Far
Far
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
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