1. Which statement is incorrect regarding the Financial b. P286,200 d.

P264,600
Reporting Standards Council (FRSC)?
a. Established by the Board of Accountancy (BOA) to 8. On August 15, 2018, a typhoon damaged a
assist the BoA in carrying out its power and warehouse of Parlophone Merchandise Company. The
function to promulgate accounting standards in entire inventory and many accounting records stored
the Philippines. in the warehouse were completely destroyed.
b. Has 15 members with a Chairman Although the inventory was not insured, a portion
c. FRSC members serve for a term of three years could be sold for scrap. Through the use of the
renewable for another term. remaining records, the following data are assembled:
d. Has 6 representatives from public practice. Inventory, January 1 P 375,000
Purchases, January 1-August 15 1,385,000
2. The following were created to assist the Board of Cash sales, January 1-August 15 225,000
Accountancy in carrying out its powers and functions, Collection of accounts, Jan. 1-Aug. 15 2,115,000
except Accounts Receivable, January 1 175,000
a. Financial Reporting Standards Council Accounts Receivable, August 15 265,000
b. Auditing and Assurance Standards Council Salvage value of inventory 5,000
c. Education Technical Council Gross profit percentage on sales 32%
d. Accredited Professional Organization Council
Compute the inventory loss as a result of the typhoon.
3. It is a “global phenomenon” intended to bring about a. P107,600 c. P102,600
transparency and a higher degree of comparability in b. P104,200 d. P255,600
financial reporting, both of which will benefit the
investors and are essential to achieve the goal of one 9. Martin Corp. values its inventory by using the retail
uniform and globally accepted financial reporting method (FIFO basis, lower of cost or NRV). The
standards. following information is available for the year just
a. Information technology c. World Trade ended:
b. Borderless accounting d. IFRS Cost Retail
Beginning inventory P 80,000 P140,000
4. The International Financial Reporting Standards Purchases 297,000 420,000
Foundation is: Freight-in 4,000 -
a. A body which oversees the work of the IASB, IFRS Breakage 8,000
Advisory Council and IFRS Interpretations Markups (net) 10,000
Committee and organizes their funding. Markdowns (net) 2,000
b. A body which must approve all new accounting Sales 400,000
standards before they are issued.
c. A body whose main aim is to enforce the use of At what amount would Martin report its ending
international GAAP throughout the world. inventory?
d. The body which funds the development of new a. P112,000 c. P117,600
IFRSs. b. P113,400 d. P119,000

5. The objective of financial reporting in the Conceptual 10. Tristine Dairy produces milk to sell to local and
Framework for Financial Reporting: national ice cream producers. Tristine Dairy began
a. Is the foundation for the framework operations on January 1, 2018 by purchasing 840 milk
b. Includes the qualitative characteristics that make cows for P1,176,000. The company controller had the
accounting information useful. following information available at year end relating to
c. Is found on the third level of the Framework. the cows:
d. All of the choices are correct regarding the Carrying value, January 1, 2018 P1,176,000
objective of financial reporting. Increase in fair value due to growth
and price changes 365,000
6. Which of the following is not a primary information Decrease in fair value due to harvest 42,000
need for the ‘investor’ user group of financial Milk harvested during 2018 but not yet sold 54,000
statements?
a. Assessment of repayment ability of an entity At December 31, 2018, what is the value of the
b. Measuring performance, risk and return milking cows on Tristine Dairy’s statement of financial
c. Taking decisions regarding holding investments position?
d. Taking buy / sell decisions a. P1,583,000 c. P1,499,000
b. P1,553,000 d. P1,445,000
7. The Benson Mfg. Co. in its statement of financial
position as of December 31, 2018 has an inventory in 11. Cavern Corporation has decided to expand its
the amount of P176,000 which consists of: operations and has purchased land for construction of
a new manufacturing plant. The following costs were
Direct materials P99,000 incurred in purchasing the property and constructing
Direct materials purchases in transit, the building:
FOB destination 21,600
Direct materials purchases in transit, Land purchase price P 120,000
FOB shipping point 16,200 Payment of delinquent property taxes 35,000
Prepaid insurance on inventory 3,600 Title search and insurance 6,500
Work-in-process 68,400 City improvements for water and sewer 18,000
Finished goods 81,000
Building permit 8,000
Goods shipped on consignment, at selling
Cost to destroy existing building on
price with 20% profit on sales 27,000
land (P3,000 worth of salvaged
What is the cost of inventory to be shown in the material used in new building) 20,000
statement of financial position of Benson Mfg. Co. as Contract cost of new building 1,650,000
of December 31, 2018? Land improvements-landscaping 82,000
a. P287,100 c. P268,200
Sidewalks and parking lot 39,000
 Fire insurance on building - 1 year 18,000 d. An entity shall disclose the amounts recognized in
profit or loss for direct operating expenses
The depreciated value of the old building on the books (including repairs and maintenance) arising from
of the company from which the land was purchased investment property that did not generate rental
was P26,000. The old building was never used by income during the period.
Cavern. How much should be recognized as cost of
land? 16. Muscat Company purchased a patent on January 1,
a. P278,500 c. P260,500 2015, for P3,570,000. The patent was being
b. P178,500 d. P196,500 amortized over its remaining legal life of 15 years.
During 2018 Muscat determined that the economic
12. On June 30, 2017, Rickenbacker Equipment benefits of the patent would not last longer than ten
purchased a precision laser-guided steel punch that years from the date of acquisition. What amount
has an expected capacity of 300,000 units and no should be reported in the statement of financial
residual value. The cost of the machine was P450,000 position as patent, net of accumulated amortization,
and is to be depreciated using the units-of-production at December 31, 2018?
method. During the six months of 2017, 24,000 units a. P2,618,000 c. P2,520,000
of product were produced. At the beginning of 2018, b. P2,448,000 d. P2,142,000
engineers estimated that the machine can realistically
be used to produce only another 230,000 units. 17. Wan acquired Yang, a small company that specializes
During 2018, 70,000 units were produced. in pharmaceutical drug research and development for
Rickenbacker would report depreciation in 2018 of: P35 million. The fair value of Yang’s net assets was
a. P135,230 c. P108,000 P15 million (excluding any items referred to below).
b. P126,000 d. P105,000
Yang owns a patent for an established successful drug
13. Rubber Soul Co. purchased equipment on 1/1/17 for that has a remaining life of 8 years. A firm of
P500,000, estimating a four-year useful life and no specialist advisors, Tantsahan, has estimated the
residual value. In 2016 and 2017, Rubber Soul current value of this patent to be P10 million;
depreciated the asset using the sum-of-years'-digits however, the company is awaiting the outcome of
method. In 2018, Rubber Soul changed to straight- clinical trials where the drug has been tested to treat
line depreciation for this equipment. What a different illness. If the trials are successful, the
depreciation would Rubber Soul record for the year value of the drug is then estimated to be P15 million.
2018 on this equipment? Also included in the company’s balance sheet is P2
a. P 75,000 c. P150,000 million for medical research that has been conducted
b. P125,000 d. P175,000 on behalf of a client.
Compute the amount of goodwill from this acquisition.
14. The following account balances relating to property, a. P8,000,000 c. P 3,000,000
plant and equipment of Paperback Company appear b. P5,000,000 d. P20,000,000
on the books on December 31, 2017:
Land P 6,000,000 18. On January 1, 2015, Sihamoni Corp. acquired a gold
Building 60,000,000 mine property for P10,000,000. In 2015 and 2016,
Accumulated depreciation 24,000,000 Sihamoni spent P4,000,000 on exploration and
development. It expects to be able to mine 35,000
Plant, property and equipment have been carried at
ounces of gold over the 10-year life of the mine.
cost since their acquisition. The land was acquired 15
Sihamoni uses the output method to account for its
years ago while the building’s construction was
gold costs and expects to be able to sell the property
completed on January 1, 2008. The straight line
to a real estate developer for P2,000,000 at the end
method for depreciation is used. On January 1, 2018,
of the10 years. It mined 3,100 ounces in 2017 and
the company revalued property, plant and equipment.
2,800 in 2018. How much depletion would be
On the same date, contracted professional appraisers
recorded related to the gold in 2018?
submitted the following:
a. P 960,000 c. P1,200,000
Fair value b. P1,120,000 d. P1,400,000
Land P 8,000,000
Building 48,000,000

What is the revaluation surplus on December 31, 19. Maharishi Corp. uses the cost model for intangible
2018? assets. On April 10, 2017, Maharishi acquired assets
a. P13,200,000 c. P13,800,000 for P100,000. On December 31, 2018, it was
b. P15,000,000 d. P14,000,000 determined that the recoverable amount for these
intangible assets was P80,000.
15. Which statement is correct regarding investment On December 31, 2018, it was determined that the
property in accordance with PAS 40? intangible assets had a recoverable amount of
a. Investment property includes property occupied by P84,000. What is the impairment gain or loss
an employee paying market rent. recognized in 2017 and 2018 on the income
b. Investment property does not generate cash flows statement?
largely independently of the other assets held by 2017 2018
an entity. a. P20,000 loss P16,000 loss
c. An entity need not disclose the fact the fair value b. P20,000 loss P0
of investment property is not determined on the c. P20,000 loss P4,000 gain
basis of a valuation by an independent valuer who d. P0 P0
holds a recognized and relevant professional
qualification and has recent experience in the 20. An entity is planning to dispose of a collection of
location and category of the investment property assets. The entity designates these assets as a
being valued. disposal group. The carrying amount of these assets
immediately before classification as held for sale was

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 P20 million. Upon being classified as held for sale, the settlement of bank loan, paid by 100,000
assets were revalued to P18 million. The entity feels check no. 9344 on same date
that it would cost P1 million to sell the disposal group. Deposit of another client on 12/6/18
How would the reduction in the value of the assets on credited in error to Lucy Co. 25,000
classification as held for sale be treated in the
The cash balance per books of Lucy Company on
financial statements?
December 31, 2018 is
a. The entity recognizes a loss of P2 million
a. P1,491,000 c. P961,800
immediately before classification as held for sale
b. P1,146,700 d. P911,400
and them recognizes an impairment loss of P1
million.
24. Julia Bakery estimates the allowance for uncollectible
b. The entity recognizes an impairment loss of P3
accounts at 3% of the ending balance of accounts
million.
receivable. During 2018, Julia's credit sales and
c. The entity recognizes an impairment loss of P2
collections were P125,000 and P131,000, respectively.
million.
What was the balance of accounts receivable on
d. The entity recognizes a loss of P3 million
January 1, 2018, if P180 in accounts receivable were
immediately before classifying the disposal group
written off during 2018 and if the allowance account
as held for sale.
had a balance of P750 on 12/31/18?
a. P 5,820 c. P31,180
21. Which statement is incorrect regarding capitalization
b. P31,000 d. P25,000
of borrowing costs?
a. Capitalization should commence when
25. During your review of the records of Maggie Mae
expenditures are being incurred, borrowing costs
Corporation for the year 2018, you noted that Maggie
are being incurred and activities that are
Mae sold a machine with a carrying amount of
necessary to prepare the asset for its intended
P640,000 (cost is P1,600,000) on June 30, 2018.
use or sale are in progress.
Maggie Mae received an P800,000 non-interest
b. Capitalization should be suspended during periods
bearing note due in 3 years. There is no established
in which active development is interrupted.
market value for the machine. The prevailing interest
c. Capitalization should cease when substantially all
rate for a note of this type is 12%. Maggie Mae
of the activities necessary to prepare the asset for
recorded the transaction by debiting Note Receivable
its intended use or sale are complete.
for P800,000 and crediting Machinery for P640,000
d. If there are minor modifications outstanding, this
and Gain on sale of Machine for the difference.
indicates that substantially all of the activities are
Because of this, Maggie Mae’s profit for the year
not yet complete.
ended December 31, 2018 had been overstated by
a. P196,394 c. P125,834
22. Sexy Sadie Corporation had the following items listed
b. P162,227 d. P 55,274
in its trial balance at 12/31/18:
Currency and coins P 650 26. Martha Company sold a tract of land to My Dear Co.
Balance in checking account 2,600 on July 1, 2017, for P8,000,000 under an installment
Customer checks waiting to be deposited 1,200 sale contract. My Dear Co. signed a 4-year 11% note
Treasury bills, purchased on 11/2/18, for P5,600,000 on July 1, 2017, in addition to the
mature on 4/30/19 3,000 down payment of P2,400,000. The equal annual
Marketable equity securities 10,200 payments of principal and interest on the note will be
Commercial paper, purchased on 11/2/18, P1,805,000 payable on July 1, 2018, 2019, 2020,and
mature on 1/30/19 5,000 2021. The land had an established cash price of
What amount will Sexy Sadie include in its year-end P8,000,000, and its cost to the company was
statement of financial position as cash and cash P6,000,000. The collection of the installments on this
equivalents? note is reasonably assured.
a. P9,450 c. P12,450 The current portion of the installment note receivable
b. P7,450 d. P19,650 on December 31, 2018 is
a. P1,805,000 c. P1,319,790
23. You obtained the bank statement, paid checks, and b. P1,400,000 d. P1,189,000
other memoranda relating to Lucy Company’s bank
account for December 2018. In reconciling the bank
balance at December 31, 2018, you observed the 27. On March 1, 2018, Pyne Furniture Co. acquired
following facts: P700,000 of 10 percent bonds to yield 8 percent.
Balance per bank statement, 12/31/18 P1,465,800 Interest is payable semiannually on February 28 and
Outstanding checks, 12/31/18 624,750 August 31. The bonds mature in ten years. Pyne
Receipts of 12/31/18, deposited Furniture Co. is a calendar-year corporation. If the
1/2/19 95,550 bonds are not held for trading, the interest income to
Proceeds of bank loan, 12/15/18, be recognized in 2018 is
discounted for 90 days at 10% per a. P52,925 c. P58,933
year, omitted from records 195,000 b. P53,000 d. P58,333
Deposit of 12/23/18, omitted from 53,000
bank statement Use the following information for the next two questions.
Check 733 of Lucky Co., charged by 82,100
The following data pertains to Jennah Co.'s investments in
the bank in error to Lucy Co.
marketable equity securities:
Proceeds of note receivable of Lucy
Co. collected by bank, 12/10/18, 40,300 Fair Value
not entered in cash records Cost 12/31/18 12/31/17
(Principal, P40,000; Interest, P400; Trading P150,000 P155,000 P100,000
Collection charge, P100) Available-for-sale 150,000 130,000 120,000
Erroneous debit memo of 12/31/18, to 28. What amount should Jennah report as unrealized
charge company’s account with holding gain in its 2018 profit or loss?

Page 3 of 7 www.prtc.com.ph FAR.2451

 a. P50,000 c. P60,000 P3,000,000. Total payments under the lease
b. P55,000 d. P65,000 aggregate P5,000,000 of which P3,380,000 represents
the fair value and cost of the machine to West.
29. What amount should Jennah report as net unrealized Payments of P500,000 are due on January 1 each
loss at December 31, 2018, in accumulated other year starting January 1, 2018. The interest rate of
comprehensive income in equity? 10% which was stipulated in the lease is considered
a. P0 c. P15,000 fair and adequate compensation to North for the use
b. P10,000 d. P20,000 of its funds. West expects the machine to have a 10-
year life, no residual value and be depreciated on a
30. On January 1, 2018, Monique Corp. purchased 30 straight line basis. The lease is appropriately
percent of the outstanding shares of Kris Corp. for classified as a sales type lease by North. What should
P1,500,000 cash. On that date, Kris' net assets be the total income before tax that is derived by North
were P3,000,000. Monique has determined that from this lease for the year ended December 31,
the excess of the cost of its investment in Kris 2018?
over its share of Kris' net assets is attributable to a. P668,000 c. P338,000
equipment whose market value exceeds its b. P288,000 d. P718,000
carrying amount by P1,000,000 and to an
operating license whose market value exceeds its 35. In accordance with the revised PAS 19, which of the
carrying amount by P1,000,000. The remaining following is reported in profit or loss?
useful life of the equipment is ten years and the a. Actuarial loss on defined benefit obligation
remaining useful life of the operating license is 20 b. Actuarial gain on plan assets
years. c. Interest on the effect of asset ceiling
d. Gain or loss on routine settlements
Kris's profit for the year ended December 31, 2018,
was P600,000. During 2018, Monique received
36. In accordance with the revised PAS 19, which of the
P50,000 cash dividends from Kris. There were no
following is not reported in profit or loss?
other transactions between the two companies.
a. Gain or loss on non-routine settlements
Calculate the carrying amount of the investment in b. Past service cost if not yet vested
Kris Corp. as of December 31, 2018. c. Net interest on defined benefit asset.
a. P1,585,000 c. P1,570,000 d. None of the above
b. P1,630,000 d. P1,620,000
37. On June 30, 2016, John Corporation granted share
31. Upon the death of an officer, Jung Co. received the options for 50,000 shares of its P20 par value
proceeds of a life insurance policy held by Jung on the ordinary shares to certain of its key employees. The
officer. The proceeds were not taxable. The policy’s market price of the ordinary share on that date was
cash surrender value had been recorded on Jung’s P36 per share and the option price was P30. The
books at the time of payment. What amount of Black-Scholes option pricing model determines total
income should Jung report in its statements? compensation expense to be P600,000. The options
a. Proceeds received. are exercisable beginning January 1, 2019, provided
b. Proceeds received less cash surrender value. those key employees are still in John’s employ at the
c. Proceeds received plus cash surrender value. time the options are exercised. The options expire on
d. None. June 30, 2020.
On January 4, 2019, when the market price of the
32. The Generous Corporation’s president has a profit-
share was P42 per share, all 50,000 options were
sharing agreement with the company. The agreement
exercised. What should be the amount of
states that the president is to receive a bonus
compensation expense recorded by John Corporation
consisting of a basic amount equivalent to 10% of the
for the calendar year 2018?
company’s net income before deduction of bonus but
a. P600,000 c. P240,000
after deduction of income tax. In addition, the basic
b. P200,000 d. P120,000
bonus shall be increased by the company’s tax
savings on bonus because the total amount of bonus
38. An entity that operates ten petrol stations and owns
is deductible in computing the company’s taxable
the land and buildings for those stations chooses not
income. The company registered a net income of
to purchase fire insurance on those buildings but,
P5,000,000 before deduction of the president’s bonus
rather, to ‘self insure’ in case of fire loss. The entity
and income tax. The company is subject to corporate
can estimate reliably the statistical probability of the
income tax of 30%. The total bonus due to the
occurrence and amount of expected fire loss (loss of
president is
about P100,000 once every ten years). The entity
a. P522,388 c. P339,806
should
b. P360,825 d. P263,158
a. Recognize a liability of P10,000 and related
expense each year for the next ten years to
33. On July 1, 2018, Chocolate Company purchased a
reflect its expected loss.
noncash asset with a list price of P260,000 by issuing
b. Not recognize a liability and related expense each
a five-year noninterest-bearing note. The market or
year for the next ten years to reflect its expected
"going" rate of interest for this note was 12%. The
loss.
note will; be paid in five equal annual P64,000
c. Appropriate retained earnings of P100,000 for ‘self
installments each June 30, 2019 through 2023. The
insurance’.
interest expense to be recognized by the entity for the
d. Appropriate retained earnings of P100,000 for
year ended December 31, 2018 is
contingencies.
a. P27,685 c. P13,842
b. P15,600 d. Nil
39. An entity recognized a liability (provision for a lawsuit)
at P40,000 in its statement of financial position at 31
34. On January 1, 2018, North Company entered into a
December 2017. At 31 December 2018, the entity
lease agreement with West Company for a machine
remeasured the liability at P90,000. P3,000 of the
which was carried on its accounting records at
increase in the provision is attributable to the

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 unwinding of the discount (ie the increase in the Debit Credit
P40,000 because it is one year closer to settlement) Excess of issuing price of share
and the remainder of the increase is attributed to capital over par value 24,000
better information becoming available on which to Loss on the sale of equipment 2,500
base the estimates. Correction of error of prior year 10,500
Gain on sale of treasury shares 3,500
Which statement is correct?
Cash and share dividends 60,000
a. The increase of P50,000 is recognized as an
Net income for the year 58,500
expense in other comprehensive income for the
Balance, December 31, 2018 119,500 .
year ended 31 December 2018.
P198,500 P198,500
b. The increase of P47,000 is recognized as an
adjustment to retained earnings balance as of 1 The correct balance of retained earnings on December
January 2018. 31, 2018 is
c. The increase of P3,000 is a finance cost. a. P119,500 c. P94,500
d. All the statements are incorrect. b. P100,500 d. P92,000

Use the following information for the next two questions. 43. The shareholders' equity section of Brown Co.'s
December 31, 2017 balance sheet consisted of the
The accounting profit before tax for the year ended
following:
December 31, 2018 for Regiel Ltd amounted to P18,500
and included: Ordinary share capital, P30 par,
10,000 shares authorized and
Depreciation – motor vehicle (25%) P 4,500
outstanding P300,000
Depreciation - equipment (20%) 20,000
Share premium 150,000
Rent revenue 16,000
Retained earnings (deficit) (210,000)
Royalty revenue (exempt from tax) 5,000
Doubtful debts expense 2,300 On January 2, 2018, Brown put into effect a
Entertainment expense (non-deductible) 1,500 shareholder-approved quasi reorganization by
Proceeds on sale of equipment 19,000 reducing the par value of the shares to P5 and
Carrying amount of equipment sold 18,000 eliminating the deficit against share premium.
Annual leave expense 5,000 Immediately after the quasi reorganization, what
The draft statement of financial position at December 31, amount should Brown report as share premium?
2018 contained the following assets and liabilities: a. P (60,000) c. P190,000
b. P150,000 d. P400,000
2018 2017
Assets
44. Christian Corp.'s current balance sheet reports the
Cash P 11,500 P 9,500
following shareholders' equity:
Receivables 12,000 14,000
Allowance for doubtful debts (3,000) (2,500) 5% cumulative preference share
Inventory 19,000 21,500 capital, par value P100 per share;
Rent receivable 2,800 2,400 2,500 shares issued and P250,000
Motor vehicle 18,000 18,000 outstanding
Acc. Dep. - motor vehicle (15,750) (11,250) Ordinary share capital, par value P3.50
Equipment 100,000 130,000 per share; 100,000 shares issued
Acc. Dep. - equipment (60,000) (52,000) and outstanding 350,000
Deferred tax asset ? 5,550 Share premium – ordinary 125,000
P135,200 Retained earnings 300,000
Liabilities Dividends in arrears on the preference shares amount
Accounts payable 15,655 21,500 to P25,000. If Christian were to be liquidated, the
Provision for annual leave 4,500 6,000 preference shareholders would receive par value plus
Current tax liability ? 7,600 a premium of P50,000. The book value per share of
Deferred tax liability ? 2,745 ordinary share is
37,845 a. P7.75 c. P7.25
Additional information b. P7.50 d. P7.00
 The company can claim a deduction of P15,000 (15%)
for depreciation on equipment, but the motor vehicle 45. Presented below is the December 31 trial balance of
is fully depreciated for tax purposes. Corinthians Company.
 The equipment sold during the year had been Corinthians Company
purchased for P30,000 two years before the date of Trial Balance
sale. December 31, 2018
 The company tax rate is 30%. Debit Credit
Cash P 14,800
40. The current tax expense for 2018 is Accounts Receivable 33,600
a. P6,030 c. P7,500 Allow. For Doubtful
b. P6,930 d. P8,040 Accounts P 2,160
Inventory, January 1 62,400
41. The deferred tax expense (benefit) for 2018 is Furniture and Equipment 67,200
a. P6,570 c. (P2,430) Accumulated Depreciation,
b. (P3,270) d. (P1,080) January 1 26,880
Prepaid Insurance 4,080
42. The Retained Earnings account of Lester Corp. for the Notes Payable 22,400
year 2018 consists of the following items: Owner, Capital 72,000
Debit Credit Sales 480,000
Balance, January 1, 2018 P112,500 Purchases 320,000
Write-off of organization costs P 6,000 Sales Salaries Expense 40,000
Advertising Expense 5,360

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 Administrative Salaries  Inventory on January 1, 2018 was understated by
Expense 52,000 P8,000.
Office Expense 4,000  Inventory on December 31, 2018 was understated
P603,440 P603,440 by P12,000.
 Business taxes of P5,500 for the fourth quarter of
Information necessary for the preparation of adjusting
2018 were paid on January 20, 2019 and charged
journal entries:
as expense in 2019.
a) Adjust the Allowance for Doubtful Accounts to 8
 On December 5, 2018, a cash advance of P10,000
percent of the accounts receivable.
by a customer was received for goods to be
b) Furniture and equipment is depreciated at 20
delivered in January 2019. The P10,000 was
percent per year.
credited to sales. The company's gross profit on
c) Insurance expired during the year, P2,040.
sales is 40%.
d) Interest accrued on notes payable, P2,688.
 The net income of Blue Jay Way's Company on the
e) Sales salaries incurred but not paid, P1,920.
income statement for the year ended December
f) Advertising paid in advance, P560.
31, 2018, before any adjustments for the above
g) Office supplies on hand, P1,200, charged to Office
information, is P155,000.
Expense when purchased.
h) Inventory on December 31, P64,000. What is the adjusted net income of Blue Jay Way’s
Company for the year ended for the December 31,
Disregarding income taxes, the adjusted profit is
2018?
a. P39,224 c. P41,912
a. P136,500 c. P144,500
b. P41,384 d. P44,072
b. P142,500 d. P150,500
46. The trial balance of Snookeroo Corporation does not
balance.
Use the following information for the next two questions.
Debit Credit
For the purpose of stating the working capital of
Cash P 5,912
COPERNICUS Corporation on December 31, 2018, the
Accounts Receivable 5,240 following data are submitted:
Supplies on Hand 2,967
Furniture and Equipment 6,100 Cash on hand and in bank, net of bank of
Accounts Payable P 7,044 overdraft of P5,000 P 56,000
Share capital 8,000 Petty cash (unreplenished petty cash
Retained Earnings 2,000 expenses, P400) 1,000
Service Revenue 5,200 Notes receivable, including discounted notes
Office Expense 4,320 _______ of P25,000 75,000
P24,539 P22,244 Accounts receivable, including accounts with
credit balance of P10,000 110,000
An examination of the ledger shows these errors. Merchandise inventory, including goods held
1. Cash received from a customer on account was on consignment of P18,000 148,000
recorded (both debit and credit) as P1,380 instead Prepaid expenses 9,000
of P1,830. Total current assets P399,000
2. The purchase on account of a computer costing
Accounts payable, including accounts with
P3,200 was recorded as a debit to Office Expense
debit balance of P5,000 P 60,000
and a credit to Accounts Payable.
Notes payable in annual installment at
3. Services were performed on account for a client,
P100,000 payable every May 31 200,000
P2,250, for which Accounts Receivable was
Accrued expenses 8,000
debited P2,250 and Service Revenue was credited
Total current liabilities P268,000
P225.
4. A payment of P95 for telephone charges was 49. How much is the total current assets of COPERNICUS
entered as a debit to Office Expenses and a debit Corp. on December 31, 2018?
to Cash. a. P370,600 c. P365,600
5. The Service Revenue account was totaled at b. P375,600 d. P360,600
P5,200 instead of P5,280.
50. How much is the total current liabilities of
The corrected trial balance of the company should COPERNICUS Corp. on December 31, 2018?
show total debits of a. P178,000 c. P188,000
a. P24,593 c. P24,444 b. P183,000 d. P173,000
b. P24,539 d. P24,349
51. An analyst compiled the following information for
47. For a given year, beginning and ending total liabilities Dominic, Inc. for the year ended December 31, 2018:
were P168,000 and P200,000, respectively. At year-  Net income was P1,700,000.
end, owners' equity was P520,000 and total assets  Depreciation expense was P400,000.
were P40,000 larger than at the beginning of the  Interest paid was P200,000.
year. If new share capital issued exceeded dividends  Income taxes paid were P100,000.
by P48,000, profit or (loss) for the year was  Common stock was sold for P200,000.
apparently  Preferred stock (eight percent annual dividend)
a. (P56,000) c. (P40,000) was sold at par value of P250,000.
b. P56,000 d. P 8,000  Common stock dividends of P50,000 were paid.
 Preferred stock dividends of P20,000 were paid.
48. Upon inspection of the records of Blue Jay Way's  Equipment with a book value of P100,000 was
Company, the following facts were discovered for the sold for P200,000.
year ended December 31, 2018:
 A fire premium of P4,000 was paid and charged as Using the indirect method, what was Dominic, Inc.'s
insurance expense in 2018. The fire insurance net cash flow from operating activities for the year
policy covers one year from April 1, 2018. ended December 31, 2018?
a. P1,630,000 c. P1,900,000

Page 6 of 7 www.prtc.com.ph FAR.2451

 b. P1,700,000 d. P2,000,000 Determine the total restated amount of assets that
will be shown on a constant peso statement of
52. Joshuarey Co. provided the following information on financial position at December 31, 2018.
selected transactions during 2018: a. P2,528,000 c. P3,168,000
Purchase of land by issuing bonds P250,000 b. P2,524,000 d. P3,164,000
Proceeds from issuing bonds 500,000
Purchases of inventory 950,000 57. A non-publicly accountable entity with total assets of
Purchases of treasury shares 150,000 P300 million and total liabilities of P200 million should
Loans made to affiliated corporations 350,000 apply what financial reporting framework?
Dividends paid to preference shareholders 100,000 a. Full PFRS
Proceeds from issuing preference share 400,000 b. PFRS for SMEs
Proceeds from sale of equipment 50,000 c. Another acceptable basis of accounting
d. Any of the above
The net cash provided by financing activities during
2018 is 58. An SME must measure its investment property after
a. P550,000 c. P800,000 initial recognition:
b. P650,000 d. P900,000 a. Either at fair value or using the cost-depreciation-
impairment model (same accounting policy for all
53. Which of the following best describes the purpose of investment property).
disclosure notes in the financial statements? b. Either at fair value or using the cost-depreciation-
a. To provide more detail for the users of accounts impairment model (elected item by item).
about the information in the main financial c. At fair value.
statements. d. At fair value, for those properties that fair value
b. To allow companies to present their financial can be measured reliably without undue cost or
results in a more favorable way by only disclosing effort on an ongoing basis, with all other
some things in the notes and not on the main investment property accounted for using the cost-
financial statements. depreciation-impairment model in Section 17.
c. To give all the detail of all the transactions that
occurred during the period because the main 59. A small and medium-sized entity may report which of
financial statements only present a summary. the following assets in its statement of financial
d. To explain the accounting treatment adopted position?
where management have chosen not to apply a. Internally generated intangible assets.
accounting standards. b. Non-current assets held for sale.
c. Intangible assets at revalued amount.
54. If revenues from transactions with a single external d. Investment in associate at cost.
customer amount to 10 per cent or more of an entity’s
revenues, the entity shall disclose 60. If an SME that uses the PFRS for SMEs in a current
a. The identity of a major customer. year breaches the floor or ceiling of the size criteria at
b. The amount of revenues that each segment the end of that current year, and the event that
reports from a major customer. caused the change is considered “significant and
c. Both a and b continuing”, the entity should
d. Neither a nor b a. Transition to the applicable financial reporting
framework in the next accounting period.
55. Under PAS 24, all of the following are considered to be b. Transition to the applicable financial reporting
NOT necessarily related parties of the reporting entity, framework in the current accounting period.
EXCEPT c. Transition to the applicable financial reporting
a. Post-employment benefit plans framework from the previous accounting period.
b. Providers of finance d. Use the same financial reporting framework.
c. Public utilities
d. Trade unions

56. The Karen Company's nominal peso statement of  - end of FAR.2451 - 

financial position at December 31, 2018 showed the
following assets:
Cash P 58,000
Accounts receivable 116,000
Inventory 224,000
Building (net) 800,000
Machinery (net) 340,000
Total assets P1,538,000
The general price-level index at December 31, 2018 is
300. Inventory cost is computed on a FIFO basis.
The December 31, 2018 inventory was purchased
over the last six months of 2018, when the index
averaged 280. Accounts receivable arose from credit
sales in the last three months of 2018 when the
average index was 290. The building was purchased
for P1,000,000 on January 1, 2014 when the index
was 150. The machinery, which originally cost
P500,000, was acquired on January 1, 2016, when the
index was 200.

Page 7 of 7 www.prtc.com.ph FAR.2451