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1. When to recognize short-term employee benefits?

a. Every 1st day of the month
b. Every 15th and 30th of the month.
c. When the employees have rendered service in exchange for the employee benefits.
d. Never!

2. Entity A have 10 employees, each earning ₱20,000 per month. Payment of salaries on a bi-
monthly basis. During the month of April 2021, none of employees were absent, late or have
rendered overtime service. When to recognize the salaries expense and at what amount for the
first payday in the month of April 2021?
Timing of recognition Amount recognized
a. April 1 20,000
b. April 15 20,000
c. April 1 100,000
d. April 15 100,000

3. Entity A has 20 employees who are each entitled to one day paid vacation leave for each month
of service rendered. Unused vacation leaves cannot be carried forward and are forfeited when
employees leave the entity. All the employees have rendered service throughout the current year
and have taken a total of 150 days of vacation leaves. The average daily rate of the employees in
the current period is ₱1,000. However, a 5% increase in the rate is expected to take into effect in
the following year. Based on Entity A’s past experience, the average annual employee turnover
rate is 20%. How much will Entity A accrue at the end of the current year for unused
entitlements?
a. 0 c. 90,000
b. 150,000 d. 94,500

4. Under a profit-sharing plan, Entity A agrees to pay its employees 5% of its annual profit. The
bonus shall be divided among the employees currently employed as at year-end. Relevant
information follows:

Profit for the year ₱8,000,000

Employees at the beginning of the year 8
Average employees during the year 7
Employees at the end of the year 6

If the employee benefits remain unpaid, how much liability shall Entity A accrue at the end of the
year?
a. 400,000 c. 200,000
b. 300,000 d. 0

5. The company’s retirement plan states that, upon retirement, an employee (not less than 60 years
but not more than 65 years of age) is entitled to a lump sum payment equal to the employee’s
final monthly salary level multiplied by the number of years in service (not less than 10 years).
At the end of month following the month of retirement and every month thereafter, the retired
employee is entitled to a monthly pension equal to one-eighth (1/8) of the final monthly salary
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level. The monthly pensions cease upon death of the retired employee. However, if the
employee has immediate dependent(s) with age of less than 18 years, the dependent(s) will be
entitled to the monthly pensions, which will cease when the dependent(s) reaches 18 years of
age. What type of post-employment benefit plan does your company have?

a. Defined contribution plan

b. Defined benefits plan
c. Defined pension plan
d. Cannot be determined; insufficient information!

Use the following information for the next six questions:

Information on Entity A’s defined benefit plan is as follows:
PV of DBO – Jan. 1, 2021 1,800,000
FVPA – Jan.1, 2021 1,440,000
PV of DBO – Dec. 31, 2021 2,160,000
FVPA, end. – Dec. 31, 2021 1,572,000
Current service cost 390,000
Actuarial loss 120,000
Return on plan assets 132,000
Discount rate 5%

6. How much is the net defined benefit liability (asset) in Entity A’s December 31, 2020 statement of
financial position?
a. 588,000 liability
b. 588,000 asset
c. 360,000 liability
d. 360,000 asset

7. How much is the net defined benefit liability (asset) in Entity A’s December 31, 2021 statement of
financial position?
a. 588,000 liability
b. 588,000 asset
c. 360,000 liability
d. 360,000 asset

8. How much is the total defined benefit cost for 2021?

a. 588,000
b. 468,000
c. 348,000
d. 228,000

9. How much is the component of the total defined benefit cost to be recognized in profit or loss?
a. 390,000
b. 408,000
c. 348,000
d. 18,000
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10. How much is the component of the total defined benefit cost to be recognized in other
comprehensive income?
a. 180,000
b. (60,000)
c. 60,000
d. (180,000)

11. Which of the following is considered a government grant under PAS 20?
a. Award of major government contracts
b. Cancellation of an existing loan from the government
c. Free technical advice
d. Public improvements

12. Which of the following is not considered a government grant under PAS 20?
a. Financial aid
b. Benefit of subsidized loans
c. Tax breaks
d. Forgivable loans

13. The main concept used in recognizing income from government grants is
a. capital approach
b. historical cost
c. matching
d. materiality

14. In 20x1, Entity A proposes an environmental clean-up project for a river. The government
supports this project and gives Entity A a ₱1M monetary grant conditioned that the money will
only be spent on the proposed project. The proposed project is expected to take about 2 years to
complete. Entity A starts the clean-up project in 2022. How should Entity A recognize income
from the government grant?
a. in full when Entity A receives the grant
b. over 2 years starting in 2021
c. over the period of the project as expenses are incurred
d. the grant is not recognized as income

15. According to PAS 20, a government grant that becomes repayable is accounted for
a. retrospectively.
b. prospectively.
c. a or b
d. not accounted for

Use the following information for the next two questions:

You are an auditor. ABC Philippines Co., your client, is not sure on what to disclose in its financial
statements as its functional currency. Relevant information follows:

ABC Philippines Co. is a branch of ABC U.S. Co. ABC Philippines operates in a Philippine Economic
Zone Authority (PEZA) Special Economic Zone. ABC Philippines is engaged in the apparel business.
All of its raw materials are imported from the main office in the U.S. and all of its finished products
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are exported directly to U.S. customers. The U.S. customers remit payments to the U.S. main office.
The U.S. main office will then provide the Philippine branch its working capital needs. None of ABC
Philippines Co.s’ finished products are sold in the Philippines. The raw materials imported and
finished goods exported are denominated in U.S. dollars.

16. What is ABC Philippines Co.’s functional currency?

a. Philippine peso
b. U.S. dollar
c. a or b
d. none of these

17. ABC Philippines Co. is required to file audited financial statements with the Philippine
Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR). What is
the presentation currency for the financial statements to be filed with the said government
agencies?
a. Philippine peso
b. U.S. dollar
c. a or b
d. none of these

18. These are those which do not give rise to a right to receive (or an obligation to deliver) a fixed or
determinable amount of money.
a. Monetary items
b. Non-monetary items
c. Financial items
d. Non-financial items

19. On December 1, 2021, you imported a machine from a foreign supplier for $100,000, due for
settlement on January 6, 2022. Your functional currency is the Philippine peso. When preparing
the December 31, 2021 statement of financial position, which of the following will you translate
to the closing rate?
a. machine
b. accounts payable
c. a and b
d. none of these

20. Use the information in Problem #19 above. The relevant exchange rates are as follows:
Dec. 1, 2021 Dec. 31, 2021 Jan. 6, 2022
₱50:$1 ₱52:$1 ₱47:$1

How much foreign exchange gain (loss) will you recognize on December 31, 2021?
a. 200,000 c. 100,000
b. (200,000) d. (100,000)
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