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St. Paul University Philippines

Tuguegarao City, Cagayan 3500
Quiz No. 5

Date: January 11, 2019 Time: 8:30PM-10:00PM

Name:________________________________________________________________
[FAR- 20 minutes]
The following information relates to JERRYVIC COMPANY.
On July 1, Jerryvic purchased the plant assets of Yokona Co., which had discontinued operations. The following
are the fair value of the plant assets acquired:
i. Land 10,500,000
ii. Building 31,500,000
iii. Machinery and Equipment 21,000,000
Jerryvic issued 550,000 shares of its P100 par value ordinary share capital in exchange for the above plant assets.
On the acquisition date, the stock had a fair value of P160 per share.
Jerryvic expanded the following amounts in cash between July 1 and December 20, the date when the company first
occupied the building:

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iv. Special assessment by city on land 540,000

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v. Repairs to buildingseH w 3,150,000
vi. Construction of bases for M&A acquired 4,050,000

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vii. Driveways and parking lots 3,660,000
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viii. Remodelling of office space in building 4,830,000
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On December 23, Jerryvic paid cash for machinery, P7,800,000, subject to 2 percent cash discount, and freight on
machinery of P315,000.
Based on the preceding information, calculate the cost of each of the following PPE items
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1. Land
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a. 10,540,000 c. 14,200,000
b. 14,700,000 d. 11,040,000
2. Building
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a. 39,480,000 c. 31,500,000
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b. 37,980,000 d. 30,000,000
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3. Machinery and equipment

a. 32,009,000 c. 33,009,000
b. 28,959,000 d. 21,000,000
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4. Land improvements
a. 4,200,000 c. 540,000
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b. 3,660,000 d. 0
5. The entry to record the purchase of Yokona’s plan assets should include a
a. Debit to Land of 22,666,667
b. Credit to Share Premium of 8,000,000
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c. Credit to Ordinary Share Capital of 63,000,000

d. Debit to Machinery and Equipment of 29,333,333
6. Which of the following terms best describes the cost or an amount substituted for cost of an asset less the residual
value?
a. Revalued amount
b. Carrying amount
c. Recoverable amount
d. Depreciable amount
7. Which of the following statements is true?
a. Assets are depreciated even if their fair value exceeds their carrying amount
b. Land and buildings are not accounted for separately when acquired together
c. A noncurrent asset acquired as the result of an exchange of assets is not recognized
d. A gain on disposal of a noncurrent asset is classified as revenue
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8. A machine with a 5-year estimated useful life and an estimated residual value was acquired at the beginning of the
current year. At the end of the fourth year, accumulated depreciation using the sum of years’ digits method would
be
a. Original cost less residual value multiplied by 1/15
b. Original cost less residual value multiplied by 14/15
c. Original cost multiplied by 14/15
d. Original cost multiplied by 1/15
9. An asset is being constructed for an entity’s own use. The asset has been financed with a specific new borrowing.
The interest cost incurred during the construction period as a result of expenditures for the asset is
a. Interest expense in the construction period
b. A prepaid asset to be written off over the estimated useful life of the asset
c. A part of the historical cost of the acquiring the asset to be allocated over the estimated useful life of
the asset
d. A part of the historical cost of acquiring the asset to be allocated over the term of the borrowing used to
finance the construction of the asset
10. Which of the following assets could be treated as qualifying asset for purpose of capitalizing borrowing cost
a. Investment property
b. Financial asset
c. Inventory that is manufactured or produced in large quantity on a repetitive basis
d. Biological asset

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[RFBT- 10 minutes]

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11. Which is the correct order of application of the rules in connection with solution of problems involving in nominate
contracts? eH w
a. The provisions of the Civil Code; then stipulation of the parties; the provisions of the most analogous

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nominate contract and lastly custom or usage of the place
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b. Custom or usage of the place; then stipulation of the parties; then the provisions of Civil Code and lastly
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provisions of the most analogous nominate contract

c. The stipulation of the parties; then the provisions of the Civil Code; then the provisions of the most
analogous nominate contract and lastly the custom or usage of the place
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d. The provisions of the most analogous nominate contract; then the stipulation of the parties; then the
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provisions of the Civil Code and lastly the custom or usage of the place
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12. To defraud his creditors, A contracted B by selling a land to B. B now seeks to register the land with the Register
of Deeds. X, a creditor of A, seeks to prevent the registration on the ground that the contract is rescindable. Despite
X’s objection may the land be registered based on the contract in B’s name.
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a. The land cannot be registered based on the contract which is rescindable

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b. The land cannot be registered because the contract is in fraud of creditor

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c. The land can be registered based on the contract because the contract is not yet rescinded
d. The land can be registered because the contract is valid and can be attacked collaterally in a land registration
proceeding.
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13. This is a real contract:

a. Deposit c. Antichresis
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b. Pledge d. All of them

14. Sisa defraud Booba in making the latter believe that the ring she is selling is gold and diamond when in fact, it is
copper and glass. On the other hand, Booba defrauded Sisa in paying him P200,000 in fake Philippine Currency.
Which of these is correct?
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a. Sisa can go to court for the annulment of the contract so that the ring will be returned to her
b. Booba can go to court so that her fake money will be restored to him
c. Neither Sisa nor Booba can go to court since they are both guilty of fraud
d. All the statements are false
15. X and Y were to marry in 3 months. Meantime, to express his affection, X donated a house and lot to Y, which
donation X wrote in a letter to Y. Y wrote back, accepting the donation and took possession of the property. Before
the wedding, however, Y suddenly died of heart attack. Can Y’s heirs get the property?
a. No, since the marriage did not take place
b. Yes, since all the requisites of a donation of an immovable are present
c. No, since the donation and its acceptance are not in a public instrument
d. Yes, since X freely donated the property to Y who became its owner
16. A contract of commodatum has the following essential elements:
a. Consent of the contracting parties, object certain and cause or consideration
b. Consent of the contracting parties, object certain, cause or consideration and delivery of object
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c. Consent of the contracting parties, object certain, cause or consideration and formalities required by law
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d. Consent of the contracting parties, object certain, delivery of object, and formalities required by law.
17. “A,” bachelor lawyer, raped W twice. Upon learning this “F,” the father of W, was able to force A to marry W
under pain of being sued in court and disbarred from the practice of his law profession. Which statement is correct?
a. The marriage may be annulled on the ground of force or violence
b. The marriage may be annulled on the ground of threat or intimidation
c. The defective marriage may, however, be ratified
d. There was no defect, the marriage was perfectly valid
18. S offered to sell to B his house and lot for 10,000,000. In order to pressure B into buying said house and lot, T, a
very good friend of S, threatened B with death as a result of which, B accepted the offer to S. It turns out now that
the market value of the house and lot is 15,000,000. Is the contract of S and B valid?
a. The contract is valid since it is very clear that S did not apply the intimidation
b. The contract is voidable because the consent given by B is anyway vitiated even if the intimidation was
employed by a third person
c. The issue of the contract being voidable is not relevant because B will not have the contract avoidable
because it is actually favourable to him
d. It is not B but S or T who can file the action for annulment
[MAS- 10 minutes]
19. An increase in the income tax rate
a. Raises the break-even point
b. Lowers the break-even point

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c. Increases sales required to earn a particular after-tax profit

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d. Decreases sales required to earn a particular after-tax profit

a. Operating loss
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20. A company with a negative margin of safety also has a/n
c. Sales above its break-even point

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b. Operating profit d. Sales equal to its break-even point
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21. Operating leverage measures how sensitive the profit is to changes in
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a. Selling price c. Fixed costs

b. Sales volume d. Variable costs
22. Operating leverage factor=
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a. Gross margin / profit after tax d. Contribution margin / profit before

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b. Gross margin / profit before tax tax

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c. Contribution margin / profit after tax

23. If inventories are expected to change, the type of costing that provides the best information for breakeven analysis
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a. Job-order costing c. Joint costing
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b. Variable costing d. Absorption costing

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24. At the break-even point, total contribution margin is

a. Zero c. Equal to total costs
b. Equal to total fixed costs d. Equal to variable costs
25. Which of the following does not affect a company’s break-even point?
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a. Total fixed costs c. Unit selling price

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b. Unit variable cost d. Number of units sold

26. Under CVP analysis, which of the following is not assumed to be constant?
a. Unit variable cost c. Sales mix
b. Unit selling price d. Unit fixed cost
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[AUDITING-30 minutes]
The following long-term receivables were reported in the December 31, 2019, statement of financial position of ARY
CORPORATION:
Note receivable from sale of plant 3,000,000
Note receivable from officer 800,000
The following transactions during 2020 and other information relate to the company’s long-term receivables:

• The note receivable from sale of plant bears interest at 12% per annum. The note is payable in 3 annual
instalments of P1,000,000 plus interest on the unpaid balance every April 1. The initial principal and interest
payment was made on April 1, 2020.
• The note receivable from officer is dated December 31, 2019, earns interest at 10% per annum, and is due
on December 31, 2022. The 2020 interest was received on December 31, 2020.
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•
ARY sold a piece of equipment to ARNOLD, Inc. on April 1, 2020, in exchange for a 400,000 non-interest-
bearing note due on April 1, 2022. The note had no ready market, and there was no established exchange
price for the equipment. The prevailing interest rate for a note of this type at April 1, 2020, was at 12%.
The present value factor of 1 for two periods at 12% is .797
• A tract of land was sold by ARY to EARL, Inc. on July 1, 2020, for P2,000,000 under an instalment sale
contract. Earl signed a 4-year 11% note for P1,400,000 on July 1, 2020, in addition to the down payment
of P600,000. The equal annual payments of principal and interest on the note will be P451,250 payable on
July 1, 2021; 2022; 2023 and 2024. The land had an established cash price of P2,000,000, and its cost to
ARY was P1,500,000. The collection of the instalments on this note is reasonably assured.
27. The amount to be reported as noncurrent receivables in the statement of financial position at December 31, 2020,
is
a. 3,096,242
b. 3,067,550
c. 3,221,550 d. 3,250,242

28. The current portion of notes receivable on December 31, 2020, should be
a. 1,451,250 c. 2,097,250
b. 1,297,250 d. 2,297,250
29. The accrued interest receivable on December 31, 2020, should be
a. 257,000 c. 285,692
b. 180,000 d. 334,000

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30. On December 31, 2020, the unauthorized discount on note receivable from sale of equipment should be
a. 42,944 c. 0

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b. 109,892 eH w d. 52,508
31. The total interest income for the year ended December 31, 2020, should be

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a. 427,000 c. 375,692
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b. 455,692 d. 532,692
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32. Prior to, or in conjunction with, the information-gathering procedures for an audit, audit team members should
discuss the potential for material misstatement due to fraud. Which of the following best characterizes the mindset
that the audit team should maintain during this discussion?
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a. Presumptive c. Criticizing
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b. Judgmental d. Questioning
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33. When using the cycle approach to segmenting the audit, the reason for treating capital acquisition and repayment
separately from the acquisition of goods and services is that:
a. The transactions are related to financing a company rather than to its operations.
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b. Most capital acquisition and repayment cycle accounts involve few transactions, but each is often highly
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material and therefore should be audited extensively

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c. Both A and B are correct

d. Neither A nor B is correct
34. An auditor has identified the controller’s review of the bank reconciliation as a control of test. In connection with
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this test, the auditor interviews the controller to understand the specific data reviewed on the reconciliation. In
addition, the auditor verifies that the bank reconciliation is properly prepared by the accountant and reviewed by
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the controller as evidenced by their respective sign-offs. Which of the following types of audit procedures do these
actions illustrate?
a. Observation and inspection of records
b. Confirmation and reperformance
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c. Inquiry and inspection of records

d. Analytical procedures and reperformance
[TAXATION – 10 minutes] Please refer to Old Law
35. PCSO and lotto winnings are
a. Exempt from tax
b. Subject to 20 percent final tax
c. Exempt from tax not exceeding 10,000 any in excess will be subject to 20 percent final tax
d. Half will be exempt half will be tax
36. “Global system of income taxation” means:
a. All types of income except those subject to final tax are aggregated to arrive at gross income
b. Separate graduated rates are imposed on different types of income
c. Capital gains are excluded in determining gross income
d. Compensation income and business or professional income are taxed at different places in the world
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37. Sale of real property located outside of Philippines shall be
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a. Subject to capital gains tax of 6 percent on selling price or fair market value whichever is higher
b. Subject to capital gains tax of 15 percent on the net capital gain
c. Exempt from tax if the taxpayer is resident citizen
d. Subject to net income tax if taxpayer is resident citizen or domestic corporation
38. Which of the following statements is incorrect?
a. A prize of 10,000 is subject to net income tax
b. Winnings from the Philippines Charity Sweepstakes are exempt from income tax
c. Royalties on books, literary works and musical composition are subject to 10 percent final
withholding tax
d. Interest income from long term deposit is exempt from income tax
39. The following are subject to Net Income Taxation, except:
a. Resident citizen c. Non-resident citizen engaged in business
b. Domestic corporation d. Non-resident corporation
40. A sale of principal residence to purchase a new principal residence shall be exempt from tax if done
a. Once every ten years and reported to BIR within 18 months from sale
b. Once every 18 years and reported to BIR within 10 months from sale
c. Once every 10 years and reported to BIR within 2 months from sale
d. Once every 10 years and reported to BIR within 1 month from sale
41. The payor of passive income subject to final tax is required to withhold the tax from payment due to the recipient.
The withholding of the tax has the effect of
a. A final settlement of the tax liability on the income

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b. A credit from the recipient’s income tax liability

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c. Consummating the transaction resulting in an income

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42.
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d. A deduction in the recipients income tax return
Mr. Andes asks your professional expertise whether the following items of income need be reported in his ITR

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i. Passive income
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ii. Fringe benefits received
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iii. Capital gains from sale of real property and shares of stock
iv. Exempt or exclusion from gross income e.g. proceeds of life insurance
a. All of the above must be supplemented in the ITR
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b. None of the above must be supplemented in the ITR

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c. Only items i and ii must be supplemented in the ITR

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d. Only items i, ii, and iii must be supplemented in the ITR

[Advanced FAR- 10 minutes]
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43. Which of the following statements concerning the formation of partnership business is correct?
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a. Philippine Financial Reporting Standards allows recognition of goodwill arising from the formation of
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partnership
b. The juridical personality of the partnership arises from the issuance of certification of registration
c. The parties may become partners only upon contribution of money or property but not of industry or service
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d. The capital to be credited to each partner upon formation may not be the amount actually
contributed to each partner.
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44. Under the generally accepted accounting principles in the Philippines, what is the acceptable reason when the
amount credited to a partner is greater than the amount actually contributed by such partner during partnership
formation?
a. Recognition of goodwill by virtue of special skills or reputation of said partner
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b. Receipt or transfer of capital from other partner by virtue of partner’s agreement resulting to bonus
to the said partner
c. Recognition of impairment loss on the property contributed by said partner
d. When there is a bonus given by said partner to the other partners
45. Which of the following transactions shall not affect the capital balance of a partner?
a. Share of a partner in the partnership’s net loss
b. Receipt of bonus by a partner from another partner based on the agreement
c. Advances made by the partnership to a partner
d. Additional investment by a partner to the partnership
46. Which of the following will decrease the capital balance of a partner?
a. Share in partnership profit
b. Receipt of share in revaluation surplus from a partnership property, plant and equipment
c. Drawing made by partner
d. Advanced made by a partner to the partnership
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47. Which of the following will not result to the dissolution of a partnership?
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a. Insolvency of the partnership

b. Admission of a new partner in an existing partnership
c. Assignment of an existing partner’s interest to a third person
d. Retirement of partner
48. If a partner who retired from the partnership receives less than the capital balance before retirement which also
resulted to decrease in the capital balance of remaining partners. Which is correct?
a. The retiring partner receives bonus from remaining partner
b. An impairment loss is recognized before the retirement
c. Revaluation surplus is recognized before the retirement
d. The retiring partner gives bonus to the remaining partner
49. In the liquidation of general partnership, which of the following credits shall be paid first?
a. Those owing to third persons
b. Those owing to partners other than capital and profits
c. Those owing to partners for their capital contribution
d. Those owing to partners for their share in profits
50. In the liquidation of limited partnership, which of the following credits shall be paid last?
a. Those owing to third persons
b. Those owing to limited partners
c. Those owing to general partners for their share in profits
d. Those owing to general partners for their capital contribution

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Prepared by:
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HARLEY BERNIESON D. CORTES, CPA
Instructor
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