CUP 2(FAR)

EASY ROUND

1. It is the removal of all or part of a recognized asset or liability from the statement of financial position.
a. Writeoff
b. Derecognition
c. Extinguishment
d. Retirement

2. Which is an optional step in the accounting cycle?

a. Adjusting entries
b. Closing entries
c. Financial statements
d. Reversing entries

3. When classifying assets as current and noncurrent

a. Current assets must reflect realizable cash value
b. Prepayments are included in other assets
c. Current assets are determined by the seasonal nature
d. Assets are classified as current if reasonably expected to be realized in cash or consumed during the
normal operating cycle.

4. Which of the following is not a related party?

a. A shareholder owing 30% of the outstanding ordinary shares of an entity
b. An entity providing banking facilities
c. An associate
d. Key management personnel

5. Which statement is true in relation to events after the reporting period?

a. Notes to financial statements should give details of material adjusting events included in those financial
statements
b. Notes to financial statements should give details of material nonadjusting events which could influence
the decisions of primary users
c. A decline in fair value of trading investments would normally be classified as adjusting event
d. The settlement of a long-running court case would normally be classified as nonadjusting event

6. When an entity decided to sell a component, the gain on disposal should be

a. Presented in other income
b. Presented as an adjustment of retained earnings
c. Netted against the loss from operations of the component as part of discontinued operations
d. Included in other comprehensive income

7. An entity that changed from cash basis to accrual basis of accounting during the current year should report
a. Prior period adjustment resulting from the correction of an error
b. Prior period adjustment resulting from the change in accounting policy
c. Component of income from continuing operations
d. Component of income from discontinued operations
 8. For interim financial reporting, an expropriation gain occurring in the second quarter shall be
a. Recognized ratably over the last three quarters
b. Recognized ratably over all four quarters with the first quarter being restated
c. Recognized in the second quarter
d. Disclosed in the second quarter
9. The approach used in segment reporting is known as
a. Segment approach
b. Revenue approach
c. Management approach
d. Enterprise approach
10. In reimbursing the imprest petty cash fund, which of the following statements is true?
a. Cash is debited
b. Petty cash is debited
c. Petty cash is credited
d. Expense accounts are debited

11. Which is not permitted in accounting for uncollectible accounts?

a. Percentage of accounts receivable
b. Percentage of sales
c. Direct writeoff method
d. Aging of accounts receivable

12. Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods
sold computed using FIFO method exceeds cost of goods sold using average cost method?
a. Prices decreased
b. Prices remained unchanged
c. Prices increased
d. Price trend cannot be determined
13. Depending on the business model for managing financial assets, an entity shall classify financial assets
subsequent to initial recognition at
a. Fair value through profit or loss
b. Amortized cost
c. Fair value through other comprehensive income
d. All of these are used in measuring financial assets

14. If the entity uses the fair value model for investment property, which statement is true?
a. Value the property at cost less accumulated depreciation and impairment
b. Report the increase in fair value in other comprehensive income for the period
c. Depreciate the property using normal depreciation methods
d. Do not depreciate the investment property

15. Cost of demolishing an old building to make room for construction of a new building should be
a. Expensed as incurred
b. Added to the cost of the new building
c. Added to the cost of the land
d. Amortized over the estimated time period between the demolition of the old building and completion of
the new building
AVERAGE ROUND

1. The cash count on December 31, 2023 included two customers’ checks amounting to P5,000 both dated in January
2024. These checks were recorded in the books in December and were accepted for deposit by the bank on due
dates. The adjusting entry is:
Debit Credit

a. Cash in bank 5,000 Cash on hand 5,000

b. Accounts receivable 5,000 Cash 5,000
c. Cash 5,000 Accounts receivable 5,000
d. Accounts receivable 5,000 Sales 5,000

2. Which of the following is reported as cash for financial reporting purposes? I. Petty cash funds and change funds.
II. Money orders, and traveler’s checks
III. Coin, currency, and available funds for current operations.
IV. Savings account for acquisition of equipment. V. Savings account for acquisition of inventory.
VI. Savings account for employee’s travels.
VII. Postdated checks and IOUs.

a. I, II, III, and V

b. I, II, III, V, and VI
c. I, II, III, IV, V, and VI.
d. I, II, III, V, and VII.

3. Unreleased checks, which are checks drawn before the end of reporting period but held for later delivery to
creditors
a. Shall be treated as outstanding checks
b. Shall be restored back to the cash balance if previously recorded as disbursements
c. Shall be treated as outstanding checks if the date is shortly after the end of reporting period.
d. Shall be treated as outstanding checks if they are ultimately encash.

4. A check disbursement during the current month for P5,000,000 was credited in the book at P5,500,000. This error
was discovered and corrected in the same month. How would this affect the proof of cash in the book?
a. P500,000 deducted from disbursements, P500,000 deducted from receipts.
b. P500,000 added from disbursements, P500,000 added to ending cash balance.
c. P500,000 deducted from disbursements, P500,000 deducted from ending cash balance.
d. P500,000 deducted from disbursements, P500,000 added to ending cash balance.

5. When the allowance method of recognizing uncollectible accounts is used, the entry to record the recovery of
accounts previously written off would?
a. Increase the balance of the allowance for uncollectible accounts and decrease accounts receivable.
b. Decrease both accounts receivable and the allowance for uncollectible accounts.
c. Decrease accounts receivable and increase allowance for uncollectible accounts.
d. Increase the allowance for uncollectible accounts and no effect on accounts receivable.
6. If your analysis of the balance of allowance for uncollectible accounts resulted to following adjusting entry:
Uncollectible accounts expense xx
Allowance for uncollectible accounts xx
This may indicate that:
a. the amount of provisions made is understated.
b. the amount of provisions made is overstated.
c. the amount of provisions made is greater than the amount of uncollectible accounts expense.
d. the amount of provisions made is always equal to the ending balance of the allowance for uncollectible
accounts.

7. Which of the following statements concerning non-interest-bearing notes receivable is generally a false statement?
a. Amortization of the premium causes the carrying amount of the notes receivable to decrease over the life of
the note.
b. The periodic amortization of discount or premium is the difference of nominal interest recorded and effective
interest recorded over the life of the note.
c. The unamortized discount on notes receivable should be deducted from the principal amount of notes
receivable to arrive at the carrying value of notes receivable.
d. Amortization of the discount causes the carrying amount of the notes receivable to increase over the life of the
note

8. The following statements relate to cash. Which statement is true?

Statement 1: Classification of a restricted cash balance as current or non-current should be parallel in the
classification of the related obligation for which the cash was restricted.
Statement 2: Compensating balances required by a bank should always be excluded from “cash and cash
equivalent”.
Statement 3: The purpose of establishing a petty cash fund is to keep enough cash on hand to cover small amount of
operating expenses for a period of time.
a. Only statement 1 and 2 are true.
b. Only statement 1 and 3 are true.
c. Only statement 2 and 3 are true.
d. All statements are true.

9. Which of the following is added to both cost and retail in computing the total goods available for sale?
a. Freight – in
b. Purchase returns
c. Departmental transfer – in
d. Net mark – up

10. The account title “Inventories” as shown on an entities financial statement would include?
a. Unused supplies in the factory for administrative purposes.
b. Goods in transit, purchased FOB buyer.
c. Goods sold with a buyback arrangement.
d. Goods held on consignment.

11. Which of the following is not a condition that must be satisfied before interest capitalization can begin on a
qualifying asset?
 a. Interest cost is being incurred.
b. Activities that are necessary to get the asset ready for its intended use are in progress.
c. Expenditures for the assets have been made.
d. The interest rate is equal to or greater than the company's cost of capital.

12. Paolo Builders Company determines that a machine used in its operations has suffered an impairment in value
because of technological changes as of the end of 2023. An entry to record the impairment should:
a. recognize additional depreciation expense for year 2023.
b. include a credit to impairment loss account.
c. Impairment loss should not be made if the machine is still being used.
d. include a credit to the machine’s accumulated depreciation account.

13. Costs incurred internally to create intangibles are generally:

a. capitalized.
b. capitalized if they have an indefinite life.
c. expensed as incurred.
d. expensed only if they have a limited life.

14. Copyrights should be amortized over

a. their legal life.
b. the life of the creator plus fifty years.
c. twenty years.
d. their useful life or legal life, whichever is shorter.

15. The intangible asset goodwill may be

a. capitalized only when created internally.
b. written off directly to retained earnings.
c. capitalized only when arise from a purchase of business.
d. capitalized either when purchased or created internally.

DIFFICULT ROUND

1. Which of the following research and development related costs should be capitalized and depreciated over current and
future periods?
a. Research and development general laboratory building which can be put to alternative uses in the future.
b. Inventory used for a specific research project.
c. administrative salaries allocated to research and development.
d. Research findings purchased from another company to aid a particular research project currently in
process.
Calculator Company purchased a machinery January 1, 2022 at a cost of P1,000,000. It is being depreciated using the
sum-of-the-years-digit method over its projected useful life of 5 years. At December 31, 2022, the asset’s fair value was
P1,300,000. Accordingly, an entry was made on that date to recognize the revaluation. A revaluation was made again on
December 31, 2023 with the sound value of P500,000. The company has the policy of transferring any revaluation
surplus to retained earnings as the asset is being used up.
2. How much is the revaluation surplus on December 31, 2022?
a. P633,333
b. P533,333
c. P400,000
d. P333,333
3. How much is the depreciation expense for the year 2023?
a. P266,667
b. P253,333
c. P520,000
d. P545,000

The following information relate to an item of raw materials of Dragon Empire Company as of June 30, 2023:
Replacement cost of raw materials P680,000, Historical cost of raw materials 700,000, Conversion cost 250,000
4. How much is the value of the closing raw materials if the finished product to be produced is expected to be sold at
P1,150,000?
a. P680,000
b. P700,000
c. P950,000
d. P1,150,000

5. How much is the value of the closing raw material if the finished product to be produced is expected to be sold at
P880,000?
a. P680,000
b. P700,000
c. P950,000
d. P1,150,000

6. Assuming that your bad debts expense increased by 50% from prior period’s bad debts expense and your ending
balance of allowance for bad debts remains the same. Which of the following is true?
a. the ratio of the write-off and beginning balance of allowance is equal to the ratio of the write-off and
ending balance of allowance.
b. The ratio of the write off and ending balance of allowance is equals to the ration of write off and bad
debts expense recognized.
c. the ratio of the write-off and beginning balance of allowance is higher than the ratio of the write-off and
ending balance of allowance.
d. the ratio of the write-off and beginning balance of allowance is less than the ratio of write-off and
ending balance of allowance.
7. Which of the following is correct?
I. Direct origination costs – added to principal
II. Direct origination fees – added to principal
III. Direct origination costs – deducted from principal
IV. Direct origination fees – deducted from principal
a. I and II only
b. III and IV only
c. II and III only
d. I and IV only

8. Identify the cost formula that is described in the following statements:

Statement 1: The cost formula in which the recent cost of purchases was used to determine the cost of
ending inventory.
Statement 2: The cost formula in which the average cost of each inventory item in stock is re-calculated after
every inventory purchase.
a. Specific Identification, Moving Average
b. FIFO, Moving Average
c. Specific Identification, Periodic Average
d. FIFO, Periodic Average

9. Evaluate whether each of the following two statements is true or false. Statement 1: The retail inventory
method is allowed for external reporting purposes as an alternative method to measure the cost of inventory.
Statement 2: The gross profit method may be used to measure inventory and related expense for interim
reporting purposes, but not for annual reporting purposes.
a. True, true
b. True, false
c. False, true
d. False, false

10. Roczan Company is determining the amount of inventory to be reported in its statement of financial position as
of December 31, 2023. An entry was made as follow:
Allowance for inventory write down xx
Gain on recovery xx
This indicates that:
a. The cost of ending inventory in 2022 is less than its net realizable value in 2022.
b. The cost of ending inventory in 2022 is greater than its net realizable value in 2022.
c. The cost of ending inventory in 2023 is less than its net realizable value in 2023.
d. The cost of ending inventory in 2023 is greater than its net realizable value in 2023.

11. Which of the following is similar for sum-of-the-years’-digit method and double declining balance method of
depreciation?
a. results in a lower depreciation method in earlier years of the asset.
b. results in residual value being ignored in computing periodic depreciation expense.
c. the carrying amount should not be lower than its residual value at the end of its useful life.
d. Depreciation rate based on its useful life is used to depreciate the asset.
12. When a previous impairment loss was recognized on a depreciable asset and subsequently the recoverable
amount is higher that it’s carrying value, the proper accounting treatment should be:
a. recognized the entire amount as revaluation surplus (revaluation model); recognized the entire amount
as impairment loss (cost model)
b. recognized the entire amount as impairment loss (revaluation model); recognized the entire amount as
impairment loss (cost model)
c. recognized a gain on recovery up to the extent of impairment loss recognized in the previous year and
any excess to revaluation surplus (revaluation model); recognized a gain on recovery up to the extent of
the impairment loss recognized in the previous year and any excess is ignored (cost model)
d. recognized a gain on recovery up to the extent of unrecovered impairment loss as of the date of
recovery and any excess to revaluation surplus (revaluation model); recognized a gain on recovery up to
the extent of unrecovered impairment loss as of the date of recovery and any excess is ignored (cost
model)

13. The cost of a non-monetary asset acquired in exchange for another non-monetary asset and the exchange has
commercial substance is usually recorded at:
a. the fair value of the asset given up, and a gain or loss may be recognized.
b. the fair value of the asset given up, and a gain but not a loss may be recognized.
c. the fair value of the asset received if it is equally reliable as the fair value of the asset given up and no
gain but loss may be recognized.
d. either the fair value of the asset given up or the asset received, whichever one results in the largest gain
or smallest loss to the company.

On January 2, 2022, Turon Inc. purchased an office equipment costing P1,880,000 with a useful life of 4 years. The
company is using straight-line method of depreciation. At December 31, 2022, and December 31, 2023, the
company determines that impairment indicators are present. The following information is available for
impairment testing at each year end:

12/31/2022 12/31/2023
Fair value less costs to sell P1,430,000 P840,000
Value-in-use P1,500,000 P890,000

No changes were made in the asset's estimated useful life.

14. The company's 2022 income statement will report

a. Depreciation Expense of P470,000
b. Depreciation Expense of P470,000 and Loss on Impairment of P20,000.
c. Depreciation Expense of P470,000 and a Recovery of Impairment of P90,000.
d. Loss on impairment of 380,000.

15. The company's 2023 income statement will report

a. Depreciation Expense of P470,000.
b. Depreciation Expense of P500,000 and Loss on Impairment of P110,000.
c. Depreciation Expense of P470,000 and a Loss on Impairment of P50,000.
d. DepreciationLoss on impairment of P140,000.