Jack Company operates two major lines of business namely, candle manufacturing and clothing retailing.

On December 31, 2018, in

response to an unsolicited ofter, Jack Company disposed of its candle-making operation for P1,000,000 when the carrying amount of
the operation's assets were factory building, P400,000; machinery, P300,000 and trademark, P200,000. The candle- making operation
has no other assets and has no liability, but as a result of the disposal the company has an income tax payable of P20,000 related to
the gain on dlsposal. The candle-making has a profit after tax of P150,000 for the year ended December 31, 2018.

Emilia Company is an experienced home appliance dealer. Emilia Company also offers a number of services together with the home
appliances that it sells (installation and maintenance). Emilia Company sells dishwashers on a standalone basis, it also sells
installation and maintenance service for the dishwashers.

Pricing for dishwashers is as follows:

Dishwasher only P1,600
Dishwasher with installation service 1,700
Dishwasher with maintenance services 1,950
Dishwasher with installation and maintenance services 2,000

In cases where maintenance services are provided, the maintenance service is separately priced within the arrangement at P350.
Dishwashers are sold subject to a general right of return. If a customer purchases a dishwasher with installation and/or maintenance
services, in the event Emilia Company does not complete the service satisfactorily, the customer is only entitled to a refund of the
portion of the fee that exceeds P1,600. On January 1, 2018, Emilia Company sell 100 dishwashers to Condo Complex, Inc. A
developer of high-rise condos. The dishwashers are installed and Condo Complex, Inc. purchases the dishwashers with the
installation and maintenance services. The total price for the 100 dishwashers is P190,000.

The Hawk Company maintains a general current account at the Pacific Bank. Pacific Bank provides a bank statement and canceled
checks one a month. The cut-off date is the last day of the month. The bank statement for the month of October is summarized below:

Balance October 1, 2018 P321,200

Deposits 821,400
Checks processed (784,330)
Service charges ( 800)
NSF checks ( -21,870)
Note payment collected by bank 11,200
Balance October 31, 2018 P346,800

The company's general ledger account has a balance of P352,760 at the end of, October. A review of the company records and the
bank statement reveals the following:
1. Cash receipts not yet deposited totaled P29,650
2. A deposit of P10,200 was made on October 31 that was not credited to the company's account until November.
3. All checks written in September have been processed by the bank. Checks written in October that had not been processed by the
bank total P55,360.
4. A check written for P17,900 was incorrectly recorded by the company as P7,900 disbursement. The check was for payment to a
supplier of raw materials.

Bliss Company owes First Bank P30 million under a 10% note with two years remaining to maturity. Due to financial difficulties of
Bliss Company, the previous year's interest (P3 million) was not paid. First Bank agrees to; forgive the interest accrued from last year,
reduced the two interest payments to P2 million each and reduced the principal to P25 million. The current prevailing rate of interest is
11%.

The following data concerning the retail inventory method are taken from the financial records of Welch Company.

Cost Retail
Beginning inventory P 49,000 P 70,000
Purchases 224,000 320,000
Freight-in 6,000 -
Net mark-ups - 20,000
Net markdowns - 14,000
Sales - 336,000
01. In the statement. of comprehensive income, what single amount should Jack Company disclose related to the discontinued
operation?
a. None c. P150,000
b. P100,000 d. P230,000

02. How much revenue should Emilia Company allocate to the installation?
a. none c. P 9,500
b.P4,750 d. P33,250

03. What is the correct cash balance of Hawk Company for the month ended October 31, 2318?
a. P331,290 c. P342,340
b. P332,520 d.P345,620

04. What amount of loss should First Bank recognize in relation to the loans owed by Bliss Company?
a. None c. P8,867,768
b. P3,513,757 d. P9,284,392

05. If the ending inventory of Welch Company is to be valued at approximately the lower-of-cost-or-net realizable value, the calculation
oi the cost to retail ratio should be based on goods available for sale at (1) cost and (2) retail, respectively of
a. P279,000 and P410,000 c. P279,000 and P390,000
b. P279,000 and P396,000 d. P273,000 and 390,000.

The Perch Company purchased a jewel polishing machine for P694,000 on 1 January 2018 and received a government grant of
P108,000 towards the capital cost. Company policy is to treat the grant as a deferred income. The machine was to be depreciated on
a sum-of-years-digit over 8 years and was estimated to have a residual value of P10,000 at the end of this period.

On June 30, 2018, Sky Company, which uses PFRS 9, sold an investment in other comprehensive income for P1,200,000. This
investment was originally purchased at a cost of P800,000. At the time of disposal, the carrying amount of the investment at fair value
gain P100,000. The investment has a related fair value gain of P100,000 that was recognized in the fair value reserve.

On January 1, 2018, Texas Company, a medium-sized entity, acquired 30% of the ordinary shares that carry voting rights at a
general meeting of shareholders of Houston Company for P6,000,000. For the year ended December 31, 2018 Houston Company
recognized a profit of P8,000,000 and declared a paid dividend of P4,000,000. The fair value of Texas Company investment on
December 31, 2018 is P5,800,000. Texas Company uses the cost less impairment loss model of accounting its investment because
Houston Company shares have no published price quotations.

On January 2, 2018, Horizon Company, a medium-sized entity acquired 20% of the outstanding ordinary shares of Meadow
Company tor P2,200,000 which included P50,000 transaction cost. This investment gave Horizon the ability to exercise significant
influence over Meadow Company. The book value of the acquired shares was P1,800,000. The excess of cost over book value was
attributed to a depreciable asset which was undervalued on Meadow Company's balance sheet and which had ten years Useful life
remaining. For the year ended December 31. 2018, Meadow Company reported net income of P1,500,000 and paid cash dividends of
P300,000 on its ordinary.

The Niagara Company owns three properties which are classified as investment properties according to IAS40 Investment property.
Details of the properties are given below:

Initial cost Fair value at Fair value at

31 Dec 2018 31 Dec 2019
Property (1) 270,000 320,000 350,000
Property (2) 345,000 305,000 285,000
Property (3) 330,000 385,000 360,000

Each property was acquired in 2018 with a useful life of 50 years. The company's accounting policy' is to use the fair value model for
investment properties.

06. Under IAS20 Government grants and government assistance, what should be the net effect in the profit or loss with respect to the
machine and grant for the year ended December 31, 2019?
a. P96,000 c. P112,000
b. P128,000 d. 133,000

07. What amount of unrealized gain or loss should be transferred to retained earnings immediately after the sale?
a. none c. P300,000
b. P200,000 d. P400,000

08. What is the net amount should Texas Company report in its statement of comprehensive income related to its investment in Maxim
Company for the year ended December 31, 2018?
a. P200,000 c. P1,200,000
b. P1,000,000 d. P2,400,000

09. If Horizon Company uses the equity model to account,for its investment and the investment has a recoverable amount of
P2,000,000 on December 31, 2018, what is the net effect in its statement of comprehensive income in relation to its investment in
Meadow Company?
a. P100,000 decrease c. P200,000 increase
b. P140,000 decrease d. P300,000 increase

10. What is the gain or loss to be recognized in Niagara's profit or loss for the year ending 31 December 2019?
a. P15,000 loss c. P30,000 gain
b. P18,900 loss d. P45,030 loss

The Lancer Company has a single investment property which had originally cost P580,000 on 1 January 2017 at 31 December 2017
its fair value was P550,000 and at 31 December 2010 it had a fair value of P510,000. On acquisition the property had a useful life of
40 years.

On January 1, 2017. Star Company purchased the debt instruments of Trek Company with a face value of P5,000,000 bearing
interest rate of 8% for P4,620,921 to yield 10% interest per year. The bonds mature on January 1, 2022 and pay interested val ue on
December 30. on December 31, 2017 the fair value of the investment is P4,838,014 which is based on the prevailing market right of
9%.

At September 30, 2017 the following balances existed in the records of Loves Company:

Equipment P860,000
Accumulated depreciation 397,000

During the Year ended September 30, 2018, equipment with a written down value of P37,000 was sold for P49,000. The equipment
had originally cost P80,000. Equipment purchased during the year cost P180,000. It is the company's policy to charge full year's
depreciation in the year of acquisition of an asset are none in the year of sale. using a rate of 10% on the straight line basis.

A cash-generating unit of Tailor Company contains: Property, plant equipment P6,000,000; patent P4,000,000 and Goodwill
P2,000,000. an annual impairment review is required as the cash-generating unit contains goodwill.The most recent review assesses
its recoverable amount to be P9,000,000. An impairment loss of P3,000,000 has occurred and is recognized in the profit or loss.

Jackson Oil company paid P2,300,000 for an offshore oil rig to extract oil in the Philippine Sea. After the oil is extracted from the
offshore site, the equipment will be sold. Jackson Oil Company is required by its licensing agreement to remove the oil rig at the end of
the production and restore the seabed. The company has provided the following three cash flow possibilities for the restoration costs
to be paid in three years, after the extraction is completed.

Cash outflow Probability

1. 500,000 30%
2. 600,000 50%
3. 700,000 20%

The company's risk free interest rate is 8%. A 5% risk adjustment factor to the probability-weight expected cash flows is considered
appropriate to reflect the uncertainties in the cash flow estimates.

11. According to IA340 Investment property, what amount should be included in expense. Lancer's profit or loss for the year ending 31
December 2018 under each of the fair value model and the cost model, respectively?

a. P40,000 and P12,000 c. P40,000 and P26,500

b. P40,000 and P14,500 d. P40,000 and P55.500

12. What amount of interest income should Star Company report in its December 31, 2018 statement of comprehensive income
assuming the debt instrument was designated at initial recognition as investment at Fair Value to Other Comprehensive Income?
a. P400,000 c. P438,609
b. P435,421 d. P468,308

13. What net amount should appear in Loves Company's balance sheet at September 30, 2018 for equipment? a. P467,000
c. P563,000
b. P510,000 d. P606,000

14. After the recognition oi the impairment loss on the cash-generating unit of Tailor Company, at what amount should the property,
plant and equipment be valued?
a. P5,000,000 c. P5,600,000
b. P5,400,000 d. P6,000,000

15. At what amount should the oil rig be initially recorded?

a. P2,300,000 c. P2,791,360
b. P2,768,360 d. P2,890,000

The Clear Company accounts for non-current assets using the cost model. On 20 July 2018 Clear classified a noncurrent asset as
held for sale in accordance With IFRS5 Non-current assets as held for sale and discontinuedoperations. At that date the asset's
carrying amount was P580,000 its fair value was estimated at P860,000 and the cost to sell at P58,000.The asset was sold on 18
October 2018 for P848,000.

Sunrise corporation inccured the following development costs:

2015 2016 2017 2018 2019

Development costs 10,000,000 20,000,000 20,000,000 30,000,000 20,000,000

Commercial production commenced in 2018 and the product is expected to last 5 years. Sunrise corporation uses the straight-line
method of amortization for development costs.

Crazy company has recognized a provision for lawsuit at P400,000 in its statement of financial position at 31 december 2017. At
december 31 2018, the risk adjusted present value of the best estimate of the amount required to settle the lawsuit is P900,000 but
portion of the increased during 2018 included as 7% that is attributable to the unwinding of the discount and the remainder of the
increased is attributed to better information becoming available on which to base the estimates.

Happy company has the following information related to its warranty obligation:
In year 2018, goods are sold for P10,000,000. Experience indicates that 90% of the product sold require no warranty repairs; 6% of
the products sold require minor repair cost a 30% of the sales price; in 4% of the products sold require major repairs on a replacement
costing 70% on sales price. The expenditures for made 60% in 2019,, 30% in 2020 and 10% and 2021, in each case at the end of the
period. Because the cash flow already reflect the probabilities of the cash flows, and assuming there are no other risks or uncertainties
that must be reflected, to determine the present values of those cash flows the entity uses a “risk free” discount rate based on
government bonds with the same term as expected cash flows (6% for one-year bonds and 7% for two-year and three-year bonds).

On december 31 2018 , cordial company is pursuing a claim against an insurance company through legal processes the court is
expected to rule in late december 2019 . at the reporting date december 31 2018 the outcome of the case is uncertain . furthermore ,
they believe that there is 20% chance that the entity will be awarded P200,000 (the amount sought by the cordial company) an 80%
chance that cordial company will be awarded P100,000 the amount that was recently awarded by the same judge in a similar case.)
Other outcomes are unlikely. a 7% adjustment factor to the probability with an expected cash flows is considered appropriate to reflect
the uncertainties in the cash flow estimate . An appropriate discount rate is 10%.

16. In accordance with IFRSS, at what amount should the asset be stated in Clear's statement of financial position at 30 September
2018?
a. P580,000 c. P802,000
b. P790,000 d. 848,000

17. What is the amount of deferred development cost at the end year 2019?
a. P45,000,000 c. P64,000,000
b. P63,000,000 d. P80,000,000

18. In the statement of comprehensive income for the year ended December 31, 2018, what amount of loss from the lawsuit Crazy
Company must disclosed?
a. None c. P472,000
b. P28,000 d. P800,000

19. What amount of provision on warranty should. Happy Company report in its Statement of financial position for the year ended
December 31, 2018?
a. P120,529 c. P380,907
b. P260,378 d. P413,457

20. In the December 31,2018 financial statement of Cordial Company the entity;
a. recognizes an asset measured at P100,000
b. recognizes an asset measured at P84,000
c. recognizes a contingent asset measured at P81,709
d. discloses ea contingent asset (and does not recognize an asset in its statement of financial position)

On January 1,2018, Triumph Company entered, was a lessee, into a three-year non-cancelable lease of a motor vehicle that has an
economic life of seven years. At the inception of the lease, the fair value (cash cost) of the motor vehicle is P1,000,000. On
December 31, 2018, 2019 and 2020 the lessee is required to pay the lessor P250,000. The lessor is required to sell the motor
vehicle to a independent third party at the end of the lease term. If the motor vehicle is sold for less than P369,500 the lessee will pay
the shortfall to the lessor. Conversely, if the motor vehicle is sold tor more than P369, 500 the lessee will receive the excess from the
lessor in the form of rental rebate. The incremental borrowing rate is 5% per year.

On January 1, 2014. Melody Company entered, as a lessor, into a five-year non cancellable operating lease of a building it
completed constructing earlier that day at a cost of P8,000,000 The building has an economic life of 60 years and nil residual value.
The company accounts for the building as property, plant and equipment using the cost model because the fair value of the property
cannot be determined reliably without undue cost or effort on an ongoing basis. No lease amount is payable for the first four years of
the lease. The single lease payment of P1,500,000 is due on January 1, 2018.

At the beginning of 2018, Wallace Corporation issued 10%. bonds With a face value of P1,800,000. These bonds mature in the five
years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for P1,667,518 to yield 12%. Wallace
uses a calendar-year reporting period.

Shine Company offers a coffee mug as a premium for every ten P2.50 candy bar wrappers presented by customers together with
P10.00. The purchase price of each mug to the company is P8.00; in addition, it costs P5.00 to mail each mug. The results of the
premium plan for the years 2018 and 2019 are as follows (assume all purchases and sales are for cash);
 2018 2019
Coffee mugs purchased…………………………….. 480,000 400,000
Candy bars sold……………………………….. 3,750,000 4,500,000
Wrappers redeemed……………………………. 1,900,000 2,800,000

2018 wrappers expected to be redeemed in 2019…………… 1,300,000

2019 wrappers expected to be redeemed in 2020…………… 1,800,000

As of December 31, 2018, the carrying amount of Manors unfunded obligation tor long-service leave was P500,000 of which
P200,000 are entitled to take a leave in the twelve months following the end of the reporting period December 31, 2018. The balance
of P300,000 is in respect of leave that employees are entitled to take only atrer the end of the next annual reporting period. Manor
Company anticipates that only 75% of its employees will take the leave due during the next annual reporting period (approximately
P50,000 of the P200,000) is expected to be carried forward.

21. What amount of current liability for long-service leave should Manor Company report in its December 31, 2018 statement of
financial position?
a. P50,000 c. P300,000
b. P20,000 d. P500,000

22. Sha: is the amount of premium expense to be recognized in 2019?

a. P540,000 c. P840,000
b. P690,000 d. P990,000

23. Using the effective-interest method of amortization, what amount of interest expense should Wallace Corporation report for
2018? (Round your answer to the nearest peso.)
a. P100,051 c. P180.000
b. P100,654 d. p200.705

24. What amount of unearned rental should Melody Company recognize on January 1, 2018?
a. None C. P600,000
b. P300,000 d. P1,200,000

25. What amount of finance cost should Triumph Company recognize in its statement of comprehensive income for the year ended
December 31, 2019?
a. None c. P40,000
b. P29,500 d. P50,000

String Company leased office premises to Sling, Inc. for a 4-year term beginning January 2, 2018. Under the terms of the operating
lease, rent for the first year is P216,000 and rent for years 2 through 4 is P337,500 per annum. However, as an inducement to enter
the lease, Sling was allowed to use the leased asset rent-free for the first three months. Income tax rate for all years is 32%.

Assume that on January 1, 2016, Hsu Co sells a computer system to Larson Finance Co. for P510,000 and immediately leases the
computer system back. The relevant information is as follows.
1. The computer was carried on Hsu's books at a value of P450,000
2. The term of the nonecancelable lease is 10 years; title will transfer to Hsu.
3. The lease agreement requires equal rental payments of P83,000.11 at the end of each year.
4. The incremental borrowing rate for Hsu is 12%. Hsu is aware that Larson Finance Co. set the annual rental to ensure a rate of
return of 10%.
5. The computer has 23 fair value of P510,000 on January 1, 2016, and an estimated economic life of 10 years.
6. Hsu plays executory costs or P9,000 per year.

For calendar year 2018, Kane Corp. reported depreciation of P1,200,000 in its income statement. On its 2018 income tax return,
Kane reported depreciation of P1,800,000. Kane's income statement also included P225,000 accrued warranty expense that will be
deducted for tax purposes when paid. Kane's enacted tax rates are 30% for 2018 and 2019, and 24% for 2020 and 2021. The
depreciation difference and warranty expense will reverse over the next three years as follows:

Depreciation Difference Warranty Expense

2019 P240,000 P45,000
2020 210,000 75,000
2021 150,000 105,000
P600,000 P225,000

These were Kane’s only temporary differences.

Wonder Company is experiencing financial difficulty and is negotiating trouble debt restructuring with its creditors to relieve its
financial stress. Wonder has a P3,000,000 note payable to Megabank. The bank is considering acceptance of an equity interest in
Wonder Company in the form of 200,000 ordinary shares with a fair value of P12 per share. The par value of the ordinary share is
P10 per share. Wonier Company incurred total transaction costs of P80,000 related to the issue of shares.

Purity Company owes P1,998,000 to Sanctity, Inc. the debt is a 10-year, 11% note. Because Purity Company is in financial trouble,
Sanctity, Inc. agreed to accept some property and cancel the entire debt. The property has a book value of P800,000 and fair market
value of 1,200,000.
At its year end. The Parlor Company has the following balances in relation to a defined benefit post-employment plan; Plan assets
P690,000 Plan liability P1,140,000 Remeasurement loss P120,000.

The following information pertains to the 2018 activity of Lark Corp's defined benefit pension plan:

Current service Cost P300,000

Expected return on plan assets 100,000
Interest cost on actuarial benefit obligation 164,000
Actual return on plan asset 195,000
Remeasurement gain on pier asset 115,000

26. Based on this information, which of the following would be recorded by Hsu on December 31, 2016?
a. a debit to Leased Computer under Finance Lease for P510,000
b. a credit to Unearned Profit on Sale-leaseback for P60,000
c. a debit to Unearned Profit on Sale-leaseback for P60,000
d. a debit to Unearned Profit on Sale-leaseback for P6,000

27.In its December 31, 2018 statement of financial position of String Company, what amount should be reported as deferred tax
liability?
a. None c. P51,840
b. P42,120 d. P93,969

20. In Kane's 2018 income statement, the deferred portion of its provision for income taxes should be
a. P101,700 c. P112,500
b. P109,800 d. P200,700

29. What is the amount of share premium to be reported by Wonder in its statement of financial position as a result of the
restructuring assuming the issue of equity is a settlement of debt?
a. P320,000 c. P920,000
b. P400,000 d. P1,000,000

30. What amount of gain or loss on the settlement of the liability should Purity Company recognize?
a. None c. P 798,000
b. P400,000 d. P1,198,000

31. Under IAS19 Employee benefits, what figure should be shown on Parlor's statement of financial position for the plan deficit?
a. P330,000 c. P570,000
b. P450,000 d. P1,140,000

32. How much is Larks 2018 retirement benefit costs?

a. P316,000 c. P374,000
b. P384,000 d. P684,000

Dreamer Corp. has an employee benefit plan for compensated absences that gives employees 10 paid vacation days and 10 paid
sick days. Both vacation and sick days can be carried over indefinitely. Employees can elect to receive payment in lieu of vacation
days; however, no payment is given for sick days not taken. At December 31, 2018, Dreamers unadjusted balance of liability for
compensated absences was P210,000. Dreamer estimated that there were 150 vacation days and 75 sick days available at.
December 31, 2018. Dreamer's employees earn an average of P1,000 per day.

Ana Co. offers all its 10,000 employees the opportunity to participate in an employee share-purchase plan. Under the terms of the
plan, the employees are entitled to purchase 100 ordinary shares (par value P1 per share) at a 20 percent discount. The purchase
price must be paid immediately upon acceptance of the offer. In total, 8,500 employees accept the offer, and each employee
purchases on average 80 shares at P22 share (market price P27.50).

Home Company reported the following amounts in the stockholder's equity section of its balance sheet dated December 31, 2017:

Preference share capital (P150 par value, 20,000 shares) 3,000,000

Ordinary share capital (P37.50 par value, 100,000 shares) 3,750,000
Share premium reserve 6,000,000
Accumulated profits 4,500,000
Treasury stock, at cost (5,000 ordinary shares) 250,000

On January 2, 2018, Home sold 20,000 additional shares of ordinary share for P90 per share. Late in 2018, it was learned that
because of mathematical error, an overstatement of depreciation expense by P375,000 had occurred in 2014. Home reported net
income of P825,000 for 2018. Home declared cash dividends of P150,000 on preference share and P450,000 on the ordinary share
during 2018. All the treasury shares were re-issued for P35 per share on December 31, 2018.

Tarnished Company has incurred heavy losses since its inception. At the recommendation of the president, the board of directors
voted to implement quasi-reorganization, through reduction of par value subject to shareholders' approval. Immediately prior to the
restatement on December 31, 2018, the shareholders equity was as follows:
Ordinary share capital, P50 par, P75,000,000; Share premium, P30,000,000 and Accumulated losses, P27,000,000.

The shareholders approved the quasi-reorganization on January 2, 2019 to be accomplished by a reduction of P3,500,000 in the
value of their inventory, the intangible asset and plant and equipment should be written down by P6,500,000 and P5,000,000
respectively, and recognition of unrecorded liabilities of P3,000,000.

The shareholders equity of Joyful Corporation on December 31, 2018 shows the following account balances:

10% Preference share, 5,000 shares, P100 par P500,000

12% Preference share, 6,000 shares, P100 par 600,000
Ordinary share, 10,000 shares, P40 par 400,000
Share premium 320,000
Accumulated profits 480,000

The 10% preference share is cumulative and fully participating, While the 12% preference share is non-cumulative and fully
participating. The last payment of dividends was on December 31, 2016.

33. In its December 31, 2018 balance sheet, what amount of liability for compensated absences is Dreamer required to report?
a. P360,000 c. P210,000
b. P225,000 d. P150,000

34. Under IFRS, Ana Co. will record

a. No compensation since the plan is used to raise capital, not compensate employees.
b. Compensation expense of P5,500,000
c. Compensation expense of P18,700,000
d. Compensation expense of P3,740,000

35. What should be the accumulated profits balance on December 31, 2018?
a. P4,275,000 C. P5,025,000
b. P4,905,000 d. P5,100,000

36. To complete the quasi- reorganization of Tarnished Company the par value per share should be reduced, what should be the par
value after the quasi reorganization?
a. P30 c. P40
b. P35 d. P45

37. What 15 the book value per share of ordinary shares?

a. P44.00 c. P 60.27
b. P59.68 d. P102.80

38. On December 31, 2018, Raven Company has 200,000 ordinary shares outstanding with a par value of P100 per share.
Information revealed that Raven had an 9% convertible debenture, P1,000,000 face value bonds. The bond has a carrying value of
P1,067,830 as of January 2, 2018 based on a prevailing rate of 7%. Each 1,000 bond is convertible into 20 ordinary shares. The
bonds were dated January 1, 2018. Net income after tax of 32% for 2018 was P418,000.

How much should Raven Company report as earnings per share in its December 31, 2018 financial statements?
a. P1.90 c. P2.13
b. P2.09 d. P2.89

39. On January 1, 2018, the Accumulated Depreciation-Machinery account of a particular company showed a balance of P370,000.
At the end of 2018, after the adjusting entries were posted. It showed a balance of P395,000. During 2018, one of the machines
which cost P125,000 was sold for P60,500 cash. This resulted in a loss of P4,000. Assuming that no other assets were disposed of
during the year, how much was depreciation expense for 2018?
a. P25,000 c. P85,500
b. P60,000 d. P93,500

40.The following is an extract from the balance sheets of Fotward Company for the years ended July 31, 2017 and July 31, 2018:
2018 2017
Inventory 50,000 800,000
Receivables 600,000 500,000
Trade payables 350,000 300,000
Accruals of expense 50,000 200,000

What effect would the movements in these items during the year have on cash generated from operations, as reported in the cash
flow statement of Forward Company?
a. P100,000 outflow c. P250,000 outflow
b. P100,000 inflow d. P250,000 inflow
41. Alberta Company provides the following note to the non-current assets in its balance sheet:
Plant and machinery:
Cost Depreciation Book Value
Opening balance P250,000 P120,000 P130,000
Additions/charge 150,000 40,000 110,000
Disposals (100,000) (80,000) (20,000)
Closing balance P300,000 P80,000 P220,000

The additional machinery was purchased for cash. A machine was sold at a profit of P20,000. What is tha net cash outflow for plant
and machinery?
a. P 90,000 c. P100,000
b. P110,000 d. P150,000

42. On January 1, 2018, Porter company, leased a color copier from Whimper Company at a price of P479,079. The lease
agreement specifies annual payments beginning January 1, 2018, the inception of the lease and at each December 31 thereafter
through December 31, 2022. The estimated Life of the copier is 7 years. On December 31, 2023, at the end of the six year lease
term, the copier is expected to be worth P75,000 and Porter Company has the option to purchase it for P60,000 on that date and
Porter has the intention to exercise the option. The residual value of the copier after seven years 15 zero. Whimper Company
manufactured the copier at a cost of P300,000 and its interest rate for financing the transaction is 10%. What is the carrying value of
the lease rental payable as of December 31, 2021?

a. P54,542 c. P134,066
b. P132,543 d. P137,567

43. Fortune Company, a medium enterprise has following information in relation to its defined benefit pension plan: Actual return on
plan assets, P230,300: Benefits paid to retirees, P200.000; Contributions, P345,000; Present value of defined benefit obligation, Jan.
1, 2019, P2,500,000; Present value of defined benefit obligation, Dec. 31, 2019, P2,870,000; Fair value of plan asset, Jan. 1, 2019,
P2,400,000; Current service cost, P300,000; Past service cost, P40,000; Discount rate 10%; Remeasurement gain on obligation,
P20,000. What amount of retirement benefit costs should be included in the profit or loss?
a. P340,000 c. P360,000
b. P350,000 d. P370,000

44. On January 1, 2019, Alison Company issued its 10%, 5-year convertible debt instrument with a face amount of P5,000.000 for
P5,100,000. Interest payable every December 31 of each year. The debt instrument is convertible into 50,000 ordinary shares with a
par value of P100. When the debt instruments were issued, the prevailing market rate of interest for similar debt without conversion
caption is 11%. The Company incurred transaction cost of P70,000 related to the issue of fine compound instrument.

PV of 11% for an ordinary annuity of P1 after 5 periods 3,696

PV of 11% after 5 interest periods .593

How much of the total proceeds represent the equity component?a. P100,000 b. P225,500 C. P283,059 d. P285,050

45. Revel company's worksheet for the preparation of its 2018 statement of cash included the following:

December 31 January 1
Accounts receivable P116,000 P92,000
Allowance for uncollectible accounts 4,000 3,200
Prepaid expense 32, 800 49,600
Accounts Payable 89,600 77,600

Revel Company's 2018 net income is P600,000. What amount should Revel company include as net cash provided by Operating
activities in the statement of cash flows?
a. P605,600 c. P592,000
b. P604,000 d. P581,600

46. The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method
for operating activities) as a(n)
a. Addition to net income c. Investing activity
b. Deduction from net income. d. financing activity.

47. If, at the end of a period, a company erroneously excluded some goods from its ending inventory and also erroneously did not
record the purchase of these goods in its accounting records, these errors would cause
a. The ending inventory and retained earnings to be understated.
b. The ending inventory, cost of goods sold, and retained earnings to be understated.
c. No effect on net income, working capital, and retained earnings.
d. Cost of goods sold and net income to be understated

48. Statement l: If accrued expense decreases, this means that the expense actually incurred exceeds the expenses paid.
Statement II: The increase in salaries payable means that the salaries expense under the accrual basis exceeds the salaries paid to
employees.
a. True; True c. False; True
b, True; False d. False; False

49. Which body authors the present International Financial Reporting Standards ( IFRS )?
a. International Accounting Standards Board
b. International Financial Reporting Standards Board
c. International Accounting Standards Committee
d. International Accounting Standards Council

50. This means "correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior
period. error had, never occurred".
a. Retrospective application c. Prospective application
b. Retrospective restatement d. Prospective restatement

51. When an owner-occupied property is transferred to investment property at fair value, a decrease in the carrying amount of the
property to its fair value at the date of transfer
a. Is recognized in profit and loss, or, for a revalued property, charged against the revaluation surplus to the extent of its credit
balance
b. Is recognized in profit and loss at all times
c. Is absorbed by retained earnings
d. Is carried directly to equity

52. PAS 36 (Impairment of assets) should be applied in accounting for the impairment of which type of asset?
a. Assets arising from construction contracts
b. Non-current assets held for sale
c. Investment properties measured at fair value d. Non-current assets measured at cost

53. Which of the following is not correct regarding trading securities?

a. They are classified as current assets
b. Unrealized holding gains and losses are reported in profit or loss
c. Cash dividend shall be recognized as dividend income
d. Share in profit of the investee increases carrying of the investment

54. Which is correct concerning the effect of asset ceiling in a defined benefit plan?
a. It is the excess of asset ceiling over the prepaid pension cost
b. It is the excess of prepaid pension cost over the asset ceiling of prepaid pension cost over the asset ceiling.
c. It is the excess of asset ceiling over the accrued pension cost
d. It Is the excess of accrued pension cost over the asset ceiling.

55. Which of the following is true about fair value model in accounting for investment in associate of a small and medium entity?
a. Investment should be carried at the balance sheet date at fair value less cost to sell
b. Impairment loss shall be recognized if recoverable value its lower than carrying amount.
c. Transaction cost should be expensed outright at initial recognition
d. Dividend received is considered a deduction from investment account

56. Which of the following items shouLd be treated as dividend income?

a. Reverse stock split c. Shares received in lieu of cash
b. Cash received in Lieu of shares. d. Cash dividend under equity method

57. Deductible temporary difference arises when a revenue item is reported for tax purposes in a period .
After it is reported Before it is reported in
in financial income financial income
a. Yes Yes
b. Yes No
c. No Yes
d. No No

58. All of the following situations will result to a future taxable amount,except
a. Carrying amount of the asset > tax base of the asset
b. Tax base of the asset > carrying amount the asset
c. Carrying amount of the liability < tax base of the liability
d. Financial income > taxable income

59. For a sales-type lease,

a. The sales price includes the present value of the guaranteed residual value.
b. the present value of the unguaranteed residual value is deducted from the cost or carrying value of the asset to determine the cost
of goods sold.
c. the gross profit will be the same whether the residual value is guaranteed or unguaranteed
d. none of these.

60. A company records impairment loss on goodwill. This would result in what type of difference?
a. Temporary, future taxable amount c. Permanent, nondeductible expense
b. Temporary future deductible amount d. Permanent, nontaxable revenue

61. Due to the importance of earnings per share information, it is required to be reported by all
Public companies non-public companies
a. Yes Yes
b. Yes No
c. No No
d. No Yes

62. What effect will the acquisition of treasury stock have on stockholders equity and earnings per share, respectively?
a. Decrease and no effect c. Decrease and increase
b. Increase and no effect d. Increase and decrease

63. Which of the following transactions would not lead to the recognition of a share premium?
a. Donation of land by a shareholder
b. Gain on sale of shares as a result of exercise of stock rights
c. Issuance of convertible bonds
d. None of the above

64. In computing the diluted earnings per share, convertible securities are assumed converted at the
a. Beginning of the year in all cases
b. End of the year in all cases
c. Beginning of the earliest period or at the time of issuance whichever comes later
d. Beginning of the earliest period or at the time of issuance whichever comes earlier

65. What is the treatment of unguaranteed residual value under a dealer's or manufacturers lease?
a. The unguaranteed residual value is deducted from the cost of the leased asset at present value, to derive cost of sales.
b. The unguaranteed residual value is deducted from the cost of the leased asset at absolute amount, to derive cost of sales.
c. The unguaranteed residual value is completely disregarded.
d. The unguaranteed residual value is added to the cost of the leased asset at Present value, to derive cost of sales.

66. Which of the following statement are false under a sale and leaseback transaction?
I. If a sale and leaseback transaction results in a finance lease, any excess of proceeds over the carrying amount shall not
be immediately recognized as income by a seller-lessee. Instead, it shall be deferred and amortized over the lease term.
II. If the sale price is established at fair value under an operating lease, any shall be deferred and amortized over the period
for which the asset is expected to be used,
a. I only c. Both I and II
b. II only d. Neither I nor II

67. It is defined as the issuance by an entity of its own ordinary shares to its ordinary shareholders without consideration and under
conditions indicating that such action is prompted mainly by a desire to increase the number of shares outstanding for the purpose of
effecting a reduction in their unit market price.
a. Share split c. Share option
b. Rights issue d. Share appreciation right

68.Under a cash settled share-based payment transaction, when shall an entity measure the fair value of the liability arising from this
arrangement?
a. At the end of each reporting period only.
b. At the beginning of each reporting period only
c. At the date of settlement only
d. At the end of each reporting period and the date of settlement

69. Options and warrants are antidilutive if

a. The option price is lower than the average market price
b. The option price is higher than the average market price
c. The option price is equal or lower to the average market price
d. The option shares represent 50% of the outstanding shares

70. Which of the following is a component of amount to be recognized in profit or loss under a defined benefit plan?
Statement I: Current service cost
Statement II: The difference between the actual return on plan asset and interest income on plant asset
Statement III: Any settlement loss or settlement gain
Statement IV: Past service cost
a. I and IV c. I, III and IV
b. ll and Ill d. l, ll, lll and lV

MULTIPLE CHOICE
Instructions: Select the correct answer for each of the following questions. Mark only one answer for each item by shading the box
corresponding to the letter of your choice on the sheet provided. STRICTLY NO ERASURES ARE ALLOWED. Use pencil no. 2 only.
Problem 1.
You are assigned to audit the cash accounts of Markat Corporation for the period ended December 31, related to the company’s
cash accounts:

Petty cash fund, imprest balance P40,000

Cash in bank, Metrobank 543,000

Audit notes:
A. You rendered a cash account in the company's petty cash fund on December 31. The custodian presented to you the
following.

Currencies and coins 11,450

An officer’s personal check accommodated by the fund marked NSF 4,000

Manager’s check 2,000

Petty cash expense vouchers: 1,500

12/20 Transportation

12/24 Office repairs 1,900

12/27 Miscellaneous 2,100

Unused postage stamps 500

A disbursement check payable to the custodian 15,600

An enveloped marked “collections for charity” with list of names and 2,500
corresponding amounts contributed. There is no money inside the
envelope.
B. the November bank reconciliation statement included the following information:

Balance per general ledger 326,830

Note receivable collected by the bank in November 125,000

Interest rate in the note receivable in November 12,500

Bank service charge in November (5,600)

Customer NSF check (25,000)

Adjusted balance P433,730

Balance per bank statement in November 467,500

Deposits in transit 55,790

Outstanding checks (98,460)

Bank charge error in November 8,900

Adjusted balance P433,730

 ● The November book reconciling items were recorded in the books in December while the bank charge error in November
was automatically corrected by the bank in December.
● The bank collected another P100,000 note receivable in December with a P10,000 interest on the company's behalf.
● Bank service charge for December was P8,100.
● The company erroneously regarded a disbursement check amounting to P56,000 as P65,000 in December. The error is yet
to be corrected.
● The bank erroneously credited the company P21,000 for 23 deposit of Meerkat Inc. The bank discovered and corrected the
error in December.
● Total bank credits and debits appearing in the December bank statement were at P2,670,600 and P2,441,920 respectively.
Moreover, total receipts per the general ledger was at P2,659,110.

Requirements:
1. What is the petty cash shortage as of December 31, 2016?
a. 3,860 c. 3, 950
b. 1,360 d. 5,860

2. What is the adjusted balance of the petty cash fund as of December 31, 2016?
a. 29,050 b. 28,550
b. 28,050 d. 26,550

3. What is the December deposit in transit?

a. 46, 700 c. 37,800
b.25,700 d. 55,700

4. What is the December outstanding checks?

a. 88.070 c. 96,970
b. 67,070 d. 97,070

5. What is the correct balance of the cash in bank account as of December 31, 2016?
a. 654,810 c. 654,810
b. 637,010 d. 633,810

6. In auditing the client-prepared bank reconciliation statement, the auditor requested the client to request the bank to furnish the
auditor a cutoff bank statement of the following period. The purpose of the cut-off bank statement is primarily to:
a. To ascertain whether all outstanding checks as of the balance sheet date, as presented in the client-prepared bank reconciliation
Statement subsequently clears the bank the following period.
b. To ascertain. whether deposits in transit and undeposited collections as of the balance sheet date, as presented in the client-
prepared bank reconciliation subsequently clears the bank the following period.
c. To determine the validity of the unrecorded bank credits for the current month, such as.note collection by the bank in behalf of the
company.
d. To determine the whether all deposits clearing the bank during the cutoff period covered by the cutoff bank statement are
presented as book reconciling item as of the balance sheet date.

PROBLEM 2:
In line with your audit of Faith Corporation's inventory accounts you rendered a cutoff procedures on deliveries and receipts of goods
several days before and after. the balance sheet date, December 31, 2016. The inventories reported per books amounting to
P679,800 was as a result of a physical count conducted. on the clients' warehouse on December 30 2016. All customers are within a
3-5 days delivery area. Gross profit on sales is at 40%.

Audit notes:
a. The following is a summary of the cut-off made on sales transactions:
December 2016 entries on the sales journal:

Invoice no. Invoice date Shipment date Amount REmarks

19817 Dec. 20 Dec. 20 P 76,500 FOB Shipping point

19818 Dec. 21 Dec. 21 80,900 FOB Destination (to consignee)

19819 Dec. 29 Dec. 29 90,500 FOB Destination (in transit)

19820 Dec. 31 Dec. 31 50,600 FOB Shipping point (in transit)

January 2017 entries on the sales journal:

Invoice no. Invoice date Shipment Amount Remarks

19821 Dec. 31 Dec. 31 P 86,800 FOB Shipping point(in transit)

19822 Jan. 2 Jan. 2 80,900 FOB Destination

19823 Jan. 4 Jan. 5 90,500 FOB Shipping point