Far Resa b47

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 47  May 2024 CPALE  18 Feb 2024  11:45 AM - 02:45 PM
FINANCIAL ACCOUNTING and REPORTING FIRST PRE-BOARD EXAMINATION
INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
JET’AIME Company acquired an Equipment and Land with the following considerations:
• On August 1, 2023, an equipment was acquired with an estimated useful life of 5

years from a single supplier with the following terms of payments:
Down payment P1,000,000

5-year non-interest bearing note for the balance 4,000,000
It was ascertained that the total cash equivalent price of the equipment was
P3,200,000.
• On November 30, 2023, JET’AIME Company acquired a piece of land in exchange for
20,000 shares of the company’s P5 par value ordinary shares. When the company
acquired the Land, the shares were selling for P15.00 per share.
• Salvage value of the asset was at 10% of their initial cost.
• The prevailing rate of interest on this date was at 12%. Round off PV factors to
the nearest 4 decimal places, if applicable.
1. How much is the accumulated depreciation on December 31, 2024, assuming the
company is using the straight-line method of depreciation?
a. P576,000 c. P906,667
b. P816,000 d. P1,152,000
On April 1, 2023, WOAINI Company purchased and installed several furniture and fixtures
from a local furniture manufacturer and dealer under the terms 4/10, n/45. The invoice
price of the furniture and fixtures was P2,200,000. WOAINI settled the account on April
22, 2023. In addition, the company incurred freight and installation cost amounting
to P5,000 and P8,000, respectively. The estimated useful life of the furniture and
fixtures is 5 years.
On May 1, 2023, WOAINI Company also purchased a Building for an installment price of
P4,000,000. The company made a P1,000,000 down payment and issued a 6-year, non-
interest-bearing note for the balance payable annually every May 1 starting next year.
There is no cash equivalent price for the building. The estimated useful life of the
building is 9 years. The prevailing interest rate for similar note is at 6%. The
present value factor of P1 at 6% for 6 periods is at 0.7050 and the present value
factor of P1 at 6% ordinary annuity for 6 periods is at 4.9173.
Salvage values of both assets were at 10% of their initial cost. The company is using
the double-declining balance method and SYD method to depreciate its Furniture and
Fixtures and Building, respectively.
2. Statement 1: The depreciation expense for the year 2023 related to Furniture and
Fixtures is P637,500.
Statement 2: The book value of the Building on December 31, 2023 is P3,043,612.
a. Only statement 1 is TRUE c. Both statements are TRUE
b. Only statement 2 is TRUE d. Both statements are FALSE
On July 1, 2023, EUTEAMO Company exchanged machine with PORTUGUESE Company. The cost
of the machine was P650,000 with a related accumulated depreciation balance on this
date of P250,000. Its fair value was P50,000 higher than its book value. PORTUGUESE,
on the other hand, purchased its old machine for P700,000. Carrying value as of the
date of exchange was P480,000. EUTEAMO received cash of P100,000 from PORTUGUESE for
the difference in fair values of the two machines.
3. How much is the initial cost of the new machine that should be recognized by
PORTUGUESE Company assuming the exchange has commercial substance?
a. P350,000 c. P550,000
b. P450,000 d. P580,000
Page 1 of 23 0915-2303213  resacpareview@gmail.com

FINANCIAL ACCOUNTING & REPORTING
ReSA Batch 47 – May 2024 CPALE Batch
18 February 2024  11:45 AM to 02:45 PM FAR First Pre-Board Exam
KALUGURANDAKA Company had a one-year, 12% P4,000,000 loan dated January 1, 2023
specifically for the construction of its own building. The entity began the construction
on March 1, 2023 and was completed on September 1, 2023. Funds not yet utilized during
the construction were temporarily invested in a short-term debt security that earned
a P10,000 interest revenue.
The following expenditures were made during 2023:

April 1, 2023 4,000,000
May 1, 2023 5,000,000
August 1, 2023 3,000,000
4. Statement 1: The initial cost of the building is P12,230,000.

Statement 2: The interest expense for the year 2023 is P0.
AISHITEMASU Corporation started constructing its own building on January 1, 2023. The
total actual expenditures during the construction period were P5,000,000. The
construction was completed on December 31, 2023. AISHITEMASU had the following
borrowings outstanding during 2023:
10%, P1,500,000, interest payable annually, due on May 31, 2025 (general)
11%, P1,000,000, interest payable annually, due on January 1, 2027 (general)
12%, P2,000,000, interest payable annually, issued on December 31, 2022 (specific)
AISHITEMASU determined that weighted average accumulated expenditures for the

construction in 2023 were P3,600,000.
5. Statement 1: The capitalized interest in 2023 is P406,400.

Statement 2: The interest expense for the year 2023 is P93,600.
On April 30, 2023, AYAYATENKA Mining Company purchased a mineral mine for P2,000,000
with removal ore estimates by geographical surveys at 200,000 tons. AYAYATENKA expects
to complete the mining operations in 6 years. The property has an estimated value of
P200,000 after the ore has been extracted. AYAYATENKA Company incurred P500,000 of
development costs in preparing the property for extraction of ore. Exploration rights
secured by the entity require that the site be cleaned up and restored. A reasonable
estimate of this restoration cost is P400,000. The cost of the debt in the mining
industry is 12%.
AYAYATENKA Company also purchased a new equipment on the same date costing P4,000,000
with a useful life of 10 years. This equipment will be used in current and future
mining activities. During 2023, 100,000 tons ore were extracted. The company is using
the straight-line method.
6. What is the amount of depletion for the year 2023?

a. P1,231,000 c. P1,350,000
b. P1,251,000 d. P1,450,000
7. What is the amount of depreciation for the year 2023?

a. P400,000 c. P2,000,000
b. P266,667 d. P1,333,333
NALUYAGAKOSAIMO Company acquired an equipment on January 1, 2020 costing P3,900,000

for its operations. The equipment has an estimated useful life of 9 years and an
estimated salvage value of P300,000. It’s the company’s policy to depreciate all
equipment using the straight-line method. On January 1, 2023, the company made the
following revisions: New depreciation method is 150% declining balance method; New
residual value is P100,000.
8. How much is the carrying value of the equipment on December 31, 2023?
a. P2,025,000 c. P2,925,000
b. P2,050,000 d. P3,225,000

PINAURATAIKAW Company acquired a machinery on January 1, 2018 for P2,500,000. The

estimated useful life is 10 years with no residual value at the end of its useful life.
PINAURATAIKAW uses the straight-line method of depreciation. On December 31, 2021,
PINAURATAIKAW reviewed the machine for possible impairment. As of December 31, 2021,
the following information is available:
Total remaining undiscounted cash inflows P 2,500,000

Total remaining undiscounted cash outflows 700,000
Total remaining undiscounted cash flows (net) P 1,800,000
Assume that the remaining annual undiscounted cash flows will be received equally at
the end of each of the remaining years of useful life. Assume further that the
appropriate discount rate is 10%. Round off PV factors to the nearest 4 decimal places.
Based on quoted prices and the condition of the machine, PINAURATAIKAW estimates the
fair value less cost to sell of the machine is P1,250,000.
On December 31, 2023, the machine was again tested for impairment, and found to have
a new recoverable value of P1,100,000. PINAURATAIKAW Company uses the cost model in
measuring the machine subsequent to initial recognition.
9. How much is the impairment loss to be recognized on December 31, 2021?

a. 0 c. P250,000
b. P193,410 d. P483,900
10. How much is the recovery from impairment loss to be recognized on December 31,
2023?
a. 0 c. P128,940
b. P100,000 d. P228,940
KALASAHANTAKAW Company acquired several machineries on January 2, 2014 costing

P6,000,000 with an original life of 20 years. These machineries were carried under the
cost model since their acquisition. The book value of the machineries on December 31,
2023 was P3,000,000. The straight-line method was used in computing depreciation
charges.
These machineries were carried under the cost model since their acquisition. On January
2, 2024, KALASAHANTAKAW decided to adopt the revaluation model and immediately revalue
the machineries. The depreciated replacement cost of these machineries amounted to
P5,000,000.
On January 2, 2026, KALASAHANTAKAW subjected the machineries to a second revaluation.

The sound value of the machineries on this date amounted to P2,000,000 with no change
in useful life.
KALASAHANTAKAW uses the proportional approach in recording revaluation of property,

plant and equipment. In addition, revaluation surplus of depreciable assets is being
transferred periodically (piecemeal realization) to retained earnings.
11. How much is the revaluation surplus on January 2, 2024, immediately after
recording the revaluation?
a. 0 c. P4,000,000
b. P2,000,000 d. P5,000,000
12. How much is the revaluation loss to be recorded on January 2, 2026?

a. P1,600,000 c. P400,000
b. P2,000,000 d. 0
13. How much is the machineries account balance on January 2, 2026, after recording
the second revaluation?
a. P2,000,000 c. P5,000,000
b. P4,000,000 d. P10,000,000
The following relevant data for 2 different companies were as follows:
Company 1: The following data were gathered from MAHALKITA Company in relation to
estimating its inventories on December 31, 2023:

Inventory, 1/1/23 P1,000,000

Sales 2,200,000
Purchases 800,000
Freight cost on goods purchased 20,000
Freight cost on goods sold 30,000
Inventory inside the warehouse per count, 12/31/23 160,000
Credit memo issued to customers for goods returned 50,000
Sales discounts 100,000
The company’s pricing structure has been established to yield a gross profit of 30%.
MAHALKITA Company is satisfied that all sales and purchases have been properly recorded.
Company 2: On June 1, 2023, a typhoon at INAROTAKA Company’s only warehouse caused

severe damage to its entire inventory. Based on recent history, INAROTAKA has a gross
profit of 25% on sales. The following information is available from INAROTAKA’s
records for the five months ended June 1, 2023.
Inventory, January 1, 2023- P300,000; Purchases- P4,500,000; Purchase returns-

P200,000; Purchase discounts-50,000; Freight-out- P100,000; Freight-in- P150,000; Cash
Sales- P1,200,000; Sales returns- P100,000; Sales allowances – P20,000; Credit sales-
P1,800,000.
A physical inventory disclosed usable damaged goods which INAROTAKA estimates can be
sold to a jobber for P25,000. Also, included in the inventories were goods out on
consignment still unsold as of the date of typhoon costing P200,000. Goods purchased
in transit as of June 1, 2023 under FOB Seller with an invoice price of P300,000 were
included in physical inventory but not recorded as purchases. Goods sold in transit as
of June 1, 2023 under FOB Shipping point costing P400,000 were recorded as sales and
excluded from inventories.
14. Statement 1: The estimated cost of inventory shortage related to MAHALKITA

Company is P155,000.
Statement 2: The estimated cost of inventory loss related to INAROTAKA Company
is P2,300,000.
ILOVEYOU Corporation had the following amounts under retail inventory method:
Cost Retail
Beginning inventory 1,020,000 1,920,000
Purchases 13,072,500 22,155,000
Freight in 300,000
Purchase return 450,000 750,000
Purchase allowance 270,000
Departmental transfer debit 300,000 425,000
Departmental transfer credit 600,000 1,200,000
Net markup 450,000
Net markdown 1,425,000
Sales 19,800,000
Sales returns and allowance 450,000
Sales discounts 500,000
Employee discount 300,000
Normal Spoilage and breakages 600,000
Abnormal Spoilages and
120,000 200,000
breakages
Note: Round off cost % to nearest whole number (e.g., xx%)
15. How much is the estimated COST of ending inventory under FIFO method?
a. P697,500 c. P708,750
b. P652,500 d. P625,500
16. How much is the estimated COST of ending inventory under AVERAGE method?
a. P697,500 c. P708,750
b. P652,500 d. P625,500

17. How much is the estimated COST of ending inventory under CONSERVATIVE method?
a. P697,500 c. P708,750
b. P652,500 d. P625,500
TAAMAYOCONTIGO Company asks you to review its Dec. 31, 2023, inventory values and
prepare the necessary adjustments to the books. The company provided the following
information:
a. TAAMAYOCONTIGO uses the periodic method of recording inventory. A physical

count reveals P3,000,000 inventory on hand at Dec. 31, 2023.
b. Included in the physical count of inventory is P140,000 of merchandise
purchased on Dec. 26 from ZAMBOANGA Company. This merchandise was shipped
F.O.B. Seller on Dec. 29 and arrived on Jan. 4, 2024. The invoice arrived and
was recorded as purchases on Dec. 31.
c. Not included in inventory was merchandise sold to MINDANAO Company shipped on
Dec. 30, F.O.B. Buyer. The invoice was prepared and recorded as a sale on
account for P140,000 on Dec. 31. The cost of merchandise was P80,000 and
MINDANAO received it on Jan. 3, 2024.
d. Included in inventory was merchandise received from CHAVACANO Company on
consignment on Dec. 31 with an invoice price of P150,000.
e. Included in the inventory was merchandise purchased costing P110,000 shipped
FAS on December 27, 2023. The invoice includes the cost of shipment amounting
to P10,000 back to the warehouse.
18. How much is correct cost of inventory cost that should be reported by
TAAMAYOCONTIGO Company on December 31, 2023?
a. P2,930,000 c. P2,860,000
b. P2,390,000 d. P2,850,000
A physical count on December 31, 2023 revealed that BEBEKOH Company had inventory
with a cost of P4,400,000. The following items were included from this amount:
a. Merchandise inventory out on consignment costing P600,000 was held by the consignee
as of the balance sheet date.
b. Goods costing P400,000 were shipped by BEBEKOH “Ex-ship” to a customer on December
31, 2023. The customer received the goods on January 3, 2024.
c. Goods costing P500,000 was purchased under layaway sale. Full payment was made on
December 30, 2023.
d. Goods sold under the repurchase/buyback agreement costing P100,000.
e. Goods costing P800,000 shipped by a vendor under FOB Buyer on December 31, 2023
were received by BEBEKOH on January 7, 2024.
f. Goods costing P700,000 was shipped by a supplier “CIF” on December 30, 2023 and
received by BEBEKOH on January 10, 2024.
19. What amount should the inventory be valued on December 31, 2023?
a. P4,400,000 c. P3,600,000
b. P2,900,000 d. P3,900,000
GIHIGUGMAKOIKAW Company provided you the following inventory details for the month of
July, 2023.
Beginning balance 300 units valued at P20 each

July 10 Purchase of 500 units at P23.80 each
July 15 Sale of 400 units
July 24 Purchase of 600 units at P25 each
July 30 Sale of 250 units
20. Statement 1: The cost of inventory on July 31 is P18,570 using the FIFO method.
Statement 2: The cost of goods sold for the month of July is P15,275 using the
Average Perpetual Method.
21. How much is the unit cost of inventory on July 31, 2023 assuming the company
maintains perpetual inventory records?
a. P17,625 c. P23.95
b. P17,962 d. P23.50
Information pertaining to the inventory of ICHADAWKOIMU Company as of December 31,

2023, follows:
A B C D
Historical cost 2,000,000 2,500,000 3,500,000 4,000,000
Estimated selling price 2,200,000 3,600,000 4,000,000 4,400,000
Estimated cost to sell 300,000 800,000 600,000 600,000
Normal profit margin 440,000 720,000 800,000 850,000
Current replacement cost 2,500,000 3,000,000 2,700,000 3,300,000
ICHADAWKOIMU records losses that result from applying the lower of cost or NRV rule.
22. How much inventories on December 31, 2023 should be reported in the statement
of financial position if the company is using the direct method?
a. P11,600,000 c. P12,000,000
b. P11,900,000 d. P12,300,000
23. How much inventories on December 31, 2023 should be reported in the statement
of financial position if the company is using the allowance method?
a. P11,600,000 c. P12,000,000
b. P11,900,000 d. P12,300,000
24. Assuming the total cost of goods available for sale is P15,000,000, How much is
the cost of goods sold using the allowance method if the company reports the
write-down as part of other expenses?
a. P3,400,000 c. P3,000,000
b. P3,100,000 d. P2,700,000
SWEETHEART Company had the following items in its “Cash and Cash Equivalents” account
as of December 31, 2023:
Petty cash fund including P2,000 unreplenished vouchers P10,000

and P8,000 remaining bills and coins
Postal money order including traveler’s check of P5,000 30,000
and manager’s check of P2,000
Total customers’ checks on hand (40% is post-dated) 100,000
Bond and Mortgage fund 500,000
Cash set aside for the acquisition of Assets to be 900,000
disbursed in 2024. (2/3 of cash for the purchase of
Machineries and the remaining cash for the purchase of
Office Supplies)
Cash in bank to be used for payment of interests and taxes 200,000
Cash in bank – compensating balances (40% is unrestricted;
50% is restricted related to short-term loan; 10% is 1,000,000
restricted related to long-term loan)
25. What amount should be presented as Cash and Cash Equivalents on December 31,
2023?
a. P1,598,000 c. P1,498,000
b. P998,000 d. P698,000
HONEY Company reported the following information at the end of the current year:
• Short-term ordinary share investment (acquired 12/30/23 to be sold in less than
3 months from the balance sheet date).
• Short-term preference share investment (acquired 12/31/23 to be sold within 2
months from the balance sheet date.
• Short-term bond investment purchased 1 month before maturity date.
• BSP treasury bills (acquired 12/1/2023; due in 1/31/2024).
• Redeemable preference shares (original term of 5 years due on 3/28/2024; acquired
on 12/29/2023).
• Money market fund acquired on 11/30/2023 that will mature on 3/31/2024.
26. How many items from the above list are considered cash equivalents?
a. 2 c. 4
b. 3 d. 5

LUVZKIE Corporation’s petty cash fund on December 31, 2023 is composed of the following:
Coins and Currencies P 7,000
Unreplenished petty cash vouchers representing expenses 13,000
Employee’s check dated December 25, 2023 8,000
Employee’s NSF check returned by the bank 3,000
Check drawn by the company payable to the petty cash custodian 10,000
Emptied envelope labeled as contributions of employees for wedding
gift to an officer amounting to 4,000
Advances to employee 5,000
Employee’s postdated checks 2,000
The petty cash ledger has an imprest balance of P50,000.
27. How much is the adjusted balance of the Petty Cash Fund on December 31, 2023?
a. P21,000 c. P17,000
b. P30,000 d. P25,000
28. How much is the petty cash shortage or overage?

a. P2,000 shortage c. P6,000 shortage
b. P2,000 overage d. P6,000 overage
The petty cash fund of PALANGGA Company on December 31, 2023 is composed of the
following:
Currencies and coins 7,000

Petty cash vouchers not yet replenished:
• Postage stamps 800
• Supplies 3,000
• IOU’s 2,000
• Transportation 5,700
Replenishment check 8,000
Unused supplies 1,000
Unused postage stamps 300
Check drawn by office manager dated 12/30/23 5,000
Collections from customer dated 12/25/23 (70% is check) 10,000
Envelope containing cash contributions from employees
for networking start-up party (no money when opened) 2,500
The Petty cash fund was established for an amount of P35,000.
29. How much is the adjusted balance of the Petty Cash Fund on December 31, 2023?
a. P17,500 c. P15,000
b. P14,500 d. P12,000
You obtained the following information from the Cash – BPI Current Account no. 0218-
2024 of BABE Corporation:
Details of the cash records revealed the following details/list of the company’s
receipts and disbursements for the month of September:
RECEIPTS DISBURSEMENTS
OR No. Amount Check No. Amount
0908021 P66,000 008901 P12,000
0908115 127,800 008902 18,000
0908129 120,000 008903 6,000
0908144 336,000 008904 20,000
0908169 234,000 008905 72,000
0908189 230,000 008906 118,000
0908211 528,000 008907 156,000
0908228 462,000 008908 180,000
0908254 126,000 008909 366,000
0908279 180,000 008910 42,000
You obtained some of the information from the bank statement for the month of
September:

Bank Statement
BPI Current Account no. 0218-2024
September 30, 2023
Date Particulars Debit Credit

Sept. 5 Check No. 008902 18,000 66,000
Sept. 7 127,800
Sept. 8 Check No. 008905 72,000 120,000
Sept. 10 Check No. 008910 42,000 462,000
Sept. 12 Check No. 008908 180,000 126,000
Sept. 14 Check No. 008903 6,000
Sept. 15 180,000
Sept. 16 Check No. 008909 366,000 336,000
Sept. 17 DM 0091 360 360
Sept. 19 CM 0020 291,000
Sept. 22 Check No. 008907 156,000
Sept. 28 DM 0210 720
Sept. 30 CM 0056 72,000
DM 0091 - NSF check CM 0020 - Bank loan proceeds

DM 0210 - Bank service charge CM 0056 - Customer note collection
30. Statement 1: The total outstanding checks on September 30 is P150,000.

Statement 2: The total deposits in transit on September 30 is P992,000.
The following information pertains to the Cash in Bank account of DEAR Company for the
month of April, 2023 for bank reconciliation purposes:
a. Cash balance per bank statement, P23,000.

b. Undeposited collections, P10,100.
c. Outstanding checks, P1,900, of which a check for P500 was certified by the bank
on April 22.
d. NSF checks returned not yet recorded in the books, P1,000
e. Collections by bank not yet recorded by company, P11,500.
f. Bank service charges not entered in company’s books, P400.
g. A check for P900 of another company was charged by bank to DEAR Company in error.
h. A check drawn for P800 was erroneously entered in the books as P480.
31. What amount should be reported as adjusted cash in bank?

a. P22,820 c. P32,600
b. P23,320 d. P33,100
32. How much is the unadjusted cash balance per books?

a. P22,820 c. P32,600
b. P23,320 d. P33,100
MYCUDDLEBEAR Company had the following bank reconciliation at May 31, 2023:
Balance per bank statement, 05/31 P490,000

Add: Deposit in transit P100,000
Debit memo 10,000 110,000
Total P600,000
Less: Outstanding checks P 125,000
Credit memo 60,000 185,000
Balance per book, 05/31 P415,000
All reconciliation items at May 31 cleared through the bank in June. Outstanding
checks at June 30 totaled P75,000; Deposits in transit at June 30 amounted to
P150,000; Credit memo for June-P80,000; Debit memo for June- P15,000, Bank receipts
for June-P600,000 including erroneous bank credit of P100,000 corrected by the bank
in June and Bank disbursements for June-P500,000 including erroneous bank charge of
P50,000 corrected by the bank in July.
33. What is the amount of adjusted cash receipts in June?

a. P600,000 c. P550,000
b. P500,000 d. P650,000
34. What amount should be reported as adjusted cash in bank on June 30?
a. P550,000 c. P465,000
b. P715,000 d. P300,000
The following is the summary of transactions of SARANGHAE Company related to its

accounts receivable in 2023:
Accounts receivable, 1/1 P1,200,000

Credit sales 7,150,000
Cash collected from customers during the year 5,700,000
Accounts written off as uncollectible 160,000
Recovery of accounts previously written off included in the total 65,000
above collections
Sales discount (gross method) 435,000
Sales returns on credit customers 150,000
Days past invoice date at December 31: Amounts

0 – 60 1,000,000
61 – 90 820,000
Over 90 days ?
The company’s policy to provide allowance on its account receivable at year end as
follows: 0-60 days – 1%; 61-90 days – 5%; and over 90 days – 10%.
35. How much is the balance of the allowance for bad debts on December 31, 2023?
a. P66,000 c. P55,000
b. P65,000 d. P50,000
36. How much is the Accounts Receivable that should reported in the Statement of
Financial position on December 31, 2023?
a. P1,926,000 c. P1,915,000
b. P1,924,000 d. P1,904,000
On January 1, 2023, SWEETIE Company had a balance in the Allowance for Doubtful Accounts
of P10,000. During 2023, it wrote off P13,500 of accounts and collected P2,000 on
accounts previously written off. The balance in Accounts Receivable was P200,000 at
January 1 and P250,000 at December 31. At December 31, 2023, SWEETIE Company estimated
that 5% of accounts receivable will prove to be uncollectible.
37. How much is the bad debts expense for the year 2023?
a. P14,000 c. P2,500
b. P11,000 d. P12,500
MYONLYONE Company uses the net method of accounting for cash discounts. In one of its
transactions on December 15, 2023, MYONLYONE sold merchandise with a list price of
P500,000 to MYLIFE Company who was given a trade discount 15% and 20%. Credit terms
were 2/10, n/30. The goods were shipped FOB destination, freight collect. Total
freight charges amounted to P75,000. On December 20, 2023, MYLIFE returned damaged
goods originally billed at P60,000. MYLIFE paid the accounts on January 2, 2024.
38. Statement 1: The correct receivables to be reported on December 31, 2023, is

P205,000.
Statement 2: The correct receivables to be reported on December 31, 2023, is
P205,000 under the Gross method.
On January 1, 2023, DARLING Company sold a tract of land for P5,000,000. DARLING
Company received P1,000,000 down and a non-interest-bearing note for the balance which
is payable in 4 equal annual payments every December 31 of each year. There was no
established exchange price for the land and the note had no ready market. The
prevailing interest rate for this type of the note was 12%. The present value of note
on January 1, 2023, is P3,037,300.

39. Statement 1: The non-current portion of notes receivable on December 31, 2023,
is P1,689,989
Statement 2: The interest income for the year 2024 is P288,213.
On January 1, 2023, BUTTERCUP Corporation received from a customer an 8-month,

P6,000,000 note bearing an annual interest rate of 10%. The principal and the interest
are payable on September 1, 2023. To obtain cash quickly, BUTTERCUP discounted the
note with Cookie Bank on March 1, 2023 without recourse. Cookie Bank charged a discount
rate of 12%.
40. What is the loss on note receivable discounting to be recognized by Iceland?

a. 100,000 c. 384,000
b. 84,000 d. 0
On July 31, 2023, STUPIDLOVE Company received a ten-year, P2,000,000 face value notes
from MISTERKUPIDO Company. The note bears interest at 10% and the market interest rate
of similar notes on July 31, 2023 was 12%. The present value of the note on July 31,
2023, was P1,774,000. Interest is payable every July 31.
41. How much is the interest income for the year ended December 31, 2023?
a. 106,440 c. 88,700
b. 100,000 d. 73,917
IAMYOURS Company reported the following notes receivable balances as of December 31,
2022:
Notes receivable from sale of goods P2,000,000
Notes receivable from services rendered 1,000,000
Additional information:
a. The notes receivable from sale of goods has a coupon rate of 12% per annum
dated July 1, 2022. The note is payable in two equal annual installments of
P1,000,000 plus interest on the unpaid balance every July 1. The initial
principal and interest payments were made on July 1, 2023.
b. The notes receivable from services rendered dated December 31, 2022, has a
stated rate of 12% payable annually every December 31. The note matures on
December 31, 2024. The market interest rate of similar notes on December 31,
2022 was 12%.
Present value of P1 at 12% for two periods is 0.7972. Present value of P1 at 12%
for one period is 0.893. The present value of an ordinary annuity of 1 at 12%
for two periods is 1.690.
42. How much is the interest receivable on December 31, 2023 related to notes
receivable from sale of goods?
a. 0 c. 120,000
b. 180,000 d. 60,000
43. How much is the carrying value of notes receivable on December 31, 2023 related
to notes receivable from services rendered?
a. 892,640 c. 797,000
b. 1,120,000 d. 1,000,000
On January 1, 2023, NAMUMUTANTAKA Company loaned P5,000,000 to BICOL Company. The loan
is repayable after 4 years. Interest on this loan is 5% annually every December 31 of
each year starting 2023. Direct origination cost of P400,000 was paid by NAMUMUTANTAKA
and direct origination fee amounting to P218,505 was deducted from the proceeds received
by BICOL Company. The interest effective on this loan is 4% after the origination costs
and fees.

Based on NAMUMUTANTAKA Company’s initial estimates on initial recognition date, the
present value of the 12-month expected credit loss discounted at 10% is P200,000.
The probability of default is at 20%. At the end of 2023, there was no evidence of
significant increase in credit risk, the note is determined to have a “low credit
risk”, and there were no changes in the estimate of the 12-month expected credit
loss.
On December 31, 2024, the interest for the period was collected. On this date, based
on available forward- looking information, there is evidence that there was a
significant increase in credit risk, thus, the entity had to change its basis of
calculating loss allowance from a 12-month expected credit loss to a lifetime expected
credit loss. The PV of the lifetime expected credit loss discounted at 10% is at
P650,000. The probability of default is at 30%.
44. Statement 1: The credit loss that should be recognized in 2024 is P170,800.
Statement 2: The carrying value of the loan receivable on December 31, 2024 is
P4,566,045.
You noted the following items relative to the company’s intangible assets of IFONLY
Corporation at December 31, 2023.
• On January 2022, IFONLY signed an agreement to operate as franchisee of for an

initial franchise of P680,000. Of this amount, P200,000 was paid when the agreement
was signed and the balance was payable in four annual payments of P120,000 each
beginning on January 1, 2023. The agreement provides that the down payment is not
refundable, and no future services are required in the franchisor. The implicit rate
for loan of this type is 14%. The agreement also provides that 5% of the revenue from
the franchise must be paid to the franchisor annually. IFONLY’s revenue from the
franchise for 2023 was P8,000,000. IFONLY estimates the useful life of the franchise
to be ten years.
• IFONLY incurred P624,000 of experimental development costs in its laboratory to

develop a patent which was granted on January 2, 2022. Legal fees and other costs
associated with the registration of the patent totaled P131,200. IFONLY estimates that
the useful life of the patent will be eight years.
• A trademark was purchased for P320,000 on July 1, 2021. Expenditures for successful
litigation in defense of the trademark totaling P80,000 were paid on July 1, 2023.
IFONLY estimates that the trademark’s useful life will be indefinite.
45. What are the carrying amounts of the intangible assets (franchise, patents and
trademarks, respectively) on December 31, 2023?
a. P439,715; P98,400; P320,000 c. P544,000; P566,400; P320,000
b. P439,715; P566,400; P240,000 d. P544,000; P98,400; P240,000
On April 1, 2023, MAHALMO Company purchased from MAHALAKO Company(franchisor), a

franchise to operate a café for P3,125,000. In addition, the franchise contract
stipulates that MAHALMO shall pay MAHALAKO Company 5% of its sales exceeding P5,000,000,
payable at the end of the month following the end of every quarter. For the nine months
ended December 31, 2023, MAHALMO Company’s sales amounted to P8,500,000. MAHALMO
estimates that the useful life of franchise is 10 years. It is the company’s policy to
amortize to the nearest month.
46. How much is MAHALMO Company’s amortization expense and franchise fee expense
for the year 2023?
a. P312,500 and P425,000 c. P312,500 and P175,000
b. P234,375 and P425,000 d. P234,375 and P175,000
On December 31, 2022, REWIND Company acquired the following intangible assets:
• A trademark for P3,000,000. The trademark has 8 years remaining in its legal life.
It is anticipated that the trademark will be renewed in the future indefinitely,
without problem.

• A patent for P2,000,000. Because of market conditions, it is expected that the patent
will have economic life for just 5 years, although the remaining legal life is 10
years.
On December 31, 2023, because of a decline in the economy, the trademark is now expected
to generate net cash flows of just P120,000 per year. The useful life of the trademark
still extends beyond the foreseeable horizon. The cash flows expected to be generated
by the patent are P500,000 in 2024, P600,000 in 2025, P400,000 in 2026 and P500,000 in
2027. The appropriate discount rate for all intangible assets is 6%. The present value
of 1 at 6% for one period is 0.94, for two periods is 0.89, for three periods is 0.84,
and for four periods is 0.79.
47. REWIND Company shall recognize a total impairment loss in 2023 at

a. P1,265,000 c. P 625,000
b. P1,000,000 d. P 0
At December 31, 2022, IKAWANGFOREVERKO Manufacturing Company had three existing patents
as shown in the table below.
Date Acquired Cost Useful Life

Patent A March 8, 2018 P150,000 8 years
Patent B January 1, 2021 P210,250 10 years
Patent C July 1, 2021 P72,000 5 years
During 2023, the company had the following transactions and assessments pertaining to
its patents.
• Due to the emerging competition relating to the product being manufactured in Patent
A, it is expected that the right will be useful only in 2023 and 2024.
• Patent B is believed to be uniquely useful as long as the company retains the right
to use it.
• On June 20, 2023, the company unsuccessfully attempted to defend its rights to Patent
C. Legal fees of P15,000 was incurred in this action. The asset was immediately
derecognized in the accounts.
The company’s policy is to take full year amortization in the year of acquisition and
no amortization in the year of derecognition using straight-line method. The company
reports on a calendar-year basis.
48. How much is the amortization of the patent for the year 2023?
a. P63,550 c. P49,150
b. P54,175 d. P28,125
49. How much is the total expense taken to profit or loss during 2023 relating to
the derecognition of Patent C?
a. P15,000 c. P58,200
b. P43,200 d. P65,400
HAPPILYEVERAFTER Company incurred the following costs during 2023 in developing Doors,
an alternative program to Windows:
Completion of detailed program design P 40,000
Costs incurred for coding and testing to establish technological
Feasibility 60,500
Other coding costs after establishing technological feasibility 21,000
Other testing costs after establishing technological feasibility 39,200
Costs of producing product masters for training materials 16,800
Duplication of computer software and training materials from
Product masters (1,000 units) 44,000
Packaging the product (1,000 units) 9,000
50. Statement 1: The capitalized computer software that should be included in the
total intangible assets is P59,200.
Statement 2: The amount of R&D that should be expensed outright is P100,500.
51. The following statements are related to cash equivalents:

Statement 1: Short-term and highly liquid investments that are readily
convertible into cash with remaining maturity of three months.
Statement 2: Short-term and highly liquid investments that are readily
convertible into cash and acquired three months before maturity.
a. Only statement 1 is true c. Both statements are true
b. Only statement 2 is true d. Both statements are false
52. The following statements are related to company’s check:

Statement 1: Undelivered check should be restored back to cash in all cases.
Statement 2: Post-dated check should be restored back to cash only if it was
previously recorded as receipts.
53. The following statements are related to imprest petty cash fund system:
Statement 1: Adjusting entry to record any unreplenished petty cash fund at
year-end will require a credit to cash in bank or petty cash fund.
Statement 2: The journal entry to record at the time of payment of expense is
debit to expense and credit to cash in bank.
54. The following statements are related to bank reconciliation:

Statement 1: A statement sent by the bank to depositor on a monthly basis.
Statement 2: A schedule that accounts for the difference between an entity’s
cash balance as shown in the bank statement and the cash balance shown in the
general ledger.
55. The following statements are related to reconciling items for bank
reconciliation purposes:
Statement 1: Credit memos and any undeposited collections are treated as book
reconciling items.
Statement 2: Outstanding checks and debit memos are treated as bank reconciling
items.
56. The following statements are related to Property, Plant and Equipment:
Statement 1: If the properties are recorded at fair value of the asset given up
and adjusted for any amount of cash paid or received, the exchange is considered
as with commercial substance.
Statement 2: Cost of purchase of PPE includes the purchase price, import duties,
non-refundable purchase taxes and rebates less any amount of trade discount.
57. The following statements are related to Inventories:

Statement 1: Inventories are measured every end of the reporting period at cost
or net realizable value whichever is lower on an item-by-item basis or by
reclassification basis (i.e., raw materials, work in process and finished
goods).
Statement 2: If the net realizable value of the inventory exceeded its cost,
the difference should be reported in profit or loss.
58. The following statements are related to Inventories:

Statement 1: Goods held on consignment should be excluded from inventories to
be reported as of the balance sheet date in all cases while goods out on
consignment may or may not be reported as inventories as of the balance sheet
date.
Statement 2: FOB Shipping point, Freight Collect means that the buyer paid the
shipper freight charges and later asked for reimbursement from the seller
59. The following statements are related to Borrowing cost:

Statement 1: Under specific borrowing, the actual interest incurred for the
period is always capitalized.
Statement 2: Under general borrowing, the excess average interest over the
actual interest is recognized as interest expense.
60. The following statements are related to Depreciation:

Statement 1: Depreciation is the process of allocating the depreciable cost of
property over its estimated useful.
Statement 2: Depreciation expense and Accumulated depreciation should be
reported in the Statement of Financial Position and Statement of Comprehensive
Income, respectively.
61. The following statements are related to Estimation of inventories:

Statement 1: Purchase discounts and Sales discounts are ignored in the
computation of total goods available for sale at cost and net sales,
respectively.
Statement 2: Conventional approach in retail inventory method will generally
produce the lowest cost ratio and cost of inventories.
62. Which of the following is reported as cash item on December 31, 2023?
a. Money market fund purchased on November 1, 2023 due on January 29,
2024.
b. Cash in Bank where the bank filed its bankruptcy on December 2, 2023.
c. Case set aside for the payment of mortgage payable
d. Cash in Bank, this bank account is restricted for disbursement of
payroll only.
63. Unreplenished petty cash vouchers at balance sheet date will require adjustments
to avoid
a. Overstatement of both asset and expense
b. Understatement of both asset and expense
c. Understatement of asset and overstatement of expense
d. Overstatement of asset and understatement of expense
64. In a bank reconciliation, a DAUD or DAIF check is

a. Added to the bank balance
b. Added to the book balance
c. Deducted from the bank balance
d. Deducted from the book balance
65. Which of the following is true about erroneous book debits?

a. Cash balance per bank is overstated
b. Receipts per book is understated
c. It should be recorded as a debit to cash in bank account
d. It should be deducted from balance per book in the bank reconciliation
66. Which of the following statements concerning notes is valid?

a. It is possible to have a premium on non-interest-bearing note.
b. The rate stated on the face of an interest-bearing note is equal to the
rate prevailing in the market in all cases.
c. Present value factors are always irrelevant in the accounting for
interest-bearing note
d. It is possible to have a premium on interest-bearing note, when the
stated rate is not equal to the prevailing rate in the market.

67. The buyer paid the shipper freight charges and later asked for reimbursement
from the seller. The term agreed must have been
a. FOB destination point freight prepaid
b. FOB destination point freight collect
c. FOB shipping point freight prepaid
d. FOB shipping point freight collect
68. Which of the following reduces the balance of allowance for bad debts?
a. Collection of overdue credit sales
b. Provision of bad debt allowance
c. Accounts written-off
d. Collection of a previously written-off account
69. What is the initial recognition basis of non-interest-bearing note received in

exchange for a property?
a. At fair value of the property or note.
b. At maturity value of the note.
c. At face value of the note.
d. At the carrying amount of the property.
70. If there is a change from sum of years’ digits to straight line method, it
should be applied:
a. Prospectively
b. Retrospectively
c. Either A or B
d. None of the above
ANSWERS & SOLUTIONS/CLARIFICATIONS

1 B 26 B 51 B
2 C 27 A 52 D
3 B 28 C 53 D
4 A 29 B 54 B
5 C 30 C 55 D
6 B 31 C 56 A
7 B 32 A 57 D
8 A 33 C 58 A
9 B 34 B 59 D
10 C 35 A 60 A
11 B 36 D 61 B
12 C 37 A 62 D
13 C 38 C 63 D
14 A 39 C 64 D
15 C 40 B 65 D
16 A 41 C 66 D
17 B 42 D 67 B
18 A 43 D 68 C
19 C 44 D 69 A
20 A 45 A 70 A
21 C 46 D
22 A 47 B
23 A 48 C
24 C 49 C
25 B 50 B

1. Ans. B
• Initial cost of Equipment,8/1/23 = 3,200,000 (cash equivalent price)
• Annual Depreciation Expense = 3,200,000 x 90% /5 = 576,000
• ACCUMULATED DEPRECIATION, 12/31/24 = (576,000 x 5/12) + 576,000 = 816,000
2. Ans. C
Purchase price (2,200,000 x 96%) P2,112,000

Freight cost 5,000
Installation cost 8,000
Initial cost of FURNITURE AND FIXTURES P2,125,000
• Fixed rate = 2/5 = 40%

• DEPRECIATION EXPENSE-2023 = 2,125,000 x 40% x 9/12 = 637,500
PV of FCO (500,000 x 4.9173) P2,458,650

Down payment 1,000,000
Initial cost of BUILDING P3,458,650
• SYD of 9 = (9 x 10) / 2 = 45
Cost P3,458,650
Accumulated Depreciation, 12/31/23
(3,458,650 x 90% x 9/45 x 8/12) (415,038)
BOOK VALUE of BUILDING, 12/31/23 P3,043,612
3. Ans. B
EUTEAMO PORTUGUESE
FAIR Value of asset GIVEN UP P450,000 P350,000
Cash (received) / paid (100,000) 100,000
INITIAL COST OF NEW MACHINE (FV of asset P350,000 P450,000
RECEIVED)
4. Ans. A
Borrowing cost DURING the construction period P240,000

(4,000,000 x 12% x 6/12)
Interest revenue (10,000)
Capitalized interest - 2023 P230,000
Actual expenditures P12,000,000
(4,000,000 + 5,000,000 + 3,000,000)
Capitalized interest 230,000
INITIAL COST OF BUILDING P12,230,000
• INTEREST EXPENSE-2023 (Before and After construction)

= P4,000,000 x 12% x 6/12 = P240,000
5. Ans. C
WAAE P3,600,000
Allocated to Specific borrowings (2,000,000)
Allocated to General borrowings 1,600,000
Multiply by: Average interest rate (260,000/2.5M) 10.40%
Average interest P166,400
Capitalized interest – General borrowings P166,400

(Average interest of P166,400 vs. Actual interest of P260,000
whichever is LOWER)
Capitalized interest – Specific borrowings
(2,000,000 x 12% x 12/12) 240,000
TOTAL CAPITALIZED INTEREST - 2023 P406,400

Actual interest – 2023 related to General borrowings P260,000

(110,000 + 150,000)
Capitalized interest – 2023 (General borrowings) (166,400)
INTEREST EXPENSE - 2023 P93,600
6. Ans. B
7. Ans. B
Acquisition cost P2,000,000

Development cost 500,000
PV of Restoration cost 202,640
(400,000 x .5066)
Cost of Wasting Asset P2,702,640
• Depletion rate = P2,702,640 – 200,000 / 200,000 tons = P12.51 per ton

• DEPLETION = P12.51 per ton x 100,000 tons = P1,251,000
• Since the Equipment will be used in future mining activities, the depreciation is based on
its useful life (i.e., time-factor SL depreciation method)
• DEPRECIATION EXPENSE-2023 = (P4,000,000 / 10 years) x 8/12 = P266,667
8. Ans. A
Cost P3,900,000
Accumulated Depreciation, 1/1/23
(3,900,000 – 300,000 / 9 years) x 3 years (1,200,000)
CV of Equipment as of date of change, 1/1/23 P2,700,000
• Fixed rate = 1.5/6 = 25%

• DEPRECIATION EXPENSE-2023 = P2,700,000 x 25% x 12/12 = P675,000
• CV, 12/31/23 = P2,700,000 – 675,000 = P2,025,000
9. Ans. B
10. Ans. C
CV, 12/31/21 (P2,500,000 x 6/10) P1,500,000

Recoverable value, 12/31/21 (1,306,590)
IMPAIRMENT LOSS, 12/31/21 P193,410
• Value in use:
= P1,800,000 / 6 years remaining = P300,000 annual net cash flows
= P300,000 x 4.3553 = P1,306,590
• Recoverable value:
= FVCTS of P1,250,000 vs. P1,306,590 whichever is HIGHER
Recoverable value, 12/31/23 P1,100,000

CV w/ impairment, 12/31/23
(P1,306,590 x 4/6) (871,060)
Increase, 12/31/23 P228,940
CV w/o impairment, 12/31/23 P1,000,000

(P1,500,000 x 4/6)
CV w/ impairment, 12/31/23
(P1,306,590 x 4/6) (871,060)
Maximum amount to be recovered, 12/31/23 P128,940
NOTE: The increase of P228,940 exceeded the maximum amount to be recovered of P128,940, thus,
the maximum recoverable amount of P128,940 is also the amount of recovery from
impairment that should be recognized on 12/31/23.

11. Ans. B
12. Ans. C
13. Ans. C
Cost Revalued amount, 1/2/24 INCREASE

Gross P6,000,000 P10,000,000 P4,000,000
Accumulated Depreciation (3,000,000) (5,000,000) (2,000,000)
Net P3,000,000 P5,000,000 P2,000,000
(50%) (50%) (REVALUATION SURPLUS)
CV, 1/2/26 SV, 1/2/26 DECREASE

Gross P10,000,000 P5,000,000 P5,000,000
Accumulated Dep.
(5,000,000+1,000,000) (6,000,000) (3,000,000) (3,000,000)
P4,000,000 P2,000,000 2,000,000
Net (40%) (40%)
Carrying value, 1/2/26 P4,000,000

Sound value, 1/2/26 (2,000,000)
Decrease, 1/2/26 P2,000,000
Revaluation surplus bal., 1/2/26
(P2,000,000 x 8/10) (1,600,000)
REVALUATION LOSS, 1/2/26 P400,000
• MACHINERIES ACCOUNT BALANCE,1/2/26 = P2,000,000 / 40% = P5,000,000
14. Ans. A
TGAS (1,000,000 + 800,000 + 20,000) P1,820,000

Estimated COGS (2,200,000 – 50,000) x 70% (1,505,000)
Estimated cost of ending inventories P315,000
Inventories per physical count (160,000)
ESTIMATED COST OF INVENTORY SHORTAGE P155,000
TGAS (300,000 + 4,500,000 + 300,000 – 200,000 – 50,000 + P5,000,000

150,000)
Estimated COGS (1,2000,000 + 1,800,000 – 100,000) x 75% (2,175,000)
Estimated cost of ending inventories P2,825,000
Damaged goods at NRV (25,000)
Cost of goods out on consignment (200,000)
ESTIMATED COST OF INVENTORY LOSS P2,600,000
15. Ans. C
16. Ans. A
17. Ans. B
FIFO AVERAGE CONSERVATIVE

TGAS at RETAIL P21,375,000 P21,375,000 P21,375,000
(1,920,000 + 22,155,000 – 750,000 + 425,000 –
1,200,000 + 450,000 – 1,425,000 – 200,000)
Adjusted net sales (20,250,000) (20,250,000) (20,250,000)
(19,800,000 – 450,000 + 300,000 + 600,000)
Estimated ending inventory at RETAIL P1,125,000 P1,125,000 P1,125,000
Cost ratio 63% 62% 58%
ESTIMATED ENDING INVENTORY AT COST P708,750 P697,500 P652,500
• TGAS at COST = 1,020,000 + 13,072,500 + 300,000 – 450,000 – 270,000 + 300,000 -600,000

- 120,000 = P13,252,500
• Cost ratio under FIFO = (13,252,500 – 1,020,000) / (21,375,000 – 1,920,000) = 63%
• Cost ratio under AVERAGE = 13,252,500 / 21,375,000 = 62%
• Cost ratio under CONSERVATIVE = 13,252,500 / (21,375,000 + 1,425,000) = 58%
18. Ans. A
Unadjusted balance P3,000,000
Goods sold under FOB Buyer 80,000
Goods held on consignment (150,000)
CORRECT COST OF INVENTORIES, 12/31/23 P2,930,000
19. Ans. C
Unadjusted balance P4,400,000
Goods purchased under FOB Buyer (800,000)
CORRECT COST OF INVENTORIES, 12/31/23 P3,600,000
20. Ans. A
21. Ans. C
7/24 purchases (600 units x P25 each) P15,000

7/10 purchases (150 units x P23.80 each) 3,570
COST OF INVENTORY ON 7/31 UNDER FIFO METHOD P18,570
• TGAS = (300 x P20) + (500 x P23.80) + (600 x P25) = P32,900

• TUAS = 300 + 500 + 600 = 1,400 units
• WAUC = P32,900 / 1,400 units = P23.50/unit
• COGS UNDER WEIGHTED AVERAGE METHOD/ AVERAGE PERIODIC METHOD = 650 UNITS x
P23.50 = P15,275
MOVING AVERAGE METHOD

7/1 300 @ P20 P6,000
7/10 500 @ P23.80 11,900
7/10 800 @ P22.38 P17,900
7/15 (400) @ P22.38 (8,952)
7/24 600 @ P25 15,000
7/24 1,000 @ P23.95 P23,948
7/30 (250) @ P23.95 (5,988)
7/30 750 @ P23.95 P17,960
• COGS UNDER MOVING AVERAGE METHOD/ COMPANY MAINTAINS PERPETUAL INVENTORY

RECORDS/ AVERAGE PERPETUAL METHOD = P8,952 + P5,988 = P14,940
22. Ans. A
• P1,900,000 + P2,500,000 + P3,400,000 + P3,800,000 = P11,600,000
23. Ans. A
Cost, 12/31/23 P12,000,000
Allowance for inventory write-down, 12/31/23
(P12,000,000 – P11,600,000) (400,000)
Ending inventory to be reported in the SFP, 12/31/23 P11,600,000
24. Ans. C
TGAS P15,000,000
Ending inventory at COST (12,000,000)
COGS P3,000,000

25. Ans. B
Petty cash fund (P8,000 remaining bills and coins) P8,000

Postal money order including traveler’s check of P5,000 and 30,000
manager’s check of P2,000
Total customers’ checks on hand (60%) 60,000
Cash set aside for the acquisition of Assets to be disbursed 300,000
in 2024. (1/3 for the purchase of Office Supplies)
Cash in bank to be used for payment of interests and taxes 200,000
Cash in bank – compensating balances (40%) 400,000
CORRECT CASH AND CASH EQUIVALENTS, 12/31/23 P998,000
26. Ans. B
• Short-term bond investment purchased 1 month before maturity date.
• BSP treasury bills (acquired 12/1/2023; due in 1/31/2024).
• Redeemable preference shares (original term of 5 years due on 3/28/2024; acquired on
12/29/2023).
27. Ans. A
28. Ans. C
Coins and Currencies P 7,000

Employee’s check dated December 25, 2023 8,000
Check drawn by the company payable to the petty cash custodian 10,000
Emptied envelope (4,000)
ADJUSTED PETTY CASH FUND, 12/31/23 P21,000
• Balance before shortage or overage = P50,000 – 13,000 – 3,000 – 5,000 – 2,000 = P27,000
• PETTY CASH SHORTAGE = P27,000 – P21,000 = P6,000
29. Ans. B
Currencies and coins P7,000

Replenishment check 8,000
Check drawn by office manager dated 12/30/23 5,000
Collections from customer dated 12/25/23 (30%) (3,000)
Envelope containing cash contributions from employees
for networking start-up party (no money when opened) (2,500)
ADJUSTED PETTY CASH FUND, 12/31/23 P14,500
30. Ans. C
• The total outstanding checks on September 30 = 120,000 + 20,000 + 118,000 = P150,000
• The total deposits in transit on September 30 = 234,000 + 230,000 + 528,000 = P992,000
31. Ans. C
32. Ans. A
Unadjusted balance per bank P23,000

Undeposited collections 10,100
Outstanding checks (1,900 – 500) (1,400)
Bank error 900
ADJUSTED CASH BALANCE P32,600
NSF 1,000
Credit memo (11,500)
Bank service charge 400
Book error (800 – 480) 320
UNADJUSTED CASH BALANCE PER BOOKS P22,820

33. Ans. C
Unadjusted receipts per bank - June P600,000

DIT- May (100,000)
DIT- June 150,000
Bank error (100,000)
ADJUSTED RECEIPTS - JUNE P550,000
34. Ans. B
Unadjusted balance per bank,5/31 P490,000

Receipts - June 600,000
Disbursements - June (500,000)
Unadjusted balance per bank,6/30 P590,000
DIT - June 150,000
OC - June (75,000)
Bank error not yet corrected this June 50,000
ADJUSTED CASH BALANCE, 6/30 P715,000
35. Ans. A
36. Ans. D

Credit sales 7,150,000
Cash collected from customers during the year (5,700,000)
Accounts written off as uncollectible (160,000)
Recovery of accounts previously written off included in the total above 65,000
collections
Sales discount (gross method) (435,000)
Sales returns on credit customers (150,000)
• ABD, 12/31/23 = (1,000,000 x 1%) + (820,000 x 5%) + (150,000 x 10%) = P66,000
AR,12/31/23 P1,970,000
ABD, 12/31/23 (66,000)
AR TO BE REPORTED IN THE SFP ON 12/31/23 P1,904,000
37. Ans. A
• ABD, 12/31/23 = P250,000 x 5% = P12,500

• ABD, 12/31/23 before adjustment = P10,000 – 13,500 + 2,000 = P1,500 DEBIT balance
• BAD DEBTS EXPENSE-2023 = P12,500 + P1,500 = P14,000
38. Ans. C
• AR Balance, 12/31/23 = (500,000 x 85% x 80% = 340,000 – 60,000 = P280,000) x 98% =

P274,400 – 75,000 = 199,400
• AR TO BE REPORTED ON 12/31/23 under NET METHOD (EXPIRED DISCOUNT
PERIOD)
= 199,400 + (280,000 x 2% = 5,600) = P205,000
• AR TO BE REPORTED ON 12/31/23 under GROSS METHOD = 500,000 x 85% x 80%

= 340,000 – 60,000 - 75,000 = P205,000
39. Ans. C
Date Payment Applied to Interest Applied to Principal Carrying Value
01/01/2023 3,037,300
12/31/2023 1,000,000 364,476 635,524 2,401,776
12/31/2024 1,000,000 288,213 711,787 1,689,989
• INTEREST INCOME-2024 = P2,401,776 x 12% x 12/12 = P288,213

40. Ans. B
Face value P6,000,000

Interest Jan. & Feb. (6M x 10% x 100,000
2/12)
Total CV as of Mar. 1 6,100,000
Less: Proceeds
Maturity value (Principal) P6,000,000
Interest (6M x 10% x 8/12) 400,000
Discount (6,400,000 x 12% x (384,000) (6,016,000)
6/12)
LOSS P84,000
41. Ans. C
• INTEREST INCOME-2023 = P1,774,000 x 12% x 5/12 = P88,700
42. Ans. D
• INTEREST RECEIVABLE, 12/31/23 = P1,000,000 x 12% x 6/12 = P60,000
43. Ans. D
• CARRYING VALUE, 12/31/23 = P1,000,000 (Remaining FACE VALUE)
44. Ans. D
• ACL, 1/1/23 = P200,000 x 20% = P40,000
• ACL, 12/31/24 = P650,000 x 30% = P195,000
• ACL, 12/31/24 before adjustment = P40,000 + (40,000 x 10%) = P44,000 + (44,000 x 10%)
= P48,400
• CREDIT LOSS-2024 = P195,000 – P48,400 = P146,600
• Gross Amortized Cost on 12/31/24 = P4,207,475 x 1.10 – 250,000 x 1.10 – 250,000 =

P4,566,045
• NET AMORTIZED COST ON 12/31/24 = P4,566,045 – P195,000 = P4,371,045
45. Ans. A
Down payment P200,000

PV of Note (120,000 x 2.9137) 349,644
Initial cost of Franchise 549,644
• Initial cost of Patent = P131,200

• Initial cost of Trademark = P320,000
Franchise 549,644 x 8/10 P439,715

Patent 131,200 x 6/8 P98,400
Trademark No AE (indefinite life) P320,000
46. Ans. D
• AMORTIZATION EXPENSE-2023 = P3,125,000/10 x 9/12 = P234,375

• FRANCHISE FEE EXPENSE = 5% x (P8,500,000 – 5,000,000) = P175,000

47. Ans. B
TRADEMARK
CV, 12/31/23 P3,000,000
IMPAIRMENT LOSS, 12/31/23 P1,000,000
• Value in use:
= P120,000 / 6% = P2,000,000
PATENT
CV, 12/31/23 (P2,000,000 x 4/5) P1,600,000
IMPAIRMENT LOSS, 12/31/23 P0
• Value in use: (P500,000 x .94) + (P600,000 x .89) + (400,000 x .84) + (P500,000 x .79)
= P1,735,000
48. Ans. C
• PATENT A = P150,000 x 3/8 = P56,250 / 2 years = P28,125

• PATENT B = 210,250 / 10 years = P21,025
• PATENT C = P0
• TOTAL AMORTIZATION EXPENSE-2023 = P28,125 + P21,025 = P49,150
49. Ans. C
CV, 1/1/23 (P7,000 x 3/5) P43,200

Legal fees 15,000
TOTAL P58,200
50. Ans. B
Other coding costs after establishing technological feasibility P21,000

Other testing costs after establishing technological feasibility 39,200
Costs of producing product masters for training material 16,800
Capitalized computer software P77,000
Completion of detailed program design P40,000

Costs incurred for coding and testing to establish technological feasibility 60,500
R&D EXPENSE P100,500

Far Resa b47

Uploaded by

Copyright:

Available Formats

Far Resa b47

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Far Resa b47

Uploaded by

Copyright:

Available Formats

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

FINANCIAL ACCOUNTING and REPORTING FIRST PRE-BOARD EXAMINATION

• On August 1, 2023, an equipment was acquired with an estimated useful life of 5

Down payment P1,000,000

• Salvage value of the asset was at 10% of their initial cost.

Page 1 of 23 0915-2303213  resacpareview@gmail.com

The following expenditures were made during 2023:

4. Statement 1: The initial cost of the building is P12,230,000.

AISHITEMASU determined that weighted average accumulated expenditures for the

5. Statement 1: The capitalized interest in 2023 is P406,400.

6. What is the amount of depletion for the year 2023?

7. What is the amount of depreciation for the year 2023?

NALUYAGAKOSAIMO Company acquired an equipment on January 1, 2020 costing P3,900,000

Page 2 of 23 0915-2303213  resacpareview@gmail.com

PINAURATAIKAW Company acquired a machinery on January 1, 2018 for P2,500,000. The

Total remaining undiscounted cash inflows P 2,500,000

9. How much is the impairment loss to be recognized on December 31, 2021?

KALASAHANTAKAW Company acquired several machineries on January 2, 2014 costing

On January 2, 2026, KALASAHANTAKAW subjected the machineries to a second revaluation.

KALASAHANTAKAW uses the proportional approach in recording revaluation of property,

12. How much is the revaluation loss to be recorded on January 2, 2026?

The following relevant data for 2 different companies were as follows:

Page 3 of 23 0915-2303213  resacpareview@gmail.com

Inventory, 1/1/23 P1,000,000

Company 2: On June 1, 2023, a typhoon at INAROTAKA Company’s only warehouse caused

Inventory, January 1, 2023- P300,000; Purchases- P4,500,000; Purchase returns-

14. Statement 1: The estimated cost of inventory shortage related to MAHALKITA

Note: Round off cost % to nearest whole number (e.g., xx%)

Page 4 of 23 0915-2303213  resacpareview@gmail.com

a. TAAMAYOCONTIGO uses the periodic method of recording inventory. A physical

Beginning balance 300 units valued at P20 each

Information pertaining to the inventory of ICHADAWKOIMU Company as of December 31,

Petty cash fund including P2,000 unreplenished vouchers P10,000

Page 6 of 23 0915-2303213  resacpareview@gmail.com

The petty cash ledger has an imprest balance of P50,000.

28. How much is the petty cash shortage or overage?

Currencies and coins 7,000

The Petty cash fund was established for an amount of P35,000.

Page 7 of 23 0915-2303213  resacpareview@gmail.com

Date Particulars Debit Credit

DM 0091 - NSF check CM 0020 - Bank loan proceeds

30. Statement 1: The total outstanding checks on September 30 is P150,000.

a. Cash balance per bank statement, P23,000.

31. What amount should be reported as adjusted cash in bank?

32. How much is the unadjusted cash balance per books?

Balance per bank statement, 05/31 P490,000

33. What is the amount of adjusted cash receipts in June?

The following is the summary of transactions of SARANGHAE Company related to its

Accounts receivable, 1/1 P1,200,000

Days past invoice date at December 31: Amounts

38. Statement 1: The correct receivables to be reported on December 31, 2023, is

Page 9 of 23 0915-2303213  resacpareview@gmail.com

On January 1, 2023, BUTTERCUP Corporation received from a customer an 8-month,

40. What is the loss on note receivable discounting to be recognized by Iceland?

Page 10 of 23 0915-2303213  resacpareview@gmail.com

• On January 2022, IFONLY signed an agreement to operate as franchisee of for an

• IFONLY incurred P624,000 of experimental development costs in its laboratory to

On April 1, 2023, MAHALMO Company purchased from MAHALAKO Company(franchisor), a

Page 11 of 23 0915-2303213  resacpareview@gmail.com

47. REWIND Company shall recognize a total impairment loss in 2023 at