Far Reviewer Quali
July 30, 2022 | Author: Anonymous | Category: N/A
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FINANCIAL ACCOUNTING AND REPORTING INSTRUCTIONS: Sele INSTRUCTIONS: Select ct the best answer answer for each of the follo following wing questio questions. ns. ALL questions are compulsory and MUST be attempted. attempted. Mark on only ly one ans answer wer for ea each ch item on the an answer swer sheet sheet pr provid ovided. ed. Stri Strictly ctly NO ERASUR ERASURES ES ALLOWED. Erasures will render your examination answer sheet INV INVALID. ALID. Use PENCIL NO NO.. 2 only. only. GOODLUCK! 1.
2.
The fo follow llowing ing ar are e rep repres resente ented d both tto o the FR FRSC SC an and d the AASC, except a. Secu Securit rities ies an and d Exc Excha hange nge Co Commi mmissi ssion on b. Ban Bangk gko o Sentr Sentral al ng ng P Pili ilipin pinas as c. Co Comm mmis issi sion on o on n Au Audi ditt Bure reau au of Inte Intern rnal al Rev Revenu enue e d. Bu Whic Which h statemen statementt is tr true ue ab about out th the e IAS IASB’s B’s d devel evelopme opment nt of IFRSs? a. Th The e IA IASB SB giv gives es pre prece cede denc nce e to the bal balan ance ce sheet sheet over Prot or Loss.
d.
Use the following information for the next two questions. Presented below is the statement of nancial position of Simple Simp le Corporat Corporation ion pr prepar epared ed by the chi chief ef accounta accountant nt for the current year, 2015. Simple Corporation Statement of Financial Position December 31, 2015 Current assets P 435,000 Investments 640,000 Property plant, and equipment 1,720,000 Intangible assets 305,000 P3,100,000
b. The IASB gives precedence precedence to fair value accoun accounting ting over amortized cost. c. Both a and b. d. Ne Neit ithe herr a no norr b.
3.
4.
Which Which of the followi following ng ste steps ps in the acco accoun untin ting g cycl cycle e are listed in a logical order? a. Post Post the clos closing ing en entri tries, es, tak take e a pos post-c t-clos losin ing g tria triall balance, and journalize the closing entries. b. Pos ostt th the e jo jour urna nall en entr trie ies s to the the ge gene nera rall le led dge gerr account acc ounts, s, pre prepar pare e a work workshee sheet, t, and then tak take e a trial balance. c. Tak ake e a tr tria iall ba bala lanc nce, e, pr prep epar are e a wo work rksh shee eet, t, th then en prepare nancial statements. d. Pr Prepar epare e the in income come st statem atement, ent, p prep repare are th the e bal balance ance sheet and then prepare a trial balance.
P1,800
6.
7.
Whi Which of th the e fol olllow owin ing g is the the fou foundati ation of the Conceptual Framework? a. The objective of general purpose nancial reporting. b. A reporting entity concept. c. The qualitative characteristics of, and the constraint on, useful nancial information. d. The The ele elemen ments ts of nan nanci cial al st state atemen ments. ts. Cont Contri ribu buti tion ons s fr from om an and d di dist stri ribu buti tion ons s to owne owners rs ar are e consid con sider ered ed as inc income ome and expen expenses ses,, respe respecti ctive vely, ly, under a. The The nan nancia ciall capit capital al conce concept pt b. The The ph physi ysical cal capita capitall co conc ncept ept c. Both a and b eith the er a nor b d. Nei Whic Which h statement statement is iincor ncorrec rectt rega regardi rding ng pr presen esentatio tation n of nancial statements? a. An en enti tity ty sh shal alll prep prepar are e it its s nan nanci cial al st stat atem emen ents ts,, with without out ex except ception ion,, us usin ing g th the e ac accr crua uall ba basi sis s of accounting. b. An en enti tity ty sh shal alll pres presen entt sepa separa rate tely ly ea each ch ma mate teri rial al cl class ass of si simil milar ar ite items ms and items of a di dissi ssimil milar ar nature or function unless they are immaterial. c.
P 330,000 1,000,000 1,770,000 P3,100,000
Consider the following information: 1.
Th The e curr curren entt ass assets ets sec sectio tion n in inclu clude des: s: cash P100,00 P100,000, 0, ac acco coun unts ts re rece ceiv ivab able le P170 P170,0 ,000 00 le less ss P1 P10, 0,00 000 0 for for allowance for doubtful accounts, inventories P180,000, and unearn unearned ed reven revenue ue P5,00 P5,000. 0. The cas cash h balanc balance e is co comp mpos osed ed of P1 P114 14,0 ,000 00,, le less ss a bank bank ov over erdr draf aftt of P14,000. Inventori Inventories es are stated stated on the lower of FIFO cost or market.
2.
Th The e inv invest estmen ments ts sec sectio tion n inclu includes des:: the cash surre surrend nder er value of a life insurance contract P40,000; investment in ordinar ordinary y shar shares, es, shor short-ter t-term m (trading (trading)) P80, P80,000 000 and long-t lon g-ter erm m (avail (availabl able-f e-for or-sa -sale) le) P27 P270,0 0,000 00;; and bond bond sinkin sin king g fund P25 P250,0 0,000 00.. Th The e cost cost and and fair fair value value of investments in ordinary shares are the same.
3.
Pr Prop oper erty ty,, pl plan ant, t, and and eq equi uipm pmen entt in incl clud udes es:: buil buildi ding ngs s P1,040,000 less accumulated deprec P1,040,000 depreciation iation P360,000; P360,000; equipme equ ipment nt P450,00 P450,000 0 less accu accumula mulated ted deprec depreciati iation on P180,000; land P500,000; and land held for future use P270,000.
P1,800
If annual rent is paid in advance every October 1, the original transaction transaction entry made was a. Deb Debit it Pr Prepai epaid dR Rent ent and and cr credit edit C Cash, ash, P1,8 P1,800. 00. b. Deb Debit it R Rent ent E Expen xpense se an and d cr credit edit Cash Cash,, P1 P1,800 ,800.. c. Debit Rent Expense and credit Cash, P2,400. d. Deb Debit it R Rent ent E Expen xpense se an and d cr credit edit Cash Cash,, P7 P7,200 ,200.. 5.
Current liabilities Long-term liabilities Shareholders’ equity
The ac accoun countant tant of Re Review view C Compa ompany ny mad made e the fo follo llowing wing adjusting entry on December 31. Prepaid Rent Rent Expense
An entit entity y shall shall pre presen sentt a comple complete te set of nanc nancial ial statements (including comparative information) at least annually annually..
4. In Inta tang ngib ible le as asse sets ts in incl clu ude de:: a fr fran anch chis ise e P1 P165 65,0 ,000 00:: goodwill good will P100 P100,000 ,000;; and discount discount on bon bonds ds paya payable ble P40,000. 5.
Cu Curr rren entt lia liabi bilit lities ies incl includ ude: e: accou accounts nts pay payabl able e P90 P90,00 ,000; 0; notes payable - short term P80,000 and long - term P120,000: and taxes payable P40,000.
6.
Long - term liabilities liabilities are compose solely of 10% bonds payable due 2022.
7.
Sh Shar areho eholde lders' rs' equity equity has has:: pr prefe efere renc nce e shar shares, es, no par value val ue,, aut autho horiz rized ed 200,0 200,000 00 sha share res, s, issue issued d 70,00 70,000 0 shares shar es for P450,000 P450,000;; and ordina ordinary ry shar shares, es, P1.0 P1.00 0 par value val ue,, aut author horize ized d 400,0 400,000 00 sha share res, s, issue issued d 100,0 100,000 00 shares shar es at an aver average age pri price ce of P10. In add additio ition, n, the corporation has retained earnings of P320,000.
An ent entit ity y sh shal alll no nott o ose sett as asse sets ts and or lia liabi bili liti ties es or income and expenses, unless required permitted by a PFRS.
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FAR
TeamPR TeamPRT TC QUESTIONS: Compute Compu te the adju adjuste sted d amo amoun untt to be re repor ported ted on the company’s statement of nancial position as of December 31, 2015: 8. Cur Current ent asse assets ts a. P548,000 b. P574,000 b. P520,000 9.
c. P588,000 d. P534,000 d. P790,000
Curr Curren entt li liab abil ilit itie ies s a. P224,000 b. P229,000
c. P210,000 d. P215,000
Use the following information for the next two questions. T Tawi2 awi2 Company’s income statement for the year ended December Dece mber 31, 201 2015 5 rep reporte orted d net pro prot t of P10, P10,000 000,000 ,000.. The auditor raised questions about the followin following g amounts that had been included in the net prot: Unrealized loss on decline in value of available for sale securities Loss on write-o of inventor inventory y due to a government ban net of tax Ad Adjus justme tment nt o off pro prott of p prio riorr ye year ar netnet-de debit bit Loss from expropriation of property, net of tax Exchange dierences gain on translating foreign operations Revaluation surplus realization
P 500,000 1,500,000 2,0 2,000 00,00 ,000 0 3,500,000 4,500,000 1,000,000
Increase 2014 (Decrease)
2015 equipment Accumulated depreciation— buildings and equipment Land
Accounts payable Accrued expenses Notes payable— bank, long-term Mortgage payable Share capital, P10 par Retained earnings (decit)
(90,000) 450,000 P1,635,000
(40,000) 200,000 P1,285,000
50,000 250,000 P350,000
P 3 34 40,000 60,000
P 2 27 75,000 90,000
P65,000 ( 3 30 0,000)
200,000
(200,000) 150,000
1,045,000
795,000
250,000
40,000 P1,635,000
(75,000) P1,285,000
115,000 P350,000
150,000
Land was acquired for P250,000 in exchange for ordinary share sha res, s, par P25 P250,0 0,000 00,, du duri ring ng the ye year; ar; all equ equip ipmen mentt purchased purch ased was for cash. Equipmen Equipmentt costing P2 P25,000 5,000 was sold for P10,000; book value of the equipment was P20,000 and the los loss s was rep report orted ed as an ordin ordinary ary item in net net income inc ome.. Cas Cash h divi dividen dends ds of P5 P50,0 0,000 00 were were char charged ged to retained earnings and paid during the year; the transfer of net income to retained earnings was the only other entry in the Retained Earnings account.
The loss from expropriation expropriation was unusual in occurr occurrence ence in Based of the foreg Based foregoin oing g in infor format mation ion,, compu compute te for the following.
T Tawi2’s awi2’s lin line e of business. business. 10. Tawi2 Company’s Company’s 2015 2015 state statement ment of comp compreh rehensi ensive ve income should report prot at c. P7,000,000 a. P9,000,000 b. P6,500,000 d. P8,500,000 11. Tawi2 Company’s Company’s 2015 2015 state statement ment of comp compreh rehensi ensive ve income should total compreh comprehensive ensive income at a. P12,000,000 c. P5,000,000 d. P4,000,000 b. P11,000,000
12 12.. Gar Gary y Com Compan pany y had had ne nett in incom come e of P700 P700,00 ,000 0 for for the year ended December 31, 2015 after giving eect to the following events which occurred during the year: The decision was made January 2 to discontin discontinue ue the travel agency segment. The travel agency agency segmen segmentt was sold Jun June e 30. Operating loss from January 1, to June 30 for the trav travel el agen agency cy segm segmen entt am amou ount nted ed to P60, P60,00 000 0 before tax benet. T Travel ravel agency a assets ssets with a book v value alue of P350,0 P350,000 00 were sold for P200,000 •
•
•
•
Gary’s tax rate was was 40% for 2015. For the the year ended December Decemb er 31, 31, 20 2015 15,, Gar Gary’s y’s after after-ta -tax x inc income ome from from continuing operations was a. P574,000 c. P784,000 b. P700,000 d. P826,000 Use the following information for the next two questions. The statement of nancial nancial position d data ata of Davao Compan Company y at the end of 2015 and 2014 follow:
Cash Accounts receivable (n (net) Inventory Prepaid expenses Buildings and
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2015 P 125,000
Increase 2014 (Decrease) P 175,000 (P50,000)
13. Net cash pr provided ovided by o operating perating ac activities. tivities. a. P120,000 c. P140,000 b. P130,000 d. P165,000 14. Net cash prov provided ided by (used in) n nancing ancing activ activities. ities. a. P150,000 c. (P100,000) b. P350,000 d. (P250,000)
15. The followi following ng pertain pertains s to Miraor, IInc. nc. on Decem December ber 31 of th the e cu currrent ent ye year ar:: Ch Chec ecki king ng ac acco coun untt ba bala lanc nce e P925,000 P925,000;; an overdraft in special checking account at P17,000;; same sam e ba bank nk as nor normal mal chec checkin king g accou account nt of P17,000 certica cert icate te of dep deposit osit P400,000; P400,000; cash held in a bond sinking fund P200,000; postdated check from customer P11,000 P11, 000;; certied certied check from customer P9,800; P9,800; NSF check received from customer P15,000; cash advance to subs subsidia idiary ry of P30 P300,00 0,000; 0; postage postage stamp stamps s on han hand d P620; utility deposit paid to electric company P8,000; currency and coins in a petty cash fund (the company has not replenished the fund to the imprest amount of The e corre correct ct amo amoun untt that shoul should d be P5 P5,0 ,000 00)) P800. P800. Th reported reporte d as cash is a. P908,800 c. P1,318,600 b. P918,600 d. P1,322,800 16. 16. You obtai obtained ned the ba bank nk sta statem tement ent,, pai paid d chec checks, ks, and otherr memo othe memoran randa da rel relatin ating g to Lucy Lucy Comp Company’ any’s s ban bank k account for December 20 2015. 15. In reconciling reconciling the b bank ank ba balan lance ce at De Decem cember ber 31, 31, 20 2015 15,, you you obs observ erved ed the following facts: Balance Balanc ep per er bank bank statem statement ent,, 1 12/ 2/31/ 31/15 15 Outstanding checks, 12/31/15 Receipts of 12/31/15, deposited 1/2/15
P1 P1,46 ,465,8 5,800 00 624,750 95,550
Proceeds of bank loan, 12/15/15, 300,000 350,000 50,000 450,000
225,000 225,000 125,000 375,000
75,000 125,000 ( 75,000) 75,000
discounted year, omittefor d fr90 omdays recoat rds10% per Deposit of 12/23/15, omitted from bank statement Check 733 of Lucky Co., charged by
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195,000 53,000 82,100 FAR
TeamPR TeamPRT TC the bank in error to Lucy Co. Proceeds of note receivable of Lucy Co. collected by bank, 12/10/15, not entered in cash records (Principal, P40,000; Interest, P400; Collection charge, P100) Erroneous debit memo of 12/31/15, to charge company’s account with settlement of bank loan, paid by check no. 9344 on same date Deposit of another client on 12/6/15 credited in error to Lucy Co.
40,300
d.
100,000
25,000
The cash balance per books of Lucy Company on December 31, 2015 is a. P1,491,000 c. P961,800 b. P1,146,700 d. P911,400 17 17.. Whi Which ch sta statem tement ent is inc incor orre rect ct regar regardi ding ng loa loans ns and receivables? a. An ent entity ity sh shall all me measu asure re loan loans s and rec receiv eivabl ables es on initial initial rec recogn ognition ition at fair value plu plus s transact transaction ion cost sts s that are directl ectly y attr ttribu ibutabl able to the acquisition acquisit ion of the nancial asset. b. The ffair air v value alue of a lo long-t ng-term erm lloan oan o orr re receiv ceivable able tthat hat carries carrie s no interes interestt can be estimated as the presen presentt value of all future cash receipts discounted using the prevailing market rate of interest for a similar instrument with a similar credit rating. c. Short Short-te -term rm rec receiv eivab ables les wit with h no sta stated ted int inter erest est rat rate e may be measured at the original invoice amount if the eect of discounting is immaterial. derivative nancial d. Loans and receivables are derivative assets asse ts with xed or dete determi rminabl nable e paym payments ents that are not quoted in an active market. 18. On Jan January 1, 2015, Com omfforte orterr Comp Compan any y so sold ld equipment with a carrying amount of P800,000 to Cold Company.. As payment, Cold gave Comforter Company Company a P1,200,000 note. note. The note bears an interest ra rate te of 5% and is to be repaid in three annual installments of P400,000 P400 ,000 (plus (plus inte interes restt on the outs outstand tanding ing balance) balance).. The rst payment payment was receiv received ed on Decemb December er 31, 2015. The marke markett price of the equipmen equipmentt is not reliab reliably ly determinable. determin able. The prev prevailing ailing rate of in interest terest for no notes tes of this type is 10%. The interest interest income to be rrecognized ecognized in 2016 is a. P 40,000 c. P 74,708 b. P 69,587 d. P109,735 19 19.. The Pre Premie mierr Na Natio tional nal Bank has a not note e recei receivab vable le of P200,0 P20 0,000 00 from from th the e Mar Marvel velou ous s Co Compa mpany ny th that at it is carryin carry ing g at fac face e val value ue and is due due on Dec Decemb ember er 31, 31, 2019 2019.. In Inte terres estt on the no note te pay payab able le at 9% each each Decemb Dec ember er 31. The The Mar Marve velou lous s Compa Company ny pai paid d the interest due on December 31, 2015, but informed the bank that it would probably miss the next two years' interest payments because of its nancial diculties. After After that that,, it exp expected ected to res resume ume its ann annual ual intere interest st payments paym ents,, but it woul would d mak make e the pri princip ncipal al paym payment ent one year late, with interest paid for that additional year at the time time of the pr princ incip ipal al pay paymen ments. ts. How mu much ch should be recognized as loan impairm impairment ent loss in 2015? (Rou (Round nd o pres presen entt valu value e fa fact ctor ors s to four four deci decima mall places.) a. P12,752 c. P19,965 b. P31,669 d. P32,812 20. Which of the followi following ng is incorr incorrect ect regard regarding ing expecte expected d credit cre dit loss losses es on nan nancial cial assets in acco accord rdance ance with PFRS 9? a. Exp Expec ected ted cred credit it los losses ses are a prob probabi abilit lityy-wei weigh ghted ted estimate of credit losses (ie the present value of all ca cash sh shor shortf tfal alls ls)) ov over er the the ex expe pect cted ed li life fe of the the nancial instrument. b. A cas cash h shor shortfa tfall ll is th the e die diere rence nce be betwe tween en the ca cash sh ows that are due to an entity in accordance with
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c.
th the e con contra tract ct and the cash cash ow ows s tha thatt th the e entity entity expects to receive. Ex Expe pect cted ed cr cred edit it loss losses es consi conside derr th the e am amou ount nt and timing of payments. A credit loss cannot arise if arise if the entity expects to be paid in full even if later than when contractually due.
21. 21. On Jan Januar uary y 1, 20 2015 15,, Alask Alaska a Cor Corpor porati ation on P1,00 P1, 000,0 0,000 00 10 10% % bonds bonds for P1, P1,05 051,5 1,510 10 broker’s brok er’s commissio commission n of P20,00 P20,000). 0). Interest annuall ann ually y every Dec December ember 31 31.. The bon bonds ds
pu purc rcha hased sed (in (incl clud uding ing is p payable ayable mature mature on
December 31, 2017. The prevailing market rate for the bonds is 9% at December 31, 2015. (Round o present value factors to four decimal places) If the bonds are classied as held-to-maturity (HTM), the amount to be reported on the entity’s December 31, 2015 statement of nancial position is a. P1,034,340 c. P1,025,330 b. P1,035,630 d. P1,017,610 22. On April 1, 20 2015, 15, Etcha Co. pur purchased chased 25,0 25,000 00 ordinary ordinary shares of Pwera Co. at P180 per share which reected bo book ok valu value e as of th that at da date te.. At th the e ti time me of the the pu purrchas chase, e, Pw Pwer era a ha had d 10 100, 0,00 000 0 or ordi dina nary ry shar shares es outstanding. outstandi ng. The share shares s are inten intended ded as a long term investment.. The rst quar investment quarter ter statement end ending ing March March 31, 2015 of Pwera recorded pr prot ot of P480,000. For the year ended December 31, 2015, Pwera reported prot of P2,400,000. P2,400,000. Pwera paid Etc Etcha ha dividends dividends of P60,000 on June 1, 2015 and again P60,000 on December 31, 2015. 201 5. onThe shares shares 31, of Pw Pwera era ar are e sellin selling g at P190 per share December 2015. Etcha is entitled to appoint two directors to the board, which consists of eight members. The remaining of the voting rights are held by two other companies, each of which is entitled entitled to appoint thr three ee directors. directors. The boar board d makes mak es de decis cision ions s on the ba basis sis of sim simpl ple e major majority ity. Because board meetings are often held at very short notice, Etcha does not always have representation on the board. Often the sugg suggestions estions of the repr representative esentative of Etcha are ignored, and the decisions of the board seem to take little notice of any representations made by the director from Etcha Corp. Based on the above information, the carrying amount of the investment in Pwera Co. as of December 31, 2015 should be c. P4,860,000 a. P4,750,000 b. P4,500,000 d. P4,950,000 23. Losses rec recognized ognized usin using g the equity method in e excess xcess of the entity’s investment in ordinary shares are applied rst to which of the following? a. Pr Pref efer eren ence ce sh shar ares es b. Trade rade rrec ecei eiva vabl bles es c. Lo Long ng-te -term rm rec recei eiva vabl bles es d. Secured loan loans s
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TeamPR TeamPRT TC 24 24.. On Janu January ary 1, 2014 2014,, Job Corp Corpora oratio tion n enter enters s in into to a forward forw ard contr contract act to pur purcha chase se on Janu January ary 1, 201 2016, 6, a specied number number of bar barrels rels of oil at a xed p price. rice. Job Corpor Cor porati ation on is specu speculat latin ing g tha thatt the pr pric ice e of oi oill wi will ll increase increa se and plans to net settle the contract if the price increases. increa ses. Job Corpor Corporation ation does n not ot pay any anything thing to enter into the forward forward con contract tract on January 1, 2014. Job Corporation Corporatio n does not designate the forward contract as a hedging hedging inst instrume rument. nt. At the end of 20 2014, 14, the fai fairr valu value e of the the fo forw rwar ard d cont contra ract ct ha has s in incr crea ease sed d to P400,000 P400 ,000.. At the end of 20 2015, 15, the fai fairr value of th the e forward contract has dec declined lined to P350 P350,000. ,000. How much should be recognized in 2015 prot or loss related to this forward contract? a. P400,000 c. P50,000 b. P350,000 d. P 0 25. Oran Orang g Dampuan Dampuan Co Co.. whole wholesale sales s bicy bicycles cles.. It use uses s the perpetual inventory inventory sy system. stem. The company company's 's reporti reporting ng date is 31 December December.. At 1 December 2 2015, 015, inventor inventory y on hand consisted of 350 bicycles at P820 each and 43 bicycles bicy cles at P85 P850 0 each each.. Dur During ing th the e month ended ended 31 December 2015, the following inventory inventory transaction transactions s took place (all purchase and sales transactions are on credit): De Dec. c. 02 03
09 13 15 16
22 26 29
Sold Sold 300 300 bic bicyc ycle les s for for P1 P1,2 ,200 00 ea each ch.. Five ive bicy icycles were retur turned by a custo tom mer er.. They had original originally ly cost P820 each and were sold for P1,200 each. Pu Purrchas chased ed 55 bi bicy cycl cles es at P9 P910 10 ea each ch.. Pu Purrchas chased ed 76 bi bicy cycl cles es at P9 P960 60 ea each ch.. So Sold ld 86 bi bicy cycl cles es fo forr P1 P1,3 ,350 50 ea each ch.. Returned o on ne d da amaged b biicycles t o tth he supplier.. This bicyc supplier bicycle le had been pur purchased chased on 9 December Decembe r. So Sold ld 60 bi bicy cycl cles es fo forr P1 P1,2 ,250 50 ea each ch.. Pu Purrchas chased ed 72 bi bicy cycl cles es at P9 P980 80 ea each ch.. Two bicycles, sold on 22 December, w we ere ret return urned ed by a cus customer tomer.. The bic bicycle ycles s were badly bad ly da damag maged ed so it was deci decide ded d to wri write te them o. They had or originally iginally c cost ost P910 each. each.
The cost of inventory as of December 31, 2015 using movin mov ing g avera average ge met method hod is (Round unit costs to the nearest peso) a. P133,672 c. P145,349 b. P143,485 d. P145,285 26. 26. The The clos closin ing g inve invent ntor ory y at co cost st of a co comp mpan any y at 31 December 2015 2015 amounte amounted d to P284,70 P284,700. 0. The follo following wing items were included at cost in the total: •
•
400 sold sold coats, fo forr Pwhich 150 ehad ac ach h.costOP80 wing ingeach to and a dnormally efec efectt in manufacture, they were all sold after the reporting date at 50% of their normal price. Selling expenses amounted to 5% of the proceeds. 800 skirts skirts,, which had had cos costt P20 each each.. Thes These e too were wer e foun found d to be defe defecti ctive. ve. Reme emedia diall wo work rk in Febru ebruar ary y 20 2016 16 co cost st P5 per per sk skir irt, t, an and d sell sellin ing g expense exp enses s for the batch tot totaled aled P800. P800. They we were re sold for P28 each.
What should the inventory value be accord according ing to PAS 2 Inventories after considering the above items? a. P281,200 c. P282,800 b. P282,100 d. P329,200
d.
estimates are made, of the amount the inventories are expected to realize. Mate Ma teri rial als s an and d ot othe herr su supp ppli lies es held held fo forr us use e in the production of inventories are written down below cost even if the nished products products in which they will be in incor corpor porate ated d ar are e ex expe pecte cted d to be sol sold d at or above cost.
28. Yumul Company pr provided ovided the followin following g data: Beginning inventory Purchases Freight in Markup Markup cancellation Markdown Markdown cancellation Sales Physical Phys ical invento inventory ry at year end Es Esti tima mate ted d norma mall shrinkage is 4% of sales
Cost P 160,000 2,800,000 40,000
Retail P 400,000 3,200,000 300,000 30,000 160,000 40,000 3,000,000 500,000
Assu Assumi ming ng the the co comp mpan any y uses uses the the av aver erag age e reta retail il inventory method, the estimated inventory shortage is a. P104,000 c. P200,000 b. P130,000 d. P 4,000 29. Items of proper property, ty, plant and equ equipme ipment nt acquir acquired ed for safety or environmental reasons a.
b.
c.
d.
Quali Qualify fy asplant ass assets ets be becau cause se the tacq acqui uisit sition ionincrea of such su ch prope property, rty, and equipment equipmen directly directl y increases ses the future economic economic benets benets of exi existin sting g item of property, plant and equipment. Quali Qu alify fy as assets assets becau because se they they enable enable an entity entity to derive future economic benets from related assets in excess of what could be derived had those items not been acquired. Do no nott qual qualif ify y as assets assets bec becaus ause e the acquis acquisiti ition on of such such pr prope operty rty,, pl plant ant and and equip equipmen mentt do does es not not dir directl ectly y inc increa rease se the future future economic economic ben benets ets of existing item of property, plant and equipment. Do not not qua qualif lify y as assets assets b becau ecause se the acqu acquisit isition ion o of f such such pr prop oper erty ty,, pl plan antt and and eq equi uipm pmen entt is no nott nece necess ssar ary y for for an en enti tity ty to ob obta tain in the the fu futu ture re economic benets from its other assets.
30. On Apri Aprill 1, 2015, the new mach machiner inery y was ordered ordered at a quoted price price of P56,000. P56,000. On July 1, 2 2015, 015, it arr arrived ived at Do Dodik dik Cor Corp.’ p.’s s pl plant ant wit with h an actua actuall invoic invoice e pri price ce of P58,000, which it paid immediately. During July 2015, a new concrete concrete plat platfor form m was constr constructe ucted d at a cost of P4,00 P4, 000 0 to pro proper perly ly inst install all the mach machine ine.. In Aug August ust 2015, testing was performed at a cost of P7,000 to ensure the machine was operating properly. properly. On August 31, 2015, the machine machine was enter entered ed into service service.. Minor repairs rep airs and main maintena tenance nce costs on the new mac machine hine amoun amo unted ted to P3,00 P3,000 0 in Septem September ber 20 2015 15.. No oth other er costs cos ts wer were e in incu curr rred ed pr prior ior to De Decem cembe berr 31, 31, 2015 2015.. Similar Simi lar machiner machinery y is dep deprec reciated iated on a stra straigh ight-lin t-line e basis over 10 years and typically has no residual value. What should be the depreciation expense for the year ended 31 December 2015? c. P2,875 a. P2,300 b. P2,233 d. P3,350
27. Which is incor incorrect rect regar regarding ding writedo writedown wn of inventory to net realizable value? a. In Inv ventori tories es are usu sua all lly y wri writte tten down to net realizable value item by item. b. c.
Eac Each h servic service e of a servi service ce pr provi ovider der is tr treat eated ed as a separate item. Est Estima imates tes of ne nett rea reali lizab zable le value value are are bas based ed on the the most reliable evidence, available at the time the
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TeamPR TeamPRT TC 31. Roxanne Roxanne Co. purch purchased ased e equipment quipment for P500,000 P500,000.. The equip equ ipmen mentt had an estima estimated ted 10 10-y -year ear ser servic vice e li life. fe. Roxanne’s policy for 10-year assets is to use the 150% declining declinin g balance depreciation method for the rst ve years of the asset’s life and then switch to the straightlin line e depreci depreciati ation on meth method od.. Wha Whatt amount amount sho should uld Roxann oxanne e repor reportt as accu accumul mulate ated d dep depre reci ciati ation on for equipment at the end of the sixth year? a. P300,000 c. P278,147 d. P311,425 b. P322,518 32 32.. Wh Whic ich h of th the e fo foll llow owin ing g wi will ll mo most st li lik kel ely y res esul ultt to reclassication? a. An enti entity ty de deci cide ded d to di disp spos ose e of an inve invest stme ment nt property without development. b. An entity begins to redevelop an existing investme inv estment nt pro propert perty y for con continu tinued ed futu future re use as investment property property.. c. Co Comm mmen ence ceme ment nt of devel develop opme ment nt with with a vi view ew to sale. d. All All of of tthe he ab abov ove. e. 33. Cute Corp Corporat oration ion owns the followi following ng prop properti erties es at 1 January 2015: 2015: Property A An oce oce build building ing use used d by Cu Cute te for for adm admini inistr strati ative ve pu purp rpose oses s wit with h a de depr preci eciate ated d his histor toric ical al cost cost of P2 million. At 1 January 2 2015 015 it had a remain remaining ing life of 20 years. yea rs. After After a re-or re-orga gani nizat zation ion on 1 July July 2015 2015,, th the e property proper ty was leased to a third party and reclassied as an investment property applying Cute’s policy of the fair value model. model. An indep independent endent value valuerr assessed the property to have a fair value of P2.3 million at 1 July 2015, which had risen to P2.34 million at 31 December 2015.
d.
A research and development project acquired in a business combination is recognized as an asset.
36. 36. Wh Which ich statem statement ent is in incor corre rect ct re regar gardin ding g in intan tangi gibl ble e assets contained in or on a physical substance such as a compact compact disc (in the case of comp computer uter software) software),, legal documentation documentation (in the case of a license or patent) or lm? a. In det deter ermin minin ing g whether whether an asse assett that inc incorp orpora orates tes both intangible intangible and tangible tangible elements elements shou should ld be treated treated propert property, y, plant plant and equi equipmen pmentt or as an intangible intangib le asset, an entity uses judgment to assess which element is more signicant. b. Comp Comput uter er sof softw twar are e fo forr a co comp mput uter er-c -con ontr trol olle led d machi mac hine ne too tooll tha thatt canno cannott operat operate e witho without ut that that specic software is an integral part of the related hardware and it is treated as property, plant and equipment. c. When When the the soft softwa ware re is not not an in inte tegr gral al part part of the the related hardware, computer software is treated as an intangible asset. d. Th The e operat operatin ing g syst system em of a com compu puter ter is tr treat eated ed as an intangible asset. asset. 37. On 1 January 20 2015 15 an entity pur purchased chased a new sof software tware pa pack ckage age to opera operate te its pr produ oducti ction on equ equip ipmen mentt for P600,0 P60 0,000 00,, inc inclu ludin ding g P50,00 P50,000 0 re refun funda dable ble pu purc rchas hase e taxes. The purchase price was funded by incurring a loan of P605 P605,000 ,000 (includ (including ing P5,000 P5,000 loan orig originat ination ion fees fees). ). Th The e loan loan is secu secure red d agai agains nstt the the so soft ftwa warre licenses. In January 2015 the entity incurred the following costs in customizing the software so that it is more suited to the systems used by the entity: Labor – P120,000 Depreciation of plant and equipment used to perform the modications – P15,000. •
Property B
•
Another oc Another oce e bui buildin lding g subsub-leas leased ed to a subs subsidia idiary ry of Cute.. At 1 Jan Cute January uary 2 2015 015,, it had a fair value value of P1. P1.5 5 mi mill llio ion n wh whic ich h ha had d rise risen n to P1 P1.6 .65 5 mi mill llio ion n at 31 December 2015. 2015. At 1 January 2015 2015 it had a remainin remaining g life of 15 years.
In Jan Januar uary y 2015 2015 the ent entity ity’s ’s pr prod oduc uctio tion n sta sta we were re trained in how to operate operate the new softwar software. e. Training costs included: Cost of an expert external instructor – P7,000 Labor – P3,000. In February 2015 the entity’s production team tested the softwa software re and th the e inf infor ormat mation ion techn technolo ology gy tea team m made further modications necessary to get the new software to function as intended by management. The following costs were incurred in the testing phase: Material Mate rial,, net of P3,0 P3,000 00 rec recover overed ed from from the •
In relation to these properties, the net amount to be recogn rec ognized ized in pro prot t or loss in the enti entity’s ty’s separate separate nancial statements for the year ended December 31, 2015 is a. P540,000 b. P490,000
c. P190,000 d. P140,000
34. An intangi intangible ble asset shall b be e recogn recognized ized if, and onl only y if it is probable that the expected futur future e economic benets that are attributable to the asset will ow to the entity and the cost of the asset can be meas measure ured d rel reliabl iably y. The probab probability ility recogn recognition ition criterion is always cons consid ider ered ed to be sati satis sed ed for for in inta tang ngib ible le as asse sets ts acquired a. Separat aratel ely y. b. In a b busi usine ness ss combi combina natio tion. n. c. Either a or b d. Neith eithe er a nor b 35. Which statement is cor correct rect regar regarding ding initial rrecognitio ecognition n of research and development costs? a. Research costs may be capitalized. b. All development costs should be capitalized. c. If an entity cannot distinguish the research phase of an internal project to create an intangible asset ass et from from the de devel velop opmen mentt phase phase,, the entity entity treats the expenditure for that project as if it were incurred in the development phase only.
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•
•
• •
sale ofLabor the scrapped output – P21,000 – P11,000 Depreciation of plant and equipment while it was used to perform the modications – P5,000.
The new softwar software e was ready for use on 1 March 2015. However, because of low initial order levels, the entity incurred a loss of P23,000 on operating the software during March. What is the cost of the software? a. P550,000 b. P685,000
c. P722,000 d. P732,000
38. At the end of the repo reportin rting g period, period, a toma tomato to grower’s grower’s vines are six months old and bearing fully developed rip ripe e tomatoes tomatoes.. The acc accumu umulat lated ed cost of the fr fruit uit-bear bearin ing g vi vine nes s is P12, P12,50 500 0 an and d thei theirr fa fair ir valu value e is P100,000 P100 ,000.. It is expected expected to cost the entit entity y P5,000 to sell the the tomato crop crop at mark market. et. Once the the tomatoes tomatoes have been harvested the then-worthless vines will be abandoned. At the end of the reporting period: a. The entit entity y measur measures es the to tomat matoes oes at P8 P82,5 2,500 00,, the tomato vines at P12,500 and recognizes a gain of P82,500 for the increase in fair value.
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TeamPR TeamPRT TC measures s the tomato-bearing vines b. The entity measure at P95 P95,000 ,000 and rec recogni ognizes zes a gain of P82, P82,500 500 for the increase in fair value. c. The en entit tity y meas measur ures es the to tomat mato-b o-bear earin ing g vine vines s at P100,000 and recognizes a gain of P87,500 for the increase in fair value. d. The en entit tity y meas measur ures es the to tomat matoes oes at P9 P95,0 5,000 00,, the tomato vines at P0 and recognizes a gain of P82,500 for the increase in fair value. 39. Which statement is in incorr correct ect regarding regarding ‘beare ‘bearerr plants’? a. Tea bushes, bushes, gr grape ape vi vines, nes, oi oill palm palms s and ru rubbe bberr tree trees s b. c.
d.
usually meet a bearer plant. Bear Bearer er plants pl antsthe a are redenition w withi ithin n theofscope scope of P PAS AS 1 16. 6. The produce growing on bearer plants, for examp example, le, tea lea leaves ves,, gr grape apes, s, oil palm palm fruit fruit and latex, is within the scope of PAS 41. prevent the the plant from In Inci cide dent ntal al sc scra rap p sa sale les s would prevent satisfying the denition of a bearer plant.
40. Whic Which h statement statement is inco incorr rrect ect reg regard arding ing impair impairment ment of assets classied as ‘held-for-sale’ ‘held-for-sale’ in accord accordance ance with PFRS 5? a. Impa Impairm irment ent m must ust b be e con conside sidered red b both oth a att the ttime ime o of f classication as held for sale and subsequently. b. Imme Immediat diately ely pr prior ior to c class lassify ifying ing an an asse assett as he held ld for sale, any impairment loss is recognized in prot or loss lo ss un unle less ss the the as asse sett had had been been meas measur ured ed at revalued amount under PAS 16 or PAS 38, in which case the impa impairm irment ent is treated treated as a rev revalua aluation tion decrease. c. Af After ter cl classi assicat cation ion as held for s sale, ale, im impair pairment ment lloss oss is the die dieren betw between een fair thevalue adju adjusted sted carryi carrying ng amounts of rence theceasset and less costs to sell. d. Any Any imp mpai airrme ment nt lo loss ss th that at aris arises es by us usin ing g the the meas me asur urem emen entt pr prin inci cipl ples es in PF PFRS RS 5 mu must st be reco recogn gniz ized ed in pro prott or loss loss,, excep eptt for ass assets ets previously carried at revalued amounts.
newspape news paperr. A store lea lease, se, eect eective ive December December 16, 2014, calls for xed rent of P4,800 per month payable 1 mont onth from th the e eec eecti tive ve date and mo mon nth thly ly thereafter thereaf ter.. In additio addition, n, rent equal tto o 5% of net sales overr P1, ove P1,20 200,0 0,000 00 pe perr calen calendar dar ye year ar is pay payabl able e on January 31 of the followin following g year. year. Net sales for 2015 were P2,200,000. P2,200,000. In its Decemb December er 31, 2015 sta statement tement of nancial position, Pythagoras should report accrued liabilities of a. P56,800 c. P56,300 b. P51,500 d. P53,900 43. F unnufa anfact Ind ugstr trie ies suipm pent urc ases w 2014 pec eci aliiTh ze zed d manu ma ctur urin ing equi eq pmen t has onesJul July yne1, 20s14. . ial The e equip equipmen mentt cash cash pric price e is P79 P79,00 ,000. 0. Funan unan sig signs ns a deferr defe rred ed paym payment ent cont contract ract that pr provid ovides es for a dow down n payment of P10,000 and an 8-year note for P103,472. The note is to be paid in 8 equal annual payments of P12,934. The payments include include 10% interest an and d are made mad e on Ju June ne 30 of eac each h ye year, ar, beginn beginnin ing g June June 30 30,, 2015. The total interest expense December 31, 2015 is a. P6,900 b. P6,599
for
the
year
ended
c. P6,612 d. P5,982
44. 44. On Dece Decemb mber er 31, 31, 2015 2015,, X Co Corp rp.. wa was s in inde debt bted ed to Zyland Co. Co. on a P1,000,000, P1,000,000, 10% note. Only int interest erest had been paid to date, and the remaining life of the note was 2 years. years. Beca Because use X Corp. Corp. was in nanc nancial ial diculties, diculti es, the parties agreed that X Corp. would settle the debt on the following terms: Settle one-half of the note by transferring transferring land with a recorded value of P400,000 and a fair value of P450,000. Sett Settle le oneone-fo four urth th of th the e no note te by tr tran ansf sfer erri ring ng 10,000, P1 par, ordinary shares with a fair market value of P15 per share. Modify the terms of the remaining one-fourth of the note by reducing the interest rate to 5% for the remaini rem aining ng 2 years years and reduci reducing ng the princip principal al to P150,000. •
•
•
41. The balan balance ce in Iwig Co. Co.'s 's accoun accounts ts payabl payable e acc account ount at Dece Decemb mber er 31 31,, 20 2015 15 wa was s P400 P400,0 ,000 00 be befo forre an any y nece necess ssar ary y year year-en -end d ad adju just stme ment nts s rela relati ting ng to the the following: • On Dece Decemb mber er 28, 28, 2015 2015,, Iw Iwig ig purc purcha hase sed d an and d received receive d goods for P40,0 P40,000, 00, terms 2/1 2/10, 0, n/30. Iwig record rec ords s pur purcha chases ses and acco accounts unts payable at net amoun amo unts. ts. The invoic invoice e was re recor corded ded and pa paid id January 3, 3, 2016. • Goods Goo ds were were in tra transi nsitt to Iwig Iwig from from a ven vendor dor on De Dece cemb mber er 31 31,, 20 2015 15.. Th The e in invo voic ice e cost cost wa was s P50,000. The goods we were re ship shipped ped ff.o.b. .o.b. ship shipping ping point on December 29, 2015 and were received on January 4, 4, 2016. • Goods shipped f.o.b. destination on December 21, 20 2015 15 fr from om a vend vendor or to Iw Iwig ig were were recei eceive ved d on January 6, 6, 2016. The invoi invoice ce cost was P25,0 P25,000. 00. Goods Goo ds shipp shipped ed to Iwig, Iwig, f.o.b. .o.b. shi shipp pping ing point point on • Decembe Dec emberr 20, 2015 2015,, fro from m a vendor vendor were lost in transit. The invoice p price rice was P20,000. On January 5, 20 2016 16,, Iwig Iwig le led d a P20 P20,00 ,000 0 claim claim again against st the the common carrier carrier.. In Iwig's Iwig's Decembe Decemberr 31, 2015 state statement ment of nan nancial cial position, the accounts payable should be a. P439,200 c. P509,200 b. P489,200 d. P534,200
42 42.. Pyt Pytha hagor goras as Co Co.. must must det deter ermin mine e the the Dec Decemb ember er 31, 31, 2015 20 15 ses. year ye.ar-e -end nd P2, ac accr crua uals ls for fo r ising ad adve vert rtis isin g an and d eived rent re nt expen expenses A P2,00 000 0 adv advert ertis ing bil bill l ing was rec recei ved January 7, 2016. It related to costs of P1,500 for advertisements in December 2015 issues and P500 for adve advert rtis isem emen ents ts in Janu Januar ary y 2, 2016 2016 is issu sues es of the the
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What total gains should X Corp. record in 2015 from this troubled debt restructuring? a. P100,000 c. P213,024 d. P313,024 b. P200,000 45. Hosea Corpora Corporation tion gives wa warranties rranties at th the e time of sale to purchase purchasers rs of its produ product. ct. Under Under the terms of the contract for sale the manufacture manufacturerr undertakes to make good, by repair or replac replacement, ement, manufacturing defects that become apparent within one year from the date of sale.. On the basi sale basis s of exper experienc ience, e, it is probable probable (ie more likely than not) that there will be some claims under the warranties. Sa Sales les of P10 millio million n wer were e mad made e eve evenl nly y thr throug ougho hout ut 2015. At 31 December 2015 the expenditures for warranty repairs and replacements for the product sold in 2015 are expected to be made 50 per cent in 2015 and 50 per cent cent in 2016. Assu Assume me for simp simplici licity ty that all the 20 2016 16 outo outows ws of eco econom nomic ic benet benets s relat related ed to the warran war ranty ty repairs repairs and replace replacement ments s tak take e plac place e on 30 June 2016. 2016. Experience indicates that 95 per cent of products sold require no warranty repairs; 3 per cent of products sold require minor repairs costing 10 per cent of the sale price; and 2 per cent of products sold require major re repai pairs rs or repla replacem cemen entt costi costing ng 90 per cent cent of sale sale price. The entity has no reason to believe future warranty warranty claims will be dierent from its experience.
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TeamPR TeamPRT TC At 31 December 2015 the appropriate discount factor for cash ows expected to occur on 30 June 2016 is 0.95238.. Furthermor 0.95238 Furthermore, e, an appropriate risk adjus adjustment tment factor fac tor to re reec ectt the unce uncerta rtaint inties ies in the cas cash h ow es esti tima mate tes s is an in incr crem emen entt of 6 pe perr cent cent to th the e probability-weighted expected cash ows. At 31 December 2015 the entity recognizes a warranty provision measured at: a. P210,000 c. P113,300 d. P106,000 b. P222,600 46. 46. The The N Corp Corpor orat atio ion n is auth author oriz ized ed to is issu sue e 100, 100,00 000 0 ordinary shares, P17 par value. At the beginning of the year year,, 18 18,0 ,000 00 or ordi dina nary ry shar shares es we werre is issu sued ed an and d outstand outs tanding. ing. Thes These e share shares s had been issu issued ed at P24. Du Duri ring ng the the year year,, the the co comp mpan any y en ente tere red d in into to the the following transactions: Jan. 16 - Issued Issued 1,300 or ordinary dinary sha shares res at P25 p per er share. Mar.. 21 - Ex Mar Exch chan anged ged 12,00 12,000 0 ordin ordinar ary y shar shares es for a building. buildin g. The ordi ordinary nary share shares s were selling at P27 per share. May 7 - Rea Reacquire cquired d 500 ordina ordinary ry shares at P26 per share to be held in treasury. July 1 - Accepted subscri subscriptions ptions to 1,000 ordina ordinary ry shares at P28 P28 per share share.. The contrac contractt called for 10% down payment with the balance due on June 30 next year. Sept. 20 - Sold 500 treasury shares at P29 per share. Total Total contrib contributed uted capital at D December ecember 31 is a. P615,000 c. P613,500 b. P818,000 d. P816,500 47. The followin following g balances ar are e shown in the sh sharehold areholders' ers' equity of tamarind company on December 31, 2014: Preference share capital, P10 par, 100,000 shares Ordinary share capital, P10 par, 500,000 shares, Share premium - preference Share premium – ordinary Retained earnings T Total otal
P1,000,000 5,000,000 50,000 200,000 100,000 P6,350,000 P6,350,00 0
During 2015, the following transactions pertaining to the shareholders' equity were completed: Retirement of 5,000 preference shares at P11 per share. Purc Purcha hase se of 5,0 5,000 00 ordin ordinar ary y sha share res s at P12 per per share. Share split, ordinary, 2 for 1. Reissue of 2,000 treasury shares at P8 per share. •
•
•
deduction to equity. c. Joint Joint cos costs, ts, whi which ch inc inclu lude de fee for fair fairnes ness s opin opinion ion and valuation valuation rep report, ort, tax opin opinion ion cost and other joint costs, amounting amounting to P47 P475,000 5,000 will be be allocated using the proportion of newly sold shares to the totall number tota number of shar shares es outs outstand tanding ing immediat immediately ely after the new share issuance. incurred red of P1,000,000 will be d. The total costs incur treated as a contra shareholders’ shareholders’ equity account. 49. 49. On Janu January ary 1, 20 2015 15,, Entity Entity D enter enters s in into to a forwar forward d contract that requires the entity to repurchase 1,000 shar shares es for P60 P60,0 ,000 00 on Dec Decem embe berr 31, 31, 2015 2015.. No consideration consider ation is paid or received received at the inception of the contract. The market interest rate is 10% on January 1, 2015 201 5 and 12% on December December 31, 2015. 2015. The for forwar ward d contra con tract ct decre decrease ased d Entity Entity D’s equit equity y on Januar January y 1, 2015 by a. P60,000 c. P53,574 b. P54,546 d. P 0 50. Cer Cerrito ritos s Corp Corporat oration ion began operat operations ions on Janu January ary 1, 20 2012 12.. Du Durin ring g its rs rstt three three years years of oper operati ations ons,, Cerritos reported net income and declared dividends as follows: 2012 2013 2014
Ne Nett iinc ncom ome e P 80,000 250,000 300,000
Di Divi vide dend nds s dec decla larred P 0 100,000 100,000
The following following infor information mation rela related ted to 2015 2015:: Priorunderstatement period adjustment: of 2013 depreciation expense (before taxes) Cumulative decrease in income from change in inventory methods (before taxes) Income before income tax Dividends declared (of this amount, P50,000 will be paid on January 15, 2016) Eective tax rate
P 40 4 0,000
70,000 480,000
200,000 35%
As at De Decem cember ber 31, 31, 2015 2015,, the re retai tained ned ear earnin nings gs of Cerritos Corporation is a. P520,500 c. P430,000 b. P484,500 d. P470,500 51. 51. Th The e shar shareh ehol olde ders rs’’ eq equi uity ty of Wind Windy y Co Comp mpan any y on December 31, 2015, consists of the following capital balances:
•
•
Prot for 2015, P300,000.
The total shareholders' shareholders' eq equity uity on Dec December ember 31, 20 2015 15 is a. P6,556,000 c. P6,350,000 d. P6,251,000 b. P6,551,000 48 48.. Op Open en Se Sesam same e Com Compa pany ny un under dertak takes es an IPO for the the list listin ing g and and is issu suan ance ce of 700, 700,00 000 0 new new shar shares es an and d 300, 300,00 000 0 ex exis isti ting ng shar shares es.. In rela relati tion on to this this,, the the company incurred the following costs: Documentary stamp tax Fairness o op pinion a an nd v va aluation rre eport T Tax ax opinion Newspaper publication Listing fee Other joint costs
P
25,000 125,000 75,000 200,000 300,000 275,000 P1,0000,000
Which statement is incorrect? a. b.
The The comp compan any y wi will ll rec ecog nize ze or th the e li list stin ing g fe fee e of P300,000 immediately toogni prot loss. The docu ocumen enta tary ry stam tamp ta tax x and and new ewsp spa aper pu publ blic icat atio ion n fe fee e amou amount ntin ing g to P2 P25, 5,00 000 0 an and d P200,000 P200 ,000,, res respect pectivel ively, y, will be rec recogn ognized ized as a
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Preference share capital, 10% cumulative, 3 years in arrears, P100 par, P110 liquidation price 150,000 shares Ordinary share capital, P100 par, 200,000 shares
Subscribed ordinary share capital, net of subscription receivable of P4,000,000 T Treasury reasury shares-ord shares-ordinary, inary, 50,000 50,000 shares at cost Share premium Retained earnings
P15,000,000 20,000,000
6,000,000 4,000,000 3,000,000 20,000,000
The book value value per shar share e of ordi ordinary nary is a. P156.00 c. c. P172.00 b. P190.00 d. P286.67 52. Edmund Halv Halvor or of the contr controller's oller's oce of East Au Aurora rora Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2015.
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Additional information information:: a. The compa company ny is a autho uthorize rized d to iss issue ue 8,0 8,000,0 00,000, 00, P1 P10 0 par value, valu e, ordi ordinary nary sh share ares. s. As of Dece December mber 31 31,, 2014, 3,00 ,000,00 ,000 share ares had been is issu sue ed and we werre outstanding. b. The per per shar share e mark market et pri prices ces of the or ordi dinar nary y shar shares es on selected dates were as follows. Price per Share July 1, 2014 2014 P20.00 January 1, 1, 2015 21.00 April 1, 2015 25.00
c.
d. e.
July 20 11.00 Augu1, st2015 1,15 2015 1 0.50 November 1, 2015 9.00 December 31, 2015 10.00 A tota totall of 700, 700,00 000 0 shar shares es of an auth author orize ized d 1,200,0 1,200,000 00 shares of convertib convertible le preferred shares had been issued on July 1, 2014. 2014. The shar share e was issued at iits ts par value of P25, P25, and and it ha has s a cumul cumulati ative ve div divid idend end of P3 per share. The share is conv convertible ertible into ord ordinary inary shar shares es at the rate of one share of convertible preference for one share sha re of ordinar ordinary y. The rat rate e of con conver versio sion n is to be automa aut omatic tical ally ly adjus adjusted ted for sha share re sp split lits s and sh shar are e dividends. dividen ds. Dividends Dividends are paid quart quarterly erly on September 30, December 31, March 31, and June 30. East A Auro urora ra Co Corpor rporatio ation n is su subjec bjectt to a 40 40% % in income come ta tax x rate. The af after ter-ta -tax x pro prot t for the yea yearr ende ended d Dece Decembe mberr 31, 2015 was P13,550,000.
The following following specic ac activities tivities took pl place ace durin during g 2015. 1.
2.
3.
4. 5.
6.
7.
January 1 — A 5% o rrd dinary s h ha are d iiv vidend w a as s issued. The divid dividend end had been d declare eclared d on December 1, 2014, to all shareholders of record on December 29, 2014. April ril 1 — A ttot ota al of of 2 20 00,00 ,000 p prrefer efere ence sh shar ares es wa was s converted into into ordi ordinary nary shar shares. es. The compa company ny issued new ordinary shares and retired the preference shares. July 1 — A 2-for-1 o rrd dinary s h ha are split b e ec came eecti ee ctive ve on th this is date date.. The The bo boar ard d of di dire recto ctors rs had authorized the split on June 1. Augu August st 1 — A ttot otal al of 30 300, 0,00 000 0 or ordi dina nary ry shar shares es we werre issued to acquire a factory building. November 1 — A to tottal o off 2 24 4,000 or ord dinary sh sha ares were purchased on the open market at P9 per share. These shares were to be held as treasury shares and were still in the treasury as of December 31, 2015. Ordinary ary sh sha ares ca cas sh di div vidend ends — Ca Cas sh div diviidend ends to ord ordinar inary y shar sharehol eholders ders were decl declared ared and paid as follows. April 15 — P0.30 per share October 15 — P0.20 per share Prefer eferen ence ce shar shares es cash cash di divi vide dend nds s — Ca Cash sh di divi vide dend nds s to preference shareholders were declared and paid as scheduled. Deter Det ermin mine e the nu numbe mberr of sha share res s used used to compu compute te dilu dilute ted d ea earrni ning ngs s pe perr shar share e fo forr the the ye year ar ende ended d December 31, 2015. c. 7,836,000 a. 7,891,000 b. 7,981,000 d. 7,286,000
53. The informati information on below pertains to Prance Prancerr Company. Company. Prot for the year 8% convertible bonds issued at par (P1,000 per bond). Each bond is convertible into 40 ordinary shares 6% convertible, cumulative preference shares, P100 par value. Each share is convertible into 3 ordinary shares. Ordinary shares, P10 par value Share options (granted in a a prior year) to purchase 50,000 ordinary
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P1,200,000
shares at P20 per share T Tax ax rate Average market price of ordinary shares
500,000 40% P25 per share
There were no changes during the year in the number of ordinary shares, preference shares, or convertib convertible le bonds outstanding. There is no treasury share. Compute diluted earnings per share. a. P1.70 c. P1.66 b. P1.62 d. P1.26 54. At the beginning ning of of its year 1, an entity gran grants ts 100 shar share e options opti onsbegin to each 200 employ employees. ees. Each gra grant nt is conditio cond itional nal upo upon n the empl employee oyee rem remaini aining ng in service service over the next next three yea years. rs. The enti entity ty estima estimates tes that the fair value value of each option is P21. P21. On the basis of a weighted average probability, probability, the entity estimates that 60 employees will leave during the three-year period and therefore forfeit their rights to the share options. Suppose that that 15 employees lleave eave during year year 1. Also suppose that by the end of year 1, the entity’s share price pric e has dropped, dropped, and the enti entity ty reprice reprices s its share options, and that the repriced share options vest at the end of year year 3. The entit entity y estimates that a further 3 35 5 employee empl oyees s will leav leave e durin during g years 2 and 3. During During year 2, a further 10 employees leave, and the entity estimates that a further 10 employees will leave during year 3. During year 3, a total of 8 employees leave. The entity estimates that, at the date of repric repricing, ing, the fair value of each of the original share options granted (ie before taking into account the repricing) is P10 and that the fair value of each repriced share option is P13. The amount to be be recog recognized nized as ex expense pense in year 2 is a. P159,000 c. P150,750 b. P105,000 d. P135,750 55. 55. An enti entity ty gran grants ts to an empl employe oyee e th the e rig right ht to choos choose e eit eithe herr 1,000 1,000 ph phan antom tom shar shares, es, ie a ri righ ghtt to a cash cash payment equal to the value of 1,000 shares, or 1,200 shares. The gran grantt is conditional conditional upo upon n the comp completion letion of three three years’ serv service. ice. If the employee employee choo chooses ses the share shar e alter alternativ native, e, the shares must be held for three years after vesting date. At grant date, the entity’s share price is P50 P50 per share. At the end of years 1, 2 and 3, the share price is P52, P55 and P60 respectively respectively. The entity does not e expect xpect to pay dividends dividends in the ne next xt three year years. s. After After taking into account account the eects eects of the post-ve post-vestin sting g transfer transfer restrictions, the entity estimates that the grant date fair value of the share alternative is P48 per share. Com omp pute for the the am amou oun nt to compensation expense in year 2. a. P21,868 b. P36,667
be
recogn ognize zed d
as
c. P19,334 d. P19,200
56 56.. During During 2015 2015,, Grant Grant Industries, Industries, Inc. constr constructe ucted d a new manufact manu facturin uring g facility facility at a cost of P12,000,00 P12,000,000. 0. The weighted average accumulated expenditures for 2015 were calculated calculated to b be e P5,400,000. P5,400,000. The compa company ny had the following debt outstanding at December 31, 2015: 10 percent, ve-year note to nance construction of the manuf manufact acturi uring ng facili facility, ty, da dated ted Janua January ry 1, 2015, P3,600,000. 12 percent, 20-year bonds issued at par on April 30, 2011, P8,400,000. 8 percent, six-year note payable, dated March 1, 2014, P1,800,000. •
•
2,000,000
•
3,000,000 6,000,000
Determine the amount of interest to be capitalized by Grant Industries for 2015. a. P360,000 c. P557,280 b. P563,220 d. P591,840
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57. Which of the follow following ing state statements ments is tru true? e? a. If a lease lease quali qualies es as a nan nance ce leas lease e for the les lessor, sor, it will also always qualify as a nance lease for the lessee. b. It is po possi ssibl ble e for neither neither the lessor lessor nor nor les lessee see to depreciate the asset under lease. c. A lessee's lessee's de debt bt equi equity ty rati ratio o is not in incre creased ased if th the e lease is a nance lease, whereas, it would be if the asset were purchases outright. d. The There is alway ays s "ac "accoun ounti ting ng symm mme etry" try" for recording and reporting leases between the lessor and lessee. 58. Por Porke kee e Corp Corp.. sell sells s equipme equipment nt with a car carryin rying g amount amount P150,0 P15 0,000 00 to Ch Chope opee e Cor Corp. p. for P17 P170,0 0,000 00 wh when en the equipmen equi pment's t's fair value is P10 P100,00 0,000, 0, and then ente enters rs into a cancellable operating lease agreement to use the equipment equipment for two years. In the curr current ent year, how much prot would Porkee Corp. record on the sale of the equipment? a. P20,000 c. P70,000 b. P50,000 d. Nil 59 59.. The The Walon alonek eke e Co Comp mpan any y has has a poli policy cy of usin using g no nonncurrent assets until they can no longer be operated and are worthless. On 1 January 201 2015 5 it acquired an item o of f pl plan antt and and ma mach chin iner ery y for for P1 P100 00,0 ,000 00.. It is bein being g depreciated over 10 years years on a stra straight-line ight-line b basis. asis. For tax purposes there is an allowance of 20% per annum on a reducing reducing balance balance basi basis. s. Ther There e are two rates of tax: 15% on trading prots and 25% on gains on disposals. What deferred tax balance should Waloneke recognize at 31 December 2015, according to PAS12 Income taxes? a. Deferred tax asset of P2,500 b. Deferred tax asset of P1,500 c. Deferred tax liability of P2,500 d. Deferred tax liability of P1,500 Use the following information for the next two questions. The accountin accounting g prot before tax for the year ended December 31, 2015 for Regiel Ltd amounted to P18,500 and included: Depreciation – motor vehicle (25%) Depreciation - equipment (20%) Rent revenue Royalty revenue (exempt from tax) Doubtful debts expense Entertainment e ex xpense (non-deductible) Proceeds on sale of equipment Carrying amount of equipment sold Annual leave expense
P 4,500 20,000 16,000 5,000 2,300 1,500 19,000 18,000 5,000
The draft statement of nancial position at December 31, 2015 contained the following assets and liabilities: 2015 Assets Cash Receivables Allowance for doubtful debts Inventory Rent receivable Motor vehicle Acc. Dep. - motor vehicle Equipment Acc. Dep. - equipment Deferred tax asset Liabilities Accounts payable Provision for annual leave Current tax liability Deferred tax liability
Page 9 of 10
2014
P 11,500 12,000 (3,000) 19,000 2,800 18,000 (15,750) 100,000 (60,000) ?
P
9,500 14,000 (2,500) 21,500 2,400 18,000 (11,250) 130,000 (52,000) 5,550 P135,200
15,655 4,500 ? ?
21,500 6,000 7,600 2,745 37,845
Additional information Additional The company can claim a deduction of P15,000 (15%) for depreciation depreciation on equipment, but the motor vehicle is fully depreciated for tax purposes. The equipment sold during the year had been purcha pur chased sed for P30 P30,000 ,000 two year years s befo before re the date of sale. The company company tax rate is 30%. 30%. •
•
•
60. The cur current rent tax expense expense for 20 2015 15 is a. P6,030 c. P7,500 b. P6,930 d. P8,040 61. The defer deferred red tax expense expense (benet) (benet) for 2015 iis s a. P6,570 c. (P2,430) b. (P3,270) d. (P1,080) Use the following information for the next two questions: To To encourag encourage e employees older than 60 years to extend th thei eirr em empl ploy oyme ment nt with with th the e enti entity ty,, La Lame ment ntat atio ions ns Corporati Corp oration on pro promise mises s its 6060-year year-old -old empl employee oyees s a lump lump-sum benet equal to 1 per cent of nal salary for each year of service they remain employed by the entity after their 60th 60th bi birth rthda day y pr prov ovide ided d they they re remai main n in the emp employ loy of Lamentations Corporation until they are 65, at which time, in accordance with local laws, employees are required to reti retire re.. Th The e bene benet t is pa paya yabl ble e to the emplo employe yees es on retirement. Employee A’s 60 Employee 60th th birt birthday hday is on 1 Jan January uary 2 2014 014.. Her salary for the year ended 31 December 2014 is P100,000. At 31 Dece Decemb mber er 2014 2014 the the en enti tity ty made made the the foll follow owin ing g actuarial assumptions: Employ Emp loyee ee A’s sal salary ary should should incr increas ease e by 5 per cen centt (compound) each year. There is a 20 per cent probability probability that employee A’s employme empl oyment nt with the enti entity ty will terminate terminate before before 1 January 2019. 2019. The appropriate appropriate discount discount rate is 10 per per cent per y year ear.. •
•
•
Employee A’s salary for 2015 is P105,000. At 31 Dec Decemb ember er 20 2015 15 the entit entity y re revi vised sed its actuar actuarial ial assumptions as follows: Employee A’s salary should increase by 15 per cent (compound) each year. There is a 10 per cent probability probability that employee A’s employ emp loymen mentt with with the entit entity y wil willl termin terminate ate be befor fore e reaching retirement date of 1 January 2019. The appropriate discount rate remains 10 per cent per year. •
•
•
The entity does not fund its obligatio obligation n to pay lump-sum benets. (Round o future and present value factors to four decimal places) 62. Calc Calculat ulate e the amount that the entity entity would would recog recognize nize in prot or loss for the year ended 31 December 2015. a. P1,146 c. P1,437 b. P1,080 d. P1,534 63. Calc Calculat ulate e the amount that the entity entity would would recog recognize nize in other comprehensive income for the year ended 31 December 2015. a. P1,014 c. P350 b. P1,080 d. Nil 64. On Januar January y 1, Les Lessor sor Compa Company ny signe signed d a 1-year rental rental with quarterly payments of P100,000 due at the end of ea each ch quart quarter er.. In add addit itio ion, n, the le less ssee ee must must pa pay y cont contin inge gent nt rent ent of 5% of al alll sale sales s in exc xces ess s of P10,00 P10 ,000,0 0,000 00.. Th The e conting contingent ent rent rent is paid in one payment on December 3 31. 1. The same le lessee ssee has use used d the building for the past 5 years, and in each of those years the lessee reached the contingent rent threshold
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TeamPR TeamPRT TC of P10,000,000 in sales. Sales of the lessee for the rst two quarters are as follows: Quarter ended March 31 June 30
Amount P3,200,000 3,000,00 3,000,000 0
What amount of rent expense should be reected in Lessee’s quarterly income statement for the three months ended June 30? a. P100,000 c. P130,000 b. P125,000 d. P160,000
65 65.. The The Ma Madd ddy y Co Comp mpan any y is prep prepar arin ing g in inte teri rim m nan nanci cial al stat statem emen ents ts fo forr th the e si six x mont months hs to 30 June June 20 2016 16 in accordance with the minimum requirements of PAS34. Its acco accoun unti ting ng ye year ar ends ends on 31 De Dece cemb mber er each each ye year ar.. Which Whic h of the foll followi owing ng comp comparat arative ive statemen statementt is not appropriate? a. Statement of nancial position at 30 June 2015 b. Stat Statemen ementt of pr prot ot or loss and and ot other her co compr mprehen ehensiv sive e income for the half year to 30 June 2015 c. St State atemen mentt of cha chang nges es in eq equit uity y for tthe he ha half lf ye year ar to 30 June 2015 d. St State atemen mentt of cas cash h ow ows s for th the e hal halff year year to 30 Jun June e 2015 66 66.. Whi Which ch of the follow following ing are no nott con consid sider ered ed exter external nal users of SMEs’ nancial statements? a. Ban Banks ks tha thatt ma mak ke lo loan ans s to SM SMEs. Es. b. Vendors endors th that at sel selll to SMEs and us use e SMEs SMEs’’ nan nancia ciall statements to make credit and pricing decisions. c. Cr Cred edit it rat ratin ing g agen agencie cies s and others others th that at use SM SMEs’ Es’ nancial statements to rate SMEs. SMEs’’ sharehol shareholder ders s that are are also also manage managers rs of their their d. SMEs SMEs. 67. If an SME that uses the PFRS for SM SMEs Es in a curr current ent year breaches the oor or ceiling of the size criteria at the end of that current year, and the event that caused the change is considered “signicant and continuing”, the entity should a. Tra rans nsit itio ion n to th the e ap appl plic icab able le n nan anci cial al rep epor orti ting ng framework in the next accounting period. b. Tra rans nsit itio ion n to th the e ap appl plic icab able le nan nanci cial al rep epor orti ting ng framework in the current accounting period. c. Tra rans nsit itio ion n to th the e ap appl plic icab able le nan nanci cial al rep epor orti ting ng framework from the previous accounting period. d. Use the same na nancia nciall re report porting ing fram framewor ework. k.
68. The followin following g accountin accounting g policy options in full full IFRSs are are not included in the IFRS for SMEs, except a. Fin inanc ancial ial in instr strum ument ent opt option ions, s, inc inclu ludin ding g availa availableblefor-sale, held-to-maturity and fair value options. b. Th The e rev eval alua uati tion on mo mode dell fo forr pr prop oper erty ty,, pl plan antt and and equipment, and for intangible assets. c. Pr Prop opor orti tion onat ate e co cons nsol olid idat atio ion n for for in inve vest stme ment nts s in jointly-controlled jointly-co ntrolled e entities. ntities. d. The use of fair value model for investment property. 69 69.. Wh Whic ich h of th the e foll follow owin ing g is no nott a recog ecogni niti tion on and and measurement simplication of the full IFRSs in the IFRS for SMEs? a. Financial instruments instruments meeting specied criteria are measured at cost or amortized c cost. ost. All others ar are e measured at fair value through prot or loss. b. The IFRS for SMEs does not requir require e separate accounting for ‘embedded derivatives’. Goodwill will and other other indeniteindenite-life life intangi intangible ble assets c. Good are not subject to impairment. d. Resear searc ch and devel elop opm ment ent costs sts must be recognized as expenses.
70. 70. Th The e Retr etry y Com Compan pany y use uses s cas cash-b h-basi asis s acc accou ounti nting ng for their records. records. During 20 2015, 15, Retry Retry collected P500 P500,000 ,000 from its customers, made payments of P200,000 to its supp suppli lier ers s fo forr inve invent ntor ory, y, an and d pa paid id P1 P140 40,0 ,000 00 fo forr operating costs. costs. Retr Retry y wants to prepare prepare acc accrual-basis rual-basis statements. In gathe gathering ring information information for th the e accrua accruallbasi basis s nan nanci cial al stat statem emen ents ts,, Ret etry ry di disc scov over ered ed the the following: a. Cu Custo stomer mers s owe owed d Retr etry y P50,00 P50,000 0 at the beginn beginnin ing g and P35,000 at the end of the year. b. Retry Retry owed sup supplie pliers rs P20,0 P20,000 00 at the beg beginni inning ng and P27,000 at the end of the year. c. Retry's etry's beginn beginning ing inve invento ntory ry was P42, P42,00 000, 0, and its ending inventory was P44,000. d. Ret etry ry ha had d pr prep epai aid d expen xpense ses s of P5 P5,0 ,000 00 at the the beginning and P7,400 at the end of the year. e. Ret etry ry ha had d ac accr crue ued d expe expens nses es of P1 P12, 2,00 000 0 at the the beginning and P19,000 at the end of the year. f. Deprec Depreciati iation on for for the year was P51, P51,000 000.. Dete Deterrmi mine ne th the e ac accr crua uall basi basis s net net in inco come me of Ret etry ry Company for the year ended December 31, 2015. a. P79,600 c. P91,400 b. P84,400 d. P98,400
-
Page 10 of 10
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JuniorPhilippineInstituteofAccountants CollegeofBusinessAdministration UniversityoftheEast-Caloocan
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