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Since 1977

FAR OCAMPO/OCAMPO
FINAL PRE-BOARD EXAMINATION APRIL 30, 2023

Multiple Choice. Select the letter that corresponds to the Cost Retail
best answer. This examination consists of 70 items and the Beginning inventory P 80,000 P140,000
exam is good for three (3) hours. Good luck! Purchases 297,000 420,000
Freight-in 4,000 -
1. Which statement is correct? Breakage 8,000
a. The Bologna Accord formalized the FASB and IASB’s Markups (net) 10,000
commitment to convergence of U.S. GAAP and IFRS. Markdowns (net) 2,000
b. The ISSB is intended to replace the IASB. Sales 400,000
c. Implementation guidance released by the PIC and
approved by the FSRSC is less authoritative than the At what amount would the entity report its ending
PFRS to which it relates. inventory?
d. Metro Manila is a PICPA geographical area. a. P112,000 c. P117,600
b. P113,400 d. P119,000
2. The Financial Executives Institute of the Philippines is
represented in 6. Which of the following plants, grown as annual crops,
will likely qualify as bearer plants and accounted for in
I. FSRSC accordance with PAS 16?
II. PIC
III. AASC I. Radish III. Garlic
II. Onion IV. Ginger
a. I, II and III c. II and III only
b. I and II only d. III only a. I, II, III and IV c. III and IV only
b. II, III and IV only d. None of these
3. In its statement of financial position, an entity has an
inventory in the amount of P176,000 which consists of: 7. An entity produces milk to sell to local and national ice
cream producers. The entity began operations on Jan. 1
Direct materials P99,000
of the current year by purchasing 840 milk cows for
Direct materials purchases in transit,
P1,176,000. The entity’s controller had the following
FOB destination 21,600
information available at year end relating to the cows:
Direct materials purchases in transit,
FOB shipping point 16,200 Carrying value, Jan. 1 P1,176,000
Prepaid insurance on inventory 3,600 Increase in fair value due to growth
Work-in-process 68,400 and price changes 365,000
Finished goods 81,000 Decrease in fair value due to harvest 42,000
Goods shipped on consignment, at selling Milk harvested but not yet sold 54,000
price with 20% profit on sales 27,000
At Dec. 31 of the current year, what is the value of the
What is the cost of inventory to be shown in the milking cows on the entity’s statement of financial
statement of financial position? position?
a. P264,600 c. P286,200 a. P1,583,000 c. P1,499,000
b. P268,200 d. P287,100 b. P1,553,000 d. P1,445,000

4. On August 15 of the current year, a typhoon damaged 8. An entity has decided to expand its operations and has
a warehouse of an entity. The entire inventory and purchased land for construction of a new manufacturing
many accounting records stored in the warehouse were plant. The following costs were incurred in purchasing
completely destroyed. Although the inventory was not the property and constructing the building:
insured, a portion could be sold for scrap. Through the Land purchase price P 120,000
use of the remaining records, the following data are
Payment of delinquent property taxes 35,000
assembled:
Title search and insurance 6,500
Inventory, Jan. 1 P 375,000
City improvements for water and sewer 18,000
Purchases, Jan. 1 – Aug. 15 1,385,000
Cash sales, Jan. 1 – Aug. 15 225,000 Building permit 8,000
Collection of accounts, Jan. 1-Aug. 15 2,115,000 Cost to destroy existing building on
Accounts Receivable, Jan. 1 175,000 land (P3,000 worth of salvaged
Accounts Receivable, Aug. 15 265,000 material used in new building) 20,000
Salvage value of inventory 5,000 Contract cost of new building 1,650,000
Gross profit percentage on sales 32% Land improvements-landscaping 82,000
Sidewalks and parking lot 39,000
Compute the inventory loss as a result of the typhoon.
a. P102,600 c. P107,600 Fire insurance on building - 1 year 18,000
b. P104,200 d. P255,600 The depreciated value of the old building on the books
of the company from which the land was purchased was
5. An entity values its inventory by using the retail method P26,000. The old building was never used by Cavern.
(FIFO basis, lower of cost or NRV). The following How much should be recognized as cost of land?
information is available for the year just ended: a. P144,500 c. P196,500
b. P179,500 d. P199,500

9. On June 30, 2022, an entity purchased a machine that

has an expected capacity of 300,000 units and no

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residual value. The cost of the machine was P450,000 14. Wan acquired Yang, a small company that specializes in
and is to be depreciated using the units-of-production pharmaceutical drug research and development for P35
method. During the six months of 2022, 24,000 units of million. The fair value of Yang’s net assets was P15
product were produced. At the beginning of 2023, million (excluding any items referred to below).
engineers estimated that the machine can realistically
Yang owns a patent for an established successful drug
be used to produce only another 230,000 units. During
that has a remaining life of 8 years. A firm of specialist
2023, 70,000 units were produced. The entity would
advisors, Tantsahan, has estimated the current value of
report depreciation in 2023 of:
this patent to be P10 million; however, the company is
a. P105,000 c. P126,000
awaiting the outcome of clinical trials where the drug
b. P108,000 d. P135,230
has been tested to treat a different illness. If the trials
are successful, the value of the drug is then estimated
10. An entity purchased equipment on Jan. 1, 2021 for
to be P15 million. Also included in the company’s
P500,000, estimating a four-year useful life and no
balance sheet is P2 million for medical research that has
residual value. In 2021 and 2022, the entity depreciated
been conducted on behalf of a client.
the asset using the sum-of-years'-digits method. In
2023, the entity changed to straight-line depreciation Compute the amount of goodwill from this acquisition.
for this equipment. What depreciation would the entity a. P3,000,000 c. P 8,000,000
record for the year 2023 on this equipment? b. P5,000,000 d. P20,000,000
a. P 75,000 c. P150,000
b. P125,000 d. P175,000 15. Which of the following describes cryptocurrencies?
a. Digital tokens or coins based on blockchain
11. If the cost of land includes the costs of site technology, such as Bitcoin.
dismantlement, removal and restoration, that portion of b. Digital tokens based on blockchain technology that
the land asset is signifies and derives its value from something that
a. Depreciated in a manner that reflects the benefits does not exist on the blockchain but instead is a
to be derived from land. representation of ownership of a physical asset.
b. Depreciated on a straight-line basis over the c. Digital tokens based on blockchain technology that
expected life of the land. provide users with access to a product or service
c. Depreciated over the period of benefits obtained by and derive their value from that right.
incurring those costs. d. Digital tokens based on blockchain technology that
d. Not depreciated. are similar in nature to traditional securities.

12. The following account balances relating to property, 16. On Jan. 15, 2021, an entity paid P5,400,000 for
plant and equipment of an entity appear on the books property containing natural resource of 2,000,000 tons
on Dec. 31, 2022: of ore. The entity is legally required to restore the site
Land P 6,000,000 after mining operations. The estimated cost of restoring
Building 60,000,000 the land after the resource is extracted is P450,000 and
Accumulated depreciation 24,000,000 the land will have a value of P650,000 after it is restored
for suitable use. Tunnels, bunk houses and other fixed
Plant, property and equipment have been carried at cost installations are constructed at a cost of P8,000,000 and
since their acquisition. The land was acquired 15 years such expenditures are charged to mine improvements.
ago while the building’s construction was completed on
Jan. 1, 2013. The straight-line method for depreciation Operations began on Jan. 1, 2022 and resources
is used. On Jan. 1, 2023, the entity revalued property, removed totaled 600,000 tons. During 2023, a
plant and equipment. On the same date, contracted discovery was made indicating that available resource
professional appraisers submitted the following: after 2023 will total 1,875,000 tons. At the beginning of
2023, additional bunk houses were constructed in the
Fair value
amount of P770,000. In 2023, only 400,000 tons were
Land P 8,000,000
mined because of a strike.
Building 48,000,000
The entity should report depletion for 2023 at
What is the revaluation surplus on Dec. 31, 2023?
a. P640,000 c. P1,040,000
a. P13,200,000 c. P14,000,000
b. P776,000 d. P1,560,000
b. P13,800,000 d. P15,000,000
17. Internal sources of information indicating that an
13. Which statement is correct regarding investment
impairment loss recognized in prior periods for an asset
property in accordance with PAS 40?
may no longer exist or may have decreased include
a. Investment property includes property occupied by
a. There are observable indications that the asset’s
an employee paying market rent.
value has increased significantly during the period.
b. Investment property does not generate cash flows
b. Significant changes with a favorable effect on the
largely independently of the other assets held by an
entity have taken place during the period, or will
entity.
take place in the near future, in the technological,
c. An entity need not disclose the fact the fair value of
market, economic or legal environment in which the
investment property is not determined on the basis
entity operates or in the market to which an asset
of a valuation by an independent valuer who holds
is dedicated.
a recognized and relevant professional qualification
c. Market interest rates or other market rates of return
and has recent experience in the location and
on investments have decreased during the period,
category of the investment property being valued.
and those increases are likely to affect the discount
d. An entity shall disclose the amounts recognized in
rate used in calculating an asset’s value in use and
profit or loss for direct operating expenses
increase the asset’s recoverable amount materially.
(including repairs and maintenance) arising from
d. Evidence is available from internal reporting that
investment property that did not generate rental
indicates that the economic performance of an asset
income during the period.
is, or will be, better than expected.

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18. On Jan. 1, 2021, an entity purchased a patent with a b. P47,500 d. P52,250

cost P1,160,000, a useful life of 5 years. The entity uses
straight-line depreciation. At Dec. 31, 2022, the entity 23. An entity had the following items listed in its trial
determines that impairment indicators are present. The balance at 12/31/23:
fair value less costs of disposal of the patent is Currency and coins P 650
estimated to be P540,000. The patent's value-in-use is Balance in checking account 2,600
estimated to be P565,000. The asset's remaining useful Customer checks waiting to be deposited 1,200
life is estimated to be 2 years. Treasury bills, purchased on 11/2/23,
The entity’s 2023 profit or loss will report amortization mature on 4/30/24 3,000
expense for the patent of Marketable equity securities 10,200
a. P188,333 c. P282,500 Commercial paper, purchased on
b. P232,000 d. P595,000 11/2/23, mature on 1/30/24 5,000
What amount will the entity include in its year-end
19. An entity acquired an asset on July 1, 2020 for statement of financial position as cash and cash
P250,000. Management estimates that the useful life is equivalents?
5 years. At Jan. 1, 2021, impairment indicators are a. P7,450 c. P12,450
present and management decides to write down the b. P9,450 d. P19,650
asset to an estimated recoverable amount of P75,000.
Depreciation will be taken over 3 years from that point. 24. You obtained the bank statement, paid checks, and
On Jan. 1, 2023, the entity adopts the revaluation model other memoranda relating to Lucy Company’s bank
to measure the asset. The asset now has a fair value of account for Dec. 2023. In reconciling the bank balance
P300,000. Furthermore, the estimated remaining useful at Dec. 31, 2023, you observed the following facts:
life is now believed to be 5 years.
Balance per bank statement, 12/31/23 P1,465,800
How much can be recognized as gain on impairment Outstanding checks, 12/31/23 624,750
recovery in 2023 profit or loss? Receipts of 12/31/23, deposited
a. P100,000 c. P175,000 1/2/24 95,550
b. P150,000 d. P275,000 Proceeds of bank loan, 12/15/23,
discounted for 90 days at 10% per
20. An entity is planning to dispose of a collection of assets. year, omitted from records 195,000
The entity designates these assets as a disposal group. Deposit of 12/23/23, omitted from
The carrying amount of these assets immediately before bank statement 53,000
classification as held for sale was P20 million. Upon Check 733 of Lucky Co., charged by
being classified as held for sale, the assets were the bank in error to Lucy Co. 82,100
revalued to P18 million. The entity feels that it would Proceeds of note receivable of Lucy
cost P1 million to sell the disposal group. How would Co. collected by bank, 12/10/23,
the reduction in the value of the assets on classification not entered in cash records
as held for sale be treated in the financial statements? (Principal, P40,000; Interest, P400;
a. The entity recognizes a loss of P2 million Collection charge, P100) 40,300
immediately before classification as held for sale Erroneous debit memo of 12/31/23, to
and them recognizes an impairment loss of P1 charge company’s account with
million. settlement of bank loan, paid by 100,000
b. The entity recognizes an impairment loss of P3 check no. 9344 on same date
million. Deposit of another client on 12/6/23
c. The entity recognizes an impairment loss of P2 credited in error to Lucy Co. 25,000
million.
d. The entity recognizes a loss of P3 million The cash balance per books of Lucy Company on Dec.
immediately before classifying the disposal group as 31, 2023 is
held for sale. a. P911,400 c. P1,146,700
b. P961,800 d. P1,491,000
21. An entity purchased a machine for P360,000 on Jan. 1 of
the current year and received a government grant of 25. An entity estimates the allowance for uncollectible
P50,000 towards the capital cost. The entity’s policy is to accounts at 3% of the ending balance of accounts
treat the grant as a reduction in the cost of the asset. The receivable. During 2023, the entity’s credit sales and
machine was to be depreciated on a straight-line basis collections were P125,000 and P131,000, respectively.
over 8 years and was estimated to have a residual value What was the balance of accounts receivable on Jan. 1,
of P5,000 at the end of this period. 2023, if P180 in accounts receivable were written off
during 2023 and if the allowance account had a balance
Under PAS20 Government grants and government of P750 on 12/31/23?
assistance, what should be the carrying amount of the a. P 5,820 c. P31,000
machine at Dec. 31 of the current year? b. P25,000 d. P31,180
a. P266,875 c. P271,875 26. During your review of the records of an entity for the
b. P271,250 d. P315,625 year 2023, you noted that it sold a machine with a
carrying amount of P640,000 (cost is P1,600,000) on
22. An entity borrowed P400,000 on a 10 percent note June 30, 2023. The entity received an P800,000 non-
payable to finance a new warehouse the entity is interest-bearing note due in 3 years. There is no
constructing for its own use. The only other debt on the established market value for the machine. The
entity's books is a P600,000, 12 percent mortgage prevailing interest rate for a note of this type is 12%.
payable on an office building. At the end of the current The entity recorded the transaction by debiting Note
year, average accumulated expenditures on the new Receivable for P800,000 and crediting Machinery for
warehouse totaled P475,000. The entity should P640,000 and Gain on sale of Machine for the difference.
capitalize interest for the current year in the amount of Because of this, Maggie Mae’s profit for the year ended
a. P40,000 c. P49,000 December 31, 2023 had been overstated by

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a. P 55,274 c. P162,227 32. What amount should the entity report as net unrealized
b. P125,834 d. P196,394 loss at Dec. 31, 2023, in accumulated other
comprehensive income in equity?
27. An entity sold a tract of land on July 1, 2022 for a. P0 c. P15,000
P8,000,000 under an installment sale contract. The b. P10,000 d. P20,000
buyer signed a 4-year 11% note for P5,600,000 on July
1, 2022, in addition to the down payment of 33. Minalin, Inc. acquired 30% of Momo Corp.'s ordinary
P2,400,000. The equal annual payments of principal and shares on Jan. 1, 2023 for P360,000. During 2023,
interest on the note will be P1,805,000 payable on July Momo reported profit of P150,000 and paid dividends of
1, 2023, 2024, 2025, and 2026. The land had an P90,000. Minalin's 30% interest in Momo gives Minalin
established cash price of P8,000,000, and its cost to the the ability to exercise significant influence over Momo's
entity was P6,000,000. The collection of the operating and financial policies.
installments on this note is reasonably assured.
On Dec. 31, 2023, Minalin classified 40% of the
The current portion of the installment note receivable on investment as held for sale in accordance with PFRS 5.
Dec. 31, 2023 is Total fair value of the investment was P390,000 on that
a. P1,805,000 c. P1,319,790 date. Minalin normally incurs costs to sell equal to 5%
b. P1,400,000 d. P1,189,000 of the selling price.
Determine the amount to be reported for the ‘held for
28. Lakers Company provides financing to other companies
sale’ portion of the investment.
by purchasing their accounts receivable on a
a. P148,200 c. P156,000
nonrecourse basis. Lakers charges its clients a
b. P151,200 d. P226,800
commission of 15% on all receivable factored. In
addition, Lakers withholds 10% of receivables factored
34. An entity established a savings account for building
as protection against sales returns or other
construction by making annual deposits of P800,000 at
adjustments. Experience has led Lakers to establish an
the beginning of each of six years to a savings account
allowance for bad debts of 4% of all receivables
paying 8%. At the end of the sixth year, the account
purchased.
balance was transferred to a bank paying 10%, and
On Jan. 15, Lakers purchased receivables from Kobe annual deposits of P800,000 were made at the end of
Company totaling P1,500,000. Kobe had previously an each year from the seventh through the tenth years.
allowance for bad debts for these receivables at What was the account balance at the end of the tenth
P35,000. By Jan. 31, Lakers had collected P1,200,000 year?
on these receivables. What is the loss on factoring to be a. P11,589,274 c. P12,305,193
recognized by Kobe Company? b. P12,228,056 d. P12,992,617
a. P190,000 c. P225,000
b. P375,000 d. P 0 35. A derivative financial asset may be classified as financial
asset at
29. If an entity neither transfers nor retains substantially all a. Amortized cost
the risks and rewards of ownership of a transferred b. Fair value through other comprehensive income
asset, and retains control of the transferred asset, the c. Either a or b
entity shall d. Neither a nor b
a. Derecognize the financial asset and recognize
separately as assets or liabilities any rights and 36. When settlement date accounting is applied an entity
obligations created or retained in the transfer. accounts for any change in the fair value of the asset to
b. Continue to recognize the transferred asset in its be received during the period between the trade date
entirety. and the settlement date in the same way as it accounts
c. Recognize a financial liability for the consideration for the acquired asset. Therefore, change in the fair
received. value of the asset to be received during the period
d. Continue to recognize the transferred asset to the between the trade date and the settlement date is not
extent of its continuing involvement. recognized for assets measured at
a. Amortized cost.
30. On Mar. 1, 2023, an entity acquired P700,000 of 10 b. Fair value through profit or loss.
percent bonds to yield 8 percent. Interest is payable c. Fair value through OCI.
semiannually on Feb. 28 and Aug. 31. The bonds mature d. All of the above.
in ten years. The entity is a calendar-year corporation.
If the bonds are not held for trading, the interest income 37. The balance in Hansel Company's accounts payable
to be recognized in 2023 profit or loss is account at Dec. 31, 2023, was P1,100,000 before
a. P52,925 c. P58,933 considering the following information:
b. P53,000 d. P58,333
Use the following information for the next two questions.
The following data pertains to an entity's investments in
marketable equity securities:
Fair Value
Cost 12/31/23 12/31/22
FVTPL P150,000 P155,000 P100,000
FVTOCI 150,000 130,000 120,000

31. What amount should the entity report as unrealized

holding gain in its 2023 profit or loss?
a. P50,000 c. P60,000
b. P55,000 d. P65,000

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• Goods shipped FOB shipping point on Dec. 20, 2023, An entity sponsors a defined benefit pension plan. For the
from a vendor to Hansel were lost in transit. The current year ended Dec. 31, the following information
invoice cost of P20,000 was not recorded by Hansel. relevant to the plan has been accumulated:
On Jan. 6, 2024, Hansel filed a P20,000 claim Defined benefit obligation, 1/1 P10,000,000
against the common carrier. Fair value of plan assets, 1/1 9,000,000
• On Dec. 27, 2023, a vendor authorized Hansel to Current service cost 3,000,000
return, for full credit, goods shipped and billed at Gain on settlement 500,000
P35,000 on Dec. 2, 2023. The returned goods were Actual return on plan assets 630,000
shipped by Hansel on Dec. 27, 2023. A P35,000 Increase in defined benefit
credit memo was received and recorded by Hansel obligation due to changes in
on Jan. 6, 2024. actuarial assumptions 800,000
What amount should Hansel report as accounts payable Market yield on high quality
in its Dec. 31, 2023, statement of financial position? corporate bonds 6%
a. P1,065,000 c. P1,115,000 Yield on bonds issued by the entity 8%
b. P1,085,000 d. P1,120,000 Expected return on plan assets 9%

38. Due to adverse economic circumstances and poor 42. Calculate the amount that the entity would recognize in
management, Sultan Company has negotiated a current year profit or loss.
restructuring of its P10,000,000 note payable to a. P2,560,000 c. P2,580,000
Kudarat Bank. Kudarat Bank has agreed to reduce the b. P2,570,000 d. P2,590,000
face value of the note to P8,000,000 and extend the due
date three years from the date of restructuring. 43. Calculate the amount that the entity would recognize in
However, the interest rate was increased from 15% to current year other comprehensive income.
21%. There is no unpaid interest on the restructured a. P710,000 c. P800,000
loan at this time. The tax rate is 30%. In accordance b. P790,000 d. P890,000
with PFRS 9, how much gain should be recognized in
profit or loss? (Round off present value factors to four 44. At the beginning of year 1, Addo Corp. grants 100 share
decimal places) options to each of its 200 employees. Each grant is
a. Nil c. P 904,224 conditional upon the employee remaining in service over
b. P632,957 d. P2,000,000 the next three years. The entity estimates that the fair
value of each option is P21. On the basis of a weighted
39. On Jan. 1, 2023, an entity issued a P3 million 6% average probability, the entity estimates that 60
convertible bonds at par. The bonds are redeemable at employees will leave during the three-year period and
a premium of 10% on Dec. 31, 2026 or it may be therefore forfeit their rights to the share options.
converted into ordinary shares on the basis of 50 shares Suppose that 15 employees leave during year 1. Also
for each P1,000 bond at the option of the holder. The suppose that by the end of year 1, the entity’s share
interest rate for an equivalent bond without the price has dropped, and the entity reprices its share
conversion rights would have been 10%. options, and that the repriced share options vest at the
If the holders have no intention to exercise the end of year 3. The entity estimates that a further 35
conversion option, the issuance of convertible bonds on employees will leave during years 2 and 3. During year
Jan. 1, 2023 increased the entity’s equity by (Round-off 2, a further 10 employees leave, and the entity
present value factors to four decimal places) estimates that a further 10 employees will leave during
a. Nil c. P175,518 year 3. During year 3, a total of 8 employees leave.
b. P73,068 d. P380,418 The entity estimates that, at the date of repricing, the
fair value of each of the original share options granted
40. Roy Company leased equipment for its entire nine-year (ie before taking into account the repricing) is P10 and
useful life, agreeing to pay P1,000,000 at the start of that the fair value of each repriced share option is P13.
the lease term on Jan. 1, 2022, and P1,000,000
annually on each Jan. 1, for the next eight years. The The amount to be recognized as expense by Addo corp.
present value on Jan. 1, 2022, of the nine lease in year 3 is
payments over the lease term, using the rate implicit in a. P136,800 c. P150,750
the lease which Roy knows to be 10% was P6,330,000. b. P145,050 d. P400,800
The Jan. 1, 2022 present value of the lease payments
using Roy’s incremental borrowing rate of 12% was 45. In 2024, before the Entity P’s 2023 financial statements
P5,970,000. Roy made a timely second lease payment. were approved for issue, a class action lawsuit was filed
What is the balance of the lease liability at Dec. 31, against the entity. The lawsuit seeks compensation for
2023? a community experiencing health problems allegedly
a. P4,349,300 c. P4,970,000 caused by pollution from the entity’s plant. Legal
b. P4,863,000 d. P5,349,300 counsel advised management that there is a 30 per cent
chance that the action will be successful. If successful,
41. At the commencement date, the lessor shall recognize the court is likely to award the community compensation
assets held under a finance lease in its statement of of between P1,000,000 and P2,000,000. 

financial position and present them as a receivable at an
In its financial statements for the year ended Dec. 31,
amount equal to
2023, the Entity P should recognize a liability for the
a. The gross investment in the lease.
lawsuit of
b. The net investment in the lease.
a. Nil c. P1,500,000
c. The lower of the fair value of the asset and the
b. P1,000,000 d. P2,000,000
present value of the lease payments.
d. The higher of the fair value of the asset and the
46. On Jan. 2, 2022, Midland Corp. purchased a machine for
present value of the lease payments.
P1,400,000. This machine has a 5-year useful life, a
Use the following information for the next two questions:
residual value of P200,000, and is depreciated using the

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straight-line method for financial statement purposes. b. Preference shares that entitle the holders to redeem
For tax purposes, depreciation expense was P500,000 the preference shares for cash if the issuer’s
for 2022 and P400,000 for 2023. Midland’s 2023 income revenues fall below P100 million.
before tax and depreciation expense was P2,000,000 c. Shares held by members of a co-operative entity
and its tax rate was 35%. If Midland has made no whose charter states that redemptions are made at
estimated tax payments during 2023, what amount of the sole discretion of the entity. However, the
current income tax liability would Midland report in its charter further states that approval of a redemption
Dec. 31, 2023 statement of financial position? request is automatic unless the entity is unable to
a. P385,000 c. P525,000 make payments without violating local regulations
b. P560,000 d. P700,000 regarding liquidity or reserves.
d. None of these.
47. An entity issued 60,000, P50 par value, ordinary shares
and 20,000, P100 par value, redeemable preference 52. When applying a new accounting policy to, or correcting
shares for a total consideration of P7,000,000. At this amounts for, a prior period, hindsight may be used in
date, the ordinary share was selling for P100 per share a. Making assumptions about what management’s
and the preference share was selling for P150 per share. intentions would have been in a prior period.
b. Estimating the amounts recognized, measured or
How much should be credited to share premium?
disclosed in a prior period.
a. P1,000,000 c. P2,000,000
c. Both a and b.
b. P1,500,000 d. P2,500,000
d. Neither a nor b.
48. The statement of financial position of an entity at Dec.
53. A receipt of P12,600 cash from a customer as a payment
31 of the current year showed shareholders’ equity of
on account was incorrectly credited to service revenue.
P448,700. Transactions during the year which affected
What is the effect of this error on the financial
the shareholders’ equity were: (1) an adjustment to
statements of the company?
Retained Earnings for an overstatement of depreciation
a. Assets are understated by P12,600 and equity is
in prior year P10,000; (2) gain on the sale of treasury
understated by P12,600.
shares, P9,000; (3) declared dividends of P60,000 of
b. Assets are overstated by P12,600 and equity is
which P40,000 were paid during the year; and (4) net
overstated by P12,600.
income after tax of P75,500. The share capital balance
c. Assets are overstated by P25,200 and equity is
of P300,000 remain unchanged during the year.
overstated by P25,200.
The retained earnings balance on Jan. 1 of the current d. Assets are understated by P12,600 and liabilities are
year was understated by P12,600.
a. P134,200 c. P123,200
b. P132,300 d. P114,200 54. Which of the following is not a primary information need
for the ‘investor’ user group of financial statements?
49. Equity balances of an entity as of the end of the a. Assessment of repayment ability of an entity
reporting period follow: b. Measuring performance, risk and return
c. Taking decisions regarding holding investments
12% preference share capital,
d. Taking buy / sell decisions
200,000 shares, par P100 P20,000,000
Ordinary share capital, 500,000
55. Which statement is correct regarding current/non-
shares, par P100 50,000,000
current distinction in an entity’s statement of financial
Share premium 10,000,000
position?
Retained earnings 15,000,000
a. An entity shall always present current and non-
The preference shares have a call price of 130, a current assets, and current and non-current
liquidation price of 115 and dividends have not been liabilities, as separate classifications.
paid for 3 years. The book value per ordinary share is b. When a presentation based on liquidity provides
a. P127.00 c. P133.20 information that is reliable and more relevant, an
b. P129.20 d. P139.20 entity shall present all assets and liabilities in order
of liquidity.
50. Entity A has made a profit attributable to ordinary c. An entity is not permitted to present some of its
shareholders of P20,000,000 for the year ended Dec. assets and liabilities using a current/non-current
31, 2023. Ten million ordinary shares were outstanding classification and others in order of liquidity.
during 2023. Since Jan. 2023 there has been d. An entity shall classify a liability as current when it
P8,000,000 of 5% convertible bonds in issue. The terms has a right at the end of the reporting period to
of conversion are for every P1,000 nominal value of defer settlement of the liability for at least twelve
shares: months after the reporting period.
Dec. 31, 2023 120 ordinary shares
56. Which of the following covenants affect a liability’s
Dec. 31, 2024 150 ordinary shares
classification as current or non-current?
Dec. 31, 2025 140 ordinary shares
a. Covenants with which an entity must comply on or
Assuming that the income tax rate is 35%, the diluted before the reporting date.
earnings per share in 2023 is b. Covenants to be complied with within 12 months
a. P1.81 c. P1.82 after the reporting period.
b. P1.85 d. P1.83

51. Which of the following should be classified as equity

instruments?
a. Contracts requiring Entity A, a listed company, to
deliver to another entity as many of Entity A’s own
ordinary shares as will equal P10 million.

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TEAM PRTC

c. Both a and b. Income taxes paid 260,000

d. Neither a nor b. Accounts receivable, beginning of the
year 500,000
57. At an entity, events and transactions during 2023 Accounts receivable, end of the year 850,000
included the following. The tax rate for all items is 30%. Inventory, beginning of the year 500,000
• Depreciation for 2022 was found to be understated Inventory, end of the year 400,000
by P30,000. Accounts payable, beginning of the
• A litigation settlement resulted in a loss of P25,000. year 200,000
• The inventory at Dec. 31, 2021 was understated by Accounts payable, end of the year 500,000
P40,000.
• Disposal of a business segment at a loss of The change in FA at FVTPL represents the fair value
P500,000. adjustment.
The effect of these events and transactions on 2023
Compute for the net cash provided by operating
income from continuing operations net of tax would be
activities.
a. P17,500 c. P367,500
a. P730,000 c. P795,000
b. P45,500 d. P395,500
b. P770,000 d. P880,000
58. The components of other comprehensive income
61. An entity has three manufacturing divisions, each of
include:
which has been determined to be a reportable operating
I. Changes in revaluation surplus
segment. In the year just ended, Division 1 had sales of
II. Remeasurements of defined benefit plans
P3,000,000, which was 25% of the entity’s total sales,
III. Gains and losses arising from translating the
and had traceable operating costs of P1,900,000. The
financial statements of a foreign operation
entity incurred operating costs of P500,000 that were
IV. Gains and losses from investments in equity
not directly traceable to any of the divisions. In addition,
instruments classified as held for trading
the entity incurred interest expense of P300,000. The
V. Ineffective portion of gains and losses on hedging
calculation of the measure of segment profit or loss
instruments in a cash flow hedge
reviewed by the entity's chief operating decision maker
VI. For particular liabilities designated as at fair value
does not include an allocation of interest expense
through profit or loss, the amount of the change in
incurred by the entity. However, it does include
fair value that is attributable to changes in the
traceable costs. It also includes nontraceable operating
liability’s credit risk
costs allocated based on the ratio of divisional sales to
a. I, II, III, IV, V and VI aggregate sales. In reporting segment information,
b. I, II, III, V and VI what amount should be shown as Division 1's profit for
c. I, II, III and VI the year?
d. I, II and III a. P875,000 c. P 975,000
b. P900,000 d. P1,100,000
59. Reclassification adjustments do not arise
a. On disposal of debt instruments classified as 62. Entity X is an associate of Entity T. A reporting entity is
financial assets at fair value through OCI. related to Entity X
b. On disposal of a foreign operation. a. If the reporting entity is a joint venture of Entity T.
c. When some hedged forecast cash flow affect profit b. If the reporting entity is an associate of Entity T.
or loss. c. In either a or b.
d. On changes in revaluation surplus. d. In neither a nor b.

60. An entity is preparing its statement of cash flows for the 63. An entity operates in hyperinflationary economy. Its
current year and has provided the following information: balance sheet on Dec. 31, 2023 follows:
Profit before income tax P880,000 Cash P 3,500,000
Depreciation on property, plant and Inventory 27,000,000
equipment 250,000 Property, plant and equipment 9,000,000
Provision for impairment losses 150,000 Current liabilities 7,000,000
Unrealized foreign exchange gains 60,000 Noncurrent liabilities 5,000,000
Fair value adjustment gain on FA at Share capital 4,000,000
FVTPL 130,000 Retained earnings 23,500,000
Fair value adjustment loss on FA at
The general price index at Dec. 31 had moved in this
FVTOCI 65,000
way: 2019 – 100; 2020 – 130; 2021 – 150; 2022 –
Fair value adjustment loss on
240; 2023 – 300.
investment property 190,000
Share of profit of associate 220,000 The property, plant and equipment was purchased on
Gain on sale of FA at AC 85,000 Dec. 31, 2021, and there is six months’ inventory held.
Loss on sale of equipment 70,000 The non-current liabilities were a loan raised on Mar. 31,
Gain on debt extinguishment 125,000 2023.
Gain on distribution of non-cash assets
What is the retained earnings balance on Dec. 31, 2023
to owners 40,000
after adjusting for hyperinflation?
Interest expense 150,000
a. P23,500,000 c. P31,250,000
Interest payable, beginning of the
b. P27,500,000 d. P35,500,000
year 100,000
Interest payable, end of the year 50,000
Interest income 80,000
Interest receivable, beginning of the
year 30,000
Interest receivable, end of the year 20,000

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TEAM PRTC

64. Which statement is incorrect regarding interim financial 69. Presented below is the Dec. 31 trial balance of
reporting in accordance with PAS 34? Corinthians Company.
a. This Standard does not mandate which entities Corinthians Company
should be required to publish interim financial Trial Balance
reports. Dec. 31
b. The IASB encourages publicly traded entities to Debit Credit
provide interim financial reports at least at the end Cash P 14,800
of the half year and within 45 days of the end of the Accounts Receivable 33,600
interim period. Allow. For Doubtful
c. The year-end financial statements' compliance with Accounts P 2,160
PFRS is not affected even if an entity does not Inventory, Jan. 1 62,400
prepare interim financial reports. Furniture and Equipment 67,200
d. Measurements for interim reporting purposes shall Accumulated Depreciation,
be made on a year-to-date basis. Jan. 1 26,880
Prepaid Insurance 4,080
65. A small and medium-sized entity may report which of Notes Payable 22,400
the following assets in its statement of financial Owner, Capital 72,000
position? Sales 480,000
a. Internally generated intangible assets. Purchases 320,000
b. Non-current assets held for sale. Sales Salaries Expense 40,000
c. Intangible assets at revalued amount. Advertising Expense 5,360
d. Investment in associate at cost. Administrative Salaries
Expense 52,000
Office Expense 4,000
Use the following information for the next two questions. P603,440 P603,440

An entity is preparing its financial statements in accordance Information necessary for the preparation of adjusting
with the PFRS for Small Entities. It acquired an investment in journal entries:
equity instrument for P500,000 on June 30, 2023. The direct a) Adjust the Allowance for Doubtful Accounts to 8
acquisition costs incurred were P25,000. percent of the accounts receivable.
b) Furniture and equipment is depreciated at 20
On Dec. 31, 2023 the fair value of the instrument was percent per year.
P600,000 and the transaction costs that would be incurred on c) Insurance expired during the year, P2,040.
sale were estimated at P30,000. d) Interest accrued on notes payable, P2,688.
e) Sales salaries incurred but not paid, P1,920.
66. If the shares are traded in an active market, the f) Advertising paid in advance, P560.
investment should be reported on the Dec. 31, 2023 g) Office supplies on hand, P1,200, charged to Office
statement of financial position at Expense when purchased.
a. P500,000 c. P570,000 h) Inventory on December 31, P64,000.
b. P525,000 d. P600,000
Disregarding income taxes, the adjusted profit is
a. P39,224 c. P41,912
67. If the shares are not traded in an active market, the
b. P41,384 d. P44,072
investment should be reported on the Dec. 31, 2023
statement of financial position at
70. An entity was incorporated on Jan. 1, 2022 with
a. P500,000 c. P570,000
proceeds from issuance of shares of P750,000 and
b. P525,000 d. P600,000
borrowed funds of P 110,000. During the first year of
operations, total income amounted to P82,000 and
68. The statement of financial position of an entity showed
expenses totaled P64,000. On Dec. 15, the entity
the following on Jan. 1 and Dec. 31 of the current year:
declared a P3,000 cash dividend, payable to
Jan. 1 Dec. 31 shareholders on Jan. 15, 2023. No additional activities
Total assets P9,500,000 P12,300,000 affected owners' equity in 2022. The entity's liabilities
Total liabilities 3,000,000 5,000,000 increased to P120,000 by Dec. 31, 2022. On the entity's
Dec. 31, 2022 statement of financial position, total
During the year, the following transactions pertaining to assets should be reported at
the shareholders' equity were completed: a. P878,000 c. P882,000
• Retirement of 5,000 preference shares at P11 per b. P875,000 d. P885,000
share.
• Purchase of 5,000 ordinary shares at P12 per share
to be held as treasury shares.
• Share split, ordinary, 2 for 1.
• Reissue of 2,000 treasury shares at P8 per share.

What was the net income for the current year? End of Examination
a. P701,000 c. P844,000
b. P800,000 d. P899,000 Thank you for participating in Team PRTC
Nationwide Final Pre-Board Examination.

Page 8 of 8 www.teamprtc.com.ph FAR.FinPB5.23