ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 43  May 2022 CPALE  Pre-Week/Summary Lecture

FINANCIAL ACCOUNTING & REPORTING C. UBERITA  J. BINALUYO  G. MACARIOLA

FAR PREWEEK
1. Jordan Company had the following items in its “Cash and cash equivalents” account as of December 31, 2022:
Cash on hand P125,000
Bank time deposit (acquired 12/30/2022; due in 2/28/2023) 150,000
Petty cash fund – including P2,550 unreplenished vouchers dated December 27-30, 2022; and
P1,200 dated January 4, 2023. 10,000
Cash in foreign bank – unrestricted ($5,000; average rate – P50; closing rate – P52) 260K 250,000
Cash restricted for additions to plant (to be disbursed in 2025) 1,200,000
Cash in bank – to be used for payment of 2023 dividends and taxes 1,380,000
How much should be reported as cash and cash equivalents as of December 31, 2022?
a. P1,875,450 c. P1,922,450
b. P1,921,250 d. P1,944,250
The details of the accounts receivable of Julian Corporation as December 31, 2022 shows the following:
Beginning balance P5,150,000
Sales on account made to customers 3,750,000
Collection of accounts receivable during the year 5,420,000
Accounts written off as uncollectible 120,000
The following transactions were included in the recorded transactions during the year:
a. Included in accounts receivable was an Invoice dated December 28, 2022 for P420,000 was shipped and received
by the buyer on December 31, 2022. Terms, FOB Destination point.
b. Invoice dated December 27, 2022 was shipped on December 28, 2022 amounting to P340,000, terms FOB
shipping point. This invoice was recorded as sales on account when received by customer on January 2, 2023.
c. Total accounts recovered during the period was P30,000. Total provisions for bad debts during the period
amounted to P65,000.
Julian’s policy is to provide 3.5% of the outstanding balance of accounts receivable as uncollectible and there is
beginning balance of allowance for bad debts of P40,000.
2. Statement 1: The amount of bad debt expense in 2022 is P179,500.
Statement 2: The ending balance of allowance for bad debts is P114,500
a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false
3. Statement 1: Adjusting entry to adjust the balance of allowance for bad debts include a credit of P129,500.
Statement 2: The net realizable value of accounts receivable as of December 31, 2022 is P3,570,500.
a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false
4. The following data were taken from the accounting records of Jessie Balls, Inc
Balance at January 1, 2022 5,000 balls @ P20
Purchases: January 10, 2022 3,200 balls @ P25
January 15, 2022 5,000 balls @ P28
Sales: January 5, 2022 4,500 balls
January 20, 2022 5,200 balls
If Jessie Ball uses a periodoc inventory system, the cost of the inventory using the periodic average cost flow
assumption at January 31, 2022 is?
a. P78,960 c. P98,000
b. P84,840 d. P98,240
5. If Jessie Ball uses a periodic inventory system, the cost of the inventory using first-in, first-out cost flow assumption
at January 31, 2022 is?
a. P78,960 c. P98,000
b. P84,840 d. P98,240
6. Julius Company asks you to review its Dec. 31, 2022, inventory values and prepare the necessary adjustments to
the books. The following information is given to you.
a. Julius uses the periodic method of recording inventory. A physical count reveals P3,000,000 inventory on hand
at Dec. 31, 2022.
b. Included in the physical count of inventory is P140,000 of merchandise purchased on Dec.26 from Standing.
This merchandise was shipped F.O.B. shipping point on Dec. 29 and arrived in Jan. The invoice arrived and was
recorded on Dec. 31.
c. Not included in inventory is merchandise sold to Oval on Dec. 30, F.O.B. destination. The invoice was prepared
and recorded as a sale on account for P140,000 on Dec. 31. The merchandise cost P80,000, and Oval received
it on Jan. 3. add
d. Included in inventory was merchandise received from Owl on consignment on Dec. 31 with an invoice price of
P150,000. deduct

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BATCH 43 – MAY 2022 CPA Licensure Examination

e. Included in the inventory was merchandise costing P110,000 shipped FAS on December 27, 2022. The invoice
excludes the cost of shipment amounting to P25,000.
The adjusted inventory cost of Matcha Company at December 31, 2022 should be?
a. P3,205,000 c. P3,055,000
b. P3,065,000 d. P2,955,000
7. On January 1, 2021, Jason Corp. purchased 5-year bonds with a face value of P10,000,000 and a stated interest
rate of 12% per year collectible every December 31. The bonds were acquired to yield 11%. These bonds were
classified based on business model of collecting contractual cash flows and to sell. On December 31, 2021 and
December 31, 2022, the bonds were quoted at 104 and 102, respectively. At what amount should the investment
be reported in its December 31, 2022 statement of financial position?
a. P10,000,000 c. P10,250,000
b. P10,200,000 d. P10,320,000
8. Assuming that ¾ of the bonds were sold on August 31, 2022 at total proceeds of P8,500,000. What is the amount
of gain (loss) in profit or loss on sale?
a. P800,252 c. P200,252
b. P500,252 d. P252
9. Assuming that ¾ of the bonds were sold on August 31, 2022 at total proceeds of P8,500,000. What is the total
amount in profit or loss in 2022? 1,050,848
a. P956,337 c. P1,050,445
b. P1,058,848 d. P1,281,281
10. On January 2, 2021, Johnson Inc. acquired 10% interest in Powder Co. by paying P1,000,000 for 5,000 ordinary
shares. On this date, the net assets of Powder Co. totaled P9 million. The investment was classified as a financial
asset at fair value through other comprehensive income. The fair values of Powder Co.’s identifiable assets and
liabilities approximate their book values. On August 1, 2021, Johnson received dividends of P4 per share from
Powder Co. Fair value of the stocks on December 31, 2021 was P210. Net income reported by Powder for the year
ended amounted to P2,500,000.
On August 31, 2022, Johnson Inc. paid P1.5 million to purchase 5,000 additional shares of Powder Co. from another
shareholder. On this date the fair value of the net assets exceeds carrying value by P750,000 attributable to
depreciable asset with estimated remaining life of 5 years. Johnson received a total dividends of P300,000 during
the year, of which P10 per share were declared on July 1, 2022 and were received on August 2022, the rest were
declared on September 1, 2022 and distributed on October 2022. Net income reported for the year ended amounted
to P3,500,000 with P1,800,000 being earned for the second half six months ended December 31, 2022.
What amount of investment income should be reported on Johnson’s income statement for the year ended December
31, 2022?
a. P290,000 c. P250,000
b. P280,000 d. P230,000
11. What is the carrying value of the investment in its December 31, 2022 statement of financial position?
a. P3,100,000 c. P2,980,000
b. P3,000,000 d. P2,875,000
12. A new machine was acquired on July 31, 2022 by Jakie Company with the following considerations:
Down-payment 1,000,000
Total par value of 5,000 ordinary shares issued (FV is P140) 600,000
Notes payable in three equal annual installment every July 31, starting 2023 (3 years non-
interest bearing; effective rate on this date 9%) 900,000
Estimated dismantling after five (5) year life of the machine (at 9% effective rate) 100,000
What is the initial cost of the machine on July 31, 2022?
a. P2,459,958 c. P2,582,291
b. P2,524,380 d. P2,611,388
13. Assuming the machine is depreciated using 1.5 declining balance and estimated to have P100,000 of residual value.
How much is the depreciation of the machine in 2023?
a. P757,314 c. P315,548
b. P662,650 d. P300,271
14. On January 1, 2022, Vertical Company purchased a machine from a supplier which trade discount of 10%. An
additional 4% cash discount if the account is within 30 days form the date of invoice. The machinery will be used
for 6 years. Information related to this acquisition were as follows:

List price of the machine acquired P4,000,000

Freight, unloading, and delivery charges for machinery acquired 110,000
Custom duties and other charges for machinery acquired 480,000
Allowances and hotel accommodation paid to foreign technicians during
installation and test run of machine 600,000
Cost of training for personnel who will use the machine 230,000

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How much is the cost of the machine?

a. P4,646,000 c. P4,926,000
b. P4,876,000 d. P5,030,000
15. Assuming the machine is depreciated using SYD and estimated residual value of P120,000 after its 6 years of
physical life. The recoverable amount of the machine at the end of 2022 and 2023, respectively were P3,100,000
and P2,400,000. What is the amount of gain on recovery and revaluation surplus for the period ending December
31, 2023?
a. P112,812 and P145,282 c. P213,278 and P156,281
b. P159,278 and P122,882 d. P168,571 and P124,762
16. On January 31, 2022, Jegane signed an agreement to operate as franchisee of Clear Copy Service, Inc. for an initial
franchise of P780,000. Of this amount, P300,000 was paid when the agreement was signed and the balance was
payable in four annual payments of P120,000 each, beginning January 31, 2023. The agreement provides that the
down payment is not refundable and no future services are required of the franchisor. The implicit rate for loan of
this type is 12%. The agreement also provides the 1.5% of the revenue from the franchise must be paid to the
franchisor annually. Jegane’s revenue from the franchise in 2022 was P9,500,000. Jegane estimates the useful life
of the franchise to be ten years. At the end of 2022, the franchise recoverable amount was P610,000. What is the
carrying value of the franchise as of December 31, 2022?
a. P603,571 c. P604,381
b. P598,034 d. P599,384
17. On March 1, 2022 Jegane purchased for P400,000 a trademark for a very successful soft drink it markets under the
name PowPow! The trademark was determined to have an indefinite life. A competitor recently introduced a product
that is in direct competition with the PowPow! product, thus suggesting the need for an impairment test. Data
gathered by the entity suggests that the useful life of the trademark is still indefinite, but the cash flows expected
to be generated by the trademark have been reduced either to P22,000 per year (with a probability of 60%) or to
P33,000 per year (with 40% probability). The appropriate risk-free interest rate is 7%. The appropriate risk-adjusted
interest rate is 12%. What is the carrying value of trademark as of December 31, 2022?
a. P400,000 c. P377,143
b. P397,291 d. P368,291
18. During 2022, Jelson Corporation had the following capital transactions:
January 5 Issued 300,000 shares of P 6 par at P10 per share
April 6 Issued 100,000 shares of P 6 par at P12 per share
June 8 Issued 100,000 shares of P6 par at P14 per share
July 28 Purchased 40,000 shares at P11 per share
December 31 Sold the 40,000 shares held in treasury at P18 per share
Jelson used the cost method to record the purchase and reissuance of the treasury shares. What is the total amount
of share premium as of December 31, 2022?
a. P2,600,000 c. P2,880,000
b. P2,320,000 d. P3,320,000
19. On March 2, 2022, Jente Corporation issued 4,000 shares of 6% cumulative P100 par value preference share for
P440,000. Each share carried one non-detachable warrant which entitled the holder to acquire at P17, one share
of Clemente P10 par ordinary share. On March 2, 2021, the market price of the preference share (without warrants)
was P105 per share and the market price of the share warrants was P5 per warrant. The amount credited to share
warrants outstanding by Jente on the issuance of the share was:
a. P14,000 c. P20,000
b. P62,000 d. P34,000
20. Jhim Corporation prepared the following reconciliation for its first year of operations:
Pretax financial income for 2022 P 900,000
Tax exempt interest (75,000)
Originating temporary difference (225,000)
Taxable income P600,000
The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted
tax rate for 2022 is 35%. What amount should be reported in its 2022 income statement as the deferred portion
of income tax expense?
a. P90,000 credit c. P90,000 debit
b. P120,000 debit d. P105,000 credit
21. On December 31, 2019, Jang Corporation leased a building from Fort Company for seven-year period expiring
December 31, 2026. Equal annual payments of P2,000,000 are due on December 31 of each year, beginning with
December 31, 2019. The lease is properly classified as a finance lease on Lang 's books. At inception of the lease,
Jang paid P350,000 as commission to agent and estimated that P400,000 will be paid to restore the property at the
end of lease term. The building has a useful life of 20 years at inception of the lease. Jang guaranteed a residual
value of P200,000 at the end of lease term.
Assuming all payments are made on time and the rate implicit and effective is at 12%, the amount that should be
reported by Lang Corporation as the lease liability on its December 31, 2021 financial statement is?
a. P9,310,897 c. P8,188,184
b. P7,310,897 d. P6,188,184

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22. How much is the balance of the right-of-use asset as of December 31, 2021?
a. P9,759,803 c. P7,745,875
b. P8,715,380 d. P7,803,018
23. Susan Corporation declares and distributes a cash dividend that is a result of current earnings. How will the receipt
of those dividends affect the investment account of the investor under each of the following accounting methods?
Fair Value Method Equity Method
a. No Effect Decrease
b. Increase Decrease
c. No Effect No Effect
d. Decrease No Effect
24. All of the following statements regarding accounting for investment at fair value is correct?
a. they should be recognized in the financial statements as assets and liabilities.
b. they should be reported at fair value.
c. gains and losses resulting from speculation should be deferred.
d. gains and losses resulting from hedge transactions are reported in different ways, depending upon the type of
hedge.
25. Which will not require an adjusting entry in the depositor’s books?
a. Bank service charge
b. NSF check from customer
c. Deposit of another company is credited to the account of the depositor
d. Check for payment amounting to P154 is recorded by the depositor as P145.
26. Statement 1: Savings accounts are usually classified as cash on the balance sheet.
Statement 2: Certificates of deposit are usually classified as cash on the balance sheet.
Statement 3: Bank overdrafts are always offset against the cash account in the balance sheet.
Statement 4: Short-term, highly liquid investments may be included with cash on the balance sheet.
a. Only one statement is correct
b. Only two statements are correct.
c. Only three statements are correct.
d. All statements are correct.
e. All statements are incorrect.
27. Statement 1: Trade receivables are classified as current assets if they are not to be collected within one year or
within the normal operating cycle, whichever is shorter.
Statement 2: Non-trade receivables are classified as current assts if they are to be collected within one year or
within the normal operating cycle, whichever is longer.
a. Both statements are true
b. Statement 1 is true while statement 2 is false
c. Both statements are false
d. Statement 1 is false while statement 2 is true
28. When the allowance method of recognizing uncollectible accounts is used, the entry to record the write off of a
special account would
a. Increase the allowance for uncollectible accounts and decrease net income.
b. Decrease both accounts receivable and net income
c. Decrease accounts receivable and increase allowance for uncollectible accounts.
d. Decrease both accounts receivable and the allowance for uncollectible accounts.
29. When an accounts receivable aging schedule is prepared, a series of computations is made to determine estimated
uncollectible accounts. The resulting amount from this aging schedule
a. Is the amount that should be added to the beginning allowance for doubtful accounts to get the doubtful accounts
expense for the year.
b. Is the amount of desired credit balance of the allowance for doubtful accounts to be reported at year
end.
c. When added to the total accounts written off during the year is the desired credit balance of the allowance for
doubtful accounts at year-end.
d. Is the amount of doubtful accounts expense for the year
30. The acquisition cost of a certain raw material changes frequently. The book value of the inventory of this material
at year end will be the same if perpetual records are kept as it would be under a periodic inventory method only if
the book value is computed under the
a. weighted-average method.
b. moving average method.
c. FIFO method.
d. None of these are correct.
31. Identify the cost formula that is described in the following statements:
Statement 1: The cost formula in which the oldest cost incurred rarely have an effect on the ending inventory
valuation.
Statement 2: The cost formula in which the cost of each item is determined from weighted average of the cost of
similar items at the beginning of each period and the cost of similar items purchased or produced during the period.
a. Specific Identification, Weighted Average
b. FIFO, Weighted Average

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c. Specific Identification, Moving Average

d. FIFO, Moving Average
32. On initial recognition, an item of property, plant and equipment is initially measured at its cost. Cost includes all of
the following, which is the exception?
a. its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts
and rebates.
b. any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable
of operating in the manner intended by management.
c. the estimated costs of dismantling and removing the item and restoring the site on which it is
located, unless those costs relate to inventories produced during that period.
d. the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located,
the obligation for which an entity incurs either when the item is acquired or as a consequence of having used
the item during a particular period for purposes other than to produce inventories during that period.
33. The commencement date for capitalization of borrowing cost is the date when the entity first meets all of the
following conditions, except:
a. undertakes activities that are necessary to prepare the asset for its intended use or sale.
b. incurs borrowing costs.
c. the management has an intention of constructing the asset.
d. incurs expenditures for the asset
34. Statement 1: Acquired in process R&D project separately or in business combination can be recognized as an asset
at cost, even if a component is research.
Statement 2: Subsequent R&D project expenditure on that project is also capitalized.
a. Statements 1 and 2 are true.
b. Statements 1 and 2 are false.
c. Statement 1 is false while Statement 2 is true.
d. Statement 1 is true while Statement 2 is false.
35. Statement 1: Intangible assets arising from insurance contracts issued by insurance companies are accounted for
using PAS 38 Intangible Assets.
Statement 2: Financial assets are also intangible in nature thus they are accounted for using PAS 38 Intangible
Assets.
a. Statements 1 and 2 are true.
b. Statements 1 and 2 are false.
c. Statement 1 is false while Statement 2 is true.
d. Statement 1 is true while Statement 2 is false.
36. The lessor should report the leased asset under an operating lease and income therefrom as which of the following?
a. The asset should be kept off the statement of financial position and the lease income should go to reserves.
b. The asset should be kept off the statement of financial position and the lease income should go to the income
statement.
c. The asset should be reported in the statement of financial position according to its nature and the lease income
should go to reserves.
d. The asset should be reported in the statement of financial position according to its nature and the
lease income should go to the income statement.
37. The minimum lease payments include all the following, except
a. Contingent rent
b. Rental payments over the lease term
c. Any amount guaranteed by the lessee.
d. Payment required to exercise an option on the part of the lessee to purchase the asset at a price which is certain
to exercise by the lessee determined at inception of the lease.
38. Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the statement
of financial position if
a. it is probable that a future tax rate change will occur.
b. it appears likely that a future tax rate will be greater than the current tax rate.
c. the future tax rates have been enacted or substantially enacted.
d. it appears likely that a future tax rate will be less than the current tax rate.
39. Recognition of tax benefits in the loss year due to a loss carryforward requires
a. the establishment of a deferred tax liability.
b. the establishment of a deferred tax asset.
c. the establishment of an income tax refund receivable.
d. only a note to the financial statements.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR Preweek
BATCH 43 – MAY 2022 CPA Licensure Examination

Leni Company showed the following cash items as of December 31, 2022:
Petty cash fund (P3,500 is expense receipts; P1,500 is IOU notes) P 10,000 5,000
Cash in Security Bank per bank statement (unadjusted) (outstanding
Checks, P 25,000; deposit in transit, P10,000) 45,000 30,000
Postdated customers check of P 1,500; Travelers’ check of P 2,500;
Postal money order of P 3,000 7,000 5,500
Cash in BPI per book (unadjusted) (credit memo for note collected
46,000
of P 15,000; debit memo for bank service charge of P 1,000) 32,000
Sinking fund cash 120,000
Cash surrender value of life insurance 20,000
Cash in PNB (including unrestricted compensating balances of P 100,000) 500,000
500,000
Treasury bills, with 90 days original maturity 50,000 50,000

40. How much is the Cash and Cash Equivalents on December 31, 2022?
a. 636,500
b. 636,000
c. 636,450
d. 756,500
Kiko Corporation’s petty cash fund on December 31, 2022 is composed of the following:
Coins and Currencies P16,000
Petty Cash Vouchers for Postage Stamps of 1,000 and
Office Supplies of P8,000 9,000
Customer’s check returned by the bank 4,000
Check drawn by the company payable to the petty cash custodian 15,000
Envelope that contains coins and bills representing personal
contributions of employees for Covid19 victims 5,000
Unused Postage Stamps 1,000
Employee’s Checks 3,000
Employee’s Postdated Checks 2,000
The petty cash ledger has an imprest balance of P50,000.
41. Compute for the adjusted balance of the Petty Cash Fund on December 31, 2022.
a. 39,000 c. 41,000
b. 34,000 d. 31,000
42. Compute for the cash shortage.
a. 0 c. 4,000
b. 1,000 d. 5,000
The information that follows is available from the general ledger and the bank statement of Tropa Company:
• Cash balance per book, October 31, P939,000
• Deposit in transit, October 31, 35,000; Outstanding checks, October 31, 68,000
• Credit memo, October 60,000; Debit memo, October 20,000
• Included in the October bank receipts was a deposit of Tropa Company for P25,000, erroneously recorded by
the bank to Pink Company’s account
• Included in the October bank disbursements was a check issued by Rosas Company for P10,000, erroneously
recorded by the bank in Tropa Company’s account
• Included in the book receipts was a deposit for P45,000 which was recorded as P54,000. No correction was
made yet by Tropa Company
• Included in the book disbursements was a check issued by Tropa Company for P42,000 was recorded as P24,000
43. How much is the correct cash balance on October 31?
a. 970,000 b. 927,000 c. 952,000 d. 945,000

On January 1, 2022, Teddy Corporation purchased 3-year, 10%, 5,000 of P1,000 face value bonds for P4,600,000. In
relation to this acquisition, Teddy incurred P160,000 broker’s commission. As a result, the effective rate on the bond
was 12%.
Meanwhile, Teddy determined the following fair values at each yearend:
December 31, 2022 102
December 31, 2023 105
44. How much is the unrealized gain or loss to be reported in its 2022 Profit or Loss Statement assuming the investment
is FVPL?
a. 0
b. 500,000
c. 268,800
d. 340,000

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On January 1, 2019, Neri Company acquired a 5-year, 10%, P1,000,000 face value bonds at 92. The company paid
broker’s fees amounting to P118,896. As a result, yield rate on the bond was 9%. Interests are collectible annually
every January 1. The bonds were selling at 120, 102, 98 as of December 31, 2019, December 31, 2020 and December
31, 2021, respectively. Neri company classified the investment as Fair Value through Other Comprehensive
Income.

45. How much is the unrealized gain or loss that should be reported for the year ended December 31, 2020?
a. 5,312 UL c. 172,915 UL
b. 5,312 UG d. 162,291 UL
46. How much is the unrealized gain or loss that should be reported as of December 31, 2020?
a. 5,312 UL c. 172,915 UL
b. 5,312 UG d. 162,291 UL

Chel Company purchased a bond investments and classified the same as Investment at Amortized Cost. These bonds
pay interest every April 1. Portion of the amortization table was presented below:
Nominal Effective
Date Amortization Amortized cost
Interest Interest
4/1/23 160,000 128,317 31,683 2,106,939
4/1/24 160,000 126,416 33,584 2,073,356
4/1/25 160,000 124,401 35,599 2,037,757
4/1/26 160,000 122,243 37,757 2,000,000

On October 31, 2025, Chel sold all the investments at 102 plus accrued interest.
47. Determine the gain or loss on sale of investment.
a. P24,268 Gain
b. P24,268 Loss
c. P12,587 Loss
d. P12,587 Gain
Alex Corporation’s January 1, 2019 balances of its Machinery and Accumulated Depreciation- Machinery accounts were
P5,400,000 and P2,300,000 respectively. On April 30, 2019, Alex Corporation acquired a new machine with a list price
of P1,800,000; trade discount of 10%, 5%; term 1/10, n/30 and was paid beyond the discount period. Another machine
with an invoice cost of P800,000 was purchased on May 30, 2019 and incurred freight and insurance amounting to
P20,000 while the machine is in transit.
48. What is the balance of the account Machinery on December 31, 2019?
a. 820,000 c. 2,343,610
b. 1,523,610 d. 7,743,610
On April 1, 2020, the Leila Company purchased three units of baking equipment by issuing a four-year non-interest
bearing P3,200,000 note. The note is payable in annual installments of P800,000 with the first installment due on March
31, 2021. The equipment has an equivalent cash price of P2,591,760. Effective interest on this note was computed at
9%, which approximates Leila’s incremental borrowing rate. Leila paid for P100,000 freight for this equipment and
installation charges of 160,000. Leila has a constructive obligation to dismantle the equipment at the end of its 8-year
useful life at an estimated cost of P200,000.

49. What is the initial cost assigned to this baking equipment?

a. 2,491,760
b. 2,952,140
c. 3,051,760
d. 3,660,000

Sonny Company purchased an equipment on January 1, 2020 for P13,000,000. This equipment had 10 years useful life.
In 2021, due to obsolescence, Sonny recognized an impairment loss of P2,600,000. On December 31, 2022, Sonny
determined that the fair value of the equipment had increased to P9,750,000.
50. What amount of gain on reversal of impairment shall Sonny recognize in 2022?
a. 2,925,000
b. 2,275,000
c. 650,000
d. 325,000
Dick Company acquired an investment property costing P500,000 on January 1, 2021. The property is being leased out
under operating lease and the lessee pays P50,000 on a semi-annual basis. Dick Company depreciates its properties
using the straight-line method over a 10-year useful life. The fair value of the building at the end of 2021 and 2022
were P600,000 and P 500,000, respectively.

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51. How much is the total increase in profit or loss for the year 2021 assuming the company is using the fair value
model?
a. 100,000
b. 150,000
c. 200,000
d. 250,000
52. How much is the carrying value of the investment properties on December 31, 2022 assuming the company is
using the cost model?
a. 450,000
b. 600,000
c. 400,000
d. 500,000

On January 2, 2017, Risa Corporation purchased a patent for a new consumer product for P840,000. At the time of
purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was
estimated to have a useful life of only ten years. On December 30, 2022, the product was permanently removed from
the market under governmental order because of a potential health hazard present in the product.
53. What amount should Risa charge against income during 2022?
a. 336,000
b. 420,000
c. 84,000
d. 56,000
Sentri Corporation purchased a patent for P135,000 on September 1, 2020. It had a useful life of 10 years. On January
1, 2022, the company spent P33,000 to successfully defend the patent in a lawsuit. Sentri Corporation estimated that
as of that date, the remaining useful life is 5 years.
54. What amount should be reported for patent amortization expense for 2022?
a. 30,900
b. 28,200
c. 30,000
d. 23,400
On January 1, 2021, Olympinks Company reported the fair value of plan assets at P6,700,000 and defined benefit
obligation at P6,100,000. Transactions affecting the balances for the current year are as follows:
Current service cost P1,125,000
Past service cost 325,000
Contribution to the plan 990,000
Benefits paid to retirees at scheduled date 800,000
Benefits paid to retirees at early (CV is P340,000) 300,000
Actual return on plan assets 469,000
Decrease in defined benefit obligation due to changes in actuarial assumption 135,000
Discount rate 10%
55. How much is the amount of defined benefit cost reported in its statement of comprehensive income as a component
of profit or loss?
a. 1,350,000 c. 66,000
b. 1,385,000 d. 336,000
56. How much is the amount of defined benefit cost reported in its statement of comprehensive income as a component
of OCI?
a. 1,350,000 c. 66,000
b. 1,385,000 d. 336,000
Pasig Company has an overdue note payable to Emerald Bank of P 9,000,000 and recorded accrued interest of P
810,000. On December 31, 2022, Emerald Bank agreed to the following restructuring agreement:
• Reduce the principal obligation by P 1,000,000
• Waive the P 810,000 accrued interest
• Extend the maturity date to December 31, 2020.
• Annual interest of 9% of the new principal is to be paid on December 31, 2018, December 31, 2019 and
December 31, 2020.
• The prevailing market interest rate for similar debt instrument on the date of restructuring is 10%
57. How much is the gain on debt restructuring?
a. 2,009,032 b. 1,809,864 c. 1,199,032 d. 0
Makati Company reported the following on December 31, 2017:
Bonds payable - 10% 1,000,000
Ordinary share capital, P 100 par, 50,000 shares 5,000,000
Net income 1,735,000

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The bonds are convertible into ordinary shares in the ratio of 10 ordinary shares for each P1,000 bond. The income tax
rate is 30%.
58. What is the amount of basic earnings per share?
a. 30.08 c. 34.70
b. 30.58 d. 27.75

59. What is the amount of diluted earnings per share?

a. 30.08 c. 34.70
b. 30.58 d. 27.75

Pasay Corporation’s December 31, 2016 balance sheet reports the following shareholders’ equity:
10% Cumulative Preference share capital, P100 par value per share, 30,000 shares
issued and outstanding, liquidation value of P105 P3,000,000
Ordinary share capital, P100 par value, 60,000 shares issued 6,000,000
Share premium 500,000
Treasury Stock, (ordinary) 5,000 shares at cost 600,000
Retained Earnings 4,000,000
Subscribed ordinary share, net of P400,000 subscription receivable 1,000,000
Revaluation surplus 700,000
Preference dividends have not been paid since last year up to the end of 2016.
60. What is the book value per share on ordinary share?
a. 173.08 b. 163.04 c. 166.92 d. 157.25

Batangas Corp.’s transactions for the year ended December 31, 2020 included the following:

• Purchased real estate for P 550,000 cash

• Sold building for P 500,000
• Paid dividends of P 600,000
• Issued 500 shares of ordinary shares for P 250,000
• Purchased machinery and equipment for P 125,000 cash
• Paid P 450,000 bank loan
• Increased accounts receivable by P 100,000
• Increased accounts payable by P 200,000
61. How much is the net cash provided or used in investing activities for 2020?
a. 175,000 c. 675,000
b. (175,000) d. (50,000)

62. How much is the net cash provided or used in financing activities for 2020?
a. (200,000) c. (800,000)
b. (1,050,000) d. 800,000

On December 31, 2022, the bookkeeper of Laguna Company provided the following information:

Accounts payable, net of P500,000 debit balance in creditor’s account P 2,500,000

Deferred tax liabilities 300,000
Long-term advances to officers 500,000
Other trade payables (payable normally in 15 months) 250,000
Bonds Payable 2,000,000
Stock dividends payable 800,000
Credit balance in customers’ accounts 400,000
Provision for litigation 50,000
Serial bonds, payable in semiannual installments
of P1,000,000 5,000,000
Accrued interest on bonds payable 300,000
Salaries payable 600,000
Contingent liabilities 100,000 disclosure only
Premium on bonds payable 700,000
63. In the December 31, 2022 statement of financial position, how much current liabilities should be reported?
a. 6,350,000 c. 6,200,000
b. 6,600,000 d. 6,700,000

64. In the December 31, 2022 statement of financial position, how much non-current liabilities should be reported?
a. 6,500,000 c. 6,250,000
b. 6,000,000 d. 6,000,000

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Naga has the following information for its five business segments for the year 2022

Segment Intersegment revenue Segment Assets Revenue to external customers

A P 20,000,000 P 2,000,000 P 25,000,000

B 5,000,000 500,000 5,000,000
C 2,800,000 1,000,000 3,500,000
D 1,200,000 200,000 1,500,000
E 1,000,000 250,000 1,000,000

65. How much is the minimum amount the should be reported by the reportable segments?
a. 22,500,000 c. 49,500,000
b. 27,000,000 d. 6,600,000

THEORY

66. The following statements are based on PAS 38 (Intangible Assets):

Statement I: Internally generated goodwill shall not be recognized as an asset.
Statement II: No intangible asset arising from research or research phase of an internal project shall be recognized.
Statement III: Internally generated brands, mastheads, publishing titles, customer lists and items similar in
substance shall be recognized as intangible assets.
a. All of the statements are true
b. Only statement I is true
c. Only statement II is false
d. Only statement III is false
67. The following statements are based on PAS 40 (Investment Property):
Statement I: An investment property is a property held to earn rentals or for capital appreciation or both.
Statement II: An investment property shall be measured initially at costs. Transaction costs shall be excluded in the
initial measurement.
Statement III: Under the fair value model, a gain or loss arising from a change in the fair value of investment
property shall be recognized in profit or loss for the period in which it arises.
a. All of the statements are true
b. Only statement I is true
c. Only statement II is false
d. Only statement III is false
68. Which of the following is false about erroneous bank charge?
a. Cash balance per bank is understated
b. Disbursements per bank is overstated
c. It should be recorded as a debit to cash in bank account
d. It should be added to balance per bank in preparing bank reconciliation
69. The statement of financial position may include unrealized gains and losses from which type of investment securities?
a. FVPL only
b. FVOCI only
c. FVPL & FVOCI
d. FVPLOCI

70. Which of the following transactions shall be included in the statement of cash flows?
a. Acquisition of a property by means of issuing preference shares
b. Purchase of treasury shares for cash at more than par value
c. Conversion of bonds to ordinary shares
d. Acquisition of assets by means of a finance lease

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