1.

During the beginning of the year, the assets and liabilities of ABC Company
amounted to P100,000 and P76,000, respectively. At the end of the year, its
assets became P95,000 and its liabilities became P65,000. The owners
provided an additional investment worth P7,000 and drawn worth 7,000. How
much is the profit (loss)of ABC Company?
2. On December 31, 2022, the accountant for Ty Inc. re-examined the petty cash
fund. The petty cash custodian presented the following during the count:
Currencies P2,350
Petty cash vouchers:
Postage 200
Office supplies 320
Transportation 440
Repairs 850 1,810
Advances to office staff 1,460
A check drawn by Ty Inc., payable to PCC 4,100
Postage stamps 300
An employee’s check, returned by bank, marked 900
NSF
The general ledger shows an imprest petty cash fund balance of 10,920.
How much is the petty cash shortage or overage?
3. Under the imprest fund system, petty cash fund account is debited
a. Only when the fund has been established.
b. When the fund is established and when it is decreased.
c. When the fund has been established, as well as when it is replenished.
d. When the fund has been established and when the fund’s size is increased.
4. Which of the following is not a possible combination of a journal entry?
a. Increase in asset and increase in liability
b. Decrease in equity and increase in liability
c. Decrease in liability and increase in asset
d. Decrease in asset and increase in expense.
e. None of the foregoing
5. The debit and credit analysis of a transaction normally takes place at what
point in the accounting process?
a. At some other point in the accounting cycle
b. Throughout the accounting process
c. Prior to recording the transaction in a journal
d. When the journal entry is posted to the ledger.
6. All of the following are incorrect except:
a. A concept of normal balance is when a particular account increases
whenever journalized on a particular side and also increases whenever
journalized on the opposite side.
b. A concept of normal balance is when a particular account decreases
whenever journalized on a particular side and also decreases whenever
journalized on the opposite side.
c. A concept of normal balance is when a particular account decreases
whenever journalized on a particular side and increases whenever
journalized on the opposite side.
d. A concept of normal balance is when a particular account increases
whenever journalized on a particular side and decreases when journalized
on the opposite side.
7. Which of the following least resembles a usual adjusting entry?
a. Debit an expense and credit liability
b. Debit an asset and credit revenue
c. Debit an asset and credit liability
d. Debit an expense and credit asset
 e. Debit revenue and credit liability
8. If an advance payment was initially recorded as an asset, then the adjusting
entry will involve:
a. A debit to an asset account and a credit to expense in the amount of the
unexpired cost.
b. A debit to an asset account and a credit to expense in the amount of the
expired cost.
c. A debit to expense and a credit to an asset in the amount of the expired
cost.
d. A debit to an expense and a credit to an asset in the amount of the
unexpired cost.
9. The ending balance in the account “prepaid supplies” is expected to report
which of the following?
a. Unexpired portion of the supplies paid.
b. Expired portion of the supplies paid.
c. Acquisition cost of the supplies paid.
d. The accrued amount of supplies expense.
10. The following will happen if depreciation expense was not recorded,
except…
a. Total assets balance at the end of the year will be overstated.
b. Total income for the year will be overstated.
c. Operating expenses for the year will be understated.
d. Total equity will be understated.
11. The Conceptual Framework is intended to establish which of the following?
a. IFRs
b. The objectives and concepts for use in developing IFRSs.
c. The true concept of “present fairly in accordance with IFRS”.
d. The hierarchy of sources of accounting standards and principles.
12. Which of the following is true in relation to the enhancing quality of
“understandability”?
a. All information that are necessary for a user to understand the
phenomenon being depicted must be included and clearly stated in the
reports.
b. Financial information shall be free from material errors.
c. The information contained in the financial reports should be free from
bias.
d. Users have a reasonable knowledge of the business and its activities.
13. Which of the following statements is incorrect?
a. Recognition is the process of capturing for inclusion in the financial
statements an item that meets the definition of one of the elements of
financial statements.
b. Derecognition normally occurs when the entity loses the control of the
asset and when the entity no longer has a present obligation for the
liability.
c. Measuring is the process of quantifying the elements recognized in the
financial statements.
d. Aggregation is the sorting of assets, liabilities, equity, income and
expenses on the basis of shared or similar characteristics.
14. Which of the following criteria need not be satisfied for a liability to
exist?
a. The entity has an obligation.
b. The settlement is expected to result in an outflow of economic benefit.
c. The obligation is to transfer an economic resource.
d. The obligation is a present obligation that exists as a result of past
events.
15. On October 1, 2022, Vida Company recorded a rent income covering 12
months for the amount received. Which of the following will be the most
accurate effect if no adjustment will be made at the end of the year?
a. Rent income for 2022 will be understated.
b. Cash balance at the end of 2022 will be overstated.
c. Total current liabilities at the end of the 2022 will be understated.
d. Total current assets at the end of 2022 will be overstated.
16. On October 1, 2022, Senku Company settled an amount of 24,000 for the
renewal of its insurance policy for two years. How much would be the prepaid
insurance balance on December 31, 2022?
17. Gen Company has Allowance for Doubtful accounts beginning and ending
balance of P45,000 and 64,000, respectively. During 2021, the total write
off amounted to P8,000 and it has the possibility that the entity may
recover P2,500. How much is the doubtful account expense?
18. On December 31, 2020, Anya Company’s cash and cash equivalents account
balance per ledger of P1,000,000 includes the following:
Demand deposit P550,000
Undeposited collection 75,000
Time deposit – 30 days 130,000
NSF customer check 125,000
30-day money market placement due 1/28/2021 75,000
60-day commercial papers due 2/4/2021 20,000
Savings deposit in closed bank 12,500
IOU from an employee 37,500
Preferred redemption fund 100,000
Total P1,000,000

Additional information:
a) Included in the demand deposit of P550,000 was a customer check amounting
to P12,500 dated January 25,2021.
b) Also included in the demand deposit is a customer check amounting to
P22,500 dated December 31, 2019. The company neglected to encash the
check. On December 31, 2020, the customer was informed and he was willing
to replace this with a new one. New check is yet to be received from the
customer.
c) Check of P15,00 dated January 31, 2021 in payment of accounts payable was
recorded and mailed December 31, 2020.
d) Check of P17,500 in payment of accounts payable was recorded on December
31, 2020 but mailed to creditors on January 5, 2021.
e) The company uses the calendar year. The cash receipts journal was held
open until January 15, 2021 during which time P20,000 was collected and
recorded on December 31, 2020.
How much is the cash and cash equivalents to be shown on December 31, 2020?
19. Suika company provided the following data for the purposes of reconciling
the cash balance per book with the balance per bank statement on December
31:
Balance per book 1,700,000
Balance per bank statement 4,200,000
Outstanding checks, including certified check of 300,000 1,000,000
Deposit in transit 200,000
December NSF checks, of which P100,000 had been redeposited 300,000
and cleared on December 27
Erroneous credit to Suika’s account, representing proceeds 700,000
of loan granted to another company
Proceeds of note collected by bank for Suika, net of 1,500,000
service charge of P40,000
20. Baguio Corporation showed its cash in bank below:
Balance per bank statement, December 31, 2020 P38,830
Collections recorded but not yet deposited in the bank 4,353
NSF check – not recorded on books 1,820
Bank charges not yet recorded 35
Note collected by bank and not yet recorded in the books 1,790
Outstanding checks 2,200
The cash balance per books of Baguio Company on December 31, 2020 is:
21. What amount should be reported as total current assets on December 31,
2021?
Cash in bank, net of bank overdraft P500,000 5,000,000
Petty cash, unreplenished petty cash expenses P10,000 50,000
Note receivable 4,000,000
Accounts receivable, net of customers’ account with 6,000,000
credit balance of P1,500,000.
Inventory 3,000,000
Bond sinking fund 3,000,000
Accounts payable, net of suppliers’ accounts with debit 7,000,000
balances
Notes payable 4,000,000
Bonds payable due June 30,2022 3,000,000
Accrued expenses 2,000,000
22. Ezekiel Company provided the following data for the current year:
Inventory, January 1 2,000,000
Purchases 7,500,000
Purchase returns and allowances 500,000
Sales returns and allowances 750,000
Inventory on December 31 2,800,000
Gross profit rate 20%
What amount was reported as gross sales for the current year?

23. Zarjie Company provided the following information for the current year:
Accounts receivable on January 1 1,300,000
Credit sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Accounts written off 125,000
Collections of accounts written off in prior year 25,000
Estimated uncollectible receivables per aging of receivables 165,000
at January 1
Based on past experience, 2% of credit sales would be uncollectible.
How much is the net realizable value?
24. On June 1, 2021, Ott Company sold goods to Fox Company. Fox signed a
noninterest-bearing note requiring payment of P600,000 annually for seven
years. The first payment was made on June 1,2021. The prevailing interest
for this type of note at date of issuance was 10%.
What amount should be recognized as interest income for 2022?
25. On December 31, 2021, Park Company sold used equipment with carrying
amount of 2,000,000 in exchange for a noninterest bearing note of P5,000,000
requiring tern annual payments of P500,000. The first payment was made on
December 31, 2022. The market interest for similar note was 12%. What amount
should be recognized as gain (loss) on sale of equipment in 2021?
26. Clem Company provided the following for the current year:
Central warehouse Held by consignees
Beginning inventory 1,100,000 120,000
Purchases 4,800,000 600,000
Freight in 100,000
Transportation to 50,000
consignees
Freight out 300,000 80,000
Ending inventory 1,450,000 200,000
What is the cost of goods sold for the current year?
27. Hero Company reported inventory on December 31, 2021 at P6,000,000 based
on a physical count of goods priced at cost and before any necessary year-
end adjustments relating to the following:
 Included in the physical count were goods billed to a customer FOB
shipping point on December 30,2021. These goods had a cost of P125,000
and were picked up by the carried on January 7,2022.
 Goods shipped FOB shipping point on December 28,2021, from a vendor to
Hero were received and recorded on January 4, 2022. The invoice cost was
P300,000.
 Merchandise costing P100,000 shipped FOB shipping point from a vendor on
December 31,2021 was received on January 5,2022.
 Merchandise costing P120,000 was being held on consignment by Hero
Company.
 Goods sold amounted to P200,000 by the entity and shipped FOB destination
were in transit on December 31, 2021 and received by the customer on
January 2, 2022
What amount should be reported as inventory at year-end?
28. Myca Company reported during the current year:
Beginning inventory 500,000
Net purchases 2,500,000
Net sales 3,200,000
A physical count at year-end resulted in an inventory of P575,000. The gross
profit had remained constant at 25%. The entity suspected that some inventory
may have been taken by a new employee.
What amount should be reported as estimated cost of missing inventory at year-
end?
29. Charlene Company includes one coupon in each box of laundry soap it
sells. A towel is offered as a premium to customers who send in 10 coupons
and a remittance of P10.
Distribution cost of premium is P5. Experience indicates that only 30% of
the coupons will be redeemed.
2021 2022
Boxes of soap sold 2,000,0000 2,5000,000
Number of towels at 50,000 80,000
 P50 each
Coupons redeemed 400,000 700,000

What amount should be reported as estimated premium liability on December 31,

2022?
30. Galvez Company sells laptops covered by a one-year warranty for any
defects. The entity sold 500 laptops during the year. The entity’s
experience with warranty claims that 60% of all the laptops sold in a year
have zero defect, 25% of all laptops sold in a year have normal defect and
15% of all laptops sold in a year have significant defect. The cost of
rectifying a “normal defect” in a laptop is P10,000. The cost of rectifying
a “significant defect” in a laptop is P30,000.
What amount should be reported as warranty liability at year-end?
31. Regal Department Store sells gift certificates, redeemable for store
merchandise and with no expiration date. The entity provided the following
information pertaining to the gift certificates sales and redemptions during
the current year:
Unearned revenue on January 1 750,000
Sales of gift certificates 2,500,000
Redemptions of prior year sales 250,000
Redemptions of current year sales 1,750,000
What amount should be reported as unearned revenue at year-end?
32. Diversified Company sells perishable electronic products that are shipped
in reusable containers.
Customers pay a deposit for each container. The deposit is equal to the
container cost. Customers receive a refund when the container is returned.
During the current year, deposits collected on containers shipped amounted
to P700,000. Deposits are forfeited if containers are not returned in 18
months.
Containers held by customers at the beginning of the year totaled 330,000.
During the current year, an amount of P410,000 was refunded and deposits of
P25,000 were forfeited.
What amount should be reported as liability for refundable deposit at year-end?
33. The bonus agreement of Christian Company provides that the general
manager shall receive an annual bonus of 15% of the net income after bonus
and tax. The income tax rate is 25%. The general manager received P320,000
for the current year as bonus.
What amount was reported as income before bonus and tax?
34. On February 5,2022, an employee filed a P2,000,000 lawsuit against Steel
Company for damages suffered when one of Steel’s plant exploded on December
29, 2021. The legal counsel believed the entity would probably lose the
lawsuit and estimated the loss to be P500,000. The employee offered to
settle the lawsuit out of court for P900,000 but the entity did not agree to
the settlement.
On December 31, 2021, what amount should be reported as liability from lawsuit?
35. On March 1, 2021, Cain Company issued at 103 plus accrued interest 4,000
bonds of 9%, P1,000 face amount. The bonds are dated January 1, 2031.
 Interest is payable semi-annually on January 1 and July 1. The entity paid
bond issue cost of P200,000.
What is the net cash received from the bond issuance?
36. On January 1, 2018, Greg Company issued at 99 plus accrued interest,
2,000 of 8% P1,000 face amount bonds. The bonds are dated January 1, 2018,
mature on January 1, 2028, and pay interest on January 1 and July 1. The
entity paid bond issue cost of P70,000. On December 31, 2022, one half of
the bonds were retired at 101%.
What amount should be reported as gain (loss) on early redemption of bonds?
37. On January 1, 2022, West Company issued 9% bonds in the face amount of
P5,000,000 which mature on January 1, 2032. The bonds were issued for
P4,695,000 to yield 10%. The interest is payable annually on December 31.
On December 31, 2023, what is the carrying amount of the bonds payable?
38. On April 1, 2021, Angel Company issued 5-year 5,000 bonds with face
amount of P1,000 per bond for P5,380,000 to yield 10%. Interest of 12% is
payable semi-annually every March 30 and September 30.
What amount should be reported as interest expense for 2022?
39. Glenn Company provided the following information at year-end:
Preference share capital, P100 par 3,000,000
Share premium – preference share 500,000
Ordinary share capital, P10 par 6,000,000
Share premium – ordinary share 2,000,000
Subscribed ordinary share capital 4,000,000
Retained earnings 2,500,000
Subscription receivable – ordinary share 1,000,000
Treasury shares, P15 at cost 150,000
What amount should be reported as legal capital?
40. At the beginning of current year, Ashe Company was organized with
authorized capital of 100,000 shares at P200 par value.
January 10 Issued 25,000 ordinary shares at P220 a share.
March 25 Issued 1,000 shares for legal services when the fair value was
P240 a share.
September 30 Issued 5,000 shares for a tract of land when the fair value
was P260 a share.
October 20 Acquired own shares related to the issuance of ordinary share
during January 10, 4,000 shares at P250.
October 31 Reissued 1,000 treasury shares at P270 per share
November 16 Retired the remaining treasury shares.
The retained earnings of the entity amounted to P300,000.
What amount should be reported for share premium?
41. At the beginning of current year, Guess company was organized and
authorize to issue 100,000 shares with P50 par value. During the current
year, the entity had the following transactions relating to shareholder’s
equity:
 Issued 10,000 shares at P70 per share.
 Issued 20,000 shares at P80 per share.
 Reported net income of P1,000,000
 Paid dividends of P200,000
 Purchased 3,000 treasury shares at P100 per share.
What amount should be reported as total shareholder’s equity at year-end?
42. The following are the information regarding the operations of Xin
Company:
2022 2023
Cash 76,000 93,000
Accounts receivable 34,000 45,000
Inventory 83,000 90,000
Equipment 67,000 50,000
Accounts payable 45,000 56,000
Accrued expense 65,000 48,000
Unearned revenue 90,000 69,000

How much is the profit (loss) during 2023?

43. The objective of PAS1 Presentation of Financial Statements is
a. to provide the basic principles in the presentation of general purpose
financial statements to improve comparability.
b. to provide the basis principles in the presentation of general and
special purpose financial statements to improve comparability.
c. to provide the basic principles in the presentation of general purpose
financial statements to improve consistency.
d. All of these.
44. According to PAS 2, the primary issue in accounting for inventories is
the determination of
I. Cost to be recognized as asset in the statement of financial position.
II. The amount recognized as expense in the statement of profit or loss and
other comprehensive income when the related revenue are recognized.
III. Obsolete items that need to be written down to net realizable value
IV. The point of sale where ownership is transferred from the seller to th
buyer
a. I and II
b. I, II, III
c. I, II, IV
d. I, II, III, IV
45. A change from the cost approach to the market approach of measuring fair
value is considered to be what type of accounting change?
a. Change in accounting policy
b. Change in accounting estimate
c. Correction of prior period errors
d. None of the foregoing.
46. Which of the following is included in the investing activities of cash
flows?
a. Acquisition and sale of investments in held for trading securities.
b. Acquisition and sale of items of property, plant and equipment that are
routinely manufactured in the entity’s ordinary course of business.
 c. Acquisition and sale of short-term investments in cash equivalents.
d. Cash inflow from repayment of loans.
47. Which of the following is an example of non-adjusting event?
a. Sale of inventory or less than carrying value shortly after the reporting
period.
b. Amounts received in respect of an insurance claim being negotiated at the
period end.
c. Destruction of a machine by fire after the reporting period.
d. Bankruptcy of a major customer with a balance owing at the period end.
48. Which of the following statements best described accrual adjusting
entries?
a. Adjusting entries where cash flow and revenue or expense recognition are
simultaneous.
b. Adjusting entries where cash flow precedes revenue or expense
recognition.
c. Adjusting entries where revenue or expense recognition precedes cash
flow.
d. Adjusting entries where revenue or expenses are recognized in the absence
of cash flow evidence.
49. The adjustment for depreciation has the same effect as the adjustment for
a. An accrued expense
b. An accrued income
c. A prepaid expense
d. An unearned income
50. In the preparation of the worksheet, if the total debits are greater than
total credits under the income statement column:
a. There is net income
b. There is net loss
c. Income is understated
d. Expense is overstated