goodwill 0 800,000 Indefinite
Razor Company’s net incomes in 2015 and 2016 were ₱1,400,000 and ₱1,600,000
respectively. Dividends per share paid by Razor Company amounted to ₱4 in 2015 and ₱5 in
2016. The inventory was sold in 2015 while the land was sold at the end of 2016 at a gain on
sale of ₱50,000.
What amount should Blade report as investment in associate for the year ended December 31,
2016?
a. ₱2,312,500 b. ₱2,300,000 c. ₱2,137,500 d. ₱2,120,000
22. Timothy acquires a 35% interest in Peter over which it is able to exercise significant influence.
Timothy paid ₱950,000 for its interest in Peter. At that date the book value of Peter's net assets
was ₱1,800,000, and their fair value ₱2,200,000, the difference of ₱400,000 relates entirely to an
item of property, plant and equipment with a remaining useful life of 10 years.
During 2015, Peter made a profit of ₱160,000 and paid a dividend of ₱240,000 on December 31,
2015. Peter also owned an investment in securities classified as financial asset at fair value
through other comprehensive income that increased in value by ₱40,000 during the year. Ignore
any tax implication.
What amount of goodwill should be recognized by Timothy in its financial statement relating to the
acquisition of 35% interest in Peter?
a. Nil b. ₱180,000 c. ₱460,000 d. ₱140,000
23. On January 1, 2017, Pike Company purchased 80% of the outstanding voting shares of Sword
Company for ₱800,000. On that date, Sword had ₱300,000 of capital stock and ₱600,000 of
retained earnings. All assets and liabilities of Sword had book values approximately equal to their
fair market values. Goodwill, if any, is not amortized. Pike uses the complete equity method to
account for its investment in Sword.
On April 1, 2017, Pike sold equipment with a book value of ₱40,000 to Sword for ₱60,000. The
equipment is expected to have a useful life of five years from the date of the sale and no salvage
value. Sword will use straight-line depreciation. For year 2017, Sword reported net income of
₱200,000 and paid dividends of ₱40,000.
Determine the income from investment under the equity method.
a. ₱143,000 b. ₱144,000 c. ₱163,000 d. ₱111,000
nd
24. Bernadette Company received dividends from its ordinary share investments during the year 2016
as follows:
 A stock dividend of 10,000 shares from R Company when the market price of R’s share was
₱10.
 A cash dividend of ₱1,500,000 from S Company in which Bernadette owns a 15% interest.
 5,000 shares of T Company in lieu of cash dividend of ₱20 per share. The market price of T
Company’s share was ₱150. Bernadette holds originally 50,000 shares of T Company.
Bernadette owns 5% interest in T Company.
What amount of dividend revenue should Bernadette report in its 2016 income statement?
a. ₱2,500,000 c. ₱2,250,000
b. ₱1,500,000 d. ₱2,350,000
25. On January 1, 2015, Solenn Company acquired as a long-term investment for ₱1,400,000, a 40%
interest in Lovie Company when the fair value of Lovie’s net assets was ₱3,500,000. Lovie
Company reported the following net losses:
2015 ₱1,000,000
2016 1,400,000
2017 1,600,000
2018 800,000
On January 1, 2017, Solenn Company made cash advances of ₱400,000 to Lovie Company. On
December 31, 2018, it is not expected that Solenn Company will provide further financial support
for Lovie Company.
What amount should Solenn Company report in 2018 as loss from investment?
a. ₱320,000 c. ₱200,000
b. ₱800,000 d. ₱120,000
26. The statement of financial position of a company presents the following financial assets at
December 31, 2016:
 Bank cheque account = ₱58,400.
 Bank savings account (collectible immediately) = ₱23,440.

Cash = ₱10,000.
 Common stocks of Entity Z, one of the most traded assets in Country A’s stock exchange,
purchased by the airline to speculate = ₱2,715.
 Oil price derivative entered into by the entity to hedge the commodity price risk of the
anticipated future purchase of oil for use in the entity’s operating business = ₱6,720.
 A gold price derivative entered into by the entity to speculate = ₱9,880.
 Treasury bonds issued by the government of Country A = ₱8,500. The entity acquired the
bonds from the government one week before the entity’s reporting date.
 The bonds mature 2 months after the date of acquisition (ie they are two-month bonds from
date of issue).
 Treasury bonds issued by the government of Country A = ₱6,300. The entity acquired those
bonds from the government in the previous annual reporting period. The bonds mature 15
months after the date of acquisition (ie they are 15-month bonds).
In the absence of evidence to the contrary, the entity’s total cash and cash equivalent at
December 31, 2016 is:
a. ₱98,560 c. ₱109,775
b. ₱100,340 d. ₱107,060
27. On January 1, 2015, Kendall Inc. began construction of an automated cattle feeder system. The
system was finished and ready for use on September 30, 2016. Expenditures on the project were
as follows:
January 1, 2015 200,000
September 1, 2015 300,000
December 31, 2015 300,000
March 31, 2016 300,000
September 30, 2016 200,000
Kendall borrowed ₱750,000 on a construction loan at 12% interest on January 1, 2015. This loan
was outstanding throughout the construction period. The company had ₱4,500,000 in 9% bonds
payable outstanding in 2015 and 2016.
nd
Average accumulated expenditures for 2015 was

a. 300,000 c. 500,000
b. 350,000 d. 400,000
28. At the start of its business, Snell Corp. decided to use the composite method of depreciation and
prepared the following schedule of machinery owned.
Estimated Estimated
Total cost Salvage Life in years
value
Machine A 275,000 25,000 20
Machine B 100,000 10,000 15
Machine C 20,000 - 5
Snell computes depreciation on the straight-line method. Based on the information presented, the
composite life of these assets (in years) should be
a. 13.30 c. 18.00
b. 16.00 d. 19.80
29. Which of the following statements is true?
I. The share based compensation to employees may be equity settled, but could not be cash
settled.
II. The value of employees’ compensation in a stock option scheme in the absence of the fair
value of the stock options is the intrinsic value of the stock options on the date of grant.
III. The intrinsic value of the stock option is the excess of option price over the par value of the
stock.
IV. The intrinsic value of the option could be used as measurement of the compensation income if
the fair value of the stock option cannot be estimated reliably.
V. The compensation expense is recognized in the date of grant, when the stock option is
considered as not vested.
VI. The stock option granted to the employee will benefit the employee in times when the fair
value of the stocks is lower than the option price.
a. I, II, IV, VI b. II, III, IV c. II, IV d. II, III, IV
30. In computing diluted EPS, dividends on convertible preferred stock should be
a. Deducted from net income, whether declared or not
b. Deducted from net income, only when declared
c. Added back to net income, whether declared or not
d. Ignored
31. Which of the following properly describes the denominator used in the calculation of book value
per share (BVPS) and basic earnings per share (BEPS)?
Book Value Per Share Basic Earnings Per Share
a. Ending outstanding shares Weighted average outstanding shares
b. Weighted average outstanding shares Ending outstanding shares
c. Ending outstanding shares Ending outstanding shares
d. Weighted average outstanding shares Weighted average outstanding shares
32. When the corporation issues dividends to shareholders, it is important to determine whether the
dividends are considered “small” or “large”. Large stock dividends is
a. At least 10% of the outstanding shares.
b. More than 10% of the outstanding shares.
c. At least 20% of the outstanding shares.
d. More than 20% of the outstanding shares.
33. The accounting of a change in an accounting policy is
a. Retrospective restatement.
b. Retrospective statement.
c. Retrospective application.
d. Retrospective comparison.
nd
34. Which of the following factors are relevant while computing the actuarial value:
a. Projected future salary c. Benefits promised under the plan
b. Type of business entity d. Service rendered to date
35. Which of the following statement is correct in relation to PAS 12?
1. The tax base of an asset or liability (such as the amount attributed to it for tax purposes)
might be different from its carrying value for accounting purposes, and the amount of that
difference is called a temporary difference under PAS 12.
2. The Oman location purchased a portable generator for ₱105,000. For Tax purposes,
depreciation of ₱25,000 has been already deducted in the current and prior periods and the
remaining cost of ₱80,000 will be deductible in future periods, either as depreciation or
through a deduction on disposal. Revenue generated by using the machine is taxable and any
loss on disposal will be deductible for tax purposes. Therefore, the tax base is ₱80,000.
a. I only b. II only c. Both I and II d. Neither I nor II
36. The accounting concept that is principally used to classify leases into operating and finance is
a. Substance over form. c. Prudence.
b. Neutrality. d. Completeness.
37. A post-employment benefit plan where the enterprise sets up a separate fund for the benefits of
the employees, but retains the right and obligation to pay its retiring employees is a / an -
a. Contributory plan c. Funded plan
b. Con-contributory pacboi plan d. Unfunded plan
38. There is a substantial modification of terms of an old liability if the gain or loss on extinguishment
is
a. More than 10% of the carrying amount of the old liability.
b. At least 10% of the carrying amount of the old liability.
c. More than 10% of the carrying amount of the new liability.
d. At least 10% of the carrying amount of the new liability.
39. If the sale and leaseback transaction results in an operating lease where the sales price and rental
are established at fair value, any gain from the sale and leaseback should
a. Not be recognized
b. Be recognized as gain immediately
c. Be deferred and amortized over the term of the lease
d. Be deferred and amortized over the life of the asset or term of the lease whichever is shorter
40. In which of the following entities would the PFRS for SMEs apply?
I. Company A with total assets of P300M but with total liabilities of P1M only
II. Company B with total assets of P350M and total liabilities of P250M
III. Bank C with total assets of P350M and total liabilities of P250M
IV. Company D with total assets of P3M and total liabilities of P3M
a. I and II b. I, II, IV c. II only d. all of the above
41. Under PFRS for SME, inventories must be measured at:
a. cost.
b. the lower of cost and net realizable value.
c. the lower of cost and estimated selling price less costs to complete and sell.
d. the lower of cost and fair value less costs to complete and sell.
42. The Lawson Company has 100,000 shares of common stock outstanding with a par value of ₱10
per share. The stock was originally issued for ₱14 per share. Currently, the stock has a fair value
of ₱17 per share. The company issues 22,000 new shares of this common stock to its stockholders
as a stock dividend. Retained earnings should be reduced because of this dividend by which of the
following amounts?
a. ₱220,000 (22,000 shares at ₱10 per share)
b. ₱308,000 (22,000 shares at ₱14 per share)
c. ₱374,000 (22,000 shares at ₱17 per share)
d. The company can reduce retained earnings by either ₱220,000 or ₱374,000
nd
43. A department store received cash and issued a gift certificate that is redeemable in merchandise.
When the gift certificate was issued
a. Deferred revenue account should be decreased.
b. Revenue account should be decreased.
c. Deferred revenue account should be increased.
d. Revenue account should be increased.
44. Are the following statements in relation to the term 'dilution' true or false, according to PAS33
Earnings per share?
(1) A reduction in earnings per share is an example of dilution.
(2) A reduction in loss per share is an example of dilution.
Statement (1) Statement (2)
a. False False
b. False True
c. True False
d. True True
45. Psalms Company’s trial balance reflected the following account balances on December 31, 2018:
Net Sales ₱4,000,000
Share of profit of associate 125,000
Cost of goods sold 2,500,000
Interest income 30,000
Loss on sale of equipment 50,000
Revaluation surplus during the year 300,000
Finance cost 35,000
Distribution costs 60,000
Administrative expenses 120,000
Translation gain on foreign operation 50,000
Income tax expense 408,000
Unrealized gain on FVTOCI securities 200,000
Income from discontinued operations 100,000
What is the comprehensive income for the year 2018?
a. ₱1,632,000 b. ₱1,532,000 c. ₱1,082,000 d. ₱550,000
46. Chronicles Company’s trial balance reflected the following account balances on December 31,
2018:
Cash, net of bank overdraft of ₱300,000 and unreleased check of ₱100,000 and including
customer's post-dated check of ₱50,000 and sinking fund amounting to ₱280,000 ₱1,000,000
Accounts payable, net of debit balance in suppliers accounts amounting to ₱25,000 1,900,000
Bonds payable 3,400,000
Premium on bonds payable 200,000
Deferred tax liability 400,000
Property dividends payable 400,000
Income tax payable 300,000
Note payable, due January 31, 2019 500,000
Note payable, due February 14, 2020 350,000
Contingent liability 150,000
Share dividends payable 320,000
Cash dividends payable 80,000
Financial liabilities at fair value through profit or loss 130,000
Reserve for contingencies 430,000
Estimated expenses of meeting warranties 335,000
Estimated damages as a result of unsatisfactory performance on a contract 268,000
Mortgage payable 1,000,000
Loans payable (payable in five semi-annual installment) 500,000
How much is the total noncurrent liabilities for the year ended December 31, 2018?
a. ₱5,750,000 b. ₱5,650,000 c. ₱5,570,000 d. ₱5,560,000
nd
47. Information on Lyra Co.’s defined benefit plan is shown below.

Fair value of plan assets, Jan. 1, 2017 ₱2,800,000
Present value of defined benefit obligation, Jan. 1, 2017 2,200,000
Current service cost 960,000
Past service cost, Jan. 1, 2017 (average vesting period is 5 years) 600,000
Benefits paid 420,000
Return on plan assets 600,000
Contribution to the plan 1,820,000
Increase in obligation during the year due to changes in actuarial assumptions 240,000
Expected rate of return 12%
Discount rate used to discount the defined benefit obligation 10%
On January 1, 2017, Lyra Co. amended its retirement plan. The amendment resulted to an
increase in the balance of the present value of defined benefit obligation from ₱1,600,000 to
₱2,200,000.
The present values of economic benefits available in the form of refunds from the plan are
₱400,000 and ₱800,000 on January 1 and December 31, respectively.
How much is the component of the defined benefit cost recognized in profit or loss?
a. ₱1,560,000 b. ₱1,520,000 c. ₱1,600,000 d. ₱920,000
48. During your audit of the PPE of Marvelous Company, they provided the following information
relating to the revaluation of an equipment on January 1, 2018.
Cost Replacement cost
Equipment ₱6,500,000 ₱9,200,000
Residual value 500,000 200,000
Useful life 12
Age of the equipment 2
Accumulated depreciation ? ?
On January 1, 2018, Marvelous Company estimates the remaining useful life of the equipment of 8
years. The equipment was sold on December 31, 2016 for ₱8,000,000.
Using PFRS for SMEs, what is the revaluation surplus on January 1, 2018?
a. ₱2,700,000 b. ₱2,200,000 c. ₱2,500,000 d. Some other answer
49. On January 1, Year One, the Smith Company issues 1,000 stock options to its president. The
president must work for four years and then has three additional years in which to buy the stock
at a price of ₱30 per share. The price of the stock on that day is ₱28 per share but it goes up in
price by ₱3 per year thereafter. The conveyance qualifies as a compensatory stock option plan.
According to a computer pricing model (Black-Scholes), one of these options is worth ₱5 on
January 1, Year One but ₱8 on December 31, Year One, and ₱10 on December 31, Year Two. How
much expense should this company recognize in Year Two?
a. Nil b. ₱1,250 c. ₱2,000 d. ₱3,000
50. On January 1, 2015, TimSpurs Co. issued 4-year bond with a face value of ₱2,000,000 and
stated interest of 8%, payable annually every December 31. The company received ₱1,898,205
and incurred ₱25,000 of transaction cost. The quoted price of the bonds is as follows:
December 31, 2015 102
December 31, 2016 98
December 31, 2017 99
The bonds were retired on January 1, 2018 at 105 and incurred a transaction cost of ₱20,000.
Assuming the bonds is classified as financial liability at amortized cost, how much is the interest
expense during 2015?
a. ₱160,000 b. ₱190,053 c. ₱187,321 d. ₱27,321
51. Star Company has recently launched a new model of consumer car. Its cars are sold with a three-
year warranty for manufacturing defects. Past experience of similar models indicates that about
10% of the cars sold are with some defects, of which 4% are minor defects, 3% are normal
nd
defects and 3% are major defects. For the year ended December 31, 2015, the company sold
10,000 units of the new model. The following information relates to the estimate of costs of
defects associated with the new model:
Cost of repair/unit Probability Minor Defects Normal defects Major defects
High 30% ₱1,500 ₱4,000 ₱7,000
Medium 60% 1,200 3,000 5,000
Low 10% 1,000 1,500 2,000
What amount of provision should the company recognized for the year ended December 31, 2015?
a. None b. ₱1,445,000 c. ₱1,590,000 d. ₱3,043,000
52. On January 1, 2015, Sarangani Company showed the following:
Long-term note ₱6,000,000
Accrued interest payable 600,000
At the end of 2014, Sarangani had started to experience extreme financial pressure and is in
default in meeting interest payment on its long-term note. This had continued until 2015.
However, the company had still accrued interest for 2015. The interest rate is 10% payable every
December 31.
In an agreement with the creditor, Sarangani Corporation obtained the following changes in the
terms of the note.
 The accrued interest is forgiven.
 The principal obligation is reduced to ₱5,000,000 and will be due on December 31, 2020.
 The new interest rate is 8%
What is the gain on debt restructuring to be recognized by Sarangani?
a. ₱2,579,180 b. ₱2,200,000 c. ₱1,600,000 d. Nil
53. Included in Dwight Company’s liability balances on December 31, 2016 are:
10% note payable, maturing 03/3 1/2017 ₱ 10,000,000
12% note payable, maturing 06/30/2017 6,000,000
7% guaranteed debentures, due 2020 2,000,000
Additional information:
 On January 31, 2017, the entire ₱10,000,000 note was refinanced through issuance of a long-
term obligation payable lump sum.
 For the ₱6,000,000 note, under the loan agreement, the entity has the discretion to refinance
the obligation for at least 12 months after December 31, 2016.
 The annual sinking fund requirement on the guaranteed debentures is ₱500,000 per year.
 The 2016 financial statements were issued on March 31, 2017.
Assuming all accruing interest for 2016 were paid, the amount to be reported as current liabilities
on December 31, 2016 is
a. ₱19,300,000 b. ₱10,500,000 c. ₱16,500,000 d. ₱6,500,000
54. The following data were compiled prior to preparing the statement of financial position of the
Oklahoma Corporation as of December 31, 2016:
Authorized ordinary share, ₱100 par value ₱4,000,000
Cash dividends payable 160,000
Donated capital 800,000
Gain on sale of treasury shares 80,000
Net unrealized loss on financial asset at FVTOCI 96,000
Premium on share capital 320,000
Premium on bonds payable 240,000
Reserve for bond sinking fund 400,000
Reserve for depreciation 600,000
Revaluation increment on property 800,000
Accumulated profits, unappropriated 720,000
Subscribed share capital 480,000
Share subscriptions receivables 120,000
Share warrants outstanding 200,000
nd
Treasury shares, at cost 144,000

Unissued ordinary share 800,000
The amount of legal capital
a. 4,000,000 b. 3,680,000 c. 3,560,000 d. 3,200,000
55. Marlou Ford Company had 100,000 ordinary shares issued and outstanding at January 1. During
the year; Marlou Ford also had the ordinary share transactions listed below.
April 1 Issued 30,000 previously unissued shares
May 1 Split the share 2-for-1
June 30 Purchased 10,000 shares for the treasury
July 30 Distributed a 20 percent bonus issue
December 31 Split the stock 3-for-1
The weighted number of shares for EPS purposes
a. 900,000 b. 872,000 c. 867,000 d. 864,000
56. On July 1, 2013, Mariel Inc. leased a delivery truck from Chubs Corp. under a 3 year operating
lease. Total rent for the term of the lease will be ₱360,000 payable as follows:
12 months at ₱5,000 = ₱60,000
12 months at ₱7,500 = ₱90,000
12 months at ₱17,500 = ₱210,000
All payments were made when due. In Chubs’s June 30, 2015 statement of financial position, what
amount should be reported as accrued rent income?
a. ₱60,000 b. ₱90,000 c. ₱150,000 d. Nil
57. On January 1, 2015, Renz, Inc. purchased equipment for ₱4,000,000. The equipment shall be
leased out under operating lease. The estimated useful life is 10 years and the estimated residual
value is ₱480,000.
On July 1, 2015, the equipment was leased to Wenz Co. under a 5-year operating lease. Annual
rent is ₱800,000. The first annual rent was made on that date. Initial direct cost incurred on
negotiating the lease amounted to ₱80,000. Insurance costs incurred by Renz in 2015, not
reimbursable from lessee, amounted to ₱4,000.
How much is the carrying amount of the leased asset at December 31, 2015?
a. ₱3,648,000 b. ₱3,712,000 c. ₱2,418,000 d. ₱3,720,000
58. On December 31, 2015, Kathryn Co. sold equipment to Czarina, Inc., and simultaneously leased it
back. Pertinent information is as follows:
Cost of equipment ₱2,000,000
Accumulated depreciation ₱ 960,000
Remaining useful life of equipment 5 years
Lease term 4 years
Sales price (usually equal to present value of rentals) ₱1,267,948
Annual rent payable at end of year (starting Dec. 31, ₱ 400,000
2016)
Implicit interest rate 10%
How much is the gain (loss) on sale?
a. ₱227,948 recognized immediately c. (₱227,948) recognized immediately
b. ₱227,948 deferred d. Nil
59. Black Co., organized on January 2, 2017, had pretax financial statement income of ₱500,000 and
taxable income of ₱800,000 for the year ended December 31, 2017. The only temporary
differences are accrued product warranty costs, which Black expects to pay as follows:
2018 ₱ 100,000 2020 ₱ 50,000
2019 ₱ 50,000 2021 ₱ 100,000
The enacted income tax rates are 32% for 2017, 30% for 2018 through 2020, and 35% for 2021.
Black believes that future years' operations will produce profits. In its December 31, 2017
statement of financial position, what amount should Black report as deferred tax asset?
a. ₱50,000 b. ₱75,000 c. ₱90,000 d. ₱95,000
nd
60. If petty cashier pays P200 for a transportation out of an imprest petty cash, the journal entry
should include
a. Credit to cash for P200
b. Debit to transportation and credit to petty cash for P200
c. Credit to petty cash for P200
d. No journal entry is made
61. The Cuanza Company purchased a major new piece of machinery for P10 million on 1 January
2008. It will depreciate this machinery on a straight line basis over its useful life of 10 years,
assuming a zero residual value. Also on 1 January 2008 the company received a government
grant of CU1 million to help finance this machinery. According to PAS20 Government grants and
government assistance, which, if either, of the following methods would be an acceptable
treatment of this machinery and the related government grant in the company's statement of
financial position at 31 December 2008?
Method 1 Method 2
Non-current asset Non-current asset
Cost 9,000,000 Cost 10,000,000
Depreciation 900,000 Depreciation 1,000,000
Carrying amount 8,100,000 Carrying amount 9,000,000
Deferred income 900,000
a. Method 1 only c. Method 2 only
b. Neither method d. Method 1 or Method 2
62. On January 1, 2015, Amazing Company bought a land and building from Spiderman Company for
₱3,500,000. The Amazing Company will use the building as its head office. The portion of the total
purchase price attributable to the land was ₱1,700,000, while the balance to the building. The
company depreciates the building using straight line method over an estimated useful life of 25
years. Amazing Company uses the cost model in measuring its fixed assets subsequent to initial
measurement. The company recorded impairment loss of ₱204,000.
On December 1, 2017, the company has acquired another land and building in the Central
Business District to be used as their new head office as this would be a good location. The
management decided to lease out the old building under operating lease. By the end of 2017, the
old building was already vacated by Amazing Company and another company has already
occupied the old building. The fair value of the land and building at the end of 2017 was
₱3,400,000.
The journal entry to record the transfer will include a
a. Debit – Investment property, ₱3,284,000
b. Debit – Loss on transfer, ₱204,000
c. Credit – Building, ₱1,584,000
d. Credit – Land, ₱1,496,000
63. On January 1, 2015, Amazing Company bought a land and building from Spiderman Company for
₱3,500,000. The Amazing Company will use the building as its head office. The portion of the total
purchase price attributable to the land was ₱1,700,000, while the balance to the building. The
company depreciates the building using straight line method over an estimated useful life of 25
years. Amazing Company uses the cost model in measuring its fixed assets subsequent to initial
measurement. The company recorded impairment loss of ₱204,000.
On December 1, 2017, the company has acquired another land and building in the Central
Business District to be used as their new head office as this would be a good location. The
management decided to lease out the old building under operating lease. By the end of 2017, the
old building was already vacated by Amazing Company and another company has already
occupied the old building. The fair value of the land and building at the end of 2017 was
₱3,400,000.
The journal entry to record the transfer will include a
a. Debit – Investment property, ₱3,284,000
b. Debit – Loss on transfer, ₱204,000
c. Credit – Building, ₱1,584,000
d. Credit – Land, ₱1,496,000
nd
64. The statement of financial position of the Dixie Corporation on December 31, 2015 includes the
following receivables balances:
Notes Receivable ₱365,000
Less: Notes discounted 155,000 ₱210,000
Accounts Receivable ₱856,000
Less: Allowance for doubtful accounts 41,500 814,500
Selected transactions during 2016 included the following:
 Notes received in settlement of accounts totaled ₱825,000.
 Notes receivable discounted as of December 31, 2015, were paid at maturity with the
exception of one ₱30,000 note on which the company had to pay the bank ₱30,900, which
included interest and protest fees. It is expected that recovery will be made on this note early
2017.
 Customers’ notes of ₱600,000 were discounted with recourse during the year, proceeds from
their transfer being ₱585,000. Of this total, ₱480,000 matured during the year without notice
of protest.
 Notes receivable collected during the year totaled ₱270,000 and interest collected was
₱24,500.
Notes Receivable (including notes receivable discounted) as of December 31, 2016.
a. ₱320,000 b. ₱365,000 c. ₱165,000 d. ₱285,000
65. The following data are available for the Cash in bank of Cayetano Company for February of the
current year:
1) Checks issued by the company this February, ₱150,000.
2) Outstanding checks, January 31, ₱52,000.
3) Customer’s check representing receipts in January amounting to ₱12,000 was erroneously
recorded by the company as ₱21,000.
4) Check of the company in January amounting to ₱20,000 was erroneously recorded by the
company as ₱2,000.
5) Checks paid by the bank in February, ₱130,000.
6) Erroneous bank credit in January 31, ₱10,000.
7) Erroneous bank charge in February 28, ₱12,000.
8) Bank service charge, January 31, ₱2,000.
9) Bank service charge, February, ₱3,000.
How much is the outstanding checks in February 28?
a. ₱72,000 b. ₱22,000 c. ₱52,000 d. ₱62,000
66. Which of the following statement is incorrect?
Full PFRS PFRS for SMEs
a. Always amortize goodwill and indefinite-life An intangible with an indefinite life shall
intangibles. not be amortized
b. Borrowing costs on qualifying assets must All borrowing costs are expensed when
be capitalized. Other borrowing costs are incurred.
expensed.
c. Research costs are expensed. Development Research and development costs are
costs must be capitalized and amortized if expensed when incurred.
criteria are met.
d. Residual value, useful life and depreciation Residual value, useful life and depreciation
method are reviewed annually as part of method are reviewed only if there is an
impairment tests. indication of related asset impairment.
67. Good Company filed a ₱900,000 law suit against Bad Company during Year One. At the end of
Year One, both companies think that Good will probably win ₱200,000 but that a win of ₱370,000
is reasonably possible. In Year Two, the suit is settled with Bad paying ₱170,000 in cash to Good.
What does each company recognize on its income statement for Year Two?
a. Good recognizes a gain of ₱170,000 and Bad recognizes a recovery (gain) of ₱30,000.
b. Good recognizes a loss of ₱30,000 and Bad recognizes a recovery (gain) of ₱30,000.
c. Good recognizes a gain of ₱170,000 and Bad recognizes a loss of ₱170,000.
d. Good recognizes a loss of ₱30,000 and Bad recognizes a loss of ₱170,000.
nd
68. David Company decided to offer a bonus to its branch manager at 20% of net income earned by
the branch during the current year. The income for the branch was ₱3,090,000 before tax and
before bonus for the current year. The income tax rate is 30%.
How much is the bonus if the bonus is based on the net income after bonus and tax?
a. ₱360,500 c. ₱379,474
b. ₱515,000 d. ₱618,000
69. On January 1, 2016, Deps Co. issues convertible bonds with a maturity of five years. The issue is
for a total of 1,000 convertible bonds. Each bond has a par value of ₱1,000, a stated interest rate
of 5% per year, and is convertible into 5 ordinary shares of Deps. The convertible bonds were
issued to Beps at par. The per-share price of Deps share is ₱15. Quotation for similar bonds
issued by Deps without the conversion privilege suggest that they can be sold for ₱900,000. The
issuance of convertible bonds increased Deps’s equity by
a. ₱100,000 c. ₱76,923
b. ₱75,000 d. Nil
70. Portions of the financial statements for Don Romantico Company are provided below.
DON ROMANTICO COMPANY
Statement of Comprehensive Income
For the Year Ended December 31, 2018
(in 000s)
Sales ₱ 800
Cost of goods sold (300)
Gross Margin ₱ 500
Salaries Expense ₱120
Insurance Expense 40
Depreciation Expense 123
Interest Expense 50 (333)
Gains and Losses:
Gain on sale of building 11
Loss on sale of machinery (12)
Income before tax ₱ 166
Income tax expense (78)
Net Income ₱ 88
DON ROMANTICO COMPANY

Selected Accounts from Comparative Balance Sheets
December 31, 2018 and 2017
(in 000s)
Year
2018 2017 Change
Cash ₱134 ₱100 ₱ 34
Accounts Receivable 324 216 108
Inventory 321 425 (104)
Prepaid Insurance 66 88 (22)
Accounts Payable 210 117 93
Salaries Payable 102 93 9
Deferred Income Tax Liability 60 52 8
Bond Discount 190 200 (10)
Using PFRS for SMEs, the net cash inflow (outflow) from operating activities using direct method is
a. ₱352,000 b. ₱330,000 c. ₱412,000 d. ₱350,000
 -- END -- 
nd

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Financial Accounting and Reporting

REGIONAL MOCK BOARD EXAMINATIONS

4. The following statements relate to cash. Which is false?

Average accumulated expenditures for 2015 was

47. Information on Lyra Co.’s defined benefit plan is shown below.

Treasury shares, at cost 144,000

DON ROMANTICO COMPANY

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