Revision Class – Financial Accounting & Reporting

(Adapted) Alpha Company had the following items in its “Cash and Cash Equivalents” account as of
December 31, 2024:
Petty cash fund including P2,000 unreplenished vouchers and P8,000 remaining bills and coins - P10,000
Postal money order including traveler’s check and manager’s check of P5,000 30,000
BSP treasury bills (acquired 12/1/2024; due in 1/31/2025) 150,000
Short-term ordinary share investment (acquired 12/30/24 to be sold in less than
3 months from the balance sheet date) 90,000
Total checks on hand (40% is customer’s post-dated check and 60% is
company’s undelivered check) 100,000
Cash in foreign bank of $2,000 - unrestricted (average rate–P40; closing rate–P45) 80,000
Bond and Mortgage fund 500,000
Cash set aside for the acquisition of Assets to be disbursed in 2025. (2/3 of cash for the
purchase of Machineries and the remaining cash for the purchase of Office Supplies) 900,000
Cash in bank to be used for payment of dividends, interests and taxes 200,000
Cash in bank – compensating balances (40% is unrestricted; 50% is restricted related
to short-term loan; 10% is restricted related to longterm loan) 1,000,000

The petty cash fund of Beta Company was counted on January 3, 2025. The following items were found:
Total bills and coins 4,000
Petty cash vouchers not yet replenished
Postage stamps dated 12/29/24 450
Supplies dated 1/2/25 500
IOU of employee dated 12/31/24 750
Replenishment check of petty cash fund 7,000
Check drawn by office manager dated 12/30/24 1,000
Check drawn by employee dated 1/18/25 800
Check drawn by customer dated 12/25/24 2,000
An envelope containing contributions of employees for the death of a
fellow employee (no money attached when opened) 1,500
Unused postage stamps 150
The petty cash fund was established at P15,000.
1. Statement 1: The correct balance of Cash and Cash Equivalents on December 31, 2024 related to Alpha
Company is P1,238,000. // Statement 2: The correct amount of the Petty Cash Fund on December 31,
2024 related to Beta Company is P10,500.
a. Only statement 1 is TRUE c. Both statements are TRUE
b. Only statement 2 is TRUE d. Both statements are FALSE

(Adapted) CHARLIE Company provided the following data for the purpose of reconciling the cash balance
per books and per bank on September 30, 2024:
• Cash balance per books as of 9/30 - P939,000
• Deposits made but not yet recorded by the bank as of 9/30 – 35,000
• Checks issued to suppliers but not yet recorded by the bank as of 9/30 – 68,000
• Credit memo - 60,000; Debit memo - 20,000. These September memos are not yet reflected per books
as of September 30.
• Included in the September bank receipts was a deposit of CHARLIE Company for 25,000, erroneously
recorded by the bank to Chappie Company’s account.

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• Included in the September bank disbursements was a check issued by Chuli Company for 10,000,
erroneously recorded by the bank in CHARLIE Company’s account.
• Included in the book receipts for September was a deposit for 45,000 which was recorded as 54,000. No
correction was made yet by CHARLIE Company.
• Included in the book disbursements for September was a check issued by CHARLIE Company for 42,000
was recorded as 24,000. No correction was made yet by CHARLIE Company.
2. How much is the correct cash in bank on September 30?
a. 970,000 b. 927,000 c. 952,000 d. 945,000

(Adapted) DELTA Company had the following transactions pertaining to its accounts receivable for 2024:
Credit sales 5,700,000
Cash sales 3,150,000
Collection from credit customers net of 4% discount taken by the customers 4,536,000
Accounts ascertained worthless 75,000
Credit memo issued to credit customers 375,000
Cash refund for sales returns from cash sales 30,000
Recovery of accounts previously written off not included in total collections 120,000
Dishonored notes receivable at face value (excluding accrued interest
of P 5,000 and protest fee of P1,000) 1,000,000
DELTA Company’s beginning accounts receivable amounted to P1,425,000 and its beginning allowance for
bad debts amounted to P335,000. On December 31, 2024, the accounts receivable included P2,900,000
past due accounts. After careful study of all past-due accounts, the management estimated that the
probable loss contained therein was 20%. In addition, 10% of the current accounts receivable might prove
uncollectible. The company is using the gross method of accounting for cash discounts.
3. Statement 1: The correct bad debts expense for the year 2024 is P585,600. // Statement 2: The
amortized cost of accounts receivable on December 31, 2024 is P2,956,000.
a. Only statement 1 is TRUE c. Both statements are TRUE
b. Only statement 2 is TRUE d. Both statements are FALSE

(Adapted) On August 31, 2024, Echo Company sold goods to Funny Company. Funny Company signed a
non-interest-bearing note requiring payment of P80,000 annually for five years. The first payment was
made on August 31, 2024. The prevailing rate of interest for this type of note at the date of issuance was
12%. Information on present value factors is as follows:
Periods Present value of 1 at 10% PV of Ordinary annuity of 1 at 10%
4 0.636 3.037
5 0.567 3.605
4. What is the amount of interest income for the year 2022?
a. 9,719 c. 11,536 b. 12,918 d. 14,736

(Adapted) On January 1, 2024, COLORADO Company sold an equipment costing P10,000,000 and
accumulated depreciation of P2,500,000. COLORADO received a P1,000,000 cash and a 10%, 7-year,
P7,000,000 note receivable every December 31 in equal annual installment of P1,000,000 plus interest
starting December 31, 2024. Interest effective on this note when received is at 8%.

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5. Statement 1: The amount of gain or loss on sale on January 1, 2024 is P948,407. // Statement 2: The
interest income for the period ending December 31, 2024 is P595,873.
a. Only statement 1 is true c. Both statements are true
b. Only statement 2 is true d. Both statements are false

(Adapted) On December 1, 2024, CONNECTICUT Company engaged the following transactions:

• The company pledge P600,000 of its accounts receivable as a security for a P500,000 loan with HATFORD
Bank.
• Factored P1,300,000 of accounts receivable without recourse on a notification basis with WADSWORTH
Finance Company. WADSWORTH Finance Company charged a factoring fee of 10% of the amount of
receivable factored and withheld 15% of the receivable factored.
• A customer’s P700,000, 7-month, 5% note receivable dated August 1, 2024 was discounted with
MARKTWAIN Bank at 8% discount rate on a without recourse basis.
6. How much is the total cash proceeds from the financing of receivables?
a. 1,681,008 c. 2,181,008
b. 2,200,508 d. 2,291,508

(Adapted) On March 1, 2024, DELAWARE Corporation purchased 3,000 of the ordinary shares of DOVER
Company at market value of P240 per share. Transfer taxes and broker’s commission totaling P3,600 were
paid. During the same year, the following transactions occurred, and additional information are given
below:
August 1: Sold 1,500 shares for P 125 per share.
November 1: 20% bonus issue of ordinary share was declared and distributed by DOVER.
Market value of DOVER ordinary share at December 31, 2024 was P130.
The DOVER Company shares are designated at Fair Value through Profit or Loss.
7. How much is the total amount taken to profit or loss for the year 2024?
a. 0 c. 172,500
b. 126,000 d. 302,100

(Adapted) On December 31, 2023, FLORIDA Company appropriately reported a P100,000 unrealized loss.
There was no change during 2024 in the composition of the portfolio of non-trading equity securities held
at fair value through other comprehensive income.
Security Cost MV – December 31, 2024
A 1,200,000 1,300,000
B 900,000 500,000
C 1,600,000 1,500,000
TOTAL 3,700,000 3,300,000
8. What cumulative amount of unrealized gain/loss on these securities should be reported in the
statement of financial position on December 31, 2024?
a. 100,000 b. 200,000 c. 400,000 d. 0

(Adapted) On July 1, 2024, GEORGIA Company acquired a 25% interest in the outstanding shares of
ATLANTA Company at a total cost of P1,750,000. The underlying equity of the shares acquired by GEORGIA
was P1,500,000. The difference was due to the following:
I. Land with current fair value of P750,000 more than its carrying amount.

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II. Depreciable plant assets with current fair value of P150,000 more than the carrying amount.
III. Inventories which are undervalued by P20,000.
All other identifiable assets of ATLANTA Company have fair values equivalent to their book values. The
depreciable plant assets have remaining useful lives of 10 years from the date of acquisition of the
investment. All of the inventories have been sold as of December 31, 2024.
GEORGIA received P100,000 dividends from ATLANTA in 2022. ATLANTA reported P1,350,000 profit during
the year ended December 31, 2024. Interim reports from ATLANTA revealed that it earned P650,000 during
the first two quarters of 2024.
9. How much was the income from associate reported in GEORGIA’s profit and loss for the year ended
December 31, 2024?
a. 161,875
b. 166,250
c. 168,125
d. 175,000

(Adapted) On January 1, 2023, HAWAII Corporation purchased 3-year, 10%, 5,000 of P1,000 face value
bonds for P4,600,000. In relation to this acquisition, HAWAII incurred P160,000 broker’s commission. As a
result, the effective rate on the bond was 12%.
Meanwhile, HAWAII determined the following fair values at each yearend:
December 31, 2023 – 102, December 31, 2024 - 105
10. How much is the unrealized gain or loss to be reported in its 2023 Profit or Loss Statement assuming
the investment is FVPL?
a. 0
b. 500,000
c. 268,800
d. 340,000

11. How much is the carrying value of investments that should be reported in the statement of financial
position on December 31, 2024 assuming the investment is FVOCI?
a. 5,250,000
b. 5,100,000
c. 4,831,200
d. 4,910,944

12. How much is the carrying value of investments that should be reported in the statement of financial
position on December 31, 2024 assuming the investment is Investment at Amortized Cost?
a. 5,250,000
b. 5,100,000
c. 4,831,200
d. 4,910,944

(Adapted) The inventory on hand at December 31, 2024 for IDAHO Company is valued as at a cost of
P500,000. The following items were not included in this inventory amount:
➢ Purchased goods shipped FOB destination costing P30,000. The goods were received on December 30,
2024.
➢ Purchased goods in transit, terms FOB shipping point. Invoice price- P48,000; freight costs of P3,000.
➢ Goods out on consignment to BOISE Company, sales price, P 35,000.

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➢ Purchased goods shipped FOB Buyer still in transit. The invoice price is P47,500 including freight of
P500.
➢ Inventory purchased and received with a buyback agreement costing P100,000.
➢ Inventory purchased and received, Free Alongside, costing P 245,000. Delivery cost alongside the Vessel
is P3,000 while cost of shipment is P5,000.
➢ Mark-up based on sales is 20%. It was noted that 30% of the consigned goods were sold as of December
31, 2024.
13. How much is the correct cost of inventory to be reported in IDAHO’s statement of financial position
on December 31, 2024?
a. 898,100 b. 839,400 c. 853,600 d. 850,600

(Adapted) ILLINOIS Company uses the FIFO method of valuing inventories. During August 2024, the
following inventory details were recorded.
Opening balance 300 units valued at P20 each
August 5 Purchase of 500 units at P24 each
August 10 Sale of 400 units
August 18 Purchase of 600 units at P25 each
August 23 Sale of 250 units
14. How much is the cost of inventories on August 31, 2024?
a. 17,678 c. 18,000
b. 18,600 d. 18,750

(Adapted) Information pertaining to the inventory of INDIANA Company as of December 31, 2024 follows:
A B C
Historical cost 2,000,000 2,500,000 3,500,000
Estimated selling price 2,200,000 3,600,000 4,000,000
Estimated cost to sell 300,000 800,000 600,000
Normal profit margin 440,000 720,000 800,000
Current replacement cost 2,500,000 3,000,000 2,700,000
INDIANA records losses that result from applying the lower of cost or NRV rule.
15. What amount should the inventory be valued on December 31, 2024?
a. 8,000,000 c. 7,700,000
b. 8,100,000 d. 7,800,000

(Adapted) The records of IOWA Company revealed the following information on September 30, 2024:
Cost Retail
Inventory, January 1, 2024 412,400 620,000
Purchases 2,614,100 4,275,500
Freight in 40,000
Sales 3,200,000
Purchase return 10,000 28,000
Sales allowance 25,500
Purchase allowance 8,000
Sales returns 48,500
Sales discounts 22,500
Purchase discounts 6,200

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Abnormal shrinkages 45,000 50,000
Normal shoplifting losses 150,000
Discounts granted to employees 15,500
Departmental transfer in 25,700 51,600
Departmental transfer out 31,500 68,000
Mark-ups 146,900
Mark-downs 116,000
Mark-up cancellations 25,000
Markdown-cancellation 18,000
16. How much is the estimated cost of inventories on September 30, 2024 using the Average method?
a. 1,508,000 c. 934,960
b. 1,037,570 d. 964,720

(Adapted) A new machine was acquired on July 31, 2022 by KANSAS 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
17. 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

18. 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

(Adapted) KENTUCKY Company purchased a tract of land with an old building. The old building has no fair
value on the date of acquisition. The entity razed an old building on the property to construct a new
building. Relevant information follows:
Purchase price of land and an old building 3,700,000
Demolition of old building 200,000
Proceeds from sale of salvaged materials 20,000
Legal fees for purchase contract and recording ownership 150,000
Title guarantee insurance 50,000
Payment of property taxes in arrears on land 100,000
Option paid for an alternative land not acquired 30,000
Special assessment for city improvements 120,000
19. How much is the correct cost of the Land?
a. 4,600,000
b. 4,120,000
c. 4,330,000
d. 4,300,000

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(Adapted) On January 1, 2022, LOUISIANA Company purchased equipment with cost of P10,000,000,
useful life of 10 years and no residual value. The entity used straight line depreciation. On December 31,
2022 and December 31, 2023, the entity determined that impairment indicators are present. There is no
change in useful life or residual value.
December 31, 2022 December 31, 2023
Fair value less cost of disposal 8,100,000 8,300,000
Value in use 8,550,000 8,200,000
20. What is the impairment loss for 2022?
a. 900,000
b. 450,000
c. 600,000
d. 0

21. What is the gain on reversal of impairment for 2023?

a. 400,000
b. 700,000
c. 600,000
d. 0

(Adapted) On January 1, 2023, MAINE Company showed land with carrying amount of P10,000,000 and
building with cost of P60,000,000 and accumulated depreciation of P18,000,000.
The land and building were revalued on same date and revealed the fair value of land at P15,000,000 and
the building at P70,000,000. The original useful life of the building is 20 years and depreciation is computed
on the straight line. The income tax rate is 30%.
22. What is the revaluation surplus on January 1, 2023?
a. 33,000,000
b. 23,100,000
c. 28,000,000
d. 19,600,000

(Adapted) MARYLAND 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. MARYLAND Corporation estimated that as of that date, the remaining useful life is 5 years.
23. What amount should be reported for patent amortization expense for 2022?
a. 30,900
b. 28,200
c. 30,000
d. 23,400

(Adapted) On January 1, 2023, MASSACHUSETTS Company acquired both a License and a Trademark in
exchange for 1,000 shares of MASSACHUSETTS, P100 par ordinary shares. The shares are selling for P125
per share on January 1, 2023. The trademark is worth thrice as much as the license. The license may be
used for five years while the trademark has a remaining useful life of 6 years. MASSACHUSETTS Company
intends to renew the trademark continuously because the said trademark is expected to contribute to net
cash flows indefinitely.
24. How much is the amortization expense for the year 2023?
a. 21,875 c. 23,958
b. 6,250 d. 0

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(Adapted) On January 31, 2022, MICHIGAN Company signed an agreement to operate as franchisee of
LANSING Company 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. MICHIGAN’s revenue
from the franchise in 2022 was P9,500,000.
25. What is the carrying value of the franchise as of December 31, 2022?
a. P603,571
b. P598,034
c. P604,381
d. P599,384

(Adapted) MINNESOTA Company acquired an investment property costing P1,000,000 on July 1, 2023. The
property is being leased out under operating lease and the lessee pays P30,000 on a quarterly basis.
MINNESOTA Company depreciates its properties using the straight-line method over a 5-year useful life.
The fair values of the building at the end of 2023 and 2024 were P1,200,000 and P 850,000, respectively.
Estimated cost to sell is P50,000 on December 31, 2024.
26. How much is the total net increase/decrease in profit or loss for the year 2023 assuming the
company is using the cost model?
a. 40,000
b. 140,000
c. 340,000
d. 160,000

27. How much is the carrying value of the investment properties on December 31, 2024 assuming the
company is using the fair value model?
a. 1,200,000
b. 850,000
c. 800,000
d. 700,000

(Adapted) The following information pertains to the living plant and agricultural produce of MISSISSIPPI
Company. On January 1, 2023, the cost of the living plant was P20,000,000 with an estimated useful life of
10 years. The company is using the straight-line method of depreciation. As of December 31, 2023,
MISSISSIPPI Company determines the following:
Fair value of the fruits after the harvest on December 31, 2023 P5,000,000
Estimated cost to sell of the fruit 100,000
Estimated cost to sell of the living plant 500,000
With the assistance of valuation experts, MISSISSIPPI Company determines that the fair value of the living
plant including the fruit as of December 31, 2023 is P26,000,000.
28. Statement 1: The carrying value of the living plant on December 31, 2023 under PAS 16 is
P20,500,000. Statement 2: The carrying value of the living plant on December 31, 2023 under PAS 41 is
P18,000,000.
a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false

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(Adapted) On January 1, 2022, MISSOURI Company has a building with a cost of P4,000,000 and
accumulated depreciation of P3,100,000. The company commits to a plan to sell the building by January
1, 2023. On January 1, 2022, the building has an estimated selling price of P800,000 and it is estimated
that the selling costs associated with the disposal of the building will be P120,000. On December 31, 2022,
the estimated selling price of the building has increased to P1,200,000 and the estimated selling costs
remain at P120,000.
29. How much is the total net effect in profit or loss for the year 2022 in relation to the noncurrent asset
held for sale?
a. 0
b. 220,000 increase
c. 220,000 decrease
d. 400,000 increase

(Adapted) MONTANA Company reported accounts payable of P540,000 on December 31, 2023 before any
yearend adjustments relating to the following:
• Goods with invoice cost of P30,000 were in transit to MONTANA on December 31, 2023. The purchased
goods on account shipped FOB shipping point were received and recorded on January 3, 2024.
• Goods with an invoice cost of P15,000 which were shipped FOB shipping point on December 26, 2023
were lost in transit. On December 29, 2023, MONTANA filed a P15,000 claim against the courier. The
related purchases were not recorded as of December 31, 2023.
• Goods with an invoice cost of P10,000 shipped FOB destination on December 28, 2023 were received by
MONTANA on December 29, 2023. The related purchases were recorded on December 30, 2023.
30. What amount should MONTANA report as accounts payable on its December 31, 2023 statement of
financial position?
a. 585,000
b. 595,000
c. 570,000
d. 590,000

(Adapted) On January 1, 2023, NEBRASKA Company acquired a tract of land for P 5,250,000. NEBRASKA
Company paid P1,250,000 down and signed a non-interest-bearing note for the balance which is due on
January 1, 2027. There was no established exchange price for the land and the note had no ready market.
The prevailing interest rate for this type of the note was 12%.
31. How much is the interest expense for the year 2024?
a. 305,040
b. 341,645
c. 382,642
d. 480,000

(Adapted) On January 1, 2023, NEVADA Corporation issued 4-year bonds of P 5,000,000 for P5,662,260 to
yield 8%. Interest is payable annually on December 31 at 12%. NEVADA paid a bond issue cost amounting
to P345,320. The effective rate as a result of transaction cost is 10%.
32. How much is the carrying value of the bonds payable on December 31, 2023?
a. 6,007,580
b. 5,316,940
c. 6,008,338
d. 5,248,634

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(Adapted) On January 1, 2023, NEW HAMPSHIRE Company issued P2,000,000 of 16% bonds at 102. Each
P1,000 bond has one detachable warrant that allows the holder to purchase ten shares of P50 par value
stock at P70 per share. The bonds would have been issued at 99 without the warrants.
33. Assuming that all the warrants were exercised, how much is the total net effect on equity upon
exercise of the warrants on December 31, 2024?
a. 1,400,000
b. 1,460,000
c. 460,000
d. 400,000

(Adapted) On December 31, 2023, NEW JERSEY Company had an outstanding P5 million face value
convertible bonds maturing on December 31, 2027. Each P1,000 bond is convertible into 20 shares of P25
par value ordinary shares. The unamortized discount as of December 31, 2023 is P225,000. The balance
of the Share Premium from Bond Conversion Privilege is P240,000. On December 31, 2023, bonds with a
face value of P2,000,000 were converted into ordinary shares when the market value of the ordinary
shares is P50.
34. How much is the gain or loss taken to profit or loss on the conversion of the bonds?
a. 0
b. 910,000
c. 1,006,000
d. 2,006,000

(Adapted) On July 1, 2023, NEW MEXICO Company issued P 5,000,000, 14% bonds at 105. Each P1,000
bond is convertible into 5 shares of P150 ordinary share. Without the conversion feature, the bonds would
have been sold at 102. At a later interest date, prior to maturity date of the bonds, NEW MEXICO retired
P2,000,000 face value bonds at 103. After appropriate premium amortization and interest payment, the
premium on bonds payable has a balance of P30,000 on the date of retirement. Without the conversion
privilege, these bonds would have been sold on this date at 101.
35. How much is the gain or loss on retirement of bonds that should be taken to profit or loss?
a. 8,000 loss
b. 8,000 gain
c. 48,000 loss
d. 48,000 gain

36. How much is the amount of gain on cancellation of conversion privilege taken to equity?
a. 0
b. 20,000
c. 40,000
d. 60,000

(Adapted) On December 25, 2022, an employee filed a P3,000,000 lawsuit against NEW YORK Company
for damages suffered when one of NEW YORK’s equipment malfunctioned in August of 2022. The legal
counsel of the company believes that it is probable that NEW YORK will pay the damages ranging between
P500,000 to 1,000,000 but P820,000 is considered to be the best estimate of the obligation. On March 31,
2023, the employee has offered to settle the lawsuit out of court for P925,000 and the company accepted
the offer and settled the amount. The financial statements were authorized to be issued on March 1, 2023.

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37. How much is the provision that should be recognized as of December 31, 2022?
a. 820,000 b. 925,000 c. 750,000 d. 1,000,000

(Adapted) NORTH CAROLINA Company sells plasma television sets with a two-year warranty and estimated
warranty costs as percentage of peso sales as follows: first year of warranty- 5%; second year of warranty-
8%. The company recorded sales of P 4,000,000 and P 7,000,000 in 2022 and 2023, respectively and
incurred actual repair costs of P 150,000 and P 400,000 in 2022 and 2023, respectively.
38. How much is the provision for warranty on December 31, 2023?
a. 880,000
b. 910,000
c. 160,000
d. 370,000

(Adapted) NORTH DAKOTA Company is considering to give bonus for its new company CEO. The plan states
that the bonus would be equal to 15% based on profits after deducting bonus and tax. Profit before income
tax and bonus for 2023 is P10,000,000. Income tax rate is 30%.
39. How much is the amount of bonus under the plan?
a. 1,304,348
b. 1,099,476
c. 950,226
d. 1,004,785

(Adapted) OHIO Company operates a customer loyalty program. The entity grants loyalty points for goods
purchased. The loyalty points can be used by the customers in exchange for goods of the entity. During
2023, the entity sold goods for a total consideration of P2,000,000 for which P100,000 was allocated to
award credits/loyalty points and 2,000 points were granted. The company expects that 60% of the award
credits shall be redeemed. During 2023, 720 of the award credits were redeemed.
40. How much is the total amount of income that should be recognized for the year 2023?
a. 1,900,000
b. 60,000
c. 1,960,000
d. 2,000,000

(Adapted) OKLAHOMA Company reported the following amounts in the shareholders’ equity section of its
December 31, 2021, balance sheet:
10% Preference shares, P10 par (100,000 shares authorized, 40,000 shares issued) P400,000
Ordinary shares, P5 par (50,000 shares authorized, 20,000 shares issued) 100,000
Share premium 190,000 Retained Earnings 1,200,000
The following transactions occurred during 2022:
Feb. 1 - Purchased 4,000 shares of its own outstanding ordinary shares for P80,000.
March 1 - Ordinary shares were split 2 for 1.
April 30 - Reissued 2,000 treasury ordinary shares for cash at P15 per share.
June 30 - Issued 10,000 shares of preference shares at P15 per share.
August 1 - Purchased 3,000 preference shares from June 30 issuance at P 12 per share.
Sept. 1 - Declared a 10% stock dividend on the outstanding ordinary shares when the stock is selling for
P6 per share. Issued the share dividend on September 30.
Dec. 1 - Declared the annual dividend on preference shares and the P2.00 per share dividend on ordinary
shares. These dividends are payable in 2023.
Dec. 31 - Registered a net income for 2022 at P800,000.

11
41. How much is the total SHE on December 31, 2022?
a. 2,728,200 b. 2,602,200 c. 2,632,200 d. 2,623,200

(Adapted) OREGON’s December 31, 2023 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 2023.
42. What is the book value per share on ordinary share?
a. 173.08 b. 163.04 c. 166.92 d. 157.25

(Adapted) On September 30, 2023, PENNSYLVANIA Company declared its non-current asset as a dividend
with a carrying value of P 2,000,000 and has a current fair value of P 1,800,000. On December 31, 2023,
the non-current asset has a fair value of P 1,700,000. The non-current asset was distributed on March 1,
2024 when its fair value was P 1,600,000.
43. What amount shall be taken to profit or loss as a result of remeasurement of liability on December
31, 2023?
a. 0
b. 100,000
c. 200,000
d. 300,000

(Adapted) For two consecutive years, the RHODE ISLAND Company Company failed to recognize accruals,
prepayments and other transactions in its records. Reported net income and a listing of the errors appear
below:
2021 2022
REPORTED PROFIT 500,000 750,000
a. Failed to record accrued income 15,000 5,000
b. Understatement of ending inventory 60,000 40,000
c. Failed to record accrued interest on notes payable 20,000 15,000
d. Failed to recognized the asset portion of prepayments 35,000 10,000
e. Failed to record purchases on account. Purchases
were recorded when paid in the subsequent year.
Inventories were not included at the end. 50,000 20,000
f. Major Repairs incurred during the year were erroneously
expensed. Full year depreciation at annual rate of 10%
is provided in the year that the asset is recognized. 100,000 200,000
44. What is the correct net income in 2022?
a. 890,000 b. 870,000 c. 900,000 d. 880,000

45. What is the net adjustment to Retained earnings on January 1, 2023?

a. 300,000 debit b. 300,000 credit c. 120,000 credit d. 180,000 credit

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(Adapted) SOUTH CAROLINA Company leased a new machine from COLUMBIA Company. On January 1,
2022, SOUTH CAROLINA provided the following information pertaining to the lease:
Annual rental payable at beginning of each lease year, starting Jan. 1, 2022 P400,000
Lease term 10 years
Useful life of machine 12 years
Implicit interest rate 14%
Present value of an annuity of 1 in advance for 10 periods at 14% 5.95
Present value of an ordinary annuity of 1 for 10 periods 5.22
Present value of 1 for 10 periods at 14% 0.27
Guaranteed residual value 100,000
46. How much is the depreciation expense for the year 2022?
a. 240,700 c. 192,250
b. 200,583 d. 230,700

(Adapted) SOUTH DAKOTA Company leased equipment from PIERRE Inc. on July 1, 2022, for an 8-year
period. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment
was made on July 1, 2022. The interest rate contemplated by SOUTH DAKOTA and PIERRE is 10%. The
carrying value of the equipment on PIERRE’s accounting records is P2,800,000. Residual value of P100,000
at the end of lease term is guaranteed by SOUTH DAKOTA. The lease is appropriately recorded as a sales-
type lease.
Present value of an annuity of 1 in advance for 8 periods at 10% 5.87
Present value of an ordinary annuity of 1 for 8 periods at 10% 5.33
Present value of 1 for 8 periods at 10% 0.47
47. How much is the SALES that should be recognized by PIERRE Inc.?
a. 2,800,000 c. 3,569,000
b. 2,753,000 d. 3,522,000

(Adapted) TENNESSEE reported pretax financial income for the current year 2023 at P3,000,000. Included
in the determination of the said net income were:
Permanent differences:
Non-deductible expenses P100,000
Non-taxable revenues 500,000
Temporary differences:
Unrealized gain trading securities 400,000
Impairment loss on machinery 500,000
Provision for bad debts 900,000
Excess tax depreciation over accounting depreciation 420,000
The income tax rate is 30% and is not expected to change in the future.
48. How much is the deferred tax liability on December 31, 2023?
a. 954,000 c. 246,000
b. 780,000 d. 420,000

(Adapted) On January 1, 2021, TEXAS 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 2021 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

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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%
49. 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
b. 1,385,000
c. 66,000
d. 336,000

50. 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
b. 1,385,000
c. 66,000
d. 336,000

(Adapted) On January 1, 2022, the shareholders of UTAH Company approve a plan that grants the
company’s five executives options to purchase 3,000 shares each of the company’s P50 par value ordinary
shares. The options are granted on January 2, 2022 and may be exercised anytime from January 1, 2025
to December 31, 2025.
Based on an option pricing model used by UTAH Company, the fair value of the option on the date of grant
was P40. The market price per share on January 1, 2022 was P95, while the option price is P60. Other
information follow:
• The executives must be in the employ of the company when exercising the options
• 1 executive left the company during 2023
• The remaining options vested and all vested options were exercised in 2025
51. How much is the compensation expense for the year ended 2023?
a.120,000
b. 200,000
c. 400,000
d. 80,000

(Adapted) WASHINGTON Company has 200,000 shares of ordinary shares outstanding on January 1, 2023.
On January 1, 2023, 100,000 shares of 10% cumulative preference share with par value of P10 were issued.
The preference shares are convertible into 50,000 shares of ordinary shares. On September 30, 2023, 9%
convertible, P2,000,000 face value (equal to its liability component) bonds were issued. Each 1,000 bonds
are convertible into 40 ordinary shares. Net income after income tax of P1,684,200 was reported by
WASHINGTON for the entire year.
52. How much is the basic earnings per share?
a. 5.10 c. 4.80
b. 8.42 d. 7.92

53. How much is the diluted earnings per share?

a. 6.74 c. 7.41
b. 6.40 d. none of the choices

14
1. Which of the following statements is/are true?
Statement 1: The issuance of bonds with non-detachable share warrants is treated as a compound
financial instrument.
Statement 2: Equity-settled with cash alternative is treated as a compound financial instrument if the
choice is given to employer to settle in shares or in cash.
Statement 3: The issuance of non-convertible bonds is treated as a compound financial instrument.
a. All of the statements are true b. Only statement 1 is true
c. Only statement 2 is false d. Only statement 3 is false

2. Which of the following statements is/are true?

Statement 1: If the contract is considered onerous, the provision is measured at cost to fulfill the contract
or at cost to cancel the contract whichever is lower.
Statement 2: Non-current asset classified as held for sale is initially measured at the carrying value of the
non-current asset and the fair value less cost to sell on the date of reclassification whichever is lower.
Statement 3: If the asset is a qualifying asset, capitalized borrowing cost under general borrowings is based
on the actual interest or average interest whichever is lower.
a. All of the statements are true b. Only statement 1 is true
c. Only statement 2 is false d. Only statement 3 is false

3. Which of the following statements is/are true?

Statement 1: In depreciating the depreciable asset used in mining activities, the depreciation expense is
based on its useful life or mining period where output method is used whichever is shorter in all cases.
Statement 2: Intangible asset with finite life and indefinite life should be amortized over its useful life or
legal life whichever is shorter.
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 statements are based on PAS 38 (Intangible Assets):

Statement 1: Internally generated goodwill shall not be recognized as an asset.
Statement 2: No intangible asset arising from research or research phase of an internal project shall be
recognized.
Statement 3: Internally generated brands, mastheads, publishing titles, customer lists and items similar in
substance shall not 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

5. Which of the following statements is/are true?

Statement 1: The recoverable value of PPE is the fair value less cost to sell or value in use whichever is
higher.
Statement 2: Under the profit or loss test in identifying the reportable segment, the segment is considered
reportable, if the segment’s profit or loss is at least 10% of the combined profits of all segments that
reported a profit or combined losses of all segments that reported a loss whichever is greater in absolute
amount.
Statement 3: Trade receivables or payables are classified as current if they are to be collected or paid
within 12 months after the balance sheet date or within the normal operating cycle whichever is longer.
a. All of the statements are true b. Only statement 1 is true
c. Only statement 2 is false d. Only statement 3 is false

6. Which of the following statements is/are true?

15
Statement 1: The LESSEE should account the lease as an operating lease only if the lease is a short term
lease (i.e., the lease term is 12 months or less) or the lease is considered as a “low value” lease.
Statement 2: The LESSOR should account the lease as a finance lease only if there is a transfer of ownership
to the lessee or presence of bargain purchase option or the lease term is at least 75% of the useful of the
asset or the present value of the minimum lease payments is at least 90% of the fair value of the leased
asset.
Statement 3: The LESSOR should recognize a dealer’s/manufacturer’s profit whether the residual value is
guaranteed or unguaranteed under the sales-type lease and direct finance lease.
a. All of the statements are true b. Only statement 1 is true
c. Only statement 2 is false d. Only statement 3 is false

7. Which of the following statements is/are true?

Statement 1: Premium income is recognized in the current period upon actual redemption of premiums
made by the customer in the current period.
Statement 2: Income from customer loyalty award credits is recognized in the current period upon actual
redemption of award credits/loyalty points made by the customer in the current period.
a. Only statement 1 is true b. Only statement 2 is true
c. Both statements are true d. Both statements are false

8. Which of the following statements is/are true?

Statement 1: If there is a breach of undertaking under a long-term debt agreement, the company should
classify the debt as current liability even if the lender agreed after the balance sheet date but before the
FS are authorized for issue, not to demand payment for at least 12 months after the BS date.
Statement 2: If there is a refinancing of a short-term debt on a short-term basis, the company should
classify the debt as non-current liability only if the company has a discretion/right to refinance as of the
BS date.
a. Only statement 1 is true b. Only statement 2 is true
c. Both statements are true d. Both statements are false

9. Which of the following statements is/are true?

Statement 1: If the preference share is cumulative, the company should deduct the full amount of
preference dividend from net income in computing the investment income /share in net income of the
associate, whether declared or not.
Statement 2: If the preference share is cumulative, the company should deduct the full amount of
preference dividend from net income in computing the basic and diluted earnings per share, whether
declared or not.
a. Only statement 1 is true b. Only statement 2 is true
c. Both statements are true d. Both statements are false

10. Which of the following statements is/are true?

Statement 1: Contingent asset and contingent liability may be reported in the statement of financial
position if the amount is known and definite or measurable.
Statement 2: If the provision involves a large population of items, the provision is measured by weighting
all possible outcomes by their associated probabilities known as the expected value method.
a. Only statement 1 is true b. Only statement 2 is true
c. Both statements are true d. Both statements are false

11. Which of the following statements is/are true?

Statement 1: Reissuance of treasury shares at a gain or loss will increase issued shares, outstanding shares
and total shareholders’ equity.

16
Statement 2: Retirement of treasury shares at a gain or loss will decrease issued shares, outstanding shares
and total shareholders’ equity.
a. Only statement 1 is true b. Only statement 2 is true
c. Both statements are true d. Both statements are false

12. The statement of comprehensive income may include unrealized gains and losses from which type of
investment securities?
a. FVPL only b. FVOCI only c. FVPL & FVOCI d. FVPLOCI

13. Which of the following transactions shall not be included in the statement of cash flows?
a. Sale of land for cash at less than its carrying value
b. Purchase of treasury shares for cash at more than its cost
c. Increase or decrease in Accruals and Deferrals
d. Acquisition of building by means of issuing preference share

14. If an entity failed to amortize the premium on its investment in bond classified at amortized cost, this
may result to
a. Understatement of net income
b. Overstatement of net income
c. No effect on net income
d. Understatement on investment account

15. Which of the following items should be excluded from inventories at the balance sheet date?
a. Goods sold under layaway sale where the buyer has not yet fully paid the account as of the balance
sheet date
b. Goods out on approval where the right of return has already expired as of the balance sheet date
c. Goods in transit as of the balance sheet date purchased under Free Alongside Ship (FAS) agreement
d. Goods in transit as of the balance sheet date sold under Delivered ExShip (DES) agreement

16. Share premium could NOT arise from

a. Gain on exercise of stock rights
b. Receipt of donated asset from a shareholder
c. Gain on exercise of stock options and warrants
d. Distribution of “large” bonus issue

17. CASHITO Company has issued a range of share appreciation rights to employees. In accordance with
IFRS 2 Share-based payment, what type of share-based payment transaction does this represent?
a. Asset-settled share-based payment transaction
b. Equity-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Liability-settled share-based payment transaction

18. Which of the following is false about the preparation of statement of comprehensive income?
a. Income from Operation does not include items which are considered Incidental/Peripheral.
b. Income or Loss from Continuing Operation plus Income or Loss from Discontinued Operation equals
Total Profit or Loss
c. Profit or Loss plus Other Comprehensive Income equals Total Comprehensive Income
d. Other Comprehensive Income shall be disclosed on the face of Income Statement after tax

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19. When an owner-occupied property is transferred to investment property at fair value, a decrease in
the carrying amount of the property to its fair value at the date of transfer
a. Is recognized in profit and loss, or, for a revalued property, charged against the revaluation surplus to
the extent of its credit balance
b. Is recognized in profit and loss at all times
c. Is absorbed by retained earnings
d. Is carried directly to equity

20. Which of the following is not true in relation to bearer plant?

a. It is a living plant that has a remote likelihood of being sold as agricultural produce, except for incidental
scrap sales
b. The bearer plant and the related agricultural produce are accounted as two separate assets
c. Plants which have a dual use or exclusive to be harvested as agricultural produce are not qualified as
bearer plant
d. Bearer plant should be measured initially and every BS date at fair value less estimated cost to sell

"Success is the sum of small efforts, repeated day in and day out." — Robert Collier
"The harder you work for something, the greater you'll feel when you achieve it."
"Don’t be afraid to fail. Be afraid not to try." — Michael Jordan
"Believe you can and you're halfway there." — Theodore Roosevelt
"Hard work beats talent when talent doesn’t work hard." — Tim Notke
"A calm sea never made a skilled sailor." — Franklin D. Roosevelt

18
Additional Practice Problems:
1. The following pertains to an entity on Dec. 31 of the current year: Checking account balance P925,000;
an overdraft in special checking account at same bank as normal checking account of P17,000; certificate
of deposit P400,000; cash held in a bond sinking fund P200,000; postdated check from customer P11,000;
certified check from customer P9,800; NSF check received from customer P15,000; cash advance to
subsidiary of P300,000; postage stamps on hand P620; utility deposit paid to electric company P8,000;
currency and coins in a petty cash fund (the company has not replenished the fund to the imprest amount
of P5,000) P800. The correct amount that should be reported as cash is
A. P918,600 B. P908,800 C. P1,318,600 D. P1,322,800

2. On January 31, 2023, Jo Marie Company received a P5,000,000, 3-year, note from sale of an old furniture
and fixtures to Cactus Corporation. The furniture and fixture have carrying value of P5,500,000. The note
bears 12% payable every January 31, starting 2024. On January 31, 2023, prevailing rate of interest is 10%.
6. How much is the interest income in 2024 and the carrying value of notes receivable as of December 31,
2024?
A. P524,869 and P5,173,554 C. P523,735 and P5,165,284
B. P515,263 and P5,086,253 D. P517,981 and P5,097,796

3. On January 1, 2023, Caloocan Company purchased 12% bonds, having a maturity value of P800,000, for
P860,652 including transaction cost of P110,000. The bonds provide the bondholders with a 10% yield,
are dated January 1, 2023, and mature January 1, 2028, with interest receivable December 31 of each year.
The bonds are quoted at 108 and 109 at the end of 2023 and 2024 respectively. After receiving the interest,
half of the face value of the bonds were sold on December 31, 2025, at 110.
How much is the interest income for the year 2024 assuming the investment is designated as Investment
at FVPL?
A. 76,000 B. 86,000 C. 96,000 D. 106,000

4. On February 1, 2024, Marsi Corporation purchased a parcel of land as a factory site for P2,000,000. An
old building on the property was demolished, and construction began on a new building which was
completed on November 1, 2024. Costs incurred during this period are listed below:
Demolition of old building P200,000
Architect fee 350,000
Legal fees for title investigation 50,000
Construction cost of new building 10,900,000
Salvage value of materials from demolition that were sold for 100,0000
Marsi should record the cost of the land and new building, respectively, as
A. P2,050,000 and P11,350,000 C. P2,150,000 and P11,250,000
B. P2,050,000 and P11,450,000 D. P1,950,000 and P11,450,000

5. On January 1, 2023, NEW HAMPSHIRE Company issued P2,000,000 of 16% bonds at 102. Each P1,000
bond has one detachable warrant that allows the holder to purchase ten shares of P50 par value stock at
P70 per share. The bonds would have been issued at 99 without the warrants.
Assuming that all the warrants were exercised, how much is the total net credit to share premium upon
exercise of the warrants on December 31, 2024?
A. 1,400,000 B. 1,460,000 C. 460,000 D. 400,000

6. Hans Move It Corporation issued P1,500,000 of 8% bonds on October 1, 2023, due on October 1, 2027,
at 105. The interest is to be paid twice a year on April 1 and October 1. When the bonds were issued, the
prevailing market rate was 10% without the warrant. The corporation closes its books annually on
December 31. Each P1,000 bond carried one warrant that can be used to purchase 15 shares of P100 par
value ordinary share for P122.50 per share.

19
The bonds were retired on April 1, 2025, at 102 and on this date, the bonds were quoted at 99.5 without
the warrants.
How much is the amount of interest expense for year 2024?
A. P35,597 B. P35,597 C. P141,333 D. P140,813

7. The shareholders’ equity of Las Piñas Company on January 1, 2023 showed the following:
Share capital, P50 par, authorized 100,000 shares, 50,000 shares issued P2,500,000
Share premium 400,000
Retained earnings 1,500,000
The following transactions occurred during the year:
a. Reacquired 6,000 shares on February 1, 2023 at P90 per share.
b. Reissued 3,000 treasury shares at P120 per share on June 4, 2023.
c. Reissued 1,500 treasury shares at P80 per share on September 3, 2023.
d. Issued stock rights on September 30, 2023. Four stock right entitles the stockholder to purchase an
additional share for P70 per share. The rights shall expire on December 31, 2023.
e. All but 8,500 share rights were exercised on October 11, 2023.
f. Declared P3 per share cash dividends on December 15, 2023 to stockholders as of December 31, 2023
payable on January 15, 2024.
g. Reported an adjusted net income of P540,000.
How much is total Retained Earnings on December 31, 2023?
A. 1,729,500 B. 1,864,500 C. 1,904,500 D. 1,924,500

8. Thailand Company had P1,800,000 net income in 2024. On January 1, 2024, there were 200,000 shares
of ordinary outstanding. On April 1, 20,000 shares were issued and on September 1, bought 30,000 shares
of treasury shares.

During 2024, there were 40,000 shares of cumulative preference shares outstanding. The preference has
P100 par, pays dividend of P3.00 per year, and is convertible into two shares of ordinary. Thailand issued
P2,000,000 of 8% convertible bonds at face value on April 1. Each P1,000 bond is convertible into 10 shares
of ordinary. The tax rate is 30%.
The basic earnings per share in 2024 is
A. 6.72 B. 7.20 C. 8.20 D. 8.78

20