1. Vichille Corporation purchased a machine on January 1, 2018 for P6,000,000.

t the date of acquisition, the machine

had a life of six years with no salvage value. The machine is being depreciated on a straight-line basis. On January 1, 2021,
it determined that the machine had a useful life of eight years from the date of acquisition with no salvage. What should
be the deprecation for 2021?
a. ₱ 375,000.00 c. ₱ 1,000,000.00
b. ₱ 600,000.00 d. ₱ 500,000.00
Solution Amount
Amt. ₱ 6,000,000.00 2018 ₱ 6,000,000.00
years 6 2019 ₱ 5,000,000.00
Depre. ₱ 1,000,000.00 2020 ₱ 4,000,000.00

Remaining amount as of 2021 Amount

Amt ₱ 3,000,000.00 2021 ₱ 3,000,000.00
remaining years after 3 years 5
Annual Depreciation ₱ 600,000.00

New remaining life 8 years

Years passed 3 years
Remaining life as of 1/1/21 5 years
uisition, the machine
asis. On January 1, 2021,
o salvage. What should

Depreciation
₱ 1,000,000.00 ₱ 5,000,000.00
₱ 1,000,000.00 ₱ 4,000,000.00
₱ 1,000,000.00 ₱ 3,000,000.00

Depreciation
₱ 600,000.00 ₱ 2,400,000.00
2. Nelsie Company bought a machine on January 1, 2022, for P24,000, at which time it had an estimated useful life of eight (8
with no residual value. Straight-line depreciation is used for all depreciable assets. On January 1, 2023, the machine's estimat
was determined to be only six years from the acquisition date. Accordingly, the appropriate accounting change was made in 2
The income tax rate was 40 percent in all the affected years. In its financial statements, how much would be reported as the
cumulative effect on the prior years because of the change in the estimated life of the machine?
a. ₱ - c. ₱ 2,000.00
b. ₱ 1,200.00 d. ₱ 2,800.00
Solution:
₱ 24,000.00 2022 ₱ 24,000.00 ₱ 3,000.00
8 years
₱ 3,000.00

₱ 21,000.00 2023 ₱ 21,000.00 ₱ 4,200.00

5 years 2024 ₱ 16,800.00 ₱ 4,200.00
₱ 4,200.00 2025 ₱ 12,600.00 ₱ 4,200.00
2026 ₱ 8,400.00 ₱ 4,200.00
2027 ₱ 4,200.00 ₱ 4,200.00

explanation:If nagka change sa accounting estimated

then there will be no changes in amount in financial statements.
 mated useful life of eight (8) years,
2023, the machine's estimated life
unting change was made in 2023.
h would be reported as the

₱ 21,000.00

₱ 16,800.00
₱ 12,600.00
₱ 8,400.00
₱ 4,200.00
₱ -

ng estimated
in financial statements.
3. On January 1, 2018, Melanie Co. purchased a patent for P714,000. The patent is being amortized over its remaining legal lif
of fifteen years expiring on January 1, 2033. During 2021, it determined that the conomic benefits of the patent would not las
longer than ten years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net
accumulated amortization, as of December 31, 2021?
a. ₱ 428,400.00 c. ₱ 504,000.00
b. ₱ 489,600.00 d. ₱ 523,600.00
Solution
Amt ₱ 714,000.00 2018 ₱ 714,000.00 ₱ 47,600.00
Years 15 years 2019 ₱ 666,400.00 ₱ 47,600.00
Annual dep. ₱ 47,600.00 2020 ₱ 618,800.00 ₱ 47,600.00

Amt ₱ 571,200.00 2021 ₱ 571,200.00 ₱ 81,600.00

Years 7 years
Annual dep. ₱ 81,600.00
 tized over its remaining legal life
efits of the patent would not last
lance sheet for the patent, net of

₱ 666,400.00
₱ 618,800.00
₱ 571,200.00

₱ 489,600.00
4. Rolly Co. offers a three-year warranty on its products. It previously estimated warranty costs to be 2% of sales. Due to a tec
in production at the beginning of 2021, it now believes 1% of sales to be a better estimate of warranty costs. Warranty costs o
were reported in 2019 and 2020, respectively, sales for 2021 were 5,000,000. What amount should be disclosed in 2021 finan
expense?
a. ₱ 50,000.00 c. ₱ 100,000.00
b. ₱ 88,000.00 d. ₱ 138,000.00
Solution
₱ 5,000,000.00
1%
₱ 50,000.00

explanation: Since the 1% is reasonably certain, therefore it should be used

as new warranty expense.
be 2% of sales. Due to a technological advance
nty costs. Warranty costs of 80,000 and 96,000
be disclosed in 2021 financial statements as warranty

herefore it should be used

5. Ralph has used the FIFO method of inventory valuation since it began operations in 2018. It decided to change to the weigh
for determining inventory costs at the beginning of 2021. The following schedule shows year-end inventory balances under th
average method:
Year FIFO Weighted Average
2018 ₱ 4,500,000.00 ₱ 5,400,000.00
2019 ₱ 7,800,000.00 ₱ 7,100,000.00
2020 ₱ 8,300,000.00 ₱ 7,800,000.00

What amount, before income taxes, should be reported in 2021 statement of retained earnings as the cumulative effect of th
policy?
a. ₱ 500,000.00 decrease c. ₱ 200,000.00
b. ₱ 300,000.00 decrease d. ₱ -
FIFO ₱ 8,300,000.00
WA ₱ (7,800,000.00)
RA ₱ 500,000.00
 t decided to change to the weighted average method
-end inventory balances under the FIFO and weighted

ngs as the cumulative effect of the change in accounting

6. On January 1, 2021, Gian Construction Company changed to the percentage of completion method from recovery method
of income recognition. As of December 31, 2020, it compiled data showing that income under the cost recovery method
aggregated P7,000,000. If the percentage of completion had been used, the ccumulated income through December 31, 2020
would have been P9,000,000. The income tax rate is 30%. The cumulative effec of this accounting change would be repoted
in 2021.
a. Retained earnings statement as P2,000,000 credit adjustment to the beginning balance
b. Income statement as P2,000,000 credit
c. Retained earnings statement as a P1,400,000 credit adjustments to the beginnning balance
d. Income statement as a P1,400,000 credit

₱ 9,000,000.00 ₱ 2,000,000.00
₱ (7,000,000.00) 30%
₱ 2,000,000.00 ₱ 600,000.00
₱ (600,000.00)
₱ 1,400,000.00 credit
 method from recovery method
r the cost recovery method
me through December 31, 2020
nting change would be repoted
7. Naida Company began operations on January 1, 2021, Financial statements for the years 2021 and 2022 contained the follo

2021 2022
Ending Inventory ₱ 800,000.00 under ₱ 400,000.00 over
Depreciation ₱ 150,000.00 under
Insurance expense ₱ 50,000.00 over ₱ 50,000.00 under
Prepaid insurance ₱ 50,000.00 under

In addition, On december 31, 2022, a fully depreciated equipment was sold for P100,000 cash
but sale was not recorded until 2023.

Q.1 Ignoring income tax, what is the total effects of the error on Net Income for 2021?
a. ₱ 700,000.00 under c. ₱ 650,000.00 under
b. ₱ 700,000.00 over d. ₱ 650,000.00 over
Solution
Understated End. Inv.
Understated depreciation
Overstated insurance exp.
Net Income
Q.2 What is the net income for 2022?
a. ₱ 1,350,000.00 under c. ₱ 1,150,000.00 under
b. ₱ 1,350,000.00 over d. ₱ 1,150,000.00 over
Solution
Net income after fixxing 2021
Overstated Inventory ending
Understated Insurance expense
Net Income
Q.3 What is the retained eranings on December 31, 2022?
a. ₱ 1,150,000.00 over c. ₱ 450,000.00 over
b. ₱ 700,000.00 under d. ₱ 450,000.00 under
Solution
Overstated Inventory ending
Understated Insurance expense
Net Income
years 2021 and 2022 contained the following errors:

₱ (800,000.00) Less kasi kulang sya, therefore naging loss

₱ 150,000.00 Positive amount kasi kulang bayad, kaya naging gain
₱ (50,000.00) Sobra bayad, kaya naging loss
₱ (700,000.00) Understated

₱ 700,000.00
₱ 400,000.00
₱ 50,000.00
₱ 1,150,000.00 (idk explanation)

₱ 400,000.00 Add kasi sobra yung amount, naging gain

₱ 50,000.00 Kulang bayad, kaya naging gain
₱ 450,000.00 Overstated
8. April Company failed to accrue warranty cost of P200,000 in its december 31 2021 financial statements, In addition, a chan
from straight line to accelerated depreciation made at the beginning of 2022 resulted in a cumulative effect of P120,000 on it
retained earnings. What amount before tax should it report as prior period error in 2021?
a. ₱ 200,000.00 c. ₱ 120,000.00
b. ₱ 320,000.00 d. ₱ -
Explanation:
Yung failure to accrue warranty cost lang yung recorded since
change in accounting estimate yung depreciation.
al statements, In addition, a change
mulative effect of P120,000 on its

ung recorded since

9. During the year ended December 31, 2021, the following events occurred in relation to Liezel Co.

* Accounting error relating to the inventory on December 31, 2020 was discovered. This required
a reduction in the carrying amount of inventory at that date of P140,000

* The provision for uncollectible receivables on December 31, 2020 was P150,000. During 2021,
P250,000 was written off the December 31, 2020 receivables

What adjustment is required to restate retained earnings as of December 31, 2021?

a. ₱ 140,000.00 c. ₱ 290,000.00
b. ₱ 150,000.00 d. ₱ -
Explanation
Yung 140,000 lang ang recorded since na state na nagka reduction daw
sa carrying amount of inventory, which means, yung amount na nalaga
is mali.
Whereas yung uncollectible receivables is not recorded kasi ganyan na
talaga yung process for uncollectible receivables…
 na state na nagka reduction daw
h means, yung amount na nalagay

s is not recorded kasi ganyan naman

eceivables…
10. Statement of Financial position extracts for Colleen Company show the following:

December 31, 2022 December 31, 2021

Development Costs ₱ 8,160,000.00 ₱ 5,840,000.00
Amortization ₱ (1,800,000.00) ₱ (1,200,000.00)

The capitalized development costs relate to a single project that commenced in 2019. It has
now been discovered that one of the criteria for capitalization has never been met. What
adjustment is required to restate retained earnings on December 31, 2021?
a. ₱ 6,360,000.00
b. ₱ 1,720,000.00
c. ₱ 4,640,000.00
d. ₱ -
Solution
2021 Development cost ₱ 5,840,000.00
2021 amortization ₱ (1,200,000.00)
Retained earnings ₱ 4,640,000.00
11. Regelyn, Inc. is a calendar-year corporation whose financial statements for 2019 and 2020 included errors as follows:

Year Ending Inventory Depreciation Expense

2019 ₱ 30,000.00 Overstated ₱ 25,000.00 overstated
2020 ₱ 10,000.00 Understated ₱ 8,000.00 understated

Assume that purchases were recorded correct and that no correcting entries amade at December 31, 2019
or December 31, 2020. Ignoring income txes, by how much should the retained earnings be retroacively
adjusted on January 1, 2021?
a. ₱ 27,000.00 increase
b. ₱ 27,000.00 decrease
c. ₱ 7,000.00 decrease
d. ₱ 3,000.00 decrease

Overstated depreciation ₱ 25,000.00 (Add kasi, I redeem yung 25,000 na naoverstated)

Understated Ending inv. ₱ 10,000.00 (yung 2020 lang kasali kasi eto yung beginning inventory para sa 2021)
Understated depreciation₱ (8,000.00) (Less kasi dapat bayarin yung understated depreciation)
Retained earnings ₱ 27,000.00
ed errors as follows:

para sa 2021)
12. Kristine, Inc. receives subscription payments for annual (one-year) subscriptions to its magazine. Payments
are recorded as revenue when received. Amount received but unearned at the end of each of the last three
years are shown below
2019 2020 2021
Unearned revenues ₱ 120,000.00 ₱ 150,000.00 ₱ 176,000.00

It failed to record unearned revenues in each of the three years. The entry needed to correct the above errors is

a. Retained earnings ₱ 150,000.00 explanation:

Subscription revenues ₱ 26,000.00 Taking consideration na "Annual" subscription sya, then iinclud
Unearned revenues ₱ 176,000.00 pasok sa one year. Assumingly 2021 to ginawa, then magiging u
portion yung 2021, since unearned palang sya in a way, na hind
b. Retained earnings ₱ 30,000.00 for the current year. Not pa need mapasok sa retained earning
Subscription revenues ₱ 26,000.00 need ng fixing, kasi hindi pa sya error as of now. Pero yung 202
Unearned Revenues ₱ 56,000.00 retained earnings, kasi last period lang sya. Fresh pa sya and m
kaya need sya I record. Whereas yung 2019, hindi na sya nirere
c. Subscription revenues ₱ 176,000.00 immaterial na sya in a way, since 3rd period na sya and it will re
Unearned revenues ₱ 176,000.00

d. Subscription Revenues ₱ 150,000.00

Retained Earnings ₱ 26,000.00
Unearned Revenues ₱ 176,000.00
agazine. Payments
of the last three

ct the above errors is

ual" subscription sya, then iinclude lang yong

y 2021 to ginawa, then magiging unearned
arned palang sya in a way, na hindi pa sya rereceive
need mapasok sa retained earnings kasi hindi naman
ya error as of now. Pero yung 2020, 150k is pasok sa
eriod lang sya. Fresh pa sya and material sa magiging next accounting period
eas yung 2019, hindi na sya nirerecord kasi prang
nce 3rd period na sya and it will remain unadjusted na sya.
13. Mark Co. made the following errors in counting its year-end physical inventories

2019 ₱ 60,000.00 Overstatement

2020 ₱ 108,000.00 Understatement
2021 ₱ 90,000.00 Overstatement

As a result of the above undetected errors, 2021 income was

a. Understated by ₱ 18,000.00
b. Overstated by ₱ 198,000.00
c. Overstated by ₱ 18,000.00
d. Understated by ₱ 198,000.00

₱ 108,000.00 Understatement (pasok sa retained earnings, therefore marereceiv

₱ 90,000.00 Overstatement (recent period sya, which means pasok muna sya
₱ 198,000.00 pero magiging part sya as deduction sa retained e
arnings, therefore marereceive yung 108k)
which means pasok muna sya as part of the income
ya as deduction sa retained earnings next period)