1. Under PAS PAS 32 and PIC rules, any transaction costs attributed to the issuance of new shares shall be a. expensed iediately. b. deducted fro e!uity, net of any related incoe tax benefit. c. deducted fro e!uity, "ross of any related incoe tax benefit. d. char"ed to retained earnin"s, net of any related incoe tax benefit. 2. #hat lin$s the decision a$ers and the decisions they a$e so that financial inforation would be useful% a. &eliability b. Understandability c. &ele'ance d. (ateriality 3. )he IAS*+s standardsettin" structure includes all of the followin" except a. Standin" Interpretations Interpretations Coittee Coittee b. Standards Ad'isory Ad'isory Council c. Standards Standards Coparison Coparison Coittee Coittee d. )rus )ruste tees es -. #hich stateent is incorrect re"ardin" Philippine inancial &eportin" Standards /P&Ss0% a. P&Ss set out reco"nition, easureent, presentation and disclosure re!uireents dealin" with transactions and e'ents that are iportant in "eneral purpose financial stateents. b. P&Ss are based on the raewor$, which addresses the concepts underlyin" the inforation presented in "eneral purpose financial stateents. c. P&Ss are desi"ned to apply ap ply to the "eneral purpose financial stateents and other financial reportin" of all profitoriented entities. d. P&Ss are desi"ned to apply a pply to notforprofit acti'ities in the pri'ate sector. . Under Section 2 of P&S for S(s, what are the coon easureent bases used to easure financial stateent eleents of S(s% a. istorical cost and fair 'alue b. istorical cost, current cost and fair 'alue c. istorical cost, present 'alue and fair 'alue d. istorical cost, current cost, present 'alue and fair 'alue 4. #hich of the followin" stateents re"ardin" the IAS* and AS* conceptual fraewor$s is not correct% a. )he existin" IAS* and AS* AS* conceptual fraewor$s are or"ani5ed in siilar ways. b. )he two assuptions of the IAS* fraewor$ are that the financial stateents are prepared p repared on an accrual basis and that the reportin" entity is a "oin" concern. c. )he AS* AS* and IAS* a"ree that the sole ob6ecti'e ob6ecti'e of financial financial reportin" reportin" is to pro'ide users with inforation that is useful for decisiona$in". d ecisiona$in". d. )he AS* AS* conceptual fraewor$ fraewor$ discusses discusses the concept concept of accrual basis accountin" accountin" in detail, but does not specifically identity it as an assuption. 7. )he issues which the AS* and IAS* ust address in de'elopin" a coon conceptual fraewor$ include all of the followin" except8 a. Should the coon coon fraewor$ lead to standards standards that are principlesbased or rulesbased% b. Should the role of financial reportin" focus on stewardship as well as pro'idin" inforation to assist users in decision a$in"% c. Should the characteristic of reliability be tradedoff in fa'or of inforation that is is 'erifiable% d. Should a sin"le sin"le easureent ethod such as historical cost be used%
9. *rown Copany+s account balances at :eceber 31, 2;12 for Accounts &ecei'able and the related Allowance for :oubtful Accounts Accounts are P<2;,;;; debit and P1,-;; credit, respecti'ely. ro an a"in" of accounts accounts recei'able, recei'able, it is estiated estiated that P2,;;; of the :eceber :eceber 31 recei'ables recei'ables will be uncollectible. )he necessary ad6ustin" entry would include a credit to the allowance account for
a. b. c. d.
P2,;;;. P24,-;;. P23,4;;. P1,-;;.
<. )he stateent of cash flows helps eet the ob6ecti'e of financial reportin", which is to assess all of the followin" except the a. aount of future cash flows. b. source of future cash flows. c. tiin" of future cash flows. d. uncertainty of future cash flows. 1;. Under the Conceptual raewor$ for inancial &eportin" 2;1;, which of the followin" stateents is not a feature of financial inforation+s coparability characteristic% a. Consistency, althou"h related to coparability, is not the sae. b. A coparison re!uires at least two ites. c. Coparability is unifority. d. Coparability is the "oal= consistency helps to achie'e that "oal. 11. #hich of the followin" is not directly in'ol'ed in the accountin" standardsettin" due process in the Phillippines% a. inancial &eportin" Standards Council b. Professional &e"ulations Coission c. *ureau of Internal &e'enue d. *oard of Accountancy 12. Under P&S for S(s, an entity has public accountability in all of the followin" situations, except8 a. )he entity+s debt or e!uity instruents are traded in a public ar$et b. )he entity is in the process of issuin" debt or e!uity instruents for tradin" in a public ar$et. c. )he entity holds assets in a fiduciary capacity for a broad "roup of outsiders as one of its priary businesses. d. )he entity holds assets in a fiduciary capacity for a broad "roup of outsiders as an incidental part of its business. 13. #hich of the followin" is not considered as a basic financial instruent for S(s% a. Coercial papers and bills b. *onds and loans payable c. Cash and ban$ accounts d. >ptions and warrants 1-. Under PAS 39, which of the followin" ethods of aorti5ation is norally not recoended for intan"ible assets% a. Units of production ethod b. :eclinin" balance ethod c. ffecti'e interest ethod d. Strai"htline ethod 1. #hen calculatin" estiates of future cash flows for 'alue in use, which of these cash flows should not be included% a. Cash flows fro disposal b. Incoe tax payents c. Cash flows fro the sale of assets produced b y the asset d. Cash outflows on the aintenance of the asset 14. An entity owns a nuber of fars that har'est produce seasonally. Approxiately 9;? of the entity+s sales are in the period Au"ust to >ctober. *ecause the entity+s business is seasonal, PAS 3su""ests a. Additional disclosure in the accountin" policy note b. Additional disclosure in the notes about the seasonal nature of the business
c. :isclosure of the seasonal nature of the business and disclosure of financial inforation for the latest and coparati'e 12onth period in addition to the interi report d. @o additional disclosure 17. ow can accountin" for bad debts be used for earnin"s ana"eent% a. :eterinin" which accounts to writeoff. b. Chan"in" the percenta"e of sales recorded as bad debt expense. c. Usin" an a"in" of the accounts recei'able balance to deterine bad debt expense. d. &e'ersin" pre'ious writeoffs. 19. #hy do copanies pro'ide trade discounts% a. )o a'oid fre!uent chan"es in catalo"s. b. )o induce propt payent. c. )o easily alter prices for different custoers. d. *oth a. and c. 1<. An eployee as$s for an authori5ed reiburseent of transportation char"es out of the Iprest petty cash fund. )o docuent this transaction, the petty cashier should a. :ebit transportation expensed b. :ebit recei'able fro eployee c. Credit cash and cash e!ui'alents d. Prepare the petty cash 'oucher only 2;. Accordin" to PAS 37, which two of the followin" best describe the sources of le"al obli"ation% A le"al obli"ation is an obli"ation deri'ed fro 1e"islation 2A contract 3A published policy -An established pattern of past practice a. 1 and 2 b. 1 and 3 c. 3 and d. 2 and 21. #hich of the followin" is within the scope of PAS 37 /Pro'isions, contin"ent liabilities and contin"ent asset0% a. inancial instruents carried at fair 'alue b. uture payents under eployent contracts c. uture payents on 'acant leasehold preises d. An insurance copany+s policy liability SI)UA)I>@A P&>*( 1 An S( operates an executi'e a'iation ser'ice. )he entityBs only ite of property, plant and e!uipent is an aircraft that it ac!uired for P1;,-;;,;;;. )he cost of the aircraft is attributed to its si"nificant parts as follows8 the 6et en"ine /4;?0, body /2;?0 and a'iation e!uipent /1;?0 and furniture and fittin"s /1;?0. A condition of operatin" an aircraft is that it is inspected by the a'iation authorities e'ery three years. An inspection costs P-;;,;;;. )he 6et had been inspected at the anufacturerBs expense before deli'ery to the entity. A'iation re"ulations re!uire the 6et en"ine to be replaced when it has flown 2,;;;,;;; air iles. (ana"eent intends fittin" a new en"ine to the aircraft when it re!uires replaceent so that the aircraft can be used for approxiately 1; years, at which tie it intends to scrap the aircraft. (ana"eent does not expect to replace the body of the aircraft or the a'iation e!uipent. owe'er, ana"eent assesses the useful life of the furniture and fittin"s as fi'e years at which tie they will be
scrapped and replaced. 22. #hat is the cost of each of the si"nificant parts of the aircraft that the S( ust depreciate separately8 a. P4,2-;,;;; 6et en"ine, P2,;9;,;;; body, P1,;-;,;;; a'iation e!uipent and P1,;-;,;;; furniture and fittin"s. b. P1;,-;;,;;; 6et aircraft. c. P4,;;;,;;; 6et en"ine, P3,;;;,;;; body and e!uipent, P1,;;;,;;; furniture and fittin"s and P-;;,;;; a'iation inspection. d. P1;,;;;,;;; 6et aircraft. 23. #hat depreciation ethods are ost appropriate for the S( to apply to copute depreciation for the si"nificant parts of the aircraft8 a. Strai"htline ethod for all parts of the aircraft. b. Units of production ethod, based on air iles flown, for the 6et en"ines and the strai"ht line ethod for all other parts of the aircraft. c. Units of production ethod, based on air iles flown, for all parts of the aircraft. d. :iinishin" balance ethod for all parts of the aircraft.
SI)UA)I>@A P&>*( 2 •
In your analysis, as the accountant for ohn (anuel Copany, you "ot the followin" inforation fro the boo$s of accounts on :eceber 31, 2;148 Accounts &ecei'able, before deductin" credit balance of P;;,;;; inancial assets at fair 'alue throu"h profit or loss inancial assets at fair 'alue throu"h other coprehensi'e incoe Cash In'entory !uipent and furniture Accuulated depreciation!uipent and furniture Patent Prepaid expenses and held for future business site Accounts payable, after deductin" debit balances in suppliers+ accounts aountin" to P1;;,;;; Accrued expenses Stoc$ di'idend payable Clais for increase in wa"es and allowances b y eployees of the copany, co'ered in a pendin" lawsuit stiated expenses in redeein" pri5e coupons presented by custoers
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1,4;;,;;; ;;,;;; 1,3;;,;;; 1,1;;,;;; 3,;;;,;;; 2,;;,;;; 1,;;,;;; -;;,;;; 1;;,;;; 1,9;;,;;; -,;;;,;;; 1,;;,;;; 1,;;;,;;;
-;;,;;; 4;;,;;;
oeeCorp+s finance ser'ices departent has presented to you the followin" incoplete data8 Sales Cost of "oods sold orei"n translation ad6ustentcredit Sellin" expenses Unusual and infre!uent "ain Correction of in'entory error Deneral and adinistrati'e expenses Incoe tax expense Dain on sale of in'estent, AEF)>CI Proceeds fro sale of land at cost
% % -;;,;;; % -;;,;;; 2;;,;;; 4;;,;;; 1;,;;; ;;,;;; 9;;,;;;
:i'idends Incoe fro continuin" operations •
1,1;,;;;
:urin" year 3, elita Copany disco'ered that the endin" in'entories reported on its financial stateents were incorrect by the followin" aounts8 Gear 1 P4;,;;; understated Gear 2 7,;;; o'erstated elita uses the periodic in'entory syste to ascertain yearend !uantities that are con'erted to dollar aounts usin" the I> cost ethod.
2-. In ohn (anuel Copany+s :eceber 31, 2;14 stateent of financial position, the current assets should be a. <,-;;,;;; b. 4,-;;,;;; c. 4,3;;,;;; d. 7,4;;,;;; 2. ow uch should be presented as total current liabilities on the stateent of financial position of ohn (anuel Copany% a. 4,7;;,;;; b. 4,4;;,;;; c. 7,1;;,;;; d. 7,7;;,;;; 24. If other incoe is 9? of sales and expenses /except incoe tax expense0 is 24? of sales, how uch is cost of "oods sold in oeeCorp+s boo$s% a. 2,9;;,;;; b. 3,312,;; c. 2,2;;,;;; d. ,;;;,;;; 27. In oeeCorp+s boo$s, how uch is the sellin" expenses% a. 1,3;;,;;; b. 942,;; c. 7;;,;;; d. 4;;,;;; 29. Prior to any ad6ustents for the errors abo'e and i"norin" incoe taxes, elitaBs retained earnin"s at anuary 1, year 3, would be a. Correct. b. P 1,;;; o'erstated. c. P 7,;;; o'erstated. d. P13,;;; o'erstated. SI)UA)I>@A P&>*( 3 An array of probles were presented to you for consultation by different entities. )hese entities were relyin" on your professional accountin" expertise8 >n (arch 1, i6i Copany purchased for P-,;;,;;; a tract of land as a factory site. An existin" buildin" on the property was ra5ed and construction was be"un on a new factory buildin" in April. Additional data are a'ailable as follows8 Cost of ra5in" old buildin" 3;;,;;; )itle insurance and le"al fees to purchase land 2;;,;;; Architect fee <;,;;; @ew buildin" construction cost 9,;;;,;;; )he acob Copany purchased an in'estent property on 1 anuary 2;1 for a cost of • P22;,;;;. )he property had a useful life of -; years and at 31 :eceber 2;17 had a fair 'alue •
of P3;;,;;;. >n 1 anuary 2;19 the property was sold for net proceeds of P2<;,;;;. acob uses the cost odel to account for in'estent properties. •
)he followin" expenditures relatin" to the plant buildin" were ade by ian &ob Copany durin" the year ended :eceber 31, 2;148 replaceent of the old shin"le roof with a fireproof tile roof, P7;,;;;= repainted the plant buildin", P;,;;;= a6or ipro'eent to the electrical wirin" syste, P3;,;;;.
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ohanna Copany pro'ides the followin" data with respect to its in'entory8 Ites counted in the bode"a Ites included in the count specifically se"re"ated per sale contract Ites in the recei'in" departent, returned by custoer in "ood condition Ites ordered and in the recei'in" departent, in'oice not recei'ed Ites ordered, in'oice recei'ed but "oods not recei'ed. rei"ht is on account of seller Ites shipped today, in'oice ailed, >* shippin" point Ites shipped today, in'oice ailed, >* destination Ites currently bein" used for window display Ites on counter for sale Ites in recei'in" departent, refused by ohanna Copany because of daa"e Ites included in count, daa"ed and unsalable Ites in the shippin" departent
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-,;;;,;;; 1;;,;;; ;,;;; -;;,;;; 3;;,;;; 2;,;;; 1;,;;; 2;;,;;; 9;;,;;; 19;,;;; ;,;;; 2;,;;;
&ai5il Copany purchased 1;; beef cattle at an auction for P9;;,;;; on uly 1, 2;1;. )ransportation costs were P9,;;;. &ai5il Copany would ha'e to incur the sae transportation costs if it had sold its cattle in the auction. In addition, there would be a 2? auctioneer+s fee on the ar$et price of the cattle payable by the seller. &ai5il Copany also incurred P-,;;; 'eterinary expenses. >n :eceber 31, 2;1;, the fair 'alue of the cattle in the ost rele'ant ar$et increases to P99;,;;;. >n (ay 2, 2;11, &ai5il Copany sold 19 cattle at an auction for P14;,;;; and incurred transportation costs of P1,2;;. >n une 1, 2;11, the fair 'alue of the reainin" cattle was P442, 4; but on the sae day, -2 cattle were slau"htered with total cost of P33,4;;. )he fair 'alue of the carcasses on that day was P394,-;; and the estiated transportation cost to sell the carcasses is P3,34;. @o other sellin" costs were expected. >n une 3;, 2;11, the fair 'alue of the reainin" -; cattle was P39,-;;. )he estiated transportation cost is P3,2;;.
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&ob Copany recei'ed an P1,9;;,;;; subsidy fro the "o'ernent to purchase anufacturin" e!uipent on anuary 2, 2;1. )he e!uipent has a cost of P3,;;;,;;;, a useful life of six years, and no sal'a"e 'alue. &ob depreciates the e!uipent on a strai"htline basis.
2<. In i6i+s boo$s, the cost of the factory buildin" should be a. <,2;,;;; b. <,-;,;;; c. 9,<;,;;; d. <,1;,;;; 3;. #hat is the "ain or loss to be reco"ni5ed by acob Copany in profit or loss for the year ended 31 :eceber 2;19 re"ardin" the disposal of the property, accordin" to PAS -; In'estent property% a. P94,;; "ain b. P91,;;; "ain c. P1;,;;; loss d. P7;,;;; "ain
31. ow uch should be capitali5ed by ian &ob Copany in 2;14% a. 1,1;,;;; b. 1,1;;,;;; c. 7;,;;; d. ;,;;; 32. #hat is the correct aount of in'entory in ohanna+s boo$s% a.4,;;;,;;; b.,7;;,;;; c.,9;;,;;; d. ,1;,;;; 33. #hat aount should the biolo"ical asset be initially reco"ni5ed on uly 1, 2;1; in &ai5il+s boo$s% a. 774,;;; b. 79-,;;; c. 7<2,;;; d. 9;;,;;; 3-. #hat is the net proceeds fro the sale of cattle on (ay 2, 2;11 /&ai5il Copany0% a. 1,4;; b. 14,-;; c. 19,9;; d. 14;,;;; 3. If &ob chooses to account for the "rant as deferred re'enue, the aount of depreciation expense recorded in 2;1 will be8 a. ; b. 2;;,;;; c. 3;;,;;; d. ;;,;;; SI)UA)I>@A P&>*( :ifferent entities with different in'estent accounts went to you for consultation. )hese are the inforation you "athered8 •
:urin" 2;x3 Cynthia Copany ac!uired in'estent in e!uity securities and desi"nated as financial assets at fair 'alue throu"h other coprehensi'e incoe. At :eceber 31, 2;x3, the balance in the fair 'alue ad6ustent account was a credit aount of P2;;,;;; and unreali5ed loss of P1-;,;;; net of deferred tax asset of P4;,;;;. )here were no security transactions durin" 2;x-. Pertinent data on :eceber 31, 2;1- are8 Securities istorical Cost (ar$et P1,;;,;;; P1,4;;,;;; A 1,2;;,;;; 1,-;;,;;; & 2,3;;,;;; 2,-;;,;;;
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(anuel Copany purchased 1;? of Hyon Corporation+s 2;;,;;; outstandin" shares of ordinary share on anuary 2, 2;1- for P2,;;,;;;. >n anuary 2, 2;1-, (anuel Copany purchased another -;,;;; shares of Hyon for P4,;;;,;;;. )here was no "oodwill as a result of either ac!uisition. Hyon reported earnin"s of P4,;;;,;;; and P7,;;;,;;; for the year ended :eceber 31, 2;1- and :eceber 31, 2;1, respecti'ely. @o di'idends were declared in years 2;1- and 2;1, respecti'ely by Hyon.
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>n (arch 1, year 1, Acadia purchased 1,;;; shares of coon stoc$ of (arston Corp. for P;,;;; and classified the in'estent as a'ailableforsale securities. >n :eceber 31, year 1, the (arston stoc$ had a fair 'alue of P3,;;;. Acadia Corp. prepares its financial stateents in accordance with I&S. Acadia elects to use fair 'alue throu"h profit or loss to record its in'estents in a'ailableforsale securities.
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>n anuary 2, year 1, #ell Co. purchased 1;? of &ea, Inc.Bs outstandin" coon shares for P-;;,;;;. #ell is the lar"est sin"le shareholder in &ea, and #ellBs officers are a a6ority on &eaBs board of directors. &ea reported net incoe of P;;,;;; for year 1, and paid di'idends of P1;,;;;. #ell does not elect the fair 'alue option to report its in'estent in &ea.
34. If securities are to be sold a""re"ately, the copany will ha'e to incur P1;,;;; transaction cost. #hat aount of cuulati'e unreali5ed "ain should Cynthia Copany report in its shareholders e!uity on :eceber 31, 2;x-% a. 2;;,;;; b. 14;,;;; c. 29;,;;; d. 4;;,;;; 37. #hat aount of incoe fro in'estent should (anuel Copany report in its stateent of coprehensi'e incoe related to its in'estent for the year ended :eceber 31, 2;1% a. none b. P4;;,;;; c. P1,-;;,;;; d. P2,1;;,;;; 39. ow is the "ain on the in'estent in (arston stoc$ reported in AcadiaBs year 1 financial stateents% a. As a P3,;;; "ain in other coprehensi'e incoe. b. @o "ain or loss is reported in year 1. c. As a P3,;;; prior period ad6ustent to retained earnin"s. d. As a P3,;;; "ain in current earnin"s of the period. 3<. In its :eceber 31, year 1 balance sheet, what aount should #ell report as in'estent in &ea% a. -3,;;; b. -;,;;; c. -;;,;;; d. 39,;;; SI)UA)I>@A P&>*( An S( with 'aried in'estents in other entities had the followin" data "athered8 •
>n anuary 2, 2;1- ennelyn Copany, an S(, purchased 2;? of Chad Corporation+s 2;;,;;; ordinary shares for P3,;;;,;;; includin" a P;,;;; transaction cost. )his in'estent "i'es ennelyn the ability to exercise si"nificant influence o'er Chad Corporation. :urin" 2;1-, Chad reported net incoe of P1,7;,;;; and paid cash di'idends of P1,;;;,;;; on its ordinary shares. As of :eceber 31, 2;1-, the shares of Chad Corporation are traded and are currently sellin" at P91.2 per share.
•
>n uly 1, 2;1-, (alou Copany, an S(, purchased 2;? of the outstandin" ordinary shares of Abet Corporation for P9;;,;;;, when the fair 'alue of Abet+s net assets was P3,;;;,;;;. )he shares of Abet Copany are traded in the acti'e ar$et. (alou Copany has elected the use of the e!uity odel to account for the in'estent in associate. )he followin" data concernin" Abet are a'ailable for 2;1-8 12 onths ended 4 onths ended :eceber 31, 2;1:eceber 31, 2;1 @et Incoe P4;;,;;; P32;,;;; :i'idends declared and paid 34;,;;; 2;;,;;; Shares outstandin" 1;;,;;; (ar$et 'alue per share P-1.;;
-;. In the stateent of coprehensi'e incoe of ennelyn Copany for the year 2;1-, what net aount that is reported in relation to the in'estent% a. 2;;,;;; b. 2;,;;;
c. -;,;;; d. -;;,;;; -1. Assuin" the shares of the in'estee are sellin" at P7; per share and cost to sell of P4 per share on :eceber 31, 2;1- and ennelyn Copany uses the cost ethod of accountin" for the in'estent, what net aount is reported in the 2;1- stateent of coprehensi'e incoe of ennelyn Copany% a. 2;;,;;; b. /1<;,;;;0 c. /2-;,;;;0 d. /--;,;;;0 -2. In the stateent of financial position of (alou Copany for the year ended :eceber 31, 2;1-, at what aount should the in'estent be reported% a. 9;-,;;; b. 92;,;;; c. 91-,;;; d. 92-,;;; SI)UA)I>@A P&>*( 4 )he followin" are independent cases fro different entities8 •
(arch 1, 2;1- &apture Corporation issued at 1;3 plus accrued interest, 1,;;; of its
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At the be"innin" of 2;1, #allace Corporation issued 1;? bonds with a face 'alue of P<;;,;;;. )hese bonds ature in the fi'e years, and interest is paid seiannually on une 3; and :eceber 31. )hese bonds were sold for P933,74; to yield 12?. #allace uses a calendar year reportin" period.
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>n anuary 1, 2;12, aith Copany issued its 9?, year con'ertible debt instruent with a face aount of P9,;;;,;;; for P7,7;;,;;;. Interest is payable e'ery :eceber 31 of each year. )he debt instruent is con'ertible into ;,;;; ordinary shares with a par 'alue of P1;;. #hen the debt instruents were issued, the pre'ailin" ar$et rate of interest for siilar debt without con'ersion option is 1;? >n :eceber 31, 2;1-, all the con'ertible debt instruents were retired for P9,;;;,;;;. )he pre'ailin" rate of interest on a siilar debt instruent as of :eceber 31, 2;1- is
-3. *ased on the "i'en inforation, how uch should &apture reali5e as net cash receipts fro the bond issuance% a. 1,;2,;;; b. 1,;3;,;;; c. 1,;-;,;;; d. 1,;-,;;; --. Usin" effecti'einterest ethod of aorti5ation, what aount of interest expense should be reported for 2;1 by #allace Corporation% a. <<,7; b. 1;;,;; c. 1;;,33 d. 1;3, 2-9 -. #hat is the carryin" 'alue of the debt instruent to be reported by aith on :eceber 31, 2;1-% a. P7,3<3,-73 b. P7,-<2,92; c. P7,4;2,1;2
d. P7,722,31-
SI)UA)I>@A P&>*( 7 An entity had financial assets at its disposal but does not $now how to account for the. Assist the entity in its predicaent8 )he entity reported the followin" inforation as of the end of the current year8 • In'estent securities of P1,;;;,;;;. )hese securities are share in'estents in entities that are traded in the Philippine Stoc$ xchan"e. As a result, the shares are 'ery acti'ely traded in the ar$et. In'estent securities if P2,;;;,;;;. )hese securities are "o'ernent treasury bills. )he treasury bills ha'e a 1;year ter and purchased on :eceber 31 at which tie they had two onths to "o until they ature Cash of P3,-;;,;;; in the for of coin, currency, sa'in" account and chec$in" acc ount. In'estent securities of P1,;;,;;;. )hese securities are coercial papers. )he ter of the papers is nine onths and they were purchased on :eceber 31 at which tie they had four onths to "o until they ature. •
At the close of its first year of operations, :eceber 31, 2;1, the entity had accounts recei'able of P-;,;;; after deductin" the related allowance for doubtful accounts. :urin" 2;1, the copany had char"es to bad debt expense of P<;,;;; and wrote off, as uncollectible, accounts recei'able of P-;,;;;.
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>n the :eceber 31, year 2 balance sheet of the entity, the current recei'ables consisted of the followin"8 )rade accounts recei'able Allowance for uncollectible accounts Clai a"ainst shipper for "oods lost in transit /@o'eber year 20 Sellin" price of unsold "oods sent by the entity on consi"nent at 13;? of cost /not included in entityBs endin" in'entory0 Security deposit on lease of warehouse used for storin" soe in'entories )otal
P <3,;;; /2,;;;0 3,;;; 24,;;;
3;,;;; P1;,;;;
-4. ow uch should be reported as cash and cash e!ui'alents at the end of the current year% a. ,-;;,;;; b. 4,-;;,;;; c. 4,<;;,;;; d. 7,<;;,;;; -7. #hat should the entity report on its stateent of financial position at :eceber 31, 2;1, as accounts recei'able before the allowance for doubtful accounts% a. --;,;;; b. -<;,;;; c. <;,;;; d. 4-;,;;; -9. At :eceber 31, year 2, the correct total of the entityBs current net recei'ables was a. <-,;;; b. 12;,;;; c. 12-,;;; d. 1;,;;;
SI)UA)I>@A P&>*( 9 Gou are "i'en the followin" inforation about different entities8 )he openin" in'entory of Chronic Copany on anuary 1, 2;1- was P,;;;,;;;. )his aount • included in'entory A ites which were carried at their net reali5able 'alue of P;;,;;;, the ori"inal cost of these ites was P9;;,;;;. :urin" the current year purchases totaled P2;,;;;,;;;, transportations and other directly attributable costs incurred in brin"in" the in'entories to warehouse totaled P;;,;;;. At year end :eceber 31, 2;1-, a physical in'entory count was conducted and it re'ealed a boo$ aount of P7,;;;,;;;. Included in the closin" in'entory was P2,;;;,;;; but the estiated reali5able 'alue was P1,2;;,;;;. Also, in'entory A ites brou"ht forward fro prior year reained unsold at year end. )here was an increase in the deand for these ites and it was estiated that they could be sold for P1,;;;,;;;. •
Internet ProtocolIP, Inc. owns a fleet of o'er 1;; cars and 2; ships. It operates in a capital intensi'e industry and thus has si"nificant other property, plant, and e!uipent that it carries in its boo$s. It decided to re'alue its property, plant, and e!uipent. )he copanys accountant has su""ested the alternati'es that follow.
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Shien Copany copletes installation of its telecounication networ$ facilities on anuary 1, 2;12. )he 'arious costs incurred prior to copletion are as follows8 Cost of o'erseas trips to search for telecounication, facilities purchasin" and adinistrati'e cost incurred prior to installation, P2,;;;,;;;= costs of site preparation, P;,;;;,;;;, telecounication achinery and e!uipent, P3;;,;;;,;;;= initial deli'ery and handlin" costs, P1;,;;;,;;;= coissionin", installation and assebly costs, P-;,;;;,;;;= cost of testin" the networ$, P,;;;,;;;= directly attributable professional fees, P1,;;;,;;;= costs of openin" the networ$ facilities, includin" costs incurred for in'itin" superstars and FIPs, P,;;;,;;;= costs of relocatin" certain facilities, P2,;;;,;;;. Shien Copany has a ri"ht to operate the facilities for 1; years. After the 1;th year, it is re!uired to decoission the facilities and the cost of deco issionin" is estiated at a future 'alue of P;,;;;,;;;. Shien CopanyBs current borrowin" cost is 9? per annu.
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#o6towic5 iited was in'ol'ed in a inin" exploration business. It coenced a pro6ect to desi"n ore efficient "old detectin" e!uipent. )he followin" expenditures occurred durin" the financial year ended 2;138 &esearchers salary P,;;; &esearch consuables P3,;;; &e de'elopent of the detectin" e!uipent P-,;;; inal ad6ustents to the detectin" e!uipent P2,;;.
•
osh Corporation owns an office buildin" where nine out of ten floors are leased out to a third party under operatin" lease, while the 1;th floor is occupied by (illeniu as its head office.
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At 3; une 2;14 the fair 'alue of #ineCos 'ineyard is P2. illion. At 3; une 2;17 the followin" inforation is a'ailable8 air 'alue of 'ines prior to har'est at 31 (arch 2;17 3,1;;,;;; air 'alue of "rapes har'ested at 31 (arch 2;17 ;;,;;; stiated costs to sell "rapes 1;,;;; stiated costs to sell 'ines 2;,;;;
•
@CAS Co. is plannin" to dispose of a collection of assets. )he entity desi"nates these assets as a disposal "roup, and the carryin" aount of these assets iediately before the classification as held for sale was P2; illion. Upon bein" classified as held for sale the asset were re'alued at P19 illion. )he entity feels that the fair 'alue less cost to sell would be P17 illion.
-<. It is Chronic+s policy to include declines and re'ersals in the cost of sales. #hat is the aount of the cost of sales durin" 2;1-%
a. 19,2;;,;;; b. 19,;;,;;; c. 1<,;;;,;;; d. 1<,4;;,;;; ;. #hich one of the options should Internet ProtocolIP, Inc. select in order to be in line with the pro'isions of PAS 14% a. &e'alue one ship at a tie, as it is easier than re'aluin" all ships to"ether. b. &e'alue an entire class of property, plant, and e!uipent. c. Since assets are bein" re'alued re"ularly, there is no need to depreciate. d. &e'alue only onehalf of each class of property, plant, and e!uipent, as that ethod is less cubersoe and easy copared to re'aluin" all assets to"ether. 1. At what aount should the telecounication networ$ facilities be initially recorded by Shien Copany% a. -1,;;;,;;; b. -2;,;;;,;;; c. -;;,;;;,;;; d. --3,14;,;;; 2. )he aount to be capitali5ed by #o6towic5 as an intan"ible asset, for the 2;13 financial year, is8 a. 11,;; b. 4,;; c. 9,;;; d. 1-,;; 3. #hat is the proper treatent of the abo'e property in osh+s financial stateents% a. @ine floors are reported as In'estent Property while the tenth floor as Property and !uipent b. )he entire buildin" is reported as Property and !uipent c. @ine floors are reported as Property and !uipent while the tenth floor as In'estent Property d. )he entire buildin" is reported as In'estent Property -. )he entry to reco"ni5e the "rapes at the point of har'est is /#ineCos08 a. :ebit8 A"ricultural produce "rapes /;;,;;;0 Credit8 Profit loss /;;,;;;0 b. :ebit8 A"ricultural produce "rapes /1;,;;;0 Credit8 Cash /1;,;;;0 Credit8 *iolo"ical asset 'ines /;;,;;;0 c. :ebit8 A"ricultural produce "rapes /;;,;;;0 Credit8 *iolo"ical asset 'ines /;;,;;;0 d. :ebit8 A"ricultural produce "rapes /-<;,;;;0 Credit8 Profit loss /-<;,;;;0 . ow would the reduction in the 'alue of the assets on classification as held for sale be treated in the financial stateents of @CA S Co.% a. )he entity reco"ni5es a loss of P3 illion iediately before classifyin" the disposal "roup as held for sale b. )he entity reco"ni5es an ipairent loss of P3 illion. c. )he entity reco"ni5es a loss of P2 illion iediately before classification as held for sale and then reco"ni5es an ipairent loss of P1 illion d. )he entity reco"ni5es an ipairent loss of P2 illion. SI)UA)I>@A P&>*( < (any copanies, ha'in" no other option, resorted to your help as their last chance in redeein" their copanies fro the followin" probles8
•
Carlos Co. leased e!uipent to @ini Corp. on anuary 2, 2;14, for an 9year period expirin" :eceber 31, 2;22. !ual payents under the lease are 1,2;;,;;; and are due on anuary 2 of each year. )he initial payent was ade on anuary 2, 2;14. )he list sellin" price of the e!uipent is 7,;-;,;;; and its carryin" 'alue on @ini Corp.Bs boo$s is ,4;;,;;;. )he lease payents ha'e a present 'alue of 4,4;;,;;; at an iputed interest rate of 12?.
•
)he (inor Copany leased a freehold buildin" for 2; years, the useful life of the buildin", with effect fro anuary 1 2;1. At that date the fair 'alue of the leasehold interest was P7. illion of which P4.; illion was attributable to the buildin", Annual rentals of P9;;,;;; are payable in ad'ance on anuary 1.
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Carpenter td has 4 eployees, who are each paid P7; per wee$ for a day wor$in" wee$. ach eployee is entitled to 9 days accuulatin" non'estin" sic$ lea'e per year. At 1 uly 2;13 the accuulated unta$en lea'e was 1- days in total. :urin" the year ended 3; une 2;1- a total of ; days sic$ lea'e was ta$en, of which 12 days were unpaid lea'e. >f the accuulated unta$en lea'e at 3; une 2;1- it is estiated that 7? of it will be ta$en durin" the followin" year. >n une 3;, 2;1 orest Co. sold e!uipent with an estiated reainin" useful life of 1; years and iediately leased it bac$ for years. )he e!uipent+s carryin" aount was P21;,;;;. )he sales price was P1;,;;;. )he fair 'alue of the e!uipent was P19-,337. )he lease a"reeent is an operatin" lease.
•
4. ow uch is the dealerBs profit that should be reco"ni5ed by Carlos Co. in 2 ;14% a. 1,--;,;;; b. -,;;;,;;; c. ; d. 1,;;;,;;; 7.
S(I
9. ow uch should (inor reco"ni5e as an operatin" lease expense in the year ended :eceber 31, 2;1, accordin" to PAS 17 eases% a. @il b. 14;,;;; c. 4-;,;;; d. 9;;,;;; <. )he balance of the pro'ision for sic$ lea'e at 3; une 2;1- is /Carpenter td08 a. ;, as the lea'e is non'estin" b. 1,3; c. 3,4;; d. 2,7;; 4;. #hat aount of loss should orest Co. reco"ni5e on une 3;, 2;1 assuin" future rental is e!ual or abo'e ar$et rate rent% a. none b. P2,443 c. P3-,337 d. P4;,;;; 41. #hat aount of loss should orest Co. reco"ni5e on une 3;, 2;1 assuin" future rental is below ar$et rate rent% a. none b. P2,443 c. P3-,337 d. P4;,;;; SI)UA)I>@A P&>*( 1;
42. Under new le"islation, A*C is re!uired to fit so$e filters to its factories by 31 (arch 2;H2. Paper Co has not fitted so$e filters yet. )he state authority will perfor annual chec$s of so$e filters and ipose penalty for breach of the le"islation. Should A*C reco"ni5e any pro'ision as of 31 :eceber 2;H1% a. Ges, the pro'ision should be reco"ni5ed as of 31 :eceber 2;H1 in aount of estiated penalty for not installin" the so$e filters. b. @o, the pro'ision should not be reco"ni5ed as of 31 :eceber 2;H1, because there is no present obli"ation arisin" fro past e'ent. c. Ges, the pro'ision should be reco"ni5ed as of 31 :eceber 2;H1 for both the cost of so$e filters and the penalty. d. Ges, the pro'ision should be reco"ni5ed as of 31 :ece ber 2;H1 in aount of estiated cost of so$e filters. SI)UA)I>@A P&>*( 11 ohn is a ull P&S copliant entity. It so happens that ohn also prepares interi financial stateents. )he copany pro'ided you the followin" inforation8 •
ohn Copany+s profit before tax for the six onths ended une 3;, 2;1- was P,;;;,;;;. owe'er, the business is seasonal and profit before tax for the six onths ended :eceber 31, 2;1- is alost certain to be P<,;;;,;;;. Profit before tax e!uals taxable profit for this entity. ohn operates in a country where incoe tax is at a rate of 3;? if annual profit is below P11,;;;,;;; and a rate of 3? where annual profit exceeds P11,;;;,;;;. )hese tax rates apply to the entire profit for the year.
43. #hat should be the incoe tax expense in ohn+s interi financial stateents for the half year ended une 3;, 2;1-% a. 1,7;,;;; b. 1,;;,;;; c. 2,-;,;;; d. 2,1;;,;;; 4-. As a iniu re!uireent, interi financial report of ohn should include a. A coplete set of financial stateent pursuant to PAS 1 b. A condensed set of financial stateents and selected explanatory notes c. A balance sheet and stateent of coprehensi'e incoe d. A condensed balance sheet and stateent of coprehensi'e incoe SI)UA)I>@A P&>*( 12 )he (ar$ Corporation has re!uested you to loo$ at its financial stateents for the year 2;1;. :urin" your analysis, (ar$ presented to you its balance sheet as of :eceber 31, 2;;< containin" the followin" capital section8 Preferred stoc$ P1; par= 4;,;;; shares authori5ed and issued, of which 4,;;; are treasury shares costin" P<;,;;; and shown as an asset 4;;,;;; Coon stoc$, par 'alue P-= 4;;,;;; shares authori5ed, of which -;,;;; are issued and outstandin" 1,9;;,;;; Additional paid in capital /P per share on preferred stoc$ issued in 2;;0 3;;,;;; Allowance for doubtful accounts recei'able 12,;;; &eser'e for depreciation 9-;,;;; &eser'e for fire insurance 1<9,;;; &etained earnin"s 2,2;,;;; 4,;;;,;;; Additional inforation8 1
>f the preferred stoc$, 3,;;; shares were sold for P19 per share on Au"ust 3;, 2;1;. Perse'erance credited the proceeds to the Preferred Stoc$ account. )he treasury shares as of :eceber 31, 2;;< were ac!uired in one purchase in 2;;<
2
)he preferred stoc$ carries an annual di'idend of P1 per share. )he di'idend is cuulati'e. As of :eceber 31, 2;;<, unpaid cuulati'e di'idends aounted to P per share. )he entire accuulation was li!uidated in une, 2;1;, by issuin" to the preferred stoc$holders -,;;; shares of coon stoc$. 3 A cash di'idend of P1 per share was declared on :eceber 1, 2;1; to preferred stoc$holders of record :eceber 1, 2;1;. )he di'idend is payable on anuary 1, 2;11. At :eceber 31, 2;1;, the Allowance for :oubtful Accounts &ecei'able and &eser'e for :epreciation had balances of P2,;;; and P1,;;,;;;, respecti'ely. >n (arch 1, 2;1;, the &eser'e for ire Insurance was increased by P4;,;;;= &etained arnin"s was debited. 4 >n :eceber 31, 2;1;, the &eser'e for ire Insurance was decreased by P3;,;;;, which represents the carryin" 'alue of a achine destroyed by fire on that date. stiated fire cleanup costs of P4,;;; does not appear on the records. 7 @et incoe for the year ended :eceber 31, 2;1; was P1,2<7,;; per copanyBs records. 9 )he :eceber 31, 2;;< &etained arnin"s consists of the followin"8 :onated land fro a stoc$holder /(ar$et 'alue on date of -;,;;; donation0 Dains fro treasury stoc$ transactions 1,;;; arnin"s retained in business 1,7-<,;;; 2,2;,;;; 4. )otal stoc$holdersB e!uity a. 3,7;;,;; b. ,912,;; c. 4,314,;; d. 4,31<,;; SI)UA)I>@A P&>*( 13 Ino Corporation owned 1;,;;; shares of in" Corporation. )hese shares were purchased in 2;;< for P<;,;;;. >n @o'eber 1, 2;13, Ino declared a property di'idend of one share of in" for e'ery ten shares of Ino held by a stoc$holder. >n that date, when the ar$et price of in" was P1- per share, there were <;,;;; shares of Ino outstandin". 44. #hat "ain and net reduction in retained earnin"s would result fro this property di'idend% a. Dain /-,;;;0= @et reduction in retained earnin"s /34,;;;0 b. Dain /-,;;;0= @et reduction in retained earnin"s /91,;;;0 c. Dain /;0= @et reduction in retained earnin"s /91,;;;0 d. Dain /;0= @et reduction in retained earnin"s /124,;;;0
SI)UA)I>@A P&>*( 1At the be"innin" of year 1, ntity A "rants share options to each of its 1;; eployees wor$in" in the sales departent. )he share options will 'est at the end of year 3, pro'ided that the eployees will reain in the entityBs eploy, and pro'ided that the 'olue of sales of a particular product increases by at least an a'era"e of ? per year. If the 'olue of sales of the product increases by an a'era"e of between ? and 1;? per year, each eployee will recei'e 1;; share options. If the 'olue of sales increases by an a'era"e of between 11? and 1? each year, each eployee will recei'e 2;; share options. If the 'olue of sales increases by an a'era"e of 14? or ore, each eployee will recei'e 3;; share options.>n "rant date, ntity A estiates that the share options ha'e a fair 'alue of P2; per option. ntity A also estiates that the 'olue of sales of the product will increase by an a'era"e of bet 11? and 1? per year, and therefore expects that, for each eployee who reains in ser'ice until the end of year 3, 2;; share options will 'est. )he entity also estiates, on the basis of a wei"hted a'era"e probability, that 2;? of eployees will lea'e before the end of year 3. *y the end of year 1, se'en eployees ha'e left and the entity still expects that a total of 2; eployees will lea'e by the end of year 3. ence, the entity expects that 9; eployees will reain in ser'ice for the threeyear period.
Product sales ha'e increased by 12? and the entity expects this rate of increase to continue o'er the next 2 years. *y the end of year 2, a further eployees ha'e left, brin"in" the total to 12 to date. )he entity now expects only 3 ore eployees will lea'e durin" year 3, and therefore expects a total of 9? eployees will reain at the end of year 3. Product sales ha'e increased by 2;?, resultin" in an a'era"e of 14? o'er the 2 years to date. )he entity now expects that sales will a'era"e 14 percent or ore o'er the threeyear period, and hence expects each sales eployee to recei'e 3;; share options at the end of year 3.*y the end of year 3, a further two eployees ha'e left. ence, 1- eployees left durin" the threeyear period, and 94 eployees reain. )he entityBs sales ha'e increased by an a'era"e of 14 ? o'er the three years. 47. #hat is the copensation expense for year 2% a. 233,333 b. 294,447 c. 149,;;; d. 19;,;;; SI)UA)I>@A P&>*( 1 )he net incoe of Charles Copany for the year ended :eceber 31, 2;;2 was P1;;,;;;. )he followin" additional inforation is a'ailable about the Copany8 )he wei"hted a'era"e nuber of shares outstandin" durin" the year was 1<,;;;. • :urin" the year 1,;;; shares of P1;; par, ? con'ertible preferred stoc$ were outstandin". • ach preferred stoc$ is con'ertible into one share of coon stoc$. :urin" the year, 1;; bonds each of P1,;;; face 'alue were outstandin". )he bonds were issued • at par, pay 12? interest per year, and are con'ertible into 2; shares of coon stoc$. )here were ,;;; options outstandin", with an option price of P2; each. )he a'era"e ar$et • price for the period was P2. 49. In the case of Charles Copany, which security is the ost diluti'e a. >ptions b. Con'ertible preferred stoc$ c. Con'ertible bonds d. @o diluti'e, all antidiluti'e 4<. Copute the diluted earnin"s per share /tax rateJ3;?0 a. P.;; b. P-.7; c. P-.94 d. P-.-9 SI)UA)I>@A P&>*( 14 After hurdlin" the lifechan"in" CPA board exaination, (r. Falix "oes to PICC to ta$e the oath of upholdin" the inte"rity of the profession. After this he "oes to the ball where the board of accountancy /*>A0 ebers were happily in"lin" with the freshlyinted CPAs. )o "et ahead of the pac$ and spea$ to the *>A ebers personally, he wants to "rab the attention of the chairan. owe'er he does not $now the nae of the chairan of *>A. Can you help (r. Falix% a. oel )orre b. oel )an)orre c. oel )an)orres d. oey )an)orres
6s,cpa
