Overview of Accounting

PROBLEM 1: TRUE OR FALSE

1. FALSE
2. FALSE - measuring
3. TRUE
4. TRUE
5. FALSE
6. FALSE
7. FALSE
8. TRUE
9. FALSE
10. TRUE
PROBLEM 2: MULTIPLE CHOICE
1. A
2. D
3. B
4. B
5. C
6. C
7. C
8. D
9. C
10. B
PROBLEM 3: MULTIPLE CHOICE
1. D
2. D
3. A
4. B
5. B
6. B
7. E
8. B
9. D
10. B

PROBLEM 4: FOR CLASSROOM DISCUSSION

1. D
2. C
(a) Depreciation necessarily takes into account estimates of useful life and
residual value.
(b) Cost of goods sold may be affected by write-downs of inventory to net
realizable value. NRV is estimated selling price less estimated costs of
completion and costs to make the sale. Thus, COGS may be valued by
opinion.
(c) Discount on share capital represents the excess of par value of shares
issued over the fair value of the consideration received. This is valued by
fact because it is not affected by estimates.
(d) Various estimated expenses and income are closed to retained
earnings. Thus, retained earnings is affected by estimates.

3. D
4. C
5. D
6. D
7. A
8. D
9. A
10. C - equal authority

Conceptual Framework for Financial Reporting

PROBLEM 1: TRUE OR FALSE
1. FALSE – e.g., contributions from, and distributions to, the entity’s
owners result to changes in equity but these do not result from the
entity’s financial performance.
2. FALSE – The qualitative characteristics apply to information in the
financial statements as well as to financial information provided in
other ways.
3. FALSE
4. TRUE
5. FALSE
6. TRUE
7. FALSE
8. FALSE
9. TRUE
10. FALSE – mainly to primary users only and not necessarily to all
external users.
PROBLEM 2: TRUE OR FALSE
1. FALSE
2. TRUE
3. FALSE
4. TRUE
5. TRUE
6. TRUE
7. TRUE
8. FALSE – Historical cost may need to be updated for the asset’s
depreciation, impairment, or unwinding of discount or premium.
9. TRUE
10. TRUE
PROBLEM 3: MULTIPLE CHOICE
1. A
2. A
3. A
4. D
5. D
6. C
7. D
8. A
9. C
10. A
11. D
12. A
13. B
14. C
Explanation: Choices (a) and (b) can affect recognition decisions about
an asset or liability but not necessarily the existence of the asset or
liability.
15. B

PROBLEM 4: MULTIPLE CHOICE

1. A
2. C
3. A
4. D
5. C
6. D
7. D
8. B
9. A
Explanation: Choice (a) is the least accurate statement. General
purpose financial reports are mainly intended for primary users, and
not equally to all types of external users. For example, a government
regulatory agency is considered an external user but not a primary
user.
10. A
PROBLEM 5: FOR CLASSROOM DISCUSSION
1. D
2. D
3. C
4. D
5. C
6. A
7. B
8. D
9. A
10. B
11. D
12. A
13. C
14. A
15. D
16. D
Explanations:
 Choice (c) is correct. For example, if Entity B delivers the goods
before Entity A pays the purchase price, Entity A will record the
receipt of delivery as debit to ‘Inventory’ or ‘Purchases’ and credit to
‘Accounts payable’ (i.e., a liability).
 Choice (d) is incorrect. If Entity A performs its obligation first, Entity
A’s combined right and obligation changes to an asset, not a liability.
For example, if Entity A pays the purchase price before Entity B
delivers the goods, Entity A will record the payment as debit to
‘Advances to suppliers’ (i.e., an asset) and credit to ‘Cash’.
17. D
18. C
19. D
20. D
21. C
22. C
23. D
24. A
25. A

PAS 1 Presentation of Financial Statements

PROBLEM 1: TRUE OR FALSE
1. TRUE
2. TRUE
3. FALSE
4. FALSE
5. FALSE
6. FALSE
7. FALSE
8. FALSE
9. FALSE
10. FALSE
PROBLEM 2: MULTIPLE CHOICE
1. A
2. B
3. A
4. A
5. A
6. D
7. D
8. D
9. A
10. B
PROBLEM 3: MULTIPLE CHOICE
1. B
2. A
3. D
4. C
5. A
6. C
7. B
8. C
9. C
10. D
PROBLEM 4: FOR CLASSROOM DISCUSSION
1. A
2. B
3. D
4. A
5. C
6. D
7. A
8. C
9. C
10. B
11. D

PAS 2 Inventories
PROBLEM 1: TRUE OR FALSE
1. FALSE
2. FALSE
3. TRUE
4. FALSE
5. TRUE
6. TRUE
7. FALSE
8. TRUE
9. FALSE
10. TRUE
PROBLEM 2: MULTIPLE CHOICE
1. D
2. A
3. C
4. D
5. C
6. A
7. D
8. D
9. A
10. A
PROBLEM 3: FOR CLASSROOM DISCUSSION
1. C
2. A
Solution:
Ending inventory, in units = (3,000 + 2,250 + 10,200 – 2,700 – 7,200) = 5,550

Units Unit cost Total cost

Ending inventory in units 5,550
Allocation to latest purchases:
Jan. 26 2,250 20.60 46,350
Jan. 6 (balance) 3,300 21.50 70,950
Ending inventory in pesos 117,300

TGAS (58,650 + 219,300 + 46,350) 324,300

Less: Ending inventory in pesos (117,300)
COGS 207,000

3. C Solution:
TGAS in pesos
Weighted ave. unit cost =
TGAS in units
(58,650 + 219,300 + 46,350) = 324,300
Weighted ave. unit cost =
(3,000 + 10,200 + 2,250) = 15,450

Weighted ave. unit cost = 20.99

Ending inventory in units 5,550

Multiply by: Wtd. Ave. Cost 20.99
Ending inventory in pesos 116,495

TGAS in pesos 324,300

Less: Ending inventory in pesos (116,495)
COGS 207,805

4. B Solution:
Units Unit Cost Total Cost
Balance at January 1, 2002 3,000 19.55 58,650
January 6, 2002 10,200 21.5 219,300
TGAS 13,200 21.06 277,950
January 7, 2002 (2,700) 21.06 (56,862)
January 26, 2002 2,250 20.6 46,350
TGAS 12,750 20.98 267,438
 January 31, 2002 (7,200) 20.98 (151,056)
Ending inventory 5,550 116,382

COGS = (56,862 + 151,056) = 207,918

5. D Solution:
Product A Product B Product C Total
Purchase price 100,000 250,000 300,000
Freight-in 12,000 30,000 36,000
Cost 112,000 280,000 336,000

Selling price 210,000 300,000 570,000

Freight-out (10,500) (75,000) (11,400)
NRV 199,500 225,000 558,600

Lower 112,000 225,000 336,000 673,000

PAS 7 Statement of Cash Flows

PROBLEM 1: TRUE OR FALSE
1. FALSE
2. TRUE
3. FALSE
4. TRUE
5. FALSE
PROBLEM 2: MULTIPLE CHOICE
1. C 35,000 + 75,000 + 350,000 = 460,000
2. C
3. D
4. B
5. A
PROBLEM 3: FOR CLASSROOM DISCUSSION
1. B (300,000 + 700,000 + 500,000 + 1,600,000) = 3,100,000
2. D
3. D
4. B
5. D

PAS 8 Accounting Policies, Changes in

Accounting Estimates and Errors
PROBLEM 1: MULTIPLE CHOICE
1. A
2. B
3. D
4. A
5. C
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C
2. D
3. A
4. C
5. C

PAS 10 Events after the Reporting Period

PROBLEM 1: MULTIPLE CHOICE
1. A
2. C
3. D
4. C
5. C
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. B
2. B
3. B 600,000 add back excessive provision of 10,000 (i.e., 40,000 less 50,000) =
610,000 adjusted profit
4. C
5. D

PAS 12 Income Taxes

PROBLEM 1: MULTIPLE CHOICE
1. B
2. B
3. A
4. B
5.
Solution:
Income tax expense 600 (SQUEEZE)
Less: Increase in DTL -
Add: Increase in DTA 100
Current tax expense 700 START

6. D
7. A
8. A
9. B
10. C
11. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. B
2. A
3. B
4. A
5. A

PAS 16 Property, Plant and Equipment

PROBLEM 1: MULTIPLE CHOICE
1. D
2. D
3. D
4. D
5. D
6. D
7. D
8. B
9. D
10. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. D (800K – 10K + 20K + 40K + 30K + 10K) = 890,000

2. B (890,000 – 90,000) ÷ 10 = 80,000;

890,000 – (80,000 x 2 years) = 730,000
3. C 820,000 fair value – 730,000 carrying amount on 12/31/x2 = 90,000;
(820,000 fair value – 90,000 residual value) ÷ 8 yrs. = 91,250
4. B (1,700,000 x 90%) – 1,900,000 = (370,000)
The revaluation surplus is transferred directly to retained earnings.
Hence, it does not affect the gain or loss on the sale.

PAS 19 Employee Benefits

PROBLEM 1: MULTIPLE CHOICE
1. A
2. C
3. A (8M x 5%) ÷ 6 employees currently employed as at year-end =
66,667
4. A
5. B
6. C
7. D
8. C
9. C
10. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. D [(20 employees x 1 day x 12 months) – 150 days] x ₱1,000 x 105% =
94,500.
The 20% employee turnover rate is irrelevant because the
employee benefits are monetized.
2. D
3. B Solution: 2,900,000 PV of DBO – 2,600,000 FVPA = 300,000 deficit
4. B Solution: 400,000 service cost + 20,000 net interest (see computations
below) = 420,000
5. C
Solution:
Service cost:
(a) Current service cost 400,000
(b) Past service cost -
(c) Any (gain) or loss on settlement -
400,000
Net interest on the net defined benefit liability (asset):
(a) Interest cost on the DBO (2M, beg. x 10%) 200,000
(b) Interest income on plan assets (1.8M, beg. x 10%) (180,000)
(c) Interest on the effect of the asset ceiling -
20,000
Remeasurements of the net defined benefit liability (asset):
(a) Actuarial (gains) and losses 200,000
(b) Difference between interest income on plan assets and
return on plan assets (180,000 – 120,000) 60,000
(c) Difference between the interest on the effect of the asset
-
ceiling and change in the effect of the asset ceiling
260,000
Total Defined Benefit Cost 680,000

PAS 20 Accounting for Government Grants and

Disclosure of Government Assistance
PROBLEM 1: MULTIPLE CHOICE
1. B
2. A
3. C
4. D
5. C
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. D
2. C
 20x1 = 0, no depreciation yet is recognized from the building;
therefore, no income yet is recognized from the government
grant (i.e., ‘matching’). The building starts to be depreciated in
20x2.
 20x2 = 20,000 (200,000 ÷ 10 years)
3. B Gross presentation: (1M x 9/10) = 900,000;
Net presentation: (1M – 200K) x 9/10 = 720,000
4. A Gross presentation: (1M ÷ 10) = 100,000;
Net presentation: (1M – 200K) ÷ 10 = 80,000
5. A

Foreign Exchange Rates

PROBLEM 1: MULTIPLE CHOICE
1. D
2. A
3. D
4. A
5. B

PROBLEM 2: FOR CLASSROOM DISCUSSION

1. A [$1,000 x (52 – 50)] = 2,000 gain
2. D [$1,000 x (47 – 52)] = 5,000 loss
3. D
Solution:
(₱10M total assets - ₱5M total liabilities) ÷ ₱10 closing rate = ¥500,000
translated equity
4. A
Solution:
₱3M profit ÷ ₱8 average rate = ¥375,000 translated profit
5. A
Solution:
Translated share capital = (₱2M ÷ ₱5 historical) = ¥400,000
Translated retained earnings (see table below)
in
in pesos Rate yuans
Retained earnings, beginning 0 (not applicable) 0 (a)
Profit 3M 8 375K
Retained earnings, end. 3M 375K

(a)
Entity A has no beginning retained earnings because it has just started
operations during the year.
Translated share capital 400,000
 Translated retained earnings 375,000
Exchange difference
(squeeze) (275,000)
Translated equity 500,000

PAS 23 Borrowing Costs

PROBLEM 1: MULTIPLE CHOICE
1. A
2. B
3. D
4. D
5. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C
2. A (6M x 12%) – 180,000 = 540,000

3. D
Solution:
The average expenditure is computed as follows:
Month
Date Expenditures outstanding over Average expenditure
12 Months
(a) (b) (c)= (a) x (b)

Jan.1 5,000,000 12/12

5,000,000
Mar. 1 4,000,000 10/12
3,333,333
Aug. 31 3,000,000 4/12
1,000,000
Dec. 1 2,000,000 1/12
166,667

9,500,000

The capitalization rate is computed as follows:

Total interest expense on general borrowings

Capitalization rate =
Total general borrowings

Total interest expense on general borrowings

(1M x 12%) + (8M x 10%) 920,000
Divide by: Total general borrowings (1M + 8M) 9,000,000
Capitalization rate 10.22%

Capitalizable BC from formula = 9,500,000 x 10.22% = 970,900

970,900 vs. 920,000 actual borrowing costs = Capitalizable BC is 920,000,

the lower amount

4. C (5M + 4M + 3M + 2M total expenditures on construction) + 920,000

capitalizable borrowing costs = 14,920,000
5. C
PAS 24 Related Party Disclosures
PROBLEM 1: MULTIPLE CHOICE
1. C
2. D
3. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C
2. A
3. B
4. A

PAS 26 Accounting and Reporting by

Retirement Benefit Plans
PROBLEM 1: MULTIPLE CHOICE
1. A
2. B
3. A
4. A
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. D
2. D
PAS 27 Separate Financial Statements
PROBLEM 1: MULTIPLE CHOICE
1. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. D

PAS 28 Investments in Associates and Joint

Ventures
PROBLEM 1: MULTIPLE CHOICE
1. B
2. B
3. C
4. A
Solution:
Investment in associate
3/31/x1 500,000
Sh. in P (1M x 20% x 9/12) 150,000 60,000 Dividends (300K x 20%)
40,000 Sh. in L (200K x 20%
- Dividends
550,000 12/31/x2

PROBLEM 2: FOR CLASSROOM DISCUSSION

1. C
Solution:
Investment in associate
1/1/x1 600,000
Sh. in profit (200K x 30%) 60,000 15,000 Dividends (50K x 30%)
645,000 12/31/x1

2. B [4M profit – (10M x 5%)] x 20% = 700,000

3. B

PAS 29 Financial Reporting in Hyperinflationary

Economies
PROBLEM 1: MULTIPLE CHOICE
1. C
2. B
3. A
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C Building: 900,000 x 150/100 = 1,350,000; The accounts receivable is
not restated because it is a monetary item.
2. A 1,200,000 x 200/180 = 1,333,333

PAS 32 Financial Instruments: Presentation

PROBLEM 1: MULTIPLE CHOICE
1. B
2. B
3. B
4. A
5. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. B
2. D
3. B
Solution:
Issue price 2,600,000
Fair value of debt instrument without equity feature (2M x 102%) (2,040,000)
Equity component 560,000

4. D
5. A - Offsetting is not permitted because Entity A does not intend to
settle the financial instruments on a net basis.

PAS 33 Earnings per Share

PROBLEM 1: MULTIPLE CHOICE
1. A
2. C
3. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C
Solution:

Date No. of sh. Months outstanding Weighted average

(a) (b) (c) = (a) x (b)
1/1/20x1 120,000 12/12 120,000
3/1/20x1 42,000 10/12 35,000
9/30/20x1 20,000 3/12 5,000
11/1/20x1 (12,000) 2/12 (2,000)
158,000

Basic Profit (Loss) less Preferred dividends

=
EPS Weighted average number of outstanding ordinary shares

Basic 2,800,000 – (100,000 x ₱10 x 10%)

=
EPS 158,000

Basic EPS = ₱17.09

2. A [(-1M) – 50K] ÷ 100,000 = -1,050,000 ÷ 100,000 = -10.5

3. C
Solution:
 The weighted average number of ordinary shares outstanding are
adjusted retrospectively as follows:

20x1 20x2
1/1 (200,000 x 110% x 2) 440,000 (200,000 x 110% x 2 x 12/12) 440,000
4/1 (20,000 x 110% x 2 x 9/12) 33,000
9/30 -
11/1 -
Weighted average 440,000 473,000

20x2 20x1
Profit after tax 2,200,000 1,800,000
Adjusted weighted ave. no. of outstanding sh. 473,000 440,000
Basic EPS 4.65 4.09

4. A
Solution:
Aggregate mkt. value of shares before exercise of rts.
(200,000 sh. x ₱180) 36,000,000
Add: Proceeds from exercise of rts. [(200,000 rts. ÷ 5) x ₱120] 4,800,000
Total 40,800,000
Divide by: Outstanding shares after exercise of rts.
[200,000 sh. before exercise + (200,000 rts. ÷ 5 rts. per sh.)] 240,000
Theoretical ex-rights fair value per share 170

Fair value of stocks immediately before the exercise of

Adjustment rights
=
factor
Theoretical ex-rights fair value per share

 The adjustment factor is 180/170.

Jan. 1: (200,000 x 180/170 x 4/12) 70,588

May. 1: (240,000 x 8/12) 160,000
Weighted average no. of outstanding ordinary shares 230,588

Profit for the year 2,900,000

Divide by: Weighted average no. of outstanding sh. 230,588
Basic earnings per share 12.58

5. C
Solution:
 Profit (Loss) plus After tax interest expense on convertible
bonds
Diluted
EPS
=
Weighted average number of outstanding ordinary shares
plus Incremental shares arising from the assumed
conversion or exercise of dilutive potential ordinary shares

Diluted 800,000 + (2,000,000 x 12% x 70%*)

EPS
=
100,000 + [(2,000,000 ÷ 1,000) x 30]
*70% = 1 – 30% tax rate
Diluted EPS = (968,000 ÷ 160,000) = 6.05

PAS 34 Interim Financial Reporting

PROBLEM 1: MULTIPLE CHOICE
1. D
2. C
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. D
2. C
3. B (120,000 x ¼) + (600,000 – 510,000) + (60,000 x ¼) = 135,000

PAS 36 Impairment of Assets

PROBLEM 1: MULTIPLE CHOICE
1. D
2. C
3. C
4. B
PROBLEM 2: FOR CLASSROOM DISCUSSION
Use the following information for the next two questions:
1. A
Solution:
Recoverable amount (higher of FVLCD and VIN) 1,080,000
Less: Carrying amount (2,000,000 – 600,000) (1,400,000)
Impairment loss (320,000)

2. D Solution:
C.A had no imp. loss been recognized in prior pd. 1,200,000*
C.A. at date of reversal (1,080,000 x 5/6) 900,000
Gain on reversal of impairment loss (profit or loss) 300,000

*Lower than new recoverable amount.

 PAS 37 Provisions, Contingent Liabilities and
Contingent Assets
PROBLEM 1: MULTIPLE CHOICE
1. D
2. D
3. B
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C
2. D
3. C
PAS 38 Intangible Assets
PROBLEM 1: MULTIPLE CHOICE
1. B
2. D
3. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. B
Solution:
Cost 600,000
Residual amount -
Depreciable amount 600,000
Divide by: (Shorter of useful life and remaining legal life (a)) 20
Annual amortization expense 30,000

Carrying amount 12/31/x1 = 600,000 – 30,000 = 570,000

2. B (300,000 + 620,000) = 920,000
3. A
PAS 40 Investment Property
PROBLEM 1: MULTIPLE CHOICE
1. C
2. A
3. B
4. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. E
2. D
3. A
4. C (10,000,000 + 10,000 + 30,000 + 25,000) = 10,065,000
5. A
 PAS 41 Agriculture
PROBLEM 1: MULTIPLE CHOICE
1. D
2. C
3. D
4. D
5. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. D
2. C
3. C
4. A
5. D – Choice (a) is incorrect - fair value less costs to sell, not fair value.
Choice (b) is incorrect - gain or loss may arise from the initial
measurement of a biological asset. Choice (c) is incorrect -
agricultural produce is measured at the lower of cost and NRV in
accordance with PAS 2 or some other applicable standard.

PFRS 1 First-time Adoption of Philippine

Financial Reporting Standards
PROBLEM 1: MULTIPLE CHOICE
1. D
2. C
3. C
4. C
5. B
PROBLEM 2: MULTIPLE CHOICE
1. E
2. C
3. C
4. B
5. D
6. B
7. B
8. D
9. A
Solution:
 Accounting:
PFRS principle Application
Advertising costs are expensed in  Derecognize the deferred
the period in which they are advertising costs and charge
incurred, i.e., when the them directly to retained
advertisement has been made earnings.
known to the public.

10. A

PFRS 2 Share-based Payment

PROBLEM 1: MULTIPLE CHOICE
1. D
2. D
3. B
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C (600 x 100 x 100) x 95% x 1/3 = 1,900,000
2. C (600 x 100 x 100) x 94% x 2/3 = 3,760,000 - 1,900,000 = 1,860,000
3. C (600 x 100 x 100) x 95% x 3/3 = 5,700,000 - 3,760,000 = 1,940,000

PFRS 3 Business Combinations

PROBLEM 1: MULTIPLE CHOICE
1. B
2. D
3. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. B
Solution:
Fair value of identifiable assets acquired excluding
goodwill (4,000,000 total assets – 50,000 goodwill) 3,950,000
Less: Fair value of liabilities assumed (1,000,000)
Fair value of identifiable net assets acquired 2,950,000

Fair value of identifiable net assets acquired 2,950,000

Multiply by: Non-controlling interest (100% - 75%) 25%
NCI’s proportionate share in identifiable net assets 737,500

 Goodwill (Negative goodwill) is computed as follows:

Consideration transferred 2,500,000
NCI in the acquire 737,500
Previously held equity interest in the acquire -
Total 3,237,500
(2,950,000
Less: Fair value of identifiable net assets acquired )
Goodwill 287,500
The ₱250,000 transaction costs are expensed. Acquisition-related costs do
not affect the measurement of goodwill.

PFRS 5 Non-current assets Held for Sale and

Discontinued Operations
PROBLEM 1: MULTIPLE CHOICE
1. C
2. A
3. D
4. C
5. B
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C
2. D
3. C
4. B
5. D

PFRS 6 Exploration for and Evaluation of

Mineral Resources
PROBLEM 1: MULTIPLE CHOICE
1. B
2. C
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C
2. C

PFRS 7 Financial Instruments: Disclosures

PROBLEM 1: MULTIPLE CHOICE
1. D
2. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C
2. C

PFRS 8 Operating Segments

PROBLEM 1: MULTIPLE CHOICE
1. D
2. C
3. D
4. B
5. C
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. B
2. C
3. B
Solution:
 Revenue test (340,000 threshold: Segments A, B, D and F)
 Profit test (86,000 threshold: Segments A, B and F)
 Assets test (930,000 threshold: Segments A, B, D, and F)
 Reportable segments: A, B, D, and F

PFRS 9 Financial Instruments

PROBLEM 1: MULTIPLE CHOICE
1. A
2. B
3. B
4. B
5. B
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. A
2. C
3. D

Statements
PROBLEM 1: MULTIPLE CHOICE
1. C
2. B
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. A
Solution:
Consolidate
Entity A Entity B
d
Cash in bank 12,000 6,000 18,000
Accounts rec. 36,000 14,400 50,400
(48K +
Inventory 48,000 27,600
37.2K) 85,200
Inv. in sub. 90,000 - eliminated -
Building, net 216,000 48,000 (216K + 57.6K) 273,600
Goodwill given 3,600
 Total assets 402,000 96,000 430,800

Accounts
60,000 7,200
payable 67,200
Share capital 204,000 60,000 parent's only 204,000
Share premium 78,000 - parent's only 78,000
Retained
28,800 parent's only
earnings 60,000 60,000
NCI in net assets given 21,600
Total liab. &
342,000 96,000 430,800
equity

2. D 204,000 + 78,000 + 60,000 + 21,600 (see table above) = 363,600

PFRS 11 Joint Arrangements

PROBLEM 1: MULTIPLE CHOICE
1. C
2. A – the joint arrangement is a joint venture. Accordingly, Tech Co.
will use the equity method to account for its investment in Mecha Co.

3. B
4. C
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. A
2. C
3. B - 1M own sales + (400K x 50% share in JO’s sales) = 1.2M
4. B - 1M + (1M x 50%) – (600K x 50%) = 1.2M

PFRS 12 Disclosure of Interests in Other

Entities
PROBLEM 1: MULTIPLE CHOICE
1. D
2. D
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. D
2. A
PFRS 13 Fair Value Measurement
PROBLEM 1: MULTIPLE CHOICE
1. D
2. D
3. B
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. A
2. C
3. B (130,000 – 10,000) = 120,000
4. D
Solution:
The “most advantageous market” is determined as follows:
Active Market #1 Active Market #2
Quoted price 130,000 135,000
Transport costs (10,000) (12,000)
Costs to sell (2,000) (3,000)
Net sale proceeds 118,000 120,000

The fair value is computed as follows:

135,000 price in active market #2 – 12,000 transport costs = 123,000
PFRS 14 Regulatory Deferral Accounts
PROBLEM 1: MULTIPLE CHOICE
1. C
2. B
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C
2. D

PFRS 15 Revenue from Contracts with

Customers
PROBLEM 1: MULTIPLE CHOICE
1. A
2. A – Contract 3 is a lease. It will be accounted for under PFRS 16,
rather than PFRS 15.
3. A
4. D
5. B
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. C
2. D
3. D
4. C
5. D
6. A
7. A
8. D
PROBLEM 1: MULTIPLE CHOICE
1. C
2. B
3. C - Choice (d) is incorrect. Under a sublease, the lessee is also the
lessor of the same leased asset.
4. C
5. C
PROBLEM 2: FOR CLASSROOM DISCUSSION
1. B
Solution:
Fixed payments 220,000
Multiply by: PV of an ordinary annuity of ₱1 @10%,
n=4 3.16987
Lease liability 697,371

2. A
Solution:
Cost of right-of-use asset 697,371
Divide by: Lease term (shorter) 4
Annual depreciation 174,343

Since the lease contract neither provides for the transfer of ownership to
the lessee nor a ‘reasonably certain’ purchase option, the asset is
depreciated over the shorter of its useful life (10 yrs.) and the lease term
(4 yrs.).
3. D
4. A
5. B
Solution:
Fixed payments 220,000
Multiply by: PV of an ordinary annuity of ₱1 @10%,
n=4 3.16987
Net investment 697,371
6. A

PFRS 17 Insurance Contracts

PROBLEM 1: MULTIPLE CHOICE
1. D
2. C
3. A
4. D
5. D
6. A

PROBLEM 2: FOR CLASSROOM DISCUSSION

1. D
2. D
3. A
4. B
5. D