AFAR Fifth Monthly Assessment- Part 1

1. A company has a method of collecting and organizing cost information in an accounting system,
called (1)_______. This system performs (2)_______, which (3)_______ indirect costs and
(4)_______ direct costs.
a. (1) cost assignment, (2) cost accumulation, (3) allocates, (4) traces.
b. (1) cost assignment, (2) cost accumulation, (3) traces, (4) allocates.
c. (1) cost accumulation, (2) cost assignment, (3) allocates, (4) traces.
d. (1) cost accumulation, (2) cost assignment, (3) traces, (4) allocates.
2. Total manufacturing costs for the year plus beginning Work in Process Inventory cost equals?
a. Cost of goods manufactured in the year
b. Ending Work in Process Inventory
c. Total costs of goods put into process
d. Cost of goods available for sale
3. The debits in work-in-process are BWIP, direct labor, direct materials, and factory overhead. The
account should be credited for production that is completed and sent to finished goods inventory.
The balance is

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a. EWIP, which is a credit.
b. EWIP, which is a debit.

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c. Total production costs to be accounted for.
d. Closed out at the end of the accounting period.

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4. Which of the following statements is correct concerning job order?
a. Job order costing is mainly used in firms with homogeneous products such as oil refineries.
b. Indirect materials are charged to a specific job.
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c. Job order costing would be appropriate for a manufacturer of airplane.
d. All the costs appearing on the job order cost sheet are actual costs.
5. Under normal costing, the direct material, direct labor and factory overhead costs are presented at?
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a. Actual cost, actual cost and actual cost, respectively

b. Predetermined cost, actual cost and actual cost, respectively
c. Actual cost, actual cost and predetermined cost, respectively
d. Predetermined cost, predetermined cost and actual cost, respectively
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6. A mentally deranged employee, Mr. Amereil Umbra Katok, put a torch to a factory on February 20,
20x1. The resulting fire completely destroyed the plant and its contents. Fortunately, certain
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accounting records were kept in another building. They revealed the following for the period
December 31, 20x0 to February 20, 20x1:
Prime cost, ₱301,000.
Gross profit rate on sales, 20%.
Cost of goods available for sale, ₱460,000.
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Direct materials purchased, ₱170,000.

Work in process, December 31, 20x0, ₱34,000.
Direct materials, December 31, 20x0, ₱16,000.
Finished goods, December 31, 20x0, ₱30,000.
Factory overhead, 40% of conversion cost.
Sales, ₱500,000.
Direct labor, ₱180,000.
The insurance company wants to know the approximate cost of the inventories as a basis for
negotiating a settlement.
Compute for February 20, 20x1 the direct materials inventory; work in process inventory, and
finished goods inventory, respectively:
a. ₱65,000; ₱25,400; ₱60,000 c. ₱65,000; ₱25,400; ₱30,000
b. ₱49,000; ₱25,000; ₱30,000 d. ₱65,000; ₱25,000; ₱60,000
7. At the end of the last fiscal year, Mekini Mekini Company had the following account balances:
Overapplied overhead ₱ 6,000
Cost of goods sold 980,000
 Work in process inventory 38,000
Finished goods inventory 82,000
If the most common treatment of assigning overapplied overhead were used, the final balance in
cost of goods sold is:
a. ₱974,000 b. ₱974,660 c. ₱985,340 d. ₱986,000
8. Unacceptable units of production that are subsequently repaired and sold as good units are?
a. Reworked units
b. Scrap
c. Waste
d. Spoilage
9. The work in process inventory should be debited with the cost of rework that is?
a. Scrap
b. Abnormal
c. Normal and common to all jobs
d. Normal and specific to a job
10. Job No. 47 (consisting of 5,000 units) was started in September 20x1 and it is special in nature
because of its strict specifications. Factory overhead is charged at ₱0.85 per unit and includes a ₱.05

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provision for defective work. The prime costs incurred in September are: Direct materials, ₱9,000
and direct labor, ₱4,800. Upon inspection, 80 units were found with imperfections and required the

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following reprocessing costs, direct materials, ₱2,000 and direct labor, ₱1,000. The unit cost of Job
No. 47, upon completion, is:
a. ₱4.22 b. ₱4.29 c. ₱4.17 d. ₱4.35
11. To
be
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determine the EUP using the FIFO method of process costing, work for the current period must
stated in units
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a. Completed during the period and units in ending inventory.
b. Completed from beginning inventory, units started and completed during the period, and units
partially completed in ending inventory.
c. Started during the period and units transferred out during the period.
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d. Processed during the period and units completed during the period.
12. Department A is the first stage of Mann Company cycle. The following information is available for
conversion cost for the month of April:
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Units
Work in process, Beginning (60% complete) 20,000
Started in April 340,000
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Completed in April and transferred to Department B 320,000

Work in process, Ending (40% complete) 40,000
The equivalent units for conversion cost calculation are:
FIFO AVERAGE
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a. 324,000 324,000
b. 336,000 336,000
c. 336,000 324,000
d. 324,000 336,000
13. Bart Co. adds material at the end of the process in Department M. The following information pertains
to Department M’s work in process during April:
Units
Work in process, April 1 (60% complete as to conversion) 3,000
Started in April 25,000
Completed 20,000
Work in process, April 30 (75% complete as to conversion) 8,000
What are the EUP’s?
FIFO AVERAGE
Material Conversion Material Conversion
a. 28,000 28,000 28,000 28,000
b. 25,000 24,200 28,000 26,000
 c. 20,000 24,200 20,000 26,000
d. 24,200 20,000 26,000 20,000
14. The Wiring Department is the second stage of the Flem Company’s production cycle. On May 1, the
BWIP contained 25,000 units which were 60% complete as to conversion cost. During May, 100,000
units were transferred in from the first stage of Flem’s production cycle. On May 31, the EWIP
contained 20,000 units which were 80% compete as to conversion cost. Materials added at the end
of the process. Using the weighted average method, the EUP on May 31 were:
Transferred in cost Materials Conversion Cost
a. 100,000 125,000 100,000
b. 125,000 105,000 105,000
c. 125,000 105,000 121,000
d. 125,000 125,000 121,000
15. On November 1, Yankee Company had 20,000 units of WIP in Department No. 1 where were 100%
complete as to material cost and 20% complete as to conversion costs. During November, 160,000
units were added in Department No. 1 and 170,000 units were completed and transferred to
Department No. 2. WIP on November 30 was 10,000 complete as to material and 40% complete as
to conversion cost. By what amount would the EUP for conversion cost differ if FIFO method were
used instead of weighted average method?

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a. 20,000 increase c. 16,000 increase
b. 8,000 decrease d. 4,000 decrease

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16. If the normal spoilage is detected at an inspection point within the process, the cost of that spoilage
should be?

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a. Allocated to ending work in process and units transferred out based on their relative values
b. Included with the cost of the units completed in that department during the period
c. Included with the cost of the units sold during the period
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d. Allocated to the good units that have passed the inspection point
17. A continuous loss
a. Occurs evenly throughout the production process.
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b. Never occurs during the production process.

c. Always occurs at the same place in a production process.
d. All of the choices
18. Basic Chemical Industries produce a product through a continuous process in different departments.
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Each department has an independent cost accountant who is tasked with accumulating costs and
the preparation reports for the department assigned to him. You have been assigned as cost
accountant for Department A.
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Production data for the month for Department A were as follows.

WIP, beg 14,000 kg
Percentage of completion 70%
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Started in process 70,000 kg

WIP, end 12,000 kg
Percentage of completion 60%
Lost units (normal) at the end of the process 2,000 kg
In this department, cost is applied as follows:
• Materials added at the start
• Labor and overhead evenly
• WIP, beg cost - ₱8,000
• Department cost incurred for the month:
Materials ₱56,000
Labor 17,350
Overhead 13,880
Compute the adjustment for normal lost per unit?
a. ₱.0368 b. ₱.0360 c. ₱.0298 d. ₱.0357
19. Derek Industries manufactures wood furniture. In the Lamination Department, varnish is added when
the goods are 60 percent complete as to overhead. The units that are spoiled during processing are
found upon inspection at the end of production. Spoilage is considered discrete.
Production Data for May 20x1
Beginning inventory (80% complete as to labor, 70% complete as to overhead) 2,000 units
Transferred in during month 14,900 units
Ending inventory (40% complete as to labor, 20% complete as to overhead) 3,000 units
Normal spoilage (found during final quality inspection) 200 units
Abnormal spoilage-found at 30% completion of direct labor and 15% of overhead; the 400 units
sanding machine was misaligned and scarred the chairs)
All other units were transferred to finished goods
Cost Data for May 20x1
Beginning work in process inventory:
Prior department costs ₱ 15,020
Varnish 1,900
Direct labor 4,388
Overhead ₱ 11,044 ₱ 32,352

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Current period costs:
Prior department costs ₱ 137,080

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Varnish 14,030
Direct labor 46,000

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Overhead 113,564 310,674
Total costs to account for ₱ 343,026
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The cost per equivalent of transferred-in (from preceding department):
FIFO Average
a. ₱ 9.20 ₱ 9.00
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b. ₱ 9.00 ₱ 9.20
c. ₱ 9.00 ₱ 9.20
d. ₱ 9.00 ₱ 9.0
20. Contis Industries manufactures wood furniture. In the Lamination Department, varnish is added when
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the goods are 60 percent complete as to conversion cost. The units that are spoiled during processing
are found upon inspection at the 70% stage of production.
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Production Data for May 20x1

Beginning inventory (80% complete) 2,000 units
Transferred in during month 14,900 units
Ending inventory (80% complete) 3,000 units
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Normal spoilage (found during 70% final quality inspection) 200 units
Abnormal spoilage-found at 30% completion of conversion cost; the sanding machine 400 units
was misaligned and scarred the chairs)
All other units were transferred to finished goods
Cost Data for May 20x1
Beginning work in process inventory:
Prior department costs ₱ 15,020
Varnish 2,470
Direct labor 4,388
Overhead ₱ 11,044 ₱ 32,352
Current period costs:
Prior department costs ₱ 137,080
Varnish 14,030
Direct labor 46,000
Overhead 114,128 310,674
 Total costs to account for ₱ 343,026
The ending work in process using the average method amounts to
a. ₱56,400
b. ₱57,004
c. ₱56,250
d. ₱56,311
21. Levitt Corporation, which uses an operation-costing system, has three processing departments. All
units pass through Department No. 1; upon completion, 70% of the goods are sent to Department
No. 2 and 30% are sent to Department No. 3. Additional data follow:
• Forty thousand units were manufactured during the year.
• Conversion cost in each department was: No. 1, ₱380,000; no. 2, ₱196,000; and No. 3,
₱150,000.
• Batch No. 67, which consisted of 500 units, was sent to Department No. 3 for its additional
processing. Direct materials of ₱23,500 and ₱11,900 were introduced to this batch in
Department Nos. 1 and 3, respectively.
Levitt assigns conversion cost to goods manufactured on the basis of units produced.
What is the conversion cost per unit in Department No. 1

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a. ₱9.50 b. ₱7.00 c. ₱12.50 d. ₱18.15

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AFAR Fifth Monthly Assessment- Part 2

1. Which of the following is least likely to be classified as a batch-level activity in an activity-based

costing system?
a. Receiving and inspection. c. Production setup.
b. Property taxes. d. Quality assurance.
2. Vanguard combines all manufacturing overhead into a single cost pool and allocates this overhead
to products by using machine hours. Activity-based costing would likely show that with Vanguard's
current procedures,
a. All of the company's products are undercosted.
b. The company's high-volume products are undercosted.
c. The company's high-volume products are overcosted.
d. The company's low-volume products are overcosted.
3. Atmel Inc. manufactures and sells two products. Data with regard to these products are given below.

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Product A Product B
Units produced and sold 30,000 12,000
Machine hours required per unit 2 3

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Receiving orders per product line 50 150
Production orders per product line 12 18

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Production runs 8 12
Inspections 20 3
Total budgeted machine hours are 100,000. The budgeted overhead costs are shown below.
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Receiving costs ₱450,000
Engineering costs 300,000
Machine setup costs 25,000
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Inspection costs 200,000

Total budgeted overhead costs ₱975,000
Using activity-based costing, the per unit overhead cost allocation of receiving costs for product A
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is:
a. ₱10.75.
b. ₱19.50.
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c. ₱3.75.
d. ₱28.13.
4. Hello Garce, general manager of a highly automated coffee production plant in Laguna and Ilocos
Sur, has provided the following information for transactions that occurred during October. The
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production plant uses a JIT costing system.

a) Raw materials costing ₱300,000 were purchased
b) All materials costing ₱300,000 were requisitioned for production
c) Direct labor costs of ₱200,000 were incurred
d) Actual factory overhead costs amounted to ₱995,000
e) Applied conversion costs totaled ₱1,300,000. This includes the direct labor cost
f) All units are completed and immediately sold.
What is the Cost of Goods Sold after all transactions adjustments have been completed?
a. ₱1,705,000 b. ₱1,600,000 c. ₱1,495,000 d. ₱1,195,000
5. What method of production eliminates the need for inventories because no production takes place
until the firm knows that it will sell the item?
a. First-in, last-out methods c. Just-in-time methods
b. Last-in, first-out methods d. Next-in, first-out methods
6. The most important criterion in accurate cost allocations is:
a. Using multiple drivers for each cost pool.
b. Using homogeneous cost pools.
 c. Using a simple allocation method.
d. Allocating fixed and variable costs by using the same allocation base.
7. A corporation allocates indirect corporate overhead costs to its operating divisions. The company
uses a cause-and-effect criterion in the selection of appropriate allocation bases. Which of the
following would be an appropriate allocation base to assign the costs of the corporate personnel
department to the operating divisions using a cause-and-effect criterion? [CIA]
a. Number of employees in each division.
b. Square footage of space occupied by each division.
c. Total service years of employees in each division.
d. Total book value of identifiable division assets.
8. The most accurate method of allocating service department costs is the [CMA]
a. Reciprocal method.
b. Step method.
c. Direct method.
d. Accretion method.
9. The variable costs of service departments should be allocated to production departments by using
a. Actual short-run output based on predetermined rates.
b. Actual short-run output based on actual rates.

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c. The service department's expected costs of long-run capacity.
d. The service department's actual costs based on actual use of services.

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10. Which of the following allocates service department costs sequentially to both production and other
service departments starting with the department that provides the most services and finishes in a

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single pass (doesn't allocate costs to items higher in the sequence)?
a. Reciprocal method.
b. Indirect method.
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c. Direct method.
d. Step-down method.
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11. A company has two service departments, Power and Maintenance, and two production departments,
Machining and Assembly. All costs are regarded as strictly variable. For September the following
information is available:
Service Departments Production Departments
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Power Maintenance Machining Assembly

Direct costs ₱62,500 ₱40,000 ₱25,000 ₱15,000
Actual activity:
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Kilowatt hrs. 50,000 150,000 50,000

Maintenance hours 250 1,125 1,125
Assume the company uses the sequential or step method for allocating service department costs to
production departments. The company begins with the service department which receives the least
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service from other service departments. What dollar amount of Power Department costs will be
allocated to the Maintenance Department for September?
a. ₱0 b. ₱12,500 c. ₱6,250 d. ₱8,000
12. Annual overhead application rates are used to
a. Budget overhead.
b. Smooth seasonal variability of overhead costs.
c. Simulate seasonal variability of activity levels.
d. Treat overhead as period costs.
13. Jesica Chemical Company manufactures two industrial chemical products in a joint process. In May,
10,000 gallons of input costing ₱60,000 were processed at a cost of ₱150,000. The joint process
resulted in 8,000 pounds of Resoline and 2,000 pounds of Krypto. Resoline sells at ₱25 per pound
and Krypto sells for ₱50 per pound. Management generally processes each of these chemicals further
in separable processes to produce more refined chemical products. Resoline is processed separately
at a cost of ₱5 per pound. The resulting product, Resoline, sells for ₱35 per pound. Krypto is
processed separately at a cost of ₱15 per pound. The resulting product, Kryptite, sells for ₱95 per
pound. The joint cost share of product Kryptite using the net realizable value method must be:
a. ₱126,000 b. ₱84,000 c. ₱140,000 d. ₱90,000
14. Bless Ann Company produces two main products and a by-product out of a joint process. The ratio
of output quantities to input quantities of direct material used in the joint process remains consistent
from month to month. Bless Ann employs the physical units method to allocate joint production
costs to the two main products. The net realizable value of the by-product is used to reduce the
joint production costs before the joint costs are allocated to the main products. Data regarding Bless
Ann’s operations for the current month are presented below. During the month, Bless Ann incurred
joint production costs of ₱2,520,000. The main products are not marketable at the split-off point
and, thus, have to be processed further.
First Main Second Main
Product Product By-Product
Monthly output in pounds 90,000 150,000 60,000
Selling price per pound ₱30 ₱14 ₱2
Separable process costs ₱540,000 ₱660,000
The amount of joint production cost that Bless Ann would allocate to the Second Main Product by
using the physical units method to allocate joint production costs would be:
a. ₱1,200,000. b. ₱1,260,000. c. ₱1,500,000. d. ₱1,575,000.
15. A chemical company manufactures joint products Pep and Vim, and a by-product, Zest. Costs are

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assigned to the joint products by the market value method, which considers further processing costs
in subsequent operations. For allocating cost to the by-product, the market value, or reversal cost

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method is used.
The total manufacturing costs for 10,000 units were ₱172,000 during the quarter. Production and

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costs data follow:
Pep Vim Zest
Units produced ₱ 5,000 ₱ 4,000 ₱ 1,000
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Sales price per unit ₱ 50 ₱ 40 ₱ 5
Further process cost per unit 10 5 -
Selling and administrative expense per unit 2
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Operating profit per unit 1

The gross profit for Pep amounted to:
a. ₱70,000 b. ₱80,000 c. ₱100,000 d. Zero
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16. It is a party that has a right to compensation under an insurance contract if an insured event occurs.
a. Insurance company c. Insurer
b. Policyholder d. Reinsurer
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17. It is an insurance contract issued by one insurer to compensate another insurer for losses on one
or more contracts issued by the cedant '
a. Insurance contract
b. Re-insurance contract
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c. Direct insurance contract

d. Financial guarantee contract
18. The party that has an obligation under a reinsurance contract to compensate a cedant if an insured
event occurs.
a. Reinsurer
b. Insurer
c. Cedant
d. Policyholder
19. The term “rider" in an insurance contract means
a. The inclusion of another driver on a contract for automobile insurance
b. An additional clause attached to the insurance contract that amends or alters the contract.
c. Is the same as endorsement
d. All of these
20. The operator has unconditional right to receive cash if the grantor contractually guarantees to pay
the operator based on:
a. Nil
 b. Current market value of the right
c. Future value of the said unconditional right
d. Specified or determinable amounts or the shortfall, if any, between amounts received from users
of the public services and specified or determinable amount, even if payment is contingent on
the operator ensuring that the infrastructure meets specified quality or efficiency requirements.
21. Which of the following statement is correct?
Statement 1: Under BOT arrangement, the grantor is a public sector entity only.
Statement 2: Under BOT arrangement, the operator act as an agent on behalf of the grantor.
a. Statement 1 only
b. Statement 2 only
c. Both Statements are correct
d. Neither statements are correct
22. Under BOT arrangement, if the operator receives a right or license charge users of the public service.
The infrastructure asset shall be accounted under:
a. PFRS 9
b. IFRIC 12
c. PAS 38
d. PFRS 15

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23. An operator under service concession arrangement may capitalize borrowing costs during the
construction phase if:

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a. The operator has a contractual right to receive an intangible asset
b. The operator has a contractual right to receive cash or financial asset

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c. Either A or B
d. Neither A nor B
24. Under IFRIC 12, if the concession arrangement provides that the operator has a right to charge for
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use of a public sector asset that it constructs or upgrades and then must operate and maintain for
a specified period of time but the right is not an unconditional right to receive cash because the
amounts are contingent on the extent to which the public uses the service, the infrastructure asset
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shall be accounted for by the operator as

a. Property, plant and equipment
b. Intangible asset
c. Financial asset
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d. Prepaid asset
25. Under IFRIC 12 Service Concession Arrangements, infrastructure assets under build-operate-
transfer (BOT) scheme:
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a. Shall be recognized as investment property by the grantor

b. Shall be recognized as investment property by the operator
c. Shall be recognized as property, plant and equipment by the operator
d. Shall not be recognized as property, plant and equipment by the operator
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 Page 1 of 7 | MONTHLY ASSESSMENT 05

FIFTH MONTHLY ASSESSMENT – AUDITING

RAYMUND FRANCIS A. ESCALA, CPA, MBA

MONTHLY ASSESSMENT - FIFTH

1. The firm shall assign the following responsibilities
I. Ultimate responsibility and accountability for the system of quality management
II. Operational responsibility for the system of quality management
III. Operational responsibility for specific aspects of quality management
A. I and II only
B. II and III only
C. I and III only
D. I, II and III

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2. In identifying and assessing quality risks, the firm shall
I. Obtain an understanding of the conditions, events, circumstances, actions or inactions that may favorably affect

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the achievement of the quality objectives
II. Consider how, and the degree to which, the conditions, events, circumstances, actions or inactions may favorably
affect the achievement of the quality objectives
A. I only
B. II only
C. Both I and II ev
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D. Neither I nor II

3. When the firm belongs to a network, the firm shall understand

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I. The requirements established by the network regarding the firm’s system of quality management
II. All services or resources provided by the network
III. The firm’s responsibilities for any actions that are necessary to implement the network requirements or use
network services.
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A. I and II only
B. II and III only
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C. I and III only

D. I, II and III

4. The individual/s assigned ultimate responsibility and accountability for the system of quality management shall
perform an evaluation of the system of quality management
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A. At least monthly
B. At least quarterly
C. At least annually
D. When there are identified deficiencies

5. The resulting conclusions of the evaluation of the system of quality management may be stated as follows:
I. The system provides the firm with limited assurance that the quality objectives are being achieved
II. Except for matters related to identified deficiencies, the system provides the firm with limited assurance that the
quality objectives are being achieved
III. The system does not provide the firm with reasonable assurance that the quality objectives are being achieved
A. I only
B. II only
C. III only
D. I, II and III

REO CPA REVIEW PHILIPPINES Effectiveness. Efficiency. Convenience

www.realexcellenceonline.com.ph REAL EXCELLENCE ONLINE CPA REVIEW

(074) 665 6774 0916 840 0661 [email protected] MAY 2024 CPA REVIEW SEASON
 Page 2 of 7 | MONTHLY ASSESSMENT 05

RAYMUND FRANCIS A. ESCALA, CPA MBA

5TH MONTHLY ASSESSMENT – AUDITING THEORY

6. The firm shall undertake performance evaluations of the individual/s assigned with responsibilities in the system of
quality management
A. At least monthly
B. At least quarterly
C. At least annually
D. On a periodic basis

7. Who is responsible for the documentation of the engagement quality review?

A. Engagement quality reviewer
B. Engagement partner
C. Engagement manager
D. Engagement senior

8. What are required to be included in the engagement quality review of an audit of financial statements?
I. Evaluation of the basis for the engagement partner’s determination of compliance with independence

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requirements
II. Evaluation of the basis for the engagement partner’s determination that his/her involvement is sufficient and

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appropriate
III. Review the financial statements and the auditor’s management letter

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A. I and II only
B. II and III only
C. I and III only
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D. I, II and III

9. An objective evaluation of the significant judgments made by the engagement team and the conclusions reached
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thereon, performed by the engagement quality reviewer and completed on or before the date of the engagement
report.
A. Engagement quality check
B. Engagement quality review
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C. Engagement quality inspection

D. Engagement quality control review
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10. Any individual with authority to bind the firm with respect to the performance of a professional services engagement.
A. Staff
B. Partner
C. Manager
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D. Personnel

11. The auditor’s signature is

I. In the name of audit firm
II. In the name of the engagement partner
III. Both in the name of the audit firm and of the engagement partner
A. I and II
B. II and III
C. I and III
D. I, II, and III

REO CPA REVIEW PHILIPPINES Effectiveness. Efficiency. Convenience

www.realexcellenceonline.com.ph REAL EXCELLENCE ONLINE CPA REVIEW
(074) 665 6774 0916 840 0661 [email protected] MAY 2024 CPA REVIEW SEASON
 Page 3 of 7 | MONTHLY ASSESSMENT 05

RAYMUND FRANCIS A. ESCALA, CPA MBA

5TH MONTHLY ASSESSMENT – AUDITING THEORY

12. How is the auditor’s report on the financial statements that require final approval by stockholders before such financial
statements are issued publicly dated?
A. The auditor’s report should be dated coinciding the date of approval of the financial statements by the
stockholders.
B. The auditor’s report should be dated after the approval of the financial statements by the stockholders.
C. The date of the auditor’s report coincides the date of approval of the financial statements by the board of
directors.
D. The audit report should be dual dated, the first date coinciding the approval by the board of directors and the
second date to coincide with the approval by the stockholders.

13. The auditor’s address is normally the

A. Principal place of business of the audit client
B. Exact location where the auditor’s report was signed
C. Location in the jurisdiction where the auditor practices
D. Address of the majority shareholder of the audit client

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14. Which of the following statements indicates a disclaimer of opinion?
A. The financial statements do not present fairly in all material respects the financial position, results of operations,

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and cash flows in conformity with PFRS.
B. The auditor does not express an opinion on the financial statements.

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C. The financial statements present fairly in all material respects the financial position, results of operations, and
cash flows in conformity with PFRS.
D. Except for the effects of a matter, the financial statements present fairly in all material respects the financial
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position, results of operations, and cash flows in conformity with PFRS.

15. The auditor is unable to determine the amounts associated with noncompliance with laws committed by the entity.
PA

The auditor most likely issue

A. Unqualified
B. Qualified
C. Qualified or adverse
C

D. Qualified or disclaimer

16. A modified opinion on the financial statements is necessary when

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I. The auditors concludes, based on the audit evidence obtained, that the financial statements as a whole are not
free from material misstatement
II. The auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a
whole are free from material misstatement
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A. I only
B. II only
C. Either I or II
D. Neither I nor II

17. Which of the following terms is used in the standard to describe the effects on the financial statements of
misstatements or the possible effects on the financial statements, if any, that are undetected due to an inability to
obtain sufficient appropriate audit evidence?
A. Persuasive
B. Material
C. Pervasive
D. Extensive

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RAYMUND FRANCIS A. ESCALA, CPA MBA

5TH MONTHLY ASSESSMENT – AUDITING THEORY

18. Which of the following phrases would an auditor most likely include in the auditor’s report when expressing a qualified
opinion because of inadequate disclosure?
A. Do not present fairly in all material respects
B. Except for the omission of the information included in the preceding paragraph
C. With the foregoing explanation of these omitted procedures
D. Subject to the departure from generally accepted accounting principles, as described above

19. Whenever an auditor issues a qualified report, he or she

A. must use the term ‘subject to’ in the opinion paragraph.
B. may use either the terms ‘subject to’ or ‘ except for’ in the opinion paragraph, depending on the nature of the
qualification.
C. must use the term ‘except for’ in the opinion paragraph.
D. must not use the terms ‘subject to’ or ‘except for’ in the opinion paragraph.

20. An explanatory paragraph may be added to the audit report while at the same time issuing an unqualified opinion in all
cases except when:

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A. the client has changed an accounting principle with the agreement of the auditor.
B. there is an immaterial departure from GAAP to ensure fair presentation with the agreement of the auditor.

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C. the audit opinion is partly based on the work of another auditor.
D. the audit work has been significantly limited by management.

21. Which statement is incorrect regarding PSA 710, Comparatives?

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A. The auditor is required to determine whether the comparatives comply in all material respects with GAAP relevant
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to the financial statements being audited.
B. There are two broad financial reporting frameworks for comparatives; the corresponding figures and the
comparative financial statements.
PA

C. Under the comparative financial statements framework, the comparatives financial statements for the prior
period(s) are considered separate financial statements.
D. Under the corresponding figures framework, the corresponding figures for the prior period(s) are not an integral
part of the current period financial statements and may be read without reference to amounts and other
C

disclosures relating to the current period.

22. Riel, CPA, audited ECS Company's prior-year financial statements. These statements are presented with those of the
EO

current year for comparative purposes without Riel's auditor's report, which expressed a qualified opinion, In drafting
the current year's auditor’s report, Rian, CPA, the incoming auditor, should
I. Not name Riel as the predecessor auditor
II. Indicate the type of report issued by Riel
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III. Indicate the substantive reasons for Riel’s qualification

IV. Indicate the date of Riel’s auditor's report
A. I, II, and IV only
B. II, III, and IV only
C. I, II, and III only
D. I, II, III, and IV

23. Which of the following situations will not permit the auditor from choosing between qualified or adverse opinion?
A. A change in accounting policies is not properly accounted for or not adequately presented or disclosed in
accordance with the applicable financial reporting framework.
B. The current period’s accounting policies are not consistently applied in relation to opening balances in accordance
with the applicable financial reporting framework.
C. The opening balances contain a misstatement that materially affects the current period’s financial statements, and
the effect of the misstatement is not properly accounted for and not adequately presented.
D. The auditor is able to obtain sufficient appropriate audit evidence regarding the opening balances.

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5TH MONTHLY ASSESSMENT – AUDITING THEORY

24. If the auditor is unable to obtain sufficient appropriate audit evidence regarding the opening balances, the auditor
most likely will issue
A. Unqualified with emphasis of a matter
B. Qualified opinion
C. Qualified or adverse
D. Qualified or disclaimer

25. Which of the following is least considered in determining the sufficiency and appropriateness of an audit evidence that
the auditor will obtain regarding opening balances?
A. Length of years in operation of the entity
B. Materiality of the opening balances relative to the current period’s financial statements
C. Accounting policies adopted by the entity
D. Risk misstatement of the accounts

26. Statement 1: A conglomeration of accounting conventions devised to suit individual preference is considered as

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another comprehensive basis of accounting.
Statement 2: A comprehensive basis of accounting comprises a set of criteria used in preparing financial statements

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which applies to all material items and which has substantial support.
A. Only Statement 1 is correct

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B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
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27. Statement 1: The auditor cannot be requested to report on an entity's compliance with certain aspects of contractual
agreements, such as bond indentures or loan agreements.
PA

Statement 2: When there are particular matters forming part of the engagement that are outside the auditor's
expertise, the auditor would consider using the work of an expert.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C

C. Both statements are correct

D. Both statements are incorrect
EO

28. A CPA who has been engaged to audit financial statements that were prepared on a cash basis:
A. must ascertain that there is proper disclosure of the fact that the cash basis has been used, the general nature of
material items omitted, and the net effect of such omissions.
B. may not be associated with such statements which are not in accordance with generally accepted accounting
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principles.
C. must render a qualified report explaining the departure from generally accepted accounting principles in the
opinion paragraph.
D. must restate the financial statements on an accrual basis and then render the standard (short-form) report.

29. An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic financial
statements. The auditor will have access to all information underlying the basic financial statements. Under these
circumstances, the auditor:
A. may accept the engagement because such engagements merely involve limited reporting objectives.
B. may accept the engagement but should disclaim an opinion because of an inability to apply the procedures
considered necessary.
C. should refuse the engagement because there is a client-imposed scope limitation.
D. should refuse the engagement because of a departure from generally accepted auditing standards.

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RAYMUND FRANCIS A. ESCALA, CPA MBA

5TH MONTHLY ASSESSMENT – AUDITING THEORY

30. Auditors may issue a special report for all of the following except for audit of financial presentations
A. That are prepared on a cash basis of accounting that the entity uses to file its tax return
B. Of specified elements or accounts
C. Of an organization that has limited the scope of the audit
D. To comply with contractual agreements

31. If the financial statements prepared on special reporting frameworks are not suitably titled or the basis of accounting is
not adequately disclosed, the auditor should:
A. Withdraw from the engagement
B. Issue an appropriately modified report
C. Reword the title of the financial statements
D. Request for an additional representation in the management representation letter

32. Which of the following is not an element of examining a forecast?

A. Evaluating the preparation of the prospective financial statements.
B. Understanding internal controls.

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C. Evaluating the support underlying the assumptions.
D. Issuing an examination report.

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33. The review of a company's financial statements by a CPA firm:

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A. Is substantially less in scope of procedures than an audit.
B. Requires detailed analysis of the major accounts.
C. Is of similar scope as an audit and adds similar credibility to the statements.
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D. Culminates in issuance of a report expressing the CPA's opinion as to the fairness of the statements.

34. Assurance provided by a review is substantially less than an audit. Which of the following statements is/are true
PA

regarding these services?

I. A review requires more substantive evidence than an audit.
II. An audit requires less evidence related to internal control than a review.
III. A review requires less evidence than an audit.
C

A. I only
B. II only
C. III only
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D. II and III only

35. When an accountant is not independent, the accountant is precluded from issuing a:
A. Compilation report.
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B. Review report.
C. Management advisory report.
D. Tax planning report.

36. Compilation reports may be of all but which of the following types?
A. Compilation with limited independence.
B. Compilation with full disclosure
C. Compilation without independence.
D. Compilation that omits substantially all disclosures

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5TH MONTHLY ASSESSMENT – AUDITING THEORY

37. Statement 1: A compilation of financial statements provides limited assurance regarding the financial statements.
Statement 2: Compiled financial statements may omit note disclosures.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

38. An agreed-upon procedures engagement is one in which:

A. the auditor and management agree that procedures will be applied to all accounts and circumstances.
B. the auditor and management agree that procedures will not be applied to all accounts and circumstances.
C. the auditor and management or a third party agree that the engagement will be limited to certain specific
procedures.
D. the auditor and management or a 3rd party agree that the auditor will apply his or her judgment to determine
procedures to be performed.

39. The distribution of which of the following types of reports is unrestricted?

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A. Examinations and reviews
B. Reviews and agreed-upon procedures

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C. Examinations and agreed-upon procedures
D. Examinations, reviews, and agreed-upon procedure

ev
40. An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements
provided that:
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A. the prospective financial statements are also examined.
B. distribution of the report is to be restricted to the specified users involved.
C. responsibility for the adequacy of the procedures performed is taken by the accountant.
PA

D. negative assurance is expressed on the prospective financial statements taken as a whole.

--- END ---

C
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FINANCIAL ACCOUNTING AND REPORTING (FAR)
FIFTH MONTHLY ASSESSMENT

TOPIC(s) COVERED:
FAR 27 – SHE Part 1
FAR 28 – SHE Part 2
FAR 29 – Share-based Payments
FAR 30 – Book Value per Share
FAR 31 – Earnings per Share
FAR 32 – Financial Statements Part 1
FAR 33 - Financial Statements Part 2
FAR 34 – Statements of Cash Flows
FAR 35 – Operating Segments
FAR 36 – NCAHFS & Discontinued Operations

1. S1: If treasury shares are reissued for noncash consideration, the proceeds shall
be measured by carrying amount of the noncash consideration received
S2: Treasury shares can be reissued at an amount above or below par value without
the need of unrestricted retained earnings.
S3: Treasury shares are issued shares but not outstanding.
A. False, true, false D. False, true, true
B. True, true, false E. Answer not given

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C. False, false, true

2. The following items are under consideration:

I. Subscription receivable – long-term
II. Subscription receivable – short-term ie
ev
III. Donated capital
IV. Ordinary share premium – no par value shares
Which of the above items is considered in computing contributed capital?
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A. I, III and IV D. IV only

B. III and IV E. Answer not given
PA

C. II, III and IV

Use the following information in answering the next item(s):

The following information is related to the shareholders’ equity account of
C

PINEAPPLE CORP. for the current year 2024:

Ordinary share capital (P10 stated value) P2,000,000
Ordinary share premium 500,000
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Preference share capital (P20 par value) 3,000,000

Preference share premium 1,000,000
Subscribed share capital - preference shares 500,000
Donated capital 300,000
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Retained earnings – unrestricted 500,000

Appropriations for plant expansion 50,000
Cumulative translation adjustment – debit 150,000
Ordinary share warrants outstanding 40,000
Subscription receivable – preference shares 100,000

3. What is the amount of PINEAPPLE’s contributed capital?

A. P6,900,000 C. P6,840,000
B. P7,000,000 D. P7,240,000

4. What is the amount of PINEAPPLE’s legal capital?

A. P6,000,000 C. P7,000,000
B. P7,340,000 D. P7,840,000

5. BURDADO CO. is authorized to issue 300,000 of P2 par value ordinary shares. The
company has the following transactions:
(a) Issued 60,000 shares at P30 per share; received cash.
(b) Issued 750 shares, selling at P35 per share, to lawyers for services in
connection with the organization of the corporation. The value of the legal
services was P27,000.
(c) Issued 900 shares, valued objectively at P30,000, to the employees instead of
paying them cash wages.

Financial Accounting & Reporting (FAR) by Karim G. Abitago, CPA Page 1

Aim…Believe..Claim
 (d) Issued 37,500 shares in exchange for a building valued atP885,000 and land
valued at P240,000. (The building was originally acquired by the investor for
P750,000 and hasP300,000 of accumulated depreciation; the land was originally
acquired for P90,000.)
(e) Received cash for 19,500 shares issued at P38 per share.
(f) Issued 12,000 shares at P45 per share; received cash.
The statement of financial position will report share premium of
A. P4,000,950 C. P4,001,700
B. P3,973,500 D. P3,326,700

6. ORANGE CORP. issued 10,000 of its 6% preference share; par P100, at P125 per share.
Each share carried a detachable share warrant for one share of ORANGE's ordinary
share, P40 par, at a specified option price of P50 per share. Immediately after
issuance, the market value of ORANGE's preference share was P1,140,000 and the
warrants was P60,000. What portion of the proceeds should be credited to ordinary
share warrants outstanding?
A. None C. P 62,500
B. P60,000 D. P250,000

7. Total shareholders’ equity is unaffected by which of the following transactions?

I. Declaration of small stock dividends
II. Declaration of 1 for 3 share split
III. Implementation of quasi-reorganization
A. I and II D. I, II and III
B. II and III E. Answer not given
C. I and III

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8. On January 15, 2024, ABC Corporation declared 40% stock dividends on 10,000
outstanding shares of its common stock, with a par value of P100 per share, when

statements is false with regards to this transaction?

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the market value of the common stock was P120 per share. Which of the following

A. The total assets and total stockholders’ equity will not be affected.
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B. Common stock will increase equal to the total par value of the stock dividends
declared.
C. Retained earnings will decrease equal to the total par value of the stocks
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dividends declared
D. Additional paid in capital will increase at an amount equal to the difference
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between the total market value over the total par value of the stock dividends
declared.

9. The following balances are shown in the shareholders' equity of BLUEBERRIES CORP.
C

on December 31, 2023:

Preference share capital, P10 par, P 1,000,000
100,000 shares
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Ordinary share capital, 10 par,

500,000 shares, 5,000,000
Share premium – preference 50,000
Share premium – ordinary 200,000
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Retained earnings 100,000

Total P 6,350,000
During 2024, the following transactions pertaining to the shareholders equity were
completed:
• Retirement of 5,000 preference shares at P9 per share.
• Purchase of 5,000 ordinary shares at P12 per share to be held as treasury
shares.
• Share split, ordinary, 2 for 1.
• Reissue of 2,000 treasury shares at P8 per share.
• Profit for 2017, P 300,000.
The total retained earnings at 31 December 2017 is
A. P 400,000 C. P 392,500
B. P 395,000 D. P 387,000

10. In what circumstances is compensation expense immediately recognized under a share

option plan?
A. In all circumstances
B. In no circumstances is compensation expense immediately recognized.
C. In circumstances when the options are granted for prior service and the options
are immediately exercisable.
D. In circumstances when the options are exercisable within two years for services
rendered over the next two years.

Financial Accounting & Reporting (FAR) by Karim G. Abitago, CPA Page 2

Aim…Believe..Claim
11. JAJA CORP. granted of 30,000 share appreciation rights enabling the key employees
to receive cash equal to the difference between P20 and the market price of the
share on the date each right is exercised.
The service period is 2014 through 2016, and the rights are exercisable in 2017 and
2018. The market price of the share was P25 and P28 on December 31, 2014 and 2015,
respectively.
What amount should be reported as the liability under the share appreciation rights
in the December 31, 2015 statement of financial position?
A. P0 C. P160,000
B. P130,000 D. P240,000

12. On January 1, 2014, VANNAH CORP. granted share options to each of the 300 employees
working in the sales department. The share options vest at the end of a three-year
period provided that the employees remain in the entity's employ and provided the
volume of sales will increase by 10% per year. The fair value of each share option
on grant date is P30. If the sales increase by 10%, each employee will receive 200
share options. If the sales increase by 15%, each employee will receive 300 share
options.

On December 31, 2014, the sales increased by 10%, and no employees have left the
entity. On December 31, 2015, sales increased by 15% and no employees have left. On
December 31, 2016, the sales increased by 15% and 50 employees left the entity.
What amount of compensation expense should be recognized for 2016?
A. P450,000 C. P1,200,000
B. P900,000 D. P2,250,000

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13. The shareholders' equity of HAPPY COMPANY on December 31, 2018 shows the following
account balances:
10% Preference share, 5,000 shares, P 100 par
12% Preference share, 6,000 shares, P 100 par
Ordinary share, 10,000 shares, P 40 par ie
P 500,000
600,000
400,000
ev
Share premium 320,000
Accumulated profits 480,000
The 10% preference share is cumulative and fully participating, while the 12%
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preference share is non cumulative and fully participating. The last payment of
dividends was on December 31, 2016.
PA

What is the book value per share of ordinary shares?

A. P 44.00 C. P 60.27
B. P 59.68 D. P102.80
C

14. On January 1, 2024, ENGRANDE CORP. had 125,000 P20 par value shares outstanding.
The entity sold an additional 250,000 shares on the open market at P20 per share on
March 1, issued a 20% share dividend on May 1, purchased 140,000 shares and
EO

immediately retired the shares on July 1, and sold 240,000 shares for P25 per share
on November 1. What is the weighted average number of shares outstanding?
A. P370,000 C. P440,000
B. P420,000 D. P475,000
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Use the following information in answering the next item(s):

On January 1, 2018, FOREVER CORP. had 480,000 P60 par ordinary shares and 100,000,
9% P100 par convertible cumulative preference shares outstanding. The preference
shares are convertible into 100,000 ordinary shares before share dividend and share
split. During 2018, the following transactions affected the ordinary shares:
February 1 Issued 120,000 shares
March 1 Issued a 20% share dividend
May 1 Acquired 100,000 treasury shares
June1 Issued a 3-for-1 split
October 1 Reissued 60,000 treasury shares
The net income was P 32,560,000 and FOREVER did not declare dividend on preference
shares.

15. What is the number of average ordinary shares outstanding?

A. P1,939,000 C. P1,860,000
B. P1,969,000 D. P1,800,000

16. What amount should be reported as basic EPS for 2018?

A. P16.54 C. P16.96
B. P16.79 D. P16.33
`

Financial Accounting & Reporting (FAR) by Karim G. Abitago, CPA Page 3

Aim…Believe..Claim
17. What amount should be reported as diluted EPS for 2018?
A. 14.16 C. 15.53
B. 13.77 D. 15.97

18. In computing diluted EPS, interest expense on convertible bond payable shall be
A. Ignored
B. Added back to net income at gross
C. Added back to net income net of tax
D. Deducted from net income net of tax

19. In applying the treasury share method of computing diluted earnings per share, when
is it appropriate to use the average market price of ordinary share during the year
as the assumed repurchase price?
A. Never
B. Always
C. When the average market price is lower than the exercise price
D. When the average market price is higher than the exercise price

20. HOPE CORP. had 200,000 ordinary shares outstanding on January 1, 2024. In addition,
on January 1, 2024, the entity had issued 4,000 convertible 10% bonds with P 1,000
face value. The entity has no other potentially dilutive securities. The bonds were
converted on October 1, 2024 and 40 ordinary shares were issued in exchange for
each bond. Accrued interest on the bonds was recognized and paid on that date. The
net income for the year was P5,000,000. The income tax rate is 30%. What amount
should be reported as diluted earnings per share?
A. 14.47 C. 14.72
B. 14.61 D. 21.65

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21. Antidilutive securities
A. Should be disregarded in all EPS computations.
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B. Include share options and warrants whose option price is less than the average
market price.
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C. Should be included in the computation of diluted earnings per share but not
basic earnings per share.
D. Are those whose inclusion in earnings per share computation would cause basic
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earnings per share to exceed diluted earnings per share.

PA

22. The heading of a financial statement most likely will not include
A. the name of the reporting entity.
B. the title of the financial statement.
C. the date of the financial statement.
C

D. the name(s) of the business owner(s).

23. When an entity breaches an undertaking under a long-term loan agreement on or before
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the end of the reporting period with the effect that the liability becomes payable
on demand, (choose the incorrect statement)
A. The liability is classified as current, even if the lender has agreed, after
the balance sheet date and before the authorization of the financial statements
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for issue, not to demand payment as a consequence of the breach.

B. The liability is classified as current because, at the balance sheet date, the
entity does not have an unconditional right to defer its settlement for at
least twelve months after that date.
C. The liability is classified as non-current, even if the lender has agreed,
after the balance sheet date and before the authorization of the financial
statements for issue, not to demand payment as a consequence of the breach.
D. The liability is normally classified as current; however, the liability is
classified as non-current if the lender agreed by the balance sheet date to
provide a period of grace ending at least twelve months after the balance sheet
date, within which the entity can rectify the breach and during that period
the lender cannot demand immediate repayment.

24. Which of the following correctly depicts proper classification of items in the
Financial Statements?
I. Cash and Cash Equivalents – Current Asset
II. Redeemable Preference Shares – Share Capital
III. Gain from reissuance of entity’s own shares – Neither P&L nor OCI
IV. Cash Surrender Value – Non-current Liability
A. I and III D. I and III
B. I and IV E. I, II, III and IV
C. I, II and IV

Financial Accounting & Reporting (FAR) by Karim G. Abitago, CPA Page 4

Aim…Believe..Claim
25. On December 31, 2024, MIRAK CORP. showed the following current assets:
Cash 500,000
Accounts receivable 2,500,000
Inventory 2,000,000
Prepaid expenses 100,000
Total current assets 5,100,000

Cash on hand including customer's postdated check

of P20,000 and employee IOU of PI0,000 130,000
Cash in bank per bank statement (outstanding
checks on December 31, 2024, P70,000) 370,000
Total cash 500,000

Customers' debit balances, net of customers' deposit of P50,0001,900,000

Allowance for doubtful accounts (150,000)
Sales price of goods invoiced to customers at 150% of cost on
December 29, 2024 but delivered on January 5, 2025 and
excluded from reported inventory 750,000
Total accounts receivable 2,500,000
What total amount of current assets should be reported?
A. P4,630,000 C. P4,830,000
B. P4,780,000 D. P4,900,000

26. The following are the debit (credit) balances of accounts in the books of KGA CORP.
as of December 31, 2020. Cash and Cash Equivalents P20,000, Trade and Other
Receivables P30,000, Land held for sale P40,000, Merchandise Inventories P45,000

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Building P500,000 Goodwill P150,000, Accounts Payable P40,000, Mortgage Payable
(P100,000) VAT payable (P50,000). The cash and cash equivalents include investments

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in equity securities through profit or loss amounting to P5,000. How much is to be
presented as current assets in the Statement of Financial Position of KGA CORP. as
of December 31, 2020?
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A. P130,000 C. P175,000
B. P135,000 D. P60,000
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27. KIRBY INC. has the following information on December 31, 20x1:
- Cost of sales is ₱260,000.
PA

- Operating expenses are 13% of sales and 20% of cost of sales.

- Interest expense is 5% of sales.
- Income tax rate is 30%. There were no temporary differences during the year.
How much is the profit for the year?
C

A. P65,000 C. P38,600
B. P140,000 D. P47,600
28. Which of the following is included in the computation of profit or loss?
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I. Operating income IV. Realized gain on trading securities

II. Finance Cost V. Actuarial gain on defined benefit plan
III. Revaluation Surplus
A. I, II and III. D. I and II only
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B. All except III. E. All except IV.

C. I, II and IV.

29. A third statement of financial position as at beginning of the earliest comparative

period presented is required
I. When an entity applies an accounting policy retrospectively.
II. When an entity makes a retrospective restatement of items in the financial
statements.
III. When an entity reclassifies items in the
financial statements.
A. I and II only C. II and III only
B. I and III only D. I, II and III

30. OSO CORP. provided the following information for the current year:
Disbursements for purchases 5,800,000
Increase in trade accounts payable 500,000
Decrease in merchandise inventory 200,000
What is the cost of goods sold for the current year?
A. P5,100,000 C. P6,100,000
B. P5,500,000 D. P6,500,000

Financial Accounting & Reporting (FAR) by Karim G. Abitago, CPA Page 5

Aim…Believe..Claim
31. Which of the following does not correctly depict proper classification of items in
the Statement of Financial Position?
I. Redeemable Preference Share Capital – Shareholders’ Equity
II. Investment Property – Non-current Liability
III. Investment in Equity Securities at Profit or Loss – Current Asset
A. I and II D. I, II and III
B. II and III E. Answer not given
C. I and III

32. Identify the incorrect statement.

A. The final stage in the process of aggregation and classification is the
presentation of condensed and classified data, which form line items on the
face of the financial statements.
B. PAS 1 sometimes uses the term ‘disclosure’ in a broad sense, encompassing items
presented on the face of the balance sheet, statement of profit or loss and
other comprehensive income, statement of changes in equity and cash flow
statement, as well as in the notes.
C. Applying the concept of materiality means that a specific disclosure requirement
in a Standard or an Interpretation need not be satisfied if the information is
not material.
D. An entity shall prepare its financial statements, including cash flow
information, using the accrual basis of accounting.
E. PAS 1 requires an entity presenting its current year financial statements to
also present its financial statements for the previous year.

33. The ledger of PERNICIOUS DEADLY Co. as of December 31, 20x1 includes the following:
Liabilities

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Bank overdraft 10,000
Trade accounts payable (net of ₱10,000 debit balance in accounts) 40,000
Notes payable (due in 20 semi-annual payments of ₱4,000)
Interest payable
Bonds payable (due on March 31, 20x2) ie 80,000
30,000
70,000
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Discount on bonds payable (30,000)
Dividends payable 10,000
Share dividends payable 12,000
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Deferred tax liability (expected to reverse in 20x2) 36,000

Income tax payable 44,000
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Contingent liability 100,000

Reserve for contingencies 28,000
Totals 430,000
How much is the total current liabilities?
C

A. P192,000 C. P212,000
B. P186,000 D. P178,000
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34. Which TWO of the following can be classified as Cash and cash equivalents under
PAS7 Statement of cash flows?
A. Redeemable preference shares due in 180 days
B. Loan on notes held due for repayment in 90 days
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C. Equity investments
D. A bank overdraft
A. A and B C. B and D
B. A and C D. C and D

35. An entity purchases a building and the seller accepts payment partly in equity
shares and partly in debentures of the entity. This transaction should be treated
in the cash flow statement as follows:
A. This does not belong in a cash flow statement and should be disclosed only in
the notes to financial statements
B. The purchase of the building should be investing cash outflow and the issuance
of shares and debentures financing cash outflows
C. Ignore the transaction totally since it is a non-cash transaction. No mention
is required in either the cash flow statement or anywhere else in the financial
statements
D. The purchase of the building should be investing cash outflow and the issuance
of debentures financing cash outflows while the issuance of shares investing
cash outflow

36. The net income for the year ended December 31, 2024 for BURGER CORP. was P3,520,000.
Additional data follow:
Purchases of plant assets P2,800,000

Financial Accounting & Reporting (FAR) by Karim G. Abitago, CPA Page 6

Aim…Believe..Claim
 Depreciation of plant assets 1,480,000
Dividends declared on plant assets 970,000
Net decrease in non-cash current assets 290,000
Loss on sale of equipment 130,000
What should be the cash provided from operating activities in BURGER's statement of
cash flows for the year ended December 31, 2024?
A. P5,130,000 C. P5,420,000
B. P5,290,000 D. P7,250,000

37. FRIES CORP. had the following activities during 2024:

□ Acquired 2,000 shares of stock in BURGER CORP. for P260,000.
□ Sold an investment in NACHOS INC. for P350,000 when the carrying value was
P330,000.
□ Acquired a P500,000, 4-year certificate of deposit from a bank (during the
year, interest of P37,500 was paid to FRIES).
□ Collected dividends of P12,000 on available for sale investment.
In FRIES CORP.’s 2024 statement of cash flows, how much should be the net cash used
in investing activities?
A. P372,500 C. P398,000
B. P380,500 D. P410,000

38. It is the approach of looking to an entity’s organization and management structure

and its interim financial reporting system to identify the business and geographical
segment for external reporting purposes
A. Entity approach C. Organizational approach
B. Management approach D. Scientific approach

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39. Are the following statements true or false, according to PFRS8 Operating segments?
1) If an entity changes the way it is structurally internally so that its
reportable segments change, the
must be restated
2) Disclosure is always required of ie
comparative information for earlier periods

the total assets of each reportable segment

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A. B. C. D.
Statement 1 True True False False
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Statement 2 True False True False

40. OSO CORP., a publicly owned corporation, is subject to the requirements for segment
PA

reporting. In its income statement for the year ended December 31, 2024, OSO reported
revenues of P50,000,000, operating expenses of P47,000,000, and net income of
P3,000,000. Operating expenses include payroll costs of P15,000,000. OSO's combined
identifiable assets of all industry segments at December 31, 2024 were P40,000,000.
C

In its 2024 financial statements, OSO should disclose major customer data if sales
to any single customer amount to at least-
A. P 300,000 C. P4,000,000
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B. P1,500,000 D. P5,000,000

41. What is the function of the chief operating decision maker?

A. To allocate resources to the operating segments only.
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B. To assess the performance of the operating segments only.

C. To allocate resources to the operating segments and assess their performance.
D. To provide general information to financial statement users about operating
segments.

42. To which TWO of the following types of asset do the measurement provisions of PFRS5
Non-current assets held for sale and discontinued operations apply?
A. Financial Asset C. Buildings
B. Intangible development assets D. Deferred tax assets
A. A and B C. B and C
B. A and D D. B and D

43. Which of the following is a requirement for a component of an entity to be classified

as a discounted operation in accordance with PFRS 5 Non-current assets held for
sale and discontinued operation?
A. Its assets must have been classified as held for sale in the previous financial
statements
B. It must comprise a separately reported segment in accordance with PFRS 8
Operating segments
C. It must have been a cash-generating unit or a group of cash generating units
while being held for use

Financial Accounting & Reporting (FAR) by Karim G. Abitago, CPA Page 7

Aim…Believe..Claim
 D. Its activities cease permanently prior to the financial statements being
authorized for issue by management

44. On January 1, 2024, SILVER SWAN CORP. classified a noncurrent asset as held for
sale that had a carrying amount of P5,000,000. On this date, the asset is expected
to be sold for P4,600,000. Disposal cost is expected at P200.000. On December 31,
2024, the asset had not been sold and management after considering its options
decided to place back the noncurrent asset into operations. On that date, the
entity estimated that the noncurrent asset is expected to be sold at P4,300,000
with the disposal cost at P50,000. The carrying amount of the noncurrent asset was
P4,500,000 on December 31, 2024 if the noncurrent asset was not classified as held
for sale.
What is the carrying amount of the asset that should be reported in the statement
of financial position on December 31, 2024?
A. P4,250,000 C. P4,500,000
B. P4,400,000 D. P5,000,000

45. On September 1, 2024, DATU PUTI CORP. approved a formal plan to sell a business
segment. The sale will occur in February 2025. The segment had operating income of
P5,000,000 from January 1 to August 31, and P1,000,000 for the remainder of the
year 2024. On December 31, 2024, the carrying amount of the segment was P8,000,000
and the recoverable amount was P10,000,000. The income tax rate is 35%. How much
will be reported as income from ordinary activities of the discontinued segment,
net of tax, for the year 2024?
A. P2,040,000 C. P3,900,000
B. P3,400,000 D. P5,440,000

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- END OF ASSESSMENT EXAMINATION -

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PA
C
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Financial Accounting & Reporting (FAR) by Karim G. Abitago, CPA Page 8

Aim…Believe..Claim
 Batch 7 – MS Fifth Monthly Assessment

1. Although a firm's existing mix of financing sources may reflect its target capital structure, it is ultimately
________.
A. the internal rate of return that is relevant for evaluating the firm's future investment opportunities
B. the marginal cost of capital that is relevant for evaluating the firm's future investment opportunities
C. the risk-free rate of return that is relevant for evaluating the firm's future investment opportunities
D. the risk-free rate of return that is relevant for evaluating the firm's future financing opportunities

2. The cost to a firm of each type of capital is dependent upon ________.

A. the risk-free rate of bonds plus the business risk of the firm
B. the risk-free rate of each type of capital plus the business risk of the firm
C. the risk-free rate of each type of capital plus the financial risk of the firm
D. the risk-free rate of each type of capital plus the business risk and the financial risk of the firm

3. Which of the following is true of long-term funds?

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A. They provide an easy way to reduce financing costs because they are relatively cheaper than short-
term funds.

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B. They are a type of investment fund which invests in money market investments of high quality and low
risk.

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C. They are the sources that supply the financing necessary to support a firm's capital budgeting
activities.
D. They are the funds available to a business on the basis of inventory held and require detailed inventory
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tracking.

4. A tax adjustment must be made in determining the cost of ________.

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A. long-term debt
B. common stock
C. preferred stock
D. retained earnings
C

5. The approximate before-tax cost of debt for a 15-year, 10 percent, P1,000 par value bond selling at
P950 is ________.
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A. 10 percent
B. 10.7 percent
C. 12 percent
D. 15.4 percent
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6. A firm has issued preferred stock at its P125 per share par value. The stock will pay a P15 annual
dividend. The cost of issuing and selling the stock was P4 per share. The cost of the preferred stock is
________.
A. 7.2 percent
B. 12 percent
C. 12.4 percent
D. 15 percent

7. The cost of common stock equity may be estimated by using the ________.
A. yield curve
B. break-even analysis
C. Gordon model
D. DuPont analysis
8. A firm has a beta of 1.2. The market return equals 14 percent and the risk-free rate of return equals 6
percent. The estimated cost of common stock equity is ________.
A. 6 percent
B. 7.2 percent
C. 14 percent
D. 15.6 percent

9. In comparing the constant-growth model and the capital asset pricing model (CAPM) to calculate the
cost of common stock equity, ________.
A. the CAPM ignores risk, while the constant-growth model directly considers risk as reflected in the beta
B. the CAPM directly considers risk as reflected in the beta, while the constant-growth model uses the
market price as a reflection of the expected risk-return preference of investors
C. the CAPM directly considers risk as reflected in the beta, while the constant growth model uses
dividend expectations as a reflection of risk
D. the CAPM indirectly considers risk as reflected in the market return, while the constant growth model
uses dividend expectations as a reflection of risk

10. A firm has determined its cost of each source of capital and optimal capital structure, which is

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composed of the following sources and current market value proportions:
Source of Capital Mix After-tax Cost

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Long-term debt 45% 5%
Preferred stock 10% 14%

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Common stock 45% 22%

Other things remaining constant, if the firm were to shift toward a capital structure with ________ the
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weighted average cost of capital will be higher.
A. 45% long-term debt, 40% common stock, and 15% preferred stock
B. 60% long-term debt, 20% common stock, and 20% preferred stock
PA

C. 20% long-term debt, 60% common stock, and 20% preferred stock
D. 60% long-term debt, 30% common stock, and 10% preferred stock

11. ________ projects have the same function; the acceptance of one ________ the others from
C

consideration.
A. Capital; eliminates
B. Independent; does not eliminate
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C. Mutually exclusive; eliminates

D. Replacement; eliminates

12. A firm is evaluating a proposal which has an initial investment of P35,000 and has cash flows of
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P10,000 in year 1, P20,000 in year 2, and P10,000 in year 3. The payback period of the project is
________.
A. 1 year
B. 2 years
C. between 1 and 2 years
D. between 2 and 3 years

13. A firm is evaluating an investment proposal which has an initial investment of P5,000 and cash flows
presently valued at P4,000. The net present value of the investment is ________.
A. -P1,000
B. P9,000
C. P4,000
D. can not be determined based on the given information.
14. What is the NPV for a project if its cost of capital is 0 percent and its initial after-tax cost is P5,000,000
and it is expected to provide after-tax operating cash inflows of P1,800,000 in year 1, P1,900,000 in year
2, P1,700,000 in year 3, and P1,300,000 in year 4?
A. P1,700,000
B. P371,764
C. P137,053
D. can not be determined based on the given information.

15. What is the IRR for the following project if its initial after-tax cost is P5,000,000 and it is expected to
provide after-tax operating cash inflows of P1,800,000 in year 1, P1,900,000 in year 2, P1,700,000 in year
3, and P1,300,000 in year 4?
A. 15.57%
B. 0.00%
C. 13.57%
D. 12.25%

16. Projects S and L are equally risky, mutually exclusive, and have normal cash flows. Project S has an
IRR of 15%, while Project L's IRR is 12%. The two projects have the same NPV when the WACC is 7%.

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Which of the following statements is CORRECT?
A. If the WACC is 10%, both projects will have positive NPVs.

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B. If the WACC is 6%, Project S will have the higher NPV.
C. If the WACC is 13%, Project S will have the lower NPV.

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D. If the WACC is 10%, both projects will have a negative NPV.

17. Consider the following projects, X and Y, where the firm can only choose one. Project X costs P600
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and has cash flows of P400 in each of the next 2 years. Project Y also costs P600, and generates cash
flows of P500 and P275 for the next 2 years, respectively. Which investment should the firm choose if the
cost of capital is 10 percent?
PA

A. Project X, since it has a higher NPV than Project Y

B. Project Y, since it has a higher NPV than Project X
C. Project X, since it has a lower NPV than Project Y
D. Project Y, since it has a lower NPV than Project X
C

18. Consider the following projects, X and Y, where the firm can only choose one. Project X costs P600
and has cash flows of P400 in each of the next 2 years with 8% financing cost. Project Y also costs P600,
EO

and generates cash flows of P500 and P275 for the next 2 years with 10% financing cost. Which
investment should the firm choose?
A. Project X, since it has a higher EAA than Project Y
B. Project Y, since it has a higher EAA than Project X
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C. Project X, since it has a lower EAA than Project Y

D. Project Y, since it has a lower EAA than Project X

19. What is the present payback period for Tangshan Mining company's new project if its initial after-tax
cost is P4,000,000 and it is expected to provide after-tax operating cash inflows of P1,800,000 in year 1,
P1,900,000 in year 2, P700,000 in year 3, and P1,800,000 in year 4 with cost of capital of 10%?
A. 4.33 years
B. 3.22 years
C. 2.43 years
D. 1.33 years

20. Which capital budgeting method is most useful for evaluating a project that has an initial after-tax cost
of P5,000,000 and is expected to provide after-tax operating cash flows of P1,800,000 in year 1,
(P2,900,000) in year 2, P2,700,000 in year 3, and P2,300,000 in year 4?
A. net present value
B. internal rate of return
C. payback
D. accounting rate of return

21. Last year, Mike bought 100 shares of Dallas Corporation common stock for P53 per share. During the
year he received dividends of P1.45 per share. The stock is currently selling for P60 per share. Inflation is
4% during the year. What real rate of return did Mike earn over the year?
A. 11.9 percent
B. 6.73 percent
C. 19.9 percent
D. 15.9 percent

22. Risk aversion is the behavior exhibited by managers who require ________.
A. an increase in return, for a given decrease in risk
B. an increase in return, for a given increase in risk
C. no changes in return, for a given increase in risk
D. decrease in return, for a given increase in risk

23. A corporation has concluded that its financial risk premium is too high. In order to decrease this, the
firm can ________.

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A. increase the proportion of long-term debt to decrease the cost of capital
B. increase the proportion of short-term debt to decrease the cost of capital

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C. decrease the proportion of common stock equity to decrease financial risk
D. increase the proportion of common stock equity to decrease financial risk

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24. An investment advisor has recommended a P50,000 portfolio containing assets R, J, and K; P25,000
will be invested in asset R, with an expected annual return of 12 percent; P10,000 will be invested in
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asset J, with an expected annual return of 18 percent; and P15,000 will be invested in asset K, with an
expected annual return of 8 percent. The expected annual return of this portfolio is ________.
A. 12.67%
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B. 12.00%
C. 10.00%
D. 11.78%
C

25. Combining negatively correlated assets having the same expected return results in a portfolio with
________ level of expected return and ________ level of risk.
A. a higher; a lower
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B. the same; a higher

C. the same; a lower
D. a lower; a higher
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26. Systematic risk is also referred to as ________.

A. business specific risk
B. internal risk
C. nondiversifiable risk
D. maturity risk

27. An investment banker has recommended a P100,000 portfolio containing assets B, D, and F. P20,000
will be invested in asset B, with a beta of 1.5; P50,000 will be invested in asset D, with a beta of 2.0; and
P30,000 will be invested in asset F, with a beta of 0.5. The beta of the portfolio is ________.
A. 1.25
B. 1.33
C. 1.45
D. 1.85

28. If you expect the market to increase which of the following portfolios should you purchase?
A. a portfolio with a beta of 1.9
B. a portfolio with a beta of 1.0
C. a portfolio with a beta of 0
D. a portfolio with a beta of -0.5

29. Consider the following information for three stocks, A, B, and C. The stocks' returns are positively but
not perfectly positively correlated with one another, i.e., the correlations are all between 0 and 1.
Expected Standard
Stock Return Deviation Beta
A 10% 20% 1.0
B 10% 10% 1.0
C 12% 12% 1.4

Portfolio AB has half of its funds invested in Stock A and half in Stock B. Portfolio ABC has one third of its
funds invested in each of the three stocks. The risk-free rate is 5%, and the market is in equilibrium, so
required returns equal expected returns. Which of the following statements is CORRECT?
A. Portfolio AB has a standard deviation of 20%.
B. Portfolio AB's coefficient of variation is greater than 2.0.
C. Portfolio AB's required return is greater than the required return on Stock A.
D. Portfolio ABC's expected return is 10.66667%.

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30. Inflation, recession, and high interest rates are economic events that are best characterized as being

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A. systematic risk factors that can be diversified away.
B. company-specific risk factors that can be diversified away.

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C. among the factors that are responsible for market risk.
D. risks that are beyond the control of investors and thus should not be considered by security analysts or
portfolio managers.
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31. _______________ is the length of time that a product serves the needs of customers.
A. Product life cycle
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B. Revenue producing life

C. Consumable life
D. Introduction stage
C

32. Which of the following manufacturing costs is assigned to products in a JIT environment using
allocation?
A. cafeteria services
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B. equipment depreciation
C. insurance and taxes
D. operating supplies
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33. A competitive advantage has been established when

A. customers see the variation as important and the value added to the customer exceeds the cost of
providing differentiation.
B. a high-cost strategy increases customer value by minimizing customer sacrifices.
C. a low-profit item is dropped from the product line.
D. profits are increasing steadily

34. When a computer company selects a mix of strategies in order to create sustainable competitive
advantage, it is following a
A. focusing strategy.
B. low-cost strategy.
C. differentiation strategy.
D. strategic positioning strategy.

35. Which of the following is an example of a value-added activity?

A. supervision of production workers
B. inspection of products
C. scheduling of production
D. storage of products

36. _______________ is an effort to reduce costs of existing products and processes.

A. Kaizen costing
B. Activity elimination
C. Activity selection
D. Activity reduction

37. A time-and-motion study revealed that it should take 2 hours to produce a product that currently takes
6 hours to produce. Labor is P8 per hour.

The non-value-added costs are

A. P16.
B. P32.
C. P48.
D. P-0-.

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38. Costs incurred to determine whether products and services are conforming to requirements are called
A. external failure costs.

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B. internal failure costs.
C. appraisal costs.

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D. prevention costs.

39. Lean manufacturing is best defined as

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A. an operating approach that reports on the effectiveness of the management of the organization.
B. an operating approach designed to eliminate waste and maximize customer value.
C. an operating approach that is designed to analyze the activities of the organization.
PA

D. an operating approach that is designed to compute variances between expectations and actual
performance.

40. The production rate

C

A. tells how many units of a product can be produced by the manufacturing cell.
B. calculates how many minutes it takes an operation to process one unit of product.
C. calculates the processing time of the slowest department.
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D. calculates the wait and move time of a production.

41. Suppose that Swiss wrist watches priced in Swiss Francs become very popular among Filipino
consumers while at the same time Britain experiences relatively higher inflation than the Philippines.
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Assuming that all other economic parameters remain constant, which one of the following statements is
most accurate?
A. The Philippine peso will appreciate relative to the Swiss Franc and depreciate relative to the British
pound.
B. The Philippine peso will appreciate relative to both the Swiss Franc and the British pound.
C. The Philippine peso will depreciate relative to both the Swiss Franc and the British pound.
D. The Philippine peso will depreciate relative to the Swiss Franc and appreciate relative to the British
pound.

42. If the Philippine peso declines in value relative to the currencies of many of the Philippine trading
partners, the likely result is that
A. The Philippine balance of payments deficit will become worse.
B. Foreign currencies will depreciate against the peso.
C. Philippine imports will tend to increase.
D. Philippine exports will tend to increase.

43. Country A's currency would tend to appreciate relative to Country B's currency when
A. Country A has a higher rate of inflation than Country B.
B. Country A has a slower rate of growth in income that causes its imports to lag behind its exports.
C. Country B switches to a more restrictive monetary policy.
D. Country B has real interest rates that are greater than real interest rates in Country A.

44. The dominant reason countries devalue their currencies is to:

A. Discourage exports without having to impose controls.
B. Improve the balance of payments.
C. Curb inflation by increasing imports.
D. Slow what is regarded as too rapid an accumulation of international reserves.

45. Consumers are willing to pay for a glass of milk tea for P120 but found that it has a market value for
only P110, if total equilibrium quantity is 600,000 units and supply is 700,000 units, how much is the
consumer surplus?
A. P500,000
B. P1,000,000
C. P3,000,000
D. P3,500,000

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46. It was observed that there is a 5% increase in unemployment rate in the Philippines during the

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pandemic. Assuming Okun’s law holds true, what is most likely to happen?
A. there is a 10% drop in the potential GDP

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B. there is a 10% drop in the actual GDP
C. there is a 15% drop in the potential GDP
D. there is a 15% drop in the actual GDP
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47. The natural unemployment rate was determined to be 5%, if job finding rate is 19%, compute for the
rate of job separation.
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A. 26%
B. 1%
C. 14%
D. 24%
C

48. A local car dealership gathered data on changes in demand and consumer income for its cars for a
particular year. When the average real income of its customers falls from P5,000,000 to P4,000,000, the
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demand for its cars plummets from 10,000 to 5,000 units sold, all other things unchanged. Compute for
income elasticity of demand
A. 2.5
B. -2.5
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C. 0.4
D. -0.4

49. During the pandemic food pantries became a boom but were abused by unscrupulous people who got
more than they needed. What is a possible solution to this issue?
A. Charge a small fee for the items taken
B. Let the people freely get the goods until supply lasts
C. Offer the free goods on a first-come, first-served basis to deserving individuals
D. Let the government subsidize the free goods

50. If a normal good competes with three similar goods, and all four goods give the consumer equal utils
of satisfaction, the demand for the normal good
A. Is relatively elastic.
B. Is perfectly elastic.
C. Responds as an inferior good.
D. Is perfectly inelastic.
RFBT
FIFTH MONTHLY ASSESSMENT

1. The subject matter of this intellectual property are literary, scientific or artistic works
A. Copyright
B. Patent
C. Trademark
D. All of the choices

2. The following are prohibited to be registered as marks, except:

A. Flag or coat of arms or other insignia of the Philippines
B. Those that falsely suggest a connection with persons, living or dead, institutions,
beliefs, or national symbols
C. Those consisting exclusively of signs or indications that are suggestive in character

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D. None of the choices is an exception

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3. The protection granted by a trademark shall be __ years from registration and renewable
_____________.
A. 10; 3 times
B. 20; 3 times
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C. 10; indefinitely
D. 20; indefinitely
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4. A Declaration of Actual Use shall be filed:

A. Within 3 years from filing date of the application
B. Within 1 year from the 5th anniversary of the registration of the mark
C

C. Within 1 year from the date of renewal of the registration

D. All of the choices apply
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5. Original Works for purposes of a copyright include the following, except:

A. Books
B. Newspapers
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C. Musical compositions
D. Inventions

6. The following cannot be the subject of a copyright, except:

A. Supreme Court decisions
B. Statutes
C. Executive orders
D. Compilation of legislative work

7. If an employee created a work during his employment using the facilities, time and
materials of the employer, but not connected to his regular duties, who shall own the
copyright to the work?
A. The employee
 B. The employer
C. Both of them, jointly
D. Neither of them

8. The requisites for the grant of an invention patent include the following, except:
A. Novelty
B. Inventive Step
C. Industrial Applicability
D. Ornamentality

9. Under this type of patent infringement, the item being sold, made or used conforms
exactly to the patent claim of another
A. Exactness Rule
B. Addition Rule
C. Doctrine of Equivalents

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D. All of the choices

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10. The government agency tasked to implement the provisions of the Ease of Doing Business
Act is the:
A. National Privacy Commission
B. Bureau of Ease of Doing Business ev
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C. Anti-Red Tape Authority
D. Department of Trade and Industry
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11. Applications or requests involving activities that pose danger to public health, public safety,
public morals and/or public policy shall be processed upto a maximum of:
A. 3 working days
C

B. 7 working days
C. 20 working days
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D. 45 working days

12. When all documents supported the application have been submitted and the required
charges have been paid, but no action was taken by the government agency within the
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prescribed period,
A. The application is deemed to be on hold
B. The application will be automatically forwarded to the Anti-Red Tape Authority
C. The application is deemed approved
D. The application is deemed denied

13. In a local government setting, a one-stop business facilitation service shall be established
for the city/municipality’s business permitting and licensing system, which shall be referred
to as:
A. The Business Permit and Licensing Office
B. The Business One Stop Shop
C. The Central Receiving Department
D. None of the choices
14. One of the following is not a function of the Philippine Deposit Insurance Corporation
(PDIC). Which is it?
A. Co-regulator of banks
B. Deposit insurer
C. Engage in the lending of funds obtained from deposits
D. Receiver and liquidator of closed banks

15. Which of the following is not an exception to the secrecy of foreign currency deposits?
A. In cases of impeachment.
B. When there is written consent of depositor.
C. Upon the order of a competent court, the Anti-Money Laundering Council (AMLC)
may inquire when it has been established that there is probable cause that the deposits
or investments involved are in any way related to a money laundering offense.
D. Upon order of the Court of Appeals for purposes of examination by law enforcement

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officers in terrorism cases under the Human Security Act of 2007.

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16. Deposits insured by the Philippine Deposit Insurance Corporation amounts to:
A. Less than P500,000
B. Up to P500,000
C. More than P500,000 ev
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D. P500,000
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17. Mr. X maintains P250,000 in ABC Bank’s Manila Branch and P300,000 in ABC Bank’s US
Branch. In the event of a closure, how much can Mr. X recover?
A. P275,000 c. P300,000
B. P250,000 d. P500,000
C

18. Which of the following is not an exception to the secrecy of bank deposits?
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A. Upon order of the competent court or tribunal in cases involving unexplained wealth.
B. Upon inquiry by the Commissioner of Internal Revenue for the purpose of
determining the net estate of a deceased depositor.
C. Upon inquiry by the Commissioner of Internal Revenue when a taxpayer applied for
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compromise settlement of his tax liability by reason of financial incapacity.

D. Upon inquiry by the Commissioner of Internal Revenue when a taxpayer applied for
compromise settlement of his tax liability by reason of doubtful validity of the
assessment.

19. Albus Dumbledore maintains the following accounts with Gringotts Bank, Manila Branch:
(1) Account Name: Albus Dumbledore – savings account with a balance of P300,000; and
(2) Account Name: Albus Dumbledore and Hogwarts University – demand deposit with
a balance of P30,000,000. How much is the total insured deposit of Albus Dumbledore?
A. P300,000
B. P500,000
C. P800,000
D. P1,000,000
20. Which of the following is a covered transaction under the AMLA?
A. A cash deposit for P500,000 within a banking day
B. A purchase of real property for P8,000,000
C. A casino transaction amounting to P4,500,000
D. None of the choices

21. This step in Money Laundering is when the launderer inserts dirty money into a legitimate
financial institution. This is the riskiest stage of the laundering process because large
amounts of cash are pretty suspicious and banks are required to report high-value
transactions.
A. Placement
B. Layering
C. Integration
D. Money Laundering

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22. This power of the AMLC can be exercised ex-parte, in all instances:

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A. Examine bank accounts of individuals suspected of money-laundering
B. Apply for a freeze order of accounts or related web of accounts suspected to be
connected to money-laundering
C. Both ev
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D. Neither
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23. The following provide for an exception to the secrecy of foreign currency deposits,
except:
A. Anti Money Laundering Act
B. Human Security Act
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C. Unclaimed Balances Act

D. None of the choices is an exception
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24. The secrecy of bank deposits is not violated in which of the following reports sent to
the Anti-Money Laundering Council?
A. Covered Transaction Report
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B. Suspicious Transaction Report

C. Both Covered and Suspicious Transaction Report
D. Neither Covered and Suspicious Transaction Report

25. In terrorism cases, the order to inspect or examine bank accounts by law enforcement
officers is issued by:
A. Regional Trial Court
B. Court of Appeals
C. Supreme Court
D. Anti-Money Laundering Council

26. Suspicious transactions refer to transactions with covered institutions, regardless of the
amount involved, where any of the following circumstances exist:
 A. No underlying legal or trade obligation, purpose or economic justification
B. Client is properly identified
C. Amount involved commensurate with client’s business or financial capacity
D. Based on all known circumstances, it may be perceived that client’s transaction is
not structured in order to avoid being subject of reporting requirements

27. Jewelry dealer is a covered institution if it deals in precious metals, who as a business or
trade in excess of:
A. P500,000
B. P1,000,000
C. P5,000,000
D. P7,500,000

28. The AMLC can prescribe a different period for reporting covered and/or suspicious
transactions to AMLC as long as it does not exceed:

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A. 5 working day
B. 10 working days

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C. 15 working days
D. 30 working days

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29. A freeze order, relative to money laundering, may be issued by:
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A. Regional Trial Court
B. Municipal Trial Court
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C. Court of Appeals
D. Any of the choices

30. A freeze order shall be effective immediately and its effectivity may be extended by the
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Court of Appeals for a period not exceeding:

A. 20 days
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B. 30 days
C. 6 months
D. 12 months
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31. AMLC may conduct an examination of bank accounts without a court order in cases
involving
A. Murder
B. Jueteng
C. Plunder
D. Estafa

32. An individual with 2 joint accounts of P10,000,000 each and individual accounts with an
aggregate amount of P50,000,000 shall be insured upto:
A. P500,000
B. P1,000,000
C. P25,000,000
D. P35,000,000
33. If an employee worked overtime on a rest day, he shall be entitled to a premium of:
A. 25%
B. 30%
C. 50%
D. 100%

34. As a rule, the normal hours of work should not exceed:

A. 4 hours
B. 6 hours
C. 8 hours
D. 10 hours

35. As a rule, land-based OFWs shall be treated as:

A. Self-employed members

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B. Employee-members
C. Either self-employed or employee members

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D. Neither self-employed or employee members

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36. The loss of hearing of one ear entitles the permanent-partial disabled member to 10
months-worth of pension. In this case,
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A. He shall receive the monthly pensions upto a maximum of 10 months
B. He may opt to receive the benefits in lumpsum
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C. He shall receive the monthly pensions in lumpsum

D. None of the choices is correct

37. At what age may a member receive the monthly pension relative to retirement, without
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need of being unemployed?

A. 55
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B. 60
C. 65
D. 70
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38. If an employee’s Average Monthly Salary Credit is P20,000 and has been a member of
the SSS for 30 years prior to the semester of retirement in 2023, where all such years
are considered credited, how much would be his monthly pension?
A. P8,000
B. P9,000
C. P12,300
D. P13,300

39. If the contingency happened in July, the semester of contingency would be:
A. January to June
B. April to September
C. July to December
D. October to March of the following year
40. The minimum dependent’s pension shall be:
A. P100/month
B. P250/month
C. P500/month
D. P1,000/month

41. The sickness benefit that a member, who was confined for more than 3 days, is equivalent
to:
A. 50% of the Average Daily Salary Credit
B. 75% of the Average Daily Salary Credit
C. 80% of the Average Daily Salary Credit
D. 90% of the Average Daily Salary Credit

42. The maximum number of days that a female worker may allocate to the child’s father is:

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A. 3 days
B. 7 days

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C. 10 days
D. 30 days

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43. Meal periods are mandated to be provided for employee’s regular meals which should
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be:
A. Not less than 30 minutes
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B. Not less than 60 minutes

C. Not more than 30 minutes
D. Not more than 60 minutes
C

44. If Araw ng Kagitingan coincided with Maundy Thursday, how much is an employee
entitled to if he worked on the said day?
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A. 100%
B. 150%
C. 200%
D. 300%
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45. When an employee is permitted to work on his scheduled rest day, he shall be entitled
to additional compensation of at least ____ of his regular wage:
A. 25%
B. 30%
C. 50%
D. 100%

46. It refers to information generated, sent, received, or stored by optical or similar means.
A. Electronic key
B. Electronic data message
C. Electronic signature
D. Electronic document
47. Where is the place of dispatch of electronic data messages or electronic documents if the
originator has more than one place of business and there is an underlying transaction?
A. Place which has the closest relationship to the underlying transaction
B. Principal place of business
C. Habitual residence
D. Place where the server is located

48. Who has the burden of proving the authenticity of an electronic data message or
electronic document in any legal proceeding?
A. The person who sent the electronic data message
B. The person who signed the electronic document
C. The person denying the authenticity of said electronic data message or electronic
document
D. The person seeking to introduce said electronic data message or electronic document

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49. Which government agency is empowered to promulgate rules and regulations for the

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implementation of the Electronic Commerce Act?

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A. Department of Trade and Industry (DTI)
B. Department of Transportation and Communication (DOTC)
C. Department of Information and Communications Technology (DICT)
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D. Supreme Court (SC)
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50. First Statement: As between the originator and the addressee of an electronic data
message or electronic document, a declaration of will or other statement shall not be
denied legal effect, validity or enforceability solely on the ground that it is in the form of
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an electronic data message.

Second Statement: An electronic data message or electronic document is that of the
originator if it was sent by the originator himself.
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A. Both statements are correct

B. Both statements are incorrect
C. Only the first statement is correct
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D. Only the second statement is correct

TAX FIFTH MONTHLY ASSESSMENT

1. The following are the requisites of a donation for purposes of the donor's
tax except _.
A. capacity of the donor
B. capacity of the donee
C. delivery of the subject matter of gift
D. donative intent
2. Which of the following statements is most correct?
Statement 1. Natural and juridical persons are subject to estate tax
while only natural persons are subject to donor’s tax.
Statement 2. To be valid, form is an essential legal requirement for a
donation of an immovable property.
A. Statement 1 only.
B. Statement 2 only.

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C. Both statements.
D. Both statements are not correct.

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3. All of the following are taxable with Philippine transfer tax for their
gifts within and outside the Philippines except
A. Gift of resident citizen to stranger.

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B. Donation of non-resident citizen to a relative in the Philippines.
C. Donation of resident alien to a stranger.
D. Gift of non-resident alien to a Filipino citizen.
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4. Which of the following statements is most correct?
Statement 1. In all cases, void donations are not subject to donor’s tax.
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Statement 2. Every donation between the spouses during the marriage shall
be void.
Statement 3. The rule of reciprocity is applicable only to the intangible
properties owned by a nonresident alien if the said properties are
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situated outside the Philippines.

A. Statement 1 only.
B. Statement 2 only.
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C. Statement 3 only.
D. All of the above.
5. Which of the following constitutes a taxable gift?
A. One-day rent-free use of another's property.
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B. A gratuitous transfer by an incompetent

C. Creditor's gratuitous discharge of a debtor's obligation.
D. An agreement to make a future transfer which is not supported by a
consideration.
6. Which of the following examples is not taxable?
A. A Filipino citizen donated a parcel of land located in the United
States to B, a non-resident alien.
B. On June 12, 2019, A made a gift of P500,000 to his daughter on
account of her marriage celebrated May 1, 2018.
C. Mr. Ramos, a multi-millionaire, gives his wife a diamond ring worth
P300,000 as a birthday gift.
D. A and B are the only heirs of C. A renounces his share of inheritance
in favor of B.
7. Which of the following donations result to a net gift of P80,000?
 A. Mary requested Anna to pay Mary’s liability with Ella in the amount
of P100,000 and in return, the personal property of Mary valued at
P180,000 will be donated to Anna.
B. Alex donated property to Liam with a market value of P140,000 The
property is subject to a mortgage indebtedness of P60,000 which was
paid by the donor at the time of the donation.
C. The daughter of Arlene was married to her boyfriend. As a gift,
Arlene donated cash worth P100,000 to her daughter.
D. Property worth P80,000 was donated by Jupiter to Barangay
Maaliwalas for use as site of the Barangay Hall.
8. Pedro donated the following properties
Land in Los Angeles, California, USA P 250,000
Land and building in Jolo, Sulu 175,000
Car registered in the State of 225,000
California, USA
Jewelries in the Philippines 45,000
Shares of stock in a corporation 60,000

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based in U.S.A
Accounts receivable, debtor is in 25,000

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the Philippines
The gross gift if Pedro is a non-resident alien with reciprocity is _.
A. 220,000
B. 245,000
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C. 295,000
D. 780,000
9. Amie made the following donations to Betty.
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500,000 - Fair market value of land, with an unpaid mortgage of

P200,000, 50% of which shall be assumed by Betty
600,000 - Car, with an agreement that the tax of P36,000 on the
donation shall be assumed by Betty
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The net gift on the donation is _.

A. 834.000
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B. 934,000
C. 1,000,000
D. 1,100,000
10. Mr. and Mrs. Villapondo gave the following donations on July 1, 2020:
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• Community property was donated to Gina, sister of Mr. Villapondo. The

fair market value of the property is P650,000.
• To Andrew, legitimate son on account of marriage, exclusive property
of Mr. Villapondo worth P150,000.
The donor's tax due on Mr. Villapondo’s donation is _.
A. 8,400
B. 9,000
C. 12,900
D. 13,500
11. Which importation is subject to VAT?
A. Importation of fuels by a person engaged in international shipping
worth P20 Million if the fuel shall be used exclusively for
international shipping and air transport operations.
 B. Importation of raw, unprocessed, refrigerated Kobe beef from Japan
by a beef dealer for sale to hotels in Makati City with a fair
market value of P10 Million.
C. Importation of books worth P5 Million and school supplies worth
P1.2 million.
D. Importation of wines by a wine dealer with a fair market value of
P2 million for sale to hotels in Makati City.
12. Value-added tax is a (an) _.
A. Indirect tax
B. Direct tax
C. Progressive tax
D. Regressive tax
13. Which of the following statements is true?
A. A Hongkong national who comes to the Philippines for a tourist
visit in Boracay shall be entitled to a 20% discount on plane fare
and hotel accommodations.

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B. A multi-millionare senior citizen shall be also entitled to the 20%
discount.

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C. A senior citizen who buys "fishball" from an ambulant vendor shall
be entitled to a 20% discount on amount which is net of VAT.

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D. The monthly electric bill on a senior citizen shall be subject to
5% discount based on the amount which is net of VAT.
14. A creditable input tax allowed on one who becomes subject to VAT for the
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first time.
A. Presumptive input tax
B. Excess input tax
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C. Total input tax

D. Transitional input tax
15. Statement 1: Inventories of goods for sale which are exempt from value-
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added tax may be subject to transitional input tax when the seller becomes
liable to VAT for the first time, or when he voluntarily registers under
the VAT system even if his annual turn-over does not exceed P3,000,000.
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Statement 2: When a transitional input tax is created, the taxable

person shall make a journal entry debiting "Transitional input tax and
crediting "Merchandise inventory."
Statement 3: The purchase of fish to be processed into sardines shall
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entitle the manufacturer of sardines to a 4% presumptive input tax.

Statement 4: A person who sells his riceland because he needs money for
the hospitalization of his child is subject to VAT on the sale of real
property

Which of the following options is wrong?

A. Statement 1 is true, while statement 4 is false
B. Statements 2 and 3 are false
C. Statements 1 and 2 are true
D. Statements 3 and 4 are false
16. Mr. Wang, rents his 12 residential units for P14,800 per month. During
taxable year 2022, his accumulated gross receipts amounted to P2,131,200.
He is subject to _.
 VAT 1% percentage
tax
A. Yes Yes
B. Yes No
C. No Yes
D. No No
17. Which statement is false? If a non-VAT registered person issues an
invoice or receipt showing his TIN, followed by the word "VAT", the
erroneous issuance shall _.
A. Make the seller liable to percentage tax applicable to his
transactions
B. make the seller liable to a 50% surcharge
C. entitle the purchaser to an input tax credit
D. subject the seller to VAT due on the transaction and be entitled
to input tax credit
18. The 3% percentage tax on non-VAT under Section 116 of NIRC is payable

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in the following instances, except _.
A. The annual gross sales or receipts exceed P100,000 but do not exceed

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P3,000,000 and is not VAT registered.
B. The business is not a cooperative.

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C. The business is not subject to common carrier's tax, franchise tax,
amusement tax, value-added tax, etc.
D. Profession or business which declared income using the 8% income
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tax option.
19. Given the following statements:
Statement 1: Sale of goods or services which are subject to Other
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Percentage Tax are subject also to value-added tax.

Statement 2: Persons or transactions which are subject to Other
Percentage Tax may still be subject to income tax.
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Statement 3: A person whose gross annual sales or receipts exceed

P3,000,000 may, nevertheless, be subject to Other Percentage
Tax.
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Statement 4: A domestic carrier of passengers by land shall be subject

to value-added tax if the gross annual sales or receipts
exceed P3,000,000.
Which of the following options is false?
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A. Statements 1 and 4 are wrong

B. Statements 2 and 4 are correct
C. Statements 2 and 3 are correct
D. Statement 2 is correct while Statement 4 is wrong
20. All of the following, except one, are not subject to common carrier's
tax.
A. owner of a parking lot/building for lease
B. rent-a-car companies
C. common carriers by land engaged in carriage of goods or cargo
D. airline companies
21. Period within which refund/credit of input taxes shall be made _.
A. within ninety (90) days from the date of submission of the official
receipts or invoices and other documents in support of the
application filed
 B. within ninety (90) days from the date of payment of the tax
C. within sixty (60) days from the date of submission of the official
receipts or invoices and other documents in support of the
application filed
D. within sixty (90) days from the date of payment of the tax
22. This tax will require the use of BIR Form 2552 in filing the percentage
tax return:
A. Tax on Banks
B. Tax on Winnings
C. Overseas Communication Tax
D. Stock Transaction Tax
23. Wesel Company, a VAT-registered business, had the following data during
the quarter:
Zero-rated export sales P 1,815,000
Domestic sales (tax included) 1,232,000
Purchases of goods for export, gross of tax 672,000

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Purchases of goods for domestic sales, tax 323,120
inclusive

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Purchases of supplies on domestic sales, 124,850
net of tax

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Assuming that the input taxes paid on purchases of goods for export are
claimed as tax credit, the VAT payable by Wesel Company is _.
A. 10,398
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B. 12,895
C. 84,895
D. 177,895
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24. Cruz, a trader, made the following transactions during the second
quarter:
Cash sales P 200,000
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Open account sales 100,000

Consigned goods- delivered:
April 15 100,000
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May 15 100,000
June 15 100,000
If no consigned goods were returned by the consignees, the output tax in
the second quarter is _.
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A. 36,000
B. 40,000
C. 48,000
D. 60,000
25. Newton Company, a newly VAT registered business, had the following data
in January:
Merchandise inventory, VAT
inclusive P 204,000
Actual VAT paid on the
inventory 16,000
Sales, total invoice amount 469,000
Purchases, gross of VAT 57,400
Fifty percent (50%) of the merchandise inventory on January 1 were
purchased from non-VAT registered sellers.
 The VAT payable by Newton Company is _.
A. 3,960
B. 4,950
C. 28,100
D. 30,100
26. Beth had the following receipts during the month (exclusive of tax):
Passenger Cargo
Bus (10 units), per P 15,000
unit
Sea vessel 1,500,000 800,000
Cessna plane for hire P800,000 560,000
The output tax during the period is _.
A. 164,220
B. 439,200
C. 440,220

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D. 441,000
27. In 2023, Dimagiba Construction Company entered into a contract with the

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government to construct an edifice for a total contract price of
P25,000,000. During the month, the government paid P10,000,000 to the

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company. How much is to be withheld by the government on the payment?
A. Zero
B. 500,000
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C. 700,000
D. 1,250,000
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28. Constantino, a VAT registered taxpayer, had the following data on

importation in 2022:
For Sale Own Use
Invoice cost (Exchange rate: $1 = Php $ 5,650 $ 850
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50)
Customs duties 12% 10%
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Freight 20,000 4,000

Insurance 28,000 4,250
Other charges before release from 7,000 2,500
customs house
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Facilitation fee 10,000 5,000

Freight from customs house to 12,000 1,200
warehouse (net of VAT)
Assuming the customs duties are determined on the basis of the quantity
or volume of the goods, the VAT on the importation is _.
A. 37,285
B. 47,981.76
C. 44,742.00
D. 51,468
29. Data during the second quarter:
Output tax P 35,000
Input tax 19,000
VAT paid:
April 3,000
 May 4,500
Excess input tax, 1st quarter 2,400
The VAT payable (or excess tax to be carried over) is _.
A. 6,100
B. 8,500
C. 16,000
D. None
30. Saklolo Transportation Company is a holder of a franchise to operate
five (5) units of passenger buses (seating capacity is 44 passengers) in
the Bicol Region. It also owns a gas station which is used exclusively
to load its buses with diesel fuels, and a garage with service shop
exclusively to its own buses although in very rare instances it is
accepting repair jobs from outsiders. During the last quarter of the
year, it had the following gross receipts:
From the buses P 280,000
From the gas station (in loading its 300,000
own buses)

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From the garage for repair jobs from 12,000

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outsiders
How much is the common carrier's tax payable?

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A. 8,400
B. 8,760
C. 17,400
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D. 17,760
31. Lito, 90 years old, tendered a lunch for his two grandchildren, Nina and
Kikay in one popular fastfood chain in town. Nina ordered spaghetti,
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drinks and burger with an invoice price of P85.00, gross of VAT. Kikay
ordered chicken with rice and drinks with an invoice price of P92.00,
while Lito ordered chicken with spaghetti and drinks worth P106.40 in
the menu. How much should be paid by Lito for the foods ordered?
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A. 217.60
B. 234.06
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C. 253.00
D. 283.40
32. Which of the following excise taxes is ad valorem? Excise tax on
A. sweetened beverages
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B. diesel fuel oil

C. cigarette
D. invasive cosmetic procedures
33. May Caya is planning to purchase a Toyota Vios The net manufacturers
price is P587,255. The amount payable after VAT (disregard centavos in
the final answer) is _.
A. 587,255
B. 599,000
C. 670,880
D. 684,035
34. Drinky Import Corporation will remove from customs custody 50 cases of
Sarap Powdered Juice using caloric and non-caloric sweetener containing
144 packs by 25 grams. Each 25 grams pack can make one (1) liter (per
serving suggestion appearing on the label). The excise tax to be paid
before removal is _.
 A. 7,200
B. 43,200
C. 88,400
D. Exempt

35. One of the following products is not subject to excise tax. Which is it?
A. Toilet water
B. Sweetened juice drinks
C. 3-in-1 coffee, milk, 100% natural juice
D. Perfume
36. A residential condominium unit in Makati was sold on March 20, 2022 in
a pacto de retro sale for P2,100,000 Market value in the tax declaration
is P2,155,600 while the zonal value is P1,890,200
The documentary stamp tax due is _.
A. 32,325
B. 32,334

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C. 32,340

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D. None
37. Which is FALSE on documentary stamp tax? In case of sale of real property

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under installment payment
A. the tax shall accrue upon full payment of the selling price.
B. the tax shall accrue upon execution of the deed of sale.
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C. the basis for the imposition shall be at the time of the execution
of the Contract to Sell
D. the tax base shall either be the gross selling price or the market
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value.
38. Statement 1: On every original issue, whether on organization,
reorganization or for any lawful purpose, of shares of stock by any
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association, company or corporation, there shall be collected a

documentary stamp tax of Two peso (P2.00) on each Two hundred pesos
(P200), or fractional part thereof, of the par value, of such shares of
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stock
Statement 2: An instrument, document or paper which is required by law
to be stamped and which has been signed, issued, accepted or transferred
without being duly stamped, shall not be recorded, nor shall it or any
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copy thereof or any record of transfer of the same be admitted or used

in evidence in any court until the requisite stamp or stamps are affixed
thereto and cancelled.
A. True, true
B. False, false
C. True, false
D. False, true
39. It is an official document that empowers a revenue officer to examine
and scrutinize a taxpayer's books of accounts and other accounting
records, in order to determine the taxpayer's correct internal revenue
tax liabilities.
A. Preliminary Assessment Notice
B. Final Assessment Notice
C. Audit engagement letter
D. Letter of Authority
40. A Preliminary Assessment Notice (PAN) is required —
 A. Before a Final Assessment Notice (FAN) is sent to the taxpayer.
B. When a discrepancy has been determined between the tax withheld and
the actual amount remitted by the withholding agent.
C. When an article locally purchased or imported by an exempt person
has been sold, traded, or transferred to non-exempt persons.
D. When the deficiency tax is the result of mathematical errors in the
computations appearing on the face of the return.
41. Before a Final Assessment Notice (FAN) is issued, the taxpayer is
required to respond to the Preliminary Assessment Notice within a period
of _.
A. 30 days
B. 15 days
C. 45 days
D. 6 months
42. Where a return was filed, as a general rule, the prescriptive period for
assessment after the date the return was due or was filed, whichever is
later, is within _.
A. 3 years

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B. 5 years
C. 7 years

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D. 10 years
43. Mila filed her 2021 Income Tax Return and paid the tax due thereon on

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April 1, 2022. In case of deficiency, the last day for the Bureau of
Internal Revenue to send a Final Assessment Notice (FAN) is on _.
A. April 1, 2024
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B. April 1, 2025
C. April 15, 2024
D. April 15, 2025
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44. Peter filed an Income Tax Return for the calendar year 2022 on March 10,
2023. The BIR assessed a deficiency income tax on April 10, 2025. When I
the last day for the BIR to make a Formal Letter of Demand (FLD)?
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A. April 10, 2025

B. April 15, 2025
C. April 10, 2026
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D. April 15, 2026

45. Mila, a compensation income earner, filed her income tax return for the
taxable year 2022 on March 30, 2023. On May 20, 2026, Mila received an
assessment notice and letter of demand covering the taxable year 2022
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but the postmark on the envelope shows April 10, 2026. Her return is not
a false and fraudulent return. Can Mila raise the defense of prescription?
A. No. The 3-year prescriptive period started to run on April 15,
2023, hence, it has not yet expired on April 10, 2026.
B. Yes. The 3-year prescriptive period started to run on April 15,
2023, hence, it had already expired by May 20, 2026.
C. No. The prescriptive period started to run on March 30, 2023, hence,
the 3-year period expired on April 10, 2026.
D. Yes. Since the 3-year prescriptive period started to run on March
30, 2023, it already expired by May 20, 2026.
46. Sheila filed her 2021 Income Tax Return (ITR) on April 10, 2022. On June
20, 2022, she filed an amended return which is substantially different
from the original return. The last day to release, mail or send an
assessment is _.
A. April 10, 2025
B. April 15, 2025
 C. June 20, 2025
D. June 20, 2022
47. What is the effect on the tax liability of a taxpayer who does not
protest an assessment for deficiency taxes?
A. The taxpayer may appeal his liability to the CTA since the
assessment is a final decision of the Commissioner on the matter.
B. The BIR could already enforce the collection of the taxpayer's
liability if it could secure authority from the CTA.
C. The taxpayer's liability becomes fixed and subject to collection
as the assessment becomes final and collectible.
D. The taxpayer's liability remains suspended for 180 days from the
expiration of the period to protest.
48. Franny filed her Income Tax Return (ITR) for taxable year 2021 on March
20, 2022. Assuming that the return filed is not false or fraudulent, the
last day for the Bureau of Internal Revenue (BIR) to collect the tax by
judicial action if no assessment was made is _.
A. March 20, 2025
B. March 20, 2024

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C. April 15, 2025
D. April 15, 2024

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49. The taxpayer filed his 2021 income tax return on April 14, 2022. On May
20, 2023, he received a Final Assessment Notice (FAN) from the BIR. It

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is dated May 10, 2023 and was mailed on May 15, 2023. The last day for
him to file a Request for Reconsideration is _.
A. April 15, 2023
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B. April 14, 2023
C. June 14, 2023
D. June 19, 2023
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Numbers 50 and 51 are based on the following information:

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Date of filing the Income Tax Return March 28, 2022

Date Formal Letter of Demand (FLD) was July 20,2024
received
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Request for Reinvestigation was filed August 4, 2024

50. Protest or Request for Reinvestigation should be filed not later than-
A. August 20, 2024
B. September 20, 2024
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C. September 18, 2024

D. August 19, 2024
51. The last day for the taxpayer to submit relevant supporting documents
is _.
A. October 4, 2024
B. August 20, 2024
C. October 2, 2024
D. October 3, 2024
52. Assuming that the taxpayer submitted the documents supporting his motion
on August 26, 2024. The Bureau of Internal Revenue should act on the
protest not later than _.
A. September 26, 2024
B. April 15, 2025
C. February 26, 2025
D. February 22, 2025
53. A parcel of land located in a residential area in Caloocan City and
classified in the tax declaration as industrial is leased and used as
commercial. What will be the basis of the city government in assessing
the property?
A. Commercial
B. Residential
C. Industrial
D. Agricultural
54. A transfer of real property ownership such as sale, donation or barter
is subject to transfer tax. Which of the following statements is not true
about transfer tax?
A. The tax rate for cities should not exceed 3/4%.
B. All transfers of real property including the disposition under
Comprehensive Tax Reform Law (RA 6657) are subject to transfer tax.
C. It is payable within 60 days from the date of the execution of the
deed or from the date of the decedent's death.
D. It is payable to the Office of the City Treasurer.

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55. There are several special levies on real property. Which of the following

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is not one of them?
A. Special education fund tax

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B. Special assessment
C. Ad valorem tax on idle land
D. Transfer tax on transfer of real property ownership
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56. The City of Pampanga has an ordinance requiring all businesses that will
install or post signboards, billboards, streamers, tarpaulins and other
modes of advertisements outside of their establishments and within the
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territorial jurisdiction of the city shall pay P2.00 per square foot of
each advertisement material. Barangay Matigas has also an existing
barangay ordinance imposing taxes and fees on advertisements of similar
nature. Which of the following statements is correct?
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A. Both the city and the barangay can validly impose and collect such
taxes and fees.
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B. Only the barangay can validly impose and collect such taxes and
fees.
C. Only the city can validly impose and collect such taxes and fees.
D. Neither the city nor the barangay can validly impose and collect
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such taxes and fees.

57. Which of the following is not true on a medical clinic?
A. Required to pay local taxes based on gross receipts if it is selling
medicines to its patients.
B. Required to pay local taxes based on gross receipts even if not
engaged in selling medicines to its patients.
C. Required to pay local fees such as garbage fees, health and
sanitation fee, and fire inspection fee.
D. Required to pay business taxes based on gross receipts to the Bureau
of Internal Revenue.
58. A parcel of land located in a province was assessed as commercial with
a fair market value of P4,000,000. How much would be the highest possible
amount of annual basic real property tax that can be collected from the
owner?
A. 8,000
 B. 16,000
C. 20,000
D. 40,000
59. The real property tax payable is P33,000. How much is the total amount
payable if the taxpayer pays his real property tax after twelve (12)
months of delinquency?
A. 3,000
B. 8,250
C. 27,500
D. 40,920
60. Eliza Uy is a resident of Brgy. Bactad East, Urdaneta City, Pangasinan.
Eliza is engaged in general merchandise and is operating a sari-sari
store with an annual income of P200,000. Eliza owns a parcel of land,
where her residence and her sari-sari store stands. The parcel of land
has a fair market value of P2,500,000. Eliza also owns shares in Expansion
Corporation, a domestic corporation with principal office in the same
barangay. Details regarding Expansion Corporation are as follows:

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Assets P 2,500,000
Gross receipts 1,500,000

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Net income 350,000
How much is Eliza's community tax?

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A. 200
B. 205
C. 2,000
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D. 2,005
61. This double taxation model generally favours retention of greater so-
called “source country” taxing rights under a tax treaty—the taxation
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rights of the host country of investment—as compared to those of the

“residence country” of the investor.
A. OECD Model Tax Convention
C

B. United Nations Model Tax Convention

C. Double Taxation Agreement
D. US Model Income Tax Convention
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62. A type of tax treaty signed by two nations, is an arrangement between

jurisdictions that mitigates the problem of double taxation that can
occur when tax laws consider an individual or company to be a resident
of more than one country.
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A. Contract Between Nations

B. Tax Sparing Treaty
C. Bilateral Tax Treaty
D. All of the above
63. Which of the following are eligible activities under PEZA?
I. Export manufacturing
II. Medical tourism
III. Logistics and warehousing services
A. I and II only
B. I and III only
C. II and III only
D. I, II, and III
64. In order to qualify as a barangay micro-business enterprise, the total
assets of the enterprise _.
A. must not exceed P1,500,000
 B. must not exceed P2,000,000
C. must not exceed P2,500,000
D. must not exceed P3,000,000
65. To be entitled to registration under the Investment Priorities Plan, an
applicant must satisfy the Board of Investments that the applicant is,
except _.
A. Filipino citizen
B. It if is a partnership or association, that it is organized under
the laws of the Philippines and that at least 60% of its capital
is owned or controlled by Filipinos.
C. If it is a corporation, it is organized under Philippine laws and
that at least sixty 60% of the capital stock outstanding and
entitled to vote is owned and held by Philippine nationals, and at
least 60% of the members of the Board of Directors are citizens of
the Philippines.
D. If it is a corporation, it is organized under Philippine laws and
that at least 60% of the authorized capital stock is owned and held

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by Philippine nationals.
66. Statement 1: The Income Tax Holiday shall be followed by the Special

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Corporate Income Tax Rate or Enhanced Deductions.
Statement 2: In no case shall the Enhanced Deductions be granted

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simultaneously with the Special Corporate Income Tax.
Which of the above statements is/are correct?
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A. Statement 1 only
B. Statement 2 only
C. Both statements
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D. Neither statements
67. An export company registered under PEZA shows a gross income of
P25,000,000 for the taxable year. Assuming the company’s tax holiday
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had lapsed, how much Special Corporate Income Tax should it pay?
A. 2,500,000
B. 2,000,000
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C. 1,250,000
D. 250,000
68. Using the preceding data, how much should be remitted to the National
Government?
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A. 750,000
B. 500,000
C. 375,000
D. 250,000
69. How much is allowed as domestic sales allowance to PEZA-registered
entities?
A. 50%
B. 30%
C. 25%
D. 10%
70. A PEZA-registered enterprise has the following data for the current
taxable year:
Gross revenue 300,000,000
Other income 15,000,000
Cost of service 150,000,000
 Operating expenses 30,000,000
How much is the tax due if the company is under Income Tax Holiday?
A. 7,500,000
B. 8,250,000
C. 15,000,000
D. None of the above

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