Pamantasan ng Lungsod ng Valenzuela • Department of Accountancy • A.

Y 2022 – 2023, 2nd Semester

GENERAL DIRECTIONS: Use black permanent ink pen in writing your final answers in your answer sheet. Erasure
and/or superimposition of any kind is strictly not allowed. Doing such shall automatically render your answers
INCORRECT. If you have any query or clarification as to anything about the examination, kindly approach the
facilitators.
DO NOT CHEAT. GOD IS WATCHING YOU.

1. Nontrade receivables are classified as current assets only if they are reasonably expected to be
realized in cash
a. Within the normal operating cycle.
b. Within one year, the length of the operating cycle notwithstanding
c. Within one year or within the operating cycle, whichever is longer.
d. Within one year or within the operating cycle, whichever is shorter.

2. On July 1 of the current year, an entity received a one-year note receivable bearing interest at
the market rate. The face amount of the note receivable and the entire amount of the interest
are due in one year. The interest receivable account would show a balance on
a. July 1 and December 31
b. July 1 but not December 31
c. December 31 but not July 1
d. Neither July 1 nor December 31

3. In calculating the carrying amount of loan receivable, the lender adds to the principal
a. Interest incurred by the borrower
b. Loan origination fee charged to the borrower
c. Direct loan origination cost incurred by the lender
d. Indirect loan origination cost incurred by the lender

4. If accounts receivable is pledged against borrowing, the amount of accounts receivable pledged
shall be
a. Included in total receivables with disclosure
b. Excluded from total receivables with disclosure
c. Included in total receivables without disclosure
d. Excluded from total receivables without disclosure

5. For an investment in equity securities classified as FVOCI, unrealized loss taken to equity is
a. The excess of fair value over the original cost
b. The excess of fair value over the amortized cost
c. The excess of original cost over the fair value
d. The excess of amortized cost over the fair value

6. Unrealized holding gains or losses which are recognized in the statement of comprehensive
income are from securities classified as
a. FVPL only
b. FVPL and FVOCI
c. FVOCI and Investment at Amortized Cost
d. FVOCI only

7. The reason goodwill is sometimes referred to as a master valuation account is because

a. it represents the purchase price of a business that is about to be sold.
b. it is the difference between the fair market value of the net tangible and identifiable
intangible assets as compared with the purchase price of the acquired business.
c. the value of a business is computed without consideration of goodwill and then goodwill
is added to arrive at a master valuation.
d. it is the only account in the financial statements that is based on value, all other
accounts are recorded at an amount other than their value.
 8. Goodwill may be recorded when:
a. It is identified within a company.
b. One company acquires another in a business combination.
c. The fair value of a company’s assets exceeds their cost.
d. A company has exceptional customer relations.

9. Which of the following legal fees should be capitalized?

Legal fees to Legal fees to successfully
obtain a copyright defend a trademark
a. No No
b. No Yes
c. Yes Yes
d. Yes No

10. A brand name that was acquired separately should initially be recognized, according to PAS38
Intangible assets, at
a. Recoverable amount
b. Either cost or fair value at the choice of the acquirer
c. Fair value
d. Cost

PENK Company uses the statement of financial position approach in estimating uncollectible accounts
expense. The entity prepares an adjusting entry to recognize this expense at the end of the year. During
the year, the entity wrote off a P200,000 receivable and made no recovery of previous write-off. After
the adjusting entry for the year, the credit balance in the allowance for doubtful accounts was P350,000
larger than it was on January 1.

11. What amount of uncollectible account expense was recorded for the year?
a. 350,000
b. 200,000
c. 150,000
d. 550,000

REYD Company prepared an aging of accounts receivable on December 31, 2023 and determined that
the net realizable value of the accounts receivable was P3,300,000. Additional information is available as
follows:
Allowance for doubtful accounts on January 1 200,000
Accounts written off as uncollectible 200,000
Accounts receivable on December 31 3,700,000
Uncollectible accounts recovery 300,000

12. For the year ended December 31, 2023, what amount should be recognized as doubtful
accounts expense?
a. 200,000
b. 100,000
c. 300,000
d. 400,000

On July 1, 2023, BLOO Company sold equipment to BAYOLET Company for P1,000,000. BLOO accepted a
10% note receivable for the entire sales price. This note is payable in two equal installments of P500,000
plus accrued interest on December 31, 2023 and December 31, 2024. On July 1, 2024, the entity
discounted the note at a bank at an interest rate of 12%.
 13. What is the amount received from the discounting of note receivable?
a. 484,000
b. 493,500
c. 503,500
d. 517,000

INDEYGO Company factored P 750,000 of accounts receivable at year-end. Control was surrendered.
The factor accepted the accounts receivable subject to recourse for nonpayment. The factor assessed a
fee of 2% and retained a holdback equal to 4% of the accounts receivable. In addition, the factor
charged 12% interest computed on a weighted-average time to maturity of fifty-one days. The fair value
of the recourse obligation is P 15,000.

14. What is the amount of cash initially received from the factoring?
a. 692,425
b. 720,000
c. 722,425
d. 705,000

YELOW Company insured the life of its president for P1,500,000, the entity being the beneficiary of an
ordinary life insurance policy. The annual premium is P80,000 and the policy is dated January 1, 2022.
The cash surrender values are P15,000 on December 31, 2024 and P19,000 on December 31, 2025. The
entity follows the calendar year. The president died on April 1, 2025 and the policy is settled on
December 31, 2025.

15. What is the gain on life insurance settlement?

a. 1,421,000
b. 1,404,000
c. 1,424,000
d. 1,500,000

16. What is the life insurance expense for 2025?

a. 19,000
b. 16,000
c. 59,000
d. 17,000

On January 1, 2022, BITCOIN Company took out a loan of P24,000,000 in order to finance specifically the
renovation of a building. The renovation work started on the same date. The loan carried annual interest
at 10%. Work on the building was substantially complete on October 31, 2022. The loan was repaid on
December 31, 2022 and P200,000 investment income was earned in the period to October 31 on the
proceeds of the loan not yet used for the renovation.

17. What amount of capitalizable borrowing cost should be included in the cost of the building?
a. 2,400,000
b. 2,200,000
c. 2,000,000
d. 1,800,000

18. What amount should be reported as interest expense for 2022?

a. 800,000
b. 400,000
c. 200,000
d. 0
ETHERIUM Company was constructing an asset that qualified for interest capitalization. The construction
began at the beginning of the current year and was completed at the end of current year. The
construction cost totaled P12,000,000 and was incurred evenly during the current year. The entity had
outstanding notes payable during the entire year of construction comprising P6,000,000 8% interest and
P9,000,000 9% interest. None of the borrowings were specified for the construction of the qualified
asset.

19. What amount of interest should be capitalized?

a. 480,000
b. 516,000
c. 810,000
d. 960,000

On January 1, 2023, TRON Corp. acquires a patent for a drug with a remaining legal and useful life of ten
years from TETHER Co. in exchange for 2,500 shares of TRON Corp.’s P5 par value common stock and
P90,000 cash. When TRON Corp. acquired the patent, its stock was selling for P9 a share. On January 1,
2025, a new patent is received for an improved version of the same drug. The new patent has a legal
and useful life of 12 years from the date of acquisition.

20. TRON Corp. should record the patent at what amount?

a. P102,500
b. P108,750
c. P112,500
d. P90,000

21. What amount should be recorded as amortization expense for 2025?

a. 7,500
b. 8,200
c. 9,000
d. 1,800

Presented below is information related to copyrights owned by SHIBA INU Corporation at December 31,
2023.
Cost 2,700,000
Carrying amount 2,400,000
Expected future net cash flows 2,100,000
Fair value 1,400,000

Assume SHIBA INU will continue to use this asset in the future. As of December 31, 2023, the copyrights
have a remaining useful life of 5 years.

22. What amount should be recorded as impairment loss on December 31, 2023?
a. 300,000
b. 600,000
c. 1,300,000
d. 1,000,000

On January 1, 2023, DOGECOIN Company purchased a trademark and incurred the following costs:

Purchase price P1,000,000

Nonrefundable value added tax 50,000
Training of personnel on the use of new trademark 70,000
Research expenditures associated with the purchase of 240,000
the new trademark
Legal cost incurred to register the new trademark 105,000
 Administrative salaries 120,000

23. What is the initial cost of the trademark?

a. 1,000,000
b. 1,155,000
c. 1,395,000
d. 1,585,000

On January 1,2023, Sana Tama Ka Dito Company purchased non trading equity investment for
P8,000,000 including transaction cost of P300,000.
The entity irrevocably designated the investment as Financial asset at fair value through other
comprehensive income

The following are the market value of the investment at year end
December 31, 2023 – P8,200,000
December 31,2024 – P7,500,000
On June 1,2025, the entity sold the investment for P9,000,000
24. How much is the unrealized gain or loss in the Statement of shareholder’s equity on December
31,2024?
a. 800,000 unrealized loss
b. 500,000 unrealized loss
c. 0
d. 700,000 unrealized loss

25. How much is the adjustments to retained earnings as a result of sale on June 1,2025?
a. 1,000,000 debit
b. 1,500,000 credit
c. 1,000,000 credit
d. 700,000 credit

26. Which of the following is true regarding impairment of loans?

a. The impairment loss is recorded as other comprehensive income item
b. The impairment loss arises if the present value of collectible cashflow is greater than the
carrying amount of the loans
c. The present value of collectible cashflow is computed using the new effective rate
d. None of the choices

27. Which of the following is a correct accounting treatment regarding loans?

a. It is not tested for impairment
b. The fair value is compared to carrying amount to test for impairment at year end
c. Increase in fair value is recorded
d. All of the choices

28. Which of the following is not included in the computation of loss on factoring for factoring
without recourse?
a. Interest expense
b. Fair value of recourse liability
c. Factor’s fee or Commission of factor
d. Assessed fee of factor

On January 1,2023, Kaya Mo ‘To Company purchased 30% of Idle Company for P5,000,000. The carrying
amount of the net asset of Idle as of that date is P30,000,000. All assets and liabilities are at fair value
except for Land, and Machinery. The fair value of land is P7,000,000 less than its cost, while the fair
value of Machinery is P3,000,000 less than its cost. The land was sold in 2023. The useful life of the
Machinery is 5 years. During 2023, Idle Sold inventory to Kaya Mo ‘To for P4,000,000, the cost of the
inventory is P3,500,000. The inventory was sold in 2024. During 2024, Kaya Mo ‘To sold land to Idle for
P5,000,000 with a cost of P4,000,000, the land remains in the hand of Idle at year end. Net income is
P5,000,000 and P4,000,000 for 2023 and 2024. Dividends are P1,000,000 and P1,500,000 for 2023 and
2024.
29. How much is the initial recognition?
a. 5,000,000
b. 9,000,000
c. 6,000,000
d. 7,000,000

30. How much is the excess of cost over fair value at the date of purchase?
a. 1,000,000
b. 850,000
c. 4,000,000
d. 550,000

31. How much is the share in net income for the year ended December 31,2023?
a. 1,500,000
b. 3,630,000
c. 3,780,000
d. 3,480,000

32. How much is the share in net income for the year ended December 31,2024?
a. 1,200,000
b. 1,030,000
c. 1,230,000
d. 1,500,000

33. Which of the following is true?

a. Share split will increase the total cost of the investment
b. Share dividends will increase the total cost of the investment
c. Share dividends and share split doesn’t have an effect to the cost per unit of investment
d. Share dividends will decrease the cost per share

34. An investor uses equity method. What is the effect in the 2023 net income of the overvalued
land and overvalued inventory if the investor purchased the investment in 2023. The land was
sold in 2023 while the inventory was sold in 2024
Land Inventory
a. Increase Decrease
b. Decrease Increase
c. Increase No effect
d. Decrease No effect

35. Which of the following is true regarding excess of fair value over acquisition cost?
a. Already included in the purchase price of the investment
b. Part of other comprehensive income
c. Amortized at year end
d. Included in the profit or loss for the year

36. Lasinggero Company purchased the 100% share of Tiger Company for P12,000,000. The
following are the carrying amount and fair value of the purchased business
Carrying amount Fair value
Cash 2,000,000 4,000,000
Accounts Receivable 2,000,000 3,500,000
Inventory 4,500,000 6,000,000
Customer list 2,000,000 0
Loans payable 3,000,000 3,000,000
Bonds Payable 1,000,000 1,000,000
Retained Earnings 2,000,000 2,000,000
How much is the goodwill?
 a. 7,500,000
b. 4,500,000
c. 2,500,000
d. 5,500,000

Bonus Points Company plans to sell its business. The earnings of the business for the past 5 years are as
follows
2018 3,000,000
2019 4,000,000
2020 1,500,000
2021 1,000,000
2022 1,300,000

The fair value of the net asset of the company is P10,000,000.

The 2022 net earnings includes the expropriation loss amounting to P500,000.
The normal rate of return of the business is 20%
37. How much is the goodwill if it is computed using Purchase of average excess earnings for 5
years?
a. 1,300,000
b. 0
c. 260,000
d. 300,000

38. How much is the goodwill if it is computed using Capitalization of average excess earnings at
30%?
a. 866,666.67
b. 2,466,666.67
c. 0
d. 78,000

The following are the data of Maikli Na ‘To Company

Land 2,000,000
Building use as store building 4,000,000
Vehicle leased out under operating lease 500,000
Land with undetermined future use 2,500,000
Land for capital appreciation 3,000,000
Vehicle for rentals 600,000
Land of subsidiary held for investment purposes 3,000,000
Land leased out to subsidiary under operating lease 2,000,000
Land leased out to associate under operating lease 3,000,000
Land used by associate who doesn’t pay rent 1,500,000
Building use by employee who pay rent 4,000,000
Building use by subsidiary who doesn't pay rent 2,000,000
Building with mix use 30% rentals 70% store 2,000,000
Hotel buildings 1,000,000
Rental building in which the entity provides
significant ancillary services 1,000,000
Rental building of subsidiary in which the subsidiary
provides maintenance and security services 1,000,000
Rental land of associate in which the associate
provides maintenance and security services 1,000,000
Additional info: The building with mix use cannot be sold or leased out separately.
39. How much is the investment property for Consolidated Financial Statements purposes?
a. 12,000,000
b. 12,500,000
c. 13,100,000
d. 13,500,000
 40. How much is the PPE for Consolidated Financial Statements purposes?
a. 20,600,000
b. 20,000,000
c. 21,000,000
d. 19,600,000

Kabit Momints Company purchased 6% P5,000,000 bonds on January 1,2023. The bonds will mature in
December 31,2025. The effective interest of the bonds is 8%. The business model of the entity is to
collect contractual cashflow and to sell the bonds in the open market. The bonds are quoted at 105 and
110 on December 31,2023 and December 31,2024, respectively. Use 2 decimal places in rounding off the
present value factor
41. How much is the initial recognition of the bonds of Kabit Company?
a. 3,974,000
b. 4,724,000
c. 4,803,000
d. 5,106,000

42. How much is the carrying amount at December 31,2024?

a. 5,500,000
b. 4,886,073.6
c. 4,563,240
d. 4,801,920

43. Which of the following may be classified as investment property?

a. Vehicle
b. Patent
c. Land of Associates
d. Building of Subsidiary

44. Which of the following is true regarding patent?

a. The capitalizable cost of internally generated patent is the cost regarding registration
only
b. The capitalizable cost of purchased patent is the purchase price plus directly attributable
cost
c. The Patent is amortized at year end and is tested for impairment
d. All of the choices

45. Which of the following is false regarding patent?

a. Patent is amortized using the legal life or useful life whichever is higher
b. Purchased of competitive patent is amortized using the remaining useful life of the
original patent
c. Purchased of related patent is amortized using the extended life of the original patent
d. The cost of defending the patent in a lawsuit is expense outright

On January 1,2023, Deny Hanggang Mamatay Company purchased 9% P6,000,000 bonds for
5,772,552.79 including transaction cost of P300,000. The bonds will mature on December 31,2027. The
business model of the entity is to collect contractual cashflow. The effective rate is 10%. On March 2023,
the entity changed its business model to sell the asset in the open market. The fair value and the
effective rate at year end are as follows. The fair value on January 1,2024 remains unchanged.
Fair value
December 31,2023 6,200,000
December 31,2024 6,500,000
46. How much is the interest income for the year ended December 31,2023?
a. 540,000.00
b. 577,255.28
c. 607,255.28
d. 600,000
 47. How much is the interest income for the year ended December 31,2024?
a. 540,000
b. 580,980.8
c. 620,000
d. 558,000

48. At January 1, 2001, Judy Co. had a credit balance of ₱260,000 in its allowance for uncollectible
accounts. Based on past experience, 2% of Judy 's credit sales have been uncollectible. During
20x1, Judy wrote off ₱325,000 of uncollectible accounts. Credit sales for 20x1 were ₱9,000,000.
In its December 31, 20x1, balance sheet, what amount should Judy report as allowance for
uncollectible accounts?
a. 115,000
b. 180,000
c. 245,000
d. 440,000

49. On the December 31, 2006, balance sheet of Esther Co., the current receivables consisted of the
following:
Trade accounts receivable  93,000
Allowance for uncollectible accounts  (2,000)
Claim against shipper for goods lost in transit (November 20x6)  3,000
Selling price of unsold goods sent by Esther on consignment at 
  130% of cost (not included in Esther's ending inventory)  26,000
Security deposit on lease of warehouse used for storing some 
  inventories  30,000
150,00
Total 
0

At December 31, 2006, the correct total of Esther's current net receivables was
a. 94,000
b. 120,000
c. 124,000
d. 150,000

On January 1, 20x1, ABC Co. sold a transportation equipment with a historical cost of ₱1,000,000 and
accumulated depreciation of ₱300,000 in exchange for cash of ₱100,000 and a noninterest-bearing note
receivable of ₱800,000 due on January 1, 20x4. The prevailing rate of interest for this type of note is
12%.
50. How much is the interest income in 20x1?
a. 68,331  
b. 76,532 
c. 85,714
d. 96,000  

51. How much is the carrying amount of the receivable on December 31, 20x2?
a. 800,000
b. 569,424
c. 637,755        
d. 714,286 

52. A shareholder owns 10,000 shares costing P1,000,000. Subsequently the shareholder receives
1,000 shares in lieu of cash dividend of P10 per share. The market value per share is 150. How
should be the receipt of the 1,000 shares be recorded?
a. Debit to Investment in shares amounting to 150,000
b. Debit to Investment in shares amounting to 100,000
c. Credit to Investment in shares amounting to 150,000
d. Credit to Investment in shares amounting to 100,000
 53. If there is no related market value relating to previous question, how should it be recorded?
a. Debit to Investment in shares amounting to 150,000
b. Debit to Investment in shares amounting to 100,000
c. Credit to Investment in shares amounting to 150,000
d. Credit to Investment in shares amounting to 100,000

54. On January 1, 2020, Mega Company acquired 10% of the outstanding ordinary shares of Penny
Company for P4,000,000. The investment was appropriately accounted for under cost method.
On January 1, 2021, Mega Company gained the ability to exercise significant influence over
financial and operating control of Penny Company by acquiring an additional 20% of Penny’s
outstanding ordinary shares for P10,000,000. The fair value Penny’s net assets equaled carrying
amount.
The fair value of the 10% interest on January 1, 2021 was P6,000,000.
For the years ended December 31, 2020 and 2021, the investee reported the following:

2020 2021
Dividend Paid 2,000,000 3,000,000
Net income 6,000,000 6,500,000
What is the investment income in 2020?
a. 200,000
b. 400,000
c. 600,000
d. 300,000

55. What is the carrying amount in 2021?

a. 16,000,000
b. 17,050,000
c. 15,050,000
d. 16,700,000

56. Solo Co. purchased ₱300,000 bonds for ₱315,000. The securities are to be held until maturity to
collect the contractual cash flows. The entry to record the investment includes
a. a debit to Held-for-Trading Securities at ₱300,000.
b. a credit to Premium on Investments of ₱15,000.
c. a debit to Investment in bonds measured at amortized cost for ₱315,000.
d. none of these.

57. On January 1, 20x1, Kevin Co. acquired 12%, P4,000,000 bonds for P4,198,948.  The principal is due
on December 31, 20x3 but interest is made annually starting December 31, 20x1. The effective interest
rate on the bonds is 10%.
How much is the interest income recognized in 20x1?
a. 419,895 c. 407,273
b. 413,884 d. 480,000

58. On January 1, 20x1, NURTURE REAR Co. acquired a building with an estimated useful life of 10 years
and residual value of ₱400,000 for a total cost of ₱4,000,000. The fair value of the building on January 1,
20x1 is ₱4,800,000 while the fair value on December 31, 20x1 is ₱5,200,000. The purpose of the building
is for capital appreciation. NURTURE estimates that if the building is sold currently on December 31,
20x1, costs to sell amount to ₱200,000. NURTURE uses the straight line method in depreciating its PPE.
NURTURE uses the fair value model for its investment properties. The year-end adjusting entry will
include
a. 360,000 depreciation c. 200,000 unrealized gain
b. 400,000 unrealized gain d. 1,200,000 unrealized gain
Alena Company applied revaluation accounting to plant asset with carrying amount of 8,000,000 on
January 1, year 1, useful life of 4 years and no residual value. Depreciation is based on straight line
method. On December 31, year 1, independent appraisers determined that the asset has a fair
value of 7,500,000

59. How much is the depreciation on Year 1?

a. 2,000,000
b. 2,500,000
c. 3,000,000
d. 3,500,000
60. What is the amount included in the journal entry to record the revaluation on December 31, Year 1?
a. 1,300,000
b. 1,500,000
c. 2,000,000
d. 1,800,000

61. PAS 28 – Standards for Investment in Associates and Joint Ventures generally applies when the level
of ownership over another company is at what percentage?
a. Less than 20%
b. 20%-30%
c. 20%-50%
d. More than 50%

62.When an investor uses fair value accounting to account for investments in common stock, cash
dividends received by the investor from the investee would normally be recorded as
a. a deduction from the investment account.
b. dividend revenue.
c. an addition to the investor's share of the investee's profit.
d. a deduction from the investor's share of the investee's profit.

63.Under the equity method in PAS 28, goodwill amortization

a. reduces the investment account.
b. increases the investment account.
c. reduces both investment income and the investment account.
d. is not recorded.

64. Securities classified as financial asset measured at amortized cost are reported at
a. acquisition cost.
b. acquisition cost plus amortization of a discount.
c. acquisition cost plus amortization of a premium.
d. fair value.

65. In accounting for investments in debt securities that are classified as held for trading securities,
a. a discount is reported separately.
b. a premium is reported separately.
c. any discount or premium is not amortized.
d. none of these.

66. According to PFRS 9 Financial Instruments, investments in debt securities that are classified at
amortized cost are initially measured at
a. cost including accrued interest.
b. maturity value.
c. cost including brokerage and other fees.
d. fair value plus brokerage and other fees.

67. An entity starts the capitalization of borrowing costs to the cost of a qualifying asset when
a. expenditures for the asset are being incurred.
b. borrowing costs are being incurred.
c. activities necessary to prepare the asset for its intended use or sale are being undertaken.
d. all of the above conditions are met.

68. Derecognition of PPE using revaluation model states that:

a. Carrying amount should be derecognized at disposal
b. Fair value should be derecognized at midyear
c. No derecognition allowed
d. It can only be derecognized once it has no economic benefits

69. Select the incorrect statement relating to Cash Surrender Value

a. Upon the 3rd year of the insurance policy, the company should credit an entry to the Retained
Earnings
b. If the beneficiary is the wife of the president, the company should record cash surrender at 3rd year.
c. The company should record adjusting entries at year end.
d. The company should record a credit in insurance expense if there is a dividend received.

70. Choose letter A to pass this exam 😊

a. A
b. ?
c. ?????????? Really?
d. Please do not choose this letter

NAME: DATE:

SECTION: SCORE: