18/20

' Financial Accounting and Rep

orting

D 1• Which Statement is true in relation to the objective of financial statements?

Financial Statements meet the common and specific needs of most users
�II. Finan
cial Statements provide all the information that users may need to make economic decisions since
P(, they largely portray the financial effects of past events and do not necessarily provide non-financial
information.
I.
� Financial Stateme nts show the results of the stewardship of management or accountability of
management for the resources entrusted to it.

a. I and II only
b. I and Ill only
c. II and Ill only
�lll only

A 2. Information has the quality of relevance when

I. It influences the economic decisions of users by helping them evaluate past, present, or future
/
events or confirming or correcting their past evaluations
II. It is free from bias and error and can be depended upon by users to represent faithfully that which it
either purports to represent or could reasonably by expected to represent

G) I only
b. II only
c. Both I and II
d. Neither I nor II

C 3. Which Statement is incorrect concerning the framework

,,a. The framework is not a PFRS and therefore does not define standards for any particular
/ measurement or disclosure issues.
/ b. The framework is concerned with general purpose financial statement including consolidated
r) financial statements
\__.:/ In case of conflict, the requirements of the framework prevail over those of the relevant PFRS
J'The framework applies to the financial statements of all commercial, industrial and business
reporting entities, whether in public or private sector

D 4. Which of the following would not be a correct form of an adjusting entries?

,,.,-a._ A debit to revenue and a credit to liability
/b. A debit to an expense and a credit to liability
-,l
� debit to a liability and a credit to revenue
�A debit to an asset and a credit to a liability

C
ts
5. When an entity breaches an undertaking under a long-term loan agreement on or before the end of the
reporting period with the effect that the liability becomes payable on demand
I. The liability is classified as current if the lender has agreed after the reporting period and before the
issuance of the statements no to demand payment as a consequence of the breach.
II. The liability is classified as non-current if the lender agreed on or before the end of the reporting
/ period to provide a grace period for at least twelve months after the reporting period within which
to rectify the breach.

1
 l only
C Either I or ll
d. Neither Inor Il

D 6. Other comprehensive income includes all of the following, except

a. Gain and loss arising from the translating the financial statements of a foreign operation.
b. Gain and loss on remeasuring available for sale financial assets.
The effective portion of gain and loss on hedging instrument in a cash flow hedge.
d. ) Dividend paid to shareholders.

A 7. Nonfinancial disclosures include all of the following, except

The unlimited life of the entity
b. The domicile and legalform of the entity, its country of incorporation and registered office address
C
Description of the nature of the entity's operation and its principal activities
he name of the parent and ultimate parent of the group.

B 8. Itis an adjustment of the carrying amount of an asset or a liability or the amount of the periodic
consumption of an asset that results from the assessment of the present status and expected future benefit
and obligation associated with the asset and liability.
Change in accounting policy
Change in accounting estimate
C. Correction of a prior period error
d. Change in reporting entity

B 9
This means "correcting the recognition, measurement and disclosure of amounts of elements of financial
statements as if aprior error never occurred".
a. Retrospective application
(6.)Retrospective restatement
C. Prospective application
d. Prospective restatement

A 10. Which of the following cash flows does not appear in a statement of cash flow using indirect method?
Cash received from customers
b. Net cash flow from operating activities
C. Cash inflow from sale of equipment
A. Cash outflow for dividend payment.

2
A 11, What is the adjusted cash balance as per given below?
On 31 December 2017, IC showed the following current assets

Cash 3,200,000
Accounts receivable 2,500,000
Inventory 2,000,000
Prepaid expenses 100,000
Total Current Assets 7,800,000

Cash on hand, nclud1ng postdated check of P50,000 and S00,000

enployees IOUs P50,000
Cash in bank per bank statenment (Outstand1ng Checks on 2,700,000
31 Decenmber 2017, P200,000)
Total Cash 3,200,000
Customers' debit balances, net of customer deposit of 1,900,000
P50,000
Allowance for doubtful accounts (150,000)
Sales price of goods invoiced to customers at 150% of cost 750,000
on 29 December 2017 but delivered on 5 January 2018
and excluded from reported inventory
Total accounts receivable 2,500,000

a.) 2,900,000
b 2,500,000
C. 2,950,000
d. 3,200,000

B 12. What is the adjusted balance of receivables as per given below?

On 31 December 2017, IC showed the following current assets
Cash 3,200,000
Accounts receivable 2,500,000
Inventory 2,000,000
Prepaid expenses 100,000
Total Current Assets 7,800,000

Cash on hand, incuding postdated check of P50,000 and 500,000

employees 1OUs P50,000
Cash in bank per bank statement (Outstand1ng Checks on 2,700,000
31 December 2017, P200,000)
Total Cash 3,200,000

Customers' debit balances, net of customer deposit of 1,900,000

P50,000
Allowane for doubtful accounts (150,000)
Sales price of goods invoiced to customers at 150o of cost 750,000
on 29 Decenber 2017 but delivered on 5 January 2018
and excluded from reported inventory
Total acoounts receivable 2,500,000

1,950,000
b. 2,000,000
c.) 1,850,000
d. 1,800,000
B 13. What is the adjusted cash in bank on December 31 as per given beloW?
Chris Company presented the followingbank reconciliation for the month of November:
Balance per bank statement, November 30 3,600,000
Add: Deposit in Transit 800,000
Less: Outstanding Checks 1,200,000
Bar1k credit recorded in error 200,000 1,400,000
Balance per book, November 30 3,000,000

Data per bank statement for the month of December are as follows:

December depxosits, ixluchng note colected of P1,000,000 for Chris 5,500,000

December disbursements, includ1ng NSF customer check P350,000 4,400,000
and service harge P50,000
All items that were outstanding on November 30 were deared through the bank in December, inchuding the bank credit
Checks amounting to PS00,000 were outstanding and deposits of P700,000 were in transt on 31on December 31
4,700,000
b. )4,900,000
C 4,500,000
d. 3,200,000

A 14. Germo Company started business at the beginningof the current year. Theentity established an allowance
for doubtfulaccounts estimated at 5% of credit Sa<es. During the year, the entity wrote off P50,000 of
uncollectible accounts.

Further analysis showed that the merchandise purchased amounted to P9,000,000 and ending merchandise
inventory was P1,500,000. Goods were sold at 40% above cost. The totalsales comprised of 80% on account
and 20% cash sales. The total collection from customers, excluding cash sales, amounted to P6,000.000.

What is the net realizable value of accounts receivable at year-end?

(a 1,980,000
b. 2,350,000
C. 1,930,000
d. 2,400,000

B 15. For the month of December, the records of Balin Corporation show the following information
Cash received on accounts receivables 70,000
Cash sales 60,000
Account receivable, December 1 160,000
Account receivable, December 31 148,000
Accounts receivable written off as uncollectible 2,000

The corporation uses the direct write-off method in acçounting for uncollectible accounts receivable
118,000 What 1s gms sAes fer ocen ber.
b) 120,000
C. 130,000
d. 144,00
C 16. On October 31, a flood at Pan Company's,only warehQuse severe damaged to its entire inventory. Based on
recent history, Payne has a gross profit of25% of net sals. The following information is available from
Payne's records for the ten months ended Ostober 31

4
 Inventory, January 1 520,000
Purchases 4,120,000
Purchase returns 60,000
Sales 5,600,000
Sales Discount 400,000

A physical inventorydisclosed usable damaged goods which Pan estimates can be sold for P70,000. Using
gross profit method, the estimated cost of goods sold for the 10 month ended October 31 should be
680,000
383,000
390,0000
d. 420,0000

A 17. What is the estimated ending inventory using average cost approach as per given below?
Presented below is information pertaining to AIR Co.
Cost Retail
Inventory, Jan 1 8,700 14,000
Purchases 55,300 80,300
Freight-in 2,000
Purchase Discounts 500
Purchase Returns (5,200) ( 8,600 )
Departmental Transfer - In 1,000 1,500
Departmental Transfer - Out 800) 1,200 )
Mark-up 6,000
Mark-up Cancellation l 2,000)
Markdown 12,000 )
Markdown Cancellation 3,000
Abnormal Spoilage
............. 5,000 7,000
Sales 43,800
Sales Returns (2,500)
Sales Discount ( 1,000)
Employee Discount 500
Normal Spoilage 200

24,000
b. 31,500 58oD
C. 24,960
d. 30,540
e

A 18. The accounting records and bank statement of Entity A show the following information
SUBSIDIARY LEDGER
CASH IN BANK - BPI CURRENT ACCOUNT

Description Debit Credit Balance

Date
6/1 Bal. forwarded 881,000
6/11 Check #1113 130,800 750,200
6/15 Check #1114 220,000 530,200
6/16 Deposit 295,800 826,000
6/22 Deposit 670,000 1,496,000
6/24 Check #1115 80,000 1,416,000
6/28 Check #1116 380,000 1,036,000
6/29 Deposit 160,000 1,196,000
5
 METROBANK
BANK STATEMENT - ENTITY A

Date Description Debit Credit Balance

6/1 Bal. forwarded 881,000
6/10 Deposit 350,000 1,231,000
6/15 Payment 1,229,000
2,000
6/15 Check #1114 1,009,000
220,000
6/16 Deposit 295,800/1,304,800
6/20 Payment 50,000 1,254,800
6/22 Deposit 1,924,800
670,000
6/24 Check #1115 80,000 1,844,800
6/26 Check #1113 130,800 1,714,000
6/28 Deposit 410,000 2,124,000
Additional information:
The payments of P2,000and 50,000 shown on the bank statement pertain to the cost of checkbook
requested form the bank and the monthly amortization of a bank loan, respectively. The loan
payment includes payment of interest of P8,000.
Deposits shown on the bank statement but not on the cash ledger represent collection accounts
receivable

How much is the deposit in transit?

a.) 160,000
b 102,000
c. 52,000
d. 38,000

C 19. On June 1,2024, PC sold merchandise with a list price of P5,000,000 to Burr on account. PC allowed trade
discount of 30% and 20%.On June 11, 2024, the customer paid in full. Credit terms were 2/10, n/30 and the
sale made FOB shipping point. PC prepaid P200,000 of delivery cost for Burr as an accommodation.

What amount was received by PC form Burr as remittance in full?

a 2,744,000
2,940,000
2,944,000
d. 3,140,000

A 20. In perpetual average cost system

A new weighted-average unit cost is calculated each time additional units are purchased
b. The cost allocated to ending inventory is generally the same as it would be in a periodic inventory
system
Y C. The moving-average unit cost is determined following each sales
d. The average is determined by dividing the total number of units sold by the cost of units purchased
during the period.

END