Shareholders’ Equity

Share Capital Transactions

Use the following information for the next two questions:
Dayron Co. had 8,000 ordinary shares outstanding in January 2014. The company
distributed a 15% share dividend in March and a 10% share dividend in June 2014.
After acquiring 1,000 treasury shares in July 1, the company split its shares 4 for 1 in
December 2014.

Question 1
How many ordinary shares are outstanding as of 12/31/2014?
A. 36,480
B. 48,800
C. 40,480
D. 35,480

Question 2
How many ordinary shares are issued as of 12/31/2014?
A. 36,480
B. 48,800
C. 40,480
D. 35,480

Question 3
The December 31, 2013 condensed statement of nancial position of Ambani Services,
an individual proprietorship, follows:

Current assets P140,000

Equipment (net) 130,000
P270,000

Liabilities P 70,000
Mukesh Ambani, Capital 200,000
P270,000
Fair values at December 31, 2013 are as follows:
Current assets P160,000
Equipment 210,000
Liabilities 70,000

On January 2, 2014, Ambani Services was incorporated with 5,000, P10 par value,
ordinary shares issued. How much should be credited to share premium?
A. P320,000
B. P250,000
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C. P230,000
D. P200,000

Question 4
Hiro Corp. issues 1,000 5 par value ordinary shares and 1,000 20 par value preference
shares for a lump sum of 60,000. At the issue date, the ordinary shares were selling for
36 and the preference shares were selling for 28. The Share Premium—Ordinary
account will be credited for
A. 31,000
B. 36,000
C. 26,250
D. 28,750

Question 5
On December 1, 2011, shares of authorized common stock were issued on a
subscription basis at a price in excess of par value. A total of 20% of the subscription
price of each share was collected as a down payment on December 1, 2011, with the
remaining 80% of the subscription price of each share due in 2012. Collectibility was
reasonably assured. At December 31, 2011, the stockholders’ equity section of the
balance sheet would report additional paid-in capital for the excess of the subscription
price over the par value of the shares of common stock subscribed and
A. Common stock issued for 20% of the par value of the shares of common stock
subscribed.
B. Common stock issued for the par value of the shares of common stock subscribed.
C. Common stock subscribed for 80% of the par value of the shares of common stock
subscribed.
D. Common stock subscribed for the par value of the shares of common stock
subscribed.

Question 6
On December 1, 2014, Joshtin Company received a donation of 2,000 shares of its P50
par value ordinary share from a stockholder. On that date, the stock’s market value was
P350 per share. The stock was originally issued for P250 per share. By what amount
would this donation cause total stockholders’ equity to decrease?
A. 700,000
B. 500,000
C. 200,000
D. 0

Question 7
On July 1, year 1, Cove Corp., a closely held corporation, issued 6% bonds with a
maturity value of 60,000, together with 1,000 shares of its 5 par value ordinary share,
for a combined cash amount of 110,000. The market value of Cove’s stock cannot be
ascertained. If the bonds were issued separately, they would have sold for 40,000 on an
8% yield to maturity basis.
What amount should Cove report for share premium on the issuance of the stock?
A. 75,000
B. 65,000
C. 55,000
D. 45,000

Question 8
During year 1, Brad Co. issued 5,000 shares of 100 par convertible preferred stock for
110 per share. One share of preferred stock can be converted into three shares of
Brad’s 25 par ordinary share at the option of the preferred shareholder. On December
31, year 3, when the market value of the ordinary share was 40 per share, all of the
preferred stock was converted. What amount should Brad credit to ordinary share and
to share premium—ordinary share as a result of the conversion?
Ordinary share Share premium
A. 375,000 175,000
B. 375,000 225,000
C. 500,000 50,000
D. 600,000 0

Question 9
On July 1, 2014, Kristine Company issued rights to stockholders to subscribe to
additional shares of its ordinary share. One right was issued for each share owned. A
stockholder could purchase one additional share for 10 rights plus P30 cash. The rights
expired on December 31, 2014. On July 1, 2014, the market price of a share with the
right attached was P40 while the market price of one right alone was P2. All stock rights
were exercised on December 31, 2014. Kristine’s stockholders’ equity on June 30,
2014 comprised the following:

Ordinary share, P25 par value, 40,000 shares issued and 1,000,000
outstanding
Share premium 600,000
Retained earnings 800,000

What is the contributed capital on December 31, 2014?

A. 2,400,000
B. 1,600,000
C. 1,100,000
D. 1,720,000

Question 10
Percy Corporation was organized on January 1, 2014, with an authorization of
1,200,000 ordinary shares with a par value of 6 per share. During 2014, the corporation
had the following capital transactions:
 January 5 issued 675,000 shares @ 10 per share
July 28 purchased 90,000 shares @ 11 per share
December 31 sold the 90,000 shares held in treasury @ 18 per share

Percy used the cost method to record the purchase and reissuance of the treasury
shares. What is the total amount of share premium as of December 31, 2014?
A. -0-.
B. 2,070,000.
C. 2,700,000.
D. 3,330,000.

Question 11
On December 1, 2014, Abel Corporation exchanged 20,000 shares of its 10 par value
ordinary shares held in treasury for a used machine. The treasury shares were acquired
by Abel at a cost of 40 per share, and are accounted for under the cost method. On the
date of the exchange, the ordinary shares had a fair value of 55 per share (the shares
were originally issued at 30 per share). As a result of this exchange, Abel's total equity
will increase by
A. 200,000.
B. 800,000.
C. 1,100,000.
D. 900,000.

Question 12
In 2013, Rose Corporation issued 50,000 shares of P10 par value ordinary share for
P100 per share. In 2014, Rose acquired 2,000 of its shares at P150 per share and
immediately canceled these 2,000 shares. In connection with the retirement of these
2,000 shares, Rose should debit
Share premium Retained earnings
A. 20,000 280,000
B. 100,000 180,000
C. 180,000 100,000
D. 280,000 0

Question 13
The accounts below appears in the December 31, 2009 trial balance of Mara Company:
 Authorized share capital 5,000,000
Unissued share capital 2,000,000
Subscribed share capital 1,000,000
Subscription receivable 400,000
Share premium 500,000
Retained earning unappropriated 600,000
Retained earning appropriated 300,000
Revaluation surplus 200,000
Treasuary share, at cost 100,000

In its December 31, 2009 statement of nancial position, Mara should report total
shareholder’s equity at
A. 5,100,000
B. 5,500,000
C. 4,900,000
D. 4,800,000

Accounting for Dividends

Question 1
Bristol Corp.’s outstanding capital stock at December 15, 2019 consisted of the
following:
• 30,000 shares of 5% cumulative preferred stock, par value P10 per share, fully
participating as to dividends. No dividends were in arrears.
• 200,000 shares of common stock, par value P1 per share.

On December 15, 2019, Bristol declared dividends of P100,000. The amount of

dividends payable to Bristol’s common stockholders is
A. P10,000
B. P34,000
C. P40,000
D. P60,000

Question 2
The following stock dividends were declared by Sweden Company:
Percentage of common shares
outstanding at declaration date Fair Value Par Value
10 1,500,000 1,000,000
25 4,000,000 3,500,000

The amount debited to retained earnings for these stock dividends

A. 4,500,000
B. 3,500,000
C. 5,000,000
D. 5,500,000
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Question 3
On January 1, 2014, Easy Company had ordinary and preference shares outstanding.
The incorporators or original shareholders own ten ordinary shares but no preference
shares. On December 31, 2014, the entity declared dividends on the ordinary shares.
The entity decided to give the ordinary shareholders a choice between receiving a cash
dividend of P500,000 per share or a property dividend in the form of a noncash asset.
The noncash asset is a standard model from entity’s car eet. Each car has a fair value
of P600,000. The entity estimated that 80% of the ordinary shareholders will take the
option of the cash dividend and 20% will elect for the noncash asset. What is the
dividend payable that should be recognized on December 31, 2014?

A. P5,500,000 C. P4,000,000
B. P5,200,000 D. P6,000,000

a.

Question 4
On January 2, 2014, Simpson Co.'s board of directors declared a cash dividend of
P400,000 to shareholders of record on January 18, 2014, payable on February 10,
2014. Selected data from Simpson's December 31, 2013 statement of nancial position
are as follows:

Accumulated depletion P100,000

Share capital 500,000
Share premium 150,000
Retained earnings 300,000

The P400,000 dividend includes a liquidating dividend of

A. P 0
B. P100,000
C. P150,000
D. P300,000

Accumulated Pro ts
Question 1
Selected information from the accounts of Ian Co. at December 31, 2015 follows:
Total income since incorporation P420,000
Total cash dividends paid 130,000
Total value of property dividends distributed 30,000
Excess of proceeds over cost of treasury shares sold,
accounted for using the cost method 110,000
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 In its December 31, 2015 nancial statements, what amount should Ian report as
Accumulated Pro ts?
a. 260,000
b. 290,000
c. 370,000
d. 400,000

Question 2
Cerritos Corporation began operations on January 1, 2011. During its rst three years
of operations, Cerritos reported net income and declared dividends as follows:
Net income Dividends declared
2011 P80,000 P 0
2012 250,000 100,000
2013 300,000 100,000

The following information related to 2014:

Income before income tax P480,000

Prior period adjustment: understatement of 2012
depreciation
Cumulative expensein(before
decrease incometaxes)
from change in 40,000
inventory methods (before taxes)
Dividends declared (of this amount, P50,000 will be 70,000
paid on
Effective taxJanuary
rate 15, 2015) 200,000
35%

As at December 31, 2014, the retained earnings of Cerritos Corporation is

A. P520,500
B. P484,500
C. P430,000
D. P470,500

Question 3
Kevin Company sustained heavy losses for several years and underwent quasi-
reorganization via recapitalization on December 31, 2019. The entity provided the
following information:
Fair Value Carrying Amount
Inventory 5,700,000 6,000,000
Equipment 7,200,000 8,000,000

The share capital is P6,000,000 with a P6 par value, share premium is P1,500,000 and
the de cit is P6,200,000 before the adjustments. The par value is reduced by 1/3 of the
original amount. What must the shareholders contribute in order to eliminate the de cit?
A. 0
B. 1,800,000
C. 3,800,000
D. 6,200,000
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 Other Comprehensive Income
Question 1
Searles does not elect the fair value option for recording nancial assets and liabilities.
What amount of comprehensive income should Searles Corporation report on its
statement of income and comprehensive income given the following net of tax gures
that represent changes during a period?

Pension liability adjustment recognized in OCI $ (3,000)

Unrealized gain on available-for-sale securities 15,000
Reclassi cation adjustment, for securities gain included in net
income (2,500)
Stock warrants outstanding 4,000
Net income 77,000

A. $86,500
B. $89,000
C. $89,500
D. $90,500

Book Value per Share

Question 1
Manggahan Company’s shareholders’ equity at December 31, 2019 consisted of the
following:
8% cumulative preference share, P50 par, liquidating value,
P55 per share; issued and outstanding, 20,000 shares P1,000,000
Ordinary share, P25 par, 100,000 shares issued and
outstanding 2,500,000
Accumulated pro ts 400,000

Dividends on preference share have been paid through 2018 but have not been
declared for 2019. At December 31, 2019, how much is the book value per ordinary
share of Manggahan Company?
A. P25.00
B. P28.20
C. P27.20
D. P29.00

Question 2
BPS Company’s shareholders’ equity on December 31, 2019:
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 6% non-cumulative preference shares, P100 par, liquidation P 1,000,000
value P105
Ordinary share capital, P60 par 3,000,000
Retained earnings 950,000
4,950,000
The book value per ordinary share is
A. 76.80
B. 77.80
C. 78.00
D. 74.25

Question 3
The shareholders’ equity of Kristine Company on December 31, 2013 consisted of the
following:

Preference share capital, P100 par value, 12% annual dividend P5,000,000
Ordinary share capital, P100 par 15,000,000
Share premium 3,000,000
Retained earnings 4,000,000

The preference share is noncumulative and nonparticipating with a liquidation value of

P120 per share. Preference dividends have been paid up to December 31, 2013. What
is the book value per share of ordinary?
A. P140.00
B. P136.00
C. P146.67
D. P142.67

Use the following information for the next two questions.

The equity section of the statement of nancial position of the Guts Company on
December 31, 2013 shows following items:
6% Cumulative preference share capital, P100 par value
(liquidation value, P115 per share); Authorized, 6,000
shares; issued, 4,000 shares; in treasury, 600 shares P400,000
Ordinary share capital, P100 par value, authorized, 20,000
shares; issued and outstanding, 8,000 shares 800,000
Share premium – preference shares 150,000
Share premium – ordinary shares 165,000
Retained earnings 458,600
Reserve for bond retirement 320,000
Treasury shares - preference, at cost 84,000

Question 4
The book value per share of ordinary is
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 A. P121.00
B. P223.70
C. P224.78
D. P223.65

Question 5
Assuming the preference share is participating, the book value per share of ordinary is
A. P204.35
B. P223.70
C. P189.35
D. P187.56

Earnings per Share

Question 1
Dogman Company had 250,000 ordinary shares outstanding on January 1, 2018.
During 2018 and 2019, the following transactions took place.
2018 March 1 Sold 24,000 shares
July 1 Issued a 20 percent stock dividend
October 1 Sold 16,000 shares
December 1 Purchased 15,000 shares to be held in treasury

2019 June 1 3 for 1 split

September 1 Sold 60,000 shares
For earnings per share computation, what is the weighted average number of shares for
2018 and 2019, respectively for comparative nancial statements at the end of 2019?
2018 2019 2018 2019
A. 980,250 1,009,400 C 984,000 1,169,400
B. 329,800 1,049,400 D. 969,000 989,400

Question 2
Urdaneta Company reported the following capital structure at year-end.
2018 2019
Ordinary shares 500,000 500,000
Convertible preference shares 100,000 100,000
10% convertible bonds payable P3,000,000 P3,000,000

During 2019, the entity paid the annual dividend of P5 per share on the preference
share. The preference shares are convertible into 200,000 ordinary shares and the 10%
bonds are convertible into 100,000 ordinary shares. Net income for 2019 was
P5,000,000. The tax rate is 30%. What amount should be reported as diluted earnings
per share?
A. 6.51
B. 6.25
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 C. 7.85
D. 9.00

IFRS 2 – Share-based Payments

Question 1
The Palau Company has issued a range of share options to employees. In accordance
with PFRS 2 Share-based payment, what type of share-based payment transaction
does this represent?
A. Asset-settled share-based payment transaction
B. Cash-settled share –based payment transaction
C. \
D. Liability -settled share – based payment transaction

Question 2
The TBB Company has entered into a contract with The Galilee Company. Galilee will
supply TBB with a range of services. The payment for those services will be in cash and
based upon the price of TBB's ordinary shares on completion of the contract. In
accordance with IFRS 2 Share-based payment, what type of share-based payment
transaction does this represent?
A. Asset-settled share-based payment transaction
B. Cash-settled share-based payment transaction
C. Liability-settled share-based payment transaction
D. Equity-settled share-based payment transaction

Question 3
In accordance with PFRS 2 Share-based payment, how, if at all, should an entity
recognize the change in the fair value of the liability in respect of a cash-settled share-
based payment transaction?
A. Should not recognize in the nancial statements but disclose in the notes thereto
B. Should recognize in the statement of changes in equity
C. Should recognize in other comprehensive income
D. Should recognize in pro t or loss

Question 4
Under IFRS2 Share-based payment, in which ONE of the following will a cash-settled
share-based payment give rise to an increase?
A. A current asset
B. A non-current asset
C. A liability
D. Equity
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Question 5
On January 1, 2018, Norren Company granted key executives 160,000 share options at
an option price of P35 per share. Market prices of the shares where P46 and P51 on
December 31, 2018 and 2019 respectively. The options where granted as compensation
for services to be rendered over a two-year period beginning January 1, 2018. The
Black-Scholes option pricing model determined total compensation expense to be
P1,600,000. What amount of compensation expense should be recognized for 2019?
A. 800,000
B. 1,600,000
C. 1,760,000
D. 2,800,000

Question 6
In connection with a share option plan, Ward Company intends to distribute treasury
shares when the options are exercised. These shares were bought in 2018 at P42 per
share. On January 1, 2019, the entity granted share options for 10,000 shares at P38
per share as additional compensation for services to be rendered over the next three
years. The options are exercisable during a four-year period beginning January 1, 2022
by grantees still employed. Market prices was P47 per share at the grant date. No share
options were terminated during 2019. What amount should be reported as
compensation expense pertaining to the options for 2019?
A. 0
B. 30,000
C. 40,000
D. 90,000

Question 7
On January 1, 2019, Morey Company granted the president, 20,000 share appreciation
rights for past services. Those rights are exercisable immediately and expire on January
1, 2022. On exercise, the grantee is entitle to receive cash for the excess of the market
price on the exercise date over the market price on the grant date. The grantee did not
exercise any of the rights during 2019. The market price of share was P30 on January
1, 2019 and P45, on December 31, 2019. What amount should be recognized as
compensation expense for 2019?
A. 0
B. 100,000
C. 300,000
D. 600,000

Question 8
On January 1, 2019, Plane Company purchased an equipment for the cash price of
P5,000,000. The supplier can choose how the purchase is to be settled. The choices
are 50,000 shares with par value of P50 in one year time or a cash payment equal to
market value of 40,000 shares on December 31, 2019. At grant date on January 1,
2019, the market price is P110 and on the date of settlement on December 31, 2019,
the market price of each share is P130. Compute for the following:
 Interest expense if Share premium if
Equity supplier chooses supplier chooses
component cash alternative share alternative
A. 500,000 600,000 5,000,000
B. 400,000 400,000 4,400,000
C. 600,000 800,000 2,500,000
D. 0 0 4,000,000

Question 9
January 1, 2019, BAUTISTA Company grants to its employees rights to choose either
1,200 phantom shares (cash payment equal to the value of 1,200 shares) or 1,500
shares. The grant is conditional upon the completion of three years of service. If the
employee chooses the share alternative, the shares must be held for three years after
the vesting date. At grant date, the BAUTISTA Company’s share price was P62 per
share. At the end of 2019, 2020 and 2021 the share prices were P64, P63 and P66
respectively. After taking into account the post-vesting transfer restrictions, BAUTISTA
Company estimates that the fair value at grant date of the share alternative was P53.
The amount reported as compensation expense in BAUTISTA Company’s 2019 income
statement is
A. 27,300
B. 29,200
C. 30,100
D. 33,700

IAS 23 - Borrowing Costs

Question 1
PAS 23 de nes qualifying assets as assets that necessarily takes a substantial period of
time to get it ready for its intended use or sale. Which of the following is not a qualifying
asset?
A. Building that will take three years to construct
B. Inventories such as wine and cigars
C. Machinery that is purchased under a three-year installment period
D. Manufacturing plant and power generation facilities

Question 2
Capitalization of borrowing costs
A. Shall be suspended during temporary periods of delay
B. May be suspended only during extended periods of delay in which active
development is delayed
C. Should never be suspended once capitalization commences
D. Shall be suspended only during extended periods of delays in which active
development is delayed

Use the following information for the next ve questions:

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 Bautista Company is constructing a building. Construction began on January 1 and was
completed on December 31. Expenditures were 2,400,000 on March 1, 1,980,000 on
June 1, and 3,000,000 on December 31. Bautista Company borrowed 1,200,000 on
January 1 on a 5-year, 12% note to help nance construction of the building. In addition,
the company had outstanding all year a 10%, 3-year, 2,400,000 note payable and an
11%, 4-year, 4,500,000 note payable.

Question 3
What are the weighted-average accumulated expenditures?
A. 4,380,000
B. 3,155,000
C. 7,380,000
D. 3,690,000

Question 4
What is the weighted-average interest rate used for interest capitalization purposes?
A. 11%
B. 10.85%
C. 10.5%
D. 10.65%

Question 5
What is the avoidable interest for Bautista Company?
A. 144,000
B. 463,808
C. 164,281
D. 352,208

Question 6
What is the actual interest for Bautista Company?
A. 879,000
B. 891,000
C. 735,000
D. 352,208

Question 7
What amount of interest should be charged to expense?
A. 382,792
B. 735,000
C. 526,792
D. 415,192

IFRS 16 - Leases
Use the following information for the next two (2) questions:
Your auditing rm has been engaged to audit the BTS Company. As the one of the staff, you
were assigned to perform procedures on the company’s leasing activities.
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Based on your inspection of relevant documents, you noted the following:
• BTS Company entered into a contract on 1 January 2021 for 10 years, annual rental
payments are P10,000 (exclusive of VAT and withholding tax) in arrears (that is, 31
December each year).
• The useful life of underlying asset is 25 years
• BTS Company’s incremental borrowing rate is 6%.

Question 1
How much is the interest expense recognized in 2022?
A. ₱4,081
B. ₱3,726
C. ₱3,349
D. ₱5,919

Question 2
How much is the lease liability and right-of use asset as of December 31, 2023?
Lease Liability Right-of-use
A. ₱55,824 ₱51,521
B. ₱62,098 ₱51,521
C. ₱49,173 ₱44,161
D. ₱42,124 ₱44,161

Question 3
On October 1, 2022, Nova Company leased of ce space at a monthly rental of P35, 000
for ten years expiring on September 30, 2032. Payment is made at the start of every
month. As an inducement to enter into the lease, the lessor permitted the lessee to
occupy the premises rent-free from October 1, 2022 to December 31, 2022. This of ce
space is considered as low-value assets. On December 31, 2023, what amount should
be recognized as accrued rent payable?
A. 0
B. 102,375
C. 91,875
D. 409,500

Question 4
Orville Company is a dealer in equipment. The entity leased equipment to a lessee on
January 1, 2016 for an eight-year period expiring January 1, 2024. Equal annual
payments under the lease are due at the end of each year beginning December 31,
2016. The lease agreement included a guaranteed residual value of P200, 000 and an
implicit rate of 10%. It was determined that the fair value of the asset is P3,000,000, the
carrying amount is P2,500,000 and that the present value of the minimum lease
payment at 10% is P2,760,900. The PV of 1 at 10% for 8 periods is 0.467, and the PV
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 of an ordinary annuity of 1 at 10% for 8 periods is 5.335. What is the total nancial
revenue over the lease term?
A. 1,379,156
B. 1,498,594
C. 1,439,100
D. 1,558,538

Question 5
On January 1, 2016, Yole Company signed a 10-year non-cancellable lease agreement
to lease equipment to Warehouse Company. The agreement required equal rental
payments at the each of each year beginning December 31, 2016. The fair value of the
building on January 1, 2016 is P6, 000,000 and the carrying amount is P5, 000,000. The
equipment has an estimated economic life of 10 years with no residual value. At the
termination of the lease, the title to the building will be transferred to the lessee. The
lessee's incremental borrowing rate is 11%. The lessor determined the annual rental to
insure a 10% rate of return which is known to the lessee. What total amount of income
should the lessor recognize in 2016 if the transaction is treated as sales type?
A. 1,000,000
B. 1,600,000
C. 1,500,000
D. 1,660,000

IAS 12 - Income Taxes

Question 1
RGS Inc.’s nancial reporting basis of its plant assets exceeded the tax basis because it
uses a different method of reporting depreciation for nancial reporting purposes and
tax purposes. If there is no other temporary differences, RGS should report a
A. Current tax asset
B. Deferred tax liability
C. Deferred tax asset
D.Current tax payable

Question 2
The deferred tax consequence attributable to a deductible temporary difference and
operating loss carryforward is known as a deferred
A. Tax expense.
B. Tax asset
C. Tax bene t.
D. Tax liability

Question 3
It is the amount of income tax paid or payable for the year as determined by applying
the provisions of the enacted tax law to the taxable income.
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 A. Current tax expense
B. Deferred tax bene t
C. Deferred tax expense
D. Income tax expense

Question 4
Which of the following differences would result in future taxable amounts?
A. Expenses or losses that are deductible after they are recognized in nancial
income
B. Revenues or gains that are taxable before they are recognized in nancial
income
C. Expenses or losses that are deductible before they are recognized in nancial
income
D. Revenues or gains that are recognized in nancial income but are never included
in taxable income

Question 5
A deferred tax liability is computed using
A. The current tax laws, regardless of expected or enacted future tax laws.
B. Expected future tax laws, regardless of whether those expected laws have been
enacted.
C. Current tax laws, unless enacted future tax laws are different.
D. Either current or expected future tax laws, regardless of whether those expected
laws have been enacted.

Question 6
According to PAS 12, deferred tax assets and liabilities should be reported in the
balance sheet
A. as current and non-current assets and liabilities depending the balance sheet
classi cation
B. of the related tax basis of the temporary difference
C. as current and non-current depending on the order of liquidity or maturity
D. as non-current asset and non-current liability
E. always net non-current asset or net non-current liability

Use the following information for the next four questions:

Maryheights Company prepared the following reconciliation of income per books with
income per tax return for its rst year of operations the year ended December 31, 2019.
Book income before income taxes P 50,000
Add: Future deductible amounts
_____________________ ______
_____________________ ______ ( 1 )

Less: Future taxable amounts

_____________________ ______
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 _____________________ ______ ( 2 )
Taxable income _____

• Maryheights Company acquired an equipment at a cost of P500,000 on January

1, 2019. Depreciation was recorded using the straight-line method with no
expected residual value for an estimated useful life of 5 years. For tax purposes,
the double-declining balance method was used.
• Sales, cost of sales, operating expenses are recognized under the accrual
method for both nancial and tax reporting purposes, except for the following
items:
a. Rent income is recognized for nancial reporting is recognized under accrual,
for tax purposes rent is recognized when collected. In 2019, Maryheights
Company reported rent income of P140,000, while rent collected totaled to
P90,000
b. Warranty costs are recognized for nancial reporting purposes under the
accrual method and provide an expense equal to 5% of selling price. For tax
purposes, warranty costs are recognized when actual payment is made. Total
warranty expenditures for 2019 was P320,000. At year end, Maryheights
Company reported an estimated warranty obligation of P40,000.
• Bad debts expense reported during the year for nancial reporting was P65,000.
For tax purposes, bad debts are recognized as deductions only upon write-off
which amounted to P30,000 during the year.
• Maryheights Company is under a tax jurisdiction that allows operating losses to
be carried over in the future. The current and future tax rate is at 30%

Question 7
Temporary difference resulting into future deductible amounts in 2019 is
A. 75,000
B. 85,000
C. 140,000
D. 150,000

Question 8
Temporary difference resulting into future taxable amounts in 2019 is
A. 125,000
B. 135,000
C. 140,000
D. 150,000

Question 9
The deferred tax liability reported in the December 31, 2019 statement of nancial
position is
A. 15,000
B. 22,500
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 C. 30,000
D. 45,000

Question 10
The deferred tax asset reported in the December 31, 2016 statement of nancial
position is
A. 15,000
B. 22,500
C. 30,000
D. 45,000

Use the following information for next two questions:

The following information was provided to you by Campus Company
Book value Tax base
Receivable 150,000 200,000
Building – net 300,000 100,000
Machinery and equipment - net 500,000 550,000

Unearned revenue 100,000 -

Estimated warranty obligation 80,000 -

Current and future tax rate 30%. Taxable income for the year P300,000.

Question 11
12. Deferred tax asset
A. 60,000
B. 84,000
C. 30,000
D. 90,000

Question 12
Deferred tax liability
A. 60,000
B. 84,000
C. 30,000
D. 90,000

IAS 19R - Employee Bene ts

Use the following information for the next ve questions:
An entity’s employees are each entitled to 20 days of paid holiday leave per calendar
year. Unused holiday leave cannot be carried forward and does not vest. The entity’s
annual reporting date is 31 December.
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Question 1
The holiday leave is
a. a short-term employee bene t
b. an other long-term employee bene t
c. a post-employment bene t
d. a termination bene t

Question 2
Consider the preceding information. However, in this question, unused holiday leave is
paid on 31 December of each year (ie it vests at the end of each calendar year but does
not accumulate). The holiday leave is
a. a short-term employee bene t
b. an other long-term employee bene t
c. a post-employment bene t
d. a termination bene t

Question 3
Consider the preceding information. However, in this question, unused holiday leave
may be carried forward for one calendar year (ie it accumulates but does not vest). The
holiday leave is
a. a short-term employee bene t
b. a post-employment bene t
c. an other long-term employee bene t
d. a termination bene t

Question 4
Consider the preceding information. However, in this question, unused holiday leave
may be carried forward for two calendar years (ie it accumulates but does not vest).
The holiday leave is
a. a short-term employee bene t
b. a post-employment bene t
c. an other long-term employee bene t
d. a termination bene t

Question 5
Consider the preceding information. However, in this question, unused holiday leave
may be carried forward until the employee leaves the employment of the entity, at which
time the entity will pay the employee for all unused holiday leave (ie it accumulates and
vests). The holiday leave is
a. a short-term employee bene t
b. a post-employment bene t
c. an other long-term employee bene t
d. a termination bene t
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 Question 6
An entity made a public announcement of its commitment to a voluntary redundancy
plan. The entity has an obligation to pay employees that choose voluntary redundancy a
lump sum equal to twice their gross annual salary. The obligation to pay employees that
choose voluntary redundancy is
a. a short-term employee bene t
b. a post-employment bene t
c. an other long-term employee bene t
d. a termination bene t

Question 7
Icar Company pays all employees on a biweekly basis. Overtime pay, however, is paid
in the next biweekly period. Icar Company accrues salaries expenses only at its
December 31 year-end. Data relating to salaries earned in December 31, 2019 are as
follows:
• Last payroll was paid on December 26, 2019 for the 2-week period ended
December 26, 2019.
• Overtime pay earned in the 2-week period ended December 26, 2019 was
P10,500.
• Remaining work days in 2019 were December 29, 30, and 31, on which days,
there was no overtime.
• The recurring biweekly salaries total P187,500.

Assuming a ve-day workweek, what amount should Icar Company record as

accrued salaries at December 31, 2019?
A. P56,250
B. P66,750
C. P112,500
D. P123,000

Use the following information for the next four questions:

Ultimate Company provided the following information for 2016:
January 1 December 31
Fair value of plan assets 2,600,000 3,000,000
Projected bene t obligation 2,000,000 2,100,000
Prepaid/accrued bene t cost-surplus 600,000 900,000
Asset ceiling 200,000 300,000
Effect of asset ceiling 400,000 600,000
Current service cost 100,000
Contribution to the plan 350,000
Bene ts paid 150,000
Discount rate 10%
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Question 8
What is the actual return on plan assets for the current year?
A. 200,000
B. 350,000
C. 150,000
D. 260,000

Question 9
What is the actual gain due to decrease in PBO?
A. 50,000
B. 40,000
C. 30,000
D. 0

Question 10
What is the employee bene t expense for 2016?
A. 200,000
B. 100,000
C. 80,000
D. 40,000

Question 11
What is the net remeasurement loss in 2016?
A. 110,000
B. 220,000
C. 270,000
D. 170,000

IAS 34 - Interim Reporting

Question 1
Which statement is correct concerning interim nancial reporting?
I. PAS 34 mandates which entitles are required to publish interim nancial reports,
how frequently, or how soon after the end of an interim period.
II. Entities that provide interim nancial reports in conformity with generally
accepted accounting principles shall conform to the recognition, measurement
and disclosure principles set out in the standard.
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Question 2
PAS 34 encourages publicly traded entities to provide interim nancial reports
A. At least at the end of the half year and within 60 days of the end of the interim
period.
B. Within a month of the half year- end.
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 C. On a quarterly basis.
D. Whenever the entity wishes.

Question 3
Are the following statements in relation to an interim nancial report true or false,
according to PAS 34?
Statement 1: An interim nancial report may consist of a complete set of nancial
statements.
Statement 2: An interim nancial report may consist of a condensed set of nancial
statements.
A. False , False
B. False, True
C. True, False
D. True, True

Question 4
The following statements relate to interim reporting. Which statement is true?
I. It is necessary to count inventories in full at the end of each interim period.
II. The net realizable value of inventories is determined by reference to selling
prices at the interim date.
A. I only
B. II only
C. Both I and II
D. Neither I nor II

Question 5
Dogman Company’s P190,000 net income for the quarter ended September 30, 2019
included the following after tax items:
• A P120,000 gain on disposal of equipment, realized on April 30, 2019 was
allocated equally to the 2nd, 3rd and 4th quarters.
• A P32,000 cumulative effect loss resulting from a change in inventory valuation
method was recognized on August 4, 2019.
• In addition, Dogman Company paid P96,000 on February 1, 2019, for 2019
calendar year property taxes, of this amount, P24,000 was allocated to the 3rd
quarter of 2019.

For the quarter ended September 30, 2019, how much should Dogman report as net
income?
A. P182,000
B. P222,000
C. P206,000
D. P230,000
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 Question 6
Rica Co., a calendar-year corporation, reported income before income tax expense of
10,000 and income tax expense of 1,500 in its interim income statement for the rst
quarter of the year. Rica had income before income tax expense of 20,000 for the
second quarter and an estimated effective annual rate of 25%. What amount should
Rica report as income tax expense in its interim income statement for the second
quarter?
A. 3,500
B. 5,000
C. 6,000
D. 7,500

Question 7
Icar Company operates in the travel industry and incurs costs unevenly through the
nancial year. Advertising costs of P1 million were incurred on March 1, 2019, and staff
bonuses are paid at year-end based on sales. Staff bonuses are expected to be around
P20 million for the year. Of the sum, P3 million would relate to the period ending March
31, 2019. What costs should be included in the entity’s quarterly nancial report for the
interim period ending March 31, 2019?
A. Advertising costs P1 million; staff bonuses P5 million.
B. Advertising costs P0.25 million; staff bonuses P5 million.
C. Advertising costs P1 million; staff bonuses P3 million.
D. Advertising costs P0.25 million; staff bonuses P3 million.

Question 8
PonyTail Company prepares quarterly interim nancial reports. The entity sells electrical
goods and normally 5% of customers claim on their warranty. The provision in the rst
quarter was calculated as 5% of sales to date, which was P10 million. However, in the
second quarter, a design fault was found and warranty claims were expected to be 10%
for the whole year. Sales in the second quarter were P15 million. What would be the
provision charged in the second quarter’s interim nancial statements?
A. 2,000,000
B. 1,500,000
C. 1,250,000
D. 750,000

Question 9
Math5c Company incurred an inventory loss from market decline of P800,000 on March
31, 2019. The market decline is expected to recover during the year.
What amount of inventory loss should be reported in the quarterly income statement
ending March 31, 2019?
A. 800,000
B. 200,000
C. 400,000
D. 0
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 IFRS 8 – Operating Segments
Question 1
Revolution Company has expanded rapidly and segment reporting is now required. The
entity has no intersegment sales. The following data are for the year ended December
31, 2019:
Operating Segment Operating pro t Identi able
segment revenue (loss) assets
1 620,000 200,000 400,000
2 100,000 20,000 80,000
3 340,000 70,000 300,000
4 190,000 (30,000) 140,000
5 180,000 (25,000) 180,000
6 70,000 10,000 120,000
7 120,000 (20,000) 140,000
Others 380,000 (25,000) 140,000
• The “others” category includes ve operating segments, none of which has
revenue or assets greater than P80,000 and none with an operating pro t.
• Operating Segments 1 and 2 produce very similar products and use very similar
production processes, but serve different product distribution system. These
differences are due to the fact that Segment 2 operates in a regulated
environment while Segment 1 does not.
• Operating Segments 6 and 7 have very similar products, production processes,
product distribution systems, but are organized as separate divisions since they
serve substantially different types of customers. Neither Segments 6 and 7
operate in a regulated environment.

What are the reportable segments for the year ended December 31, 2019?
A. Segments 1, 3, 4 and 5
B. Segments 1, 3, 4, 5 and 7
C. Segments 1, 2, 3, 4 and 5
D. Segments 1, 3, 4, 5 and Segments 6 and 7 combined as one segment

Use the following information for the next two questions:

Grum Corp., a publicly owned corporation, is subject to the requirements for segment
reporting. In its income statement for the year ended December 31, 2010, Grum
reported revenues of 50,000,000, operating expenses of 47,000,000, and net income of
3,000,000. Operating expenses include payroll costs of 15,000,000. Grum’s combined
iden able assets of all industry segments at December 31, 2010, were 40,000,000.
Reported revenues include 30,000,000 of sales to external customers.

Question 2
In its 2010 nancial statements, Grum should disclose major customer data if sales to
any single customer amount to at least
A. 300,000
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 B. 1,500,000
C. 4,000,000
D. 5,000,000

Question 3
External revenue reported by operating segments must be at least
A. 22,500,000
B. 15,000,000
C. 12,500,000
D. 37,500,000