PRE8 – FINAL EXAMINATION

1. Which of the following is not one of the 7. The Weyman Hospital, a private, not-for-
classifications of inventory held by a profit institution, reported the following
government entity? information:
Inventory Held for Long-term Use Gross patient service revenue $1,000,000
Allowance for discounts to hospital
2. The Statement of Comparison of Budget employees 20,000
and Actual Amounts is dated Bad debt expense 40,000
For a given reporting period Contractual adjustments 100,000
What amount should the hospital report as
3. Guil College, a private not-for-profit college, net patient service revenue?
received the following cash inflows: 880,000

P400,000 from students for tuition. 8. At the beginning of Year 1, a government

entity acquires an intangible asset for
P200,000 from a donor who stipulated that ₱100,000. The intangible asset has a useful
the money be invested indefinitely and the life of 10 years. At the end of Year 3, the
earnings used for student scholarships. entity determines an indication of
impairment and makes the following
P100,000 from a donor who stipulated that estimates:
the money be spent according to the wishes Fair value less costs to sell 60,000
of the Board of Trustees. Value in use 50,000
How much is the impairment loss?
Which amounts of these cash flows should 10,000
be shown on the cash flow statement as
cash from operating activities? 9. The notes to the financial statements is
P500,000 least likely to be expected to show which of
the following information?
4. Cash flows from a public university Current and noncurrent distinctions of
bookstore would appear on the statement assets and liabilities
of cash flows as
Cash flows from operations 10. Which of the following may not be included
in the inventories of a government entity?
5. Account titles in the Revised Chart of Equipment costing ₱15,000
Accounts (RCA) are arranged according to
this sequence 11. The journal entry to record the collection of
Assets, Liability, Equity, Revenue, and unbilled tax revenue (e.g., Travel Tax)
Expenses through direct deposit in Authorized Agent
Banks is
6. The receipt of subsidy from the national Cash-Treasury/Agency Deposit, Regular
government or other government agencies Travel Tax
Gives rise to the recognition of revenue
 PRE8 – FINAL EXAMINATION
12. The entry to close the “Cash- 17. The Johnson Hospital, a private not-for-
Treasury/Agency Deposit, Regular” account profit hospital, received the following
at the end of the period is revenues in the current year:
Accumulated Surplus/(Deficit)
Cash-Treasury/Agency Deposit, Proceeds from sales of the Hospital’s flower
Regular shop - P60,000

13. Entity A, a government entity, has an Dividends and interest revenue not
unused NCA of ₱50,000 at the end of the restricted - P20,000
current year. The entry to record the
reversion of unused NCA is Cash contributions for the renovation of the
Subsidy from National Government  children’s ward in the Hospital - P200,000
Cash-Modified Disbursement
System (MDS), Regular Which of these amounts should be reported
as other revenues and gains (other
14. Which of the following is not an indicator of revenue) on the Statement of Operations?
reliable measurement for an asset? P80,000
Benefits can be expected on the basis of
available evidence or logic. 18. Which of the following does not belong to
Inventory for Distribution?
15. Which of the following does not affect the Merchandise Inventory
amount of surplus or deficit that is reported
in the statement of financial performance? 19. Home Care, Inc., a nongovernmental
Closing of the “Cash-Treasury/Agency voluntary health and welfare organization,
Deposit, Regular” account received two contributions in 2003. One
contribution of P250,000 was restricted for
16. The following are the account balances use as general support in 2004. The other
from Entity A’s statement of financial contribution of P200,000 carried no donor
performance: restrictions. What amount should Home
Inventory, January 1, 20x1 ............. ₱30,000 Care report as temporarily restricted
Purchases .......................................... 40,000 contributions in its 2003 statement of
Purchase Returns and Allowances ...... 5,000 activities?
Purchase Discounts ............................. 4,000 P250,000
Freight-In ............................................ 5,000
Inventory, December 31, 20x1 ......... 15,000 20. This is attached to the annual general
Freight-Out ......................................... 6,000 purpose financial statements of a
Given this information, the cost of sales government entity as a cover letter.
during 20x1 is: Statement of Management Responsibility
51,000 for Financial Statements
 PRE8 – FINAL EXAMINATION
21. Entity A, a government entity, had the 25. Which of the following is not an essential
following transactions during the period: characteristic of a financial instrument?
It is subsequently measured at fair value.
Received Notice of Cash Allocation (NCA)
amounting to ₱1,226,618. 26. Entity A grants a cash advance of ₱2,000 for
the traveling expenses of an officer. Actual
Earned total revenue of ₱1,598,000 from expenses amount to ₱2,000. The officer
billings and collections of unbilled income. remits the excess cash advance.
The entry to record the liquidation of the
Incurred total expenses of ₱791,652. cash advance is
Traveling Expenses
Remitted total taxes withheld of ₱87,460 to Advances to Officers and Employees
the BIR through Tax Remittance Advice
(TRA). 27. Which of the following statements is
correct?
The “Cash-Modified Disbursement System Under the Advice to Debit Account (ADA)
(MDS), Regular” has an unused balance mode of disbursement, payments from a
of ₱132,196 at the end of the period. government entity are directly credited to
the bank accounts of the payees through
How much is the surplus (deficit) for the bank transfers.
period?
1,988,230 28. Entity A had the following balances at
December 31, 1999:
22. Which one of the following is not a required
financial statement for a private voluntary Cash in checking account - P35,000
health and welfare organization?
Statement of Fund Balance Cash in money market account - P75,000

23. The entry to record the granting of cash Treasury bill, purchased 11/1/1999,
advance for payroll fund is maturing 1/31/2000 - P350,000
Advances for Payroll
Cash-Modified Disbursement Treasury bill, purchased 12/1/1999,
System (MDS), Regular maturing 3/31/2000 - P400,000

24. Which of the following items are classified Entity A’s policy is to treat as cash
by a government entity as Inventory Held equivalents all highly liquid investments
for Consumption? with a maturity of three months or less
Office supplies and similar materials when purchased. What amount should
Entity A report as cash and cash equivalents
in its December 31, 1999 statement of
financial position?
460,000
 PRE8 – FINAL EXAMINATION
35. Entity A grants a cash advance of ₱2,000 for
29. Gerlack College, a private, not-for-profit the traveling expenses of an officer. Actual
institution, received a donation of expenses amount to P2,000.00. The officer
P2,000,000 as a challenge grant. If the remits the excess cash advance.
college raises an additional P2,000,000 The entry to record the grant of cash
within the next two years, it may keep the advance is
donation. If it fails, the P2,000,000 must be Advances to Officers and Employees
returned to the donor. How would the Cash – Modified Disbursement
college record the receipt of the grant? System (MDS), Regular
Refundable Advances
36. Relief and other welfare goods held for
30. Which of the following statements is distribution are most likely to be classified
incorrect regarding the accounting for by a government entity as
unreleased checks by a government entity? Inventory Held for Distribution
Unreleased checks are perforated
37. The main purpose of the statement of
31. A statement of functional expenses is comparison of budget and actual amounts
required for which of the following private is
not-for-profit institutions? (use SFAS 117 in To enhance the transparency of financial
answering this question) reporting of the government
Voluntary Health and Welfare
Organization 38. A private not-for-profit hospital provided
P150,000 in charity care for the current
32. The main purpose of the Statement of year. The hospital should report this charity
Comparison of Budget and Actual Amounts care as
is Only in the notes to the financial
To enhance the transparency of statements.
government’s financial reporting.
39. This account is credited when government
33. Which of the following applies to business entities remit collections to the National
entities but not to government entities? Treasury
Noncurrent asset held for sale Cash-Collecting Officers
classification. 
40. The receipt of an inter-agency fund transfer
34. According to the PPSAS, a financial asset is is recorded as
recognized when Cash-Collecting Officers
An entity becomes a party to the Due to (Central Office, Regional
contractual provisions of the instrument. Office, Operating Units or Other
Funds)