CARD-MRI DEVELOPMENT INSTITUTE, INC.

FINANCIAL ACCOUNTING AND REPORTING

MOCK BOARD EXAM

Instructions: Choose the best answer for the following questions. This test is composed of 60 questions good for 3
hours. All questions are compulsory and must be attempted. Use the answer sheet for answering this test.

1. Which of the following statements about accounting concepts and the characteristics of financial reporting information is
not correct?
(i) Entities may exclude information that is relevant in financial statements because it is too difficult for users to understand.
(ii) The historical cost concept means that only items capable of being measured in monetary terms can be recognized in the
financial statements.
(iii) Consistency in use of the same accounting policies for the same or similar items from one period to the next is essential to
enhance comparability among the entities.

A. (i) and (ii) B. (i) and (iii) C. (ii) and (iii) D. All of the above

2. What are the correct journal entries to record an accrual in the accounts?
Dr. Cr.
A. Asset Expenses
B. Expenses Liability
C. Liability Expenses
D. Expenses Asset

3. How many CPD credit units are required for accreditation to practice the accountancy profession?
A. 120 units B. 100 units C. 60 units D. 15 units

4. They encompass the conventions, rules, and procedures necessary to define what the accepted accounting practices are
A. Generally accepted accounting principles
B. Accounting assumptions
C. Qualitative characteristics
D. Recognition principles

5. Statement I: Bankruptcy of a partner will dissolve the partnership.

Statement II: A limited partnership shall have at least one general partner.
A. Only Statement I is true C. Both statements are true
B. Only Statement II is true D. Both statements are false

6. At what value non-cash investments of partners will be measured?

A. at fair value B. at face value C. at fair or face value D. Not on the choices

7. Company purchased equipment for use in the business; paid one-third cash and gave note payable for the balance. The entry
will include
A. Debit to an asset account, credit to an asset account
B. Debit to an asset account, debit to another asset account
C. Credit to an asset account, debit to a liability account
D. Debit to an asset account, debit to a liability account

8. An overstatement in an expense account for the prior period will

A. Overstate the income of the prior period
B. Understate the asset of the current period
C. Overstate the asset of the current period
D. Understate the income of the current period

9. Statement I: A fiscal period must begin on January 1.

Statement II: Withdrawals are decrease in equity other than share in the loss of the company’s operations.
A. Only Statement I is true C. Both statements are true
B. Only Statement II is true D. Both statements are false

10. At the end of the year, salaries payable of P3,600 had not been recorded or paid. This is an example of
A. Deferred revenue C. Deferred expense
B. Accrued revenue D. Accrued expense

11. Which of the following is included in the cost of an item of PPE at initial recognition?
A. Costs incurred while an item capable of operating in the manner intended by management has yet to be brought into use or
is operated at less than full capacity
B. Cost of introducing a new product or service (including cost of advertising and promotional activities)
C. Cost of opening a new facility
D. Initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located

12. Major spare parts and stand-by equipment which an entity expects to use over more than one period would qualify as
A. Inventory B.PPE C.Expense D.Deferred charge

13. Which of the following is not a capital expenditure?

A. Repairs that maintain an asset in operating condition C. A betterment
B. An addition D. A replacement

Before a devastating flood consumed the business of Jessele Company, the following records were available:

Gross sales P 400,000 Purchases (no beg. Inventory) P 500,000

Sales discounts 10,000 Purchase discounts 40,000
Net sales P 390,000 Net purchases P 460,000

Jessele sells all goods at a margin of 20%. After the flood, the only goods salvaged by Jessele were goods that:
a. Normally sell for P 14,000 but with net realizable value of P 12,000.
b. Were undamaged and regularly sell for P 30,000.

Determine the following:

14. Estimated inventory before the fire
A. P 140,000 B. P 180,000 C. P 148,000 D. P 188,000

15. Estimated inventory after the fire

A. P 35,200 B. P 41,200 C. P 42,000 D. P 36,000

16. Estimated loss

A. P 98,800 B. P 98,000 C. P 104,000 D. P 104,800

17. How should the partners in a business share in the profits and losses of the partnership?
A. Equally
B. At whatever basis of allocation that the dominating partner deems reasonable
C. In accordance with the partnership agreement
D. Equal to the ratio of initial contribution

18. Which of the following disclosures is not required by PAS 38?

A. Useful lives of the intangible assets
B. Reconciliation of carrying amount at the beginning and the end of the year
C. Contractual commitments for the acquisition of intangible assets
D. Fair value of similar intangible assets used by its competitors

19. The residual value of an intangible shall be assumed to be zero unless

I. There is a commitment by a third party to purchase the asset at the end of its useful life
II. There is an active market for the asset from which FV can be determined whether or not that market will exist at the end of
the asset’s life
A. I only B. II only C. Both I and II D. Neither I nor II

20. For SMEs, intangible assets are amortized (for 10 years if there is no reliable estimate) and impaired
A. As long as the intangible asset is not goodwill
B. Only of the intangible asset is goodwill
C. Only if the intangible asset has an indefinite useful life
D. For all intangibles

21.Graham purchased all the outstanding ordinary shares of Chestnut Travel Corporation. Chestnut has one asset whose
market value exceeds its book value by P 10,000. Chestnut’s equity is P 80,000. Graham agreed with Chestnut that its excess
earnings would last for 10 years and Graham was granted a 10% return on the investment. Chestnut’s average income for
negotiation purposes is estimated at P 40,000 and the industry average rate of return is 30% on market value of net assets.

Using the “present value of excess earnings” approach to the calculation of goodwill, what is the purchase price paid for
Chestnut?
A. P 335,782 B. P 79,880 C. P 220,000 D. P 169,880

22. The top governing body of a corporation is known as the

A. incorporators B. shareholders C. management D. board of directors
23. The difference between the issued shares and outstanding shares of stocks is
A. authorized stock B. common stock C. preferred stock D. treasury stock

24. Statement I: An individual is allowed to establish a corporation, it is called one person corporation.
Statement II: Domestic corporation is organized under Philippine laws.
A. Only Statement I is incorrect C. Both statements are incorrect
B. Only Statement II is incorrect D. Both statements are correct

25. Checks recorded on company’s books that are not paid by the bank are
a. Added to the balance per book under deposit in transit
b. Added to the balance per bank under deposit in transit
c. Added to the balance per book under outstanding checks
d. Added to the balance per bank under outstanding checks

26. Which of the following interest component calculation bases is least susceptible to manipulation when allocating profits
and losses to partners?
A. Beginning capital account balance
B. Average of beginning and ending capital account balances
C. Weighted average capital account balance
D. Ending capital account balance

27. Which of the following statement is correct?

A. Net income is 100% if bonus is 25% of net income after salary and interest.
B. Bonus is P1,400 if net income after salary and interest is P7,000, and bonus is 25% computed based on net income after
salary and interest but before bonus.
C. Bonus is P1,400 if net income after salary and interest is P7,000, and bonus is 25% computed based on net income after
salary, interest and bonus.
D. None of the above choices is correct.

28. An investment property, carried at P 400,000 under the fair value model has P 380,000 fair value at the current reporting
period. The entity decided to shift to the cost model. What should be loss on transfer?
A. P 0 B. P 20,000 P/L C. P 20,000 OCI D. P 20,000 R/E

29. It is called the listing of all accounts

A. Journal B. Chart of accounts C. Ledger D. Worksheet

30. Company ordered inventory on June 27, 2023. The same inventory arrived on July 15, 2023. Shipping term is FOB Shipping
point, Freight Prepaid. Who will record the inventory on June 30?
A. Seller B. Buyer C. Shipping company D. Depends on the agreement of both parties

31. All of the following allowed to open a corporation, except

A. an individual person
B. CPAs in practice of public accountancy
C. CPAs in textile industry
D. 9 Filipinos and 1 foreign

32. All of the following are disadvantages of a corporation, except

A. Tax regulations by government
B. Limited liability
C. Complexity in formation
D. Higher cost in formation

33. Statement I: FOB Shipping point means that it is the seller who will shoulder the shipping fee.
Statement II: FOB Destination means that it is the buyer who will shoulder the shipping fee.
A. Only Statement I is incorrect C. Both statements are incorrect
B. Only Statement II is incorrect D. Both statements are correct

34. OnlyYou Corporation declared cash dividend on December 2, 2023. The payment happened on March 15, 2024 for all shares
outstanding until February 15, 2024. When should the liability be recorded in the books of OnlyYou Corporation?
A. December 2 B. December 31 C. February 15 D. March 15

35. Purchases discounts are

A. deducted from purchases on the income statement.
B. addition to purchases.
C. deducted only if availed by the company
D. added only if availed by the company
During 2019, Novel Laboratories incurred costs to develop and produce a routine, low-risk computer software product as
follows:

Completion of detailed program P 325,000

Costs incurred for coding and testing to establish technological feasibility 250,000
Other coding and testing costs after establishment of technological feasibility 1,100,000
Costs of producing product masters for training materials 375,000
Duplication of computer software and training materials from product masters (1,000 units) 625,000
Packaging product (500 units) 225,000

Determine the following:

36. Research and development expense
A. P 0 B. P 575,000 C. P 850,000 D. P 1,675,000

37. Inventory
A. P 625,000 B. P 850,000 C. P 1,000,000 D. P 1,225,000

38. Intangible asset

A. P 1,350,000 B. P 1,425,000 C. P 1,475,000 D. P 1,725,000

39. Langyaw’s unadjusted prepaid expense account at December 31, 2023 revealed the following:
i. An opening balance at P15,000 for Langyaw comprehensive insurance policy, she paid an annual premium of P30,000 on July
1, 2022.
ii. A P32,000 annual insurance premium payment made on July 1, 2023.
iii. A P20,000 advance rental payment for a warehouse leased for one year beginning on January 1, 2024.

In its December 31, 2023 balance sheet, what amount should Langyaw report as prepaid expense?
A. P52,000 B. P36,000 C. P20,000 D. P16,000

An entity had the following bank reconciliation on June 30:

Balance per bank statement, June 30 P3,000,000
Add: Deposit in transit, June 30 400,000
Total 3,400,000
Less: Outstanding checks, June 30 900,000
Balance per book, June 30 P2,500,000
The bank statement for the month of July showed the following:
Deposits (including P200,000 note collected for the entity) P9,000,000
Disbursements (including P140,000 NSF check and P10,000
service charge) 7,000,000
All reconciling items on June 30 cleared through the bank in July. The outstanding checks totaled P600,000 and the deposits
in transit amounted to P1,000,000 on July 31.

40. What is the amount of cash receipts per books in July?

a. P8,400,000 b. P9,400,000 c. P9,600,000 d. P9,800,000

41. What is the amount of cash disbursement per books in July?

a. P5,950,000 b. P6,550,000 c. P6,700,000 d. P7,450,000

For the next set of requirements:

The following harvest transactions occurred during the period for The farms:

Harvest period:
Produce FV less cost to sell Net realizable value
Meat P 50,000 P 53,000
Milk 40,000 39,000

The carrying value of the slaughtered animals was P 47,000

End of reporting period:

Produce FV less cost to sell Net realizable value
Meat P 47,000 P 48,000
Milk 41,500 42,500

Determine the following:

42. Measurement of produce on initial recognition
A. P 90,000 B. P 92,000 C. P 89,000 D. P 83,000
43. Measurement of inventories at year-end
A. P 90,000 B. P 88,000 C. P 88,500 D. P 90,500
44. Loss on write-down of inventories
A. Zero B. P 1,500 C. P 2,000 D. P 1,000
45. Total income from harvest
A. P 90,000 B. P 93,000 C. P 40,000 D. P 43,000

46. Animo Farms produced 300,000 pounds of cotton during the 2019 season. Animo sells all of its cotton to Bryan Co., which
has agreed to purchase Animo’s entire production at the prevailing market price. Recent legislation assures that the market
price will not fall below P .70 per pound during the next two years. Animo’s costs of selling and distributing the cotton are
immaterial and can be reasonably estimated. Animo reports its inventory at expected exit value.

During 2019, Animo sold and delivered to Bryan 200,000 pounds at the market price of P .70. Animo sold the remaining
100,000 pounds during 2020 at P .72.

What amount of revenue should Animo recognize in 2019?

A. P 140,000 B. P 144,000 C. P 210,000 D. P 216,000

47. What amount of revenue should Animo recognize in 2020?

A. P0 B. P 72,000 C. P 6,000 D. P 2,000

The company maintains its current account with the Alayan Bank. The book on December 31, 2022 showed a balance of
P638,340.

 A check for P22,500 received from a customer whose account is current had been deposited and then returned
by the bank on December 28, 2022. No entry was made for the return of this check. The customer replaced the
check on January 15, 2023.
 Received a customer’s check on December 20 for P5,720 but was recorded by the company as P7,520. The
company made the correction on January 2, 2023.
 A check for P3,500 representing payment of an employee advance was received and deposited on December 27,
2022, but was not recorded in the books until January 3, 2023.
 Customers’ checks totaling P200,000 was included in the record of the company’s cash balance.

Below are the items that represent collection of customers’ accounts receivable:

Customer Amount Date mailed Date in the check

Maalab Company P90,000 December 26, 2022 January 11, 2023
Madamdamin Enterprises P45,000 December 20, 2022 December 20,2022
Masipag Co. P65,000 December 16, 2022 December 31, 2022

The company set up an imprest fund system of P40,000. Various company expenses from the imprest fund system dated
December 2022 totaled P20,250, while those dated January 2023 amounted to P6,800. The ledger shows a balance of
petty cash fund as P17,000. A replenishment of the petty cash fund was made on January 5, 2023.

48. What is the adjusted Petty cash fund balance on December 31, 2022?
a. P33,200 b. P12,950 c. P40,000 d. P19,750
49. The petty cash shortage on December 31, 2022 is
a. P16,200 b. P4,050 c. P2,750 d. P 0
50. What is the amount of cash that should be reported on December 31, 2022?
a. P527,540 b. P547,290 c. P540,490 d. P567,540

51. Emma Company is a dealer in equipment. On January 1, 2023, the entity sold equipment in exchange for a noninterest
bearing note requiring five annual payments of P800,000. The first payment was made on December 31, 2023. The market
rate for similar notes was 8%. The PV of 1 at 8% for 5 periods is 0.68 and The PV of an ordinary annuity of 1 at 8% for 5
periods is 3.99.
What is the carrying amount of the note receivable to be recognized by Emma on December 31, 2023?
a. 3,200,000 b. 2,647,360 c. 2,937,600 d. 3,447,360

52. The following information appears in Mimliya Company’s records for the year ended December 31, 2021:
Inventory, January 1 650,000
Purchases 2,300,000
Purchase returns 80,000
Freight in 60,000
Sales 3,400,000
Sales discounts 20,000
Sales returns 30,000
 On December 31, 2021, a physical inventory revealed that the ending inventory was only P420,000. The gross profit
on sales has remained constant at 30 percent in recent years. Mimliya Company suspects that some inventory may
have been pilfered by one of the entity’s employees.
On December 31, 2021, what is the estimated cost of missing inventory?
a. 151,000 b. 165,000 c. 420,000 d. 585,000

An entity’s accountant is preparing its October bank reconciliation and has collected the following data:
Per Books Per Bank
October 1 balance P11,600 P10,000
October deposits 24,600 21,200
October checks 27,800 26,500
Note collected (includes 10% interest) - 4,800
October service charge - 500
October 31 balance 8,400 9,000
Additionally, deposits in transit and outstanding checks from September's reconciliation were, P4,400 and P2,800
respectively.

53. The deposits in transit at October 31 is

a. P12,600 b. P 8,200 c. P7,800 d. P3,400

54. The outstanding checks at October 31

a. P4,600 b. P4,100 c. P1,800 d. P1,300

55. Savery Lace and Boxes sold merchandise with a P150,000 list price on July 1, 2029, trade discount is 30% with a credit
terms of 2/10, n/30. Payment by the buyer was received on July 8. Compute for the amount recorded as sale.
A. P105,000 B. P 150,000 C. P 102,900 D. 147,000

56. Savery Lace and Boxes sold merchandise with a P150,000 list price on July 1, 2029, trade discount is 40% with a credit
terms of 1/15, n/30. Payment by the buyer was received on July 28. Compute for the amount recorded as sale.
A. P90,000 B. P 89,100 C. P 148,500 D. 150,000

Use the data below for items 57-60

Manubok Company income statement is presented below:

Net sales ?
Merchandise inventory 1/1/2019 ?
Net purchases P80,000
Goods available for sale 110,000
Merchandise inventory, 1/31/2019 40,000
Cost of goods sold ?
Gross profit P50,000

57. Manubok Company’s net sales is

A. P 30,000 B. P 70,000 C. 120,000 D. P190,000

58. Manubok Company’s beginning balance of merchandise inventory is

A. P 30,000 B. P 70,000 C. 190,000 D. P150,000

59. Manubok Company’s cost of goods sold is

A. P 30,000 B. P 70,000 C. 120,000 D. P150,000

60. Bebe Ko Corporation issued 300,000, P90.00 par value for P120.00. At what amount will the asset be increased?
A. P 36,000 B. P27,000 C. P9,000 D. P2,700

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