No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

FINANCIAL ACCOUNTING AND REPORTING PREWEEK LECTURE

MAY 2022 CPA LICENSURE EXAMINATION
FOR ICARE REVIEWEES (Please do not share this handout.)

SELECTED THEORY QUESTIONS:

1. Pepper Corp. granted 1,000 share option to its employee on January 2, 2022, for
services performed during 2021 and 2022. At the date of the grant, the fair value of
the share options is P60,000. The options are exercisable on January 2, 2023 and
expires on June 30, 2023. On July 1, 2023, it was determined that none of the
options were exercised. On December 31, 2023, the company should
a. Not adjust or reverse compensation expense
b. Record P60,000 of compensation expense in 2023
c. Restate its financial statements for 2021 and 2022 and reduce compensation
expense for each year
d. Make a prior period adjustment to retained earnings for compensation expense
recognized in 2016 and 2017

2. Ivana Co. leased equipment to Alawi Co. under a non-cancellable lease with a
transfer of title. Can Ivana record depreciation expense on the leased asset and
interest revenue related to the lease as
a. Yes, Yes
b. Yes, No
c. No, Yes
d. No, No

3. The items which are amounts reclassified to profit in the current period but were
recognized in other comprehensive income in the current or previous period are
a. Correcting entries
b. Reclassification adjustments
c. Prior period errors
d. Reversing entries

4. In a period of declining prices, the use of the following inventory cost flow method
that would result in the highest cost of goods sold is
a. FIFO
b. LIFO
c. Moving average method
d. Weighted average method

5. Closing entries are BEST described as

I. Made at the end of an accounting period
II. Prepared after the adjusting entries and financial statements have been
prepared
III. Prepared for the purpose of reducing all nominal and temporary accounts to
zero

a. I only
b. I and III only
c. I and II only
d. I, II and III

6. Gain or loss from disposal of investment property is the difference between the
a. Fair value and the carrying amount of the asset
b. Gross disposal proceeds and fair value of the asset
c. Net disposal proceeds and the carrying amount of the asset
d. Gross disposal proceeds and the carrying amount of the asset

7. The qualitative characteristic of faithful representation, according to the IASB

Framework for the preparation and presentation of financial statements, includes
a. Comparability and Consistency
b. Neutrality, Completeness, and Free from error
c. Timeliness, Predictive value, and Feedback value
d. Predictive value, Confirmatory value, and Materiality

1|P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

8. The gain or loss from extinguishment of a financial liability by issuing equity

instruments is presented as
a. Component of finance cost
b. Other income or other expenses
c. A separate line item in the income statement
d. Component of other comprehensive income
9. For IFRS reporting, the valuation method used for intangible assets are
a. Cost model or the fair value model
b. Cost model or the revaluation model
c. Revaluation model or the fair value model
d. Cost model or the fair value through profit or loss model
10. Patricia Co. issued ten-year P2,000,000 debenture bonds on January 2, 2023. The
bonds pay interest semiannually.

Patricia company uses the effective interest method to amortize bond premiums and
discounts. The carrying value of the bonds on this date was P1,859,530. A journal
entry was recorded for the first interest payment on June 30, debiting interest
expense for P130,160 and crediting cash for P120,000. The annual stated interest
rate for the debenture bonds is
a. 6%
b. 7%
c. 12%
d. 14%

2|P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

SITUATIONAL
Situation – 1:
Information relevant to three different companies follows.
• Jonald Co. made available the following information relative to its defined
benefit obligation plan for the year 2023:
 Benefit obligation, January 1, P4,500,000
 Fair value of plan assets, January 1, P5,000,000
 Current service cost, P1,700,000
 Discount rate, 10%
 Benefit paid to retirees, P1,000,000
 Contribution to the plan, P1,200,000
 Actual return on plan assets, P600,000
 Net actuarial gain due to remeasurement of benefit obligation, P200,000
 Past service cost, P300,000

• Thomas Co. commenced construction of a new plant on March 1, 2023. The

average accumulated expenditures is P36,000,000 and was funded from the
existing general borrowings. The construction was completed on October 31,
2023. The borrowing during 2023 comprised of the following: PhilTrust Bank at
6%, P8,000,000; Union Bank at 8%, P10,000,000; Metrobank at 9%,
P30,000,000.

• Brian Co. provides the following information

December 31, 2022 December 31, 2023
Physical inventory, at cost P800,000 P1,200,000
Sales 6,000,000
Cost of Sales 3,100,000
Accounts receivable 1,500,000 1,700,000
Accounts payable 1,700,000 1,900,000

In 2023, accounts written off amounted to P120,000. Sales returns with credit
memo amounted to P150,000 and purchases returns, P80,000. Cash receipts
from customers after P220,000 discounts totaled P7,900,000 while cash
payments to trade creditors amounted to P5,500,000 after discounts of
P300,000.

Questions:
11. Jonald Co.’s benefit obligation on December 31, 2023, is
a. P5,200,000
b. P5,750,000
c. P5,650,000
d. P5,840,000

12. The amounts that Thomas Co. should recognize as borrowing costs to be
capitalized in relation to the plant and the amount of interest expense for 2023,
respectively, shall be
a. P0 and P3,980,000
b. P1,989,600 and P1,990,400
c. P1,990,080 and P1,989,920
d. P3,980,000 and P0

13. The amount that Brian Co. should report as gross sales for 2023 under the
accrual basis is
a. P8,120,000
b. P8,370,000
c. P8,490,000
d. P8,590,000

3|P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

14. The amount that Brian Co. should report as gross purchases for 2023 under the
accrual basis is
a. P5,500,000
b. P5,780,000
c. P6,000,000
d. P6,080,000

Situation – 2
Information pertaining to four different companies follows:
• Information on the inventory of Paye Co:
 Cost, P12.00
 Estimated selling price, P13.60
 Estimated disposal cost, P.20
 Normal gross margin, P2.20
 Replacement cost, P10.90.

• In June 2023, Maria Co. determined that actual costs incurred associated with
the equipment used in its assembly line significantly exceeded the original
expected costs. On June 30, 2023, the company compiled the following
information:
 Original cost of the equipment, P1,600,000
 Accumulated depreciation, P600,000
 Expected net future cash inflows (undiscounted) related to the continued
use and eventual disposal of the equipment, P900,000
 Fair value of the equipment, P750,000.

• RA Co. uses the revaluation model for intangible assets. On March 1, 2022, it
acquired intangible assets with an indefinite life of P300,000. On December 31,
2022, it was determined that the recoverable amount for these intangible assets
was P270,000. On December 31, 2023, it was determined that the intangible
assets had a recoverable amount of P282,000.

• On July 1, 2023, Patricia Co. has a piece of equipment with a cost of P500,000
and accumulated depreciation of P375,000. On that date, the company
classified the equipment as held for sale and decided to sell it within one year.
On the same date, the equipment had an estimated selling price of P50,000 and
a remaining useful life of 2 years. It is estimated that the selling cost associated
with the disposal equipment will be P5,000. On December 31, 2023, the
estimated selling price of the equipment had increased to P75,000 with an
estimated selling cost of P10,000.

Questions:
15. Under the lower of cost or net realizable value rule, the measurement the inventory
item of Paye Co. should be at
a. P10.70
b. P10.90
c. P11.20
d. P12.00

16. The amount of impairment loss that should be reported on the income statement
of Maria Co. for the period ended June 30, 2023 is
a. P100,000
b. P250,000
c. P700,000
d. P750,000

4|P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

17. The impairment gain or loss to be recognized by RA Co. on the intangible assets
in the 2022 and 2023 income statements shall be
a. 0,0
b. P 30,000 loss, 0
c. P 30,000 loss, P 12,000 gain
d. P 30,000 loss, P 18,000 gain

18. The amount to be recognized by Patricia Co. as gain on reversal of the impairment
on December 31, 20123is
a. P20,000
b. P30,000
c. P36,875
d. P46,875

Situation – 3
Relevant data for three different companies follow:
• Graciel Co. had outstanding on December 31, 2023, 10%, P5,000,000 face
value convertible bonds maturing on December 31, 2026. Interest is payable
annually on December 31, each P1,000 bond is convertible into 50 shares of
Graciel’s P20 par value ordinary shares. The unamortized premium balance on
December 31, 2023, is P128,000. The paid-in capital arising from the bond
conversion privilege account has a balance of P100,000. On December 31,
2023, an individual holding 500 of the bonds exercised the conversion privilege
when the market price of Graciel’s ordinary shares was P30 each.

• Willen Co. had 100,000 of 15 par value-ordinary shares on January 1, 2023. In

2023, the following transactions pertaining to its ordinary shares occurred:
 Purchased 5,000 shares as treasury at P30 each.
 The ordinary share was split 3-for-1
 Reissued 4,000 treasury shares at P16 each

• Shane Co. issued on January 1, 2022 share appreciation rights to its president
exercisable for one year beginning January 1, 2024 provided that the president
is still in the employ of the company at that date of exercise. Each right provides
for a cash payment equal to the excess of the company’s share price over P50.
The equivalent number of shares for share appreciation rights will be based on
the level of sales of the company at the date of exercise as follows:

Level of sales P200Million to P500Million Over 500Million

Equivalent shares granted 12,000 15,000

Actual sales achieved by Shane and the share price at the end of each year are
as follows:
2022 2023
Sales P330,000,000 P520,000,000
Share price P88 P95

Questions:
19. Under IAS 32, Graciel Co.’s entry to record the conversion should include a credit
to share premium of
a. P0
b. 12,800
c. P10,000
d. P22,800

5|P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

20. Willen Co.’s total cost of the remaining treasury shares and the number of
outstanding shares on December 31, 2023, respectively, shall be
a. P110,000 and P285,000
b. P330,000 and P285,000
c. P110,000 and P289,000
d. P330,000 and P289,000

21. Shane Co. ’s co m p en sat io n expense recognized in the accounts for the year
ended December 31, 2022, is
a. P0
b. P228,000
c. P190,000
d. P285,000

22. Shane Co.’s co m p en sat io n expense recognized in the accounts for the year
ended December 31, 2023, is
a. P228,000
b. P447,000
c. P337,500
d. P675,000

Situation – 4
Data given for two different companies follow:
• Angelika Co. started business in 2022. It sells printer with a three-year warranty.
Angelika estimates its warranty cost as a percentage of peso sales. Based on past
experience, it is estimated that 3% will be repaired during the first year of warranty,
5% will be repaired during the second year of warranty and 10% will be in the third
year.
In 2022 and 2023, the company was able to sell 8,000 and 9,000 units, respectively
at a selling price of P4,000 per unit. The company also incurred actual repair costs
of P650,000 and P1,500,000 in 2022 and 2023, respectively.

• Arthur Co. issued on December 31, 2021, 20-year bonds of P5,000,000 for
P5,425,460 to yield 10%, interest is payable annually on December 31 at 11%. On
December 31, 2023, Arthur retires 2,000 of its own P1,000 bonds at 96. The
accounting period of Arthur is the calendar year. The company uses the effective
interest method of amortization.

Questions:
23. The amount of liability for warranty to be reported in Angelika Co.’s December
31, 2023 statement of financial position and the warranty expense for the year
ended December 31, 2023, respectively, shall be
a. P10,486,000 and P1,500,000
b. P10,090,000 and P6,480,000
c. P10,666,000 and P5,468,000
d. P12,816,000 and P6,856,000.

24. Arthur Co.’s gain or loss on the retirement of bonds is

a. P80,000 gain
b. P243,923 gain
c. P80,000 loss
d. P243,923 loss

25. The carrying amount of Arthur Co.’s remaining bonds on December 31, 2023 is
a. P3,000,000
b. P3,489,626
c. P3,470,663
d. P3,245,884

6|P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Situation – 5
Information provided relative to four different companies follows:
• Ayanna Co. regularly buys shirt from Lon Co. and is allowed trade discount of 20%
and 10% from the list price. Ayanna purchased shirts from Lon on April 11, 2023 and
received an invoice with list price amount of P50,000 and payment terms of 2/10, n/30.
Ayanna uses the net method to record purchase.

• On July 1, 2023, Kathryn Co. purchased a new machine on a deferred payment basis.
A down payment of P100,000 was made and 4 monthly installments of P250,000 each
are to be made beginning August 1, 2023. The cash equivalent price of the machine
was P950,000. Kathryn incurred and paid installation cost amounting to P30,000

• In 2023, Jamil Co. incurred the following costs related to a new solar-powered car:
 Salaries of laboratory employees researching how did to build the new car,
P500,000
 Legal fees for the patent application for the new car, P40,000
 Engineering follow-up during the early stages of commercial production,
P100,000
 Marketing research to promote the new car, P60,000

• Jomari Co. is engaged in raising dairy livestock. Data provided in 2023 follows:
 Carrying amount in January, P2,500,000
 Increase due to purchases, P1,000,000
 Gain arising from change in fair value less cost of disposal attributable to
price change, P200,000
 Gain arising from change in fair value less cost of disposal attributable to
physical change, P300,000
 Decrease due to sales, P400,000
 Decrease due to harvest, P100,000.

Questions:
26. Ayanna Co. should record the purchases from Lon Co. at
a. P34,300
b. P35,280
c. P35,000
d. P36,000

27. The amount to be capitalized by Kathryn as the cost of the machine is

a. P950,000
b. P1,100,000
c. P980,000
d. P1,130,000

28. The amount that should be reported by Jamil Co. as research and development
expense in the 2023 income statement is
a. P500,000
b. P1,440,000
c. P1,300,000
d. P1,500,000

29. The carrying amount of the biological assets of Jomari Co. on December 31, 2023
is
a. P3,000,000
b. P3,500,000
c. P4,000,000
d. P4,400,000

7|P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Situation – 6
Information pertaining to four different companies follow:
• The information provided by the Payeye Corp. with respect to the cash and cash
equivalent at December 31, 2023 follows:
 Checking account at Bank of Asia (overdraft), P510,000
 Checking account at Sterling Bank, P2,000,000
 Employee’s postdated check, P120,000
 Foreign bank account which is unrestricted and in equivalent peso,
P2,500,000
 IOU from the company president, P500,000
 NSF Customer check, P100,000
 Payroll account, P800,000
 Petty cash fund comprising P25,000 in currency and expenses receipts
for P50,000, P75,000
 Postage stamps, P10,000
 Traveler’s check, P300,000
 Treasury bonds, P1,500,000
 Value added tax account, P600,000.

• Included in the bank reconciliation of Andrea Corp. on December 31, 2023 were
the following:
 Credit memo for November recorded in December, P60,000
 Credit memo for December not yet recorded, P80,000
 Deposit in transit at December 31, 2023, P100,000
 Erroneous bank charge in December corrected by bank in December,
P8,000
 Erroneous receipt by the company during December where no correction
was made until the following year, P10,000
 Total company receipts for December, P850,000
 Total credit per bank in December, P800,000

• Chjoseph Corp. sells various merchandise both for cash and on credit. Accounts
receivable transaction during 2023 follows:
 Accounts written off as worthless, P6,400
 Cash received from cash customers, P206,200
 Cash received from credit customers where P231,000 was received from
credit customer who took the advantage of the 4% discount within the
discount period, P330,000
 Credit memoranda issued to credit customers for sales returns and
allowances, P26,400
 Cash refunds given to cash customers for sales returns and allowances,
P17,100
 Recoveries on accounts written off as uncollectible in prior periods which
are not yet included in the above collections, P6,800
 Sales for cash and credit, P791,000.

The December 31, 2022 statement of financial position balances for account
receivable and allowance for bad debts are P85,800 and P7,900, respectively. An
aging of the receivables indicates that P15,500 of the account receivable balance
are deemed uncollectible.

• Jayson Corp. purchased for P108,000, on July 2, 2023, 2,000 shares of Paula
Corp.’s newly issued 6% cumulative P20 par value preference share capital. Each
share also had one stock warrant attached, which entitled the holder to acquire,
at P19, one share of Paula P10 par value ordinary share capital for each two
warrants held. The market price, on this date, of the preference share capital
(without warrants) was P50 per share and the market price of the stocks warrants
was P10 per warrants. On September 2, 2023, all the stock warrants were sold
for P19,800

Questions:
30. The correct amount to be reported by Payeye Corp, as unrestricted cash on
December 31, 2023 is
a. P6,085,000
b. P6,585,000
c. P6,285,000
d. P6,225,000

8|P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

31. Andrea Corp.’s amount of deposit in transit at November 30, 2023 is

a. P32,000
b. P42,000
c. P40,000
d. P50,000

32. Chjoseph Corp.’s balance of accounts receivable that would be shown in the
December 31, 2023 statement of financial position and the bad debts expense to be
reported in profit or loss for the year ended December 31, 2023, respectively, shall
be
a. P298,175 and P7,200
b. P304,575 and P7,900
c. P298,175 and P15,500
d. P304,575 and P8,300

33. Jayson Corp.’s gain on sale of the stock warrants to be presented in the income
statement is
a. P0
b. P1,800
c. P800
d. P9,800

Situation – 7
Information relevant to four different companies follows:
• The following notes payable, issued by Deloitte Co., were outstanding during the
entire construction of an assets that qualified for interest capitalization:
 P8,000,000 notes payable bearing interest at 10%
 P10,000,000 notes payable bearing interest at 5.5%

None of the borrowing were specified for the construction of the qualified asset.

• On June 1, 2023, Isla Lipana Co. entered into a real estate lease agreement for
a new building. The lease is an operating lease and is fully executed on that day.
According to the terms of the lease, payments of P30,000 per month are schedule
to begin on October 1, 2023 and to continue each month thereafter for 56 months.
The lease term spans five years. Dreamer has a calendar year-end

• KPMG Co. incurred on March 1. 2023, an apparently permanent inventory loss

from market decline in the amount of P600,000

• The following information pertains to SGV Co. and its operating segments for
the year ended December 31, 2023:
 Total revenues P100,000,000
 Sales to external customers (including in total) 20,000,000

Questions:
34. The interest rate that should be used by Deloitte Co. to calculate capitalized
interest on the construction is
a. 5.5%
b. 7.75%
c. 7.5%
d. 10%

35. Isla Lipana Co.’s lease expense for 2023 is

a. P84,000
b. P196,000
c. P90,000
d. P210,000

9|P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

36. The amount of inventory loss that should be recognized by KPMG Co. in its
quarterly income statement for the 3 months ended March 31, 2023 is
a. P150,000
b. P400,000
c. P200,000
d. P600,000

37. External revenue reported by SGV Co.’s reportable segments must at least be
a. P60,000
b . P15,000,000
c. P20,000,0000
d. P40,000,000

Situation – 8
Data for two different companies follows:
• On December 5, 2023, Angat Buhay Co. established a petty cash fund of
P20,000. On December 31, 2023, the petty cash fund was examined and found
out to have receipts and documents for miscellaneous expenses amounting to
P18,200. In addition, there was cash amounting to P2,200.

• Kulay Rosas Co. acquired at the beginning of 2023 nontrading equity

instrument for P5,000,000 with transaction cost of P550,000 and irrevocably
designated as financial asset at fair value through other comprehensive income.
The fair value was P6,200,000 at December 31 and the transaction cost that
would be incurred on the sale of the investment is estimated at P500,000.

Questions:
38. The entry that would be required by Angat Buhay Co. on December 31, 2023 to
record the replenishment of the petty cash fund is
a. Petty Cash 18,200
Cash 17,800
Cash short and over 400

b. Miscellaneous Expense 18,200

Cash 17,800
Cash short and over 400

c. Miscellaneous Expense 17,800

Cash short and over 400
Cash 18,200

d. Miscellaneous Expense 18,200

Petty Cash 17,800
Cash short and over 400

39. As provided in PFRS 9, the amount of gain that Kulay Rosas Co. should
recognize in other comprehensive income for 2023 is
a. P0
b. P650,000
c. P550,000
d. P1,200,000

10 | P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Situation – 9
Data available for three different companies follow:
• Andrea Co. suffered damages from a storm surge on December 31, 2023. The
entire inventory and most of the accounting records were completely destroyed.
Information salvaged from remaining records follows:
 January 1: Inventory P750,000; Accounts receivable, P350,000
 December 31: Accounts receivable, P550,000
 Purchases, P2,750,000
 Collections of accounts receivable, P4,200,000
 Cash sales, P450,000
 Gross profit on sales, 40%

• Brillantes Co. acquired a patent on June 20, 2020 for P2,100,000. Management
expects that the patent will be useful to the company for its remaining useful life of
10 years. On January 10, 2022, Brillantes spent P350,000 in successfully
defending the patent against a competitor. During 2023, management determines
that the estimated remaining life of the patent should be reduced to only five
years, including the current year. Brillantes’s policy is to amortize the cost of
intangible assets using straight-line method to the nearest month.

• Blythe Co. insured the life of its president for P16,000,000, Blythe being the
beneficiary of an ordinary insurance policy. The premium is P400,000. The policy
is dated January 1, 2014. The cash surrender value on December 31, 2022 and
2023 are P120,000 and P160,000, respectively. Blythe follows the calendar year
as its fiscal year. The president died on October 1, 2023 and the policy was
collected on December 31, 2023. No premium was refund on the insurance
settlement.

Questions:
40. The amount of inventory that was lost by Andrea Co. from the storm surge is
a. P590,000
b. P1,350,000
c. P750,000
d. P1,560,000

41. Brillantes Co.’s amortization expense for the year 2023 is

a. P294,000
b. P336,000
c. P315,000
d. P358,750

42. Blythe Co.’s gain on life insurance settlement is

a. P15,320,000
b. P15,750,000
c. P15,620,000
d. P16,000,000

11 | P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Situation – 10
Data gathered from the two different companies follow:
• Rainiel Co. converted P5,000,000 bonds of its 10% convertible bonds into 100,000
ordinary shares, P50 par value on January 1, 2023, after recording interest and
amortization. On the conversion date, the carrying amount of the bonds were
P5,500,000 and the paid in capital arising from the conversion privilege
recognized in the accounts is P200,000. The market value of the bonds without
the conversion privilege was P6,000,000, and Rainiel’s ordinary shares was
publicly trading at P60 each.

• Soriano Co. had retained earnings of P3,300,000 at the beginning of 2023.

Throughout 2023, the company had 20,000 shares of P100 par value ordinary
shares that are issued and outstanding. During 2023, Soriano reported profit of
P5,500,000, purchased treasury shares for P600,000, declared cash dividend of
P1,800,000, reissued all treasury shares at a gain of P100,000, and declared and
issued a 10% ordinary share bonus issue when the market value was P180 per
share

Questions:
43. Under IAS 32, the amount of share premium that should be recognized by Rainiel
Co. as a result of the conversion is
a. P500,000
b. P1,000,000
c. P700,000
d. P1,200,000

44. The retained earnings balance of Soriano Co. at December 31, 2023 is
a. P3,300,000
b. P6,740,000
c. P6,640,000
d. P7,000,000

12 | P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Situation – 11
The following information pertain to two different companies:
• Niño Company has two classes of shares outstanding, 10%, P100 par
preference share capital and P10 par ordinary share capital. During the fiscal
year ending June 30, 2023, the company had the following transaction affecting
shareholder’s equity
Number of Price per
shares share
Issue of preference shares 5,000 P 140
Issue of ordinary shares 20,000 70
Purchase and retirement of preference share 1,000 150
Purchase of treasury share – Ordinary Shares 5,000 80
Ordinary share split (Par value reduced to P5) 2 for 1
Reissue of treasury shares – Ordinary shares 5,000 52

The balance of the accounts in the shareholders’ equity section as of June 30,
2022 statement of financial position follows:
 Preference share capital, 30,000 shares, P3,000,000
 Ordinary share capital, 100,000 shares, P1,000,000
 Preference share premium, P1,200,000
 Ordinary share premium, P8,000,000
 Retained earnings, P2,550,000

Dividend were paid at the end of the fiscal year on the ordinary shares at P6 per
share and on the preference share at the preference rate. Profit after tax for the
year is P750,000

• Niña Company provided the following information:

December 31, 2022 December 31, 2023
Trades accounts receivable, net P 840,000 P 780,000
Inventory 1,500,000 1,400,000
Accounts payable 950,000 980,000

 Total sales were P12,000,000 for 2023 and 11,000,000 for 2022
 Cash sales were 20% of total sales each year
 Cost of goods sold was P8,400,000 for 2023
 Each year there was P50,000 bad debts estimate and a P50,000 write-
off.

Questions:
45. The balance of additional paid in capital of Niño Company on June 30, 2023 is
a. P2,620,000
b. P9,200,000
c. P10,600,000
d. P10,620,000

46. The balance of retained earnings of Niño Company on June 30, 2023 is
a. P1,540,000
b. P1,560,000
c. P1,550,000
d. P1,600,000

47. The cash collected by Niña Company from customers during 2023 is 12,010,000
a. P11,890,000
b. P11,010,000
c. P11,960,000
d. P12,060,000

13 | P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

48. The cash disbursed by Niña Company from purchases during 2023 is
a. P8,200,000
b. P8,300,000
c. P8,270,000
d. P8,500,000

Situation – 12
Information for three different companies follows.
• Peter Co. provided the following information relative to its 2023 profit and loss:
Profit before income tax P 2,880,000
Income tax expense
Current P 970,000
Deferred 90,000 1,060,000
Profit P 1,820,000

Granada’s first year of operation was 2023. The Company’s tax rate is 30%.
Management decided to use accelerated depreciation for tax purposes and
straight-line method for financial reporting purposes. The amount charged to
depreciation expense in 2023 was P820,000

• Parker Co. provided the following information concerning its plan assets to cover
a defined benefit plan for the year 2023. The interest rate used by the entity is 10%.

January 1 December 31
Fair value of plan assets P 5,000,000 P 5,800,000
Contribution to plan 500,000
Benefits paid to retirees 100,000

• Spider Man Co. had the following loans outstanding in 2023:

 Specific construction loan, 8% interest, P1,000,000
 General purpose loan, 10% interest, P20,000,000.

The entity begun the Self-construction of the building on January 1, 2023 and the
building was contemplated on December 31, 2023. The following expenditures
were made during the year:
 January 1, P3,000,000
 July 1, P6,000,000
 November 1, P9,000,000

Questions:
49. The amount that Peter Co. did deduct for depreciation on its tax return for 2023,
assuming the temporary difference existed between the book income and taxable
income, was
a . P820,000
b. P910,000
c. P1,060,000
d. P1,120,000

50. Parker Co.’s actuarial gain/loss in 2023 taken to other comprehensive income is
a. P100,000 gain
b. P100,000 loss
c. P400,000 gain
d. P400,000 loss

14 | P a g e RSORIANO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

51. The total cost of Spider Man Co.’s new building is

a . P18,000,000
b. P18,730,000
c . P19,440,000
d . P19,800,000

“Just believe in yourself. Even if you don’t, pretend

that you do and, at some point you will.”
-Venus Williams

“Trust yourself, you know more than you think you

do”
-Benjamin Spock

“Keep your dreams alive. Understand to achieve

anything requires faith and belief in yourself, vision,
hard work, determination, and dedication. Remember
all things are possible for those who believe.”
-Gail Devers

“Successful and unsuccessful people do not vary

greatly in their abilities. They vary in their desires to
reach their potential.”
-John Maxwell

Write your name below and claim that in few weeks, it

will be read that way. Good luck and God bless, future
CPAs.

______________________________________,CPA
Proud iCARE Reviewee who successfully passed the
May 2022 CPALE.

15 | P a g e RSORIANO