Transcript
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
Tel. No.: (033) 320-2728; 09106547262
Email Address:
[email protected]
BOARD OF CERTIFIED PUBLIC ACCOUNTANT
CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
MANAGEMENT ADVISORY SERVICES
GENERAL INSTRUCTIONS:
1. This test booklet contains 49 test questions.
2. Read INSTRUCTIONS TO EXAMINEES printed on your answer sheet.
3. Shade only one (1) box for each question on your answer sheets. Two or more boxes shaded will invalidate
your answer.
4. AVOID ERASURES.
INSTRUCTIONS:
1. Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.
2. Write the subject title “MANAGEMENT ADVISORY SERVICES” on the box provided.
3. Shade Set Box “A” on your answer sheet if your test booklet is Set A; Set Box “B” if your test booklet is Set B.
__________________________________________________________________________________________
1. The following statements characterized MAS Practice, except:
A. The risk associated to multifarious ongoing changes in business, environment and conditions greatly
contribute in making MAS Practice visibly important.
B. CPA advisors must always maintain Independence and integrity despite so many situations that may
negate their practical applicability.
C. The practice of advisory services is too broad to include those outside the traditional professional
services of CPA’s and allow him to deviate from the general code of professional involves from
problem-solving affecting the future operations of the client.
2. What is one primarily benefit of an enterprise resource planning (ERP) system?
A. It reduces inventory levels.
B. It permits companies to be more streamlined in production.
C. It replaces research and development in a company.
D. It requires an increased emphasis on product quality.
3. Which one of the following is classified as direct labor?
A. Flour in a bakery
C. Bottles of cola in a bottling company
B. Wages of factory-janitors
D. Coy machine cost of a copy shop
E. 4. What is value chain management best defined as?
A. A large chain that keeps the machines from falling on the production floor
B. Management decisions that affect how quickly the production run occurs
C. The increment value of costs associated with hiring a new production floor leader
D. All activities associated with providing a product or service
F. 5. For what reason is a production cost primarily tracked?
A. To keep with current cost trends to being products to market
B. To effectively allocate the cost of products to measure profitability
C. To determine what amounts are necessary for allocating overhead
D. To keep management’s bonuses increasing every year
G. 6. The following activity and cost data were provided by: Hammer Corp., which would like help in
estimating its future maintenance costs:
H. Units – Maintenance Cost
I.
3
P450
J.
7
P530
K.
11
P540
L.
15
P700
M. Using the least-squares regression method to estimate the cost formula, the expected total cost for an
activity level of 10 units would be closest to;
A. P612.50
C. P595.84
B. P581.82
D. P601.50
A1 PASSERS REVIEW CENTER///1
E. 7. Selected information about Buehler Corporation’s operations at high and at low levels of activity
follow.
F.
G.
Level of Activity
Low
High
H.
Number of units produced
25,000
30,000
I.
Total manufacturing costs
P575,000
P680,000
J.
Direct material cost per unit
P5
P5
K.
Direct labor cost per unit
P6
P6
L. Using the high-low method, what is the cost formula for manufacturing overhead?
A. P50,000 per period plus P10 per unit
C. P50,000 per period plus P22 per unit
B. P50,000 per period plus P21 per unit
D. P347,000 per period plus P0.10 per unit
E. 8. Expected sales for next year for the Jona Division are 120,000 units. Nestor Carey the manager of Jona
Division, is under pressure to improve the performance of the Division. As he plans for next year, he has
decide whether to produce 120,000 units or 140,000 units. The Jona Division will have higher profit, if Nestor
Carey decides to
A. Produce 140,000 units if income is measured under absorption costing.
B. Produce 140,000 units if income is measured under variable costing.
C. Produce 120,000 units if income is measured under absorption costing.
D. Produce 120,000 units if income is measured under variable costing.
F. 9. Which is not true concerning sales mix?
A. Sales mix is the relative percentage in which each product is sold when a company sells more than one
product.
B. Sales mix is important to managers because different products often save.
C. Sales mix does not affect breakeven analysts
D. The computation of weighted average unit contribution margin is useful in sales mix analysis.
G. 10. During the last year, Ruth Company had profit under absorption costing that was P5.500 lower than its
income under variable costing. The company sold 9,000 units during the year, and its variable costs were
P10 per unit, of which Pt was variable setting expense. If fixed production cost is P5 per unit under
absorption costing every year, then how many units did the company produce during the year?
A. 7,525 units.
C. 10,100 units.
B. 8,450 units.
D. 7,900 units.
E. 11. Last year, Francis Company had 20,000 units in its ending inventory. During the year, Francis variable
production costs were P12 per unit. The fixed manufacturing overhead cost was P8 per unit in the beginning
inventory. The company profit for the year was P9,600 higher under variable costing than it was under
absorption costing. Given these facts, the number of units of product in the beginning inventory last year
must have been:
A. 21,200.
C. 18,800.
B. 19,200.
D. 19,520
E.
F. Questions 12 through 13 are based on the following information:
G. Jason Company’s variable costing income statement for August appears below:
H. Jason Company
I. Income Statement
J. For the month ended August: 31
K. Sales (P15 per unit)
P600,000
L. Less variable costs:
M. Variable cost of goods sold:
N. Beginning inventory
P72,000
O. Add variable CGM
315,000
P. Goods available for sale
387,000
Q. Less ending Inventory
27,000
R. Variables cost of goods sold
360,000
S. Total variable costs
80,000
T. Contribution margin
440,000
U. Fixed costs:
160,000
V. Fixed manufacturing
105,000
W. Fixed selling and administrative
35,000
X. Total fixed costs
140,000
Y. Profit
P20,000
Z. The company produces 35,000 units each month. Variable production costs per unit and total fixed costs
have remained constant over the past several months.
AA.12. The peso value of the company’s inventory on August 31 under the absorption costing method
would be:
A. P27,000.
B. P42,000.
A1 PASSERS REVIEW CENTER///2
C. P36,000.
D. P47,000.
E. 13. Under absorption costing for the month ended August 31, the company woul report a :
A. P20,000.
C. P35,000 profit.
B. P5,000.
D. P5,000.
E. 14. ABC had P400,000 budgeted fixed costs and based its standard and normal activity of 40,000 units.
Actual fixed overhead costs were P430,000, actual production was 36,000 units, and sales were 30,000
units. The volume variance was
A. P30,000.
C. P70,000.
B. P40,000.
D. P77,777.
E. 15. Myla Inc. makes a single product that sells for P50. The standard variable manufacturing cost is P32.50
and the standard fixed manufacturing cost is P7.50 based on producing 20,000 units. During the year Myla
produce 22,000 units and sold 21,000 units. Actual fixed manufacturing costs were P157,000; actual
variable manufacturing costs were P735,000. Selling and administrative expenses, all fixed, were P75,000.
There were no beginning inventories.
F. Which costing model, absorption or variable, has a higher profit and how much?
A. Absorption, P7,500.
C. Absorption, P25,000.
B. Variable, P7,500.
D. Variable, P15,000.
E. 16. Which one of the following is true about graph of a mixed cost?
A. The portion of the cost that is fixed cannot be determined from the graph.
B. There are three lines on the graph for this cost-total variable cost total fixed costs, revenue.
C. The fixed cost portion of the graph is the same amount at all levels of activity.
D. The variable cost portion of the graph is rectangular shape.
F. 17. Company A and Company B sell their product for exactly the same sales price. Both have the same
annual fixed costs, Company’s A variable and fixed costs at break even total P60,000 and P30,000
respectively. Company B’s variable and fixed costs at break even total P30,000 and P60,000 respectively.
Both companies have the same profit. If both companies experience as increase in sales, which company
will have the higher profit?
A. Company A
B. Company B
C. Both companies will report the same profit since total cost are the same.
D. More information is needed to determine the answers.
G. 18. Jonathan Corporation sells its product for P40. The variable are P18 per unit. Fixed costs are P16,000.
The company is considering the purchase of an automated machine that will result in a 2 reduction in unit
variable and an increase of P5,000. In fixed costs. Which of the following is true about the break-even point
in units?
A. It will remain unchanged.
D. It cannot be determined from the information
B. It will decrease.
provided.
C. It will increase.
E. 19. Which of the following statements is not true>
A. Operating leverage refers to the extent to which a company’s profit reacts to a given change in sales.
B. Companies that have higher fixed costs relative to variable costs have higher operating leverage.
C. When a company’s sales revenue is increasing highly operating leverage is a good thing because it means
that profits will increase rapidly.
D. When a company’s sales revenue is decreasing high operating leverage is a good thing because it means
that profits will decrease at a slower pace than revenues decrease.
F. 20. Pinoy Buhay-Buhay is a nonprofit organization that captures stray deer from residential communities.
Fixed costs are P10,000. The variable cost of capturing each deer is p10.00 each. How many deers can
Pinoy Buhay-Buhay capture during 2012?
A. 2,200.
C. 4,200.
B. 3,200.
D. 2,000.
E. 21. Ruth Company’s degree of operating leverage is 2.0. Myla Corporation’s degree of operating leverage is
0.0. If the sales of the companies are expected to increase by 10%, the increase (decrease) in the profit
before interest and tax of Ruth as compared to Myla would be:
A. 30% higher.
C. 3 times higher.
B. 2 times higher.
D. 33% lower.
E. Questions 22 and 23 are based on the following information.
F. Below are income statements that apply to ABC Company’s three product lines:
G.
Product A
Product B
Product C
H. Sales
P100
P100
P100
I. Variable costs
(10)
(20)
(30)
J. Contribution margin
P90
P80
P70
K. Fixed costs
(30)
(20)
(10)
L. Profit before taxes
P60
P60
P60
M.
A1 PASSERS REVIEW CENTER///3
N. 22. Within the relevant range. If sales go up by P1 for each firm which product line will experience the
greatest increase in profit?
A. Company A
C. Company C
B. Company B
D. Can’t be determined from the information given
E. 23. At sales of P100, what is the difference in the margin of safety rate between the two product lines having
the highest profitability performance?
A. 87.71%
C. 66.67%
B. 75.00%
D. 10.71%
E.
F. Vinzon Company produces and sells three products that, after with their relative quality and price
structure as follows:
G.
H. De Luxe
I. Premium
J. Economy
K. Unit sales
L.
M.
N.
price
P400
P200
P100
O. Unit variable
P.
Q.
R.
rate
150
120
75
S. Budget
T.
U.
V.
sales in
1,000
3,000
6,000
units
W.Direct fixed
X. P2.5
Y. P4.0
Z. P1.2
cost
million
million
million
AA.
AB.In the next counter, the following changes are being considered.
AC.
AD. De Luxe
AE.Premium
AF. Economy
AG. Unit sales
AH. Increase
AI.
AJ. Decreased
price
d by 10%
by 10%
AK.Unit
AL.
AM. Decreas
AN. Increased
variable
ed by
by 10%
rate
15%
AO. Budget
AP.Increase
AQ.
AR.
sales in
d by 20%
units
AS.Direct fixed
AT.
AU. Increase
AV. Decreased
cost
d by 40%
by 10%
AW.
AX. 24. After embedding the changes, what is the difference break even point its between the two least profitable
products in terms of pesos?
A. 57,143
C. 92,857
B. 150,000
D. 8,621
E. 25. Which one of the following is a critical factor in budgeting for a service company?
A. Coordinating professional staff needs with and operated services.
B. Determining how to allocate the disproportionate costs.
C. Budgeting expenditures before anticipated receipts.
D. Determining client needs.
F. 26. The performance report of the Bohol Division of South Inc. showed a difference between the budget and
the actual results for the year. Management determines this difference was controllable by the manager in
charge. Should the division manager be held responsible?
A. No, since budget difference over time.
B. Yes, because managers are responsible for controllable cost for their department.
C. Only if the difference is favorable.
D. Yes, manages are responsible for all cost in their division.
G. 27. Which of the following includes people who make up the budget committee?
A. Sales manager, company president treasurer.
C. Sales manager, controller, investors.
B. Company treasurer, creditors, controller.
D. External auditors, controller, treasurer
E. 28. How does a sales forecast from states budget?
A. A sales forecast includes the company, while a sales budget includes the industry.
B. A sales forecast includes the company and the industry, while a sales budget includes only the industry.
C. A sales forecast includes the company and the industry, while a states budget includes only the company.
D. They are both the same.
F. 29. Burnham Park Company makes and sells umbrella. The company is in the process of preparing its selling
and administrative Expense Budget for the last half of the year. The following budget data are based on
20,000 units:
A1 PASSERS REVIEW CENTER///4
G. Item
H. Variable Cost
I. Unit Sold
P0.60
P1.30
P0.30
J. Monthly Fixed
K. Cost
P3,000
L. Sales commissions
M. Shipping
N. Advertising
O. Depreciation on office Equipment
P4,000
P. Other Operating expenses
P0.35
P34,000
Q.
R. Expenses are paid in the month incurred. If the company has budgets to spend P90,900 for the
expenses, how many unit does the company expect to sell in the last half of the year?
A. 20,000
C. 37,102
B. 22,000
D. 20,367
E.
F.
G. 30. The production budget shows expected unit sales are 1,800. The required production units are 1,700.
Which of the following represents possible inventory balance?
H.
Beginning Units
Ending Units
A. 200
100
B. 100
200
C. 200
200
D. 0
100
I. 31. Bayantel Company showed the following on its direct materials budget for June:
J.
Units to be produced
50,000
K.
Total pounds needed for production
4,000
L.
Total pounds of materials to be purchased
5,000
M.
Increase in materials inventory
400
N.
O. The materials cost P2 per pound. How much is the cost of direct per unit?
A. P 0.16
C. P20
B. P25
D. P 0.20
E. 32. Bajada Company reported the following information for 2012;
F.
G. Septem
H. October
I. Novemb
J. Dece
K. Janu
ber
er
mbe
ary
r
L. Budgeted Sales
M. P240,0
N. P310,000
O. P250,00
P. P360,
Q. P20
00
0
000
0,0
00
R. Budgeted
S. P90,00
T. P120,000
U. P128,00
V. P144,
W.P88,
purchases
0
0
000
000
X.
Cost of goods sold is 35% of sales.
Bajada purchase and pays for merchandise 60% in the month of acquisitions and 40% in the following
month.
Account payable is used only for inventory acquisitions.
Y. How much is the budgeted balance for Accounts Payable at October 31, 2012?
A. P48,000
C. P102,000
B. P72,000
D. P51,200
E. 33. All-Purpose Equipment, Inc. is planning to sell 200 buckets and produce 190 buckets during March. Each
buckets requires 500 grams of plastic and one half hour of direct labor. Plastic costs P10 per 500 grams and
employees of the company are paid P15.00 per hour. Manufacturing overhead is applied at a rate of 10% of
direct labor costs. All-Purpose Equipment has 300 kilos of plastic in beginning inventory and wants to have
200 kilos in ending inventory. How much is the total amount of budgeted labor for March.
A. P1,500.
C. P1,425.
B. P3,000.
D. P2,850.
E. 34. If a company is concerned with the potential negative effects standards, they should.
A. Set loose standards that are easy to fulfil.
C. Not employ any standards.
B. Offer wage incentives to those meeting
D. Set tight standards in order to motivate people.
standards.
E. 35. Which of the following statements is false?
A. The overhead volume variance whether plant facilities were used efficiently during the period.
B. The costs that cause the overhead volume variance are usuDurian controllable cost.
C. The overhead volume variance relates solely to fixed cost.
A1 PASSERS REVIEW CENTER///5
D. The overhead volume variance is favorable if standard hours allowed to output is greater than the standard
hours at normal capacity.
F. 36. An unfavorable labor quantity variance may be caused by.
A. Paying workers higher wages than expected.
C. Worker fatigue or carelessness.
B. Paying workers a bonus at a year end.
D. Higher pay rates mandated by union contacts.
E. 37. The standard number of hours that should have been worked for the output attained is 8,000 direct labor
hours and the actual number of direct labor hours worked was 8,400. If the direct labor price variance was
P8,400 unfavorable, and the standard race of pay was P16 per direct labor hour, what was the actual rate of
ay for direct labor?
A. P17.00 per direct labor hour
C. P15.00 per direct labor hour
B. P17.00 per direct labor hour
D. P18.00 per direct labor hour
E. Questions 38 and 37 are based on the following information. The controller for Oriental Gravity is reviewing
the production cost report for July. Ari analyst of direct materials costs reflects an unfavourable flexible
budget variance of P25,000. The plant manager believes this is an excellent performance on a flexible
budget for 5,000 units of direct materials. However, the production supervisor is not pleased with this result
because he claims to have saved P1,200 in materials cost on actual production using 4,900 units of direct
materials. The standard materials costs is P12.00 per unit. Actual materials used for the month amounted o
P60,025.
F. 38. The actual average cost per unit of materials was
A. P12.00
C. P12.24
B. P12.01
D. P12.25
E.
F.
G. 39. If the direct materials variance is investigated further. It will reflect a price variance of:
A. Zero.
C. P1,225 unfavorable.
B. P1,176 favorable.
D. P1,250 unfavorable.
E. 40. The Dongyi Company has a standard cost system. In July the company purchased and used 22,500
pounds of direct material at an actual cost of 53,000; the materials quantity variance was P1,875 UF;
and the standard quantity of materials allowed for July production was 21,750 pounds. The budgeted
materials for the period are 23,000 pounds for purchases and 24,000 for usage.
F.
G. Also during the period, the company incurred 12,540 direct labor hours and paid 5,300,000 for plant
payroll. The materials price variance for July was 24,000.
A. P2,725 F.
C. P3,250 F.
B. P2,725 U.
D. P3,250 U.
E. 41. The Reedy Company uses a standard costing system. The following data are available for
F. November:
G. Actual direct labor hours worked
5,800 hours
H. Standard direct labor rate
P9 per hour
I. LAbor rate variance
P1,150 favorable
J. Standard pounds per hour
K. Standard variable rate per hour
P10
L. Normal Capacity in hours
6,000
M. The actual direct labor rate for November is:
A. P8.80.
C. P9.00.
B. P8.90.
D. P9.20.
E. 42. Borden Enterprises uses standard costing. For the month of April, the company reported the
following data:
Standard direct labor rate: P10 per hour
Standard hours allowed for actual production: 8,000.
Actual direct labor rate: P9.50 per hour
Labor efficiency variance: P4,800 F
F. The labor rate variance for April is:
A. P3,760 U.
C. P2,850 F.
B. P3,760 F.
D. P2,850 U.
E. Questions 43 and 44 are based on the following information:
F. The Lon Company makes and sells a single product called a Grix and employs a standard costing
system. The following standards have been established for one unit of Grix.
G.
Standard Quantity of Hours
Standard Cost per Grix
H. Direct Materials
6 board feet
P7.00
I. Direct labor
0.8 hours
P9.60
J. There were no inventories of any kind on August. During August, the following events occurred:
Purchased 15,000 board feet at the total cost of P24,000.
A1 PASSERS REVIEW CENTER///6
Used 12,000 board feet to produce 2,100 Grix.
Used 1,700 hours of direct labor time at a total cost of P20,060.
K. 43. To record the purchase of direct materials, the general ledger would include what entry to the
Materials Price Variance Account?
A. P1,500 credit.
C. P6,000 credit.
B. P1,500 debit.
D. P6,000 debit.
E. 44. To record the incurrence of direct labour cost and its use in production, the general ledger would
include what entry to the Labor Efficiently Variance account?
A. P480 credit.
C. P1,200 debit.
B. P240 debit.
D. P1,200 credit.
E.
F. Questions 45 and 46 are based on the following information:
G. The following standards for variable manufacturing overhead have been establish for a company that
makes only one product:
H. Standard hours per unit of output
1.5 hours
I. Standard variable overhead rate
P11.55 per hour
J. The following data pertain to operations for the last month:
K. Actual hours
4.900 hours
L. Actual total variable overhead cost
P58,310
M. Actual output
3,000 units
N. 45. What is the variable overhead spending variance for the month?
A. P2,870 U.
C. P1,715 U.
B. P2,870 F.
D. P1,715 F.
E.
F. 46. What is the variable overhead efficiency variance for the month?
A.
P1,680 F.
C.
P1,155 U.
B.
P1,190 U.
D.
P1,190 F.
E.
F. Questions 47 through 49 are based on the following information:
G. Durian Corporation produces a model plastic casing, TD4 for desktop computers.
H. Summary data from its 2012 income statements are as follows:
I.
Revenues
P 5,000,000
J.
Variable cost
3,000,000
K.
Fixed cost
2,160,000
L.
Operating income
P (160,000)
M. Aro N. Cillo, Durians president, is very concerned about Durian Corporation’s poor profitability.
She asks Cove Yellow, production manager, and T.D Puyat, Controller, to see if there are ways
to reduce costs.
N. After two weeks, Cove returns with a proposal to reduce variable costs to 52% of revenues by
reducing the costs. Durian currently incurs for safe disposal of wasted plastic. T.D Puyat
concerned that this would expose the company to potential environment cost and include them
in our analysis. “You can’t do that,” Cove replies. “We are not violating any laws. There is some
possibility that we have to incur environmental costs in the future, but if we bring it up now this
proposal will not go through because our senior management always assumes these costs to
be larger than they turn out to be. The market is very tough and we are in danger of shutting
down the company. We don’t want all our colleagues to lose their jobs. The only reason our
competitors are making money is because they are doing exactly what I am proposing.
O. 47. What is Durian Corporation’s breakeven revenues for 2012?
A. P5,000,000.
C. P3,500,000.
B. P4,900,000.
D. P5,400,000.
E. 48. What is Durian Corporation’s breakeven revenues if variable costs are 32% of revenues?
A. P4,500,000.
C. P5,000,000.
B. P5,500,000.
D. P3,900,000.
E. 49. What is Durian Corporation’s operating income for 2012 if variable costs had been 52% of
revenues?
A. P240,000.
B. P200,000.
C. P180,000.
D. P260,000.
F.
G.
H.
I.
A1 PASSERS REVIEW CENTER///7
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AK. ANSWER KEY
1. C
2. A
3. C
4. C
5. B
6. C
7. B
8. A
9. C
10. D
11. C
12. C
13. A
14. B
15. A
16. C
17. A
18. C
19. D
20. A
21. A
22. A
AL. Management Advisory
AM.
23. C
24. C
25. B
26. B
27. A
28. C
29. B
30.
31. A
32. A
33. C
52.
34. D
35. D
36. C
37. C
38. D
39. D
40. D
41. A
42. B
43. D
44. A
45. C
46. A
47. D
48. A
49. A
50.
51.
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A1 PASSERS REVIEW CENTER///8
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87. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
88. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
89. Tel. No.: (033) 320-2728; 09106547262
90. Email Address:
[email protected]
91.
92. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
93.
94. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
95.
96.
AUDITING THEORY
97.
98. 1. Which of the following defines the specific requirements of the Securities and Exchange
Commission (SEC) regarding financial reporting of entitles registered with the SEC?
A. SRC Rule
B. SEC Circulars
C. SRC Rule 68
D. SEC Bulletins
99. 2. SRC Rule 68, as amended, is effective for audited financial statements covering periods ended
100.
and onwards, and for Interim financial statements starting the
101.
, and thereafter.
102. 3. Part I of SRC Rule 68, as amended, deals with the general financial reporting requirements of the
SEC to the following entities: (For each covered entity, indicate the required threshold must be met.)
103.
104. Covered Entity
Thresholds
a. Stock corporations
b. Non-stock corporations
c. Branch offices of stock
105. foreign corporations
d. Brand offices of non-stock
106. corporations
e. Regional operating headquarters 107. of foreign corporations
A1 PASSERS REVIEW CENTER///9
108.
4. In addition to the financial reporting requirements under Part I of Rule 68, as amended, additional
requirements are set forth under Part II of the Rule. The following issuers of securities to the public must
comply with the requirements under this part of the Rule:
a. Issuer which has sold a class of their securities pursuant to a registration under Section 12 of the
Securities Regulation Code (SRC).
b. Issuer with a class of securities listed for trading on an Exchange; and
c. Issuer with assets of at least P50 million and has 200 or more holders each holding at least 100 shares
of a class of its equity securities as of the first day of the Issuer’s fiscal year.
109. 5. Rule 68, as amended, deleted the term “Generally Accepted Accounting principles (or GAAP) and
replace it with
.
110.
111.
112. 6. Large and/or publicity accountable entities shall use as their financial reporting framework the
113.
a.
114.
b.
115.
116. 7. Small and medium-sized entitles (SMEs) shall use as their Financial Reporting Framework
117. the
.
118.
119. 8. If an SME that uses the PFRS for SMEs In a current year the floor or ceiling of the size criteria at
the end of that current year, and the event that caused the change is considered “significant and
continuing”, the entity shall transition to the applicable financial reporting framework in the next
accounting period.
120. The assessment of “significant and continuing” shall be based on management’s judgement taking into
consideration relevant qualitative and quantitative factors.
121. As a general, rule,
would be considered significant.
122.
123. 9. Rule 68, as amended, prescribed the wording of the Statement of Management’s Responsibility
(SMR) for Financial Statements that shall be attached to the financial statements filed with the SEC. All
of the following shall sign the SMR:
a.
b.
c.
124. 10. The failure of any of the prescribed signatories to sign the SMR constitutes a
.
125.
126. 11. In the case of branch offices or regional operating headquarters of foreign corporations, the SMR
shall be signed by its
who is in charge of its operations within the Philippines.
127.
128. 12. The SMR of the entities covered under Part II of Rule 68, as amended, shall be signed
129.
.
130.
131. 13. A regulated agency shall report to the SEC its action on a report of its independent auditor
pertaining to the following:
a. Any material findings involving fraud or error.
b. Losses or potential losses the aggregate of which amounts to at least 10% of the consolidated total
assets of the entity.
c. Any finding to the effect that the consolidated assets of the entity, on a going concern basis, are no
longer adequate to cover the total claims of creditors; and
d. Material internal control weaknesses which may lead to financial reporting problems.
132. 14. A regulated agency shall submit the required report to the SEC within
from
the date the report is submitted by the independent auditor.
133.
134. In the case regulated agency falls to submit the required report, the Independent auditor shall, within
135.
from the submission of his findings to the entity, file a report to the SEC.
136.
137. 15. Report of Independent Auditor when the Company Incurred Capital Deficiency.
138. The external auditor of a company which has incurred a capital deficiency shall provide in the audit
report an
Indicating the following Information:
a. The fact that the company has incurred a capital deficiency that raises an issue on its going concern
status.
A1 PASSERS REVIEW CENTER///10
b. A brief discussion of a concrete plan of the company to address the capital deficiency and reference to
the note to financial statements that provides a complete disclosure of the said plan;
c. A statement that the auditor conducted sufficient audit procedures for verify the validity of the
aforementioned plan.
139.
140. In case the company falls to present to the external auditor a concrete plan or sufficient supporting
documents to address the capital deficiency, the auditor shall provide an
Indicating that
the company is no longer a going concern and should use liquidation basis in the preparation of its
financial statements.
141.
142. 16. It is considered as a violation of Rule 68, as amended, If the audited financial statements covered
by Part II of the Rule with an auditors opinion other than unqualified arising from the following:
a.
b.
143. 17. For
, a qualified opinion from the Independent auditors shall not be
considered a non-compliance with Rule 68, as amended, if the qualification pertains to a deviation from
the financial reporting framework adopted by the Bangko Sentral ng Pilipinas as part of its prudential
reporting requirements.
144.
145. 18. The financial statements that may be found by the SEC to be deficient and/or misstated, the
Commission shall make a determination whether such misstatement or Incompleteness is significantly
material that would necessitate the
of the financial statements.
146.
147. 19. Corporation covered by PART II of Rule 68, as amended, shall not reissue their financial
statements without
.
148.
149. 20. Under Rule 68, as amended, error means an act by one or more individual among management,
employees, or third parties that results in a misrepresentation of financial statements which reduces or
increases the consolidated total assets, total liabilities or income of the company by
.
150.
151. 21. Under Rule 68, as amended, error means an unintentional mistake in the financial statements
which reduces or increases the consolidated total assets, total liabilities or income of the company
152. by
_____________________ .
153.
154.
155. 22. The financial statement of companies not covered by SRC Rule 68 should be accompanied
156. by a
.
157. Such financial statements should have at least a:
a. Statement of Financial Position Fund Balance.
b. Income Statement (or a Statement of Receipts and Disbursements) and
c. Applicable explanatory notes.
158.
159. 23. Companies with no operation but are covered under Rule 68:
a) If no operation only for 1 year, a
must be submitted by the company despite its nonoperation.
b) If no operation for the last 2 years, the
need not be included in the audited
financial statements.
160.
161. 24. It is the responsibility of the entity’s management to provide all schedules, reports,
computations/projection, reconciliations, reports, analyses, and other financial Information collectively
referred to as
in PAPS 1000ph.
162.
163. 25. Which of the following procedure is Inappropriate when the entity’s management is unable to
provide the audit Information requirements?
A. The auditor shall prepare the audit Information requirements.
B. The auditor shall consider assisting the client, for example by preparing a pro forma recondition
statement or schedule format for the client to complete or use as a guide.
C. The auditor shall discuss with the management and/or those changed with governance the possibility of
outsourcing the preparation of audit Information requirements to third party service providers.
D. The auditor shall evaluate the reasons why management is unable to prepare the audit Information
requirements.
164.
A1 PASSERS REVIEW CENTER///11
165. 26. In situations where the client provided Incomplete, and Insufficient audit Information requirements,
the auditor shall consider the following except.
A. Communication in writing the issues and concerns on the Incomplete and Insufficient audit Information
requirements with management and/or those changed with governance.
B. Discuss if the audit information requirements can be revised to meet adequacy the needs of the auditor.
C. Express a qualified or an adverse opinion.
D. Discuss with management and/or those charged with governance the possibility of outsourcing the
completion of the information to third party service providers.
166.
167. 27. The term “
“ is generally used at present to refer to a set of incomplete
or unaudited financial statements accompanied by a report of an external auditor who has not yet
completed his audit of such financial statements.
168.
169. 28. The BIR accepts incomplete or unaudited financial statements to accompany tentative ITRs. (True
or False)
170.
171. 29. To avoid any association with incomplete or unaudited financial statements, no report (even a
report containing a disclaimer of opinion) shall be issued by the auditor on such incomplete or
unaudited financial statements. (True or False)
172.
173. 30. PAPS 1001Ph (Guidance in Dealing with Tentative Financial Statements) shall be applied to
situations where the auditor has completed an audit and has concluded that there are scope limitations
that affected the audit giving rise to either a qualified opinion or disclaimer of opinion. (True or False)
174.
175. 31. The purpose of PAPS 1002Ph is to provide additional guidance on the application of the existing
PSA 700, specifically on the description of the applicable Philippine financial reporting framework when
this is other than Philippine Financial Reporting Standards. (True or False)
176.
177.
178. 32. Which of the following types of engagements may be undertaken by an auditor in connection with
a corporation’s application for an increase in its authorized capital stock?
I. An engagement to perform agreed-upon procedures regarding-financial information.
II. An engagement to report on supplementary information in connection with an audit of financial
statements.
III. An engagement to report on a specific element, account or item of a financial statement.
A. I and II only.
C. II and III only.
B. I and III only.
D. I, II, and III.
179. 33. An agreed-upon procedures engagement Is to be performed if the application for increase in
authorized capital stock is filed long after (e.g., more than 120 days) the date of the most recent audited
financial statements submitted to the SEC and even if the application is closed to the most recent
audited financial statements submitted, the corresponding information in such financial statements is
considered by the SEC to be insufficient. (True or False)
180. 34. The auditor may issue a report on supplementary information if
I. The application for increase in authorized capital shock is made on a date close (e.g., 120 days or less)
to the date of the most recent audited financial statements submitted to the SEC.
II. The applicable information in the audited financial statements is considered sufficient by the SEC.
A. I only.
C. II only.
B. Neither I nor II.
D. Both I and II.
E. 35. Which of the following statements concerning the form and content of Inter-bank confirmations
is Incorrect?
A. The form and content of a confirmation request letter will depend on the purpose for which it is required,
on local practices and on the requesting bank’s account.
B. Not all information for which confirmation is usually sought will be required at the same time.
C. The confirmation request should be prepared in a clear and concise manner to ensure ready
comprehension by the confirming bank.
D. Whenever possible, the confirmation request should be prepared in the language of the requesting bank
or in the language normally used for business purposes.
F. 36. Which of the following are required to be reported by the external auditor to the BSP?
I. Any material finding during the audit involving fraud or dishonesty which will reduce capital funds by at
least one percent (1%).
II. Adjustments or potential losses amounting to at least one percent (1%) of capital funds of the bank.
A1 PASSERS REVIEW CENTER///12
III. Any finding to the effect that the total bank assets, on a going concern basis, are no longer adequate to
cover the total claims of creditors.
A. I and II only.
B. I and III only.
C. II and III only.
D. I,II, and III.
G. 37. The most significant of banking risks, in terms of historical loss experience, is the risk that a
customer or counterparty will not settle an obligation for full value. This risk is sometimes referred to
as
A. Market risk
B. Liquidity and funding risk
C. Credit risk
D. Operational risk
H. 38. An external auditor monitors the present and future viability of banks and uses their financial
statements in assessing their condition and performance. (True or False)
I. The BSP is primarily concerned with reporting on the bank’s financial statements ordinarily either to
the bank’s shareholders or board of directors (True or False)
J. 39. As defined in PAPS 1005, a
is any entity in which:
a. There is concentration of ownership and management in a small number of individuals (often a single
individual); and
b. One or more of the following are also found:
Few sources of income;
Unsophisticated record-keeping;
Limited internal controls together with the potential for management override of controls.
K. 40. Identify the following BANKING RISKS:
a. The risk of the foreign customers and counterparties falling to settle their obligations because of
economic, political, and social factors of counterparty’s home country and external to the customer or
counterparty. Counter Risk
b. The risk of loss arising from future movements in the exchange rates applicable to foreign currency
assets, liabilities, rights and obligations. Currency risk
c. The risk of loss arising from factors such as failure to maintain safe custody or negligence in the
management of assets on behalf of other parties. Fiduciary risk
d. The risk that a movement in interest rates would have an adverse effect on the value of assets and
liabilities or would affect interest cash flows. Interest rate risk
e. The rate that contacts are documented incorrectly or are not legally enforceable in the relevant
jurisdiction in which the contracts are to be enforced or where the counterparties operate. Legal and
documentary risk
f. The risk of loss arising from the changes in the bank’s ability to sell or dispose of an asset. Liquidity
risk
g. The risk associated with the imperfections and subjectivity of valuation models used to determine the
values of assets or liabilities. Modelling risk
h. The risk of direct or Indirect loss resulting from inadequate or failed internal process, people and
systems or from external events. Operational risk
i. The risk of losses arising from adverse changes in market prices, including interest rates, foreign
exchange rates, equity and commodity prices from the movements in the market prices of investments.
Price risk
j. The risk of loss arising from failure to comply with regulatory or legal requirements in the relevant
jurisdiction in which the bank operates. Regulatory risk
k. The risk of failure of a customer or counterparty to perform the terms of a contact. This failure creates
the need to replace the failed transaction with another at the current market price. It is sometimes
called performance risk. Replacement risk
l. The risk of losing business because of negative public opinion and consequential damage to the bank’s
reputation arising from failure to properly manage some of the above risk, or from involvement in
improper or illegal activities by the bank or its senior management, such as money laundering or
attempts to cover up losses. Reputation risk
m. The risk that one side of a transaction will be settled without value being received from the customer or
counterparty. This will generally result in loss to the bank of the full principal amount. Settlement risk
n. The risk of loss of arising from the possibility of the bank not having sufficient funds to meet his
obligations, or from the bank’s inability to access capital markets to raise required funds. Solvency
risk
o. The risk of loss arising when a counterparty’s obligations is not denominated in the counterparty’s home
currency. The counterparty may not obtain the currency of the obligation irrespective of the
counterparty’s particular financial condition. Transfer risk
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L. 41. In the exercise of its power to conduct an oversight into the quality of audits, the BOA organized
the
M.
Department of the Philippine Institute of Certified Public Accountant (PICPA) to
conduct an independent study, appraisal, or review of the quality of audit of financial statements.
A. Quality Assurance Review
C. Independent Quality Assurance Review
B. Quality Control Review
D. Independent Quality Control Review
E. 42. The operation of the Quality Assurance Review Department (QARD) of the PICPA shall be
supervised by a /an
A. Executive Committee
C. Oversight Committee
B. Supervisory Board
D. Accountability Board
E. 43. Which of the following is an Incorrect statement concerning of office of the Executive Committee
members?
A. The term of office of the Chairman and members shall be co-terminus with their respective term in the
BOA or PICPA unless replaced earlier by the Board or ICA
B. The terms of office of the chairman and members in no case shall be more than 3 years.
C. The chairman and members may continue to be in active practice of public accountancy during their
term subject to certain restrictions imposed by the Board.
D. The chairman of the Executive Committee shall be from the Board’s appointees.
F. 44. The head of the QARD who will be appointed by the Executive Committee is the
A. Chief Inspector
C. Chief Auditor
B. Chief of Administration
D. Chief Quality Assurance Reviewer
E. 45. Who is responsible for the non-technical aspect of the QAR program?
A. Chief Inspector
C. Assistant to the Chief Inspector
B. Chief of Administration
D. Chairman of the Executive Committee
E. 46. The QAR program covers all CPAs in
A. Public Accounting
C. Commerce and Industry
B. Government
D. Education/Academic
E. 47. CPAs in public practice required to register with the QAR program under the prescribed category.
Those whose clients are public-interest entities (listed and not-listed but with public accountability)
should register under
A. Category A
C. Category C
B. Category B
D. Category D
E.
F.
G. Section 19 provides that CPA practitioners should be registered in accordance with the following
categories:
Category A – registration for CPA practitioners handling clients that use the full IFRS or their Philippine
equivalents. These would cover CPA practitioners auditing public-interest entities (listed and not-listed
but with public accountability)
Category B - registration for CPA practitioners handling clients that use the full IFRS or their Philippine
equivalents for Small and Medium-sized enterprises.
H. 48. What is the effectivity date of the BOA Resolution No. 88 (Series of 2008) prescribing the rules and
regulations for the accreditation of accounting teachers?
A. June 4, 2008
C. December 30, 2008
B. June 20, 2008
D. June 30, 2008
E. 49. Which of the following requirements for the accreditation of accounting teachers shall not apply to
those CPAs already engaged in teaching as of the effectivity date of the Rules and Regulations?
I. Possession of relevant Master’s degree.
II. Completion of 12 units of relevant education subjects from the CHED recognized schools.
III. A total of 3 years meaningful experience in actual accounting work either in Public Practice, Commerce
& Industry or Government sector.
IV. Proof that the CPA has undergone Continuing Professional Education (CPE).
A. I and II only
C. I and IV only
B. II and III only
D. II only
50. The following statements relate to the complete 12 units of relevant education subjects for the
accreditation of accounting teachers. Which is correct?
A. For purposes of compliance, the 12 units may be earned from the undergraduate education program or
from a graduate degree program of any Higher Education Institution (HEI) duly recognized by CHED.
B. The 12 units may be earned from In-service or In-house trainings on relevant education subjects offered
by schools or training centers.
C. The 12 units may be a combination of In-service trainings and units earned in an undergraduate or
graduate education programs.
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D. CPAs who have passed the Teachers Board Exams and are licensed Professional Teachers should earn
the 12 units through in-service or in-house service.
51. Which of the following shall be considered proof of compliance with the CPE requirement for accreditation
of accounting teachers?
I.
Certification of CPE units from accredited CPE providers issued by the PICPA.
II.
Certificate of Attendance or other proofs of meaningful participation in other CPE programs as approved
by the PRC/CPE Council upon recommendation of the PICPA of the individual CPA of a minimum of
sixty (60) credit units earned for the past immediate 3 years.
A. I only.
C. Either I or II.
B. II only.
D. Neither I nor II.
52. The Certification of Accreditation issued by the PRC to an accounting teacher shall
A. Be valid for 2 years and renewable every 2 years.
B. Be valid initially for 3 years and renewable annually.
C. Remain in full force and effect unless revoked, cancelled or withdrawn.
D. Be valid for 3 years and renewable every 3 years.
53. According to the Transitory Provisions of the BOA Resolution No. 88, any tenured/full time/full load faculty
member who doest not meet the accreditation requirements as of the effectivity date of the Rules and
Regulations may be issued a Provisional Accreditation. Choose the correct statement.
I. The Provisional Accreditation will be valid for a period not exceeding 3 years unless earlier withdrawn,
revoked, or cancelled for cause by the BOA.
II. The Provisional Accreditation may be Issued only once and is not renewable.
III. The transitory provision shall also apply to returning teachers who have not been teaching for the last 5
years.
A. I only.
C. II and III only.
B. I and II only.
D. I, II, and III
54. Issuance of exposure drafts on proposed Philippine Standards or Practice Statements requires the
approval by
A. A majority of the AASC members.
C. At least 5 members of the AASC.
B. At least 10 members of the AASC.
D. All members of the AASC.
55. The time allowed for each exposure draft to be considered by the organizations and persons to whom the
exposure draft is sent for comment is generally not shorter than
A. 60 days
B. 90 days
C. 30 days
D. 120 days
56. The AASC considers the comments and suggestions received as a result of the exposure of Philippine
Standards and Practice Statements and revises the exposure draft when deemed appropriate. Such
exposure draft is then issued as a final Philippine Standard or Practice Statement after meeting the
approval of
A. A majority of the AASC members.
C. At least 5 members of the AASC.
B. At least 10 members of the AASC.
D. All the AASC members.
57. In case of an initial public offering (IPO) of securities by a company, the interim financial statements to
accompany the Registration Statement (SEC Form 12-1, as amended) shall be audited by an external
auditor accredited by the
A. Board of Accountancy (BOA)
B. Professional Regulation Commission (PRC)
C. BOA/PRC
D. BOA/PRC and SEC (Securities and Exchange Commission)
58. The COA chairman and the two (2) commissioners shall be appointed by the president of the Philippines
with consent of the Commission on Appointments for a term of
A. 5 years
C. 7 years
B. 6 years
D. 9 years
59. The Code states that when a financial statements audit client becomes a listed entity, the length of time the
engagement partner or the individual responsible for the engagement quality control review has served the
audit client in that capacity should be considered in determining when the individual should be rotated.
Before rotating off the engagement, the person is allowed to continue to serve as the engagement partner
or as the individual responsible for the engagement quality control review for
A.3 additional years
C.2 additional years
B.1 additional years
D.4 additional years
60. The established of an overall audit strategy involves
I. Determining the characteristics of the engagement that define its scope.
II. Ascertaining the reporting objectives of the engagement to plan the timing of the audit and the nature of
the communications required.
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III. Considering the important factors that will determine the focus of the engagement team’s effort.
A. I and II only.
C. I and III only.
B. II and III only.
D. I, II, and III.
61. In an initial public offering of securities, a written communication from the independent accountant to be
underwriter about procedures the accountant performed on the unaudited financial statements and
schedules accompanying a client’s registration statement
.
62. Refers to a company’s maintaining a steady rate of earnings growth over a series of years, thereby
providing no reason for the financial markets to impute unexpected risk in the company or in expected
stock prices.
63. All the components whose financial information is included in the group financial statements
.
64. Financial statements that include the financial information of more than one component. It also refers to
combined financial statements aggregating the financial information prepared by components that have no
parent but are under common control.
65. Historical financial information that is derived form financial statements but that contains less detail than the
financial statements, while still providing a structured representation consistent with that provided by the
financial statements of the entity’s economic resources or obligations at a point in time or the changes
therein for a period of time.
66. A third-party organization (or segment of a third-party organization) that provides services to user entities
that are part of those entities’ information systems relevant to financial reporting.
67. An auditor established a P180,000 tolerable misstatement for an asset with an account balance of
P3,000,000. The auditor selected a sample of every 20th item from the population that represented the
asset account balance and discovered a net overstatement of P10,500 (P11,100 overstatement minus
P600 understatements). Under these circumstances, the auditor most likely would conclude that
A. The asset account is fairly states because the tolerable misstatement exceeds the net of projected
actual overstatement and understatement.
B. The assets account is fairly stated because the total projected misstatement is less than the tolerable
misstatement.
C. There is unacceptably high risk that the actual misstatements in the population exceed the tolerable
misstatement because the total projected misstatement exceeds the tolerable misstatement.
D. There is an unacceptable high risk that the tolerance misstatement is more than the sum of actual
overstatements and understatements.
68.
69.
70. A purpose of a management representation letter is to reduce
A. The possibility of a misunderstanding concerning management’s responsibility for the financial statements.
B. The scope of an auditor’s procedures concerning related party transactions and subsequent events.
C. Audit risk to an aggregate level of misstatement that could be considered material.
D. An auditor’s responsibility to detect material misstatements only to the extent that the letter is relied on.
71. To which of the following matters would materiality limits not apply in obtaining written management
representations?
A. Reductions of obsolete inventory to net realized value.
B. The disclosure of compensating balance arrangements involving related parties.
C. Losses from purchase commitments at prices in excess of market value.
D. The availability of minutes of stockholders’ and directors meetings.
72. An entity’s management is responsible for the preparation and fair presentation of the financial statements.
Its responsibility includes the following except
A.Designing, implementing, and maintaining internal control relevant to the preparation and presentation of
financial statements.
B.Making accounting estimates that are reasonable in the circumstances.
C.Selecting and applying appropriate accounting policies.
D.Assessing the risks of materials misstatement of the financial statements.
73. Sam, CPA was engaged to audit the financial statements of Mantha Corp. after its fiscal year had ended.
The timing of Sam’s appointment as auditor and the start of field work made confirmation of accounts
receivable by direct communication with the debtors ineffective. However, Sam applied other procedures
and was satisfied as to the reasonableness of the account balances. Sam’s auditors most likely contained
a/an
A. Qualified opinion because of a scope limitation.
B. Qualified opinion because of a departure from GAAS.
C. Unmodified opinion.
D. Unmodified opinion with an emphasis of matter paragraph.
74. Under which of the following circumstances would a disclaimer of opinion not be appropriate?
A1 PASSERS REVIEW CENTER///16
A. The financial statements fall to contain adequate disclosure concerning party transactions.
B. The auditor is engaged after fiscal year-end is unable to observe the physical inventories or apply
alternative procedures to verify their balances.
C. The auditor is unable to determine the amounts associated with fraud committed by the clients
management.
D. The client refuses to permit its attorney to furnish-information requested in a letter of audit inquiry.
75. Comparative financial statements include the prior year’s statements that were audited by a predecessor
auditor whose report is not presented. If the predecessor’s report was unqualified, the incoming auditor
should
A. Indicate in the auditor’s report that the predecessor auditor expressed an unqualified opinion.
B. Express an opinion on the currents year’s statement alone and make no reference to the prior year’s
statements.
C. Obtain a letter of presentations from the predecessor auditor concerning any matters that might affect
the incoming auditor’s opinion.
D. Request the predecessor auditor to reissue the prior year’s report.
76. An auditor expressed a qualified opinion on the prior year’s financial statements because of a lack of
adequate disclosure. The financial statements are properly restated in the current year and presented in
comparative from with the current year’s financial statements. The auditor’s updated report on the prior
year’s financial statements should.
A. Make no reference to the type of opinion expressed on the prior year’s financial statements.
B. Express an unmodified opinion on the restated financial statements of the prior year.
C. Be accompanied by the auditor’s original report on the prior year’s financial statements.
D. Continue to express a qualified opinion on the prior year’s financial statements.
77. PSA 800 applies to
A. Review engagements
D. Audit of financial statements prepared in
B. Agreed-upon procedures engagements
accordance with a special purpose
C. Compilation engagements
framework.
78. In an audit of special financial statements, the auditor shall obtain an understanding of
I. The purpose for which the financial statements are prepared.
II. The interior users.
III. The steps taken by management to determine that the applicable financial reporting framework is
acceptable in the circumstances.
A. I and II only.
C. I,II, and III.
B. II and III only.
D. I and II only.
79. Whenever a report, filed on a printed designed by authorities, calls upon the independent auditor to make an
assertion that the auditor believes is not justified, the auditor should
A. Withdraw from the engagement.
B. Submit the form with questionable items clearly omitted.
C. Reword the form or attach a separate report.
D. Submit a standard report with explanations.
80. An auditor may express an opinion on an entity’s accounts receivable balance event if the auditor has
disclaimed an opinion on the financial statements taken as a whole provided the
A. Report on the accounts receivable is presented separately from the disclaimer of opinion on the financial
statements
B. Auditor also reports on the current asset portion of the entity’s balance sheet
C. Use of the report on the accounts receivable is restricted
D. Report on the accounts receivable discloses the reason for the disclaimer of opinion on the financial statement
81. An auditor may accept an engagement to report on summary financial statements in accordance with PSA 810
on when
A. The auditor has been engaged to conduct an audit in accordance with PSAs of the financial statements from
which the summary financial statements are derived
B. Summary financial statements are distributed only to management and the board of directors
C. Auditor describes the additional review procedures performed on the summary financial statements
D. Summary financial statements are presented in comparative from with the prior year’s summary financial
statement
82. In the auditor’s report on summary financial statements that are derived from an entity’s audited financial
statements, a CPA should indicate that the
A. CPA has audited and expresses and opinion on the complete financial statements
B. CPA expresses limited assurance that the financial statements conform with another comprehensive basis of
accounting
C. Summary financial statements are not fairly presented in all material respects
D. Summary financial statements are prepared in conformity with another comprehensive basis of accounting
83. Which of the following procedures should a practitioner perform during an engagement to review an entity’s
financial statements?
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A. Examining cash disbursements in the subsequent period for unrecorded liabilities
B. Sending bank confirmation letter to the entity’s financial institutions
C. Obtaining a client representation letter from members of management
D. Communicating material internal control weakness during the assessment of control risk
84. During an engagement to review the financial statements of an entity, a practitioner becomes aware of a
material departure from GAAP. If the practitioner decides to modify the review report because management will
not revise the financial statements the practitioner should
A. Express negative assurance on accounting principles not conforming with Philippine Financial Reporting
Standards.
B. Express positive assurance on accounting principle conforming with Philippine Financial Reporting Standard
C. Express a qualified opinion
D. Express a qualification of the negative assurance provided or give an adverse statement that the financial
statements are not presented fairly in all material respects in accordance with Philippine Reporting Standard
85. If there has been a significant limitation on the practitioner’s review of an entity’s fincial statements the
practitioner should describe the limitation and
I. Express a qualification of the negative assurance
II. Provide no assurance
A. I only
C. Either I or II
B. II only
D. Neither I nor II
86. An agreed-upon procedures engagement may involve the accountant in performing certain procedures
concerning
I. Individual items of financial data
II. A financial statement
III. A complete set of financial statements
A. I and II only
C. I and III only
B. II and III only
D. I, II and III
87. In performing a compilation of financial statements of an entity, the accountant decides that modification of the
report is not adequate to indicate deficiencies in the financial statements taken as a whole and the client is not
willing to concert the deficiencies. The accountant should therefore
A. Express an adverse audit opinion
B. Express a qualification of the negative assurance
C. Withdraw from the engagement
D. Perform a review of the financial statements
88.
89.
90. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
91. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
92. Tel. No.: (033) 320-2728; 09106547262
93. Email Address:
[email protected]
94.
95. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
96.
97. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
98.
99. BUSINESS LAW
100.
1. In an obligation to give a determinate thing, what is rights are available to the creditor?
101. First Answer- To compel specific performance
102. Second Answer- To record damages in case of breach of the obligation
103. Third Answer- To ask that the obligation be complied with at the expenses of the labior.
a.
All answers are correct
c.
Only the first answer is correct
b.
Only the first and second answers are
d.
All answers are wrong
correct
2. The following contacts, except one, are void an initio. Which is the exception?
a. That whose object is outside the commerce of men.
b. That whose object did not exist at the time of the transaction.
c. That which contemplates an impossible service.
d. That which is undertaken in fraud of creditors.
3. S, minor, owns a specific property valued at P50,000. B capacitated, by means of fraud induced S to sell
his property to him for P30,000, which S did so. The contact is in writing. Which is correct?
a. the contract is valid and binding from the start
b. the contract remains unenforceable because it falls under the Statute of Frauds.
A1 PASSERS REVIEW CENTER///18
4.
5.
6.
7.
8.
c. The contract is rescissible because the ward suffered lesion by more than ¼ of the value.
d. The contract is voidable and B can ask for annulment within the period prescribed by law.
Legal compensation is allowed when one of the debts
a. Arises from a sale of real property made by a minor to a capacitated person
b. Arises from the obligation of a depositary
c. Consist in civil liability arising from a penal offense
d. Arises from a claim for support by gratuitous title
This is not a characteristics of a void or inexistent contract.
a. The right to raise a defense of illegality cannot be waived
b. The action or defense for declaration of the nullity or inexistent of the contract does not prescribed
c. Not subject to ratification
d. Defense of illegality of the contract is available to third persons whose interest are not directly affected
Reformation is not the proper remedy if
a. The mutual mistake of the parties causes the failure of the instrument to disclose their real agreement
b. One party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument
does not show their true intention.
c. There was mistake, fraud, inequitable conduct or accident which prevented the meeting of the minds of
the contracting parties
d. The true intention of the contracting parties in not expressed in the instrument purporting to embody the
agreement by reason of mistake, fraud, inequitable conduct or accident
The following contracts are defective. Which one is unenforceable?
a. Contract of sale by which a guardian acquires the property of his ward without the approval of the court
b. Contract of sale by which a city mayor acquires a portion of the city part pursuant to a city ordinance
enacted by the City Council
c. Contracts whose object is outside the commerce of man
d. Those were both parties are incapable of giving consent to a contract
Which of the following is not a requisite of fraud?
a. There must be a misrepresentation or concealment
b. The fraud must be serious
c. A party is induced by fraud to enter into contract
d. The fraud is employed by both parties upon each other
9.
10.
11. I agreed to paid his debt and in case of non-payment, to render free service as a servant. Is the obligation
valid.
a. No, the obligation to pay and to render service as a servant is contrary to law and morals
b. Yes, if the service will be rendered in satisfaction of the debt and in case of non-performance, the proper
remedy is specific performance
c. No, the nullity of the condition carries with the nullity of the principal obligation
d. Yes, in so far as the obligation to pay but not as undertaking to render domestic services for free.
12. E, a manufacturer of locks, hired a for 2 years, on the condition that for 5 years, A should not engage in
competitive locks business. After one year, A left for reasons of health. Shortly afterwards, after regaining
his health, A competed with E, who now seeks to restrain him for such competition, will the action prosper?
a. No, the restriction is void, because it is an unreasonable restrain of trade.
b. Yes, it is a reasonable restrain, considering that it was only 5 years.
c. No, the contract of employment for 2 years was not completed because of a justifiable reason
d. Yes, if E will allow a to complete the 2 years services agreed upon.
13. Which of the following is not correct in rescission?
a. Cannot be availed when the party who has been damage has other legal remedy
b. The person who seeks rescission must be able to return what he ought to return
c. The object of the contract in not in the possession of the third persons who have acquired it in good faith
d. Can be demanded by any of the contracting parties
14. A owes B p10,000 with 12% interest B owes C P1,200. It was agreed between A and B that A would give
the interest of P1,200 to C and C communicated his acceptance of the stipulation between A nd B. there is
a. Stipulation pour atrui
c. Compensation
b. Pactum commissorium
d. Assignment
15. -A donated to B a real property, the donation is made orally
16. -A sold to B a real property, the sale is made orally.
a. Both contracts are valid
c. Only the first is valid
b. Both contracts are void
d. Only the second is valid
17. If an obligation is with a penal clause
18. Statement A- Proof of actual damages suffered by the creditor is not necessary in order that the
penalty may be demanded.
A1 PASSERS REVIEW CENTER///19
19. Statement B- When the debtor is guilty of fraud in the fulfilment of the obligation, the creditor can
demand payment of damages and interest in addition to the penalty.
a. True, True
c. False, False
b. False, true
d. True, False
20. A, B, and C solidarity owe D and E P30,000. D remitted the entire obligation in favor of A without the
consent of E. the effect is
a. A cannot recover from B and C because remission in her favor extends to the benefit of B and C
b. A can recover from B and C their respective share of the debt
c. The obligation is not extinguish until a collects from B and C
d. The obligation is not yet extinguished until E is paid by D of her share of the credit.
21. In quasi-delict, the liability of a person who is held liable for the fault or negligence of another person who is
under his care or responsibility shall case if.
a. There was contributory or responsibility shall cease if.
b. He was not present at the time of the act, hence it was not possible to him to prevent the damage.
c. He observed ordinary diligence to prevent the damage.
d. He observed the diligence of a father of a good family.
22. What is the effect of the loss of the prestations in alternative obligation where the right of choice belongs to
the creditor and the loss is due to the fault of the debtor?
e. First Answer; If only one remains the obligation still subsist, but it ceases to be alternative as it
becomes a simple obligation.
f. Second answer; If 2 more objects remain, the obligation still subsist and the choice is limited to the
remaining objects.
g. Third Answer; If none remains, the obligation is extinguished because the debtor chose not to give
anything.
a. All answers are correct
c. Only one of the answers is correct
b. Only the first and second answers are
d. All answers are wrong
correct
23. A owes b P20,000 which became due on December 20,2011. On that date, a offered P10,000, the only
money he then had, but B refused to accept the payment. Thereafter A met, C, B’s 23 year old daughter, to
whom she gave the P10,000 with the request that she turn the money over to her mother. The money was
stolen while in C’s possession. How much may B still recover from A?
a. P20,000
c. P15,000
b. P10,000
d. P0
24. A wife, of B and daughter of C, while employed in a jewelry store owned by d embezzled P100,000
belonging to said jewelry store. In order to prevent her criminal prosecution for estafa, B and C signed a
document obligating themselves jointly and severally to pay D the amount embezzled plus interest.
Because of their failure to comply with their promise, d brought an action against B and C. will the action
prosper?
a. Yes, both knowingly and voluntarily agreed to assume the obligation of A.
b. No, C should not have been included because A is no longer under his authority.
c. Yes, but only in so far as B is concerned because husband and wife are required by law to support each
other.
d. No, it is considered contrary to public policy to allow parties to make an agreement designed to prevent
prosecution for crimes.
25. A contract in which a person literally contracts with himself is
a. Adhesion contract
c. Accessory contract
b. Auto contract
d. Unilateral contract
26. The statement “Contracts shall be obligatory in whenever from they have been entered into provided all the
requisites for their validity are present” refers to
a. Real contract
c. Formal contracts
b. Consensual contract
d. Solemn contracts
27. The pre-nuptial agreement of H and W, husband and wife, provides for complete separation of property.
Later, H, with violence and intimidation forced W to sell to him (H), W’s pieces of jewelry. The sale is
a.
Rescissible, if W suffered a lesion of more than ¼ of the value of the property
b.
Voidable, because the consent of W is vitiated
c.
Unenforceable, if the value is at least P500
d.
Void, because husband and wife are not allowed to sell property to each other.
28. This obligation is dencandable at once
a. With a suspensive condition
d. When it depends on the happening of a
b. With a period in diem
specified event
c. When my means permit me to do so
29. This contract is without effect unless ratified
a. Marriage between first degree cousins
b. Contract of sale between two insane persons
A1 PASSERS REVIEW CENTER///20
c. Contract of sale between a guardian and his
d. Donation between husband and wife
event
30. One of the following is void
a. Policitation
c. Stipulation pour atrui
b. Pactum commissorium
d. Walver intentionada
31. To be valid and enforceable, the following contracts should be in writing, except:
a. Contract to pay interest on loan
b. Contract of donation of real property
c. Contract of giving authority to an agent to sell a piece of land
d. Contract made in consideration of marriage.
32. A condition which if imposed on an obligation will be disregarded and will therefore make the obligation
immediately demandable
a. If Lala kills Lele
c. If Lolo commits suicide
b. If Lili passes the CPA board exams
d. If Lulu will not rise from the dead
33. If the law or contract does not state the diligence which is to be observed in the performance of an
obligation, the obligor is expected to observed.
a. Ordinary diligence
c. Diligence of a father a good family
b. Extraordinary diligence
d. Utmost care
34. Facultative as distinguished from alternative obligation
a. The right of choice id given only to the debtor
b. Various things are due, but the giving of one is sufficient
c. If one of the prestations is illegal, the other may be valid and the obligation remains.
d. If it is impossible to give all except one, that last one must still be given
35. Within what period must recovery be made if the debtor did not know that payment was not yet due?
a. Before maturity with regard to both was aid and the interest
b. Even after maturity with regard to both the interest and what was paid
c. Before maturity with regard to what was and even after maturity with regard to the interest
d. Before maturity with regard to interest and even after the maturity with regard to what was paid
36. Which of the following is wrong in alternative obligations?
a.
The obligor shall completely perform one of them
b.
The oblige cannot be compelled to receive part of one and part of the other undertaking
c.
The right of choice belongs to the creditor, unless it has been expressly granted to the debtor
d.
The debtor shall have no right to choose those prestations which are impossible
37. A remedy in equity by means of which a written instrument is made or construed so as to express or
conform to the real intention of the parties when some error or mistake has been committed
a. Rescission
c. Reformation
b. Annulment
d. Consideration
38. Payment by cession as distinguished from dation in payment
a. The debtor is not necessarily in a state of financial difficulty
b. The effect is to release the debtor for the net proceeds of the things ceded or assigned.
c. The property is alienated by the debtor to the creditor in satisfaction of a debt in money.
d. What is delivered by the debtor is merely a thing to be considered as the equivalent of the performance
of the obligation
39. If a third person pays an obligation. What are the rights, which are available to him if he pays the obligation
which the knowledge and consent of the debtor?
40. First Answer- He can recover from the debtor the entire amount, which he has paid.
41. Second Answer- He is subrogated to all of the rights of the creditor
a. True, True
c. False, True
b. True, False
d. False, True
42. I. The loss or determination of the thing intended as a substitute through the negligence of the obligor,
does not render him liable
43. II. A person alternatively bound by different prestations shall completely perform one of them
a. True, true
c. False, True
b. True, False
d. False, True
44. There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment
shall be made
a. At the domicile of the debtor
b. At the domicile of the creditor
c. Wherever the thing might be at the moment the obligation was constituted
d. Wherever the thing might be at the moment the obligation is to be fulfilled
45. Which of the following statements is not correct?
a. The validity and compliance of a contract cannot be left to the will of one of the parties
A1 PASSERS REVIEW CENTER///21
b. In case of foreclosure and the price of the sale is less than the amount due the pledge cannot recover
any deficiency
c. Persons who are prohibited by law to enter into construct of donation cannot from universal partnership
d. Actions for fraud cannot be waived
46. The right of the creditor to exercise all the rights of his debtor to satisfy his claims, except rights which are
inherent and personal on the part of the debtor
a. Actor subrogatoria
c. Action pauliana
b. Action redhibitoria
d. Action quanti minoris
47. An assignor of credit warrants
a. Solvency of the debtor
c. Assurance of payment
b. Collectibility
d. Existence and legality of credit
48. A, B, and c executed a promissory note binding themselves to pay P9,000 to X, and Y and Z. the note is
now duo and demandable. Can the creditors proceed against A alone fro the payment of the entire debt?
a. No, each creditors can collect only P3,000 from A.
b. Yes, either X, y or z can collect P9,000 from A.
c. No, each creditor can collect only P1,000 from A.
d. Yes, since the promissory note is silent with respect to the right of the creditors, the oblibation is
resumed to be solidary.
49. Using the preceding number, suppose that C is insolvent, can A and B be held liable for C’s share in the
obligation?
a. Yes, the debt shall be presumed to be divided into as many equal share as there are debtors.
b. Yes, but A and B will be liable proportionately
c. No, the debts are considered distinct from one another.
d. No, only either a and B but not both will be liable
50. Using No.40, suppose that the obligation was about to prescribed, but X wrote a letter to A demanding for
payment of the entire debt. Will this have the effect of interrupting the running of the period of prescription?
a. Yes, because the demand by X covers the entire debt and will therefore it was to the benefit of the other
creditors
b. Yes, insofar as A is concerned nut not with regard to B and C.
c. No, because the demand should have been made to all the debtors.
d. No, all the creditors should have made the demand.
51. Using the preceding number, and prescription sets in, how much can y collect from A?
a.
P9,000
c.
P1,000
b.
P3,000
d.
P0
52. Using the preceding number, how much can X collect from A?
a.
P9,000
c.
P1,000
b.
P3,000
d.
P0
53. Indivisibility as distinguished from solidarity.
a. Plurality of subject is indivisible.
b. When the obligation is converted into one of indemnity for damages because of breach, the character of
the obligation remains
c. Refers to the legal or vinculum
d. Refers to the prestation which constitute the object of the obligation
54. I. When one of the parties has brought an action to enforce the instrument, he cannot subsequently ask for
its reformation
55. II. The injured party may seek rescission, even after he has chosen fulfilment if the latter should
become impossible.
a.
True, true
c.
False, true
b.
True, false
d.
False, false
56. Culpa aquiliana as distinguished from culpa contractual
a. Proof of due diligence in the selection and supervision of employees is not available as a defense
b. Proof of the contract and of its breach is sufficient prima facle to warrant recovery.
c. The negligence of the defendant is merely an incident in the performance of the obligation
d. The source of liability is the defendant’s negligent act or omission itself
57. A assenger on a bus was hurt, but in a criminal case against the driver, said driver was acquitted. The
victim now sues the owner of the truck for culpa contractual. May the suit still prosper?
a. No, this will constitute double jeopardy
b. No, the acquittal means that the guilt of the accused was proven by proof beyond reasonable doubt
c. Yes, it is sufficient fro him to prove the existence of the contract of carriage and the injuries suffered.
d. Yes, provided he can prove the negligence of the driver.
58. A owes B P11,000 due on July 2, 2011. B owes A P6,000 due on July 3, 2011 and P4,000 due on July 10,
2011. B owes C P11,000 due on July 3, 2011. On July 3, 2011 B cannot pay C so B assigns to C her credit
A1 PASSERS REVIEW CENTER///22
P11,000 against A, without the knowledge of A. on July 10, 2011, C tries to collect from A the P11,000. How
much can C compel A to ay?
a. P11,000
c. P5,000
b. P9,000
d. P1,000
e.
f. Questions 50-52: A, B, C ad D owe W,Y and Z P9,000. On maturity, how much can W collect from A?
59. If debtors are joint and creditors are joint
a. P2,250
c. P9,000
b. P3,000
d. P750
60. If debtors are joint and creditors are solidary
a. P9,000
c. P3,000
b. P750
d. P2,250
61. If debtors are joint solidary and creditors are joint
a. P750
c. P9,000
b. P2,250
d. P3,000
62. Using the same data in No.28, but the share of debtors A, B, C and D in the indebtedness is 1:2:3:4 and
creditors W, Y and Z is 2:3:5. How much can Y collect from b if debtors are joint and creditors are joint?
a. P1,800
c. P675
b. P2,700
d. P540
63. How much can Z collect from d, if debtors are solidary and creditors are joint?
a. P1,800
c. P3,600
b. P1,125
d. P4,500
64. How much should A pay W, if debtor are joint and creditors are solidary?
a. P180
c. P2,250
b. P9,000
d. P900
65. A lost P100,000 in a card game called pusoy, but he had no more cash to apply in full the winner at the
time session ended. A promised to pay B, the winner, two weeks thereafter. A failed to pay despite the
lapse, of two months, so B filed in court a suit to collect the unpaid amount. Will the collection suit against A
prosper?
a. Yes, if A made a negotiable promissory note was made by A.
b. Yes, whether or not a negotiable promissory note was made by A.
c. No, if A has no property to pay the obligation
d. No, because pusoy is fundamentally game of chance.
66. A filed a suit for ejectment against B for non-payment of condominium rentals amounting to P150,000.
During the pendency of the case, B offered and A accepted the full amount due as rentals from B who then
filed a motion to dismiss the suit. Is b correct?
a. Yes, the acceptance of the payment constitutes a waiver of the ejectment case
b. Yes, because there is a novation
c. No, the payment should first result to benefit to A.
d. No, the payment by B of the rentals in arrears is not an abandonment of the ejectment case.
67. A was employed as professional driver B Transit Bus owned by C. in the course of his work, a hit a
pedestrian who was seriously injured and later died in the hospital as a result of the accident. The victim’s
heirs sued the driver and the owner of the bus for damages. Which of the following statements is not
correct?
a. There is a presumption of negligence on the art of the employer C if a passenger is injured
b. The conviction of A in a criminal case makes C liable for the damages arising from the criminal act
c. The presumption that C is negligent is rebuttable by proof of observance of ordinary diligence
d. The liability of C shall cease when he proves that he observed ordinary diligence to prevent damage to
passengers and pedestrians.
68. N<, r and J solidarily bound themselves to deliver to S a Honda motorcycle valued at P60,000. The
obligation was not fulfilled through the fault of J. thereupon, S filed an action in court against N and the
court awarded P72,000 to S representing the value of the motorcycle plus damages. Which of the following
situations is valid?
a. If N pays s the P72,000, N can collect from R and J P24,000 each.
b. S has to collect P24,000 cash from N, R and J to satisfy the court’s award of P72,000.
c. N can refuse to pay the penalty because it should be charged against J, the guilty party.
d. If S succeeds in collecting the P72,000 from N, n in turn can collect from R P20,000 and from J P32,000.
69. In which of the following debts is legal compensation proper? When one of the debts
a. Arises from the obligation of a depository
b. Arises from a voidable contract
c. Arises from a claim for support by gratuitous title
d. Consists in civil liability arising from penal offense
A1 PASSERS REVIEW CENTER///23
70. A borrowed P10,000 from B on Dec. 25, 201. The debt is evidenced by a promissory note executed by A
wherein she promised to ay as soon as she has the money or as soon as possible. B made several
demands upon A for payment, the first, an oral demand was made on May 2, 2011 and the last written
demand was dated September 25, 2011 but up to now, there is no payment of the debt. B sued A, will the
case prosper?
a. Yes, A is in default since May 2, 2011
b. Yes, a is in default since September 25, 2011
c. No, the obligation is subject to a suspensive condition
d. No, the obligation is one with a period and the period has not arrived yet
71. On September 25, 2011, A sent a telegram to B in Cebu, offering to sell to b his house and lot for P2M,
cash. On the same date, B sent to A a telegram offering to buy A’s same house and lot for P2M, Is there a
perfected contract?
a. No, because both telegram are mere offers
b. Yes, a promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
c. No, because B did not offer to buy the house and lot for cash.
d. Yes, being a consensual contract, it is perfected by, mere consent.
72. Which of the following statement is not correct?
a. The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in
which they were upon the perfection of the contract.
b. All the fruits of the thing sold shall pertain to the vendor from the day on which the contract was
perfected.
c. The vendor shall not be bound to deliver the thing sold, if the vendor has not paid him the price, or if no
period for the payment has been fixed in the contract.
d. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the
object of the sale.
73. As a rule, which of the following contract of sale is void?
a. Between two insane persons
c. Between husband and wife
b. Between brother and sister
d. Between pupil and teacher
74. A and B are co-owners of a one hectare rural land. A sold his ½ share to Y, C, an adjoining land owner is
interested in buying the share which A sold to y. which of the following is correct?
a. B can redeem what A sold to Y if Y already owns a rural land
b. B can redeem what A sold to Y even if Y does not own any rural land
c. As adjoining land-owner C has a superior right to redeem what A sold to Y.
d. C can redeem what A sold to Y whether or not Y already owns a rural land
75. A sells to B her car for P300,000 on a “sale or return within 10 days” after delivery. On the 5 th day after
delivery, the car was lost through fortuitous event. Who bears the loss?
a. A under the principle of “res perit domino”
b. B and he must pay the purchase price
c. Both A and B jointly
d. No one because the loss was due to a fortuitous event
76. P1 and P2 are co-owners of a pieces of land and they named and authorized. A to sell their land. Who will
be liable to A for the payment of his commission?
a. Both P1 and P2 jointly
b. Both P1 and P2 solidarily only if stipulated
c. Both P1 and P2solidarily even without stipulation
d. 50% from P1 and 50% P2
77. J is the sole owner of one hectare of land. In need of money, she sold ½ of the land without specifying
which portion she is selling to H. in this case, the sale is
a. Void, because co-ownership is discourage by law
b. Void, because the ½ part is not determinate
c. Valid, only if H has paid the purchase price
d. Valid as the sole owner of a thing may sell an undivided interest therein
78. E owns a piece of land and sells it to S with a right of repurchase within 4 years from the date of sale. If S
sells property to T, which of the following is not correct?
a. The sale is valid because things subject to a resolutory condition maybe the object of a contract of sale
b. E can still exercise her right of redemption against T
c. The sale is void because it is a conditional sale
d. T acquires the property but subject to the right of conventional redemption
79. In which of the following cases will delivery transfers ownership the thing sold,
a. In case of express reservation by the seller until certain conditions have been fulfilled, particularly the full
payment of the purchase price.
b. In case of implied reservation of title as when goods are deliverable to the order of the seller or his
agent.
A1 PASSERS REVIEW CENTER///24
c. In sale or approval, or on trial or on satisfaction
d. In sale or return within seven days
80. A owns a piece of land and slls it to B with a right of purchase within one year from the date of sale, can b
sell the land purchased from A, to C, a third party?
a. Yes, provided the sale is with the consent of A.
b. No, B is not yet the absolute owner of the land.
c. Yes, but A can still redeem the land from C.
d. No, third parties that acquire real property are bound by prior contracts affecting such property even if
the third person is not a party thereto.
81. When goods are delivered to the buyer on “sale or return” for a period of seven days, ownership of the
goods passes to the buyer.
a. Upon perfection of the contract
d. Upon acceptance by the buyer of the offer of
b. Upon delivery of the goods
the seller
c. Upon expiration of seven days
82. In case of foreclosure of the personal property mortgaged, where such things was previously sold to the
buyer on an instalment basis and the proceeds of the sale at the public auction is less than the principal
obligation can the seller recover the deficiency from the buyer?
83. First Answer- No, the seller is not entitled to recover the deficiency from the buyer.
84. Second Answer- Yes, if there is a stipulation to that effect in the contract of sale with mortgage.
a. True, true
c. False, true
b. True, false
d. False, false
85. Statement 1- If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith.
e. Statement 2- The vendor is responsible to the vendee for any hidden faults or defects in the thing sold,
even though he was not aware thereof
a. True, true
c. False, true
b. True, false
d. False, false
86. A, B and C are co-owner of a parcel of land, A sold his 1/3 share on Sept 1, 2011. B his 1/3 share on Sept
12, 2011 and C his 1/3 share on Sept 25,2011, all to D and with the right of repurchase. Which of the
following is correct? A may redeem
a. The entire property from D if he is required by D to do so.
b. The entire property even if D allows him to redeem 1/3 share only.
c. His 1/3 share even if d requires him to redeem the whole property.
d. His 1/3 share if D allows him to do so.
87. A owns a parcel of land, which he sells to B with 3 year redemption period. After the second year, A dies,
leaving his children C, D and E as his heirs. Which of the following is not correct?
a. As A can purchase the whole thing, so any among C, D and E may purchase the whole thing.
b. C can redeem his 1/3 share, D his 1/3 share and E his 1/3 share if B does not require all of them or any
one of them to redeem the whole party.
c. B may demand that all the co-heirs come to an agreement upon the repurchase of the whole thing sold.
d. E cannot be compelled to consent to a partial redemption.
88. A bought a car from B, a minor for P100,000. One week later, A discovered that B was a minor at the time
of sale so he filed a complaint in court to annul the sale. Will the action prosper?
a. Yes, B being a minor is incapacitated to enter into contract
b. No, the right to annul the sale is given to B
c. Yes, B cannot file the action to annul the sale because he is a minor
d. No, unless there is lesion of more than ¼ of the value of the property
89. Which of the following may not be object of a contract of sale?
a. Thing having a potential existence
c. Future inheritance
b. The sale of hope or expectancy
d. Things subject to a resolutory condition
90. A, a minor sold his ring to B for P4,000. Later, B borrowed P6,000 form C and as security pledged the ring
to C. B failed to pay C and the latter foreclosed the pledge, sold it at public auction for P5,000 to X. As a
result,
a. The title of B is not valid, therefore the pledge of the ring to C is also not valid because in pledge the
pledgor must be the owner
b. The deficiency of P1,000 cannot be recover by C from B
c. The deficiency of P1,000 can be recovered if there is a stipulation to that effect
d. If X is in bad faith (X has knowledge that A, the original owner is a minor) ownership will not pass to B
91. This shall take place when the vendor reserves the right to repurchase the thing sold
a. Policitacion
c. Equitable mortgage
b. Conventional redemption
d. Legal redemption
92. A sold his piano to B for P200,000 payable in instalment. A chattel mortgage was constituted on the piano.
B defaulted in two instalment payments. A demand payment of the unpaid obligation amounting to
A1 PASSERS REVIEW CENTER///25
P120,000 and a writ of attachment was issued and the piano was sold for P100,000. Can A still recover the
deficiency?
93. First Answer- No, the foreclosure of the piano extinguished B’s obligation
94. Second Answer- Yes, only if it is stipulated that in case of foreclosure the buyer will pay any
deficiency
a. True, true
c. False, true
b. True, false
d. False, false
95. A and B entered into a “contract to sell” in private writing involving a specific parcel of land for P2M. B paid
50% of the purchase price, the balance payable in 3 years. A delivered the land o B. What is the effect of
the delivery of the land to B?
a. B is the owner because there was a delivery already.
b. B’s ownership before it is converted into real ownership must compel A to execute a deed of sale in a
public instrument.
c. The partial payment made B the owner of the land.
d. A is still the owner because the price is not yet totally paid.
96. In 2007, at age 15, A sold his land to B, of legal age for P4M at P1M in 2007, P1M in 2008, P1M in 2009
and P1M in 2010. In 2012, A wants annul the contract on the ground of minority. Will his action prosper?
a. No, A is allowed to ask for annulment of the contract within 4 years form the perfection of the contract.
b. Yes, A has 4 years counted form the time to time he becomes of legal age to ask for annulment of the
contract.
c. No, the acceptance of the instalment payments amounted to ratification of the sale.
d. Yes, provided A was then acting in good faith he sold the property.
97. Where it is stipulated that the repurchase of the property sold could be made at any time, the repurchase
shall be exercised
a. Within four years, from the date of contract
c. After ten years after the date of the contract
b. Within ten years from the date of the contract
d. Within six years from the date of the contract
98. A, seller sold to a buyer a brand new car at a price of P500,000. At the time of sale, the buyer has only
P200,000 cash and his sold car with a fair market value of P300,000 which he offered as payment of the
purchase price which was accepted by the seller. The nature of the contract is
a. Barter
c. Sales
b. Exchange
d. Partly sales and partly barter
99. In 2010, a, 17 years old, sold his land orally to B
a. The sale is unenforceable
c. A cannot ask for annulment
b. The sale is voidable
d. B can ask for annulment
100. If the thing sold had any hidden fault or defect at the time of the sale and should thereafter be lost by a
fortuitous event but the seller is not aware of the defect, how much can be the vendee recover from the
vendor, if the selling price on date of sale is P100,000 and the value on date of loss is P60,000.
a. P100,000
c. P40,000
b. P60,000
d. P0
101. Using the preceding number, except that the loss is through the fault of the vendee, how much can the
vendee recover from the vendor?
a.
P100,000
c.
P40,000
b.
P60,000
d.
P0
102. Which of the following contracts is void?
a.
Lease of piece of land made by a minor without a written authority from his parents (the owners)
b.
Oral sale of a piece of land made by the owner to insane person.
c.
Written sale of gold necklace made without authority from the owner
d.
Written sale of a piece of land with oral authority from the owner.
103. Which of the following contracts is valid?
a. Contract of sale between an insane person and a deaf-mute who does not know how to write and read.
b. Contract of donation between a husband and his paramour.
c. Contract of sale between husband and wife who are under the conjugal partnership of gains.
d. Contract of donation between a wife as donee and her former boyfriend as donor.
104. As an agent , A was given a guarantee, commission, in addition to his regular commission, after he sold 20
units of refrigerators to a customer. The customer, however failed to pay. A’s principal, P demanded payment
from A for the customer’s accountability. Which is correct?
a. A can refuse to pay on the ground that his job was only to sell and not to collect payment
b. P should demand payment from the customer
c. A is not liable if he was authorized to sell on credit
d. A bears the risk of collection and should pay P the proceeds of the sale.
105. The following are the obligations of the agent, except:
a. In the execution of the agency, the agent shall act in accordance with the instructions of the principal.
b. Shall be bound in advance the necessary funds, except when the principal is insolvent
c. Shall finish the business already begun on the death of the principal, should delay entail any danger.
A1 PASSERS REVIEW CENTER///26
d. In case a person declines an agency, he is bound to observe the diligence of a good father of a family. In the
custody and preservation of the goods forwarded to him by the owner until the latter should appoint an
agent.
106. Which of the following statements is false?
a. P in writing appoints A as bis agent to sell his specific parcel of land for P40,000. A sold it orally to X. the
contract of A and X is valid.
b. B wrote A, bis alster, to sell his parcel of land. The land was purchased by X, but A did not forward the money
to B. B now wants to recover the parcel of land. B can recover because the authority of S is not in special
power of attorney.
c. P orally appoints as his agent to sell his land for P40,000. A sold it to X in writing. The sale by A to X is not
valid.
d. P orally appointed A to sell a house on a parcel of land belonging to X. a sold it to B orally. The contract by P
and A are valid.
107. P sends a letter on A in Cavite, authorizing A to sell his specific car for P90,000. If no reply is made by A, is
there a prescription of implied agency between the two of them?
a. None, because as between persons who are absent, acceptance of the agency cannot be resumed from the
silence of the agent.
b. Yes, because no reply was send, there is an implied acceptance or implied consent
c. Yes, unless A is habitually engaged in the business of selling and buying cars.
d. None, acceptance must always be expressed
108. M appointed R and Z as her agents to sell her specific her specific property for P100,000 on cash basis.
Solidarity has been agreed upon. Can M hold Z liable if R sell the property for P80,000?
a. Yes, because the obligation is solidary
b. No, because the appointment of 2 or more agents in one and the same obligation is joint and any stipulation
to the contrary is void
c. Yes but not only for Z’s share that is P10,000
d. No, because R acted beyond the scope of his authority.
109. The following may be objects of contract of pledge, except
a. Shares of stocks
c. An agricultural land
b. Pieces of jewelry
d. A negotiable bill of exchange
110. Which of the following is not correct?
a. A movable or immovable project may be the object of commodatum
b. The bailor in commodatum need not be the owner of the thing loaned
c. A stipulation that the bailee make use of the fruits of the thing loaned is valid.
d. The bailor is oblihed to pay for the ordinary expenses for the use and preservation of the thing loaned
111. D mortgaged his land to C as security for a loan. Fearing foreclosure of the mortgage due to his inability
to pay the loan, D sold the land to B without the consent of C. which is correct?
a. The sale is void unless D can give another security.
b. B cannot acquire ownership over the land even if D delivers the land to him.
c. D cannot sell the land if there is an agreement prohibiting the mortgagor from alienating the land.
d. D can sell the land even without the consent of C.
112. The loan of movable or immovable things but not the fruits.
a. Mutuum
c. Expromission
b. Delegacion
d. Commodatum
113. Agreement giving a person the right to enjoy the thing as well as its fruits
a. Quantum meruit
c. Usufruct
b. Quantum valebant
d. Pacto de retro sale
e.
v.
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al.
A1 PASSERS REVIEW CENTER///27
am.
an.
ao.
ap.
aq.
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as.
at.
au.
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7. D
8. D
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11. D
12. A
13. D
14. A
ANSWER KEY
dc.
BUSINESS LAW
df.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
A
C
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29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
A
C
C
C
B
A
C
C
D
A
D
D
D
B
A1 PASSERS REVIEW CENTER///28
43.
44.
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48.
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50.
51.
52.
53.
54.
55.
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59.
60.
61.
62.
A
D
D
A
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C
D
D
D
D
D
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D
D
D
D
D
B
D
A
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
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80.
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82.
B
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D
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D
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A
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B
D
D
83. C
84. B
85. C
86. C
87. C
88. C
89. C
90. A
91. D
92. B
93. B
94. A
95. D
96. C
97. D
98. D
99. D
dg.
100. C
dh.
di.
dj.
dk.
dl.
dm.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
dn. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
do. Tel. No.: (033) 320-2728; 09106547262
dp. Email Address:
[email protected]
dq.
dr. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
ds.
dt. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
du.
dv.
TAXATION
dw.
1. Spouses A and B sold their family home a capital asset for P5,000,000. It was in 1980 at P2,000,000. The
fair market value as by the BIR is P6,000,000 but the fair market value as shown in the schedule of values
of the City Assessor is P5,500,000. Later, the spouses utilized P4,000,000 for the acquisition of their new
family home. The capital gains tax due is
a. P72,000
b. P60,000
c. P300,000
d. P360,000
2. Using the above data the cost basis of the new family home is
a. P4,000,000
b. P1,600,000
c. P1,000,000
d. P400,000
3. A corporation was merged with B Corporation, G, a stockholder of A Corporation was asked to surrender
his shares of stock of A Corporation which C acquired for P200,000 and in exchanged he received shares
of stock of B Corporation with a fair market value of P220,000 plus cash of P30,000. After the merger, C
later sold his B Corporation shares first P240,000. C will recognize a gain of:
4. Merger
Sale
a. P30,000
P40,000
b. P50,000
P20,000
c. P30,000
P30,000
d. P50,000
P40,000
A1 PASSERS REVIEW CENTER///29
5. A transferred his commercial land which he acquired for P10M to B Corporation and as consideration he
received shares of stock of B Corporation with a fair market value of P10.2M and cash of P300,000. As a
result, A acquired control of B Corporation. Two months later, A sold the B Corporation shares for P10.5M.
the gain to be recognized on the transfer and on the sale is
6. Transfer
Sale
a. P300,000
P500,000
b. P500,000
P300,000
c. P300,000
P300,000
d. P500,000
P500,000
7. A transferred his land in Manila which he acquired for P2M to B corporation and as consideration received
shares of stock of B Corporation with fair market value of P1.8M and as a result A gained control of B
Corporation. Later, A transferred his land in Makati which he acquired for P3M to C Corporation and as
consideration he received shares of stock of C Corporation with fair market value of P2.7M. even before
the transfer, A already owns 51% of C Corporation outstanding shares. The loss to be recognized by A is
8. B Cor.
C Corp.
a. P0
P300,000
b. P0
P0
c. P200,000
P300,000
d. P200,000
P0
9. Use the following information for question 6 and 7.
10. A, sold 3 parcels of land held as capital assets, as follows:
11.
Land1
Land2
Land3
12. Selling Price
P160,000
P160,000
P160,000
13. Cost
100,000
100,000
100,000
14.
15. Installment Payment:
16. Year 1 (year of sale)
40,000
40,000
40,000
17.
2
120,000
60,000
60,000
18.
19. Assumption of remortgaged
0
60,000
110,000
20. The capital gains tax to be paid in year 1 is:
a. P28,000
c. P19,840
b. P15,840
d. P12,640
21. The capital gains tax to be paid in year 2 is:
a. P12,960
c. P16,160
b. P8,960
d. P19,200
e. Use the following information for questions 8 and 9.
f. A and B are stockholders in corporations which are being consolidated into a new corporation, has the
following data on their shares of stock:
g.
A
B
h. Consideration received:
P75,000
P81,000
i.
Fair Market value of shares
5,000
5,000
j.
Fair Market value of property
10,000
4,000
k. Cash
80,000
80,000
l. Cost of shares surrendered
m.
22. The gain or (loss) to be recognized by A is
a. P10,000
c. P5,000
b. P15,000
d. 0
23. The gain or (loss) to be recognized by B is
a. P9,000
c. P1,000
b. P10,000
d. P0
24.
25. In 1998, Cadena de Amor Corporation gave the following fringe benefits to its employees
26.
To managerial employees -----------------------------------------------P1,320,000
27.
To rank and file employees----------------------------------------------5,000,000
28.
29. The allowable deduction from the gross income of the corporation for the benefits given to employees is:
a. P2,000,000
c. P6,320,000
b. P2,148,000
d. P7,000,000
30.
31. A vat taxpayer has the following data for a particular quarter during the current year:
e.
Sale of shares of stock:
P1,000,000
A1 PASSERS REVIEW CENTER///30
a. P0Held as inventory
f.
500,000 c. P2,500
b. P1,500 g.
Held as investment
d. P7,500
e.
h.
Cost of the shares sold:
300,000
32. An invoice
i. is issued for theHeld
saleas
ofinventory
vat taxable goods shows the following:
600,000
f. j.
Held as investment (thru local stock exchange)
g. k. Total
The stock
invoice
transaction
amount tax is:
P50,400
h.
Less: trade discount of 5%
2,520
i.
Net
P47,880
j.
k. If the vat taxpayer enjoys a partial exemption of 40% including VAT and the amount is VAT inclusive,
how much is the output tax?
a. P3,078
c. P3,447
b. P3,216
d. P3,628
33. A, a vat taxpayer, made the following purchases of capital goods from vat registered sellers for use in his
business (amounts are net of vat) for the 3rd quarter
34.
35.
Year 2001
Estimated Life
Cost
36.
July 10-Machine1
2 years
P200,000
37.
16-Machine2
6 years
900,000
38.
Aug.8- Machine3
2 years
400,000
39.
20- Machine4
6 years
500,000
40.
Sept.14- Machine5
7 years
2,000,000
41.
42. Machine 1 was retired on September 30, 2011. The input tax in July is:
a. P2,800
c. P132,000
b. P108,000
d. P2,200
43.
44. The input tax in August is:
a. P108,000
c. P5,800
b. P3,000
d. P110,800
45. The input tax for September is
a. P4,000
c. P26,000
b. P6,800
d. P27,800
46. The power to tax is exclusively ledged with the legislature but the following exceptions are provided by the
contribution, except:
a. Power of local government units to levy taxes, fees and charges
b. Authority of the President to fix tariff rates, import and export quotes, tonnage wharfage dues and other
duties and imposes.
c. Delegation to administrative agencies of the implementation and collection of taxes.
d. Delegation to private entities the levy and enforcement of tax laws.
47. Statement 1- The prizes received by Manny Pacquiao and Ricky Hatton in their last fight are subject to
Philippine income tax.
48. Statement 2- If the fight between Pacquiao and Cotto is a world championship fight promoted by the
Arum, the gross received will be exempt from percentage tax.
a. True, true
c. False, false
b. True, false
d. False, true
49. This is an inherent limitation on the power of taxation.
a. The rule on taxation shall be uniform and equitable.
b. No law impairing the obligations of contracts shall be enacted.
c. Charitable institutions, churches, personages or convents appurtenants thereto, mosque and non-profits
cemeteries and all kinds of lands, buildings and improvements actually, directly and exclusively used for
religious or charitable purposes shall be exempt from taxation.
d. The tax laws cannot apply to the property of foreign governments.
50. This is a constitutional limitations on the power of taxation
a. The power of taxation cannot be delegated.
b. The power of taxation is limited to the territorial jurisdiction of the taxing state.
c. No person shall be imprisoned for debt or non-payment of a poll tax.
d. Exemption of government instrumentalities and agencies through which the government exercised
sovereign powers from taxation.
51. Taxation as distinguished from police power and eminent domain.
a. May be exercised by private individuals
b. May be exercised only by the government
c. Limited to cover the cost to regulate
A1 PASSERS REVIEW CENTER///31
d. Generally no limit as to the amount that may be imposed.
52. Statement 1- The levymg, imposition and collection of tax are legislative in character
53. Statement 2- The aspects of taxation are shared by the legislative and executive branches of the
government
a. True, true
d. False,
b. True, false
e. false
c. False, true
54. Which of the following statements is not correct?
a. Taxes are neither political nor penal in nature.
b. Taxes should be prospective and should not be given retroactive effect because they are burdens.
c. The power to collect taxes is not lost even if foreign invaders are in control of our country.
d. The application of a constitutional limitation may disregard an inherent limitation
55. Police power as distinguished from power of taxation
a. It exist independent of the constitution being an inherent power of the state.
b. The compensation received in the protection given by the state.
c. It involves the taking of property of individual affected by the exercised of the power.
d. The amount collected is limited to the cost of regulation.
56. The following are the characteristics of special assessment, except.
a. It is based on the government’s need of money to support its legitimate objectives.
b. It is levied only on land.
c. It is based solely on the benefits derived by the owner of the land.
d. Did not result to personal liability of the person assessed.
57. As regards a revenue bill, which of the following is not correct?
a. The Senate may propose amendments if the bill originates from the House of Representatives.
b. The House of Representatives may propose amendments if the bill originates from the Senate.
c. The President may recommend a revenue bill to Congress
d. A House of Representatives version and a Senate version approved separately and then consolidated with
both approving the consolidated version.
58. In 2004, X Corporation incurred the following expenses in connection with the conduct of its business
f. A) Plane tickets and hotel bills of its employees
g. Who were sent to business seminars.................................... P100,000
h. B) Transportation allowances of its officers from
i. home to office and vice versa as part of their
j. employment contract net of P64,000.................................... 136,000
k. C) Transportation expenses of messengers from
l. Office to several clients.......................................................... 80,000
m.
n. The allowable expenses that could be claimed by X Corp. Is
a. P180,000
c.P316,000
b. P244,000
d. P380,000
59. Mr. Araki, a non-resident alien stockholder, received a dividend income of P300,000 in 2010 from a foreign
corporation doing a business in the Philippines. The gross income of the foreign corporation from within
and without the Philippines for three years preceding 2010 is as follows:
60.
Source of income
2007
2008
2009
61.
From within the Philippines
P20,000,000
P12,000,000
P20,000,000
62.
From without the Philippines 18,000,000
14,000,000
16,000,000
63.
64. How much of the dividend income received by Mr. Araki is considered income from sources within the
Philippines?
a. Zero
c. P144,000
b. P156,000
d. P300,000
65. A, married to M had the following during the taxable year:
66.
Gross Income
67.
From the practice of profession-------------------P 700,000
68.
Rental income in their conjugal property-------300,000
69.
Allowable deductions
70.
For the practice of profession----------------------520,000
71.
For the property rented to tenants---------------140,000
72.
73.
The taxable income before exemption of A is
a. P340,000
c.P260,000
b. P180,000
d. P170,000
A1 PASSERS REVIEW CENTER///32
74. K sold for P10M her Baguio rest house with a FMV of P12M to buy a new principal residence. If K utilized
P8M of the proceeds of the sale in acquiring a new principal residence, the capital gains tax payable is
a. P720,000
c.P144,000
b. P600,000
d. P120,000
75. On August 12, 2010 A sold a land held as capital assets for P2M with a FMV of P1.8M. a acquired the land
for P1M, and at the time of sale, the property was subject to a mortgage of P1.3M. payments shall be;
P100,000 on the date of sale and the balance shall be paid in equal monthly instalments beginning Jan 1,
2011. The capital gains tax for 2010 is
a. P120,000
c. P36,000
b. P24,000
d. P48,000
76. A took a life insurance policy for P5M where the annual premium is P20,000. The proceeds will be paid to A
after 25 years or to A’s estate should A dies before completing 25 years of payment. If A outlived the policy,
which of the following is correct?
a. The proceeds will be part of A’s taxable income.
b. The proceeds will be part of A’s gross estate.
c. The proceeds will be partly taxable income and partly exempt.
d. The proceeds will be partly taxable estate and partly exempt
77. Using the preceding number, but after paying the annual premiums for 10 years, A transferred the policy to
B for P250,000 and B paid the annual premiums as they mature. After 10 years, A died. Which of the
following is correct?
a. The amount received by A from B is part of A’s taxable income.
b. The proceeds received by B is part of his taxable income.
c. The amount received by A from B is partly taxable income and partly exempt.
d. The proceeds will be part of A’s gross estate.
78. The following forms of escape from taxation result to loss of revenue to the government, except
a. Exemption
c. Avoidance
b. Shifting
d. Evasion
79.
80.
81. The following are the objects of taxation, except
a. Citizens
c. Intangible property
b. Corporations
d. Municipal halls
82. A scope of the power of taxation which means that taxation covers many things
a. Plenary
c. Supreme
b. Comprehensive
d. Unlimited
83. This is not a purpose of taxation
a. To expropriate property for the promotion of the general welfare.
b. To reduce inequalities of wealth
c. As protective tariff on imported goods to protect local producers against foreign competition
d. To encourage the growth of home industries through the proper use of tax incentives
84. One of the characteristics of a tax is that it is
a. Superior to the non –impairment clause of the constitution
b. Generally unlimited in amount
c. Based on the tax payers ability to pay
d. Legislative in implementation
85. Statement 1- A tax is generally unlimited because it is based on the needs of the state
86. Statement2- One of the essential characteristics of tax is it is unlimited in amount
a.
True, true
c.
False, true
b.
True, false
d.
False, false
87. In January 1970, A bought one hectare of agricultural land in Laguna for P100,000. This property has a
current fair market value of P10M in view of the construction of a concrete road traversing, the property. A,
agreed to exchange his agricultural lot in Laguna for a ½ hectare residential property located in Batangas,
with a fair market value of P10M, owned by B, a domestic corporation engaged in the purchase and sale of
real property. B acquired the property in 2007 for P9M. Which of the following statements is correct?
a. Both real properties are ordinary assets
c. The agricultural land is an ordinary asset
b. Both real properties are capital assets
d. The residential land is an ordinary asset
88. In our jurisdiction, which of the following statements may be erroneous?
a. Taxes are pecuniary in nature.
b. Taxes are enforced charges and contributions.
c. Taxes are imposed on persons and property within the territorial jurisdiction of a state.
d. Taxes are levied by the executive branch of the government.
89. Incidence of taxation means
a. Shifting of tax
b. Refunds of tax
A1 PASSERS REVIEW CENTER///33
c. Payment of tax
d. Imposition of tax
90. This rule is not applicable on the construction of tax laws
a. If the law is repeated, taxes assessed before repeal of the law may no longer be collected.
b. If the intent of the tax is not clear as to whether the taxpayer is covered by the tax obligation, the law
shall be construed against government.
c. Where the intent to tax is clear and the taxpayer claims he is exempt from the tax obligation, the tax
shall be construed against the taxpayer.
d. Provisions intended for the security of the taxpayer or to insure equality or uniformity of taxation are
mandatory.
91. Income derived by a depository bank under the expanded foreign currency deposit system from foreign
currency transaction with local commercial bank, including branches of foreign banks that maybe
authorized by the Bangko Sentral ng Pilipinas, shall be subject to a final tax a on such income at
a. 7.5%
c. 15%
b. 10%
d. 20%
92. A privileged granted a taxpayer to deduct or set-off against Phil. Income tax, the income, war profits and
excess profits taxes that he has paid or has accrued to a foreign country.
a. Tax exemption
c. Tax consolidation
b. Tax deduction
d. Tax credit
93. Tariff may generally be defined as
a. Amounts which are levied on goods leaving the imposing country.
b. Amounts imposed on goods entering the imposing country.
c. Amounts, imposed on goods passing through the imposing country, but destined ultimately to another
country.
d. List of commodities with corresponding duties collectible therefrom.
94. Any amount subsequently received on account of a bad debt previously charged off and allowed as a
deduction from gross income for prior years must be included in gross income for the taxable year in which
received. This is
a. End-result doctrine
c. Severance theory
b. Destination of income test
d. Equitable doctrine of tax benefit
95. Taxation, just like other fields of human learning is dynamic, not static, keeps on changing so we must-all
study, otherwise we might be facing the battles of today with the antiquated weapons of yesterday.
Regardless of economic and business conditions, a sound tax system should provide for the collection of
sufficient revenue to run the government.
a. True, true
c. False, false
b. True, false
d. False, true
96. A progressive system of taxation means a tax structure
a. Where the tax rate increases as the tax base increases.
b. Where persons who desire to avail of government services or benefits are required to pay for their cost
in the form of taxes
c. Where persons who possess more in wealth or income are required to bear the cost of government
corresponding to such capacity.
d. Where the tax rate increases as the tax base decrease
97. Will not raise money for the government
a. Power of taxation
c. Police power
b. License fee
d. Eminent domain
98. Similarities of police power, power of taxation and power of eminent domain, except:
a. There is compensation
c. There is taking of property
b. Sovereign powers of the government
d. Superior to the non-impairment clause
99. Which of the following has no power to impose taxes?
a. Provinces
c. Barangays
b. Cities
d. President
100. Which statement is wrong?
a. A tax is a demand of sovereignty
c. A special assessment is a tax
b. A toll is a demand of ownership
d. Customs duty is a tax
101. Which of the following is not an element of double taxation?
a. Two taxes
c. Same year
b. Same subject matter
d. Same amount
102. One of the following is the least principle of sound tax system.
a. Fiscal adequacy
c. Theoretical justice
b. Administrative feasibility
d. Economic consistency
103. Basis of Taxation
a. Lifeblood theory
c. Benefit-protection theory
b. Necessity theory
d. Reciprocal theory
A1 PASSERS REVIEW CENTER///34
104. Tax as distinguished from license free
a. For regulation purpose
c. For revenue purposes
b. Amount imposed is limited
d. Exercise of police power
105. The following are example of non-taxable compensation for injuries, except.
a. Actual damages for injuries suffered.
b. Exemplary damages
c. Compensatory damages for unrealized profits
d. Moral damages for grief, anxiety and physical sufferings
106. How much is the allowable deduction from business income of a domestic corporation which granted
and paid P99,000 fringe benefits to its key officers in 1998?
a. P150,000
c. P99,000
b. P100,000
d. P65,000
107. What would be the allowable deduction for P8,000 contribution made by a resident citizen to a religious
organization from his P70,000 net income after contribution?
a. P8,000
c. P7,800
b. P7,000
d. P3,500
108. A bought a condominium unit under instalment basis, to be used as his office in the practice of his
profession and paying P10,000 monthly. For income tax purposes, the P10,000 monthly payment shall be
a. Treated as business rental, hence deductible.
b. Treated as capital expenditure, hence not deductible.
c. Treated as depreciation expense, hence deductible.
d. Treated as ordinary business expense.
109. The following are not taxable, except:
a. Refund of tringe benefits tax
c. Refund of estate of donor’s tax
b. Refund of Philippine income tax
d. Refund of special assessment
110. Which of the following does not represent compensation income?
a. Honorarium as a guest speaker
c. Vacation and sick leave pay
b. Emergency lave pay
d. Gratuitous condonation of obligation
111.
112. One of the following is not subject to final tax
a. Interest on savings deposit
c. Prizes amounting to more than P10,000
b. Royalties
d. Professional fees paid to individuals
113. Gain on sale of domestic shares of stock in New York is
a. Income within the Phils
c. Income party within and without
b. Income without the Phils
d. Exempt from income tax
114. A was selected as the most outstanding teacher in her region. Her name was submitted by the school
principal without her knowledge. She received a trophy and a cash award of P15,000.
a. Taxable income
c. Exempt from income tax
b. Subject to final tax
d. Partly taxable, partly exempt
115. This will not result to a taxable gain or loss
a. The sale by a corporation of its shares of stock from the unissued stock over its par or stated value.
b. The sale by a corporation of its treasury stock over its cost or other basis of acquisition.
c. The purchase and retirement by a corporation of its bonds at a price less than the issue price or face
value.
d. The issuance by a corporation of its bond at a premium.
116. For ordinary contributions, an individual may be allowed to claim as deductions an amount not to
exceed.
a. 5% of the net income before contributions
c. 5% of the net income after contribution
b. 10% of the net income before contributions
d. 10% of the net income after contribution
117. One of the following is a taxable income
a. Compensation for injuries and sickness
c. Proceeds of life insurance
b. Income derived from gifts, bequest and
d. Amounts received as returns of premium.
devices
118. A domestic corporation made a borrowing from ABC bank thereby incurring a business connected
interest expense of P60,000 for taxable year 1999. During the same year, the corporation earned an
interest income subject to final tax in the amount of P100, 000. The deductible interest is:
a. P19,000
c. P60,000
b. P21,000
d. P0
119. The share in the profits of a partner in a general professional partnership is regarded as received by him
end thus taxable although not yet distributed. The principle is known as
a. Actual receipt of income
c. Accrual method of accounting
b. Advance reporting of income
d. Constructive receipt of income
120. Which of the following statements on tax exemptions is not correct?
A1 PASSERS REVIEW CENTER///35
a. When an electric light and power franchise holder is exempt under its franchise property tax on its poles,
wires and transformers, is exemption does not extend to the VAT of its importation of said articles.
b. Where a taxpayer receives as payment for the land expropriated by the government tax exempt bonds,
such tax exempt bonds should be included in the total price to determine correct taxable profit there
from
c. The salaries of the CIR and the four deputy CIR are exempt from income tax
d. Exemptions granted to cooperatives does not extends to be members thereof in the sale of their
products
121. A donated a parcel of land to B, his 15 year old son on account of B’s graduation. A did not pay the gift
tax on the property donated. Then, B took possession of the property and received the rental derived from
it. In 2007, an assessment on the income derived from the property was issued against B, which is correct?
a. The assessment against B is correct.
b. The income should be included in A’s income tax return.
c. The assessment against B should be deferred.
d. A validly effected a transfer of the property to B by virtue of delivery.
122. A feature of ordinary gains as distinguished from the capital gains:
a. Gains from sale of assets not stock in trade
c. Sources are capital assets
b. May or may not be taxable in full
d. No holding period
123. On capital gains tax on real property, which of the following statements is not correct?
a. The tax should be paid, if in one lump sum, within 30 days from the date of the sale
b. The instalment payment of the tax should be made within 30 days from receipt of each instalment
payment on the selling price
c. The tax may be paid in instalment if the initial payment does not exceed 25% of the contract price.
d. The initial payment maybe more than down payment
124. A operates a retail store and owns the following properties. Which of the following is capital assets in the
hand of A
a. Building which houses the retail store
b. Fixtures used in the retail store
c. Inventory on hand at the end of the year
d. Trade accounts receivable
125. Amount receivable by the estate of h deceased, his executor or administrator as an insurance under
policy taken by the decedent upon his own life is
a. Part of gross income whether the beneficiary is revocable or irrevocable
b. Part of gross income if the beneficiary is irrevocable
c. Part of gross income if the beneficiary is revocable
d. Excluded from gross income
126. In 2007, ABC Corp. Paid total premiums of P1, 000 for the life insurance policy of the vice president,
where the beneficiary in the corporation. At the end of the year, ABC received dividend of P100 because of
the policy. In 2007, the corporation should indicate a claim for a deduction for life insurance premium of
a. P1,000
c. P1,100
b. P900
d. Zero
127. If a friend inquires whether or not the cost of educational assistance to the employee and/or his
dependents which are borne by the employer be taxable. What will your answer be?
128.
129. First Answer- A scholarship grant to the employee by the employer shall not be treated as taxable
fringe benefit if the education or study involved is directly connected with the employer’s trade, business or
profession and there is a written contract between them that the employee is under obligation to remain in
the employ of the employer foe the period of time that they have mutually agreed upon.
130.
131. Second Answer- The cost of educational assistance extended by an employer to the of an employee
shall be treated as taxable fringe benefits of the employee unless the assistance was provided through a
competitive scheme under the scholarship program of the company.
132.
a. True, true
c. False, true
b. True, false
d. False, false
133. All of the following taxpayers are not foreign tax credit, except
a. Resident citizen with income only from the Phils
b. Resident citizen with income only from the abroad
c. Resident citizen with income only from within and without the Phils
d. Non-resident citizen with income only from and without the Phils
134. 1st Statement- Monetized unused vacation leave credits not exceeding 10 days is an exempt de minimis
benefit.
A1 PASSERS REVIEW CENTER///36
135.
136. 2nd Statement- Daily meal allowance for overtime work not exceeding twenty five (25%) percent of
the basic minimum wage is exempt fringe benefit
a. True, true
c. True, false
b. False, true
d. False, false
137. 1st Statement- Laundry allowance not exceeding P300 per month is exempt de minimis benefit.
138.
139. 2nd Statement- Medical cash allowance to dependents of employees not exceeding P750 per
employee per semester, or one hundred twenty five pesos (125) per month is exempt de minimis benefit.
a. True, true
c.True, false
b. False, true
d. False, false
140. 1st Statement- Flowers, fruits and books or other similar token items given to employees under certain
circumstances are exempt de minimis benefits.
141.
142. 2nd Statement- gift given during Christmas and major anniversary celebrations not exceeding P5,000
per employee per annum is an exempt de minimis benefit.
a. True, true
c. True, false
b. False, true
d. False, false
143. 1st Statement- Rise subsidy of one thousand five hundred pesos or one sack of 50 kg. Rice per month
amounting to not more than one thousand five hundred pesos is an exempt de minimis benefit.
144.
145. 2nd Statement- Employee achievement awards, e.g., for length of service, or safety achievement,
146.
147. which must be in the form of a tangible personal property other than cash or gift certificate, with an
148. annual monetary value not exceeding ten thousand pesos received by an employee under an
established written plan which does not discriminate in favour of highly paid employees is an exempt de
minimis benefit.
a. True, true
c. True, false
b. False, true
d. False, false
149.
150.
151.
152. 1st Statement- uniforms and clothing allowance not exceeding four thousand pesos per annum is an
exempt de minimis benefit.
153. 2nd Statement- Actual medical benefits not exceeding P10,000 per annum is an exempt de minimis
benefit.
a. True, true
c. True, false
b. False, true
d. False, false
154. Which of the following is included in gross income?
a. Amounts received by insured as return of premium
b. Life insurance proceeds
c. Compensation for injuries or sickness
d. Share in the net income of a general professional partnership
155. One of the following does not form part of gross income?
a. Interest
c. Annuities
b. Royalties
d. Gifts, bequest and device
156. In computing allowable deduction for purposes of income taxation.
e.
f. 1st Statement- Beginning the year 2005 interest expense in connection with taxpayer’s business shall be
reduced by an amount equal to forty two percent (42%) of interest income subjected to final tax
g.
h. 2nd Statement- Interest incurred on money used to acquire property to be used in trade shall only be allowed
as a capital expenditure.
i. a. True, true
k. c. True, false
j. b. False, true
l. d. False, false
157. Which of the following is not correct?
a. An individual citizen of the Phils. Who is working and deriving income from abroad as an overseas contract
worker is taxable only on income from sources within the Phils.
b. A seaman who is a citizen of the Phils. And who receives compensation for services rendered abroad as a
member of the complement of a vessel engaged exclusively in international trade shall be treated as an
overseas contract worker.
c. An alien individual is taxable only on income derived from sources within the Phils.
d. A citizen of the Phils. Is taxable on income derived from sources within and without the Phils.
A1 PASSERS REVIEW CENTER///37
158. A work for a manufacturing firm but due to business reverses, the firm offered a voluntary redundancy
program in order to reduce overhead expenses. Under the program, an employee who offered to resign would
be given separation pay equivalent to his 3 months basis salary for every year of service. A accepted the offer
and received P800,000 as separation pay under the program. After all the employees who accepted the offer
were paid, the firm found its overhead still excessive. Hence, it adopted another program, where various
unprofitable departments were closed. As a result, B was separated from the services, B also received
P800,000 as separation pay. At the time of separation both A and B have rendered at least 10 years of service
but A was 55 years old while B was 45 years old. As a result,
a. Both amounts are exempt from income tax.
c. Only Mr. A is subject to income tax.
b. Both amounts are subject to income tax.
d. Only Mr. B is subject to income tax.
159. Which of the following expenses is deductible from gross income?
a. Contribution to a newspaper fund for needy families when such newspaper organizes a drive solely for
charitable purpose.
b. Premiums paid by the self-employer for the insurance of his employees.
c. Contribution to the construction of a chapel of a university dividends to its stockholders.
d. Donation of prizes and awards to athletes in local and international competitions and sanctioned by their
respective sport associations.
160. Cash dividends received by a non-resident foreign corporation from a domestic corporation is
a. Exempt from income tax
c. Part of taxable income
b. Subject to final tax
d. Partly exempt, partly taxable
161. Cash dividends received by a domestic corporation from a domestic corporation is
a. Exempt from income tax
c. Part of taxable income
b. Subject to final tax
d. d.Partly exempt, partly taxable
162. Which of the following statements is not correct?
a. When a compulsory heir is given by will less than his legitime, the provisions of the will should be modified in
such a way that he will receive his legitime
b. The CIR may examine the bank deposit of a decedent for the purpose of determining his gross estate even if
the estate did not request for a compromise on the ground of financial incapacity
c. The P500,000 standard deduction for medical expenses for estate tax purpose is a legal mechanism to
further exempt the less privileged estate and heirs from tax burden
d. The sharing of heirs in testamentary succession must satisfy the rules on legitime
163. In a transfer in contemplation of death, revocable transfer and transfer under a general power of
appointment, there are rules to observe to determine what amount to include in the gross estate, which is
not a rule to observe?
a. If the transfer was in the nature of a bona fide sale for an adequate and full consideration in money or
money’s worth, no value shall be included in the gross estate.
b. If there was no consideration received on the transfer as in donation intervivos, the value to include in
the gross estate shall be the fair market value of the property at the time of transfer.
c. If the consideration received on the transfer was less than adequate and full, the value to include in the
gross estate shall be the excess of the fair market value of the property at the time of decedent’s death
over the consideration received.
d. If there was no consideration received on the transfer as in donation mortis cause, the value to include
in the gross estate shall be the fair market value of the property at the time of the decedent’s death.
164. Which of the following is not directly reducing the inheritance?
a. Standard deduction
c. Unpaid mortgage
b. Claims against the estate
d. Funeral expense
165. Which of the following may reduce the taxable estate but not the inheritance?
a.
Funeral expense
c.
Judicial expense
b.
Losses
d.
Family home
166. Donor’s tax is a (an)
a.
Progressive tax
c.
Property tax
b.
Proportional tax
d.
Excise tax
167. Which of the following is a stranger donor? If the donee is the
a. Grandfather of the donor’s great grandfather
b. Granddaughter of the sister of the donor’s mother
c. Grandson of the donor’s half-sister
d. Brother of the donor’s grandfather
168. J, a Filipino citizen, married to M, died in a vehicular in NLEX on April 10, 2013. The spouses owned,
among others a 100-hectare agricultural land in Sta. Rosa, Laguna with current fair market value of P20M,
which was the subject matter of a Joint Venture Agreement about to be implemented with Star Land
Corporation, a well known real estate development company. He bought the said real property for P2M fifty
years ago. On January 5, 2013, the administrator of the estate and SLC jointly announce their big plans to
start conversion and development of the agricultural lands in Sta. Rosa Laguna, into first class residential
and commercial centers. As a result, the prices of real properties in the locality have doubled. The
A1 PASSERS REVIEW CENTER///38
administrator of the estate of J filed the estate tax return on January 9, 2013 by including in the gross
estate the real property at P2M. after 9 months, the BIR issued estate tax assessment by valuing the real
property at P40M. As a result, the real property should be valued
a. P2M
b. P10M
c. P20M
d. P40M
169. While driving his car to Baguio P, together with his wife, A, and only son J, met an accident that caused
the instantaneous death of J. The following day, A also died in the hospital. The spouses and their son had
the following assets and liabilities at the time of death.
170.
171.
(Exclusive)
Conjugal
J (Exclusive)
172.
Cash
P10,000,000
P1,200,000
173.
Cars
P2,000,000
500,000
174.
Land
5,000,000
2,000,000
175. Residential House
4,000,000
176. Mortgage payable
2,500,000
177. Funeral Expenses
300,000
178. Which of the following statement is correct?
a. The estate of J will pay corresponding estate tax.
b. The administrator of J’s estate will claim vanishing deduction.
c. The administrator of both estates will file one consolidated estate tax return.
d. A CPA certificate as regards the valuation of A’s estate is required.
179.
180.
181.
182.
183.
184.
185.
186.
187.
188.
189.ANSWER KEY
190. TAXATION
191.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
A
B
A
A
A
D
C
A
A
D
C
B
A
D
D
D
C
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
C
C
D
C
B
D
A
B
D
B
C
A
D
C
C
C
D
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
B
S
C
B
D
D
D
A
B
D
B
D
A
A
D
D
D
A1 PASSERS REVIEW CENTER///39
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
C
D
D
D
C
C
A
C
B
A
D
D
A
B
A
B
B
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
B
D
C
B
D
C
D
D
D
A
B
A
A
A
A
A
B
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
99.
100.
D
D
D
C
D
B
A
C
B
A
C
D
B
C
D
192.
193.
194.
195.
196.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
197. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
198. Tel. No.: (033) 320-2728; 09106547262
199. Email Address:
[email protected]
200.
BOARD OF CERTIFIED PUBLIC ACCOUNTANT
202.
CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
201.
203.
204.
205. THEORY OF ACCOUNTS
206.
1. Under PAS 32, which of the following assets is not financial asset?
a. Cash
b. An equity instrument of another entity
c. A contract that may or will be settled in the entity’s own instrument and is not classified as an equity
instrument of the entity
d. Prepaid expense
2. Which of the following liabilities is a financial liability
a. Deferred avenue.
b. A warranty obligation.
c. A constructive obligation.
d. An obligation to deliver own shares worth a fixed amount of cash.
3. Which of the following instrument would not be classified as a financial liability?
a. A preference share that will be redeemed by the issuer for cash on a future date.
b. A contract for the delivery as many of the entity’s ordinary shares as are equal in value to P100,000 on a
future date.
c. A written call option that gives the holder the right to purchase a fixed number of the entity’s ordinary shares
in return for a fixed price.
d. An issued perpetual debt instrument.
4. What is the principal of accounting for a compound instrument?
A1 PASSERS REVIEW CENTER///40
a. The issuer shall classify a compound instrument as either a liability or equity based on evaluation of the
predominant characteristics of the contractual arrangement.
b. The issuer shall classify the liability and equity components of a compound instrument separately as financial
liability or equity instrument.
c. The issuer shall classify a compound instrument as a liability in its entirely, until converted into equity, unless
the equity components is detachable and separately transferable, in which case the liability and equity
components shall be presented separately.
d. The issuer shall classify a compound instrument as a liability in its entirely, until converted equity.
5. What is the accounting for treasury share transaction?
a. On repurchase of treasury shares, a gain or loss is recognized equal to the difference between the amount at
which the shares were issued and the repurchase price for the shares.
b. On reissuance of treasury shares, a gain or loss is recognized equal to the difference between the previous
repurchase price and the reissuance price.
c. On repurchase or reissuance of previously repurchased own shares, no gain or loss is recognized.
d. Treasury shares are accounted for as financial assets.
6. How are the proceeds from issuing a compound instrument allocated between the liability and equity
components?
a. First, the liability component is measured at fair value, and then the remainder of the proceeds is allocated to
the equity component.
b. First, the liability component is measured at fair value, and then the remainder of the proceeds is allocated to
the liability component.
c. First, the fair values of both the equity components and the liability component are estimated. Then the
proceeds are allocated to the liability and equity components based on the relation between the estimated
fair value.
d. The equity component is measured at its intrinsic value. The liability component is measured at the par
amount less the intrinsic value of the equity component.
7. What are the conditions for offsetting of financial assets and financial liabilities?
a. A legal right of set-off.
b. A legal right of set-off and an intention to settle net simultaneously.
c. The existence of clearing mechanism or other market mechanism for net settlement and an expectation of
net settlement.
d. A netting agreement and an expectation of net settlement.
8. For what items is fair value required to be disclosed?
a. All financial instruments.
b. All financial instruments, except unquoted equity instruments and derivatives linked thereto.
c. All financial assets and financial liabilities, except for investment in unquoted instruments and derivatives
linked thereto.
d. All financial assets, except for investment in unquoted instruments and derivatives linked thereto.
9. Transaction costs that are directly attributable to the ”issuance of new shares” should be
a. Expensed immediately.
b. Changed to retained earnings.
c. Deducted from equity.
d. Deducted from equity, net of any related income tax benefit.
10. Cost of public offering of shares or costs that relate to the “stock market listing of shares” should be
a. Expensed immediately.
b. Considered a component of other comprehensive income.
c. Deducted from equity.
d. Deducted from equity, net of any related income tax benefit
11. Transaction costs directly attributable to the issuance of new shares include all of the following, except
a. Documentary stamp tax and other
c. SEC registration fee for new shares
percentage tax
d. Stock listing fee
b. Underwriting fee
12. Costs of public offering or listing of shares include
I. Road show presentation
II. Public relations consultant fee
III. Newspaper publication fee directly relating to the shares issue.
a. I only
c. II and III only
b. I and II only
d. I,II and III
13. What is the treatment of “joint costs” that relate jointly to the concurrent listing and issuance of new shares,
and listing of old existing shares?
a. The joint costs should be expensed immediately.
b. The joint costs should be deducted from equity, net of tax benefit.
c. The joint costs should deducted from equity, plus tax benefit.
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d. The joint costs should be allocated between the newly issued and listed shares and the newly listed old
existing shares prorate based on the number of shares outstanding.
14. Joint costs related to the concurrent listing and issuance of new shares and listing of old existing shares
include all of the following, except
a. Fairness opinion and valuation report.
b. Tax opinion and opinion of counsel.
c. Audit and other professional advice relating to prospectus design and printing.
d. Documentary stamp tax.
15. Under PAS 33, contingent ordinary shares are treated as outstanding and included in the computation of
both basic and diluted earnings per share if the conditions are satisfied. Which of the following statements
is true?
I. Contingent ordinary shares are included in the calculation of basic earnings per share from the date the
condition is satisfied.
II. Contingent ordinary shares are included in the calculation of diluted earnings per share from the
beginning of the period or from the date of contingent agreement, if later.
a. I only
c. Both I and II
b. II only
d. Neither I nor II
16. Entity A has an ordinary “A” class, nonvoting share, which is entitled to a fixed dividend of 6% per annum.
The “A” class ordinary share will
a. Be included in the “per share” calculation after adjusting for the fixed dividend.
b. Be included in the “per share” calculation for EPS without adjustment for the fixed dividend.
c. Not be included in the “per share” calculation for EPS.
d. Be included in the calculation of diluted EPS.
17. Earnings per share are calculated before accounting for which of the following items?
a. Preference dividend for the period
c. Taxation
b. Ordinary dividend
d. Minority interest
18. Ordinary shares issued as part of a business combination are included in the EPS from
a. The beginning of the accounting period
c. The end of the accounting period
b. The date of acquisition
d. The midpoint of the accounting year
19.
20.
21.
22.
23. Which statement is true concerning EPS calculation?
I. Potential ordinary shares issued by a subsidiary should be included in diluted EPS as they could
potentially have an impact on the net profit for the period and the number of shares to be included in
the calculation.
II. An entity should disclose diluted EPS only if it differs from basic EPS by a material amount.
a. I only
c. Both I and II
b. II only
d. Neither I nor II
24. Under PAS 34, interim financial reports shall include as a minimum
a. A complete set of financial statements.
b. A condensed set of financial statements and selected notes.
c. A statement of financial position and an income statement only.
d. A condensed statement of financial position income statement and statement of cash flows only.
25. If an entity does not prepare interim financial reports.
a. The year-end financial statements are deemed not to comply with PERS.
b. The year-end financial statements compliance with PFRS is not affected.
c. The year-end financial statements will not be acceptable under local legislation.
d. Interim financial reports should be included in the year-end financial statements.
26. PAS 36 applies to which of the following assets?
a. Inventories
c. Assets held for sale
b. Financial assets
d. Property, plant, and equipment
27. The internal sources of information indicating possible impairment include all of the following, except
a. Evidence of obsolescence or physical damage of an asset.
b. Significant change in the manner or extent in which the asset is used with an adverse effect on the entity.
c. Evidence that the economic performance of an asset will be worse than expected.
d. Significant decrease or decline in the market value of the asset.
28. The external sources of information including possible impairment include all of the following, except
a. Significant change in the technological, market, legal or economic environment of the business in which the
asset is employed.
b. An increase in the interest rate or market rate of return on investment which will likely affect the discount rate
used in calculating value in use.
c. The carrying amount of the net assets of the entity is more than its market capitalization.
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d. Significant decline in budgeted net cash flows or significant increase in budgeted loss flowing from the asset.
29. When deciding on the discount rate to be used in calculating value in use, which factor should not be taken into
account?
a. The time value of the money.
b. Risk specific to the asset for which future cash flows estimate have not been adjusted.
c. Risk specific to the asset for which future cash flows estimate have been adjusted.
d. Pretax rate
30. Which of the following impairment losses should never be reversed?
a. Loss on property, plant, and equipment
c. Loss on a business segment
b. Loss on goodwill
d. Loss on inventory
31. Where part of a cash generating unit is disposed of the goodwill associated with the element disposed of
a. Shall not be written off to the income statement entirely.
b. Shall not be included in the calculation of gain or loss.
c. Shall be included in the calculation of gain or loss.
d. Shall be written off against retained earnings.
32. When allocating an impairment loss, such a loss should reduce the carrying amount of which asset first?
a. Property, plant, and equipment
c. Goodwill
b. Intangible assets
d. Current assets
33. Under PAS 38, which of the following disclosures is not required with respect to intangible assets?
a. Useful lives of the intangible assets.
b. Reconciliation of carrying amount at the beginning and the end of the year.
c. Contractual commitments for the acquisition of intangible assets.
d. Fair value of similar intangible assets used by its competitors.
34. A new dot-com entity has recently completed one of its highly publicized research and development projects.
Which of the following statement is true?
a. Cost incurred during the “research phase” can be capitalized.
b. Cost incurred during the “development phase” can be capitalized if criteria such as technical feasibility of the
project being established are met.
c. Training costs of technicians used in research can be capitalized.
d. Designing of the jigs and tools would qualify as research activities.
35.
36.
37.
38. Under PAS 37, a “provision” id recognized
I. When there is a legal obligation arising from a past obligating event, the probability of the outflow of
resources is more than remote but less than probable, and a reliable estimate can be made of the amount of
the obligation.
II. When there is a constructive obligation as a result of a past obligating event, the outflow of resources is
probable, and a reliable estimate can be made of the amount of the obligation.
a. I only
c. Both I and II
b. II only
d. Neither I nor II
39. Which of the following is within the scope of PAS 37?
a. Financial instruments carried at fair value
c. Future payments on vacant leasehold
b. Future payments under employment contracts
premises
d. An insurance entity’s policy liability
40. A competitor has sued an entity for unauthorized use of its patented technology. The amount that the entity may
be required to pay to the competitor succeeds in the lawsuits is determinable with reliability, and according to the
legal counsel it is less than probable but more than remote that an outflow of the resources would be needed to
meet the obligation. The entity that was sued should at year-end
a. Recognize a provision for this possible obligation.
b. Make a disclosure of the possible obligation in the notes to financial statement.
c. Make no provision or disclosure and wait until the lawsuit its finally decided and then expense the amount
paid on settlement.
d. Set aside, as an appropriation, a contingency reserve, an amount based on the best estimate of the possible
liability.
41. Under PAS 39, which of the following is not a category of financial assets?
a. Financial assets at fair value through profit or
c. Held for sale investments
loss
d. Loans and receivables
b. Available for sale financial assets
42. All of the following are characteristics of financial assets classified as held-to-maturity investments, except.
a. They have fixed or determinable payments and a fixed maturity.
b. The holder can recover substantially all of its investment unless has been credit deterioration.
c. They are quoted in an active market.
d. The holder has a demonstrated positive intention and ability to hold them to maturity.
43. All of the following are characteristics of financial assets classified as loans and receivables, except.
a. They have fixed or determinable payments.
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b. The holder can recover substantially all of its investment unless has been credit deterioration.
c. They are quoted in an active market.
d. The holder has a demonstrated positive intention and ability to hold them to maturity.
44. What is the principle for recognition of a financial asset?
a. A financial asset is recognized when it is probable that future economic benefits will flow to the entity and the
cost or value of the instrument can be measured reliably.
b. A financial assets id recognized when the entity obtain control of the instrument and has the ability to dispose
of the financial asset independent of the actions of others.
c. A financial asset is recognized when the entity obtains the risks and rewards of ownership of the financial
asset and has the ability to dispose the financial asset.
d. A financial asset is recognized when the entity becomes a partly to the contractual provisions of the
instrument.
45. At what amount is a financial asset or financial liability measured on initial recognition?
a. The consideration paid or received for the
c. Fair value
financial asset or financial liability.
d. zero
b. Acquisition cost
46. In which of the following circumstances is derecognition of a financial asset not appropriate?
a. The contractual rights to the cash flows of the financial assets have expired.
b. The financial asset has been transferred and substantially all the risk and rewards of ownership of the
transferred asset have also been transferred.
c. The financial asset has been transferred and the entity has retained substantially all the risks and rewards of
ownership of the transferred asset.
d. The financial asset has been transferred and the entity has neither retained nor transferred substantially all
the risks and rewards of ownership of the transferred asset but the entity has lost control of the transferred
asset.
47. Which of the following transfers of financial asset would qualify for derecognition?
a. A sale of financial asset where the entity retains an option to buy the asset back at its current fair value
on the repurchase date.
b. A sale of financial asset where the entity agrees to repurchase the asset in one year for a fixed price
plus interest.
c. A sale of portfolio of short-term accounts receivable where the entity guarantees to compensate the
buyer for any losses in the portfolio.
d. A loan of a security to another entity.
48. Which of the following is not a relevant consideration when evaluating whether to derecognize a financial
liability?
a. Whether the obligation has been discharged.
b. Whether the obligation has been cancelled.
c. Whether the obligation has expired.
d. Whether substantially all the risks and rewards of the obligation have been transferred.
49. What is the evidence of the fair value of a financial instrument?
a. Its cost, including transaction costs directly attributable to the purchase origination or issuance of the
financial instrument.
b. Its estimated value determined using discounted cash flows techniques, option pricing models or other
valuation techniques.
c. Its quoted price, if an active market exist for the financial instrument.
d. The present value of the contractual cash flows less impairment.
50. Which of the following is not objective evidence of impairment of a financial asset?
a. Significant financial difficulty of the issuer or obligor.
b. A decline in the fair value of the asset below its previous carrying amount.
c. A breach of contract, such as a default or delinquency in interest or principal payments.
d. Observable data indicating that there is a measurable decrease in the estimated future cash flows from
a group of financial assets although the decrease cannot yet be associated with any individual financial
asset.
51. All of the following are characteristics of a derivative, except
a. It is acquired or incurred by the entity for the purpose of generating a profit from short-term fluctuations
in market factors.
b. Its value changes in response to the change in a specified underlying.
c. It requires no initial investment or an initial net investment.
d. It is settled at a future date.
52. Which embedded derivatives should not be accounted for separately?
a. An investment in a convertible bond that is classified as available for sale.
b. A investment in a bond whose interest payments are linked to the price of gold and the bond is classified
as available for sale.
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c. An investment in a bond whose interest payments are linked to the price of silver and the bond is
classified as at fair value through profit or loss.
d. A call option in an investment in an equity instrument that allows the issuer to repurchase the instrument.
53. This is defined as a “purchase or sale of a financial asset under a contract whose terms require delivery of
the asset within the time frame established generally by regulation or convention in the market place
concerned”.
a. Regular way contract
c. Firm commitment
b. Forward contact
d. Forecast transaction
54. What is the meaning of “trade date accounting” in relation to regular way purchase or sale of financial
asset?
I. The recognition of the asset to be received and the liability to be paid on the date on which the entity
commits itself to purchase or sell an asset.
II. The recognition of the asset on the date received by the entity or derecognition of the asset on the date
delivered by an entity.
a. I only
c. Either I or II
b. II only
d. Neither I nor II
55. Under PAS 40, an investment property should be measured initially at
a. Cost
b. Cost less accumulated depreciation and impairment losses.
c. Depreciable cost less accumulated impairment losses.
d. Fair value less accumulated impairment losses.
56. A gain arising from a change in the fair value of an investment property for which an entity has opted to use
the fair value model is recognized in
a. Net profit or loss for the year.
b. General reserve in the shareholder’s equity.
c. Valuation reserve in the shareholder’s equity.
d. Retained earnings.
57. Which of the following is not deal with by PAS 41?
a. The accounting for biological assets.
b. The initial measurement of agricultural produce harvested from the entity’s biological assets.
c. The processing of agricultural produce after harvesting.
d. The accounting treatment of government grant received in respect of biological assets.
58. Generally speaking, biological assets relating to agricultural activity should be measured using
a. Historical cost
b. Historical cost less depreciation impairment
c. A fair value approach
d. Net realized value
59. An entity had a o forest that is likely to be harvested and sold in thirty years. The income should be
accounted for in which of the following way?
a. No income should reported annually until first harvest and sale in thirty years.
b. Income should be measured annually and reported using a fair value approach that recognizes and
measures biological growth.
c. The eventual sale proceeds should be estimated and matched to the profit and loss account over the
30-yearperiod.
d. The plantation forest should be measures every five years and the increase in value should be shown in
the statement of recognized gains and losses.
60. Which of the following information shall be disclosed in relation to biological assets and agricultural
produce?
a. Separate disclosure of the gain or loss relating to biological assets and agricultural produce.
b. The aggregate gain or loss arising on the initial recognition of biological assets and agricultural produce
and from the change in fair value less cost to sell of biological assets.
c. The total gain or loss from biological assets, agricultural produce, and from changes in fair value less
cost to sell of biological assets.
d. There is no requirement in the standard to disclose separately any gain or losses.
61. Where there is a production cycle of more than one year for a biological asset separate disclosure is
encourage for
a. Physical change only
c. Total change in value
b. Price change only
d. Physical change and price change
62. An unconditional government grant related to a biological asset that has been measured at fair value less
cost to sell should be recognized as
a. Income when the grant becomes receivable
b. A deferred credit when the grant becomes receivable
c. Income when the grant application has been submitted
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d. A deferred credit when the grant has been approved
63. If a government grant related to a biological asset is conditional on certain events, the grant should be
recognized as
a. Income when the conditions attaching to the grant are met.
b. Income when the grant has been approved
c. A deferred credit when the conditions attached to the government grant are met.
d. A deferred credit when the grant is approved.
64. This is defined in PFRS 1 as the “first annual financial statements in which an entity adopts Philippine
Financial Reporting Standards (PFRS) by an explicit and unreserved statement of compliance with PFRS”.
a. PFRS financial statements
b. First PFRS financial statements
c. Opening PFRS statement of financial opinion
d. First audited PFRS financial statements
65. An entity that presents in first PFRS financial statements is known as
a. An originating entity
c. A first-time adopter
b. A provisional presenter
d. A initial reporter
66. An entity’s statement of financial position, published or unpublished, at the date of transition to PFRS is
best described as the
a. Provisional PFRS statement of financial position
b. Closing GAAP statement of financial position
c. Opening PFRS statement of financial position
d. Originating PFRS statements of financial position
67. Which of the following statements best describes the “date of transition to PFRS”?
a. The beginning of the latest period presented in the entity’s most recent annual financial statements
under previous GAAP.
b. The end of the latest period presented in the entity’s most recent annual financial statements under
previous GAAP.
c. The beginning of the earliest period for which an entity presents full comparative information under
PFRS in its PFRS financial statements.
d. The end of the earliest period for which an entity presents full comparative information under PFRS in its
first PFRS financial statements.
68. Which of the following transactions involving the issuance of shares does not come within the definition of a
“share-based” payment under PFRS 2?
a. Employee share purchase plans.
c.Share-based payment relating to an
b. Employee share option plans.
acquisition of a subsidiary.
d. Share appreciation rights.
69. Which of the following is true regarding the requirements of PFRS 2?
a. Private entities are exempt.
b. “Small” entities are exempt.
c. Subsidiaries using their parent entity’s shares as consideration for goods and services are exempt.
d. There are no exemptions from PFRS 2.
70. It is an arrangement that provides for automatic grant share whenever the option holder exercises
previously granted options using the entity’s share, rather than cash, to satisfy the exercise price
a. Reload feature
c. Share option
b. Reload option
d. Equity option
71. Under PFRS 3, which of the following examples is unlikely to meet the definition of an intangible asset?
a. Marketing related such as trademarks and internet domain names.
b. Customer related such as customer lists and contracts.
c.Technology based, such as computer software and databases.
d. Pure research based, such as general expenditure on research.
72. Which of the following would not contribute to the creation of negative goodwill?
a. Errors in measuring the fair value of the acquirce’s net identifiable assets or the cost of the business
combination.
b. A bargain purchase.
c. A requirement in a PFRS to measure net assets acquired at a value other than fair value.
d. Making acquisitions at the top of a “bull” market for shares.
73. PFRS 4 defines a reinsurance contract as a contract issued by one insurer, the reinsurer, to compensate
another insurer for losses one or more contracts issued by the cedant. What is the meaning of “cedant” in
reinsurance contract?
a. Policyholder under a reinsurance contract.
c.Insurer under an insurance contract.
b. Policyholder under an insurance contract.
d. Reinsurer under a reinsurance contract.
74. The recognition of unrealized gain or loss on the measurement of the financial assets and insurance
liabilities as a component of other comprehensive income is described in insurance parlance as
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a. Fair value accounting
c. Hedge accounting
b. Current value accounting
d. Shadow accounting
75. This is defined as “the payments to which policyholder has an unconditional right that is not subject to the
contractual discretion of the insurer”.
a. Guaranteed benefits
c. Proceeds policy
b. Unconditional benefits
d. Executor benefits
76. It is the insurer’s net contractual right under an insurance contract.
a. Insurance asset
c. Reinsurance asset
b. Insurance liability
d. Reinsurance liability
77. Which of the following accounting practices has been outlawed in relation to insurance contracts?
a. Shadows accounting
b. Catastrophe provisions
c. A test for the adequacy of recognized insurance liabilities
d. An impairment test for reinsurance assets
78. All of the following are requirements for insurance contracts, except
a. Nonoffsetting of reinsurance assets against related insurance liabilities
b. An annual assessment of the adequacy of recognized insurance liabilities
c. An impairment test for reinsurance assets
d. Recognition of provisions for future claims relating to a catastrophe
79. Which of the following types of contracts would probably not be covered by PFRS 4?
a. Motor insurance
c. Medical insurance
b. Life insurance
d. Pension plan
80. Under PFRS 5, how should the assets and liabilities of a disposal group classifies as held for sale be
shown in the statement of financial position?
a. The assets and liabilities should be offset and presented as a single amount.
b. The assets of disposal group should be shown separately from the other assets and the liabilities of the
disposal group should be shown separately from other liabilities.
c. The assets and liabilities should be presented as a single amount and as a deduction from equity.
d. There should be no separate disclosure of assets and liabilities that from part of a disposal group.
e.
81. Equity acquires a subsidiary exclusively with a view to selling it. The subsidiary meets the criteria to be
classified as held for sale. At the end of reporting period, the subsidiary has not yet been sold, and six
months have passed since its acquisition. How will the subsidiary be valued at the date of the first financial
statements after acquisition?
a. At fair value
c. At carrying amount
b. At the lower of its cost and fair value less
d. In accordance with applicable PFRS
cost to sell.
82. Equity has an asset that was classified as held for sale. However, the criteria for it to remain as held for
sale no longer apply. The entity should
a. Leave the noncurrent asset in the financial statements at its current carrying amount.
b. Remeasure the noncurrent asset at fair value.
c. Measure the noncurrent asset at the lower of its carrying amount before the asset was classified as held
for sale adjusted for subsequent depreciation, amortization or revaluation, and its recoverable amount
at the date of the decision not to sell.
d. Recognize the noncurrent asset at its carrying amount prior to its classification as held for sale adjusted
for subsequent depreciation, amortization or revaluation.
83. How should the income from discontinued operation be presented in the income statement?
a. The entity should disclose a single amount on the face of the income statement wit analysis in the notes
or a section of the income statement separate from continuing operations.
b. The amounts from discontinued operations should be broken down over each category of revenue and
expense.
c. Discontinued operation should be shown as a movement on retained earnings.
d. Discontinued operation should be shown as a line item after gross profit with the taxation being shown
as part of income tax expense.
84. Which of the following criteria does not have to be met in order for an operation to be classified as
discontinued?
a. The operation should represent a separate major line of business or geographical area.
b. The operation is part of single plan to dispose of a separate major line of business or geographical area.
c. The operation is a subsidiary acquired exclusively with a view to resale.
d. The operation must be sold within three months of the year-end.
85. Does PFRS 6 acquire an entity to recognize exploration and evaluation expenditure as asset?
a. Yes, but only to the extent such expenditure is recoverable in future periods.
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b. Yes, but only to the extent the technical feasibility and commercial viability of extracting the associated
mineral resource have been demonstrated.
c. Yes, but only to the extent required by the entity’s accounting policy for recognizing exploration and
evaluation asset.
d. No, such expenditure is always expensed in profit or loss as incurred.
86. An entity is required to consider which of the following in developing accounting policies for exploration and
evaluation activities?
a. The requirements and guidance in Standards and Interpretations dealing with similar and related issues.
b. The definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and
expenses in the Conceptual Framework
c. Recent pronouncements of standard-setting bodies, accounting literature and accepted industry
practices.
d. Whether the accounting policy results in information that is relevant and reliable.
87. Which of the following expenditures would never qualify as an exploration and evaluation asset?
a. Expenditure for acquisition of rights to explore.
b. Expenditure for exploratory drilling.
c. Expenditures related to the development of mineral resources.
d. Expenditures for activities in relation to evaluating the technical feasibility and commercial viability of
extracting a mineral resources.
88. Which of the following is not a disclosure required in relation to exploration and evaluation expenditures?
a. Information about commercial reserve quantities.
b. Accounting policies for exploration and evaluation expenditures, including the recognition of exploration
and evaluation assets.
c. The amounts of assets, liabilities, income and expense, and operating and investing cash flows arising
from the exploration and evaluation of mineral resources.
d. Information that identifies and explain the amounts recognized in the financial statements arising from
the exploration and evaluation of mineral resources.
89.
90.
91.
92.
93. Which is not a characteristic of the “full cost” method of accounting in the oil and gas industry/
a. All costs incurred in acquiring, exploring and developing within a defined cost center are capitalized and
amortized.
b. Costs are capitalized even if a specific project in a cost center was a failure.
c. Costs of unsuccessful acquisition and exploration activities are charged to expense.
d. Exploration and evaluation asset is classified either as tangible asset or an intangible asset according to
the nature of the asset.
94. Under PFRS 7, the risk arising from financial instruments that are required to be disclosed include all of the
following, except
a. Qualitative and quantitative information about credit risk.
b. Qualitative and quantitative information about liquidity risk.
c. Qualitative and quantitative information about market risk.
d. Qualitative and quantitative information about operation risk.
95. This is defined as “the risk that one party to a financial instrument with cause a financial loss to the other
arty by failing to discharge an obligation”.
a. Credit risk
c. Market risk
b. Liquidity risk
d. Operational risk
96. Which of the following best describes “the risk that an entity will encounter if it has difficulty in meeting
obligations associated with its financial liabilities”?
a. Liquidity risk
c. Financial risk
b. Credit risk
d. Payment risk
97. This is defined as “the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market prices”.
a. Credit risk
c. Market risk
b. Liquidity risk
d. Operational risk
98. The components of market risks are
a. Credit risk and liquidity risk
c. Interest rate risk and currency risk
b. Currency risk and credit risk
d. Liquidity risk and currency risk
99. Disclosure of information about significant concentrations of credit risk is required for
a. All financial instruments
b. Financial instruments with off statement of financial position credit risk only
c. Financial instruments with off statement of financial position market risk only
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d. Financial instruments with off statement of financial position risk of accounting loss only
100. Under PFRS 8, an operating segment is reportable when
I. The segment external and internal revenue is 10% or more of the combined external and internal
revenue of all operating segments.
II. The segment profit or los is 10% more of the greater between the combined profit of all operating
segments that reported profit and the combined loss of all operating segments that reported a loss.
III. The assets of the segment are 10% or more of the total assets of all operating segments.
a. I and II only
c. II and III only
b. I and III only
d. I, II and III
101. Which of the following statements is true about major customer disclosure?
I. A major customer is defined as one providing revenue which amounts to 10% or more of combined
internal and external revenue of all operating segments.
II. The identities of major customer must be disclosed.
a. I only
c. Both I and II
b. II only
d. Neither I nor II
102. Under SIC 15, what is the treatment of operating lease incentives (upfront cash, reimbursement of costs
incurred by lessee and rent-free period granted by the lessor to the lessee?
I. The lessor shall recognize the aggregate cost of the incentives as a reduction of rent income over the
lease term on a straight line basis.
II. The lessee shall recognize the aggregate benefit of the incentives as reduction of rent expense over
the lease term.
a. I only
c. Both I and II
b. II only
d. Neither I nor II
103. Under IFRIC 2, members’ shares in cooperatives may give the holder the right to request redemption for
cash or other financial asset. Such members’ shares shall be accounted for as
a. Equity
c. Either as equity or liability
b. Liability
d. Partly equity and partly liability
104.
105.
106.
107.
108. Member’s shares in cooperatives shall be classified as equity
I. If the entity has unconditional right to refuse redemption of members’ share
II. If the redemption of members’ shares is unconditionally prohibited by law.
a. I only
c. Either I or II
b. II only
d. Neither I nor II
109. Fair value of an asset should be based upon
a. The replacement cost of an asset.
b. The price that would be received to sell the asset at the measurement date.
c. The original cost of the asset plus an adjustment for obsolescence.
d. The rice that would be paid to acquire the asset.
110. Which of the following describes a principal market for establishing fair value of an asset?
a. The market that has the greatest volume and level of activity for the asset.
b. Any broker or dealer market that buys or sells the asset.
c. The most observable market in which the price of the asset is minimized.
d. The market in which the amount received would be maximized.
111. Which of the following would meet the qualifications as market participants?
a. A liquidation market in which sellers are compelled to sell.
b. A subsidiary of the reporting until interested in purchasing assets similar to those being valued.
c. An independent entity that is knowledge about the asset.
d. A broker or dealer that wishes to establish new market for the asset.
112. Which of the following in assumption used in fair value measurements?
a. The asset must be in-use.
b. The asset must be considered in-exchange.
c. The most conservative estimate must be used.
d. The asset in its highest and best use.
113. Which of the following is not a valuation technique used in fair value estimates?
a. Income approach
c. Market approach
b. Residual value approach
d. Cost approach
114. Valuation techniques for fair value that include the Black-Scholes formula, a binomial model, or
discounted cash flows are example of which valuation technique?
a. Income approach
c. Cost approach
b. Market approach
d. Exit value approach
A1 PASSERS REVIEW CENTER///49
100.
a.
b.
c.
d.
The market approach valuation technique for measuring fair value requires which of the following?
Present value of future cash flows.
Prices and other related information of transactions from identical or comparable assets.
The price to replace the service capacity of the asset.
The weighted average of the present value of future cash flows.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
q.
r.
s.
t.
u.
v.
w.
x.
y.
z.
aa.
ab.
ac.
ad.
ae.
ANSWER KEY
af. THEORY OF ACCOUNTS
ag.
ah.
1. D
2. D
3. C
4. B
5. C
6. A
7. B
8. C
9. D
10. D
11. B
12. D
13. D
14. D
15. C
16. C
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
B
B
A
B
B
D
D
D
C
B
C
C
D
B
B
C
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
B
C
B
D
D
C
C
A
D
C
B
A
C
A
A
A
A1 PASSERS REVIEW CENTER///50
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
A
C
C
B
B
D
A
A
B
C
C
C
C
D
A
D
D
A
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
D
A
A
B
D
D
B
B
C
A
D
C
D
C
A
C
D
A
85. A
86. C
87. C
88. A
89. D
90. D
91. C
92. C
93. C
94. B
95. A
96. C
97. D
98. B
99. A
ai. 100. B
aj.
ak.
al.
am.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
an. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
ao. Tel. No.: (033) 320-2728; 09106547262
ap. Email Address:
[email protected]
aq.
ar. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
as.
at. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A
au.
av.
1.
2.
3.
1.
2.
AUDITING THEORY
aw.
ax. INSTRUCTIONS:
Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.
Write the subject title “AUDITHING THEORY” on the box provided.
Shade Set Box “A” on your answer sheet if your test booklet is Set A; Set Box “B” if your test booklet is Set
B.
ay.
az. MULTIPLE CHOICE:
ba.
Which of the following statements is correct concerning the concept of materiality?
a. Materiality depends on the nature of an item rather than the peso amount.
b. Materiality is matter of professional judgment.
c. Materiality is determined by reference to guidelines established by the PICPA.
d. Materiality depends only on the peso amount of an item relative to other items in the financial statements.
When considering internal control, an auditor must be aware of the concept of reasonable assurance which
recognizes that the
a. Employment of competent personnel assurance that managements control objectives will be achieved.
b. Cost of internal control should not exceed the benefits expected to be derived there from.
c. Separation of incompatible functions is necessary to ascertain that the internal control is effective.
A1 PASSERS REVIEW CENTER///51
d. Establishment and maintenance of internal control is an important responsibility of the management.
3. The ultimate purpose of assessing control risk is to contribute to the auditor’s evaluation of the
a. Possibility that the nature and extent of substantive test may be reduced.
b. Risk that material mis-statements exist in the financial statements.
c. Operating effectiveness of internal controls.
d. Factors that raise doubts about the audit ability of the financial statements.
4. The auditor looks for an indication on duplicate sales invoices to see if the invoices have been verified. This is
an example of
a. A test of controls
b. A substantive test of transaction
c. A test of details of balances
d. Both a test of control and substantive test of transaction
5. Which of the following statement about tests of controls is most accurate?
a. Tests of controls ordinarily should be performed as of the balance sheet date during the period subsequent to
the date.
b. Tests of control include observation of the proper segregation of duties that ordinarily may be limited to the
normal audit period.
c. Auditing procedures cannot currently provide both evidence of the effectiveness of internal control
procedures and evidence required for substantive tests.
d. Tests controls should be based upon proper application of an appropriate statistical sampling plan.
6. The two phases of the auditor’s involvement with internal control are sometimes referred to as “understanding
and assessment” tests of controls. In the tests of controls phase, the auditor attempts to:
a. Obtain sufficient, appropriate evidential matter to afford a reasonable basis for the auditor’s opinion.
b. Obtain a reasonable degree of assurance that the client’s controls are in use and are operating as planned.
c. Obtain assurances that informative disclosures in the financial statements are reasonably adequate
d. Obtain knowledge and understanding, the client’s prescribed procedures and methods.
7. The sequence of steps in gathering evidences as the basis of the auditor’s opinion is:
a. Assessment of control risk, substantive tests, and test of controls.
b. Tests controls, assessment of control risk, and substantive tests.
c. Assessment of control risk, tests of controls, and substantive tests.
d. Substantive tests, assessment of control risks, and tests of controls.
bb.
8. Which of the following procedure would an auditor least likely perform in planning a financial statement
audit?
a. Coordinating the assistance of entity personnel in data preparation.
b. Selecting a sample of vendor’s invoices for comparison to receiving reports.
c. Reading the current year interim financial statements.
d. Discussing matters that may affect the audit with the firm personnel responsible for non-audit services to
the entity.
9. ROI Manufacturing Co. received a substantial sales return on December 30, 2010, but the credit
memorandum for the return was not prepared and recorded until March 4, 2011. The returned merchandise
was included in the year-end physical inventory taken on December 2010. The most effective procedure for
preventing this type of error is to:
a. Prepare an aged schedule of accounts receivable monthly.
b. Pre-number and accounts for all credit memorandums.
c. Reconcile the subsidiary accounts receivable ledger with the general ledger control account monthly.
d. Prepare and numerically control receiving reports for all materials received.
10. Which of the following best describes why an independent auditor is asked to express an opinion on the fair
presentation of financial statements?
a. It is difficult to prepare financial statements that fairly resent a company’s financial position, financial
performance, and cash flows without the expertise of an independent auditor.
b. It is customarily courtesy that all share holders of a company receive an independent report on
management’s stewardship of the affairs of the business.
c. The opinion of an independent party is needed because a company may not be objective with respect to its
own financial statements.
d. It is customary courtesy that all shareholders of a company receive an independent report on management’s
stewardship of the affairs of the business.
11. An independent auditor has the responsibility to design the audit to provide reasonable assurance of detecting
errors and fraud that might have a material effect on the financial statements. Which of the following. If material
would be a fraud as defined in PSA 240 (The Auditor’s Responsible Relating to Fraud in an Audit of Financial
Statements)?
a. Misappropriation of an asset or groups of assets.
b. Clerical mistakes in the accounting data underlying the financial statements.
c. Mistakes in the application of accounting principles.
d. Misinterpretation of facts that existed when the financial statements were prepared.
A1 PASSERS REVIEW CENTER///52
12. The date of the CPA’s opinion on the financial statements of his or her client should be the date of the
a. Closing of the client’s books.
c. Completion of all important audit procedures.
b. Receipt of the client’s letter of representation.
d. Submission of the report to the client.
13. During an audit engagement, pertinent data are complied and included in the audit working papers. The working
papers primarily are considered to be
a. A client-owned record of conclusions reached by auditors who performed the engagement.
b. Evidence supporting financial statements.
c. Support for the auditor’s representation as to compliance with relevant PSAs.
d. A record to be used as a basis for the following year’s engagement.
14. Significant unexpected fluctuations indentified by analytical procedures will usually necessitate a (n)
a. Audit report modification.
c. Explanation in the representation letter.
b. Understanding of the client’s internal control.
d. Audit investigation.
15. Sandy requested permission to communicate with the predecessor auditor and review certain portion of the
predecessor’s working papers. The prospective client’s refusal to permit this will bear directly on Sandy’s
decision concerning the
a. Adequacy of the preplanned audit program.
b. Ability to establish consistency in application of accounting principles between years.
c. Apparent scope limitation.
d. Integrity of management.
16. Your analytic procedures and other test of the Yang Company reveal that the firm’s poor financial condition
makes it unlikely that it will survive as a going concern. Assuming that the financial statements have otherwise
been prepared in accordance with generally accepted accounting
17. principles, what disclosure should you make of the company’s precarious financial position?
a. You should issue a qualified opinion and, in an emphasis of matter paragraph, direct the reader’s attention to
the poor financial condition of the company.
b. You should insist that a note to the financial statements clearly indicates that the company appears to be on
the verge of bankruptcy.
c. You need not insists on any specific disclosure, since the company’s poor financial condition is clearly
indicated by the financial statements themselves.
d. You should make sure there is adequate disclosure and appropriately modify your report because the
company does not appear to have the ability to continue as a going concern.
18. An auditor is planning an audit engagement for a new client in a business with which he is unfamiliar.
Which of the following would be the most useful source of information during the preliminary planning
stage, when the auditor is trying to obtain a general understanding of audit problems that might be
encountered?
a. Client manuals of accounts and charts of accounts.
b. Industry Audit Guides.
c. Prior-year working papers of the predecessor auditor.
d. Latest annual and interim financial statements issued by the client.
19. Which of the following best describes the element of inherent risk that underlies the application of generally
accepted auditing standards?
a. Cash audit work may have to be carried out in a more conclusive manner than inventory audit work.
b. Intercompany transactions are usually subject to less detailed scrutiny than arm’s-length transactions
with outside parties.
c. Inventories may require more attention by the auditor on an engagement for a merchandising enterprise
than on an engagement for a public utility.
d. The scope of the audit need not be expanded if misstatements that arouse suspicion of fraud are of
relatively insignificant amount.
20. Failure to detect material peso misstatements the financial statements is a risk that the auditor mitigates
primarily by
a. Performing substantive tests.
c. Evaluation internal control.
b. Performing tests of control.
d. Obtaining a client representation letter.
21. Inherent risk and control risk differ from planned detection risk in that they
a. Arise from the misapplication of auditing procedures.
b. May be assessed in either quantitative or non-quantitative terms.
c. Exist independently of the financial statement audit.
d. Can be changed at the auditor’s discretion.
22.
23. For each of the following types of misstatements (Items 21-24) select the control that should have
prevented the misstatements.
24. A manufacturing company received a substantial sales return in the last month of the year, but the credit
memorandum for the return was not prepared until after the auditors had completed their filed work. The
returned merchandise was included in the physical inventory.
a. Credit memoranda are pre-numbered and all numbers are accounted for.
A1 PASSERS REVIEW CENTER///53
b. Aged trial balance accounts receivable is prepared.
c. A reconciliation of the trial balance of customer accounts with the general ledger control is prepared
periodically.
d. Receiving reports are prepared for all materials received accounts and such reports are accounted for
on a regular basis.
25. The sales manager credited a salesman, Jun with sales that were actually “house account” sales. Later
Jun divided his excess sales commission with the sales manager.
a. Sales order are reviewed and approved by persons independent of the sales department.
b. The summary sales entries are checked periodically by persons independent of sales.
c. Sales orders are pre-numbered and all numbers are accounted for.
d. The internal auditor compares the sales commission statements with the cash disbursements records.
26. Copies of sales invoices shows different unit prices for apparently identical items.
a. All sales invoices are checked as to all details after their preparation.
b. Differences reported by customers are satisfactorily investigated.
c. Statistical sales data are complied and reconciled with recorded sales.
d. All sales invoices are compared with the customers purchase orders.
27. A sales invoice for P52,000 was computed correctly but, by mistake, was key entered as P25,000 to the sales
journal and to the accounts receivable master file. The customer remitted only P25,000 the amount on his
monthly statement.
a. Unauthorized remittance deductions made by customers of other matters in dispute are investigated promptly
by a person independent of the accounts receivable function.
b. The customer’s monthly statements are verified and mailed by a responsible person other than the
bookkeeper who prepared them.
c. Sales invoice serial numbers, prices, discounts, extensions, and footings are independently checked.
d. Pre-listings and predetermined totals are used to control postings.
28. Auditors sometimes use comparison of ratios as audit evidence. For example, an unexplained decrease in the
ratio of gross profit to sales may suggest which of the following possibilities?
a.Unrecorded sales
b.Unrecorded acquisitions
c.Fictitious sales
d.Merchandise acquisition being charged to selling and general expenses
29. An auditor is performing substantive tests of transactions for sales. One step is to trace a sample of debit from
the accounts receivable master file back to supporting duplicate sales invoices. What would the auditor intended
to establish by this step?
a.All sales have been recorded.
b.Sales invoices represent existing sales.
c.All sales invoices have been properly posted to customer accounts.
d.Debit entities in the accounts receivable files are properly supported by sales invoices.
30. In a random sample of 1,000 records, an auditor determines that the sample deviation rate is 2 percent. The
auditor can state that the deviation rate in the population is:
a. Not less than 2 percent.
c. Probably about 2 percent.
b. Not more than 3 percent.
d. Not less than 1 percent.
31. As a result of analytical procedures, the independent auditor determines that the gross profit percentage has
declined from 30 percent in the preceding year to 20 percent in the current year. The auditor should:
a. Evaluate management’s performance in causing this decline.
b. Require note disclosure.
c. Consider the possibility of a misstatement in the financial statements.
d. Express a qualified opinion due to inability of the client company to continue as a going concern.
32. Which of the following is true of generalized audit software programs?
a. They can be used on any computer without modification.
b. They can be used only in auditing on-line computer systems.
c. They enable the auditor to perform all manual tests of controls procedures less expensively.
d. They each have their own characteristics that the auditor must carefully consider before using in a given audit
situation.
33. The negative form of accounts receivable confirmation request is useful except when?
a. A large number of small balances are involved.
b. Internal control surrounding accounts receivable is considered to be effective.
c. Individual account balances are relatively large.
d. The auditor has reason to believe the persons receiving the request are likely to give them consideration.
34. Which of the following is the best argument against the use of negative confirmations of accounts receivable?
a. There is no way of knowing if the intended recipients received them.
b. They each have their own characteristics that the auditor must carefully consider before using in a given audit
situations.
c. The inference drawn from receiving no reply may not be correct.
d. The cost per response is excessively high.
A1 PASSERS REVIEW CENTER///54
35. A factory foreman at Stable Corporation discharged an hourly worker but did not notify the payroll department.
The foreman then forged the worker’s signature on time cards and work tickets and, when giving out checks,
diverted the payroll checks drawn from discharge worker to his own use. The most effective procedure for
preventing this activity is to:
a. From time to time, rotate persons distributing the payroll.
b. Require written authorization for all employees added to or removed from the payroll.
c. Have someone other than persons who prepare or distribute the payroll obtain custody of unclaimed payroll
checks.
d. Have a paymaster who has no other payroll responsibility distribute the payroll checks.
36. A common audit procedure in the audit procedure in the audit of payroll transactions involves tracing selected
items from the payroll journal to employee time cards that have been approved by 7 supervisory personnel. This
procedure is designed to provide evidence in support of the audit proposition that:
a. Jobs on which employees worked were changes with the appropriate labor cost.
b. Only proper employees worked and their pay was properly computed.
c. All employees worked the number of hours for which their pay was computed.
d. Internal controls over payroll disbursements are operating effectively.
37. Buddy, the purchasing agent of Lander Hardware Wholesalers, has a relative who owns a retail hardware store.
Buddy arranged for hardware to be delivered by manufacturers to the retail store on COD basis, thereby
enabling his relative to buy at Lander’s wholesale prices. buddy was probably able to accomplish this because
of Lander’s poor internal control over.
a. Cash receipt
c. Purchase requisition.
b. Perpetual inventory records.
d. Purchase orders.
38. Which of the following is an internal control that would prevent paid cash disbursement documents from being
presented for payment as second time?
a. Cash disbursement documents should be approved by at least two responsible managements officials.
e.
b. The date on cash disbursement documents should be within a few days of the date that the document is
presented for payment.
c. Unsigned checks should be prepared by individuals who are responsible for singing checks.
d. The officials signing the check should compare the check with the documents and should deface the
documents.
39. With respect to an internal control measure that will assure accountability for fixed asset requirements
management should implement controls that include.
a. Continuous analysis of miscellaneous revenue to locate any cash proceeds from sale of plant assets.
b. Periodic inquiry of plant executives by internal auditors as to whether any plant assets have been
retired.
c. Periodic observation of plant assets by the internal auditors.
d. Continuous use of serially numbered retirement work orders.
40. Which of the following comparison would be most useful to an auditor in evaluating the results of an entity’s
operations?
a. Prior year accounts payable to current year accounts payable.
b. Prior year payroll expense to budgeted current year payroll expense.
c. Current year revenue to budgeted current year revenue.
d. Current year warranty expense to current year contingent liabilities.
41. In testing for unrecorded retirements of equipment, an auditor most likely would.
a. Select items of equipment from the accounting records and then locate them during the plant tour.
b. Compare the depreciation journal entries with similar prior-year entries in search of fully depreciated
equipment.
c. Inspect items of equipment observed during the plant tour and then trace them to the equipment master
life.
d. Scan the general journal for unusual equipment additions and excessive debits to repairs and
maintenance expense.
42. Which of the following best describes the independent auditor’s approach to obtaining satisfaction
concerning depreciation expense in the income statement?
a. Establish the basis for depreciable assets and verify the depreciation expense
b. Verify the mathematical accuracy of the amounts charged to income as a result of depreciation expense
c. Determine the method .for computing depreciation expense and ascertain that it is in accordance with
generally accepted accounting principles.
d. Reconcile the amount of depreciation expense to those amounts credited to accumulated depreciation
accounts.
43. For control purposes, the quantities of materials ordered may be omitted from the copy of the purchase
order that is:
a. Forwarded to the receiving department
b. Returned to the requisitioner
A1 PASSERS REVIEW CENTER///55
c. Forwarded to the accounting department
d. Retained in the purchasing department files
44. When evaluating inventory controls with respect to segregation of duties, a CPA would be least likely to:
a. Make inquiries
c. Consider and procedure manuals
b. Inspect documents
d. Observeprocedures
45. A CPA auditing inventory may appropriately apply attributes sampling in order to estimate the:
a. Peso value of inventory
c. Physical quantity of inventory items
b. Average price of inventory items
d. Percentage of slow-moving inventory item
46. Assuming cash receipts from credit sales have been misappropriated. Which of the following is likely to
conceal the misappropriated and unlikely to be detected?
a. Overstating the accounts receivable control account
b. Overstating the accounts receivable subsidiary ledger
c. Understanding the sales of journal
d. Overstating the cash receipts journal
47. The audit step most likely to reveal the existence of contingent liabilities is:
a. Mortgage note confirmation
b. Accounts payable confirmation
c. An inquiry directed to legal counsel
d. A review of vouchers paid during the month following the year-end
48. A principal purpose of a letter of representation from management is to:
a. Discharge the auditor from legal liability for the audit.
b. Remind management of its primary responsibility for financial statements.
c. Confirm in writing managements approval of limitations on the scope of the audit.
d. Serve as an introduction to company personnel & authorization to examine the records.
49. Management’s refusal to turnish a written representation on a matter that the auditor considers essential
constitutes.
a. Prima facie evidence that the financial statements are not presented fairly.
b. A scope limitation sufficient to prelude an unmodified opinion.
c. A violation of the Securities Regular Code.
d. An uncertainly sufficient to prelude an unmodified opinion.
50. A major customer of an audit client suffers a fire just prior to completion of year-end field work. The audit
client believes that this event could have a significant direct effect on the financial statements. The auditor
should:
a. Advise management to adjust the financial statement.
b. Disclose the event in the auditor’s report.
c. Advise the management to disclose the event in notes to the financial statements.
d. With hold submission of the auditor’s report until the extent of the direct effect on the financial
statements is known.
51. Which of the following fundamental ethical principles prohibits association of professional accountants with
reports, returns, communications or other information that is believed to contain a materially or misleading
statement?
a. Professional competence due care
c. Objectivity
b. Integrity
d. confidentiality
52. The auditor’s risk assessment procedures.
a. Are designed to detect material misstatements at the assertion level for classes of transactions, account
balances and disclosures.
b. Are designed to test the effectiveness of the entity’s controls.
c. Should not consider information obtained from the auditors previous experience with the entity.
d. By themselves, do not provide sufficient appropriate audit evidence on which to base the audit opinion.
53. An entity’s internal control system contains manual elements and often contains automated elements. Manual
elements in internal control may be less reliable than automated elements because:
a. Manual elements include reliance on system or programs that are inaccurately processing data, processing
inaccurate data or both.
b. Consistency of application of manual control elements can always be assumed.
c. Manual control elements facilitate the additional analysis information.
d. Manual control elements can be more easily by passed, ignored, or overridden and they are also more prone
to simple errors and mistake
54. When an auditor believes that an understanding with the client has not been establish, he or she should
ordinarily:
a. Assess control risk at the maximum level and perform a primarily substantive audit.
b. Decline to accept or perform the audit.
c. Perform the audit with increased professional scepticism.
d. Modify the scope of the audit to reflect an increase of material misstatement due to fraud.
55. Which of the following comparison would an auditor most likely make in evaluating an entity’s and expenses?
A1 PASSERS REVIEW CENTER///56
a. The budgeted current year’s sales with the prior’s sales
b. The current years payroll expense with the prior years payroll expense.
c. The current year’s accounts receivable with the prior year’s accounts receivable.
d. The budgeted current year’s warranty expense with the current year’s contingent liabilities.
56. The following statements are ordinarily included in a management representation letter except:
a. The financial statements are free of material misstatement, including omission.
b. There have been no irregularities involving management or employees who significant role in internal control
or that could have a material effect on the financial statement.
c. Sufficient appropriate audit evidence has been made available to permit the expression of an unmodified
opinion.
d. The completeness and availability of minutes of stockholders and directors meetings.
57. Which of the following is the greatest advantage of a database system?
a. Conversion to a database system is inexpensive and can be accomplished quickly.
b. Multiple occurrences of data items are useful for consistency checking.
c. Backup and recovery procedures are minimized.
d. Data redundancy can be reduced.
58. The auditor’s risk assesstment procedures should always include the following except:
a. Substantive test procedures and tests of controls
b. Inquiries of management and others within the entity
c. Observation and inspection
d. Analytical procedures
59. Controls activities relate to the following except:
a. An internal audit
c. Performance reviews
b. Segregation of duties
d. Authorization
60. In connection with the planning phase of an audit engagement, which of the following statements is always
correct?
a. An engagement should not be accepted after the clients financial year-end.
b. Final staffing decisions must be made prior to completion of the planning state.
c. Observation of inventory count should be performed year-end.
d. A portion of the audit of a continuing audit client can be performed at interim dates.
61. Which of the following audit procedures would allow an auditor to test whether receiving department
procedures are applied properly?
a. Interview receiving department personnel
b. Test a sample of receiving documents
c. Observed receiving procedures on a surprise basis
d. Review procedures manual
62. When assessing application controls, which one of the following input controls or edit checks is most likely
to be used to detect a data input error in customer account number field?
a. Validity check
c. Limit check
b. Control total
d. Hash total
63. Which of the following audit procedures is best for identifying unrecorded trade accounts payable?
a. Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine
whether they are supported by receiving reports.
b. Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether
the related payables apply to the prior period.
c. Reconciling vendor’s statements to the file of receiving reports to identify items received just prior to the
balance sheet dates.
d. Examining unusual relationships between monthly accounts payable balances and recorded cash
payments.
64. An audit client’s description that its financial statements are prepared in accordance with a particular
applicable financial reporting framework is appropriate only if:
a. The terminology used in the financial statements, including the title of each financial statement, is
appropriate.
b. The financial statements adequately disclose the significant accounting policies selected and applied.
c. The financial statements are in substantial compliance with the framework.
d. The financial statements comply with all the requirements of that framework that are effective during the
period covered by the financial statements.
65. PSA 620 (Revised and Redrafted), Using the Work of an Auditor’s Expert, deals with:
a. The auditor’s responsibilities regarding the use of an individual or organization’s work in a field of
expertise other than accounting or auditing, when that work is used to assist the auditor in obtaining
sufficient appropriate audit evidence.
b. Situation where the engagement team includes a member with expertise in a specialized area of
accounting or auditing.
A1 PASSERS REVIEW CENTER///57
c. How the auditor’s responsibility for the opinion on the entity’s financial statements will be divided
between the auditor and the auditor’s expert.
d. The auditor’s use of the work of a management’s expert.
66. PSA 620 considers the following individuals as “experts”, except:
a. An individual with expertise in complex modelling for the purpose of valuing financial instruments.
b. An individual with expertise in the valuation of assets acquired and liabilities assumed in business
combinations.
c. An individual with expertise in applying methods of accounting for deferred income tax.
d. An expert in taxation law.
67. Which statement is incorrect regarding external confirmation?
a. The auditor may use positive or negative external confirmation requests or a combination of both.
b. External confirmation of an account receivable provides strong evidence regarding the valuation of the
account as at a certain date.
c. The auditor should tailor external confirmation requests to the specific audit objective.
d. External confirmation is the process of obtaining and evaluating audit evidence through a direct
communication form a third party in response to a request for information.
68. The form and content of working papers are affected by matters such as the:
I. Nature and condition of entity’s accounting and internal control system
II. Nature and complexity of the business
III. Nature of the engagement
IV. Forms of the auditor’s report
V. Needs in particular circumstances for direction, supervision, and review of work performed by assistants.
VI. Specific audit methodology and technology used in the course of the audit.
a. All of the above
c. I,II and III only
b. All except V and VI
d. All except VI
e.
f.
g.
h.
i.
j.
69. Observation:
a. Consists of seeking information of knowledge persons, both financial and nonfinancial, throughout the
entity or outside the entity.
b. Consists of looking at a process or procedure being performed by others.
c. Is the auditor’s independent execution of procedures of controls that were originally performed as part of
the entity’s internal control.
d. Is the process of obtaining a representation of information or of an existing condition directly from a third
party.
70. An entity’s management is responsible for the preparation and fair presentation of the financial statements.
Its responsibility includes the following except:
a. Making accounting estimates that are reasonable in the circumstances.
b. Selecting and applying appropriately accounting policies.
c. Assessing the risks of material misstatement of the financial statements.
d. Designing, implementing and maintaining internal control relevant to the preparation and presentation of
financial statements.
71. Which of the following statements is correct regarding internal control system?
a. A strong control environment, ensures the effectiveness of the internal control system.
b. The internal control system is confined to those matter which relate directly to the functions to the
accounting system.
c. In the audit of financial statements, the auditor is only concerned with those policies and procedures
within the accounting and internal control systems that are relevant to the financial statements.
d. Internal control systems refers to all policies and procedures adopted by the auditor to assist in
achieving managements objectives.
72. Which of the following conditions and events may most likely indicate the existence of risks of material
misstatements?
a. Significant amount of routine or systematic transaction
b. Accounting measurements that involve simple processes
c. Having personnel with appropriate accounting and financial reporting skill
d. Constraints on the availability of capital and credit
73. The assessment of the risks of material misstatement at the financial statement level is affected by the
auditor’s understanding of the control environment. Weaknesses in the control environment ordinarily will
lead the auditor to:
A1 PASSERS REVIEW CENTER///58
a. Conduct some audit procedures at an interim dates rather than at period of time
b. Decrease the number of locations to be included in the audit scope
c. Modify the nature of audit procedure to obtain more persuasive audit evidence
d. Have more confidence in internal control, reliability of audit evidence within the entity
74. To reduce the risks associated with accepting e-mail responses to request for confirmation of accounts
receivable, an auditor most likely would:
a. Examine subsequent cash receipts for the accounts in question
b. Mail second request to the e-mail respondents
c. Request the senders to mail the original forms to the auditor
d. Consider the e-mail responses to the confirmations to be exceptions
75. What type of assurance engagement is involved when the practitioner expresses negative form of
conclusion?
a. Limited assurance engagement
c. Negative assurance engagement
b. Reasonable assurance engagement
d. Assertion-based assurance engagement
76. If adequate disclosure is not made by the entity regarding significant doubt about its ability to continue as a
going concern, the auditor should include in his report specific reference to the significant doubts as to the
ability to the entity to continue as a going concern and should be express:
a. Either an “except for” qualified opinion or an adverse opinion
b. Unmodified opinion with Emphasis of Matter paragraph
c. A disclaimer of opinion
d. A “subject to” qualified or adverse opinion
77. Who has the power to suspend or remove any member of the Board of Accountancy?
a. The Chairman of the PRC
c. The President of the Philippines
b. The Chairman of the FRSC
d. The Chairman of the AASC
78. If the auditor is unable to agree to a charge of the engagement and is not permitted to continue the original
engagement, the auditor should:
a. Express a qualified opinion
d. Insist on continuing engagement, the auditor
b. Express an adverse opinion
should
c. Withdraw from the engagement
79.
80. Which of the following statements concerning detection risk incorrect?
a. Detection risk arises partly from uncertainties that exist when the auditor does not examine 100 percent
of the population.
b. Detection risk is a function of the effectiveness of an auditing procedure and its application.
c. Detection risk arises partly because of other uncertainties that exist even if the auditor were to examine
100 percent of the population.
d. Detection risk exists independently of the audit of the financial statements.
81. The auditors understanding of the entity and its environment consist of an understanding of the following
aspects:
I. Industry, regulatory and other external factors, including the applicable financial reporting framework
II. Nature of the entity, including the entity’s selection and application of accounting policies.
III. Objectives and strategies and related business risks that may result in a material misstatement of the
financial statements.
IV. Measurement and review of the entity’s financial performance
V. Internal control
a. All of the above
b. I,II,III, & IV
c. I,II,&III
d. I,II,III,& V
82. The following matters are generally included in an auditor’s engagement letter, except:
a. The fact that because of the test nature and other inherent limitations of an audit, together with the
inherent limitations of internal control, there is an unavoidable risks that even some material
misstatements may remain undiscovered.
b. The scope of the audit.
c. Management’s responsibility for the financial statements.
d. The factors to be considered in setting preliminary judgements about materiality.
83. Which of the following would not be necessarily be a related partly transaction?
a. A purchase from another corporation that is controlled by corporation’s chief shareholder.
b. A sale to another corporation with a similar name.
c. Sale of land to the corporation by the spouse of a director.
d. A loan from the corporation to a major shareholder.
84. What type of assurance engagement is involved when the practitioner expresses a negative form of
conclusion?
a. Limited assurance engagement
b. Reasonable assurance engagement
c. Negative assurance engagement
A1 PASSERS REVIEW CENTER///59
d. Assertion-based assurance engagement
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
111.
112.
113.
114.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
115. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
116. Tel. No.: (033) 320-2728; 09106547262
117. Email Address:
[email protected]
118.
BOARD OF CERTIFIED PUBLIC ACCOUNTANT
120.
CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET B
119.
121.
122.
123.BUSINESS LAW AND TAXATION
124. INSTRUCTIONS:
1. Detach one (1) answer sheet form the bottom of your Examinee ID/Answer Sheet Set.
2. Write the subject title “BUSINESS LAW AND TAXATION” on the box provided.
3. Shade Set Box “A” on your answer sheet if your test booklet is Set A; Set Box “B” if your test booklet is Set
B.
125.
126. MULTIPLE CHOICE:
127.
1. This income of a resident is subject to the basic tax (scheduler)
a. Compensation for personal injuries and sickness
b. Interest income from a foreign currency deposit in PNB
c. Winnings from wagering transactions
d. Royalty income with suits in the Philippines
2. This income of a resident alien is subject to the basic tax(scheduler)
a. Fringe benefits given to managerial employees
b. Interest income from Philippine currency deposit in PNB
c. Winnings from PCSO and Philippine Lotto
d. Prizes from SM (P10,000), Rustan’s (P100,000) and Robinsons (P10,000) or a total of P30,000
3. The improperly accumulated earnings tax imposed on corporations is
a. Based on the net income per books after tax
b. Based on the net income per books before tax
c. Calculated to encourage corporations to pay dividends
A1 PASSERS REVIEW CENTER///60
d. 10% of excess retained earnings over the paid in capital
4. This income is subject to final tax
a. Fringe benefits received by rank and file employees
b. Cash dividend received by a non-resident alien from a domestic corporation
c. Marriage fees, baptismal offerings received by a clergyman, evangelist or religious worker for services
rendered
d. Share of a partner form the undistributed net income of a general professional partnership
5. No additional exemptions can be claimed if the dependent is
a. Recognized natural con who celebrated his 21st birthday during the taxable year
b. Legitimate daughter who got married on January 1 of the taxable year, one day after she turned 21
c. Illegitimate son, minor who died January 1 of the taxable income
d. Legally adopted daughter, 22 years old but incapable of self support due to mental defect
6. Amounts receivable by the estate of the decreased, his executor or administrator as an insurance under a
policy taken by the decedent upon his own life is
a. Excluded from gross income whether the beneficiary is revocable or irrevocable
b. Part of gross income whether the beneficiary is revocable or irrevocable
c. Excluded from gross income if the beneficiary is irrevocable
d. Part of gross income if the beneficiary is revocable
7. Acting on the information given by A, the BIR seized and confiscated smuggled goods with a FMV of
P15M. A’s reward will be subjected to a final tax of
a. P1.5M
c. P150,000
b. P1M
d. P100,000
8. The deduction allowed for the payment on health and hospitalization insurance of a qualified resident
citizen during the taxable year amounting to P300,000 a month for the months from April to December is
a. P2,700
c. P1,800
b. P2,400
d. P900
9. In 2010, NBC Corporation paid for the annual rental of a residential house used by its general manager
amounting to P136,000. The deductible amount for the rental and tax paid is
a. P100,000
c. P168,000
b. P132,000
d. P200,000
10.
11. A substantial under declaration of taxable sales, receipts or income, or of substantial overstatement of
deduction shall constitute a presumption of false or fraudulent return. This presumption is
a. Conclusive
c. Prima-facie
b. Absolute
d. irrevocable
12.
13. a created an irrevocable in favor of his 2 minor children. The trust provides that 50% of the net income
should be distributed yearly to the children, share alike, the balance to accumulate for eventual. The
taxable income of the trust is
a. P480,000
c. P230,000
b. P500,000
d. P0
14. The following expenses maybe deducted from gross income, except
a. Employer’s contribution to the Christmas party of his employees
b. Contribution to the construction of a chapel of a university that declares dividends to its stockholders
c. Premiums paid by the employer for the life insurance of his employees where the beneficiary is the
estate of the employee
d. Interest in taxes
15. Optional standard deduction
a. Is equal to 40% of the gross income from business or practice
b. Cannot be used as deduction of a chapel of a university that declares dividends to its stockholders
c. May be availed by all individual taxpayers
d. May be availed of by the taxpayer whether or not he signifies his desire to elect optional standard
16. M married to K, left Philippines in the middle of the year on July 1, 2009 to go to USA and work there as a
contract worker for two years, the following income provided as of December 31, 2009.
17.
18.
Philippines
USA
a. January 1 to June 30
P300,000
$10,000
b. July 1 to December 31
P100,000
$20,000
19.
20. His net taxable income is (1$=P56)
a. P910,000
b. P350,000
c. P810,000
d. P250,000
21.
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22. ABC has an authorized capital stock of P5,000,000 divided into 50,000 shares with a par value of P100
per share. Of the 25,000 shares subscribed, 13,000 will belong to A, because of additional subscription of
P9,500 shares, and to pay his additional subscription accounting to P950,000. A transferred to the
corporation a parcel of land that he owns. The investigation conducted by the BIR revealed that A acquired
the property for only P500,000. A’s taxable gain is
a. P450,000
c. P500,000
b. P950,000
d. P0
23.
24. A, a resident citizen, single had the following during the taxable year:
1. Contributions during the year:
a. To the Dept. Of Education- for priority activity in education
Php 100,000
b. To religious and charitable organizations
20,000
c. To victims of typhoon and earthquake
40,000
d. To the government for public purpose
20,000
25.
2. Provision for bad debts
30,000
26.
3. Accumulated depreciation on machines:
a. Beginning
80,000
b. Ending
100,000
27.
4. Allowance for bad depts:
a. Beginning
75,000
b. Ending
85,000
28.
5. During the year, A sold a machine acquired three (3) years earlier. The machine had an accumulated
depreciation of P30,000
29.
30. The net income of A before considering nos. 1 to % inclusive, amounts to Php300,000
31. The taxable income of A is
a. P30,000
b. P40,000
c. P50,000
d. P57,000
e.
32. Recovery of bad debt written off by a taxpayer:
f. No.1: P20,000 from accounts written off in a year which had a net income of P200,000 before write-off
(write-off for the year was P20,000)
g. No.2: P5,000 from accounts written off in a year which had a net loss before write off P36,000 (write-off
for the year was P5,000)
h. No.3: P10,000 from accounts written off in the year which had a net income of P8,000 before a write-off
(write-off for the year was 12,000)
i.
j. The net income from the bad debt recovery is:
a. P35,000
c. P26,000
b. P20,000
d. P30,000
33. Taxation is an inherent power because:
a. It is lifeblood of the government
b. It is about the protection and benefit theory
c. It co-exist with the existence of the state
d. It is exercised for the general welfare of the people
34. A tax is invalid in all of the following, EXCEPT:
a. Theory of taxation and its purpose are disregarded.
b. Basis of taxation is not recognized.
c. Inherent and constitutional limitations are not observed.
d. It results to double taxation.
35. The government may not do all EXCEPT TO:
a. Tax itself
b. Delegate its power to tax to private agencies
c. Impose tax arbitrarily
d. Disregard uniformly in taxation
36. The theory which most justifies the necessity of taxation:
a. Protection and benefits theory
c. Lifeblood theory
b. Revenue purpose
d. Ability to pay theory
37. 1st statement: Tax imposed outside the situs of taxation is void.
a. True, false
c. True, true
b. False, true
d. False, false
A1 PASSERS REVIEW CENTER///62
38. The President of the Philippines and the Prime Minister of Malaysia entered into an executive agreement in
respect of a loan facility to the Philippines form Malaysia whereby it was stipulated that interest on loans
granted by private Malaysian financial institutions in the Philippines shall not be subject to Philippine income
taxes. What basic, characteristic of taxation has been violated by this agreement?
a. Inherent limitation
c. Legislative in character
b. Theoretical Justice
d. Administrative feasibility
39. Which of the following statements constitutes tax avoidance?
a. Deliberate failure of a taxpayer to pay the taxes due to the government.
b. Cannotes fraud through the use of pretenses and forbidden devices to lessen or defeat taxes.
c. Punishable by law
d. Maybe contrary to the intent of the legislature but nevertheless does not violate by law.
40. In which of the following instances may a taxpayer include his income as part of gross income subject to basic
tax at his point?
a. When it involves a gain from sale of shares of stock held as a capital assets, and is not traded into the stock
exchange and the gain does not exceed P100,000.
b. When a real property held as capital asset is sold to the government or any of its political subdivision.
c. When it involves a gain from sale of shares of stock held as capital assets and is traded in the stock
exchange.
d. When the sale involves a personal property held as capital asset.
41. Which of the following statement is NOT CORRECT?
a. Income from a general professional partnership is constructively received by a partner when his share in the
net income is credited to his capital account.
b. Income from a taxable partnership is constructively received by a partner in the same taxable year that the
partnership determined its net income after tax.
c. Any distribution of dividend made to individual shareholders of a corporation shall be considered dividend
and income of the taxpayer subject to final tax in the year received.
d. Any distribution of dividend made to corporate shareholders of a corporation shall be deemed to have been
made from the most recently accumulated earnings or surplus exempt from income tax.
42. Gross income from within the Philippines of a resident alien subject to final withholding tax at source.
a. Dividend income from a resident foreign corporation.
b. Share from the net income after tax of a domestic general partnership in trade.
c. Interest income from investments in bonds.
d. Gain from sale of capital assets.
43. 1st statement- the power of taxation must first be expressly granted, either by law or by the Constitution,
before the state may valid exercise it.
44. 2nd statement- The Philippine government may subject the land where embassies of foreign
governments are located to real property taxes.
a. Both statements are false
c. 1st statement is true while 2nd is false
b. 1st statement is false while 2nd is true
d. Both statements are true
45. A, a rank and file employee, receiving the statutory minimum wage and supporting an illegitimate child had
the following during the taxable year.
a. Salary, gross
P120,000
b. Mid-year
10,000
th
c. 13 month pay
10,000
d. Christmas bonus
10,000
e. Overtime pay
10,000
f. Fringe benefits (paid in cash)
1. Rice subsidy
18,000
2. Uniform and clothing allowance
4,000
3. Actual medical benefits
10,000
4. Christmas cash gift
5,000
5. Achievement award (10 years service)
10,000
6. Monetized unused leave credits (10 days)
5,000
g. Deduction made by the employer:
1. SSS premiums contributions
2,000
2. Philhealth premiums contributions
1,800
3. Pag-ibig premiums contributions
1,200
4. SSS loans
3,600
5. Pag-ibig loans
2,400
6. premiums on health and hospitalization insurance
2,000
46.
47. The net taxable income of A is
a. P0
c. P48,000
b. P38,000
d. P58,000
48. Why tax credit is allowed to be availed of by certain taxpayer?
A1 PASSERS REVIEW CENTER///63
a. To provide incentive thus inducing these taxpayers to report income derived from abroad
b. To provide relief from the burden of taxation
c. In compliance with commitments to international agreement
d. For citizen doing business outside the Philippines to become competitive
49. One of the following compensation income of an individual taxpayer, is NOT an exclusion from gross income
a. Monetized vacation leave not exceeding 10 days a year
b. Separation pay of an employee who resigned from his employment
c. Retirements benefits of an employee who has worked for at least 10 years, who at the time of retirements is
not less than 50 years of age, and who avails of the retirement for the first time
d. De minimis benefits
50. 32-34. ABC Corporation engaged in freight and trucking business received the following in 2010
51. Share in net income of the joint venture with XYZ Corp.
P900,000
52. Dividend received from KLM Corp., a Domestic Corp.
100,000
53. Dividend received from NOP Corp., a Non-resident Corp.
10,000
54. Own net income
1,200,000
55.
56. Thenet taxable income of ABC Corp. is
a. P1,210,000
c. P2,210,000
b. P2,110,000
d. P1,200,000
57. The total amount of income of ABC Corporation subject to final tax
a. P1, 020,000
c. P1,018,000
b. P1,000,000
d. P0
58. The amount of final tax paid (due) on ABC’s income is
a. P102,000
c. P2,000
b. P102,000
d. P0
59. The following are true, except,
a. Fringe benefit tax shall be treated as a final income tax on the employee benefit withheld and paid by the
employer.
b. The gross up monetary value of the fringe benefit is the actual amount received by the employee.
c. The grossed-up monetary value of the fringe benefit shall be determined by dividing the monetary value of
the fringe benefit by the gross monetary value factor.
d. The person liable for fringe benefit tax is the employer, whether he is an individual, professional partnership
or a corporation regardless of whether the corporation is taxable or not.
60. The law requires that the object of sale must not only be licit but that the vendor must have a right to
transfer the ownership thereof:
a. At the time of perfection of the contract of
c. At the time of payment or delivery.
sale.
d. At any time after perfection.
b. At the time the thing is delivered.
61. Annulment and not reformation is the remedy if the ground is
a. Accident
c. Intimidation
b. Fraud
d. mistake
62. annulment or reformation is the remedy if the ground is (are)
a. fraud and mistake
c. fraud and inequitable conduct
b. violence and undue influence
d. intimidation and mistake
63. In 2010, A agreed to sell his land and B agreed to pay if C will pass the 2011 CPA Board Exam, C passes.
As a result:
64. Answer I- The fruits of the land for the year period will remain A
65. Answer II- B will keep the legal interest on his money
a. Both answers are true
c. Only answer II is true
b. Only answer I is true
d. Both answers are false
66. Reformation and not annulment is the remedy if the ground is
a. Inequitable conduct
c. Fraud
b. Undue influence
d. mistake
67. the defect contacts arranged according to their decreasing validity
a. a. Void, voidable, rescissible, unenforceable
c. c. Rescissible, voidable, unenforceable, void
b. b. Unenforceable, rescissible, voidable, void
d. d. Voidable, unenforceable, rescissible, void
68. A, minor solid the propertry of B his guardian without B;s authority. The property has a FLAV of PIM but
the selling price was P600,000. The contract is
a. Rescissible
c. Unenforceable
b. Voidable
d. Void
69. Using the preceding number, the remedy is
a. A can ask for annulment
c. The buyer can ask for annulment
b. The guardian can ask for annulment
d. The guardian can just ignore the contract
70. The following, except one are the requisites of cause or consideration in a contract. What is ijt?
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a. It must be mentioned in the contract
c. It must exist
b. It must not be contrary to law
d. It should not be false
71. A owes B P20,000. Thereafter B assigns the credit to C. on due date, can C. collect from B if A cannot
pay?
72. Answer No. 1 – No, if the obligation arose from a gambling debt
73. Answer No. 2 – Yes, if at time of assignment, the debt has prescribed
a. True, true
c. False, true
b. True, false
d. False, false
74. If an obligation is modified by changing its object and also changing the principal condition
a. There is mixed novation
c. There is real novation
b. The original obligation remains
d. There is personal novation
75. P appointed A as his agent orally to sell his parcel of land for P200,000. Ten days after, A sold the same
property for P300,000 to B through a public instrument executed between A and B. what is the effect and
status of the sale between A and B?
a. The sale is valid because A was authorized and it was executed in a public instrument.
b. The sale is unenforceable, because the agent went beyond the scope of his authority for selling the land
or price higher than the agreed price.
c. The sale is void and cannot be ratified by P.
d. The sale can be ratified although the appointment of A was done orally, because the sale between A and
B was in a public instrument.
76. A sold his car to B payable in ten equal monthly instalments and with a mortgage constituted on the same
property. For B’s failure to pay a month’s instalment, which statement is correct?
a. A may foreclose the mortgage on B’s car but he no longer has the right to recover the balance should it
be sold for an amount lower that what be claims from B
b. A may seek the cancellation of the sale made to B
c. A may seek fulfilment of the obligation of B to pay the entire purchase price
d. A may seek the cancellation of the sale and later of foreclose the mortgage should he find it impossible
to collect from B
77. A was obliged to pay B PIM on December 31, 2011, A paid B on December 31, 2010 believing that the
obligation was already due and demandable. How much many A recover from B on March 31, 2012?
a. Nothing
c. PIM plus legal interest for one year
b. Legal interest for one year and three months
d. Legal interest for one year
78. One of the following is considered fraudulent
a. Failure to disclose facts when there is duty to reveal them
b. The usual exaggeration in trade, when the other party had the opportunity to know the facts
c. Misinterpretation made not in good faith
d. “Caveat Emptor” or let the buyer beware
79. A owes X P500,000 payable on July 31, 2011. S who is not a party to the contract and without the consent
of A paid X the P50,000 on April 1, 2011 when the prevailing rate of interest was 12% per annum. As a
result,
a. S can ask imbursement from A in the amount of P50,000 plus 12% interest from April 1 to July 30, 2011
b. S can ask reimbursement from A in the amount of P50,000
c. S cannot ask reimbursement from A because the payment by S is without the consent and against the
will of A
d. S can ask refund from X because the payment of S was without the consent of A
80. When one of the parties to a contract is complied to give his consent by a reasonable and well-grounded
fear of an imminent and grave evil upon his person or property, or upon the person or property of his
spouse, descendants or ascendants there is
a. Violence
c. Undue influence
b. Intimidation
d. Mistake
81. The right of a co-owner to redeem the share of his co-owner that has been sold to a third person is an
instance of:
a. Conventional redemption
c. Legal redemption
b. Venta co pacto de retro
d. Pactum commissiorium
82. Which of the following statements is legally correct?
a. Specific performance of the obligation is proper only where the obligation of the debtor is to give
b. Under certain conditions, the performance of an obligation to do may be required by the creditor
c. An obligation to do is otherwise referred to as a real obligation if it really exist
d. Even is an obligation not to do, the debtor may incur in delay
83. Which of the following is not a ground for annulment of contract?
a. Incapacity to give consent
c. Lesion
b. Vitiated consent
d. Minority
A1 PASSERS REVIEW CENTER///65
84. A stimulation whereby the creditor automatically becomes the owner of the thing pledged or mortgage
upon the debtor’s default in the payment of his obligation is called
a. Conventional redemption
c. Pactum commissorium
b. Acceleration clause
d. Legal redemption
85. Which of the following statements is correct?
a. The debtor’s consent is necessary for the validity of the assignment of the credit made by the creditor to
another person
b. In case of doubt, a contract purporting to be a sale with a right to repurchase shall be construed as a
sale on instalment
c. The sale of animal suffering from contagious disease is void
d. The sale of a future thing or hope is valid even if the thing or hope not come into existence
86. When the sale of piece of land or any interest therein through agent, the authority of the agents must be
a. In a public instrument
c. Either in a public or private instrument
b. In a private instrument
d. Duty notarized
87. An agency cannot be revoked in the following cases, except when
a. A bilateral contract depends upon it
b. The agency is for a fixed term
c. It is the means of fulfilling an obligation already contracted
d. The authority is granted to a managing partner appointed through the contract of partnership
88. An agency couched in general terms comprises only
a. Acts of strict dominion
c. Acts of appropriation
b. Acts of administration
d. Acts of alienation
89. The vendor-a-recto shall be entitle to redeem the object of sale within
a. Four (4) years if no period is agreed upon
b. Thirty (30) days from notice of intention to repurchase
c. Ten (10) years if there is a period stipulated
d. The period agreed upon
90. Which one of the following is a common requisite of the remedies of possessory lien and stoppage in
transit of an unpaid seller?
a. Unreasonable delay in payment of the price
b. Goods are in transit
c. Object must be in vendor’s possession
d. Insolvency of the buyer
91. A bought a residential house and lot from B Realty for P2M giving a down payment of P200,000n and
promising to pay the balance of P1.8M in 15 years in monthly instalments of P10,000. After paying 72
instalments A defaulted in the payment of subsequent instalments. Despite the grace period given, he was
not able to make any further payments. Accordingly, B Realty cancelled the sale. How much cash
surrender value is A entitled to receive?
a. P552,000
c. P462,000
b. P396,000
d. P506,000
92. A stole the goods of Y and deposits the goods to W a warehouseman. W issued an order negotiable
warehouse receipt for the goods. Thereafter, A indorsed the note to B and B to C an innocent purchaser
for value. Which of the following statements is correct?
a. C cannot require W to deliver the goods to him
b. W, A and B are liable to C
c.C should first demand delivery from W and if W fails, C must give notice of dishonor to A and B to make
them liable
d. Only A is liable to C
93. If the thing sold had any hidden fault or defect at the time of the sale and should thereafter be lost by a
fortuitous event but the seller is not aware of the defect , how much can the vendee recover form the
vendor, if the selling price on April 19, 2011 is P100,000 and the value when lost or June 29, 2011 is
P60,000?
a. P100,000
c. P40,000
b. P60,000
d. P0
94. Using the preceding number, except that the loss is through the fault of the vendee, how much can the
vendee recover from the vendor?
a. P100,000
c.P40,000
b. P60,000
d. P0
95. X, Y and Z are joint creditors of A, B and D joint debtors in the amount of P60,000 . How much can X and
Y collect from A, B and C?
a. X and Y can collect P30,000 from A, B and C
b. X and Y can collect P40,000 from A, B and C
c.X and Y can collect P45,000 from A, B and C
A1 PASSERS REVIEW CENTER///66
d. X and Y can collect P30,000 from anyone of A, B and C
96. A and B are co-owners of a one hectare rural land. A sold his ½ share to Y. C an adjoining land owner is
interested in buying the share which A sold to Y. Which of the following is correct?
a. B can redeem what A sold to Y if Y already owns a rural land
b. B can redeem what A sold to Y even if Y does not own any rural land
c. As adjoining land-owner C has a superior right to redeem what A sold to Y
d. C can redeem what A sold to Y whether or not Y already owns rural land
97. A obtained an interest free loan of P50,000 from E evidenced by a promissory note payable in six months
after date. At maturity, A called B by phone to ask for an extension of one month and offer to pay 20%
interest on the loan. Enticed by the 20% interest, B agreed to the extension of the maturity. As a result
a. The interest is a demandable interest by virtue of the agreement
b. The interest is unenforceable
c.The loan is valid but the interest is void
d. The loan and interest are both demandable
98. Venus, Bea and Madonna are declared winner in a university-wide beauty7 pageant. Before their
coronation, Sadam divested them of their precious belongings by requiring them to sign a deed of sale at
the point of a gun. After the coronation, the three campus beauties went after Sadam for the payment of
the price. The contract is
a. Defective due to vitiated consent
b. Defective due to intimidation
c. Defective due to duress
d. Valid due to ratification
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.ANSWER KEY
111.BUSINES LAW AND TAXATION
112.
1. C
2. D
3. C
4. B
5. B
6. A
7. D
8. C
9. C
10. C
11. C
12. B
13. B
14. A
15. D
16. D
17. A
18. C
19. D
20. A
21. C
22. C
23. C
24. D
25. B
26. D
27. B
28. A
29. D
30. B
31. B
32. A
33. D
A1 PASSERS REVIEW CENTER///67
34. A
35. B
36. B
37. C
38. A
39. A
40. A
41. C
42. C
43. D
44. A
45. C
46. C
47. C
48. C
49. D
50. A
51. B
52. B
53. C
54. B
55. C
56. C
57. C
58. C
59. B
60. B
61. A
62. D
63. D
64. A
65. C
66. C
67. A
68. B
69. C
70. D
113.
114.
115.
116.
117.
118.
119. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
120. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
121. Tel. No.: (033) 320-2728; 09106547262
122. Email Address:
[email protected]
123.
124. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
125.
126. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
127.
128. MANAGEMENT ADVISORY SERVICES
129.
130.
1.
2.
3.
INSTRUCTIONS:
Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.
Write the subject title “MANAGEMENT ADVISORY SERVICES” on the box provided.
Shade Set Box “A”on your answer sheet if your test booklet is Set A; Set Box “B” if your test booklet is
set B.
131.
132. MULTIPLE CHOICES:
133.
134. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 1 TO 5:
135.
A company produces a product with the following standard costs:
136.
Materials – 2 plieces @ P5 per piece
P10
137.
Labor - 4 hours@ P8 per hour
32
138.
Variable overhead – 4 hours @ P6 per hour
24
139.
Fixed overhead* - 4 hour @ P4 per hour
16
140.
Total standard manufacturing cost per unit
P82
141.
*based on a capacity level of 5,000 units
A1 PASSERS REVIEW CENTER///68
1. If a flexible budget for 4,500 units, 5,000 units, and 5,500 units is prepared for a certain month the budgeted
costs are
142. 4,500 units
5,000 units
5,500 units
143.
a.P369,000
P410,000
P451,000
144.
b. 297,000
330,000
363,000
145.
c.
377,000
410,000
443,000
146.
d.0
410,000
0
2. Assume that X is the number of units to be produced and TBC is the total budgeted cost, the flexible budget
formula that the company may use to compute total budgeted cost for any value of X within the relevant
range is
a. TBC = 82x.
c. TBC = 80,00/
b. TBC = 86x.
d. TBC = 66x + 80,000.
3. Assume that during the month the company actually produced 4,800 units and incurred actual total
manufacturing costs of P400,000, how much is the flexible budget for the actual production?
a. P400,000
c. P393,000
b. P396,000
d. P316,000
4. How much is the total standard cost that should have been incurred for the actual production of 4,800 units?
a. P396,000
c. P393,000
b. P400,000
d. P316,000
5. How much is the total standard cost variance?
a. P3,200 unfavorable
c. P10,000 favorable
b. P6,400 unfavorable
d. P83,200 unfavorable
6. Ethical challenges for management accountants include:
a. Whether to accept gift from supplier, knowing it is an effort to indirectly influence decision
b. Whether to report unfavourable department information that may result in unfavourable
consequences for a friend
c. Whether to file a tax return this year
d. Both a and b are correct
7. Which of the following does NOTY affect the direct/indirect classification of cost?
a. The level of budgeted profit for the next year
b. The materiality of the cost in question
c. Available technology to gather information about the cost
d. The design of the operation
8.
9. Rover Company sells only two product, Product A and Product B.
10.
11.
Product A
Product B
Total
12. Selling price
P40
P50
13. Variable cost per unit
P24
P40
14. Total fixed costs
P840,000
15.
16. Rover sells two units of Product A for each unit it sells of Product B. rover faces a tax rate of 30%. Rover
desires a net after-tax income of P73,500. The breakeven point in units would be:
a. 21,750 units of Product A and 43,500 units of Product B
b. 22,500 units of Product A and 45,000 units of Product B
c. 43,500 units of Product A and 21,750 units of Product B
d. 45,000 units of Product A and 22,500 units of Product B
17. Cost behavior refers to:
a. How costs react to a change in the level of activity
b. Whether a cost is incurred in a manufacturing, merchandising, or service company
c. Classifying costs as either inventoriable or period costs
d. Whether a particular expense has been ethically incurred
18. Management accounting is considered successful when it:
a. Helps creditors evaluate the company’s performance
b. Helps managers improve their decision
c. Is accurate
d. Is relevant and reported annually
19. When 10,000 units are produced fixed cost are P14 per unit. Therefore, when 20,000 units are produced
fixed costs will:
a. Increase to P28 per unit
c. Decrease to P7 per unit
b. Remain at P14 per unit
d. Total P280,000
20. BLOF Manufacturing produces a unique valve and has the capacity to produce 50,000 valves annually.
Currently BLOF produces 40,000 valves and is thinking about increasing production to 45,000 valves next
A1 PASSERS REVIEW CENTER///69
year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this
change?
a. Total manufacturing costs will increase and unit manufacturing cost will stay the same.
b. Total manufacturing cost will increase and unit manufacturing costs will decrease.
c. Total manufacturing cost will stay the same and unit manufacturing costs will stay the same.
d. Total manufacturing cost will stay the same and unit manufacturing costs will decrease.
21. Management accounting :
a. Focuses on estimating future revenues, costs and other measures to forecast activities and their
results
b. Provides information about the company as a whole
c. Reports information that has occurred in the past that is verifiable and reliable
d. Provides information that is generally available only on a quarterly or annual basis
22. In the cost classification system used by manufacturing firms, total manufacturing costs would include all of
the following EXCEPT:
a. Direct materials costs and conversion costs
b. Direct materials cost, direct manufacturing labor cost and manufacturing overhead cost
c. Indirect materials costs, indirect manufacturing labor costs and manufacturing overhead costs
d. Prime costs and manufacturing overhead costs
23. Which of the following items is NOT an assumption of CVP analysis?
a. Total costs can be divided into a fixed component that is variable with respect to the level of output.
b. When graphed total costs curve upward.
c. The unit-selling price is known and constant
d. All revenues and costs can be added and compared without taking into account the time value of
money.
24. Matulunging Kamay is a nonprofit organization that supplies electric fans during the summer for individuals
in need/ fixed costs are P200,000. The fans cost P20.00 each. The organization has a budgeted
appropriation of P480,000. How many people can receive a fan during the summer?
a. 12,000 people
c. 24,000 people
b. 14,000 people
d. 34,000 people
25. Which of the following cost(s) are inventoried when using variable costing?
a. Direct manufacturing costs
b. Variable marketing-costs
c. Fixed manufacturing costs
d. Both a and b are correct
26.
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 18 THROUGH 21:
27.
28. Metro University is planning to hold a fundraising banquet at one of the local country clubs. It has
two options for the
29.
30.
Banquet:
31. OPTION 1: Quezon City Country Club
32.
a. fixed rental cost of P1,000
33.
b. P12 per person for food
34.
35. OPTION 2: Makati country Club
36.
a. fixed rental cost of P3,000
37.
b. a caterer who charges P8,000 person for good
38.
39. Metro University has budgeted P1,800 for administrative and marketing expenses. It plans to hire a band
which will cost another P800. Tickets are expected to be P30 per person, local business supporters will
donate any other items required for the event.
40.
41. Which option provides the least amount of risk?
a. Option one
b. Option two
c. Both options provide the same breakeven amount of risk
d. Neither option has risks
42. Which option has the lowest breakeven point?
a. Option one
b. Option two
c. Both options have the same breakeven point
d. The lowest breakeven point cannot be determined
43. Which option provides the greatest degree of operating leverage if 600 people attend?
A1 PASSERS REVIEW CENTER///70
a. Option one
b. Option two
c. Both options provide equal degrees of operating leverage
d. Operating leverage is indeterminable
44. How many persons should attend to make Metro University indifferent between options One and Two?
a. 600
c. 500
b. 200
d. 255
45. Spikey Company currently sells banana cue. During a typical month, the stand reports a profit of P9,000
with sales of P59,000 fixed costs of P21,000 and variable costs of P0.64 per banana cue.
46.
Next year, the company plans to start selling kamote cue for P3 per unit. Kamote cue will have a
variable cost of P0.72 and new equipment and personnel to produce kamote cue will increase monthly
fixed costs by P8,808. Initial sales of kamote cue should total 5,000 uits. Most of the kamote cue sales
are anticipated to co me from current banana cue purchasers, therefore, monthly sales of banana cue
are expected to decline to P20,000.
47.
After the first year of kamote cue sales the company president believes that banan cue sales
will increase to P33,750 a month and kamote cue sales will increase to 7,500 units a month.
48.
The monthly breakeven sales during the first year of kamote cue sales, assuming a constant
sales mix of 1 hotdog and 2 units of kamote cue, are:
a. 5,400 banana cue and 10,800 units of kamote cue
b. 16,200 banana cue and 21,600 units of kamote cue
c. 31,250 banana cue and 5,000units of kamote cue
d. 21,875 banana cue and 3,863 units of kamote cue
49. Activity-based costing (ABC) can eliminate cost distortion because ABC:
a. Develops cost drivers that have a cause-and-effect relationship with the activities performed
b. Establishes multiple cost pools
c. Eliminates product variation
d. Recognizes interactions between different departments in assigning support costs
50. When evaluating a make-or-buy decision, which of the following does NOT need to be considered?
a. Alternative uses of the production capacity
b. The original cost of the production equipment
c. The quality of the supplier’s product
d. The reliability of the supplier’s delivery schedule
51.
52.
53. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 25 AND 26:
54.
Shirt Company produces two product lines: T-shirt s and Sweatshirts. Product profitability is analyzed
as follows:
55.
T-SHIRTS
SWEATSHIRT
56. Production and sales volume
60,000 units
35,000 units
57. Selling price
P16.00
P29.00
58. Direct material
P 2.00
P5.00
59. Direct labor
P4.50
P7.20
60. Manufacturing overhead
P2.00
P3.00
61. Gross profit
P7.50
P13.80
62. Selling and administrative
P4.00
P7.00
63. Operating profit
P3.50
P6.80
64.
65. Shirt Company’s manager have decide to revise their current assignment of overhead costs to reflect the
following ABC cost information:
66.
67.
Activity
Activity cost
Activity-cost-driver
68.
Supervision
P100,920
Direct labor hours (DLH)
69.
Inspection
P124,000
Inspections
70.
71. Activities demanded
72.
T-SHIRTS
SWEATSHIRTS
73.
0.75 DLH/unit
1.2 DLH/unit
74.
45,000 DLHs
42,000 DLHs
75.
60,000 inspections
17,500 inspections
76.
77. Under the revised ABC system, total overhead costs allocated to Sweatshirts will be:
a. P 48,720
c. P224,920
b. P76,720
d. None of these answers are correct
A1 PASSERS REVIEW CENTER///71
78. Using an ABC system, next year’s estimates show manufacturing overhead costs will total P228,300 for
52,000 T-shirt. If all other T-shirt costs and sales prices remain the same, the profitability that can be
expected is
a. P5.41 per t-shirt
c. P1.11 per t-shirt
b. P4.39 per t-shirt
d. (P0.81) per t-shirt
79. If breakeven point is 100 units, each unit sells for P30, and fixed costs are P1,000, then on a graph the:
a. Total revenue line and the total cost line will intersect at P3,000 of revenue
b. Total cost line will be zero units sold
c. Revenue line will start at P1,000
d. All of these answers are correct
80. Put the following ABC implementation steps in order:
A. Compute the allocation rates.
B. Compute the total cost of the product.
C. Identify the products that are the cost object.
D. Select the cost allocation bases
81.
a. DACB
c. BADC
b. DBCA
d. CDAB
82. Within the relevant range, if there is a change in the level of the cost driver, then
a. Total fixed costs and total variable costs will change
b. Total fixed costs and total variable costs will remain the same
c. Total fixed costs will remain the same and total variable costs will change
d. Total fixed costs will change and total variable costs will remain the same
83. Absorption costing:
a. Expenses marketing costs as cost of goods sold
b. Treats direct manufacturing costs as a period cost
c. Includes fixed manufacturing overhead as an inventoriable cost
d. Is required for internal reports to manager
84. If the unit level of inventory increases during an accounting period, then:
a. Less operating income will be reported under absorption costing than variable costing
b. More operating income will be reported under absorption costing than variable costing
c. Operating income will be the same under absorption costing and variable costing
d. The extract effect on operating income cannot be determined
85.
86. Price inelasticity means
a. The quantity of goods demanded increases when price increases.
b. The quantity of goods demanded decreases when price decreases.
c. The quantity of goods demanded increases when price decreases.
d. The quantity of goods demanded does not change much with price changes
87. One possible means of determining the difference between operating incomes for absorption costing and
variable costing is try:
a. Subtracting sales of the previous period from sales of this period
b. Subtracting fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in
ending inventory
c. Multiplying the number of units produced by the budgeted fixed manufacturing cost rate
d. Adding fixed manufacturing costs to the production volume variance
88. Which of the following costs are never relevant in the decision-making process?
a. Fixed costs
c. Relevant costs
b. Historical costs
d. Variable costs
e.
f. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 35 AND 36:
g. Iking Corporation planned to be in operation for three years.
During the first year, 20X1, it had no sales but incurred P120,000 in variable manufacturing expenses
and P40,000 in fixed manufacturing expenses.
In 20X2, it sold half of the finished goods inventory from 20X1 for P100,000 but it had no
manufacturing costs.
In 20X3, it sold the remainder of the inventory for P120,000, had no manufacturing expenses and went
out of business.
Marketing and administrative expenses were fixed and totalled P20,000 each year.
h.
89. Under absorption costing, income for the years 20X1, 20X2 and 20X3 would be
i.
A1 PASSERS REVIEW CENTER///72
j. 20X1
20X2
20X3
k.
l. a.
(P60,000)
P20,000
P40,000
m. b.
(P20,000)
0
P20,000
n. c.
0
P20,000
P40,000
o. d.
0
P40,000
P60,000
p.
90. Under variable costing, income for the years 20X1, 20X2 and 20X3 would be
q.
r. 20X1
20X2
20X3
s. a. (P60,000)
P20,000
P40,000
t. b.
(P20,000)
0
P20,000
u. c.
0
P20,000
P40,000
v. d.
0
P40,000
P60,000
w.
91. Ajipe Company manufactures circuit boards for other firms. Management is attempting to search for ways
to reduce manufacturing labor costs and has received a proposal from a consulting company to rearrange
the production floor next year. Using the information below regarding current operations and the new
proposal, which of the following decisions should management accept?
x.
y.
Currently
Proposed
z. Required machine operators
5
4.5
aa. Material-handling workers
1.25
1.25
ab. Employee average pay
P8 per hour
P9 per hour
ac. Hours worker per employee
2,100
2,000
ad.
a. Do not change the production floor.
b. Rearrange the production floor.
c. Either, because it makes no difference to the employees.
d. It doesn’t matter because the costs incurred will remain the same.
ae.
af.
ag.
ah.
ai.
92. Bong Manufacturing is approached by a European customer to fulfil a one-time-only special order for a
product similar to one offered to domestic customers. Bong Manufacturing has excess capability. The
following per unit data apply for sales to regular customers:
aj.
ak. Variable costs:
al. Direct materials
P40
am.
Direct labor
20
an. Manufacturing support
35
ao. Marketing costs
15
ap. Fixed costs:
aq. Manufacturing support
45
ar. Marketing costs
15
as. Total cost
170
at. Markup (50)
85
au. Targeted selling price
P255
av.
aw. What is the change in operating profits if the one-time-only special order for 1,000 units is acceptance for
P180 a unit by Welch?
a. P70,000 increase in operating profits
c. P10,000 decrease in operating profits
b. P10,000 increase in operating profits
d. P75,000 decrease in operating profits
93. A variance shows a deviation of actual results from standard or budgeted results. In deciding whether to
investigate a variance or not, management may consider the following factors, except
a. The amount of the variance and the cost of investigation
b. Whether the variance is favourable or unfavourable
c. The possibility that investigation will eliminate future occurrences of the variance
d. The trend of the variances over overtime.
94. Tricolor Company has the following information for the current year:
95.
A1 PASSERS REVIEW CENTER///73
96. Beginning fixed manufacturing overhead in inventory
P95,000
97. Fixed manufacturing overhead in production
375,000
98. Ending fixed manufacturing overhead in inventory
25,000
99.
100. Beginning variable manufacturing overhead in inventory
P10,000
101. Fixed manufacturing overhead in production
50,000
102. Ending variable manufacturing overhead in inventory
15,000
103.
104. What is the difference between operating incomes under absorption costing and variable costing?
a. P70,000
c. P40,000
b. P50,000
d. P5,000
e.
f. THE FOLLOWING INFORMATION APPLIES TO QUESTION 41 AND 42:
g. Tagumpay Engine Company manufactures part TE456 used in several of its engine models. Monthly
production costs for 1,000 units are as follows:
h. Direct materials
P 40,000
i. Direct labor
10,000
j. Variable overhead costs
30,000
k. Fixed overhead costs
20,000
l. Total costs
P100,000
m.
n. It is estimated that 10% of the fixed overhead costs assigned to TES456 will no longer be incurred if the
company purchases TES456 from the outside supplier.tagumpay Engine Company has the option of
purchasing the part from an outside supplier at P85 per unit.
105. If Tagumpay Engine Company purchases 1,000 TES456 parts from the outside supplier per month then its
monthly operating income will:
a. Increase by P2,000
c. Decrease by P3,000
b. Increase by P80,000
d. Decrease by P85,000
106. The maximum price that Tagumapy Engine Company should be willing to pay the outside supplier is:
a. P80 per TES456 part
c. P98 per TES456 part
b. P82 per TES456 part
d. P100 per TES456 part
107. Opportunity cost(s):
a. of a resource with excess capacity is zero
b. should be maximized by organizations
c. are recorded an expense in the accounting records
d. are most important to financial accountants
108. Maligaya Company is considering eliminating Model AE2 from its camera line because of losses over
the past quarter. The past three months of information for Model AE2 are Summarized below:
109.
110. Sales (1000 units)
P300,000
111. Manufacturing costs:
112. Direct materials
150,000
113. Direct labor (P15 per hour)
60,000
114. Overhead
100,000
115. Operating loss
P10,000
116.
Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment from
117.
model AE2 that has no resale value.
118.
119.
If Model AE2 is dropped from the product line, operating income will:
a. Increase by P10,000
c. Increase by P30,000
b. Decrease by P20,000
d. Decrease by P10,000
120. It is a sequence of economic activity in a nation’s economy that is typically characterized by four phasesrecession, recovery, growth and decline that repeat themselves over time.
a. Business cycle
c. Accounting cycle
b. Operating cycle
d. Life cycle
121. In a standard costing system, actual costs are compared with standard costs. The difference or variance
determined, and responsibility for such variance is assigned or identified to a particular person or
department, in order to
a. Determine who is at fact and render the appropriate punishment
b. Be able to set the correct selling price of the product
c. Use the knowledge about the variance to promote learning and continuous improvement in the
manufacturing operations
d. Trace the variances to the proper inventory accounts so that they may be valued at actual costs.
A1 PASSERS REVIEW CENTER///74
122. For January, the cost components of a picture frame include P0.35 for the glass, P.65 for the wooden
frame, and P0.80 for assembly. The assembly desk and tools cost P400, 1,000 frames are expected to be
produced in the coming year. What cost function best represents these costs?
a. Y= 1.80 + 400X
c. Y= 2.20 + 1,000X
b. Y= 400 + 1.80X
d. Y= 1.00 + 400X
123. An Enterprise Resource Planning System can best be described as:
a. A collection of programs that use a variety of unconnected databases.
b. A single database that collects data and feeds it into applications that support each of the company’s
business activities, such as purchases, production, distribution, and sales
c. A database that is primarily used by a purchasing department to department to determine the correct
amount of a particular supply item to purchase
d. A sophisticated means of linking two or more companies to failure their planning processes
124. In economics, it refers to a rise in the general level of price of goods And services in an economy over a
period of time.
a. Inflation
c. Deflation
b. Recession
d. Depression
125. SML Company manufactures three sizes of kitchen appliances: small, medium, and large.
126. Product information is provided below:
127.
128.
Small
Medium
Large
129. Unit selling price
P150
P250
P500
130. Unit costs:
131.
Variable manufacturing
(60)
(120)
(200)
132.
Fixed manufacturing
(40)
(50)
(120)
133.
Variable selling and administrative
(30)
(30)
(30)
134. Unit profit
P20
P50
P150
135. Demand in units
100
120
100
136. Machine-hour per unit
20
40
100
137.
138. The maximum machine-hours available are 6,000 per week.
139. How many of each product should be produced per month using the short-run profit maximizing
strategy?
140.
Small
Medium
Large
141.
a. 0
120
12
142.
b. 100
0
40
143.
c.
100
100
0
144.
d. 100
20
40
145.
146. ANSWER KEY
147. MANAGEMENT ADVISORY
SERVICES
148.
1. C
2. D
3. B
4. C
5. B
6. D
7. C
8. D
9. C
10. B
11. C
12. B
13. A
14. C
15. B
A1 PASSERS REVIEW CENTER///75
16. C
17. A
18. B
19.
20. B
21. C
22. D
23. B
24. B
25. D
26. D
27. C
28. D
29. C
30. C
31. B
32. D
33. B
34. B
35. B
36. A
37. B
38. A
39. A
40. A
41. C
42. B
43. A
44. B
45. A
46. C
47. B
48. B
49. A
50. B
51.
52.
53.
54. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
55. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
56. Tel. No.: (033) 320-2728; 09106547262
57. Email Address:
[email protected]
58.
59. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
60.
61. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
62.
63.
AUDITING PROBLEMS
64. INSTRUCTIONS:
1. Detach one (1) answer sheet form the bottom of your Examinee ID/Answer Sheet Set.
2. Write the subject title “BUSINESS LAW AND TAXATION” on the box provided.
3. Shade Set Box “A” on your answer sheet if your test booklet is Set A; Set Box “B” if your test booklet is Set B.
65. ____________________________________________________________________________________________
66. MULTIPLE CHOICES:
67.
68. PROBLEM NO. 1
A1 PASSERS REVIEW CENTER///76
69. During 2010 and 2011, SUMAN CORPORATION experienced transactions involving property, plant,
and equipment (PPE). A number of errors were made in recording some of these transactions. For each
item listed below, determine the effect of the error (if any) by using the following codes:
70.
71. O = Overstates;
U = understate;
NE = No Effect or if errors was made
72.
73.
2010
2011
74.
Net Book
Net Book
75.
Value of
2010
Value of
2011
76.
PPE at
Net
PPE at
Net
77. Transaction
12/31/10
Income
12/31/11
Income
78.
1. The cost of installing a new computer system in 2010 was not recorded in 2010. It was charged to
expense in 2011.
79. A.
U
U
U
U
80. B.
U
O
U
U
81. C.
U
O
U
O
82. D.
U
U
O
U
2. In clerical workers were trained to use the new computer system at a cost of P30,000, which was,
erroneously capitalized. The cost is to be written off over the expected life of the new computer system.
83. A.
NE
NE
O
O
84. B.
NE
NE
U
U
85. C.
NE
NE
O
U
86. D.
NE
NE
U
O
87.
88.
2010
2011
89.
Net Book
Net Book
90.
Value of
2010
Value of
2011
91.
PPE at
Net
PPE at
Net
92. Transaction
12/31/10
Income
12/31/11
Income
93.
3. Interest cost qualifying for capitalization in2010 was charged to interest expense in 2010.
94. A.
NE
U
NE
O
95. B.
U
U
U
U
96. C.
U
U
U
O
97. D.
U
O
U
U
4. In 2010 land was bought for an employee parking lot. The P2, 000 title search fee was charged to
expense in 2010.
98. A.
U
U
U
O
99. B.
U
O
U
O
100. C.
U
NE
U
NE
101. D.
U
U
U
NE
5. The cost of moving several manufacturing facilities from metropolitan locations to suburban areas in
2010 was capitalized. The cost was written off over a 10-year period beginning in 2010.
102. A.
O
U
O
U
103. B.
U
O
U
O
104. C.
O
O
O
U
105. D.
NE
NE
NE
NE
106.
107. PROBLEM NO. 2
108.
The shareholders’ equity section of BENSON CORPORATION’s balance sheet
as of December 31,
109.
2010 is a follows:
110.
111.
Common stock, P5 par value; authorized, 2,000,000 shares;
112.
Issued, 400,000 shares
P2,000,000
113.
Paid-in capital in excess of par
850,000
114.
Retained earnings
3,000,000
115.
P5,850,000
116.
117.
The following events occurred during 2011:
118.
1. Jan. 5
10,000 shares of authorized and unissued common stock were sold for P8 per
A1 PASSERS REVIEW CENTER///77
119.
120.
2. Jan. 16
121.
122.
3. Feb. 10
123.
124.
4. March 1
share.
Declared a cash dividend of 20 centavos per share payable February 15 to shareholders of record o February 5.
20,000 shares of shares of authorized and unissued common stock were sold for
P12 per share.
a 30% stock dividend was declared and issued. Market value per share is
currently P15.
125.
5. April 1
A two-for-one split was carried out. The par value of the stock was to be
reduced to P2.50 per share. Market value on March 31 was P18 per share.
126.
6. July 1
A 15% stock dividend was declared and issued. Market value is currently P10 per
share.
127.
7. Aug. 1`
A cash dividend of 20 centavos per share was declared, payable September 1 to
shareholders of record on august 21.
128.
129.
Based on the preceding information, determine the balances of the following at
December 31,
2011.
130.
6. Number of common shares issued and outstanding
A. 642.850
C. 1,285,700
B. 1,228,000
D. 989,000
7. Common stock
A. P2,000,000
C. P6,428,500
B. P3,214,250
D. P2,795,000
8. Paid in capital in excess of par
A. P2,277,750
C. P3,567,750
B. P1,020,000
D. P2,310,000
9. Retained earnings
A. P596,000
C. P338,860
B. P1,853,750
D. P306,610
10. A feature common to both stock splits and stock dividends is
A. A transfer to earned capital of a corporation.
B. That there is no effect on total stockholders’equity.
C. An increase in total liabilities of a corporation.
D. A reduction in the contributed capital of a corporation.
11.
12.
13.
14.
15. PROBLEM N0. 3
16.
17. LYKA COMPANY’S net incomes for the past three years are presented below:
18.
19.
2012
2011
2010
20.
P480,00
P450,00
P360,00
21.
22. During the 2012 year-end the following items come to your attention:
23.
1. Lyka bought at truck on January 1, 2009 for P196,000 with a P16,000 estimated salvage value
and a six-year life. the company debited an expense account and credited cash on the
purchase date for the entire cost of the asset. (Straight-line method)
2. During 2012, Lyka changed from the straight-line method of depredating its cement plant to the
double-declining balance method. The following computations present depreciation on both
bases:
24.
2012
2011
2010
25.
Straight-line
36,000
36,000
36,000
26.
Double-declining
46,080
57,600
72,000
27.
A1 PASSERS REVIEW CENTER///78
28.
The net income for 2012 was computed using the double-declining balance method, on
the January 1,2012 book value, over the useful life life remaining at that time. The depreciation
recorded in 2012 was P72,000.
3. Lyka, in reviewing its provision for uncollectibles during 2012, has determined that 1% is the
appropriate amount of bad debt expense to be charged to operations. the company had used ½
of 1% as its rate in 2011 and 2012 when the expense had been P18,000 and P12,000,
respectively. The company recorded bad debt expense under the new rate for 2012. The
company would have recorded P6,000 less of bad debt expense on December 31, 2012 under
the old rate.
29.
30. What is the entry necessary to correct the blocks for the transaction in part 1 of the problem,
assuming that the books for the current year are still open?
31. A.
Equipment
196,000
32.
Depreciation expense
30,000
33.
Accumulated depreciation
120,000
34.
Retained earnings
106,000
35. B.
Equipment
196,000
36.
Accumulated depreciation
90,000
37.
Retained earnings
106,000
38. C.
Equipment
166,000
39.
Accumulated depreciation
30,000
40.
Retained earnings
136,000
41. D.
Equipment
196,000
42.
Depreciation expense
30,000
43.
Accumulated depreciation
60,000
44.
Retained earnings
166,000
45. What is the correct net income to be reported in 2010?
A. P330,000
C. P360,000
B. P336,000
D. P294,000
46. What is the correct net income to be reported in 2011?
A. P393,400
C. P441,600
B. P420,000
D. P480,000
47. What is the correct net income to be reported in 2012?
A. P510,000
C. P444,600
B. P428,400
D. P450,000
48. Which of the following is (are) the proper time period(s) to record the effects of a change in
accounting estimate?
A. Current period and prospectively
B. Current period and retrospectively
C. Retrospectively only
D. Current period only
49.
50.
51. PROBLEM NO. 4
52.
In making the first audit of the Delivery Equipment account of DELTA
CORPORATION as
53.
of December 31, 2011, you encounter the following facts.
54.
55. Delivery Equipment
56.
Date
Particulars
Debit
Credit
57.
1/1/09
Truck 1, 2, 3 and 4
P3,200,000
58.
59.
60.
61.
62.
3/15/10
7/1/10
7/10/10
Replacement of Truck 3 tires
Truck 5
Reconditioning of Truck 4, which was
25,000
800,000
5,000
damaged In a collision
9/1/10
Insurance recovery on Truck 4 accident
P33,000
10/1/10
Sale of Truck 2
600,000
4/1/11
Truck 6
1,000,000
150,000
A1 PASSERS REVIEW CENTER///79
63.
5/2/11
Repainting of Truck 4
64.
6/30/11Truck 7
27,000
720,000
65.
12/1/11Cash received on lease of Truck 7
22,000
66.
67. Accumulated Depreciation
68.
Date
Particulars
Debit
Credit
69.
12/31/09
Depreciation expense
P300,000
70.
12/31/10
Depreciation expense
300,000
71.
12/31/11
Depreciation expense
300,000
72.
73. Additional Information:
1. On July 1, 2010, Truck 3 was traded in for a new truck, Truck 5, costing P850,000; the setting party
allowed a P50,000 trade in value for the old truck.
2. On April 1, 2011, Truck 6 was purchased for P1,000,000; Truck 1 and cash of P850,000 being given
for the new truck.
3. You are instructed y the senior in-charge of the audit to accept the depreciation rate of 20% by unit
basis.
4. Unit cost of Trucks 1 to 4 is at P800,000
74. What is the correct cost of Truck No. 5?
A. P850,000
C. P900,000
B. P800,000
D. P560,000
75. What is the correct depreciation expense for 2010?
A. P725,000
C. P605,000
B. P305,000
D. P600,000
76. What is the correct depreciation expense for 2011?
A. P552,000
C. P712,000
B. P592,000
D. P300,000
77. The entry to correct the depreciation charges for the years 2009 through 2011 should include a credit to
Accumulated Depreciation of
A. P645,000
C. P900,000
B. P937,000
D. P292,000
78. The balance of the Delivery Equipment account at December 31, 2011 should be
A. P5,770,000
C. P4,170,000
B. P3,320,000
D. P3,370,00
E.
F. PROBLEM NO. 5
G.
In connection with your audit of the BRAHE CORPORATION’s financial statements for the
year ended December 31, 2011, you noted the following items relative to the company’s intangible
assets.
A patent was purchased from Tycho Company for P6,000,000 on January 2, 2010. Brahe estimated that the
remaining useful life of the patent to be 10 years. The patent was carried in Tycho’s accounting records at
P4,000,000 when Tycho sold it to Brahe.
During 2011, a franchise was purchased from Nova Company for P1,440,000. In addition, 5% of the revenue
from the franchise must be paid to Nove. Revenue from the franchise for 2011 was P7,500,000. Brahe
estimates the useful life of the franchise to be 10 years and takes full year’s amortization in the year of
purchase.
Brahe incurred research and development costs of P1,299,000 in 2011. Brahe estimates that these costs will
be recouped by December 31, 2014.
On January 1, 2011, Brahe, because of the recent events in the industry, estimates that the remaining life of
the patent purchased on January 2, 2010, is only 5 years from January 1, 2011.
H.
I. Based on the above and the result of your audit, determine the following:
J.
79. Amortization of patent for 2011
A. P1,080,000
C. P600,000
B. P1,200,000
D. P1,350,000
80. Carrying amount of patent as of December 31, 2011
A. P4,320,000
C. P3,600,000
B. P4,050,000
D. P4,800,000
A1 PASSERS REVIEW CENTER///80
81. A.
Carrying
P4,896,000
amount of intangible assets as of December 31, 2011
C. P5,616,000
B. P5,346,000
D. P6,915,000
82. Total amount that should be charged against income in 2011
A. P3,168,000
C. P3,018,000
B. P2,898,000
D. P1,599,000
83. The most effective means for the auditor to determine whether a recorded intangible asset
possesses the characteristics of an asset is to
A. Inquire as to the status of patent application
B. Analyze research and development expenditures to determine that only those expenditures
possessing future economic benefit have been capitalized.
C. Evaluate the future revenue-producing capacity of the intangible asset.
D. Vouch the purchase by reference to underlying documentation
84.
85. PROBLEM NO. 6
86.
SUMPAK CORP. Began operations in 2006. On July 15, 2011, a fire broke out in the
company’s
87.
warehouse destroying all inventory and many accounting records. The following
information
88.
was assembled from the microfilmed records. All sales and purchases are on
account.
89.
90.
The following is a summary of prior year’s sales and gross profit on sales:
91.
2008
2009
2010
92.
93.
Sales
P1,252,000
P1,410,000
P1,360,000
94.
Gross profit
375,600
366,600
462,400
95.
96. What is the company’s average gross profit ratio based on its prior years ‘sales?
A. 26%
C. 30%
B. 34%
D. 29%
97. What is the company's total sales for the period January 1 through July 15 of the current year?
A. P1,504,200
C. P1,765,380
B. P1,511,000
D. 1,768,780
98. What is the company’s total purchases for the period January 1 through 15 of the current year?
A. P905,580
C. P1,044,420
B. P912,170
D. P1,009,670
99. What is the company’s estimated inventory on July 15, 2011, before the fire?
A. P186,605
C. P146,930
B. P244,430
D. P279,180
100. What is the inventory fire loss?
A. P146,930
C. P132,250
B. P186,605
D. P112,180
E.
F. PROBLEM NO. 7
G.
H. On January 1, 201, ODAHU, INC. issued P100,000, 10 year bonds when the market rate of
interest was 8%. Interest is payable on June 30 and December 31. The following financial
information is available.
I.
Sale
P300,000
J.
Cost of sales
180,000
K.
Gross income
120,000
L.
Interest expense
?
M.
Depreciation expense
(14,500)
N.
Other expense
(82,000)
O.
Net Income
?
P.
Q.
R.
S.
Dec.31, 2011
Jan.1.2011
T.
Account receivable
P55,000
P48,000
U.
Inventory
87,000
93,000
V.
Accounts payable
60,000
58,000
A1 PASSERS REVIEW CENTER///81
W.
X. All purchases of inventory are on account. Other expenses are paid for in cash.
101. What is the carrying value of the bonds on December 31, 2011?
A. P112,661
C. P100,000
B. P113,592
D. P112,233
102. What is the interest expense for 2010?
A. P8,641
C. P9,069
B. P10,000
D. P4,544
103. How much was paid for inventory purchases?
A. P172,000
C. P184,000
B. P186,000
D. P174,000
104. What is Idahu’s net income for 2010?
A. P13,500
C. P23,000
B. P14,431
D. P14,859
105. How much was received from customers in 2010?
A. P283,000
B. P245,000
C. P293,000
D. P307,000
106.
107. PROBLEM NO. 8
108. The inventory control account balance of SAMATHA CORP. At June 30, 2011 was P221,020 using
the perpetual inventory system. A physical count conducted on that day found inventory on hand worth
P220,200. Net realizable value for each inventory item held for sale exceeded cost. An investigation of
the discrepancy revealed the following:
a. Goods worth P6,600 held on consignment for Port Company had been included in the physical count.
b. Goods costing P1,200 were purchased on credit from Rome, Inc. on June 27, 2011 on FOB shipping
point terms. The goods were shipped on June 28, 2011 but, as they had not arrived by June 30, 2011,
were not included in the physical count. The purchase invoice was received and processed on June 30,
2011.
c. Goods costing P2,400 were sold on credit to Arriola Co. For P3,900 on June 28, 2011 on FOB
destination terms. The goods were still in transit on June 30, 2011. The sale invoice was processed on
June 29, 2011.
d. Goods costing P2,730 were purchased on credit (FOB destination) from Sanmig Co. On June 28, 2011.
The goods were received on June 29,2011 and included in the physical count. The purchase involve
was received on July 2, 2011.
e. On June 30, 2011, Samantha sold goods costing P6,300 on credit (FOB shipping point) to Pizza Co. For
P9,600. The goods were dispatched from the warehouse on June 30, 2011 but the sales invoice had not
been processed at that date.
f. Damaged inventory items valued at P2,650 were discovered during the physical count. These items
were still recorded on June 30, 2011 but were omitted from the physical count.
109.
110.
Based on the preceding information, answer the following:
111.
The adjusting entry for the consigned goods included in the physical count (Item a) should include a
112.
A.
Debt to inventory for
114.
C.
Credit to purchases for
P6,600.
P6,600.
113.
B.
Credit to inventory for
115.
D.
No adjusting entry is
P6,600.
necessary.
116.
The error described in item e will
117.
A.
Overstate gross profit
119.
C.
Overstate
sales
by P3,300.
revenue by P9,600.
118.
B.
Understate gross
120.
D.
Understate inventory
profit by P3,300.
by P6,300
121. The inventory control accounting balance should be increase be increased (decreased) by
122.
A.
(P3,820)
124.
C.
(P3,000)
123.
B.
P3,820
125.
D.
P3,000
126. If the perpetual inventory records show lower quantities of inventory than the physical count, an
explanation of the difference might be unrecorded
127.
A.
Purchases.
129.
C.
Sales discounts.
128.
B.
Sales.
130.
D. Purchase discounts.
131. A client maintains perpetual inventory record in both quantities and pesos. If the assessed level of
control risk is high, an auditor will probably
132.
A.
Increase the extent of tests of controls relevant to the inventory cycle.
133.
B.
Request the client to schedule the physical inventory count at the end of the year.
134.
C.
Apply gross profit tests to ascertain the reasonableness of the physical counts.
A1 PASSERS REVIEW CENTER///82
135.
D.
Insist that the client perform physical counts of inventory items several times during
the year.
136.
137. PROBLEM NO. 9
138.
CALACHUCHI CORP.’s accounts receivable subsidiary ledger shows the
following information:
139.
140.
ACCOUNT BALANCE
INVOICE
141.
COSTUMER
DEC. 31,2011
DATE
AMOUNT
142.
Aruy, Inc.
P35,180
12/06/11
P14,000
143.
11/29/11
21,180
144.
145.
Naku Co.
20,920
09/27/11
12,000
146.
08/20/11
9,920
147.
148.
Syak Corp.
30,600
12/08/11
20,000
149.
10/25/11
10,000
150.
151.
Trip Co.
45,140
11/17/11
23,140
152.
10/09/11
22,000
153.
154.
Uy Co.
31,600
12/12/11
19,200
155.
12/02/11
12,400
156.
157.
Xak Corp.
17,400
09/12/11
17,400
158.
159.
The estimated bad debt rates below are based or Calachuchi Corp.’s
receivable collection
160.
experience.
161.
162.
Age of Account
Rate
163.
0 – 30 days
1%
164.
31 – 60 days
1.5%
165.
61 – 90 days
3%
166.
91 – 120 days
10%
167.
Over 120 days
50%
168.
169. The allowance for bad debts account had a debt balance of P5,500 on December 31, 2011,
170.
before adjustment.
171. The company’s accounts receivable under “61-90 days” category should be
172.
A.
P32,600
174.
C.
P44,600
173.
B.
P44,320
175.
D.
P42,000
176. The company’s accounts receivable under “91-129 days” category should be
177.
A.
P38,320
179.
C.
P29,400
178.
B.
P40,000
180.
D.
P12,000
181. The allowance for bad debts to be reported on the statement of financial position at December
31, 2011, is
182.
A.
P9,699
184.
C.
P4,199
183.
B.
P15,199
185.
D.
5,500
A1 PASSERS REVIEW CENTER///83
186. What
account?
187.
188.
189.
190.
191.
192.
entry should be made on December 31, 2011, to adjust the allowance for bad debts
A.
B.
C.
Bad debt expense
Allowance for bad debt
Bad debt expense
Allowance for bad debt
Allowance for bad debt
Bad debt expense
15,199
15,199
4,199
4,199
5,500
5,500
193.
D.
Bad debt expense
9,699
194.
Allowance for bad debt
9,699
195.
196. What is the net realizable value of accounts at December 31, 2011?
197.
A.
P165,641
199.
C.
P196,039
198.
B.
P171,141
200.
D.
P186,340
201.
202. PROBLEM NO. 10
203.
TANYA COMPANY was organized on January 2, 2010, with authorized share
capital of 50,000
204.
shares of 10%, P200 par value preference and 200,000 shares of P10 par
value ordinary. During
205.
the company’s first two years of operations, the following equity transaction
occurred.
206.
207.
2010
208.
Jan. 2
Sold 10,000 ordinary shares at P16.
209.
2
Sold 3,000 ordinary shares at P216.
210.
211.
Mar. 2
Sold ordinary shares as follows: 10,800 shares at P22;
2,700 shares at P25.
212.
213.
July 10
Acquired a nearby piece of land, appraised at P400,000,
for 600 preference
214.
share and 27,000 ordinary shares.
(Preference share capital was recorded at
215.
P216, the balance being assigned to
ordinary shares).
216.
Dec. 16
Declared the regular preference share dividend and a
P1.50 ordinary share
217.
dividend.
218.
28
Paid the dividends declared on December 16.
219.
31
The income summary account showed a credit balance of
P450,000
220.
221.
2011
222.
Feb. 27
Reacquired 12,000 ordinary shares at P19.
223.
June 17
Resold 10,000 treasury shares at P23.
224.
July 31
Resold all of the remaining treasury shares at P18.
225.
Sep. 30
Sold 11,000 additional ordinary shares at P21.
226.
Dec. 16
Declared the regular preference share dividend and an
P0.80 ordinary share
227.
dividend.
228.
28
Paid the dividends declared on Dec.16.
229.
31
The income summary account showed a credit balance of
P425,000.
230.
231.
Based on the above information, determine the balance of the following:
232.
233. Preference share capital
234.
A.
P729,600
236.
C.
P720,000
235.
B.
P777,600
237.
D.
P548,000
238. Ordinary share capital
239.
A.
P615,400
240.
B.
P615,000
A1 PASSERS REVIEW CENTER///84
241.
C.
P577,000
242.
D.
P966,500
243. Total share premium
244.
A.
P95,600
246.
C.
P449,100
245.
B.
P447,100
247.
D.
409,100
248. Inappropriate retained earnings
249.
A.
P875,000
251.
C.
P606,050
250.
B.
P416,000
252.
D.
P604,0
253. Total shareholders’ equity
254.
A. 2,388,150
256.
C. 2,376,630
255.
B. 1,892,100
257.
D. 2,498,150
258.
259. PROBLEM NO. 11
260.
At the beginning of year 1, an entity grants to a senior executive 30,000 share options. The grant is
conditional upon the executive remaining in the entity’s employ until the end of year 3.
261. The share options can be exercised if the entity’s share price increases from P20 at the beginning of
year 1 to above P30 at the end of year 3. If the share price is above P30 at the end of year 3, the share
options can be exercised at any time during the next five years, i.e., by the end of year 8.
262. The entity estimates the fair value of the share options on grant date to be P5 per option. This
estimate takes into account the following market condition:
The possibility that the share price will exceed P30 at the end of year 3, i.e., the share options become
exercisable; and
The possibility that the share price will not exceed P30 at the end of year 3, i.e., the share options will be
forfeited.
263. The following actual events occurred in years 1 to 3:
264. YEAR 1
The share price has increased to P24
The entity’s estimate the fair value of the options is P4 at the end of year 1. This taxes into account whether
the market condition will be satisfied by the end of year 3.
265. YEAR 2
The share price has decreased to P22. However, the entity remains optimistic that the share price target will
be met by the end of year 3.
The estimated fair value of the share option is P3. Again, this estimate takes into account the market
condition noted above.
266. YEAR 3
The share price only reaches P28 by the end of year 3.
The estimated value of the share option is zero, as the market condition has not been satisfied.
267. Based on the preceding information, determine the following:
268. Compensation expense for year 1
A.
P 50, 000
P 60, 000
B.
P 40, 000
P30, 000
E. 52. Compensation expense for year 2
A. P 50, 000
C. P 60, 000
B. P 40, 000
D. P 30, 000
E. 53. Compensation expense for year 3
A. P 50, 000
C. P 40, 000
B. P 0
D. P30, 000
E. 54. Share options outstanding at the end of year 2.
A. P 70, 000
C. P 90, 000
B. P 80, 000
D. P 100, 000
E. 55. Cumulative compensation expense for the three year period.
A. P 0
C. P 100, 000
B. P 150, 000
D. P 70, 000
E.
F. PROBLEM NO. 12
G. MARUJA CO. Was organized on January 2, 2011. The following items are from the company’s trial
balance on December 31, 2011.
H. Ordinary share capital
P 1,500, 000
I. Share premium
150, 000
J. Merchandise inventory
69, 000
K. Land
1,000, 000
L. Building
1,400, 000
M. Furniture and fixtures
367, 000
N. Accounts receivable
165, 400
O. Accounts payable
389, 650
A1 PASSERS REVIEW CENTER///85
P. Notes payable bank
500, 000
Q. Sales
6, 235, 200
R. Operating expenses (Including depreciation of 400,000)
1, 005, 150
S.
T. Additional information as is follows:
U. 1. Deposits in transits, December 31
P384, 660
V. 2. Service charge for December
2000
W.3. Outstanding checks, December 31
475, 000
X. 4. Bank balance, December 31
892, 000
Y. 5. MARUJA CO.’ S mark up on sales 30%
Z.
AA. Determine the following:
AB. 56. Total collections from sales
A. P 6,114,967
C. P 6,235,200
B. P 4,119,240
D. P 6,069,800
E. 57. Total payments for merchandise purchases
A. P 3,905,990
C. P 4,043,990
B. P 4,649,140
D. P 5,914,550
E. 58. Total cash receipts per books
A. P 7,819,800
C. P 8,219,800
B. P 8,169,800
D. P 8,069,800
E. 59. Total cash disbursements per books
A. P 7,816,140
C. P 8,021,290
B. P 7,416,140
D. P 7,278,140
E. 60. Cash balance per books on December 31
A. P 653,660
B. P 803,660
C. P 1,203,660
D. P 707,060
F.
G.
H.
I.
J. ANSWER KEY
K. AUDITING PROBLEMS
L.
1.A
2.A
3.C
4.A
5.D
6.C
7.B
8.A
9.C
10. B
11. A
12. A
13. B
14. B
15. A
16. A
17. C
18. B
19. B
20. B
21. A
22. A
23. C
24. A
25. C
26. C
27. A
28. C
29. C
30. A
A1 PASSERS REVIEW CENTER///86
31. A
32. C
33. A
34. B
35. C
36. B
37. A
38. A
39. C
40. A
41. A
42. C
43. A
44. B
45. B
46. C
47. B
48. B
49. C
50. A
51. A
52. A
53. A
54. D
55. B
56. D
57. C
58. C
59. A
60. B
61.
62.
63.
64.
65.
66.
67.
68.
69. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
70. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
71. Tel. No.: (033) 320-2728; 09106547262
72. Email Address:
[email protected]
73.
74. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
75.
76. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
77.
78.
PRACTICAL ACCOUNTING 1
79.
80. INSTRUCTIONS:
81.
82. 1. Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.
83. 2. Write the subject title “PRACTICAL ACCOUNTING I “on the box provided
84. 3. Shade Set Box ‘’A” on your answer sheet if your test booklet is Set A; Set box “B” if your if your test
booklet is Set B.
85. __________________________________________________________________________________
86. MULITIPLE CHOICE:
87.
88. 1. On December 31, 2011, the current receivable of Marty Company consisted of the following:
89.
90.
Trade accounts receivable
1,200,000
91.
Allowance for uncollectible accounts
(100,000)
92.
Claim against shipper for goods lost in transit (November 2011)
50,000
93.
Selling price of unsold goods sent by Marty on consignment at 125%
94.
Of cost (not included on marty’s ending inventory)
300,000
95.
Security deposit on lease of warehouse used for storing some inventories
200,000
96.
97. What is the correct total of current net receivables on December 31, 2011?
A1 PASSERS REVIEW CENTER///87
a. 1,150,000
c.1,350,000
b. 1,390,000
d. 1,650,000
e. 2. Farmville Company had sales of P2, 500,000 during December 2011. Experience has shown that
merchandise equalling 6% of sales will be returned within thirty days and an additional 4% will be
returned within ninety days. Returned merchandise is readily resalable. In addition, merchandise
equalling 15% of sales will be exchanged for merchandise of equal or greater value. What amount
should Farmville will report for net sales in its statement of comprehensive income for the month of
December 2011?
a. 2,125,000
c. 2,250,000
b. 1,875,000
d. 2,025,000
e. 3. On December 1, 2011, Mandela Company gave Mosgov Company a P2, 000,000, 12% loan. Mosgov
received proceeds of P1, 940,000 after the deduction of a P60, 000 non-refundable loan origination fee.
Principal and interest are due sixty monthly instalments of P44, 500 beginning January 1, 2012. The
repayments yield effective interest rate of 12% at a present value of P2, 000, 000 and 13.4% at a
present value of P 1,940,000. What amount of accrued interest receivable should Mandela report on
December 31, 2011?
a. 20, 000
c. 22, 333
b. 21, 663
d. 19, 400
e. 4. Rogers Company factored P3, 000, 000 of accounts receivable to Musburger Company on August 1,
2011. Control was surrendered by Rogers. Musburger accepted the receivables subject to recourse for
non-payment. Musburger assessed a fee of 2% and retain a holdback equal of 5% of the accounts
receivable. In addition, Musburger charged 15% interest computed on a weighted average time to
maturity of the receivable of forty days. The fair value of the recourse obligation is P300, 000. Assuming
all receivables are collected. What is the cost of factoring the receivables?
a. 110, 000
c. 259, 315
b. 260, 000
d. 109, 315
e. 5. Indira Company offers three-year warranty on its products. Indira previously estimated warranty costs
to be 5% of sales. Due to a technological advancement in production at the beginning of 2011, Indira
now believed 4% of sales to be a better estimate of warranty costs warranty costs of P300,000 and
P400,000 were reported in 2009 and 2010, respectively. Sales for 2011 were P9,000,000. What should
be reported as warranty expense for 2011?
a. 360, 000
c. 220, 000
b. 500, 000
d. 450, 000
e.
f. 6. Fidel Company began operations on January 1, 2010 and used the FIFO method of inventory costing.
Management is contemplating a change to the average method to be consistent with Fidel’s parent
company. The following information has been developed:
g.
h.
2010
2011
i. Ending inventory
j. FIFO
150,000
400,000
k. Average
300,000
200,000
l. Income under FIFO
2,500,000
3,000,000
m.
n. What is the income after a change to the average method?
a. 3,200,000
c. 2,650,000
b. 2,950,000
d. 3,050,000
e. 7. Adolph Company provided the following information for 2011:
f.
g. Gross profit
500,000
h. Costs of goods manufactured
2,800,000
i.
j. Beginning inventories
k.
l.
Goods in process
350,000
m. Finished goods
520,000
n.
o. Ending inventories
p.
q. Goods in process
230,000
r. Finished goods
150,000
s.
t. How much was the amount of sales for 2011?
A1 PASSERS REVIEW CENTER///88
a. 3,050,000
c. 3,790,000
b. 3,670,000
d. 2,810,000
e. 8. Marilyn Company regularly buys sweaters from Marcus Company and is allowed trade discount of
20% and 10% from the list price. Marilyn made a purchase on March 20 and received an invoice with a
list price of P1, 200,000 under terms of 2/10, n/30, and a freight charge of 50,000. Marilyn uses the net
method of recording purchases. What is the amount of inventory from this purchase assuming payment
was made on April 1, 2011?
a. 914,000
c. 896,720
b. 890,000
d. 873,200
e. 9. Ronald Company specializes in the sale of Apple accessories and software packages. Ronald had the
following transactions with one of its supplies:
f.
g.
Purchase of accessories
3,000,000
h.
Purchase of software packages
2,500,000
i.
Returns and allowances
`
200,000
j.
Purchase discounts taken
160,000
k.
l. Purchase were made throughout the year on terms 5/10, n/30. All returns and allowances took place
within 5 days of purchase and prior to any payment on the account, what is the amount of “Discounts
lost” for the purchases?
a. 115,000
c. 120,000
b. 105,000
d. 100,000
e. 10. Edison Company began the year with 500 units of inventory. The sale price of each unit was varied
throughout the month of January. During January, Edison completed the following inventory
transactions:
f.
Units
Unit Cost
Unit
Sale
Price
g. January
3
Purchase
200
P3, 000
h.
10
Sale
400
P4, 000
i.
14
Sale
100
4, 200
j.
20
Purchase
400
3200
k.
22
Sale
500
4500
l.
30
Purchase
200
3,300
m.
n.
o. Edison used the periodic average method of inventory costing. What is the total cost of the beginning
inventory if the gross profit in the month of January was P 1,470,000?
a. 1,100,000
c. 1,400,000
b. 1,210,000
d. 1,300,000
e. 11. The following information pertains to Lech Company for the current year:
f.
g. Cash sales
750,000
h. Cash collected on accounts receivable
4,800,000
i. Accounts receivable, January 1
400,000
j. Accounts receivable, December 31
850,000
k. Bad debts written off
100,000
l. Purchases
4,000,000
m. Inventory, December 31
620,000
n. Gross profit on sales
30%
o.
p. What was the cost of goods for the current year?
a. 3,640,000
c. 4,200,000
b. 3,745,000
d. 4,270,000
e. 12. Evington Company sells new equipment with P880, 000 list price at a mark up of 20% on selling
price. A dissatisfied customer returned a piece of equipment. Evington Company determined that the
returned equipment can be resold if it is conditioned. The estimated sales price of the reconditioned
equipment is P800, 000. The reconditioning cost is estimated to be P50, 000 and estimated cost to sell
is 10% of the selling price. What is the equipment’s net realizable value?
a. 742, 000
c. 510, 000
b. 670, 000
d. 566, 000
e. 13. The records for Thurgood’s Discount Store are summarized below for the month of July.
f.
g. Inventory, July 1 - at retail, P 450, 000; at cost, P300, 000
A1 PASSERS REVIEW CENTER///89
h.
i.
j.
k.
l.
Purchase in July - at retail, P5, 400,000; at cost, P350, 000,000; Freight-in - P75, 000
Purchase returns – at retail, P225,000: at cost, P 125,000; Purchase allowance
Net mark-ups –P 675, 000; net markdowns –P 600,000
Inventory losses due to normal breakage- at retail P 150,000,
Employee discounts-P 100,000 Sales-P5,000,000; sales returns-P250,000;sales allowance-P 50,000;
Sales discounts-P 25,000
m.
n. Using the average retail inventory method, what is the estimated cost of sales?
o. a. 3,250,500
q. c. 3,400, 000
p. b. 3,151,500
r. d. 3,300,000
s.
t. 14. Information regarding Marshall Company’s portfolio of available for sale securities in as follows:
u. Aggregate cost on December 31, 2011
1,500,000
v. Unrealized gains on December 31, 2011
50,000
w. Unrealized losses on December 31, 2011
200,000
x. Net realized gains during 2011
70,000
y.
z. On December 31, 2010, Marshall reported an unrealized loss of P60,000in other comprehensive income
to reduce this securities should be reported as other comprehensive income in the other shareholders
equity on December 31, 2011?
a. 200,000
c. 90,000
b. 150,000
d. 80,000
e. 15. Guevara Company‘s statement of comprehensive income for the year ended December 31, 2011
reported income before taxes of P3, 000,000. The auditor questioned the following amounts that had
been included in income:
f.
g. Unrealized gain on available-for-sale investment
250,000
h. Equality in earnings of James Company
400,000
i. Dividends received from James
150,000
j.
k. Guevara owns 30% of James preference share but has no interest in ordinary shares. What should be
reported as income before taxes?
a. 2,750,000
c. 2,350,000
b. 2,600,000
d. 2,050,000
e. 16. On January 1, 2011, Stallone Company purchased “held to maturity” bonds with face value of P5,
000,000 for p 4,682,600 including transaction cost of P82600. The bonds are purchased to yield 10%
interest. The nominal interest rate on the bonds is 8% payable annually every December 31. Stallone
appropriately used the effective interest method of amortization. The market value of the bonds on
December 31, 2011 is 105. What is the carrying amount of the investment on December 31, 2011?
a. 4,750,860
c. 5,250,000
b. 4,682,600
d. 4,614,340
e. 17. On December 31, 2011, Seifert Company purchased 12,000 ordinary shares of Alexander Company with
P100 per value for P1, 650,000 to be held as available for sale. On March 1, 2012. Seifert received a 10%
stock dividend from Alexander Company. On this date; Alexander’s ordinary share is selling for P140. On
June 1, 2012, Seifert sold all the stock dividends that were received on March 1, 2012 at P150 per share.
What is the total amount of income to be recorded by Seifert in 2012 from its investment in Alexander?
a. 198,000
c. 30,000
b. 183,000
d. 15,000
e. 18. On July 1, 2011, Aguilar Company purchased bonds with face value of P5, 000,000 to be held as
“available for sale”. The entity paid P4, 600,000 plus transaction cost of P142, 000 and accrued interest of
P150, 000. The bonds pay 6% interest annually on December 31 of each year with an 8% effective yield.
The transaction cost was approximately included in the carrying amount of the investment while payment for
the interest was recorded as interest receivable. The bonds are quoted at 105 on December 31, 2011. What
is the amount of interest that was received on December 31, 2011?
a. 184,000
c. 300,000
b. 150,000
d. 189,680
e. 19. Winston company has seven operating segments, five of which are reportable. A reconciliation prepared
by the chief financial officer with regard to the portable and noty reportable operating segments as is follows:
f.
g. Reportable operating segments
h. Sales from external customers
25,000,000
i. Intersegment sales
5,000,000
j. Intersegment transfers
3,000,000
k. Total segment expenses
10,000,000
A1 PASSERS REVIEW CENTER///90
l. Total segment assets
75,000,000
m. Total segment liabilities
18,000,000
n.
o. All other segments
p. Sales from external customers
3,000,000
q. Intersegment sales
500,000
r. Intersegment transfers
200,000
s. Total segment expenses
700,000
t. Total segment assets
5,000,000
u. Total segment liabilities
1,200,000
v.
w. What is the minimum revenue from a customer to qualify as a “major customer?”
a. 2,500,000
c. 3,300,000
b. 2,800,00
d. 3,670,000
e. 20. Benazir Company prepares quarterly interim financial reports. The entity sells it products through agents
who are paid a fixed monthly salary and a commission of 5% that is paid at year-end. Sales for the first
quarter were P10, 000,000. However, in the second quarter, the employees union negotiated that agent’s
commission should be increased to 8%and to be applied as of the beginning of the current year. Sales in the
second quarter were P15, 000,000. What would be the sales commissio9n expense charged in the second
quarters interim financial statements?
a. 1,500,000
c. 1,700,000
b. 1,200,000
d. 2,000,000
e. 21. On January 1, 2011. Wallace Company acquired 100,000 ordinary share of Milestone Company for P5,
000,000. At the time of purchase, Milestone Company had 500,000 outstanding shares with a fair value and
book value of P25 million. For the year ended De4cember 31, 2011, the following events took place:
Milestone reported net income of P 1,800,000 for the calendar year 2011.
Wallace received from Milestone a dividend of P2.50 per ordinary share.
Milestone recognized unrealized gains of P600,000 on its investment on available for sale securities as other
comprehensive income.
The market value of Milestone Company’s shares had temporarily declined to P45 per share.
f. Wallace does have significant influences over Milestone. What is the carrying amount of the investment on
December 31, 2011?
a. 4,500,000
c. 5,110,000
b. 5,230,000
d. 5,000,000
e. 22. The audit of Benoit Company for the year ended December 31, 2011 was completed on March 1, 2012.
The financial statements were signed by the managing director on March 15, 2012 and approve by the
shareholders on March 31, 2012. The following events have occurred before March 31, 2012:
On January 15, 2012, a customer owing P900, 000 to Benoit filed for bankruptcy. The financial statements
include an allowance for doubt6ful debts pertaining top this customer of P100, 000.
An asset acquired in December 2011 was recorded at a cost of P600, 000. It was determined on February
15, 2012 that the total cost of this asset is P 1,600,000.
Benoit Company discovered errors on March 10, 2012 that showed that the correct cash balance should be
P1, 200,000 instead of the previous balance of P1, 000,000.
A noncurrent asset with a carrying amount of P2, 000,000 was classified as held for sale on March 13, 2012.
The recoverable amount of the noncurrent asset was determined to be P1, 500,000.
f. What is the net increase or net decrease in the total assets to be re4ported by Benoit Company on December
31, 2011 as a result of “events after the reporting period”?
a. 100,000 decrease
c. 1,100,000 decrease
b. 400,000 increase
d. 300,000 decrease
e.
f. 23. On December 1, 2011, Landsman Company purchased for P3, 000,000 a tract of land as a factory site.
Landsman razed an old building on the property and used the materials it salvaged from demolition for the
new factory. Landsman incurred additional costs and realized salvage proceeds during De4cember 2011 as
follows:
g.
h. Demolition of old building
300,000
i. Legal fees for purchase contract and recording ownership
20,000
j. Filling, grading and levelling
50,000
k. Title guarantee insurance
30,000
l. Salvaged materials
100,000
m.
n. What is the total cost of the land?
a. 3,300,000
c. 3,400,000
b. 3,250,000
d. 3,350,000
A1 PASSERS REVIEW CENTER///91
a.
b.
e.
e. 24. Kennedy Company reported an impairment loss of P200, 000 in its statement of comprehensive
income for the year ended December 31, 2010. This loss was related to noncurrent asset which Kennedy
currently used in its operations. On the December 31, 2010, Kennedy reported that the non current asset
after impairment at P1, 000,000 and estimated that the noncurrent asset would be still be used for
another five years regardless whether the impairment was recognized or not, Kennedy used the straightline depreciation with no residual value. On December 31, 2011, Kennedy determined that the fair value
of its impaired noncurrent asset had increased by P50, 000 over its fair value on December 31, 2010. In
the 2011 statement of comprehensive income, what amount should be reported as gain on the reversal
of the impairment loss?
250,000
c. 50,000
160,000
d. 0
25. Mikhail Company started construction of a building on January 1, 2011 and completed construction on
December 31, 2012. Mikhail had two interest bearing notes outstanding during both years and all of the
notes were outstanding for all 12months of each year. The following information is available:
8% note (specifically for the project)
2,000,000
10% long term note
8,000,000
2010 average accumulated expenditures
2,800,000
2010 ending balance in construction in progress
Before capitalization of interest
3,600,000
2011 expenditures which were incurred evenly
2,000,000
f.
g.
h.
i.
j.
k.
l.
m. What is the total cost of the building on December 31, 2011?
a. 6,282,000
c. 5,920,000
b. 5,600,000
d. 7,520,000
e. 26. On January 1, 2011, Truman Company acquired equipment to be used in its manufacturing operations.
The equipment has an estimate useful life of 8 years and an estimated residual value of P300, 000. The
depreciation applicable for this equipment was P900, 000 for 2012 computed under the 200% double
declining balance method. What was the acquisition cost of the equipment?
a. 3,600,000
c. 4,800,000
b. 4,500,00
d. 5,100,000
e. 27. Luther Company has recently acquired a computer system for its central office in Makati. Luther
provided the following information for the new computer:
f. List price
1,000,000
g. Trade discount
10%
h. Removal of old computer
20,000
i. Concrete slab poured as a base for the new computer
30,000
j. Insurance taken during delivery
20,000
k. Repairs occurred while in transit
10,000
l. Transportation cost
50,000
m. Purchase discount available on purchase (not taken)
5%
n. Computer software that is an integral part of the system
95,000
o.
p. What is the total amount to be capitalized as cost of the computer system?
a. 1,050,000
c. 1,060,000
b. 1,070,000
d. 955,000
e. 29. on March 1, 2011, Daniella Company classified a noncurrent asset as held for sale that had a carrying
amount of P1,500,000. On this date, the noncurrent asset has a fair value of P1, 400,000. Estimated
disposal cost to be incurred for sale was P50, 000. By December 31, 2011, the asset had not been sold but
the sale is still considered to be “highly probable” and management’s intention to sell has not changed. At
the same time, Daniellas manager estimated that because of recent changes for the demand of the non
current asset and price increases, the noncurrent asset was now expected to be selling for P1,600,000 with
the related disposal cost unchanged at P50,000. Depreciation gain from March 1, 2011 to December 21,
2011 was computed at P80, 000. How much gain from the increase in fair value less cost to sell should be
reported in 2011?
a. 150,000
c. 230,000
b. 250,000
d. 200,000
e. 30. Carson Corporation purchased a new machine on January 1, 2012. A P500, 000 down payments was
made and three quarterly instalments of P200, 000 each are to be made beginning on April 1, 2011. The
cash price of the new machine would have been P1, 000,000 if paid in full. Carson paid in no installation
charge under the quarterly instalment plan but a P20, 000 installation charge would have been incurred with
a cash purchase. Delivery of P30, 000 was also incurred with the purchase. What is the amount top be
capitalized as the cost of the new machine?
a. 1,030,000
c. 1,050,000
b. 1,100,000
d. 1,150,000
A1 PASSERS REVIEW CENTER///92
e. 31. on January 1, 2011, Altidor Company was received a 4 year variable interest rate loan of P4, 000,000 with
principal payment at maturity and annual interest payment at the end of each year. The interest rate for 2011
is 10% and the rate in each succeeding year is equal to market interest rate on January 1 of that year. In
connection with the loan, Altidor Company entered into an interest rate swap agreements with another
financial institution to the effect that Altidor will receive a swap payment if the interest rate on January 1 is
more than 10%and will make a swap payment if the interest rate is less than 10%. The swap payments are
made at the end of the year on December 31. On January 1, 2012, the market rate of interest is 12% and on
January 1, 2013, the market rate of interest is 14%.
f.
g. What is the derivative asset or liability under the interest swap agreement on December 31, 2012?
(Round off PV factor to two decimal places)
a. 264,000 asset
c. 192,000 asset
b. 264,000 liability
d. 192,000 liability
e. 32. The total debits and credits in selected accounts of Condor Company after closing entries were
posted on December 31, 2011 are given below:
f.
Debits
Credits
g. Materials
200,000
800,00
h. Goods in process
500,000
700,000
i. Materials purchases
2,000,000
2,000,000
j. Purchase discount
80,000
80,000
k. Transportation in
150,000
150,000
l. Direct labor
1,000,000
1,000,000
m. Manufacturing overhead
5900,000
500,000
n. Finished goods
250,000
700,000
o.
p. What was the cost of goods sold for 2011?
a. 4,820,000
c. 4,520,000
b. 4,750,000
d. 4,450,000
e. 33. The general ledger balance trial balance of Armani Company included the following accounts on
December 31, 2011:
f. Inventory including inventory expected in ordinary course of
g. operations to be sold beyond 12 months amounting to 70,000
1,000,000
h. Trade receivables
1,200,000
i. Prepayments
50,000
j. Listed investments at “fair value through profit or loss”
200,000
k. Available for sale securities
800,000
l. Cash and cash equivalents
300,000
m. Deferred tax asset
150,000
n. Assets of a disposal group
250,000
o.
p. What amount should be reported as total current assets on December 31, 2011?
a. 3,000,000
c. 3,550,000
b. 2,750,000
d. 2,500,00
e. 34. Bankrupt Bank has a 5 year loan receivable with a face value of P2, 000,000 dated January 1, 2010 from
a borrower that is due on December 31, 2014. Interest on the loan is payable at 10% every December 31.
The borrower paid the interest that was due on December 31, 2010 but informed Bankrupt on December 31,
2011 that interest accrued in 2011 and the interest for 2012 will be paid at the maturity date. The borrower
will also probably miss the last two years for interest payments because of financial difficulty. After that, the
borrower is expected to pay the loan and accrued interest in 2011 and 2012 on December 31, 2011? (Round
off present value factor to three decimal places)?
a. 97,200
c. 597,600
b. 397,600
d. 197,600
e. 35. Blake Company used the composite method of depreciation based on a composite rate of 10%. At the
beginning of 2011, the total cost of Blake’s depre4ciable assets was P2, 500,000 with a total residual value
of P300, 000. Accumulated depreciation was p750, 000 on the same date. During 2011, Blake sold assets
with an original cost of P500, 000 and a residual value of P60, 000 for P150, 000. No gain or loss was
recognized on the sale assets costing P1, 000,000 with a residual value of P120, 000 were also acquired
during 2011 to replace assets sold within the year. What is the balance of accumulated depreciation on
December 31, 2011?
a. 1,050,000
c. 700,000
b. 664,000
d. 850,000
e. 36. For the year ended December 31, 2011. Greenberg Company estimated its allowance for uncollectible
accounts using the year-end aging of accounts receivable. The following data for 2011 are available;
A1 PASSERS REVIEW CENTER///93
f.
g. Allowance for uncollectible accounts. 1/1/11
100,000
h. Provision for uncollectible accounts during 2011(2% on credit sales
i. Of P25, 000,000
500,000
j. Uncollectible accounts written off
200,000
k. Recovery of accounts previously written off
120,000
l. Estimated uncollectible accounts per aging 12/31/11
900,000
m.
n. How much doubtful accounts expense should be reported for 2011?
a. 880,000
c. 180,000
b. 380,000
d. 500,000
e. 37. Precious Company purchased 10%of an investee’s 100,000 outstanding ordinary shares on January
1, 2011 for P500, 000. On December 31, 2011. Precious purchased an additional 20,000 shares of the
investee for P1, 500,000. There was no goodwill as a result of either acquisition, and the investee had
not issued any additional shares during 2011. The investee reported earnings of P3, 000,000 for 2011.
What is the carrying amount of the investment on December 31, 2011?
a. 1,700,000
c. 2,300,000
b. 2,000,000
d. 2,900,000
e. 38. During the current year, Aura Company incurred the following costs:
f. Research and development services performed by Amor Company for Aura
150,000
g. Design, construction and testing of preproduction prototypes and models
200,000
h. Testing in search for new product or process alternative
175,000
i. What should be reported as research and development expense?
a. 150,000
b. 200,000
c. 350,000
d. 525,000
e. 39. Mariel Company has acquired a trademark relating to the introduction of a new manufacturing
process. The costs incurred were as follows:
f. Cost of trademark
3,500,000
g. Expenditure on promoting the new product
50,000
h. Employee benefits relating to the testing of the power
i. Functioning of the new process
200,000
j.
k. What is the total cost that should be capitalized as intangible noncurrent asset in respect of the
new process?
a. 3,750,000
b. 3,700,000
c. 3,500,00
d. 3,550,000
e. 40. In 2010, Vanna Company paid P1, 000,000 to purchase land containing total estimated 160,000 tons
of extractable mineral deposits. The estimated value of the property after the mineral has been
removed is P200, 000. Extraction activities began in 2011, and by the end of the year, 20,000 tons had
been recovered and sold. In 2012, geological studies indicated that the total estimated tons of
extractable mineral deposits had been underestimated by 60,000 tons. During 2012, 50,000 tons were
extracted and 48,000 tons were sold. What is the depletion included in cost of sales for 2012?
a. 175,000
b. 168,000
c. 200,000
d. 192,000
e.
f. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
g. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
h. Tel. No.: (033) 320-2728; 09106547262
i. Email Address:
[email protected]
j.
k. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
l.
m. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET B
n.
o.
p. PRACTICAL ACCOUNTING II
q.
r.
s.
t.
u.
INSTRUCTIONS:
1. Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.
2. Write the subject title “PRACTICAL ACCOUNTING II “on the box provided
3. Shade Set Box ‘’A” on your answer sheet if your test booklet is Set A; Set box “B” if your if your test
booklet is Set B.
v. __________________________________________________________________________________
_____
A1 PASSERS REVIEW CENTER///94
w. MULTIPLE CHOICE:
x.
y. 1. The following amounts were taken from the statement of affairs for ABC Company:
z.
aa. Unsecured liabilities with priority
P131, 250
ab. Stockholders equity
P472, 500
ac. Estimated liquidation expenses that have not been entered
ad. In the accounting records
59,060
ae. Unsecured liabilities without priority
1,181,250
af. Loss on realization of assets
590,625
ag.
ah. How much is the total free assets?
A. P1,004,080
C. 1,063,125
B. P1,021,685
D. 1,135,315
E.
F. 2. J and P formed a joint venture to purchase and sell a special type of merchandise. The ventures
agreed to contribute cash of P30, 000 each to be used in purchasing the merchandise, and to share
profits and losses equally. They also agreed that each shall record his purchases, sales, and expenses
in their own books.
G.
H. Upon termination of the joint venture, the following data are made available:
I.
J
P
J. Joint Venture
P26,000 CR
P23,400 CR
K. Inventory Taken
800
2,500
L. Expenses paid from JV Cash
1,200
2,200
M.
N. How much cash is to be received by J in the final settlement?
A. P52,700
C. P56,350
B. P55,550
D. P55,750
E.
F. 3. Partners A, B and C share profits and losses in the ratio of 5:3:2. At the end of a very unprofitable
year, they decided to liquidate the firm. The partner’s capital account balances at this time are as
follows: A. P616, 000 :
B. P697,200 :
C.P420,000. The liabilities accumulate to P840,
000, Including a loan of P280, 000 from A. The cash balance is P168, 000. All partners are personally
solvent. The partners plan to sell the assets in instalment.
G.
H. If B received P100, 800 from the first distribution of cash, how much did C receive at that time?
A. 56,000
C. 33,600
B. 22,400
D. 61,600
E.
F.
G.
H.
I.
J.
K. 4. Peace Inc. uses the percentage of completion method in recognizing program. In 2010, the company
was engaged by World on a fixed price contract to build a 10 storey building.
L.
M. On January 1, 2011, a fire damaged the accounting records of Peace. The following data were taken
from the salvage files:
N.
12/31/2010
12/31/2011
O. Architect’s estimated cost of completion
1,875,000
2,000,000
P. Cost incurred
750,000
Q. Percentage of completion
60%
R. Income recognized to data
125,000
300,000
S.
T. What is the percentage of completion 2010?
A. 40%
C. 30%
B. 25%
D. 20%
E. 10. During 2009, Canlubang Construction, Inc. started a construction job with a total contract [rice
P600,000. The job was completed on December 20, 2010. Additional data are as follows:
F.
2009
2010
A1 PASSERS REVIEW CENTER///95
G. Actual costs incurred to data
P225, 000
P480, 000
H. Estimated remaining costs
225,000
I. Progress billings
240,000
300,000
J. Collections
200,000
400, 000
K. Under the percentage of completion method. What amount should Canlubang Construction recognizes
as gross profit for 2010?
A. P 0
C. P 80,000
B. P 45,000
D. P 120,000
E. 11. On July 1, 2010, Mary Ann, Inc. acquired most of the outstanding common stock of Pepito Company
for cash. The incomplete working paper elimination entries on that date for the consolidated statement
of financial position of Many Ann Inc. and its subsidiary are shown below:
F.
G. E(1) stockholders equity- Pepito
975,000
H.
Investment in Pepito
633,750
I.
Non-controlling
341,250
J. E(2) Inventories
25,000
K. Equipment
125,000
L. Patent
24,500
M. Goodwill
?
N.
Investment in Pepito
633,750
O.
Non controlling interest
P.
Q. Assuming NCI is measured at fair value, what is the amount of goodwill to be reported in the
consolidated statement of financial position on July 1, 2010 if there is a control premium of P27, 500?
A. P71,654
C. 99,154
B. 128,769
D. 113,962
E. 12. On January 2, 2010, POKEMON sign an agreement to operate as a franchise of DIGIMON for an initial
franchise fee of P 10,000,000 for 10 years. Of this amount p2, 000,000 was paid when the agreement was
signed and the balance payable in four equally annual payments beginning on December 30,
2010.POKEMON signed a non interest bearing note for the balance. POKEMONS rating indicates that it can
borrow money at 24% for a loan of this type. PV of annuity of 1 for 4 periods at 24% is 2.40. Assume that the
substantial services amounting to 1,020,000 had already been rendered by DIGIMON and that additional
indirect franchise cost of P272, 000 was also incurred. If the collection of the note is not reasonably assured,
the realized gross profit for the year ended December 31, 2010 is:
A. 5,780,000
C. 2,148,000
B. 2,420,800
D. 5,508,000
E. 13. On December 1, 2009, LOJ. Inc authorized Silber Company to operate as a franchise for an initial
franchise fee of P150, 000. Of this amount, P60, 000 was received upon signing the agreement and the
balance, represented by a note. Is due in three annually payments of P30,000 each beginning December
31,2010. The present value on December 31, 2009, for three annual payment appropriately discounted a
P72, 000. According to the agreement, the non-refundable down payment represents a fair measure of the
service already performed by LOJ and substantial future services are still to be rendered. However,
collectability of the note reasonably certain.
F.
G. LOJ’s December 31,2009 balance should report unearned franchise foe from Cloe Company in the amount
of
A. 132,000
C. 60,000
B. 90,000
D. 72,000
E. 14. On January 1, 2011, Mr. CPA got a franchise of Jollibee. The franchise agreement provides a P500, 000
initial franchise fee, payable P100, 000 upon signing of the franchise contract and the balance in four annual
instalments starting Dec 31, 2011. At present value using 12% as discount rate, the four instalments would
approximate P199, 650. The fees once paid are not refundable. The franchise may cancelled subject to the
provisions of the agreement. Should there be unpaid franchise fees attributed to the balance of the initial
franchisor entitled to a 5% continuing fee on gross sales payable monthly within the first ten days of the
following month. The first year of operations yielded gross sales of P9 million. The collectability of the note is
not assured.
F.
G. On December 31, 2011. What is the earned franchise fee
A. 550,000
C. 650,000
B. 749,650
D. 950,000
E. 15. on January 1, 2011, a acquired a 50% interest in B for P60 million. A already held a 20% interest which
had been acquired for P20 million but which was valued at P24 million at January 1, 2011 was 30 million and
the fair value of the identifiable net assets of B was P110 million. How much is the goodwill to be recognized
as a result of the business combination?
A1 PASSERS REVIEW CENTER///96
A. 3,000,000
C. 0
B. 7,000,000
D. 4,000,000
E. 16. On May 1, 2009, JAO builders obtained a contract to builds a building. The building was to built at a total
cost of P10, 000,000 and is scheduled for completion on May 2011. The contract contains a penalty clause
to the effect that the other part was to deduct of P20, 000 from the contract price for each week of daily.
Completion was delayed five weeks. Below are data pertaining to the construction period.
F.
G.
2009
2010
2011
H. Cost incurred
1,000,000
3,680,000
620,000
I. Estimated cost to complete
4,000,000
520,000
J. Progress billings
800,000
8,700,000
2,400,000
K.
L. Using the percentage of completion method, what is the realized gross profit (loss) for the year 2011?
A. 650,000
C. (20,000)
B. (70,000)
D. 480,000
E. 17. Joy is trying to decide whether to accept a bonus of 25% of net income after salaries and a bonus of a
salary of P243,750 plus a bonus of 10% of net income after salaries and bonus as a means of allocating
profit among the partners. Salaries traceable to the other partners are estimated to be P450, 000. What
amount of income would be necessary so that Joy would consider the choice to be equal?
A. 2,750,000
C. 2,275,000
B. 3,156,250
D. 2,993,750
E. 18. The following statement of financial position for the peripheral of CC, DD and EE were taken from
the books on October 1, 2010.
F.
G. Assets
liabilities and Capital
H. Cash
1,000,000
liabilities
2,000,000
I. Other assets
4,000,000
CC, Capital 1,200,000
J.
DD, Capital 950,000
K.
EE, Capital
850,000
L. Total assets
5,000,000
5,000,000
M. The partners agreed to distribute profits as follows:
a. Annual salaries to CC and DD to P50,000 each]
b. Annual interest of 5% on beginning capital
c. Bonus of 15% to CC based on income after salaries interest and bonus
d. Remaining profit: 25% to CC., 35% to DD and 40% to EE
N.
O. In addition, Company A incurred the following expenditure, costs to issue equity amounting to P900, 000.
Professional fees paid to independent values: P 280,000. Professional fees paid to lawyers taking part in the
negotiation process - P350, 000. Fees to accountant for processing SEC registration of shares- P60, 000.
Fees to advisors and bankers - P230, 000. Since the parties cannot agree on the true value of the Acquired
on the data of acquisition. They contractually agreed that additional consideration of P8, 000,000 will be paid
in the event the net earnings of Company B.
P.
Q. The partnership began its operation on October 1, 2010 and net income for the year ended Dec. 31,
2010 is P695, 000. Which of the following is true?
A. The bonus to CC is P58,040
B. Net income after salaries, interest and bonus is P 386,960.
C. DD’s total share in the net income is P216,875
D. EE’s share on the profit after salaries, interest and bonus is P135,430
R. 19. Angels Corp reported of the following accounts for the year just ended 2011:
S. Instalment receivable bag – sales of 2011
P 2,610,000
T. Instalment receivable bag – sales of 2010
1,500,000
U. Deferred gross profit end, 2010
380,000
V. Deferred gross profit end, 2011
840,000
W. Regular sales
1,400,000
X. Cost of regular sales
1, 050,000
Y.
Z. The gross profit rate on instalment sales was 10% higher than regular sales. For 2011, the gross profit on
instalment sales was 3% lower than in 2010. Total realized gross profit for 2011 is
A. P252,700
C. P602,700
B. P286,300
D. P636,300
E. 20. A home office ships inventory to its branch at 125% of cost during 2010. The required balance of the
unrealized intercompany profit account is P438, 750 for year 2009. During year 2010, the home office sent
A1 PASSERS REVIEW CENTER///97
A. 856,250
merchandise to the branch costing 3,920,000. At the start of
C.the
907,750
year 2011, the branch’s balance sheet
B. 1,103,750
shows P1, 575,000 of inventory that was acquired from theD.home
1,025,000
office.
E. 21. On January 2, 2010, F Corp. sold used equipment for P150, 000 resulting into gain of P45, 000. On that
date, G paid P25, 000 cash and signed a P125, 000, 10% interest bearing note. And was payable in three
annual instalments of P41, 667 beginning January 2, 2011. If appropriately accounted fort he sale under
instalment method. G made a timely payment of the first instalment on January 2, 2011, of P54, 167 which
included an interest of P12500. What amount of deferred gross profit should F report at December 31,
2011?
A. 28,750
C. 30,000
B. 25,000
D. 37,500
E. 22. Ding, Dong and Dang decided to dissolve their partnership on May 31, 2010. On this date, their
capital balances were as follows:
F. Ding
P87, 500
G. Dong
105,000
H. Dang
35,000
I.
J. The following provision for sharing profits and losses is provided in the agreement:
K. Income is distributed only as far as it is available.
L. Available income is to be distributed in the following sequence:
1. Ding, who is the managing partner gets a salary of P180, 000 a year, the remaining partners gets a salary Of
P72, 000 each.
2. Interest is imputed on the average capital balances at 12% per annum
M.
N. 23. The Ivonne Inc. opened an agency in Sampaloc, Manila in 2008. The following is a summary of the
transaction of the agency:
O.
P. Sales Orders sent to home office
55,000
Q. Sales orders filled by Home Office in 2008
46,500
R. Freight on shipment to agency
1,100
S. Collection, net of 2% discount
39,690
T. Selling expenses paid from the agency working fund 2,820
U. Administration expenses charged to agency
5%sales
V. Samples shipped to agency
W.Cost
2,000
X. Inventory, Dec 31, 2008
1100
Y.
Z. The company maintains its gross margin on agency sales at 30% excluding freight cost on shipment agency.
The agency’s net income must be:
A. 4,995
C. 5,995
B. 5,390
D. 6,390
E. 24. J, F and K formed a joint venture to purchase3 a piece of lot and to erect an apartment building for sale J
is to manage the venture hence, he will receive a bonus of 10% of the venture’s gain before deducting the
bonus as an expense. Any remaining gain or loss to be divided equally among the ventures. The venture is
completed on august 31, 2010, on this date, the accounts of F and K show the following balances:
F.
F
K
G. Account with J
56,000Cr
56,000Cr
H. Account with F
112,000Cr
I. Account with K
63,000Dr.
J.
K. There are unused constructions supplies which J agreed to take over at it cost of 147,000. Final settlement
with the ventures will require payments as follows:
A. J pays K P39,200 and F pays K P49,000
C. J pays f P50,400 and k pays j P107,800
B. J pays K P89,600 and F P50,400
D. J pays F P124,600 and K pays J P50,400
E. 25. ANNA and JANNA are partners sharing profits and losses in the ratio of 6:4 respectively. On January 2,
the partners decided to admit HANNAH as a new partner upon her investment of P96, 000. On this date, the
interest in partnership of ANNA and JANNA are as follows: ANNA, P138, 000; JANNA, P111, 600. Assuming
that the new partner is given as 1`/4 interest in the firm. The agreed capital of the partnership is P360, 000.
The admission of a new partner will result to which of the following:
A. Goodwill is P20,400
D. Capital balance of ANNA after admission is
B. Bonus from JANNA is P2,400
P150, 240
C. Bonus to HANNAH is P6,000
E. 26. On June 1, 2011, the following payments were made by Company A to the former owners and officers of
COMPANY B
F. Cash paid, for settlement of pre-existing relationship
P300, 000
A1 PASSERS REVIEW CENTER///98
G. PN issued, for remuneration for future employee services
1,200,000
H. Cash paid, for reimbursement for paying the
I. acquirer’s acquisition costs
800,000
J.
K. Also, Company A issued 300,000 shares with par value of P10 per share and market price of P45 per share
in exchange for 60% ownership of the outstanding shares of the Company B. The net assets of Company B
on this date is P24, 375,000. Company opted to use the partial goodwill method in this transaction.
L.
M. C. Branch collections of P75, 000 were deposited for the account of the home office on Dec 29, 2010; sixty
percent was credited on the home office bank account as of Jan. 9, 2011; and the balance was returned to
the deposited marked NSF.
N. D. Merchandise shipments of P200, 000 made by the home office on Dec. 28, 2010 were received by the
branch on Jan 4, 2011. However only ninety percent of this shipment was charged by the home office to
Baguio branch; the balance was debited to other branch.
O.
P. Compute the unadjusted balance of the home office current account as of Dec. 31, 2010
A. 442,600
C. 242,600
B. 232,600
D. 212,600
E. 29. Prominence Inc. is a contractor for the fabrication of motor service centers. At the end of 2010, the
following projects were in progress:
F.
Contract Price
Cost Incurred
Est’d Cost to
Complete
G. Project 1
P 3,800,000
P 2,070,000
P 1,380,000
H. Project 2
9,000,000
5,670,000
2,430,000
I. Project 3
13,250,000
1,800,000
10,200,000
J. During the year 2011, the following costs were incurred:
K. Project 1 – P1, 030,000 (estimated cost to complete, P775, 000)
L. Project 2 - P2, 580, 000 (project completed)
M. Project 3 – P5,700,000 (est’d cost to complete, P5,000,000)
Project 4 – P1,500,000 (contract price, P7,200,000; est’d cost to complete, P4,500,000)
N.
O. Using the zero profit method, the total gross profit to be reported in 2011 would be:
A. P-0
C. P750,000
B. P675,000
D. 825,000
E. 30. XYZ Company is engaged in merchandising both at Home office in Manila and Branch in Davao,
Selected accounts in the trial balance of the Home Office, and the branch at December 31, 2010 follow :
F. Debits
Home Office
Branch
G. Inventory, January
115,000
57,750
H. Branch Current
291,500
I. Purchases
950,000
J. Shipment from Home Office
525,000
K. Freight in from Home Office
27,500
L. Sundry expenses
250,000
125,000
M.
N. Credits
O. Home Office Current
266,500
P. Sales
775,000
700,000
Q. Shipments to branch
550,000
R. Allowance for overvaluation of branch inventory
S. Jan 1
5000
T.
U. Additional information:
V. Davao receives all its merchandise from the home office. The Home Office bills the goods at cost 10%
mark up. At December 31, 2010 a shipment with a billing price of P25, 000 was in transit to the branch.
Freight on this shipment was P1, 250 which is to be treated as part of inventory.
W.
X. December 31, 2010 inventories, excluding the shipment in transit was:
Y. Home office, at cost
150,000
Z. Davao branch, at billed value (excluding freight of P2, 600) 52,000
AA.
AB.Refer to data above: the true net6 income of the branch:
A. 52,350
C. 62,350
B. 57,350
D. 67,350
A1 PASSERS REVIEW CENTER///99
E. 31. Examination of the reciprocal accounts between Manila Home office and Cebu Branch shows the
following:
F. I. P10, 000 advertising expense of another branch was erroneously charged by the Home Office to Cebu
Branch.
G. II. Cebu recorded shipments of merchandise from Home Office amounting to P75, 000 twice.
H. III. Home office recorded cash transfer of P65, 700
I. IV. Transfer of equipment from Home Office amounting to P53, 000 was not recorded by the branch.
J. V. Cebu recorded a debit memo from Home Office of P5, 540 as P5, 450
K.
L. How much is the net adjustments to Cebu Branch Current Account and to the Home Office Current
Account?
M.
N.
Cebu Branch Current Account
Home Office Account
A. P75,700 Dr
P20,910 Dr
B. P75,700 Cr
P21,910 Dr
C. P75,700 Dr
P21,910 Cr
D. P65,700 Cr
P22,000 Cr
O. 32. On April 1, 2011, the R&R Company paid P30, 000,000 to the former stockholders of S&S to acquire
75% ownership interest (representing 135,000 shares outstanding of S&S) in a transaction properly
accounted for as acquisition. On this date, the assets and liabilities of S&S Company were as follow:
P.
Q. Cash
1,200,000
R. Inventories
7,500,000
S. Plant assets
31,000,000
T. Liabilities
13,500,000
U.
V. Furthermore, it was determined that the merchandise inventory of S&S Company had a fair market
value of P8,250,000 and the plant assets of P25,650,000. What should be the amount reflected as
goodwill (gain) by R&R Company in its separate financial statements as a result of the business
combination?
W.
X. The NCI is initially measured at fair value. Quoted price on the date of acquisition of S&S shares is
P175,000 per share.
A. P0
C. P13,800,000
B. P16,275,000
D. P18,400,000
E. 33. on January 1, 2010,m congratulations, Inc. issues 12,000 shares of its P10 per value stock to
acquire the net assets of Successful, Inc. Underlying book value and fair value information for the
balance sheet items of successful at the time of acquisition are as follows:
F.
Book Value
Fair value
G. Cash
P80, 000
P80,000
H. Accounts receivable
120,000
120,000
I. Inventory
60,000
115,000
J. Land
50,000
70,000
K. Building and Equipment
400,000
350,000
L. Less Accumulated depreciation
(120,000)
M. Total assets
590,000
735,000
N. Accounts Payable
P30, 000
P30, 000
O. Bonds Payable
P200, 000
P180, 000
P. Common Stock (P5 per value) 150,000
Q. Additional paid-in Capital
70,000
R. Retained Earnings
140,000
S. Total Liabilities and Equities
590,000
T.
U. Successful, Inc. share were selling at P18 and Congratulations, Inc. were selling at P50 just before the
merger announcement. Additional cash payments made by Congratulations, Inc. in completing the
acquisition were:
V.
W.Broker’s fee paid to firm located Successful
P15, 000
X. Engagement fee on agreed upon procedures for share issuance
10,000
Y. Legal fees for the merger
12,000
Z. Cost of SEC registration of Congratulations shares
7,000
AA.
AB.What is the amount of additional paid in capital by Congratulations related to the issuance of shares?
A1 PASSERS REVIEW CENTER///100
A. P463,000
C. P448,000
B. P463,000
D. 473,000
E.
F. 34. Cinco, a partner of Antonio and Danan, decided to withdraw from ACD partnership. Cinco’s share in
the profits and losses was 25%, while that Antonio and Danan are 50% and 25%respectively. In the
final settlement of his interest, he was paid 95,000, although the capital balance before his retirement
was only 85,000. The 10,000 difference implied that an equipment of the partnership was undervalued.
Prior to recording Cinco’s withdrawal, and adjustment was made by the partnership to bring the
equipment to its fair value.
G.
H. The total of partners capitals before anyu adjustments and before Cinco’s withdrawal was 340,000.
What would be the partnership’s net assets after the withdrawal of Cinco?
A. 285,000
C. 295,000
B. 245,000
D. 325,000
E.
F. 35. The following data were taken from the statement of realization and liquidation of ABC Corp. For the
G.
H. quarter ended June 30, 2010
I. Assets to be realized
P160, 000
J. Supplementary credits
220,000
K. Liabilities to be liquidated
160,000
L. Supplementary charges
196,000
M. Liabilities liquidated
60,000
N. Assets acquired
200,000
O. Assets realized
80,000
P. Liabilities assumed
100,000
Q. Assets not realized
180,000
R.
S. The ending capital balances of capital stock and retained earnings are P200, 000 and P36, 000,
respectively. How much is the ending balance of cash?
A. P116,000
B. P70,000
C. P116,000
D. P90,000
T.
U.
V.
W.
X.
Y.
Z.
AA.
AB.
AC.
AD.
AE.
AF.
AG.
AH.
AI.
AJ.
AK.
AL.
AM.
AN. ANSWER KEY
AO. ACCOUNTING II
AP.
A1 PASSERS REVIEW CENTER///101
1. B
2. B
3. B
4. D
5. D
6. A
7. D
8. C
9. B
10. D
11. C
12. B
13. D
14. A
15. B
16. D
17. B
18. C
19. B
20. B
21. B
22. B
23. C
24. D
25. D
26. D
27. C
28. A
29. A
30. C
AQ.
AR.
AS.
AT.
AU.
AV.
AW.
AX.
AY.
AZ.
BA.
BB.
BC.
BD.
BE.
BF.
BG.
BH.
BI.
BL.
BJ.
BK.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
BM.
2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
BN.
Tel. No.: (033) 320-2728; 09106547262
BO.
Email Address:
[email protected]
BP.
A1 PASSERS REVIEW CENTER///102
BQ.
BOARD OF CERTIFIED PUBLIC ACCOUNTANT
BR.
BS.CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A
BT.
BU.
BV.
THEORY OF ACCOUNTANT
BW.
BX. INSTRUCTIONS:
BY.
BZ.1. Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.
CA. 2. Write the subject title “PRACTICAL ACCOUNTING “on the box provided
CB. 3. Shade Set Box ‘’A” on your answer sheet if your test booklet is Set A; Set box “B” if your if your test
booklet is Set B.
CC.
CD. MULTIPLE CHOICES:
CE.
CF.1. Which one of the following enhances the relevance of accounting information?
a. Monetary unit
c. Neutrality
b. Understandibility
d. Predictive
e. 2. The principle of objectivity includes the concept of
a. Classification
c. Verifiability
b. Conservation
d. Summarization
e. 3. Using the gross profit method for inventory rather than physical count at interim periods is a trade off
between
a. Neutrality and consistency
c. Reliability and prudence
b. Timeline and verifiability
d. Objectivity and materiality
e. 4. Which of the following is synonymous to realizable value?
a. Past purchase exchange price
c. Current purchase release exchange price
b. Current sale exchange price
d. Future exchange price
e. 5. The recording of doubtful accounts expense is an example of what expense recognition principle?
a. Systematic and rational location
c. Cause and effect
b. Immediate recognition
d. Partial recognition
e. 6. A user computes Times Interest Earned (TIE) Ratio based on an entity’s financial statement is most
likely which of the following?
a. Lender
c. Investor
b. Borrower
d. Customer
e. 7. When special journal are used, accounts written of shall be recorded in the
a. Sales journal
c. General journal
b. Cash disbursements journal
d. Purchase journal
e. 8. Which of the following is an example of a nominal and contra account?
a. Freight out
c. Allowance for sales discount
b. Freight in
d. Purchase discount
e. 9. The manufacturing summary account summarizes.
a. All revenues, expenses, gains and losses
b. All accounts that enter into computing cost of goods manufactured
c. All accounts that enter into computing cost of goods sold
d. All accounts that enter into computing total manufacturing costs
f. 10. All of the following are classified as current assets, except
a. Cash set aside for payroll
b. Financial assets at fair value through profit or loss
c. A deposit on merchandise ordered, to be delivered in 15 months
d. Trade receivable due in 18 months
g. 11. A quoted debt instrument that an issuer may buy back in the near term depending on changes in fair
value is classifies as a
a. Current asset
c. Noncurrent asset
b. Current liability
d. Noncurrent liability
e.
f.
g.
h. 12. All of the following are in minimum line items for current liabilities, except
a. Trade and other payables
c. Current provisions
b. Accounts payables
d. Current tax liability’
A1 PASSERS REVIEW CENTER///103
e.
a.
b.
e.
a.
b.
c.
d.
f.
a.
b.
c.
d.
g.
a.
b.
c.
d.
h.
a.
b.
c.
d.
i.
a.
b.
e.
a.
b.
c.
d.
f.
a.
b.
c.
d.
g.
a.
b.
c.
d.
h.
a.
b.
c.
d.
i.
a.
b.
e.
a.
b.
c.
d.
f.
13. All of the following are considered nondistributable equity reserves, except
Share premium reserve
c. Foreign translation credit adjustment
Revaluation surplus
d. Unappropriated retained earnings
14. The summary of significant accounting policies shall disclose
The composition of property, plant and equipment and the depreciation method used
The composition of property, plant and equipment only
The depreciation method used only
None of the above
15. All of the following will require related party disclosure in the financial statements of an entity, except
Sold goods to another entity owned by the son of the entity’s chief director
Sold goods to the aunt of the entity’s chief director
Sold goods to shareholders of the entity who owns 10% of the ordinary shares but is a member of the board
of directors.
Sold a fully depreciated car to an associate
16. Between the date of the financial statements and the date these statements were authorized for issue,
the following events took place. All of the following are considered non adjusting events, except.
Major ordinary share transactions
Issuing guarantees
Significant decline in the market value of available for sale securities
Determination of bonus payment since entity has already the present obligation at the reporting date.
17. Between the date of the financial statements and the date these statements were authorized for issue.
The following events took place. All of the following are considered adjusting events, except:
Resolution of a court case
Plan to discontinue an operation
Sale of finished goods that may give evidence about the net realizable value at the reporting date.
Determination of proceeds from asset sold before the reporting period.
18. This form of an income statement is also known as the “cost of sales method”
Natural form
c. Account form
Functional form
d. Report form
19. An entity’s profit or loss differs from its total comprehensive income. Which of the following may be the
reasons?
Dividends received
Dividends paid
Foreign currency translation adjustment
Impairment loss on noncurrent asset held for sale
20. Which of the following would not result to reclassification adjustment in the statement of comprehensive
income?
Permanent decline in market value of available for sale securities
Ineffective portion of a cash flow hedge instrument
Realization of evaluation surplus
Gain or loss from disposal of available for sale securities
21. A statement of changes in equity will show all of the following, except
Total comprehensive income
Changes in accounting policies treated retrospectively
Dividends received
Contributions by shareholders
22. How is impairment loss treated if it relates to a disposal group?
It is allocated to the assets based on their carrying amounts
The impairment loss is first allocated to goodwill, if any and any remainder is allocated to the other assets
based on their carrying amounts.
It is deferred until the group is actually disposed of.
It is not recognized since it violates prudence.
23. An entity classified a noncurrent asset as held for sale in accordance with PFRS 5 on October 1, 2011.
The year end is December 31, 2011. On July 1, 2012, some of the criteria as held for sale were not met,
thus the asset can no longer be classified as held for sale. The entity will adjust for depreciation in 2012 for
7 months
c. 9 months
8 months
d. No adjustment for depreciation
24. According to PFRS 5, which of the following is true?
An extension of the period required to complete a sale precludes an asset being classified as held for sale if
the delay is caused by fortuitous events.
Subsequent increase in fair value less cost to sell may be recognized in excess of the cumulative impairment
loss that was previously recognized.
Immediately before the initial classifications of the assets as held for sale, the carrying amount of the asset
shall be measured in accordance with PFRS 5.
An entity can classify a noncurrent asset that is to be abandoned as held for sale.
A1 PASSERS REVIEW CENTER///104
g.
h.
i. 25. Which of the following is true regarding the discontinued operations?
a. A component of an entity always represents the same concept as an operating segment used in reporting
disaggregated information.
b. Discontinued operation shall show gross income on the face of the income statement
c. Impairment loss is recognized at year end if the disposal group is unsold and if fair value less cost to sell is
below the carrying amount.
d. The result of discontinued operation excludes income or loss from operating the discontinued operations.
j. 26. Which of the following is not treated as change in accounting estimate?
a. Doubtful accounts
c. Inventory obsolescence
b. Initial adoption to carry assets at revalue
d. Warranty cost
amount
e. 27. Which of the following is not a justification for a change in depreciation method?
a. Change in estimated useful life
b. Change in pattern of receiving estimated future benefits from asset
c. Change in manage intent
d. Change in estimated future benefits from the asset
f. 28. Which of the following accounting treatment is proper for a change in reporting entity?
a. Restatement of all financial statements presented
b. Restatement of current period financial statements
c. Note disclosure and supplementary schedules
d. Adjustment to retained earnings and note disclosure
g. 29. Which of the following is correct?
a. Correction of an inappropriate accounting policy is treated as a change in accounting policy
b. If it is impracticable to apply a change in accounting policy retrospectively, the fact should not be disclosed in
the notes to financial statements.
c. A change in reporting entity is correction of an error.
d. Disposition of a business unit is not a change in reporting entity
h. 30. Which of the following cannot be allocated over the interim periods benefited?
a. Depreciation
c. Inventory write-down
b. Property tax
d. Insurance premium
e. 31. An entity follows the fiscal year beginning July 1. It also prepares quarterly financial statements for intern
reporting purposes. For the third quarter ended and for comparative purposes, the entity shall, among the
others prepare a statement of cash flows for
a. The 3 months ended March 31 and for the 9 months ended March 31 both for previous and current year.
b. The immediately preceding year and for the 3 months ended March 31 of the current year.
c. The immediately preceding year and for the 9 months ended March 31 of the current year.
d. The 9 months ended March 31 both for previous and current fiscal year.
f. 32. An entity is preparing its financial statement for the first half of its financial year ending June 30, 2011.
One class of inventory has a cost per unit of P1000 and a net realizable value at June 30, 2011 of P1, 200
per unit. The net realizable value at year end is expected to be P900 per unit. The entity’s budget for the
year scheduled a major refurbishment project from April to June 2011. For legal reasons, the contract was
not signed until July 15, 2011on which date the work started. Which of the following statements is true?
g. I. Inventory shall be carried at its net realizable value at June 30, 2011.
h. II. The cost of the project shall be accrued on June 30, 2011.
a. I only
c. Both I and II
b. II only
d. Neither I nor II
e. 33. Which of the following are true regarding operating segments?
f. I. Corporate headquarters may be operating segments
g. II. Postemployment benefit plans may be operating segments
h. III. Start up operations may not be operating segments
a. I and II
c. III only
b. I,II and III
d. All statements are not true
e. 34. What is the practical limit to the reportable segments?
a. Six
b. Ten
c. No precise limit, but if the number exceed six, the entity shall consider if a practical limit has been reached.
d. No precise limit, but if the number exceeds ten, the entity shall consider if a practical limit has been reached.
f. 35. All of the following shall be disclosed as segment assets for each reportable segment, except
a. Accounts receivable
c. Deferred tax assets
b. Inventory
d. Trademark
e. 36. Which of the following is true?
a. Segment revenue and segment expense are defined in PFRS 8.
b. A major customer’s revenue is 10% or more of the combined revenue of all segments.
c. The chief operating decision maker is usually the chief executive officer.
A1 PASSERS REVIEW CENTER///105
d.
f.
g.
h.
i.
a.
b.
e.
a.
b.
c.
d.
f.
a.
b.
c.
d.
g.
a.
b.
c.
d.
h.
a.
b.
e.
a.
b.
c.
d.
f.
a.
b.
c.
d.
g.
a.
b.
c.
d.
h.
a.
b.
c.
d.
i.
j.
k.
a.
b.
e.
a.
b.
e.
a.
b.
e.
a.
All reportable segments are operating segments.
37. All of the following are considered cash, except
Bills and coins
c. Stale check
Bank draft
d. Money order
38. Which of the following is true?
The practice of opening books of accounts beyond the close of accounting period is called kiting.
Misappropriation of collections from customers is called window dressing.
Lapping is the transfer of cash from one bank to another bank to conceal a shortage.
Sinking fund can be classified as a current asset under certain circumstances.
39. Which of the following will not require an adjusting entry on the depositor’s books?
DAIF check from customer
Collection from a customer amounting to P90, 000 recorded by depositor as P900,000.
Deposit of another entity credited by the bank to the account of the depositor
Loans proceeds credited to the depositor’s account
40. A Cash Over and Short account
Is not generally accepted
Is debited when the petty cash fund proves our over.
Is debited when the petty cash fund proves our short.
Is a contra cash account
41. Trade accounts receivable are subsequently measured at
Present value
c. Face value
Amortized cost
d. Future value
42. Which of the following is true?
Origination fees received from the borrower will increase interest income.
Direct origination cost incurred will increase interest income.
Indirect origination cost incurred is included in the carrying amount of the loan receivable.
Loan receivable is subsequently measured at amortized cost using straight line.
43. In computing in the present value of the loan receivable to test for impairment, the discount rate is
the
Prevailing market rate of similar loans
Original effective rate of the loan
New interest rate from agreement between the debtor and creditor
Weighted average cost of capital
44. Equity in assigned accounts of an entity is the difference between
Accounts receivable-Unassigned and accounts receivable-assigned
Accounts receivable- assigned and outstanding principal of bank loan
Accounts receivable- unassigned and outstanding of principal of bank loan
Accounts receivable- assigned and accounts receivable pledged
45. Which of the following is true?
Accounts receivable hypothecated will decrease total current assets
Accounts receivable assigned will increase total cure4nt assets
Notes receivable discounted with recourse will increase with total current assets.
Factors holdback should be included in the seller’s total receivables
46. On November 1 of the current year, an entity received a one year note receivable bearing interest
which is below the market rate. When the note receivable is recorded on November 1. Which of the
following of the following will be debited?
I. Interest receivable
II. Discount on note receivable
I only
c. Both I and II
II only
d. Neither I nor II
47. After being held for 30 days, a 90-day 10% interest bearing note was discounted at a bank at 12%.
Discount will based on.
30 days at 12%
c. 30days at 10%
60 days at 12%
d. 60 days at 10%
48. All of the following will be included in the entity’s inventory, except
Goods in transit purchased free alongside
c. Goods in transit sold ex-ship
Goods in transit purchased CIF
d. Goods held on consignment
49. Goods shipped FOB Buyer that are in transit at the end of the year should be included in the
financial statements of the
Buyer
b. Seller
A1 PASSERS REVIEW CENTER///106
c.
e.
a.
b.
c.
d.
f.
g.
h.
i.
j.
a.
b.
c.
d.
k.
a.
b.
e.
a.
b.
e.
a.
b.
c.
d.
f.
a.
b.
e.
a.
b.
c.
d.
f.
a.
b.
c.
d.
g.
Agent
d. Common carrier
50. An entry debiting accounts payable and crediting inventory would be made when
Merchandise is acquired and the periodic method is used
Merchandise is returned and the periodic method is used
Merchandise is acquired and the perpetual method is used
Merchandise is returned and the perpetual method is used
51. Which of the following is true regarding the allowance method for recording inventory write-down?
Inventory is measured at cost.
If the allowance at thebe and of the year exceeds the allowance at the beginning of the year, the
difference will decrease cost of sales.
If the allowance at the beginning of the year exceeds the allowance at the end of the year, the difference
will not be recognized.
The presence of an allowance account indicates that cost exceeds net realizable value of inventory at
year-end.
52. Which of the following would cause a decrease in the cost ratio used in the retail inventory method?
Higher retail prices
c. More employee discounts
Lower net mark-ups
d. Higher freight in costs
53. All of the following are products after harvest, except
Leaf
c. Lumber
Tea
d. Cured tobacco
54. Which of the following is not within the scope of PAS 41 agriculture?
Accounting for a herd cattle
Initial measurement of wool from sheep
Ripening of mangoes for commercial sale
Government grant received in respect of trees in plantation forest?
55. Which of the following should not be considered financial asset?
Held to maturity securities
c. Investment associate
Leased assets
d. Bank account
56. Which of the following is true?
Interchange of management personnel is not an indicator of significance influence.
The existence of convertible bonds may be considered whether significant influence is present.
Under the equity method, the investor and investee are viewed as two separate legal units.
Investment preference shares may have significant influence
57. An associate recognized revaluation surplus on its equipment on it’s in the current year. How will it
affect the investment in associate balance?
No effect
It will increase the investment with a corresponding increase in investment income.
It will increase the investment balance with a corresponding increase in the investor’s equity.
It will decrease in investment balance.
58. An investor uses the equity method. On the date of purchase, the investee’s FIFO inventory and
land fair values exceeded their carrying amounts. How will these excesses affect investor’s share in the
investee’s net income?
h.
i. Inventory excess
Land excess
a. Decrease
Decrease
b. Decrease
No effect
c. Increase
Increase
d. Increase
No effect
j. 59. Bonds usually sell at a discount when investors are willing to invest in the bonds
a. At the coupon interest rate
c. At rate higher than the stated interest rate
b. At rate lower than the stated interest rate
d. When the need arises
e. 60. Which of the following is not considered investment priority?
a. Land to be leased out under the finance lease
b. Building held for undetermined use
c. Building being constructed for use as investment property
d. Land held for capital gains
f. 61. Which of the following is not a “notional” of a derivative contract?
a. Principal amount of bank loan
c. Total amount of foreign currency
b. Number of kilos
d. Commodity price
A1 PASSERS REVIEW CENTER///107
e.
a.
b.
e.
62. Uncertainty about the future market value of an asset is referred to as
Price risk
c. Interest rate risk
Credit risk
d. Exchange rate risk
63. An entity acquired a tract of land by issuing bonds by payable. Both the fair value of the land and the
fair value of the bonds can be determined reliably. What will be the initial measurement of the land?
a. Fair value of the land
c. Par value of the bond
b. Fair value of the bonds
d. Assed value of the land
e.
f.
g.
h.
i.
j. 64. If an asset was acquired in the exchange and there is cash involved, how will the recipient of cash
compute the cost of the new asset received?
a. Fair value of the asset given plus cash received
b. Fair value of the asset received plus cash received
c. Fair value of the asset given minus cash received
d. Carrying amount of the asset given minus cash received
k. 65. Which of the following is considered government assistance?
a. Improvement in communication network
b. Imposition on trading constraints on competitors
c. Free marketing advice
d. Improvement in parks and other recreational areas
l. 66. Which of the following is false concerning government grant?
a. Nonmonetary government grant is recorded at fair value.
b. Grants related to depreciable assets must recognize as an income over the useful life of the asset using
the straight line.
c. Grants that become repayable because of violations are treated as changes in accounting estimate.
d. Grants in recognition of specific costs are recognized as income over the same period as the relevant
expense.
m. 67. Which of the following is not capitalized as part of the cost of a building?
a. Architect fee
b. Renovation costs prior use
c. Property tax incurred after date of acquisition
d. Cost of temporary housing for construction workers
n. 68. If a qualifying asset is financed by both specific and general borrowing capitalizable borrowing cost
include
a. Actual borrowing cost on specific borrowing minus any investment income from temporary investment of
proceeds from borrowing
b. Average expenditures of the asset multiplied by the average capitalization rate
c. Actual borrowing cost on specific borrowing
d. Actual borrowing cost on general borrowing minus investment income from temporary investment of
borrowing?
o. 69. Revaluation surplus is based on
p. I. fair value
q. II. Replacement cost in the absence of fair value
a. I only
c. Both I and II
b. II only
d. Neither I nor II
e. 70. Revaluation surplus that is realized because of the use of the asset or its disposal may be
transferred to
a. Retained earnings
c. Other comprehensive income
b. Share premium
d. Profit or loss
e. 71. A purchased patent with a remaining legal life of 15 years should be
a. Amortized over 15 years
b. Amortized over its useful life if shorter than 15 years
c. Amortized over its useful life when longer than 15 years
d. Not amortized but tested for impairment annually.
f. 72. The term “betterment “refers to
a. An expenditure made for new facilities which increase “capacity”
b. An expenditure made to restore “capacity “after abandonment or retirement
c. An expenditure made to improve existing facilities by increasing “capacity”
d. An expenditure made to help insure continuity of service capacity.
g. 73. Which of the following expenditure may properly be capitalized?
A1 PASSERS REVIEW CENTER///108
a. Expenditure for massive advertising campaign.
b. Insurance on plant during construction
c. Research and development related to long term asset which is giving the entity a competitive market
advantage.
d. The search and other legal cost related to a piece of property which was not acquired.
h. 74. In which of the following depreciation method is residual value not a factor in determining
depreciation charge in the early years of the assets life?’
a. Straight line
c. Productive output
b. Service hours
d. Declining balance
e. 75. An addition that is an integral part of an older asset normally would be depreciated over
a. The useful life of the addition
b. The useful life of the addition or the original asset, whichever is shorter
c. The useful life of original asset
d. Either the useful life of addition or the original asset, as a matter of professional judgement
f.
g.
h.
i. 76. Information needs to compute a depletion charge per unit includes the
a. Estimated of total amount of resources available for removal
b. Amount of resources removed during this period
c. Cumulative amount of resources removed
d. Amount of resources sold during this period.
j. 77. Which of the following expenditures would never qualify as an exploration and evaluation asset?
a. Expenditure for acquisition of rights to explore
b. Expenditure for exploratory drilling
c. Expenditures related to the development of mineral resources
d. Expenditures for activities in relation to evaluating the technical feasibility and commercial viability of
extracting mineral resource.
k. 78. The amortization method used for an intangible asset shall reflect the pattern in which the assets
economic benefits are consumed by entity, if such pattern cannot be determined reliably. What is the
amortization method used?
a. Straight line
b. Production method
c. Diminishing balance method
d. Ratio of current year’s sales to the total expected sales
l. 79. Which is not a considered a research and development activity?
a. Routine ongoing efforts to refine, enrich or improve quality of existing product.
b. Laboratory research aimed at discovery of new knowledge.
c. Conceptual formulation and design of possible product or processes.
d. Design, construction and operation of a pilot plant.
m. 80. At the beginning of the current year, an entity purchased equipment for use in developing a new
product. The entity uses the straight line depreciation method. The equipment could provide benefits
over a 10 year period. However, the new product developments expected to take five years, and the
equipment can be used only for this project. The entity’s expense for the current year equals
a. The total cost of the equipment.
b. One - fifth of the cost of the equipment
c. One - tenth of the cost of the equipment
d. Zero
n.
o.
p.
q.
r.
s.
t.
u.
v.
w.
x.
y.
z.
aa.
ab.
A1 PASSERS REVIEW CENTER///109
ac.
ad.
ae.
af.
ag.
ah.
ai.
aj.
ak.
al.
am.
an.
ao.
ap.
aq.
ar.
as.
at.
au.
av. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
aw.
2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
ax. Tel. No.: (033) 320-2728; 09106547262
ay. Email Address:
[email protected]
az.
ba. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
bb.
bc. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A
bd.
be.
THEORY OF ACCOUNTS
bf.
bg. INSTRUCTION: Select the correct answer for each of the following questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on the
answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use the pencil no. 1 only.
bh. __________________________________________________________________________________
______
bi.
bj.MULTIPLE CHIOCE:
bk.
bl. 1. Special journals help most by
A. Easing the preparation of the financial statements
B. Limiting the number of transactions that have to be recorded
C. Reducing the cost of operating this accounting system
D. Improving accuracy in posting to subsidiary ledgers
bm. 2. The key to good internal control of payroll is
A. Using a payroll bank account
C. Separating payroll duties
B. Using time cards
D. Using a payroll register
E. 3. Achiever Corporation owns 50 of the outstanding capital stock of Door Farms, Inc. last year, the
profits of Achiever from the transactions with Doer amounted to P140, 000. The elimination for
intercompany profit is
A. P14,000
C. P70,000
B. None
D. P140,000
E. 4. When translating an amount for fixed assets shown on the statement of financial position of a foreign
subsidiary, the appropriate rate of translation is the
A. Average exchange rate for the current year
B. Current exchange rate
C. Average exchange rate over the life of each fixed asset
D. Historical exchange rate
F. 5. Which of the following is the appropriate basis for valuing fixed assets acquired in a business
combination accounted for as a purchase carried out by exchanging cash for common stock?
A. Cost plus any excess of purchase price over book value of asset acquired
B. Historical cost
A1 PASSERS REVIEW CENTER///110
C. Fair value
D. Book value
G. 6. Balancing the ledger at the end of the period is most closely related to
A. Control
C. Flexibility
B. Favorable cost? benefit relationship
D. compatibility
E. 7. How about gain or loss from the disposal of a business enterprise be shown on the financial
statements?
A. A separate item before income taxes
C. A separate item after continuing operations
B. As extraordinary item
D. A retained earning adjustment
E. 8. It denotes the responsibility to others that one or more persons have for their actions and behaviour.
A. Balanced budget
C. Accountability
B. All of these
D. Obligations
E. 9. Which of the following is the transaction between related parties that commonly occur in the normal
course of business?
A. Services received or furnished, such as accounting, management, engineering, and legal services
B. Use of property and equipment by lease or otherwise, and etc.
C. All of these
D. Sales, purchases and transfer of realty and personal property
F. 10. Financial accounting is said to be concerned with
A. Analyzing the financial reports
B. Summarizing and presenting financial information on reports
C. All of these
D. Recording financial transaction
G.
H.
I.
J.
K. 11. The acquisition of some or all the stock held by minority stockholders of subsidiary ---whether acquired by
the parent, the subsidiary itself, or another affiliate shall be accounted for by the
A. Pooling of interest method
B. None of these
C. Purchase method
D. Purchase method rather than by the pooling of interest method
L. 12. Which of the following is a disadvantage of the corporate form of business organization?
A. No mutual agency
C. Limited liability of stockholders
B. Transferability of ownership
D. Government regulation
E. 13. Accrual – basis accounting
A. Omits adjusting at the end of the period
B. Leads to the reporting of more complete information than does cash basis accounting.
C. Is not acceptable under GAAP
D. Results in higher income than cash basis accounting
F. 14. Depletion is computed in same manner as which depreciation method?
A. Unit of production
C. Sum of years digit
B. Double declining balance
D. Straight line
E. 15. Operating income using direct costing as compared to absorption costing would be higher
A. Under no circumstances
B. When the quantity of beginning inventory is more than the quality of ending inventory
C. When the quantity of beginning inventory equals the quantity of ending inventory
D. When the quantity of beginning inventory is less than the quantity of ending inventory
F. 16 The ratio at which the currencies of two counties are exchanged at a particular time.
A. Foreign currency
C. Closing rate
B. Foreign entity
D. Exchange rate
E. 17. The possession of direct and indirect power to direct or cause the direction of the management and
policies of an enterprise through ownership by contract or otherwise.
A. Principal owners
C. Control
B. Related parties
D. Immediate family
E. 18. Entries in the purchases journal are posted to the
A. Accounts receivable ledger and the accounts payable ledger
B. General ledger only
C. General ledger and the accounts payable ledger
D. General ledger and the accounts receivable ledger
F. 19. Cost of goods manufactured is used to compute
A. Manufacturing overhead applied
C. Cost of gold sold
B. Finished goods inventory
A1 PASSERS REVIEW CENTER///111
D. 20. Net income is P17, 000, depreciation is P9, 000, and amortization is P3, 000. In addition, the sale of a
plant asset generated a P4, 000 gain. Current assets other than cash increased P6, 000 and current
liabilities increased by P8, 000. What was the amount of cash flow from operations?
A. P27,000
C. P35,000
B. P31,000
D. P23,000
E. 21. Rearrange the following accounts in their logical sequence in the ledger
F. Notes payable
Cash
G. Accounts receivable
Jun Cruz, Capital
H. Sales revenue
Salary expense
I.
A. Cash, Accounts Receivable, Jun Cruz, Capital, Notes Payable Sales Revenue, Salary Expense
B. Accounts Receivable, Notes Payable, Cash, Jun Cruz, Capital Sales Revenue, Salary Expense
C. Notes Payable, Accounts Receivable, Cash, Sales Revenue Jun Cruz, Capital, Salary Expense
D. Cash, Accounts Receivable, Notes Payable, Jun Cruz, Capital Sales Revenue and Salary Expense
J. 22. Value engineering is used to reduce costs from
A. Initial budgeted cost to allowable cost
C. Life- cycle sale price to allowable cost
B. Initial budgeted cost to target cost
D. Target cost to allowable cost
E. 23. The purpose of the statement of cash flows is
A. All of these
B. Determine the ability to pay dividends and interest
C. Evaluate management decisions
D. Predict future cash flows
F. 24. Which is the most widely held class of stock?
A. Par value preferred stock
C. No par preferred stock
B. No par common stock
D. Par value common stock
E. 25. Dividends paid to stockholders are reported on the statement of cash flows as a(an)
A. Combination of the above
C. Operating activity
B. Financing activity
D. Investing activity
E.
F.
G.
H. 26. Which account causes the main difference between merchandisers adjusting and closing process and
that of as service business?
A. Interest revenue
C. Accounts receivable
B. Cost of goods sold
D. Advertising expense
E. 27. Ten-year, 11 percents bonds payable of P500, 000 were issued for P532, 000. Assume that the straight –
line amortization method is appropriate. The total annual interest expense on these bonds is
A. P58,200
B. P51,800
C. P55,000
D. A different amount each year because the bonds book value decreases as the premium amortized.
F. 28. Why does a pharmacy need a different kind of accounting system than a physician uses?
A. They have different kinds of journals and ledgers
B. They have different kinds of business transactions
C. They have different kinds of employees
D. They work different hours
G. 29. A plan or program of activities together with costs of undertaking them to meet goals or targets which
emphasize on expected results
A. Obligations
C. Performance budget
B. Supplemental budget
D. All of these
E. 30. Owners of record of known beneficial owners of 10 percent or more of the voting interest of the enterprise
A. None of these
C. Principal owners
B. Immediate family
D. Related parties
E. 31. Which of the following is the period cost?
A. Selling expense
C. Materials inventory
B. Manufacturing overhead
D. Direct labor
E. 32. It is generally referred to as a financial plan for carrying out activities in the future
A. Budget
C. Government budget
B. None of these
D. Government accounting
E. 33. For which of the following products is a process costing system most appropriate?
A. Houses
C. Breakfast cereal
B. Automobiles
D. Furniture
E. 34. Which of the following items is a nonmonetary asset?
A. Merchandise inventory
C. Cash
B. Sinking fund-unremitted reach
D. Investment in bonds
A1 PASSERS REVIEW CENTER///112
E. 35. Cash is P10, 000, net accounts receivable amount to P22,000 inventory is P55,000, prepaid expenses
total P3, 000, and current liabilities are P40, 000. What is the acid test ratio?
A. 2.25
C. 0.80
B. 0.25
D. 2.18
E. 36. In the absence of discontinued operations and changes in accounting principles, the following main
captions should appear in the income statement, if extraordinary items are reported
A. Income before extraordinary items less extraordinary items
B. Income before extraordinary items
F.
Extraordinary items (less applicable income tax of P) (Note)
G. C. None of these
H. D. Income aft6er extra ordinary items less Applicable income taxes of P
(Note)
I. 37. Statements which present the assets, liabilities, stockholders equity, revenues, and expenses of a parent
company and its subsidiaries as if the group were a single enterprise
A. Balance sheet and income statement
C. Balance sheet
B. Consolidated financial statements
D. Income statement
E. 38. The amount credited for a receipt of cash on account is
A. Accounts payable
C. Cash
B. Service revenue
D. Accounts receivable
E. 39. Sales total P440,000, cost of goods sold is P210,000, and operating expenses are P 160,000. How much
is gross margin?
A. P440,000
C. 70,000
B. P230,000
D. 210,000
E. 40. It is the systematic recording, classifying, summarizing, governmental transactions in terms of the money
and other resources consistent with accounting and budgetary laws.
A. Local government
C. Government budgeting
B. National government
D. Government accounting
E. 41. The credit balance in Allowance for Uncollectible is P14, 300 prior to the adjusting entries at the end of
the period. The aging of accounts indicates that an allowance of P78, 900 is needed. The amount of
expense to record is.
A. P93,200
B. P14,300
C. P78,900
D. P64,600
F.
G.
H.
I.
J. 42. A partnership records a partner’s investment of assets in the business at
A. The market values of the assets invested
B. A special value set by the partners
C. The partner’s book value of the assets invested
D. Any of the above, depending upon the partnership agreement
K. 43. The functions and activities necessary for the performance of major purpose of which a government entity
is established
A. Resources
C. Appropriation
B. Program
D. Performance budget
E. 44. The consistency principle has most direct impact on
A. Whether to use the periodic of the perpetual system
B. Whether to include or exclude an item in inventory
C. Whether to write inventory down to a market value below cost
D. Whether to change from one inventory method to another
F. 45. Which of the following items is not part of the cash inflows from financing activities?
A. Proceeds from issuing equity investments
B. Proceed from issuing bonds, mortgages and notes
C. Repayment of amount borrowed
D. Proceeds from other short-term or long-term borrowing
G. 46. Entries prepared, as a step in accounting process, to bring the books and accounts up to date, is known
as:
A. Closing entries
C. Opening entries
B. Adjusting entries
D. Reversing entries
E. 47. The information provided in the statement of cash flows, if used with related disclosures and information
in the other financial statements, should help investors, creditors, and others to
A. Assess the enterprise’s ability to generate positive future net cash flows
B. All of these
C. Assess the enterprises’ ability to pay its dividends, and its need for financing
D. Assess the reasons for differences between net income and associated cash receipts and payments
A1 PASSERS REVIEW CENTER///113
F. 48. A machine with a ten year useful life is being depreciated on a straight-line basis for financial statement
purposes, and over five years for income tax purposes under the accelerated cost recovery system.
Assuming that the company is profitable and that there are and have been no other timing differences, the
related deferred income taxes would be reported on the balance sheet at the end pf the first year of the
estimated useful life as a
A. Current liability
C. Current asset
B. Noncurrent asset
D. Noncurrent liability
E. 49. A company paid P450,000 for a building and depreciated it by the straight line method over a 40 year life
with estimated residual value of P50,000. After 10 years, it became evident that the building’s remaining
useful life would be 40 years. Depreciation for the eleventh year is
A. P7,500
C. P8,750
B. P12,500
D. P10,000
E. 50. Beginning inventory was P35,000, purchases were P`146,000, and sales totalled P240,000. With normal
gross margin of 35 percent, how much is ending inventory.
A. P 181,000
C. P 35,000
B. P 25,000
D. P 97,000
E. 51. Which of the following is a nonmonetary asset?
A. Due from employees
C. Cash
B. Merchandise inventory
D. Accounts receivable
E. 52. An advantage of using the payback method of evaluating capital budgeting alternative is that payback is
A. Insensitive to the life of the projected considered
B. Precise in estimates of profitability
C. Based on noncash flow data
D. Easy to apply
F. 53. The account number 211031 most likely refers to
A. Accounts payable
C. Liabilities
B. An individual vendor
D. Current liabilities
E. 54. The work sheet is a
A. Financial statement
F. Convenient device for completing the accounting cycle
G. B. Ledger
H. C. Convenient device for completing the accounting cycle
I.
D. Journal
J. 55. Adjusting entries
K. A. Help to properly measure the period’s net income or net loss
L. B. All of these
M. C. Bring asset and liability accounts to correct balances
N. D. assign revenues to the period in which they are earned
O.
P.
Q.
R. 56. Which of the following quantitative techniques is used to determine the fixed and variable elements of a
semi variable cost?
a. Queuing theory
c. Linear programming
b. Simple method
d. Least squares
e. 57. In a make or buy decision
a. Only conversion costs are relevant
b. Only variable costs are relevant
c. Fixed costs that can be avoided in the future are relevant
d. Fixed costs that will continue regardless of the decision are relevant
f. 58. Which of the following transactions would increase a company’s positive current ratio?
a. Use the equity method to reflect earnings of an investee
b. Sell a temporary investment at a loss
c. Repay the principal on a short term note
d. Borrow money on a short term note
g. 59. How much will an investor pay for P100, 000 bond priced at 101, plus brokerage commission of P1, 100?
a. P101,975
c. P101,100
b. P101,875
d. P100,000
e. 60. The currency other than reporting currency of an enterprise is
a. Foreign currency
c. Foreign currency loan
b. Foreign ratio
d. Closing rate
e. 61. You have purchased some unclaimed freight for P20, 000 and can sell it immediately for P30, 000. What
accounting concept principle governs the amount at which to record the goods you purchased?
a. Going concern concept
c. Cost principle
b. Entity concept
d. Reliability principle
e. 62. The income statement item that is likely to be most useful for predicting income from year to year is
A1 PASSERS REVIEW CENTER///114
a. Net income
c. Income from continuing operations
b. Discontinued operations
d. Extraordinary items
e. 63. Financial plan for the general expenditure of government
a. Special budget
c. Supplemental budget
b. Deficiency budget
d. General budget
e. 64. Discounting a note receivable is a way to
a. All of these
c. Update an account
b. Collect on a note
d. Increase interest
e. 65. An understatement in reported net income may arise from the failure to record
a. The amortization of discount in bonds payable
c. An occurred liability
b. A deferred income
d. A prepaid insurance
e. 66. Pocholo Corporation owns 30 percent of the voting stock of Maxie, Inc. Maxi reports a net income of
P100, 000 and declares and pays cash dividends’ of P40, 000. Which method should Pocholo use to
account for this investment?
a. Cost
c. Equity
b. Market value
d. Consolidation
e. 67. The matching principle provides guidance in accounting for
a. Owner’s equity
c. Liabilities
b. Expense
d. Assets
e. 68. The recording phase of financial accounting covers the following steps, except:
a. Business documents are received and
c. Transactions are posted to the ledger
prepared
d. Financial statements are prepared
b. Transactions are journalized
e. 69. A payment on account was recorded by debiting Inventory and crediting cash. This entry was posted. The
correcting entry is
f.
a. Accounts payable x
g. Inventory
x
h. b.
Inventory
x
i.
Accounts payable
x
j.
c.
Cash
x
k.
Inventory
x
l.
d.
Cash
x
m.
Accounts Payable
x
n. 70. Trading investments are reported at the
o. A. Total equity value
r. D. Lower of the total cost or total market value
p. B. Total cost of the investment
of the investment
q. C. Total market value of the investment
s. 71. A party that controls, is controlled by, or is under common control with an enterprise either directly through
one or more intermediaries
t. A. None of these
v. C, Subsidiary
u. B. Affiliate
w. D. Parent company
x.
y.
z.
aa. 72. Which of the following items appears on the bank side of bank reconciliation?
ab. A. Outstanding check
ad. C. NSF Check
ac. B. Interest revenue earned on bank balance
ae. D. Book error
af. 73. In considering in financial reporting, how did the Accounting Principles Board conclude that such reporting
should be viewed?
ag. A. As useful only if activity is evenly spread throughout the year so that estimates are unnecessary
ah. B. as a special type of reporting that need not follow generally accepted accounting principles
ai. C. As reporting for a basic accounting period
aj. D. As reporting for an integral part of an annual period
ak. 74. discounting a note receivable create a (an)
al. A. Protest fee
an. C. Contingent liability
am. B. Interest expense
ao. D. Cash disbursement
ap. 75. Stockholders of one company give up their stock in exchange for the stock of the other company; they
continue to be stockholders; but now in the expanded entity
aq. A. None of these
as. C. Acquisition method of recording a
ar. B. Leverage or trading on equity
combination
at. D. Pooling of Interests
au. 76. Expenditures in the government are broadly classified into
av. A. Current operating
ax. C. Obligations incurred
aw. B. Obligation of Allotment
ay. D. Capital outlays
az. 77. Which of the following definitions fits subsidiary
ba. A. An enterprise that is controlled by another enterprise
A1 PASSERS REVIEW CENTER///115
bb. B. None of these
bc. C. Ownership, directly or indirectly through subsidiaries, of more than half of the voting power of an enterprise
bd. D. An enterprise that has one or more subsidiaries
be. 78. Family members whom a principal owner or member of management might control or influence or by
whom they might be controlled or influenced because of the family relationship
bf. A. None of these
bh. C. Related parties
bg. B. Principal owners
bi. D. Immediate family
bj. 79. A financial plan to augment the general budget
bk. A. Deficiency budget
bm. C. Special budget
bl. B. General budget
bn. D. Supplemental budget
bo. 80. In foreign exchange transactions, the ratio at which the currencies of two countries are exchanged at a
particular time
bp. A. Closing rate
br. C. Exchange rate
bq. B. Spot rate
bs. D. Forward rate
bt. 81. Under the revenue principle, revenue is recorded
bu. A. at the end of accounting period
bw. C. After it has been earned, but not before
bv. B. At the latest acceptable time
bx. D. At the earliest acceptable time
by.82. Using direct materials in production and charging direct labor costs to a job in debits to
bz. A. Finished Goods Inventory
cc. D. Materials inventory and manufacturing
ca. B. Work in Process Inventory
wages
cb. C. Direct materials and direct labor
cd. 83. Which of the following items is revenue expenditure?
ce. A. Legal fee paid to acquire land
cf. B. Survey of fee paid during the acquisition of land
cg. C. Building permit paid to construct a warehouse on the land
ch. D. Property tax paid on the land one year after it is acquired
ci. 84. How are financial ratios used in decision making?
cj. A. They can help identify the reasons for success and failure in business but decision making requires
information beyond the ratios.
ck. B. They remove the uncertainty of the business environment.
cl. C. They aren’t useful because decision making is too complex
cm. D. They give clear signals about the appropriate action to take
cn. 85. Cash outflows for financing activities
co. A. Other principal payments to creditors who have extended long term credit
cp. B. All of these
cq. C. Payment of dividends
cr. D. Repayment of amounts borrowed
cs.86. The ratio of security to long term liabilities, which measures the protection against the presently
outstanding debt and indicates the available sources of additional funds, is computed as follows:
ct. A. Total liabilities over total assets
cv. C. Long term liabilities over fixed assets
cu. B. Stockholders equity over total liabilities
cw. D. Fixed assets over long term liabilities
cx.87. Net income was P240, 000 in 1074, P210, 000 in 1975, and 252, 000 in 1976. The change from 1975 to
1976 is a (an)
cy. A. Decrease of 10 percent
da. C. Decrease of 12:15 percent
cz. B. Increase of 20
db. D. Increase of 5 percent
dc.
dd.
de.
df.
dg. 88. When earnings per share is computed dividends on preferred stock are
dh. A. added because they represent earnings to be preferred stockholders
di. B. Reported separately on the income statement
dj. cause they represent earnings to the preferred stockholders
dk. D. Ignored because they do not pertain to the common stock
dl. 89. Which of the following accounts would be included in the calculation of a company’s acid test ratio?
dm. A. Accounts receivable: No
Inventories: No
dn. B. Accounts receivable: No
Inventories: Yes
do. C. Accounts receivable: Yes Inventories: Yes
dp. D. Accounts receivable: Yes Inventories: No
dq. 90. Which of the following methods of reporting attempts to eliminate the effect of the changing value of the
peso?
dr. A. Historical cost restated for changes in the general price levels
ds. B. Replacement value
dt. C. Discontinued net present value of future cash flows
du. D. Retirement value
dv.91. What are the rules on the use of government funds?
A1 PASSERS REVIEW CENTER///116
dw. A. No obligation shall exceed allotment
dy. C. All of these
dx. B. No allotment shall exceed appropriation
dz.
D. No liquidation shall exceed obligation
ea. 92. If the note payable in the preceding question had been the cash proceeds from issuance would have
been
eb. A. P9,100
ed. C. P9,700
ec. B. P9,625
ee. D. P10,000
ef. 93. A management consultant is scheduling a long term research and development project. The time table is
very tight due to the rainy season and to in adequate research staff the requirements are extensive and
complex, what is the appropriate approach for planning and controlling the government highway project.
eg. A. Time series or trend regression analysis
ej. D. Program evaluation review technique
eh. B. Cost volume earnings analysis
(PERT)
ei. C. Queuing theory analysis
ek. 94. Investment in activity –based costing systems justice only they lead to
el. A. More accurate inventory values
en. C. Better cost driver analysis
em. B. Better management decisions
eo. D. More accurate product costs
ep. 95. A supportive argument for the pooling method of accounting or a business combination is that
eq. A. A portion of the total cost is assigned to individual asset
er. B. Goodwill is generally a part of acquisition
es. C. The company is clearly the dominant and continuing
et. D. It was developed within the boundaries of the history cost system and is compatible with it
eu. 96. Posting is the process of transferring information from the
ev. A. Ledger to the trial balance
ex. C. Journal to the trial balance
ew. B. Ledger to the financial statement
ey. D. Journal to the ledger
ez. 97. Truelove Corporation is a stable, going concern which each invest about P50,000 in new plant and
equipment as an equip amount of older equipment is retired. It has been reporting income or both tax and
financial statement purposes by using straight line depreciation, but it has not changed to accelerated
depreciation for tax purposes. This difference in depreciation methods caused a deferred tax credit which
over the years will build up.
fa. A. Rapidly and then a slowly decline
fc. C. And then remain relatively constant
fb. B. Indefinitely
fd. D. Rapidly and slowly increase
fe. 98. Used by national government that provides uniform accounting for incurring and liquidating obligations.
The books used in this phase of accounting are the general journal, the journal and analysis of obligations,
the journal disbursements by disbursing officers, the journal of warrants issued, and the journal of checks
issued.
ff. A. Advice of allotment
fh. C. All of these
fg. B. Obligation of allotment
fi. D. Obligation of accounting office
fj. 99. A company has current ratio of 2 to 1. The ratio will decrease if the company
fk. A. Receivable a 5% stock dividend on one of its marketable securities
fl. B. Sells merchandise for more than cost and records the sale using the perpetual inventory method
fm. C. Plays a large account payable which had been a current liability
fn. D. Borrow cash on a six-month note
fo. 100. In a capital lease, the lease records
fp. A. A leased asset and lease liability
fq. B. Depreciation on the leased asset
fr. C. All of these
fs. D. Interest on the leased liability
ft.
fu.
fv. ***END***
fw.
fx.
fy.
fz.
ga.
gb.
gc.
gd.
ge.A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
gf. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
gg. Tel. No.: (033) 320-2728; 09106547262
gh. Email Address:
[email protected]
gi.
gj. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
gk.
gl. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
A1 PASSERS REVIEW CENTER///117
gm.
gn. AUDITING THEORY
go.
gp. INSTRUCTION: Select the correct answer for each of the following questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on the
answer sheet provided. STICTLY NO ERASURES ALLOWED. Use pencil no. 1 only.
gq.
gr.MULTIPLE CHOICES:
gs. 1. When an auditor qualifies an option because of inadequate disclosure, the auditor should describe the
nature of the commission in a separate explanatory paragraph and modify the introductory and scope
paragraphs.
gt.
gu. When an auditor qualifies an option because of in adequate disclosure, the auditor should describe the
nature of the omission in a separate explanatory paragraph and modify the scope and opinion paragraphs.
gv.
gw. When an auditor qualifies an option because of inadequate disclosure, the auditor should describe the
nature of the commission in a separate explanatory paragraph and modify the introductory paragraphs.
gx.
A. First statement is correct, the second and third statements are correct
B. First and third statements are not correct, the second statement is correct
C. All statements above are not correct
D. First and second statements are not correct, the third statement is correct
gy.2. To be competent, audit evidence should be either persuasive or relevant, but need not be both.
gz. The difficulty and expense of obtaining audit evidence concerning an account balance is a valid basis for
omitting the test.
ha. Clients accounting data can be sufficient audit evidence to support the financial statements
A. First and second statements are not correct, the third statement is correct
B. All above statements are not correct
C. First and third statements are not correct, the second statement is correct
D. First statement is correct, the second and third statements are not correct
hb. 3. An auditor would most likely be concerned with internal control policies and procedures that provide
reasonable assurance about the entity’s ability to process and summarize financial data.
hc.
hd. An auditor would most likely be concerned with internal control policies and procedures that provide
reasonable assurance about the efficiency of management’s decision making process.
A. Both statements are correct
B. The first statement is not correct, the second statement is correct
C. Both statements are not correct
D. The first statement is correct, the second statement is not correct.
he. 4. Select the correct statement;
A. An auditor’s analytical procedures most likely would be facilitated if the entity corrects material weaknesses in
internal control before the beginning of audit.
B. Auditor’s analytical procedures most likely would be facilitated if the entity’s develops its data from sources
solely within the entity
C. Auditor’s analytical procedures most likely would be facilitated if the entity segregates obsolete inventory
before the physical inventory count
D. An auditor’s analytical procedures most likely would be facilitated if the entity uses a standard cost system
that produces variants reports.
hf. 5. An auditor assesses control risk because it indicates where inherent risk may be the greatest.
hg. An auditor assesses control risk because it determines whether sampling risk is sufficiently low.
hh. An auditor assesses control risk because it includes the aspects of non sampling risk that are controllable.
A. All above statements are correct
B. First statement is correct; the second and third statements are not correct
C. The second statement is correct; the first and third statements are not correct
D. All above statements are not correct
hi.
hj.
hk.
hl.
hm.6. The objective of a review of interim financial information is to provide the accountant with a basis for
reporting whether material modifications should be made to conform with generally accepted accounting
principles.
hn.
A1 PASSERS REVIEW CENTER///118
ho. The objective of a review of interim financial information is to provide the accountant with a basis for
reporting whether the financial statements are presented fairly in accordance with generally accepted
accounting principles.
hp.
hq. The objective of a review of interim financial information is to provide the accountant with a basis for
reporting whether the financial statements are presented fairly in accordance with standards of interim
reporting.
hr.
A. First and second statements are correct, third statement is not correct
B. First statement is correct, second and third statements are not correct
C. All statements are not correct
D. First and third statements are correct, second statement is not correct
hs. 7. The objective of the tolerable rate in sampling for the tests of controls of an internal control is to determine
the probability of the auditor’s conclusion based upon reliance factors.
ht.
hu. The objective of the tolerable rate in sampling for the tests of controls of an internal control is to determine
that financial statements taken as a whole are not materially in error.
hv.
hw. The objective of the tolerable rate in sampling for the tests of controls of an internal control is to estimate the
reliability of substantive tests.
A. First statement is correct ; the second and third statements are not correct
B. First and second statements are not correct ; the third statements is correct
C. First and third statements are not correct ; the second statements is correct
D. All above statements are not correct
hx. 8. A written engagement letter formalizing the level of the service to be rendered is a required documentation
in an audit in accordance with generally accepted auditing standard
A. True, False
C. False; True
B. Both statements are False
D. Both statements are True
E. 9. In the context of an audit of financial statements, substantive test are audit procedures that will increase
proportionately with the auditor’s reliance on internal control.
F.
G.In the context of an audit of financial statements, substantive test are audit procedures that will increase
proportionately with the auditor’s reliance on internal control.
A. First statement is not correct; the second statement is correct
B. Both statements are correct
C. Both statements are not correct
D. First statement is correct; the second statement is not correct
H. 10. The various evidences obtained directly by the auditor through observation such as tests counts of
inventory and those obtained directly from independent sources are considered relatively more persuasive
compared to evidences secured solely from within the entity.
I.
J. Evidence secured from within the entity like prenumbered purchase order forms is considered least
persuasive type of audit evidence compared to externally created documents such as bank statements
received from the client.
A. First statement is not correct, the second statement is correct
B. Both statements are correct
C. First statement is correct, the second statement is not correct
D. Both statements are correct
K. 11. In designing audit programs which of the following objectives should be given more weight:
A. That the auditor can make constructive suggestions to management
B. That the audit evidence gathered supports the auditor’s conclusions
C. That inherent risk is assessed at a sufficiently low level
D. The most of the required procedures can be performed as interim work
L. 12. Analytical procedures used in planning an audit should focus on identifying possible scope limitations and
gathering evidence in assessing control risk environmental factors.
M.
N. Analytical procedures used in planning an audit should focus on aggregating data at a low level and
substantiating management’s assertions that are embodied in the financial statements.
O.
P. Analytical procedures used in planning an audit should focus on discovering material weaknesses in the
internal control structure and reporting them to the entity’s management for corrective action.
A. First and second statements are not correct; the third statement is correct
B. All above statements are not correct
C. First and second statements are not correct; the third statement is correct
D. First and third statements are not correct; the second statement is correct
Q.
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R.
S.
T.
U. 13. Nonsampling risk includes only those aspects of audit-risk that are not due to sampling.
V.
W. Inherent risk is the susceptibility of an assertion to a material misstatement assuming that there are no
related internal control structure, policies and procedures.
X.
Y. Sampling risk arises from the possibility that, when a test of controls or a substantive test is restricted to a
sample, the auditor’s conclusions may be different from the conclusions he would reach if the test were
applied on the same way to all items in the account balance or class of transactions.
A. First and second statements are not correct; the third statement is correct
B. All above statements are not correct
C. First statements is correct; the second and third statements are not correct
D. All above statements are correct
Z. 14. Cut-off tests designed to detect credit sales made before the end of the year that have been recorded in
the subsequent year provide assurance about management’s assertion of completeness.
AA.
AB. Cut-off tests designed to detect credit sales made before the end of the year that have been recorded in
the subsequent year provide assurance about management’s assertion of rights.
AC.
A. First statement is not correct; the second statement is correct
B. Both statements are not correct
C. First statements is correct; the second is not correct
D. Both statements are correct
AD.15. Determine the audit test for which an auditor would most likely use attribute sampling;
A. Inspecting employee time cards for proper approval by supervisors
B. Examining invoices in support of the valuation of fixed asset additions
C. Selecting accounts receivable by for confirmation of account balances
D. Making an independent estimate of the amount of LIFO inventory
AE. 16. Which of the following procedures would most likely detect a fraud involving misstatement of income
statements due to recording of journal entries whit unusual combination of debits and credits to expense
and revenue account?
A. Investigating and reconciliations between controlling accounts and subsidiary record.
B. Tracing a sample of journal entries to general ledger
C. Evaluating the effectiveness of internal control
D. Performing analytical procedures designed to disclose differences from expectations
AF.17. In the process of obtaining an understanding of an entity’s internal control in a financial statement audit,
the auditor is not obligated to determine whether the control procedure have been placed in operation.
AG.
AH.In the process of obtaining an understanding of an entity’s internal control in a financial statement audit, the
auditor is not obligated to perform procedures to understand the design of the internal control policies.
AI.
AJ. In the process of obtaining an understanding of an entity’s internal control in a financial statement audit, the
auditor is not obligated to search for significant deficiencies
AK. In the operation of the internal control
A. Second and third statement are not correct; the first statement is correct
B. First and third statements are not correct; the second statement is correct
C. All above statements are not correct
D. First and second statements are not correct; the third statement is correct
AL.18. The expected population deviation rate of client billing errors is 2%. The auditor has established a
tolerable rate of 4%. In the review of client invoices the auditor should use
A. Discovery sampling
C. Stratified sampling
B. Variable sampling
D. Attribute sampling
E. 19. Identify the correct combination of procedure which auditors most likely perform to obtain evidence about
fixed asset additions:
A. Recomputing calculations and obtaining written management representations
B. Observing operating activities and comparing balances to prior period balances
C. Confirming ownership corroborating transactions through inquiries of client personnel
D. Inspecting documents and physically examining assets
F. 20. When evaluating an entity’s accounting estimates, one of the auditor’s objectives is to determine whether
the estimates are not subject to bias.1
G. When evaluating an entity’s accounting estimates, one of the auditor’s objectives is to determine whether the
estimates are consistent with industry guidelines.
H. When evaluating an entity’s accounting estimates, one of the auditor’s objectives is to determine whether the
estimates are based on objective assumptions.
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A. First statement is correct; second and third statements are not correct.
B. All above statements are not correct
C. All statements are correct
D. The third statement is correct; first and second statements are not correct
I.
J.
K.
L. 21. When there has been a change in accounting principle that materially affects the compatibility of the
comparative financial statements presented and the auditor concurs with the change, the auditor should
(select the best answer)
A. Refer to the change in explanatory paragraph
B. Refer to the change in explanatory paragraph and concur explicitly with the change
C. Issue an “except for” qualified opinion
D. Concur explicitly with the change
M. 22. In statiscal sampling methods used in substantive testing, when would an editor most likely to stratify a
population into meaningful groups?
A. If the population has highly variable recorded amounts
B. If probability proportion to size sampling is used
C. If the auditor estimated tolerable mis statement is extremely small
D. If the standard deviation of recorded amounts is relatively small
N. 23. An auditor should design the written audit program so that all materials transactions will be selected for
substantive testing.
O.
P. An auditor should design the written audit program so that substantive test prior to the balance sheet date will
be minimized.
Q.
R. An auditor should design the written audit program so that each account balance will be tested under either
test of controls or test of transactions.
A. The first statement is correct; the second and third statement are not correct
B. All above statements are not correct
C. All above statements are correct
D. The third statement is correct; first and second statements are not correct
S. 24. Choose the element of the audit planning process most likely to be agreed upon with he client before
implementation of the audit of strategy.
A. The determination of the evidence to be gathered to provide a sufficient basis for the auditor’s opinion
B. The determination of the timing of inventory observation procedures to be performed
C. The determination of the pending legal matters to be included in the inquiry of the clients attorney
D. The determination of the procedures to be undertaken to discover litigation, claims and assessments
T. 25. The working papers serve to satisfy the auditor’s responsibilities concerning the code of professional of
ethics.
U.
V. The working papers serve to monitor the effectiveness of the CPA firm’s quality control procedures..
W.
X. The working papers serve to document the level of independence maintained by auditor.
A. First and third statements are not correct, the second statement is correct
B. Second and third statement are not correct; the first statement is correct
C. All above statements are not correct
D. First and second statements are not correct, the third statement is correct
Y. 26. Identify reason why employers bond employees who handle cash receipts:
A. Because fidelity bonds reduce the possibility of employing dishonest individuals and force employees in
position of trust to take periodic vacation s vacation and rotate their assigned duties
B. Because fidelity bonds reduce the possibility of employing dishonest individuals and facilitate an
independent monitoring of the receiving and depositing of cash receipts
C. Because fidelity bonds reduce the possibility of employing dishonest individuals and deter dishonesty making
employee aware those insurance companies may investigate and prosecute dishonest acts.
D. Because fidelity bonds reduce the possibility of employing dishonest individuals and protects employees who
make unintentional errors from possible monetary damages resulting from their errors
Z. 27. What should be the direction of the audit testing when determining the completeness of the recording of
transaction?
A. From the original source documents
C. From the general ledger balances
B. From general journal entries
D. From the adjusted trial balance
E. 28. Identify the correct statement
A. As part of understanding the internal structure culture , an auditor is not required to consider factors that
affect the risk of material misstatement
B. As part of understanding the internal control structure, an auditor is not required to ascertain whether internal
control structure policies and procedures have been placed in operation.
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A.
B.
C.
D.
C. As part of understanding the internal control structure, an auditor is not required to identify the types of
potential misstatements that can occur
D. As part of understanding the internal control structure, an auditor is not required to obtain knowledge about
the operating effectiveness of the internal control structure
F.
G.
H.
I.
J.
K.
L.
M. 29. Choose the correct statement:
A. An auditors best source of corroborative information of a clients plans to discontinue a line of business is a
written client representation letter
B. An auditors best source of corroborative information of a clients plans to terminate an employee pension plan
is a written client representation letter
C. An auditor’s best source of corroborative information of client’s plans to settle an outstanding lawsuit for an
amount less than the accrued loss contingency is a written client representation letter.
D. An auditor’s best source of corroborative information of client’s plans to make a public offering of its common
stock is a written client representation letter.
N. 30. In evaluating the reasonableness of an accounting estimate, an auditor most likely would concentrate in
key factors and asu8mptuions that are consistent prior periods.
O.
P. In evaluating the reasonableness of an accounting estimate, an auditor most likely would concentrate in key
factors and assumptions that are objective and not susceptible to bias.
Q.
R. In evaluating the reasonableness of an accounting estimate, an auditor most likely would concentrate in key
factors and assumptions that are deviations from historical patterns.
Third statement is correct; first and second statements are not correct.
All above statements are correct
First statement is correct; second and third statements are not correct
Second statement is correct; first and third statements are not correct
S. 31. Identify the required documentation in an audit in accordance with generally accepted auditing standards
A. A written audit program describing the necessary procedure to be performed
B. A written engagement letter formalizing the level of service to be rendered
C. A memorandum setting forth the scope of audit
D. A flowchart depicting the segregation of duties and authorization of transactions
T. 32. Compared to systematic selection, block selection is least desirable for use by an auditor.
U. Comparing stratified selection, with block selection the least desirable for use by an auditor is the block
selection.
V. Block selection the least desirable for use by an auditor for use by an auditor compared to to systematic
selection, stratified selection and sequential selection.
A. Only second statement is correct; all others are not correct statements are not correct.
B. Only first statement is correct; all others are not correct statements are not correct
C. All above statements are correct
D. All above statements are not correct
W.33. Select which of the following statements regarding the auditor’s primary objective in performing
procedures to obtain an understanding of internal control structure is correct
A. The primary objective is to provide the auditor with evidential matter to use in assessing inherent risk
B. The primary objective is to provide the auditor with a basis for modifying tests of controls
C. The primary objective is to provide the auditor with knowledge necessary for audit planning.
D. The primary objective is to provide the auditor with an evaluation of the consistency of application of
managements policies
X. 34. Select the correct statement about the reliability of evidential matter:
A. To be reliable, evidential matter should be convincing rather than persuasive
B. Reliability of evidential matter refers to the amount of corroborative evidence obtained
C. Information obtained indirectly from outside sources is the most reliable evidential matter
D. An effective internal control structure provides more assurance about reliability of evidential matter
Y. 35. Which of the following is considered the principal advantage of statistical method of attribute sampling
over nonstatistical methods?
A. The statistical method of attribute sampling provides a scientific basis for planning the tolerable rate.
B. The statistical method of attribute sampling provides a scientific basis for planning the sample size
C. The statistical method of attribute sampling provides a scientific basis for planning the risk of assessing
control risk too low
D. The statistical method of attribute sampling provides a scientific basis for planning the expected population
deviation rate
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Z. 36. An accountant’s compilation report should be dated as of the date of completion of the compilation.
AA.
AB. An accountant’s compilation report should be dated as of the date of transmittal of the compilation report.
A. Both statement are correct
B. First statement is not correct; the second statement is correct
C. First statement is correct, the second statement is not correct
D. Both statements are not correct
AC.
AD.
AE.
AF.
AG.
AH.
AI.
AJ.
AK. 37. Performing test of transactions to corroborate management financial statement assertion is included
when analytical procedure is used to the overall review stage of an audit. Restating control of procedures
that appeared to be ineffective during the assessment of control risk is included when analytical procedures
are used in the overall review stage of an audit.. Considering unusual or unexpected account balance that
were not previously identified is included when analytical procedure are used in the overall review stage of
an audit
A. All above statements are correct
B. Second statement is correct; first and third statement are not correct
C. First statement is correct; Second and Third statement are not correct
D. Third statement is correct; First and Second statement are not correct
AL. 38. Choose the statement which reflects auditors responsible for detecting errors and irregularities.;
A. An auditor is responsible for detecting employee errors and simple frauds, but not for discovering
irregularities involving employee collusion or management override.
B. An auditor should plan the audit to detect errors and irregularities that are caused by departures from
generally accepted accounting procedures.
C. An auditor should design the audit to provide reasonable assurance of detecting errors and irregularities that
are material to the financial statements.
D. An auditor is not responsible for detecting errors and irregularities unless the application of generally
accepted auditing standards would result in such detection.
AM. 39. When an entity changes its method of accounting for inventories which has a material effect on
comparability, the auditor should refer to the change in an explanatory paragraph added to the auditor’s
report. The paragraph should identify the nature of the change and
A. Explain why the change is justified under generally accepted accounted principles.
B. Describe the cumulative effect of the change on the audited financial statements
C. State the auditors explicit concurrence with or opposition to the change
D. Refer to the finical statement note the discusses the change in detail
AN.40. An auditor assesses control risk because it affects level of detection risk the auditor may accept.
AO. An auditor assesses control risk because it indicates where inherent risk may be the greatest.
AP. An auditor may access control risk because it determines whether sampling risk is sufficiently low.
A. First statement is correct, the second and third statement are not correct
B. The second statement is correct, the first and third statement are not correct
C. All above statements are correct
D. The third statement is correct, the first and second statements are not correct
AQ. 41 Why would an auditor assess control risk?
A. Because it indicates where inherent risk may be the greatest
B. Because it determines whether sampling risk is sufficiently low
C. Because it affects the level of detection risk the auditor may accept
D. Because it includes the aspects of non sampling risk that are controllable
AR.42. An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an
auditor to eliminate the nonstatistical sampling.
AS.
AT. An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an
auditor to reduce the level of audit risk and materiality to a relatively low amount .
AU.
AV. An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an
auditor to minimize the failure to detect error and fraud.
A. All above statements are correct
B. First statement is correct, the second and third statement are not correct
C. The third statement is correct, the first and second statements are not correct
D. All above statements are not correct
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AW. 43. If an auditor is satisfied that there is only a remote likelihood of a loss resulting from the resolution of a
matter involving an uncertainty, the auditor should express an unqualified opinion with a separate
explanatory paragraph.
AX. If an auditor is satisfied that there is only a remote likelihood of a loss resulting from the resolution of a
matter involving an uncertainty, the auditor should express a qualified opinion or disclaimer of opinion,
depending upon the materiality of the loss.
AY. If an auditor is satisfied that there is only a remote likelihood of a loss resulting from the resolution of a
matter involving an uncertainty, the auditor should express a qualified opinion or disclaimer of opinion,
depending on whether the uncertainty is adequately disclosed.
A. Second statement is correct; the first and third statements are not correct.
B. All the above statements are not correct
C. First statement is correct, the second and third statement are not correct
D. The third statement is correct; the first and third second are not correct
AZ.
BA.
BB.
BC.
BD.
BE.
BF.
BG.
BH.
BI.44. With respect to the auditor’s consideration of an entity’s ability to continue as a going concern, which of
the following statements is applicable’?
A. If there is absence of reference to substantial doubt in the auditor’s report, this should be viewed as
assurance as to an entity’s ability to continue as going concern.
B. It is not necessary from the auditor to design audit procedure solely to identify conditions and events that
indicate there could be substantial doubt about the entity’s ability to continue as going concern for a
reasonable period of time.
C. The auditor has a responsibility to evaluate whether there is substantial doubt about the entity’s ability to
continue as going concern for reasonable period of time, not to exceed the date of financial statements
being audited.
D. The auditor’s working papers must include evidential matter which provides assurance that the entity will
continue as a going concern.
BJ. 45. Due to unusual circumstances, the financial statements contain a departure from generally accepted
accounting principles otherwise the statement would be misleading. Under the situation, the auditor should
explain the unusual circumstances in a separate paragraph and express an opinion that is
A. Unqualified
C. Qualified or adverse, depending on materiality
B. Adverse
D. Qualified
E. 46. What would be the most likely use of analytical procedure when testing long term investment?
A. To ascertain the reasonableness of the valuation of the marketable equity securities
B. To ascertain reasonableness of the existence of unrealized gains or losses in the investment portfolio
C. To ascertain the reasonableness of the completeness of recorded investment income
D. To ascertain the reasonableness of the classification between current and noncurrent investment portfolio
F.47. An auditor should design the written audit program in such a manner to ensure that
A. All material transactions will be selected for substantive testing
B. Each account balance will be tested under either tests of controls or test transactions
C. The audit procedures selected will achieve specific audit objectives
D. Substantive tests prior to the balance sheet date will be minimized
G. 48. The procedure you most likely perform in auditing the statement of cash flows is to compare the
amounts included in the statement of cash flows to similar amounts in the prior year statement of cash
flows.
H.
I. The procedure you most likely perform in auditing the statement of cash flows is to compare the amounts
included in the statement of cash flows to reconcile the cut off bank statements to verify the accuracy of the
year end bank balances.
J.
K. The procedure you most likely perform in auditing the statement of cash flows is to compare the amounts
included in the statement of cash flows is to vouch all bank transfer for the last week of the year and first
week of the subsequent year..
A. All the above statements are not correct
B. First statement is correct, the second and third statement are not correct
C. The first statement is not correct; the second and third statement are correct
D. All the above statements are correct
L.49. analyses of capital stock ant other owners equity accounts are working papers that would most likely be
included in an auditors permanent file.
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M.
N. Documentation indicating that the audit work was adequately planned and supervised are working papers
that would most likely be included in an auditors permanent file.
A. True; True
C. False; True
B. False; False
D. True; False
E. 50. An auditor would most likely have substantial doubt an entity’s ability to continue as a going concern if
research and development projects are postponed.
F.
G. An auditor would most likely have substantial doubt about an entity’s ability to continue as a going concern if
significant related party transactions are pervasive.
H.
I. An auditor would most likely have substantial doubt about an entity’s ability to continue as a going concern if
stock dividends replace annual cash dividends.
A. All the above statements are not correct
B. First statement is correct, the second and third statement are not correct
C. Second statement is correct; the first and third statement are not correct
D. Third statement is correct, the first and second statement are not correct
J.
K.
L.
M.
N.
O.
P.
Q.
R. 51. Inherent risk is the risk that the auditor will not detect a material misstatement that exist in an assertion.
S.
T.Nonsampling risk includes only those aspects of audit risk that re not due to sampling
U.
V. Inherent risk is the susceptibility of an assertion to a material statement, assuming that there are no related
internal control structures, policies or procedures.
A. First statement is not correct, the second and third statement are correct
B. All the above statements are not correct
C. All above statement are correct
D. First statement is correct, second and third statement are not correct
W.52. When differences are discovered during the clients annual physical inventory count, this would most
likely cause an auditor to consider whether material misstatements exist in an entity’s financial
statements.
X.
Y.When reportable conditions previously communicated have not been corrected, this would most likely
cause an auditor to consider whether material misstatements exist in an entity’s financial statements.
Z.
AA.When supporting records that should be readily available are frequently not produced when requested, this
would most likely cause an auditor to consider whether material misstatements exist in an entity’s
financial statements.
A. Second statement is correct, the first and third statements are not correct
B. First statement is correct, the second and third statement are not correct
C. Third statement is correct, the first and second statement are not correct
D. All above statements are correct
AB.53. Operational auditing is primarily oriented toward future improvements to accomplish the goals of
management
AC.
AD.Operational auditing is primarily oriented toward the accuracy of data reflected in management’s financialrecords.
A. Second statement is not correct, the second statement is correct
B. First statement is correct, the second statement are is not correct
C. Both statements are correct
D. Both statements are not correct
AE.54. When evaluating an entity’s accounting estimates, what is one of auditor’s objectives?
A. To determine whether the estimates are based an objective assumptions
B. To determine whether the estimates are reasonable in the circumstances
C. To determine whether the estimate are consistent with industry guidelines
D. To determine whether the estimates are not subject to bias
AF.
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AG.
55. To permit effective planning of the audit, the auditor must have an understanding of the internal
control structure. As part of understanding the internal control structure, the auditor is required to consider
factors that affect the risk of material statement
AH.
AI.To permit effective planning of the audit, the auditor must have an understanding of the internal control
structure. As part of understanding the internal control structure, the auditor is required to ascertain whether
internal control structure policies and procedures have been placed in operation.
A. First statement is not correct, and the second statements is correct
B. Both statements are correct
C. Both statements are not correct
D. First statement is correct, and the second statements is not correct
AJ. 56. Identify which of the following an auditor would least likely verify when auditing inventories:
A. That the financial statement presentation of inventories is appropriate
B. That damaged goods and obsolete items have been properly accounted for
C. That the client has used proper inventory pricing
D. That all inventory owned by the client is on hand at the time of the count
AK.57. What is an advantage of using statistical sampling on nonstatistical sampling methods?
A. The statistical methods afford greater assurance than nonstatiscal sample of equal size
B. The statistical methods can more easily convert the sample into a dual purpose test useful for substantive
testing
C. The statistical method provide an objective basis for quantitatively evaluating sample risk
D. The statistical methods eliminate the need to use the judgement in determining appropriate sample sizes.
AL. 58. The tolerable rate of deviations for a test of a control is generally (select the best answer)
A. Identical to the expected rate of errors in related accounting records
B. Lower than expected rate of errors in the related accounting records
C. Unrelated to the expected rate of errors in the related account ting records
D. Higher than the expected rate of errors in the related accounting records
AM.
AN.
AO.
AP.
AQ.
AR.
AS.
AT. 59. An auditor uses the knowledge provided by the understanding of internal control and the final assessed
level of control risk primarily to determine the nature, timing and extent of the substantive test.
AU.
AV. An auditor uses the knowledge provided by the understanding of internal control and the final assessed
level of control risk primarily to determine the nature, timing and extent of the tests of controls.
AW.
AX.An auditor uses the knowledge provided by the understanding of internal control and the final assessed
level of control risk primarily to determine the nature, timing and extent of the compliance test
A. Second statement is correct, the first and third statements are not correct
B. All above statements are correct
C. All above statements are not correct
D. First statement is correct, the second and third statements are not correct
AY. 60. A basic premise underlying the application of analytical procedures is that plausible relationships among
data may reasonably be expected to exist and continue in the absence of known conditions to the contrary.
AZ.
BA.In the context of an audit of financial statements, substantive test are audit procedures that may be either
test of transactions, direct tests of financial balances of analytical tests.
BB.
BC.A basic premise underlying the application of analytical procedure is that this procedure cannot replace
tests of balances and transactions.
A. Third statement is correct, but first and third second are not correct
B. All above statements are correct
C. First and second statements are correct, but the third statements is not correct
D. Second statement is correct, but both first and third statements are not correct
BD.
BE.
BF. ***END***
BG.
BH.
.
BI.
BJ.
BK.
A1 PASSERS REVIEW CENTER///126
BL.
BM.
BN.
BO.
BP.
BQ.
BR.
BS.
BT.
BU.
BV.
BW.
BX.
BY.
BZ.
CA.
CB.
CC.
CD.
CE.
CF.
CG.
CH.
CI.
CJ.
CK.
CL.
CM.
CN.
CO.
CP.
CQ.
CR.
CS.
CT.
CU.
DB.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
CV.
2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
CW.
Tel. No.: (033) 320-2728; 09106547262
CX.
Email Address:
[email protected]
CY.
CZ.BOARD OF CERTIFIED PUBLIC ACCOUNTANT
DA.
CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A
DC.
DD.
PRACTICAL ACCOUNITNG – PROBLEMS I
DE.
INSTRUCTION: Select the correct answer for each of the following questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on the
answer sheet provided. STICTLY NO ERASURES ALLOWED. Use pencil no. 1 only.
DF.
DG.
MULTIPLE CHOICE:
DH.
DI. 1. On January 1, 1996, a group of stockholders set up Toledo, Inc. they contributed cash of P1, 500,
000 and borrowed P220, 000. During the year, revenues from sales totalled P164, 000, while total cost
and expenses were P128, 000. Toledo declared a cash dividend of P6, 000 on December 15, payable
to the stockholders on January 15, 1997. There no additional activities affecting stockholders equity.
By December 31, 1996, liabilities increased to P240, 000. Total assets should be reported on Toledo’s
December 31, 1996, liabilities increased to P240, 000. Total assets should be reported on Toledo’s
December 31, 1996 balance sheet at
A. P 1,750,000
C. P1,770,000
B. P 1,764,000
D. P1,756,000
E.
A1 PASSERS REVIEW CENTER///127
F. 2. Following are selected information in Carisbad Company:
G.
H. Cash balance, January 1, 1996
P130,000
I. Accounts receivable, January 1, 1996
P190,000
J. Collections from customers in 1996
P2,100,000
K. Stockholders’ equity, January 1, 1996
P380,000
L. Total assets, January 1, 1996
P750,000
M. Total assets, December 31, 1996
P880,000
N. Accounts receivable, December 31, 1996
P360,000
O. Total liabilities, December 31, 1996
P390,000
P. The pet income of Carisbad for 1996 is:
A. P490,000
C. P150,000
B. P70,000
D. P110,000
E.
F. 3. Stanford Co. had 300,000 shares of common stock issued and outstanding at December 31, 1995.
G. No common stock was issued during 1996. On January 1, 1996, Stanford issued 200,000 shares of
nonconvertible preferred stock,. During 1996, Stanford declared and paid P75, 000 cash dividends on
the common stock and P60, 000 on the preferred stock. Not income for the year ended December 31,
1996 was P330, 000.
H.
I. What should be Stanford’s 1996 earnings per common share?
A. P0.90
C. P1.10
B. P0.90
D. P0.65
E.
F. 4. Ramagate.Co. Acquired a trademark for P10, 000,000 from Saint Albans Co. On January 2, 1996.
The trademark is carried in the accounting records of Saint Albans at an unamortized cost of
P7,600,00. Ramagates independent consultant has estimated that the remaining life of the trademark
is 50 years. The trademark is being amortized by Ramagate over the maximum period of allowable.
G.
H. What amount should Ramagate report as accumulated amortization in its December 31, 1996 balance
sheetr?
A. P152,000
B. P200,000
C.P250,000
D.190,000
I.
J.
K.
L.
M.
N. 5. Shown below are selected data from the balance sheet of Arizgoti Corp., a grocery store:
O. Current liabilities
P150,000,000
P. Noncurrent liabilities P120,000,000
Q. Cash
P20,000,000
R. Accounts receivable P100,000,000
S. Inventory
P195,000,000
T. Total assets
P450,000,000
A. 0.8 to 1
B. 1.25 to 1
C. 2.1 to 1
D. 0.133 to 1
U.
V. 6. The account balances for Villash Corp. As of December 31, 1997
W.Follow:
X. Accounts payable
P100,000
Y. Accounts receivable P120,000
Z. Building
P400,000
AA.Capital stock
P760,000
AB.Cash
P60,000
AC. Equipment
P160,000
AD. Land
P50,000
AE.Notes payable
P280,000
AF. Retained earnings
P100,000
A1 PASSERS REVIEW CENTER///128
AG.
AH. In a trial a balance prepared on December 31, 1997, the sum of the debit column is:
A. P860,000
C. P790,000
B. P1,440,000
D. P1,240,000
E. 7. Pinetown Corp. Has current assets of P180, 000 and current liabilities of P360,000. Which of the
following transactions would improve Pinetown’s current ratio?
A. Refinancing a P60, 000 long term mortgage with with a short term note.
B. Collecting P20,000 of short term accounts receivable
C. Purchasing P100,000 of merchandise inventory with a short term accounts payable
D. Paying P40,000 of short term Accounts payable
F. 8. The net income for the year ended December 31 for Lambourne Corporation was P3, 520,000.
Additional information are as follows:
G. Purchases of plant assets
P2,800,000
H. Depreciation of plant assets
P1,480,000+
I. Dividends declared on plant assets
970,000
J. Net decrease in noncash current assets
290,000+
K. Loss on sale of equipment
130,000+
L.
M. What should be the cash provided from operating activities in Lambourne Statement of cash flows for
the year and ended December 31?
A. P5,420,000
C. P7,250,000
B. P5, 130,000
D. P5,290,000
E. 9. On June 30, 1996, Louisiana Corp. Prepaid a P38, 000 premiums on an annual insurance policy. The
premium payment was a tax deductible expense in Louisiana’s 1996 cash basis tax return. The accrual
basis income statement will report a P19, 000 insurance expense in1996 and 1997.
F.
G. Louisiana’s income tax rate is 35% in 1996. Based on a new law, tax rate is 30% in subsequent years.
H.
I. In Louisiana’s December 31, 1996 balance sheet, what amount related to the insurance should be
reported as deferred income tax liability?
A. P11,400
C. P13,300
B. P6,650
D. P5,700
E. 10. During January 1997, Sydney Corp. won a litigation award for P15, 000 which was tripled to P45,000
to include punitive damages. The defendant, who is financially stable, has appealed only the P30, 000
punitive damages. The defendant, who is financially stable, has appealed only the P30, 000 punitive
damages.
F.
G. In its 1997 financial statements, Sydney should report what amount of pretax gain?
A. P15,000
C. P95,000
B. P50,000
D. P45,000
E.
F.
G.
H.
I. 11. A machinery was acquired by Clydeband Corp. In January 1994 at a cost of P1, 000,000. Estimated
salvage value of the machinery is P200,000 at a estimated useful life of eight years, under the
straight line method. In January 1996, clydeband has determined that there was a permanent
impairment in the value of the machinery. Thus, the carrying amount should be P350,000 only, with
remaining useful life of two years and a salvage value of P50,000
J.
K. The machinery should be reported in Clydeband’s December 31, 1996 balance sheet at a carrying
amount of:
A. P300,000
C. P700,000
B. P350,000
D. P200,000
E. 12.on July 1, 1996, Clichy Corp. purchased Enry Corp. ‘s ten year , 8% bonds with a face amount
P1,000,000 for P840,000. The bonds mature on June 30,2004 and pay interest semi-annually on June
30 and December 31. Using the interest method, Clichy recorded bond discount amortization of P3,
600 for the six month ended December 31, 1996
F. From this long term investment, Clichy should report 1996 revenue of:
A. P40,000
C.P33,600
B. P36,400
D.P43,600
E. 13. Hearst Co. Sold selected merchandise on a consignment basis during 1996. Heart’s 1996
accounting records show the following:
A1 PASSERS REVIEW CENTER///129
F.
Information:
G.
Inventory January 1
P244,000+
H.
Inventory on hand December 31
2890,000I.
Inventory out on consignment December 31
40,000
J.
Purchases
1,080,000
K.
Freight-in
20,000
L.
Freight-out
70,000
M.
Freight out to consignees
10,000
N.What should amount Hearst report as cost of goods sold in its 1996 income statement?
A. P1,054,000
C. P1,024,000
B. P1,094,000
D. P1,014,000
E. 14. During 1996, Melbourne, Inc. had the following activities related to its financial operations:
F. Payment for the early retirement of
G. Long term bonds payable (carrying value, P740, 000)
P750, 000
H. Distribution in 1996 of cash dividend declared in 1995
I. To preferred shareholders
62,000
J. Carrying value of convertible preferred stock converted
K. Into common shares
120,000
L. Proceeds from sale of treasury stock
M.
(Carrying value at cost, P86, 000)
95,000
N.
O. In Melbourne’s 1996 statement of cash flows, net cash used in financing activities should be:
A. P535,000
C. P597,000
B. P716,000
D. P717,000
E. 15. Cascade Range Inc. is determining the amount of its pretax financial income for 1997 by making
adjustment to taxable from the Company’s 1997 income tax return. The tax return indicates taxable
income of P380,000 on which a tax liability of P133,000 has been recognized (P380,000 x 35% = P
133,000)
F. Following are list of items that may be required to determine pretax financial income from the amount of
taxable income
G. 1. Accelerated depreciation for income tax purposes was P134,000, straight line depreciation on these
assets is P80,000 .
H. 2. Goodwill of amortization of P45,000 was not included as a deduction in the tax return, but may be
deducted in the income statement
I. 3. Several expenses were included in the income tax return on an estimated basis. These items will be
in the income statement at these same amounts but are the subject to change if new information in the
future indicates that the original estimates were inaccurate.
J. 4. Interest on treasury bills was not included in the tax return. During the year, P24, 700 was received
on these investments. Cascade Ranges pretax financial income amounts to :
A. P458, 700
B. P389,000
C. P359,700
D. P413,700
K.
L.
M.
N.
O.
P.
Q.
R. 16.Doaktown Inc. had the following amounts of long term debt outstanding at December 31,1996
S. 14- ½% term note, due 1997
P6,000
T. 11-1/8% term note, due 2000
214,000
U. 8% note, due in 11 equal annual principal
V. Payments, plus interest beginning
W. December 31, 1997
220,000
X. 7% guaranteed debentures, due 2001
___________
Y.
P640, 000
Z.
AA.Doaktown’s annual sinking fund requirement on the guaranteed debentures is P8,000 per year.
AB.
AC. What amount should Doaktown report as current maturities of long term debt in its December 31, 1996
balance sheet?
A1 PASSERS REVIEW CENTER///130
A. P20,000
C. P14,000
B. P26,000
D. P8,000
E. 17. on October 1, 1995 Pontiac, Inc. Committed itself to a formal plan to sell its Hempstead division assets.
On that date, Pontiac estimated that the loss from the disposal of assets in February 1996 would be
P500,000. Pontiac also estimated that the loss from the disposal of assets in February 1996 would be P500,
000. Pontiac also estimated that Hempstead would incur operating losses of P2, 000,000 for the period of
October 1, 1995 thought
F. December 31, 1995 and P1, 000,000 for the period January 1, 1996 through February 28, 1996. These
estimates were materially correct.
G.
H. Disregarding income taxes, what should Pontiac report as loss from discontinued operations in its
comparative 1995b and 1996 income statements respectively?
A. P2,500,000 and P1,000,000
C. P3,500,000 and P0
B. P0 and P3,500,000
D. P2,000,000 and P1,500,000
E. 18. Elmira Corp. Purchased bonds at a discount of P20,000. Subsequently, Elmira sold their bonds at a
premium of P28,000. During the period that Elmira held this investment, amortization of the discount
amounted to P4,000.
F. What amount should Elmira report as a gain on the sale of bonds?
A. P24,000
C. P52,000
B. P48,000
D. P44,000
E. 19. The working capital of Donostia Company is P600, 000 and its current ratio is 3 to 1. The amount of
current assets is:
A. P900,000
C. P600,000
B. P1,200,000
D. P1,800,000
E. 20. Salem Co. estimates its uncollectible accounts expense to be 2% of credits sales. Salem’s credit sales for
1997 were P1, 000,000. During 1997, Salem wrote off P18, 000 of uncollectible accounts. Salem’s
allowance for uncollectible accounts had a P15,000 balance on January 1, 1997.
F. In its December 31, 1997 income statement, what amount should Salem report as uncollectible accounts
expense?
A. P23,000
C. P20,000
B. P18,000
D. P17,000
E. 21. The bookkeeper of Dijon Co. recently prepared the following bank reconciliation:
F.
Dijon Co.
G.
Bank reconciliation
H.
December 31, 1997
I. Balance per bank statement
P126,420
J. Add:
K. Deposit in transit
P8, 700
L. Checkbook printing charge
210
M. Error made in recording check no. 25
N. (issued in December)
1600
O. NSF check
5,000
15, 510
P.
_________
Q.
141, 930
R. Deduct:
S. Outstanding checks
4,480
T. Note collected by bank (includes
U. P50 interest)
9,500
13,980
V.
___________
_____________
W.Balance per books
P127, 950
X.
--------------------Y.
Z.
AA.
AB.
AC.
AD.Dijon has P9,100 cash on hand on December 31,1997. The amount Dijon should report as cash on the
balance sheet as of December 31, 1997 should be:
A. P120,260
C. P130,640
B. P139,740
D. P132,240
A1 PASSERS REVIEW CENTER///131
E. 22. The peso value LIFO inventory method was adopted by Peterborough Co. as of January 1, 1996. LIFO
inventory layers are computed through a single inventory pool and internally computed price index.
Following is Peterborough’s a peso value inventory at current year cost and at base year cost:
F.
G.
H.
I.
J.
At year current
At base year
K.
Year cost
cost
L.
_____________
____________
M. January 1, 1995
P120,000
P120,000
N. 1995 layer
42,000
15,000
O.
_____________
____________
P.
162,000
135,000
Q. 1996 layer
78,000
45,000
R.
_____________
_____________
S. December 31, 1996
P240,000
P180,000
T.
--------------------------------------U. The peso value LIFO information also follows:
V. January 1, 1995
P120,000
W.1995, layer
18,000
X. December 31, 1995
138,000
Y. The peso value LIFO inventory of Peterborough at December 31, 1996 was:
A. P198,000
C. P180,000
B. P222,000
D. P240,000
E. 23. Roubaix failed to accrue warranty cost of P100,000 in its December 31, 1995 financial statements. In
addition, a change from straight-line to accelerated depreciation made at the beginning of 1996 resulted in a
cumulative effect of P60, 000 on Roubaix’s retained earnings. Both the P100,000 and the P60,000 are net of
related income taxes.
F. What amount should Roubaix report as prior-period adjustments in 1996?
A. P0
C. P160,000
B. P60
D. P100,000
E. 24. Avon, Inc. accepted from a customer a P40, 000, P90-day, 12% interest-bearing note date August 31,
1996. On September 30, 1996, Avon discounted the note of city bank at 15%. However, the proceeds were
not received until October 1, 1996. In Avon’s September 30, 1996 balance sheet, the amount receivable
from the bank, based on a 360 day year, includes accrued interest revenue of:
A. P200
C. P400
B. P300
D. P170
E. 25. Bressiure Corp. uses perpetual inventory system. At year end, Bressiure’s inventory account had a
balance of P3,680,000, as against a complete physical inventory including goods on hand to cost only
P3,610,000.
F. Bressiure should:
A. Record a P70,000 current liability
B. Reduce the balance in its inventory controlling accounts and inventory subsidiary ledger by P70,000.
C. Reduce the balance in its inventory controlling accounts and record a current liability, both in the amount of
P70,000.
D. Reduce its cost of goods sold by P70,000
G. 26. Brandon Co’s accounting records for the year ended December 31, 1996 included the following
information:
H. Work in process inventory increase
P0
I. Finished goods inventory increase
70,000 J. Raw materials purchases
860,000 +
K. Raw materials inventory decrease
30,000 +
L. Freight-out
90,000
M. Direct labor
400,000 +
N. Manufacturing overhead
600,000 +
O.
P. Cost of goods sold of Brandon for 1996 is:
A. P1,910,000
C. P1,820,000
B. P1,900,000
D. P1,790,000
E.
F.
G.
H.
A1 PASSERS REVIEW CENTER///132
I.
J.
K.
L.
M.
N. 27. Cambridge Co. purchased a machine costing P1, 250,000 for its manufacturing operations and paid
shipping costs of P200, 000. Cambridge spent an additional P100, 000 testing and preparing the machine
for use.
O. What amount should Cambridge record as the cost of the machine?
A. P1,350,000
C. P1,250,000
B. P1,450,000
D. P1,550,000
E. 28. Edmonton Corp. Owns 80% of Fargo Corp’s common stock. Fargo’s stock outstanding at December31,
1997 is as follows:
F. 10% cumulative preferred stock
P100,000
G. Common stock
700,000
H.
I. Fargo reported net income of P60, 000 for the year ended December 31, 1997
J. What amount should Edmonton record as equity in earnings of Fargo for the year ended December 31,
1997?
A. P56,000
C. P40,000
B. P48,000
D. P50,000
E. 29. On November 1, 1996, Cornwall Corp. Was awarded a judgement of P3,000,000 in connection with
lawsuit. The decision is being appealed by the defendant, and it is expected that the appeal process will be
completed by the end of 1997. Cornwall’s attorney feels that it is highly probable that an award will be
upheld on appeal, but the judgement may be reduced by an estimated 40%. In addition to a footnote
disclosure, what amount should be reported as a receivable in Cornwall’s balance sheet at December 31,
1996?
A. P1,800,000
C. P0
B. P1,200,000
D. P3,000,000
E. 30. Drachten Company has the following information as of January 1, 1996 on its property, plant and
equipment account:
F.
G. Historical cost:
H. Land
P25,000,000
I. Buildings and improvement
150,000,000
J. Machinery and equipment
200,000,000
K.
L. Total
P375,000,000
M. Accumulated depreciation:
N. Buildings and improvements P18,750,000
O. Machinery and equipment
50,000,000
68,750,000
P.
Q. Net book value
P306,250,000
R.
S. There were no additions or disposalsw during 1996. Depreciation expense is computed on the straight line
method over 20 years for buildings and improvements; 10years for machinery and equipment were
appraised as follows:
T.
U. Appraised values:
V. Land
P50,000,000
W. Buildings and improvements
250,000,000
X. Machinery and equipment
325,000,000
Y.
P625,000,000
Z. Sound values:
AA. Buildings and improvements
P225, 000,000
AB. Machinery and equipment
225,000,000
AC.
AD.Drachten booked the appraisal on December 31,1996.
AE.
AF. Drachten should report revaluation increment (appraisal increase) in property, plant and equipment under
the stockholders equity of
A. P143,750,000
C. P318,750,000
B. P207,500,000
D. P193,750,000
E.
A1 PASSERS REVIEW CENTER///133
F. 31. Davenport Corp. Retired 50,000 shares of P5 par value common stock it held in treasury at an average
cost of P26 per share on December 31, 1996. The balances in Davenport’s stockholders equity accounts
before recording the retirement of the treasury stock are:
G.
H. Common stock- P1,080,000 additional paid in capital –P 1,500,000 treasury stock at cost – P1,300,000 and
retained earnings P1,800,000
I.
J. Davenport should report common stock outstanding in its December 31, 1996 balance sheet of:
A. P1,080,000
C. P830,000
B. P500,000
D. P0
E.
F.
G.
H. 32. The following balances were reported by Phoenix Co. at December 31, 1996 and 1995:
I.
J.
12/31/96
12/31/95
K.
L. Inventory
P2,600,000
P2,900,000
M. Accounts payable
750,000
500,000
N. Phoenix paid suppliers P4, 900,000 during the year ended December 31, 1996.
O.
P. What should phoenix report for cost of goods sold in 1996?
A. P5,450,000
C. P4,950,000
B. P4,350,000
D. P4,850,000
E. 33. Royal Oak Corporation’s capital structure at December 31, 1995 was as follows:
F.
G.
Shares issued
H.
And outstanding
I.
J.
Common stock
200,000
K.
Nonconvertible preferred stock
50,000
L.
M. On October 1, 1996, Royal Oak issued 10% stock dividend on its common stock, and paid P200,000 cash
dividends on the preferred stock. Net income for the year ended December 31, 1996 was P1, 920,000.
N.
O. Royal Oak’s 1996 earnings per common share should be:
A. P8.20
C. P9.36
B. P8.70
D. P7.82
E. 34. Monterrey Corporation’s stockholders equity is compared of 1000 share P2 per common stock, and
retained earnings of P6, 000.
F.
G. If a 40% stock dividend is declared when the stock is selling for P5 per share, what amount should be
transferred from the retained earnings account to the paid in capital in excess of par account?
A. P0
C. P2000
B. P800
D. P1,200
E. 35. At December 31, 1996, the following information was available from New Jersey Co.’s accounting
records:
F.
G.
COST
RETAIL
H.
I. Inventory 1/1/96
P220,500
P304,500
J. Purchases
1,249,500
1,732,500
K. Additional mark-ups
63,000
L. Available for sale
P1,470,000
P2,100,000
M.
N. Sales for the year totalled P1,695,000. Markdown amounted to P221,000
O. Under the approximate lower average cost or market retail method, New Jersey’s inventory at December
31, 1996 was:
A. P294,000
C. P323,400
B. P462
D. P420,000
A1 PASSERS REVIEW CENTER///134
E. 36. Purdue Corp. Maintains its accounting records on the cash basis but restates its financial statements to
the accrual method of accounting. Purdue had P600,000 in cash basis pretax income for 1996. The
following information pertain to Purdue’s operations for the years ended December 31, 1996 and 1995.
F.
G.
1996
1995
H. Accounts receivable
P400,000
P200,000
I. Accounts payable
150,000
300,000
J. Under the accrual method, what amount of income before income tax should Purdue report in its December
31, 1996 income statement?
A. P950,000
C. P550,000
B. P250,000
D. P650,000
E. 37. Cordoba, Inc. had the following activities during 1996: Acquired 2,000 shares of stock in Ventura Inc, for
P26, 000. Sold an investment in Rosewood for P35, 000 when the carrying value was P33, 000.
F. Acquired a P50, 000, 4-year certificate of deposit from a bank (during the year, interest of P3, 750 was paid to
Cordoba). Collected dividends of P1, 200 on stock investments.
G. In Cordoba’s 1996 statement of cash flows, net cash used in investing activities should be:
A. P37,250
B. P41,000
C. P39,800
D. P38,050
H.
I.
J.
K. 38. Bismarck’s Corp. Account balance during 1996 showed the following changes (all increases)
L.
M.
Assets
P178, 000
N.
Liabilities
54,000
O.
Capital stock
120,000
P.Additional paid-in Capital
12,000
Q.
R. There were no changes in retained earnings for 1996 other than P26, 000 dividend payment and the years
earning’s.
S.
T. Bismarck’s reported net income for 1996 is:
A. P26,000
C. P18,000
B. P34,000
D. P8,000
E.
F. 39. Carmel Inc. reported net income of P150,000 for 1996. Changes occurred in several balance sheet
accounts during 1996 as follows:
G.
Investment in Crystal, Inc. stock
H.
Carried on the equity basis
P5, 500 increase
I. Accumulated depreciation, caused by a
J.
Major repair to machinery
2,100 decreases
K.
Premium on bonds payable
1,400 decrease
L.Deferred income tax liability (long-term)
1,400 decrease
M.
N. In Carmel’s 1996 cash flows statement, the reported net cash provided by operating activities should be:
A. P142,800
C. P148,300
B. P144,900
D. P150,400
E.
F. 40. The December 31, 1995 financial of Hatfield Corp. Show appropriated retained earnings for construction
of a new office building of P5, 250,000. The building cost P4, 500,000 when completed in 1996. An
appropriation of retained earnings of P3, 600,000 for the construction of a new plant was made by Hatfield in
1996. In addition, cash of P6, 000,000 was restricted for the retirement of bonds due in 1997.
G.
H. What amount of appropriated retained earnings should Hatfield report in its 1996 balance sheet?
A. P4,350,000
C. P9,600,000
B. P8,850,000
D. P3,600,000
E.
F. 41. The balance in retained earnings of Brive Gailarde Company at the beginning of the year was P650,000.
During the year, Brive la Gailarde Company earned revenue of P4, 500,000 and incurred expenses of P3,
800,000 dividends of P500,000 were declared and paid, and the balance of the cash account increased by
P220,000. The Company’s net income and the yearend balance in the retained earnings account,
respectively, are:
A. P700,000 and P850,000
C. P200,000 and P850,000
B. P200,00 and P1,070,000
D. P700,000 and P1,070,000
A1 PASSERS REVIEW CENTER///135
E.
F. 42. Chiavari Corporation had total assets of P4,000,000 and stockholders’ equity of P2,080,000 at the
beginning of the year. During the year, assets increased by P520,000 and liabilities decreased by P820,000
G.
H. Chiavari’s stockholders equity at the yearend totalled:
A. P3,420,000
C. P3,380,000
B. 3,700,000
D. P1,780,000
E.
F. 43. Twin falls Co. filed a patent infringement suit against Calgary, Inc. in May 1993 seeking P2, 850,000 for
damages. Twin Falls was awarded P2,250,000 in damage by court verdict in November 1996;butb Calgary
appealed the decision and its appeal is hot expected to be decided before 1998. The counsel of Twin Falls
believes that it is probable that Twin Falls will be successful against Calgary and estimates an amount in the
range between P1, 200,000 And P1, 650,000 with P1, 500,000 considered as the most likely amount.
G.
H. Twin Falls should record as income from lawsuit in the year ended December 31, 1996 the amount of:
A. P0
C. P1,500,000
B. P2,250,000
D. P1,200,000
E.
F.
G.
H.
I.
J.
K.
L.
M.
N.
O. 44. Savanna corp. sells 1 and 2 year mail order subscriptions for its compact discs of the month business.
Subscriptions are collected in advance and credited sales. Following is an analysis of the recorded sales
activity:
P.
1995
1996
Q.
R. Sales
P2,100,000
P2,500,000
S. Less cancellations
100,000
150,000
T. Net sales
P2,000,000
P2,350,000
U.
V. In Savannah’s December 31, 1996 balance sheet, the balance of unearned subscriptions revenue should be:
A. P1,700,000
B. P2,475,000
C. P2,350,000
D. P2,325,000
W.
X. 45. The following information wrev extracted from Giessen Co.’s
Y. December 31, 1996 balance sheet
Z. Noncurrent assets:
AA. Noncurrent securities (carried at fair value)
P482,250
AB. Shareholder’s equity
AC.Net unrealized amount related to noncurrent securities
(99,000)
AD.Historical cost of the noncurrent securities was:
AE.
A. P482,250
B. P317,975
C. P383,250
D. P581,250
AF.
AG. 46. On August 1, 1996, Basildon Corp.’s P2, 000,000 one yea, noninterest bearing note due July 31, 1997
was discounted at Alaska Bank at 10.08%. Basildon uses the straight line method of amortizing bond
discount.
AH.
AI.What amount should Basildon report for notes payable in is December 31, 1996 balance sheet?
A. P2,000,000
B. P1,910,000
C. P1,874,000
D. P1,784,000
AJ.
AK.
A1 PASSERS REVIEW CENTER///136
AL.
AM.
AN.
AO.
AP.
AQ.
AR.
AS.
AT.
AU.
AV.
AW.
AX.
AY.
AZ.
BA.
BB.
BC.
BD.
BE.
BF.
BG.
BH.
BI.
BJ.
BK.
BL.
BM.
BN.
BQ.
BO.
BP.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
BR.
2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
BS.
Tel. No.: (033) 320-2728; 09106547262
BT.Email Address:
[email protected]
BU.
BV.BOARD OF CERTIFIED PUBLIC ACCOUNTANT
BW.
BX.CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A
BY.
BZ. PRACTICAL ACCOUNITNG – PROBLEMS I
CA.
INSTRUCTION: Select the correct answer for each of the following questions. Mark only one answer
for each item by shading the box corresponding to the letter of your choice on the answer sheet
provided. STICTLY NO ERASURES ALLOWED. Use pencil no. 1 only.
CB.
CC. MULTIPLE CHOICE:
CD.
CE. 1. Cygnus Inc. a new corporation formed and organized because of the recent consolidation of Pulsar
Inc. and Quasar Inc. shall issue common shares with a par value of P100 for the total contributions of
Pulsar and Quasar, including the allowances for goodwill equal to earnings in excess of 10% of net
assets; capitalized at 20%. Relevant data on Pulsar and Quasar follows:
CF.
CG.
PULSAR
QUASAR
CH. Total assets
P9,000,000
P11,520,000
CI. Total liabilities
5,400,000
4,320,000
CJ. Annual earnings (average)
576,000
864,000
CK.
CL.What is the goodwill to be recognized by Cygnus?
A. P1,800,000
C. P360,000
B. P1,080,000
D. P720,000
A1 PASSERS REVIEW CENTER///137
E. 2. Mumar Company sells a franchise with initial franchise fee of P70, 000. A down payment of P20, 000
cash is required with the balance covered by issuance of a P50,000, 10% note payable in five equal
annual instalments.
F.
G. If all material services have been substantially performed, collectability of note is reasonably assured but
the refund period has not expired, what is the journal entry to record the transaction?
A. Cash
P20,000
H. Notes receivable
50,000
I. Franchise fees
P70,000
B. Cash
P20,000
J. Notes Receivable
50,000
K. Unearned Franchise fees
P70,000
C. Cash
P20,000
L. Notes Receivable
50,000
M. Franchise fees
P50,000
N. Unearned Franchise fees
P20,000
D. Cash
P20,000
O. Notes Receivable
P50,000
P. Franchise fees
P20,000
Q. Unearned Franchise fees
50,000
R.
S. 3.
Quintanar Inc., a Bicol based agricultural corporation, opened a branch in Lucena City
and ships merchandise there at 140% of cost. For 19X5, Lucena branch submitted the following data:
T.
U. Sales for 19X5
P325,000
V. Merchandise received from Home office
175,000
W.Merchandise purchased from other sources
140,000
X. Inventory, end ( of which P10,000 are from other source)
45,000
Y. No beginning inventory
Z. What is Lucena branch’s ending inventory (at cost)?
A. P45,000
C. P32,143
B. P35,000
D. P25,000
E.
F.
G.
H. 4. Tadao Company, a wholly owned subsidiary of Hayashi Inc. issued 10% five year bonds at the face
amount of P2, 675,000 on January 1, 19X5. Interest is due and payable every year on January 1,
starting 19X5. On December 31, 19X6 Hayashi acquired in the open market Tadao’s outstanding bonds
to the extent of 40% at yield of 12% , plus one year accrued interest. Present value of P1 in four years
at 12% interest payable annually is 0.635518, and present value of P1 each year for four years at 12%
is 3.037349. Ignoring tax impact, (1) the amount of cash paid by Hayashi for Tadao’s bonds on
December 31,19X6, and (2) the gain (loss) on the extinguishment of bounds( rounded to nearest peso)
are:
A. (1) P1,112,000
(2) P65,000
B. (1) P1,070,000
(2) P42,000
C. (1) P1,047,000
(2) P42,000
D. (1) P1,005,000
(2) P107,000
I. 5. Windows Inc. shipped to its Laguna Branch merchandise billed at P165, 000. Additional shipments
were made during the period and billed at P66, 000. Laguna Branch however returned some defective
merchandise worth P4, 620 (at billed price). At the end of the period, the branch reported an ending
inventory of P92, 400 and a net loss of P14, 300. If window’s shipments s to its Laguna Branch is billed
at 20% of cost, what is the correct cost of the branch’s ending inventory?
A. P77,000
C. P110,880
B. P73,000
D. P115,500
E. 6. Pinto Co. paid P900, 000 for a 90% interest in Swan Co. on January 2, 19X1 at a price P90, 000 in
excess of the underlying book value. This excess was allocated P72,000 to undervalued equipment
with a 3 year remaining life and P18,000 to goodwill with a 10 year write off period.
F.
G. How much goodwill will the 19X5 consolidated balance sheets of Pinto and Swan reflect?
A. P18,000
C. P9,000
B. P15,000
D. P10,000
E. 7. Sabrina is admitted into the firm of Nina, Owen and Prudence. Then latter agreed to sell to Sabrina one
fourth of their respective equities and profit shares. Sabrina paid a total price of P1, 000,000. Before
A1 PASSERS REVIEW CENTER///138
A. P3,500,000
Sabrina’s admission, Nina, Owen and Prudence have capital
C. P5,000,000
balances of P2,000,000, P1,000,000 and
B. P4,000,000
P500,000, and they a share profits at the ratio of 6:3:1. Partnership
D. P4,500,000
assets are fairly stated and implied
E. 8.goodwill
If the construction
is to be recognized
in progress
prioraccount
Sabrina’s
hasadmission.
balance ofCompute
P1,000,000
the while
new capital
progress
of the
billings
partnership.
on construction
contract has P800,000 how will these accounts be reflected on the balance sheet of the Ace Construction
Company at the end of year 10?
A. Progress Billings will be shown as current liability
B. The difference between the two accounts will be shown as current liability
C. Construction in progress will be shown as current asset.
D. The difference between the two Accounts will be shown as current asset since Construction in progress is
bigger
F. 9. On May 1, 19X9, the business assets of Jose and Pedro appear below:
G.
H.
JOSE
PEDRO
I.
J. Cash ...................................................P 28,000
P 62,000
K. Accounts receivable ...........................200,000
600,000
L. Inventories ........................................120,000
200,000
M. Land...................................................600,000
N. Building .............................................
500,000
O. Furniture and fixtures.........................50,000
35,000
P. Other assets .....................................2,000
3,000
Q. Accounts payable.............................180,000
250,000
R. Notes payable..................................200,000
350,000
S.
T. Jose and Pedro agreed to form a partnership contributing their respective assets and equities subject to the
following adjustments:
U. *accounts receivable of P20, 000 in Jose’s books and P40, 000 in Pedro’s books are uncollectible.
V. *inventories of P6, 000 and P7, 000 are worthless in Jose’ and Pedro’s respective books.
W. *other assets of P2, 000 and P3, 000 in Jose’s and Pedro’s respective books are to be written off.
X. The capital accounts of the partners after adjustments will be
A. Jose, P592,000 and Pedro; P750,000
B. Jose, P600,000 and Pedro; P700,000
C. Jose, P592,000 and Pedro; P756,300
D. Jose, P600,000 and Pedro; P750,000
Y.
Z.
AA.
AB. 10. On January 1, 19X5, Kuala Company purchased 90% equity of Lumpur Company .On January 3, 19X5,
Lumpur sold equipment (with original cost of P750, 000 and carrying cost of P375, 000) to Kuala for P540,
000. The equipment has a remaining life of three years and was depreciated using the straight-line method
by both companies. In Kuala’s consolidated balance sheet as of December 31, 19X5, the depreciation
should be reported at:
A. P100,000
C. P62,500
B. P90,000
D. P125,000
E. 11. Moore admits Nolan as a partner in the business. Balance sheet accounts of Moore on September 30,
just before admission of Nolan, show:
F.
G. Cash
P2600
H. Account receivable
12,000
I. Merchandise inventory 18,000
J. Accounts payable
P6, 200
K. Moore, Capital
26,400
L.
M. It is agreed that for purposes
of establishing Moore’s interest, the following adjustments shall be made:
N.
O. (1) An allowance for doubtful accounts of 2%is to be established
P. (2) Merchandise inventory is to be valued at P20, 200
Q. (3) Prepaid expenses of P350 and accrued liabilities of P400 are to be recognized.
R. Nolan is to invest sufficient cash to obtain 1/3 interest in the partnership. How much is Nolan investment to
the partnership?
A. P14,155
C. P14,305
B. P17,600
D. P7,920
E. 12. Rubaiyat Inc.., a new corporation formed and organized because of the recent consolidation of Omar Inc.
and Khayyam Inc., shall issue 10% participating preferred stocks with a par value of P100 of Omar’s and
Khayyam’s net assets contributions, and common shares with a par value of P50 for the difference of total
A1 PASSERS REVIEW CENTER///139
shares to be issued and the preferred shares to be issued. Total shares to be issued by Rubaiyat shall be
equivalent to average annual earnings capitalized at 10%. Relevant data on Omar and Khayyam follows:
F.
G.
OMAR
KHAYYAM
H. Total assets
P1, 000,000 P1, 382,400
I. Total liabilities
648,000
518,400
J. Capital stock, par P100 450,000
750,000
K. Annual earnings (average)
69,120
103,680
L.
M. Assuming fractional shares are not considered, Shariff, a holder of 500 Omar shares, will receive how many
preferred and common stock from Rubaiyat as a result of the consolidation?
A. Preferred : 960
Common: 288
B. Preferred : 576
Common: 230
C. Preferred: 1,152
Common: 115
D. Preferred: 480
Common :576
N.
O. 13. When Mikki and Mylene, partners who share earnings equally, were incapacitated in an airplane accident,
a liquidator was appointed to wind up their business. The accounts showed cash, P35,000; other assets,
P110,000; Liabilities, P20,000; Mikki, capital, P71,000; and Myleene, capital, P564,000. Because of highly
specialized nature of the noncash assets, the liquidator anticipated that considerable time would be required
to dispose of them. The expenses of liquidating the business (advertisng, rent, travel, etc. ) are estimated at
P10,000.
P.
Q. How much cash can be distributed safely to each partner at this point?
A. P5,000 to Mikki; and P0 to Mylene
B. P5,000 to Mikki; and P500 to Mylene
C. P3,000 to Mikki; and P0 to Mylene
D. P5,000 to Mikki; and P1,000 to Mylene
R.
S. 14. Shall Petula Company re4alize and, there upon, accordingly report a gain or loss when Clark Company,
its partially owned subsidiary, issues with consent of minority and interests additional shares to (1) Petula
and (2) general Public?
A. (1) Yes
(2) No
B. (1) No
(2) No
C. (1) No
(2) Yes
D. (1) Yes
(2) Yes
T.
U.
V.
W.
X.
Y. 15. Web. Inc., Xerxes Inc., and Yet.,. agree to consolidate. Data relative to their net assets and appraised
values and average adjusted annual earnings follow:
Z.
Net
Adjusted
AA.
Asset’s
Earnings
AB. Web
P400,000
P60,000
AC.Xerxes
600,000
60,000
AD.Yeti
1,000,000
80,000
AE.
AF. Parties collectively agreed that the new corporation, Vogue Inc., is to issue a single class of stock. If the
distribution of new shares will be based on the earnings ratio, what is the distribution ratio to the
shareholders of Web, Xerxes and Yeti, respectively?
A. 30:20:50
C. 30:30:40
B. 30:40:30
D. 20:30:50
E. 16. Halo Co. purchases all of the issued and outstanding shares of Iglo Co. for P4, 000,000. Iglo’s capital
balances prior to acquisition show:
F.
G. Capital stock
P2, 500,000
H. Additional paid-in capital
500,000
I. Retained earnings
625,000
J.
K. What is the amount of goodwill to be reflected in the consolidated balance sheet?
A. P225,000
C. P100,000
B. P375,000
D. P425,000
A1 PASSERS REVIEW CENTER///140
E. 17. The Guam Company will issue share at P10 par value common stock for all the net assets of the Newark
Co. Guam’s common has current market value of P40 per share. Newark’s balance sheet accounts are
shown below
F. Current assets..................................P320,000
G. Property and equipment..................880,000
H. Liabilities..........................................400,000
I. Common stock, P4 par....................80,000
J. Additional paid in capital................320,000
K. Retained earnings..........................400,000
L.
M. The fair value of current assets is P400, 000 while that of property and equipment is P1, 600,000. All the
liabilities are correctly started. Guam issued sufficient shares so that the fair market value of the stock
equals the fair market value of Newark’s net assets.
N. How many shares of stocks will Guam issue to recognize goodwill of P200,000?
A. 40,000
C. 45,000
B. 50,000
D. 55,000
E. 18. Quasar Inc.. was formed and organized because of recent consolidation of Meteor Company and Nova
Company. Quasar shall issue its common shares with a par value of P100 for the total contributions of
Meteor and Nova, including allowances for goodwill equal to earnings in excess of 10% of net assets,
capitalized at 20%. Relevant data on Meteor and Nova follows:
F.
METEOR
NOVA
G. Total assets
P6,000,000
P7,680,000
H. Total liabilities
3,600,000
2,880,000
I. Annual earnings (average)
384,000
576,000
J.
K. What is the total number of shares to be issued by Quasar?
A. 54,000
C. 70,000
B. 86,000
D. 16,000
E. 19. The Angeles City branch of Rommel Enterprises Manila, was billed for merchandise shipments from
home office at cost plus 25% in 19X4 and cost plus 20% in 19X5. Other pertinent data for 19X5 show:
F.
G.
Angeles Branch
Home Office
H. Sales
P63,000
P212,000
I. Inventory, beginning
J. At cost
23,000
K. At billed price
8,900
L. Purchases
164,000
M. Inventory transfers
N. To Angeles, at cost
42,000
O. From Manila, at billed price
50,400
P. Inventory, end
Q. At cost
28,500
R. At billed price
11,700
S. Expenses
20,300
76,400
T.
U.
V.
W.
X. What will be the net income of Angeles Branch to be reported in Rommel’s combined income statement?
A. P25,270
C. P22,430
B. P18,740
D. P19,100
E. 20. Fosforo Inc. manufactures matches per the design and specification of its clientele, and accordingly uses
the job order cost system. In April19X6, it finished 50,000 pieces of Job at Shangri-la at the cost of P0.50 per
unit for direct materials and P0.40 per unit for direct labor. Factory overhead is applied at 100% of direct
labor. Job Shangri-la incurred 500 defective units (considered normal) that had to re worked at a cost of
P0.10 per unit, in addition to the predetermined factory overhead rate. What is the total cost of work on the
defective unit and to what account should this be charged?
A. P50, work in process
B. P100, factory overhead control
C. P100, work in process
D. P50, factory overhead control
F. 21. The Angeles City Branch of Rommel enterprises, Manila, was billed for merchandise shipments from
home office at cost plus 25% in 19X4 and cost plus 20% in 19X5. Other pertinent data for 19X5 show:
G.
H.
ANGELES BRANCH
HOME OFFICE
I. Sales
P63,000
P212,000
A1 PASSERS REVIEW CENTER///141
J. Inventory, beginning
K. At cost
23,000
L. At billed price
8,900
M. Purchases
164,000
N. Inventory transfers
O. To Angeles, at cost
42,000
P. From Manila, at billed price
50,400
Q. Inventory, end
R. At cost
28,500
S. At billed price
11,700
T. Expenses
20,300
76,400
U.
V. The net income (loss) of the Angeles City branch for 19X5 is:
A. (P13,130)
C. P3,330
B. P8,230
D. (P4,900)
E. 22. The Avenida Rizal Branch of Bram Stoker Store is billed by home office for merchandise shipments of
40% over cost.. The following information relates tom Avenidas operations for calendar year 19X6:
F.
G. Sales
P4,500,000
H. Local purchases
1,000,000
I. Shipments from home office 2,450,00
J.
K. Avenida reports an ending inventory of P700,000 of which P175,000 is identified to come local purchases.
Per home offices reckoning, how much is Avenida’s gross profit?
A. P2,300,000
C. P1,750,000
B. P2,750,000
D. P2,200,000
E. 23. The Olongapo – SMBA branch of Freeport Corporation submitted the following trial balance of 30 June
19X6:
F.
G. Cash
P28,600
H. Accounts receivable 173,800
I.
Shipments from office 462,000
J. Home office- Current P324,500
K. Sales
369,600
L. Expenses
29,700
M. Total
P694,100
N.
O. Olongapo reported an ending inventory of P138, 600. Shipments are billed at a mark up of 40% on cost.
What is the real net income of Olongapo branch?
A. P92,400
C. P70,600
B. P138,600
D. P108,900
E. 24. Jane, a senior partner in an engineering firm, has a profit share of 30% in 19X6. During 19X6, Jane
withdrew P130,00 against her capital but invested property with a fair value of P25,000. If Jane’s ending
capital is P60, 000 lesser than her beginning capital, Compute Jane’s beginning capital for 19X6.
A. P150,000
B. P175,000
C. P210,000
D. P240,000
F.
G.
H.
I.
J.
K. 25. The annual appropriation (General fund) of Agency FFF for 19X6 of P5, 000,000 was released by DBM
minus the 5% reserve on allotments. Agency FFF incurred total obligations during the year of P4, 000,000,
of which P1, 000,000 relates to procurement of equipment. Records show that by year’s end P1, 250,000 of
the total obligations have been liquidated. What is the appropriate entry in the books of Agency FFF to
record the receipt of Advise of allotment from DBM?
A. Current Surplus Unappropriated
P5,000,000 Dr.
L.
Current Surplus Appropriated 5,000,000 Cr.
B. No entry
C.National Clearing Account
M.
Appropriation Allotted
P4, 750,000 Dr.
N.
Appropriation Allotted
4,750,000 Cr.
O.
D. National Clearing Account
P.
Appropriation Allotted
P5,000,000 Dr
A1 PASSERS REVIEW CENTER///142
Q.
Appropriation Allotted
5,000,000 Cr
R. 26. Neneng’s Meat Corporation uses a process cost system and sells a variety of cooked meat, skin and
cuttings. Four joint products [produced out of the process are as follows:
S.
T. Products
Amount Produced
U. LIT-TID
1,000
V. TAD-YANG
9,000
W. PANG-A
400
X. SOUP NO. 5
5,100
Y.
Z. The split off point for this products occurs in division B and the cost incurred up to this point are: P20, 000 for
direct materials, P15,000 for direct labor, and P7,000 for factory overhead . What are the joint cost allocated
to each of the joint products by using the physical output method for Lit-tid and Tad-yang, respectively?
A. P1,000 and P9,000
C. P20,000 and P15,000
B. P3,000 And P24,387
D. P2,710 and P24,387
E. 27. Jerez Inc. acquires 75% interest in KCB Inc. for P3, 120,000. The capital balance of KCB prior to
acquisition show capital each stock; P2, 600,000; additional paid in capital, P1, 040,000; and deficit, P130,
000. What is the total minority interest to be shown in the consolidated balance sheet?
A. P877,500
C. P650,000
B. P910,000
D. P950,375
E. 28. Dreams corporation opened its Paseo branch exactly a year ago and the latter submitted the following
information on its operations:
F. Sales
P264,000
G. Expenses
137,500
H. Purchases
71,500
I. Ending inventory
J.
From purchases
16,500
K.
From home office
66,000
L.
M. Paseo remitted P151, 250 to home office . Shipments to branch are billed at cost-plus 20%. During the
period, home office shipped merchandise to Paseo at a billed amount of P148, 500. What is Paseo’s closing
inventory at cost?
A. P55,000
C. P82,500
B. P71,500
D. P69,300
E. 29. Vandros Inc. sol on January 19X4 a reconditioned dump truck to We-haul Inc. for P1,200,000 which
resulted in a gain to Vandros of P420,000, We-haul paid P310,000 and covered the balance with a chattel
mortgage at P10% interest per annum. The mortgage is payable in five equal annual amortizations starting
January 2, 19X5 is:
A. P93,450
C. P62,300
B. P249,200
D. P311,500
E. 30. Purity Water Company bottles spring water. The spring water is filtered in Department A and then flows
through the Department B where it is bottled. Party’s only direct materials cost occurs in the bottling process.
The quantity schedules are follows:
F.
G. DEPARTMENT A
H. Units started in process
P110,000
I. Units transferred to Dept. B
80,000
J. Ending units in process
30,000
K.
L. DEPARTMENT B
M. Units received from Dept. A
80,000
N. Units transferred to finished
O.
Goods inventory
61,400
P. Ending units in process
18,600
Q.
R.
S.
T. Ending units in process in both departments are 72% complete as to conversion costs. Department B would
have how many equivalent gallons of production on the basis of conversion cost
A.P74,792
C.61,400
B.80,000
D.68,929
E.
F. 31. Capitalizing on alleged inside information, Dupe and Fluke formed a partnership to purchase, sell or
otherwise trade in Bre –X mining shares. Bre- X recently made significant finding gold deposits in its
property in Busang, Indonesia. They started cautiously by making initial but modest cash contribution of
P137, 500,000 each. They agree to divide earnings equally and further agreed to settle and close the
A1 PASSERS REVIEW CENTER///143
partnership after six months of furious but ferocious (insider) trading. Below is a synopsis of the transactions
for six months:
G.
H.Purchases of shares:
I. By Dupe
P1,237,500,000
J. By Fluke
495,000,000
K.
L. Sales of shares
M. by dupe
1,339,250,00
N. by fluke
462,000,000
O.
P. Interest Charges
Q. paid by Dupe 3,200,000
R. paid by Fluke 1,375,000
S.
T. Dividend income
U. received by Dupe
1,100,000
V. received by Fluke
2,750,000
W.
X.How much will Dupe receive (or pay) in final settlement of the partnership?
A. (34,512,500)
C. P2,885,500
B. P66,137,500
D. P31,625,000
E.
F. 32. The Avenida Rizal Branch of Bram Stoker store is billed by home office for merchandise shipments at
40% above cost. The following information relates to Avenida’s operations for 19X6:
G.
H. Sales
P4,500,000
I. Local purchases
1,000,000
J. Shipment from home office
2,450,000
K.
L. Avenida reports an ending inventory of P700,000 of which P175,000 is identified to have come from local
purchases. What is Avenida’s ending inventory, at cost?
A. P375,000
C. P735,000
B. P550,000
D. P700,000
E.
F. 33. Gochic Inc. purchases 80% interest in hals Inc. for P2,700,000 Hals assets have a fair value of
P3,375,000. Hals capital balances before acquisition show capital stock of P2,700,000, additional paid in
capital of P675,000 and retained earnings of P405,000. In the consolidated financial statements prepared
after acquisition, how much will be reflected as minority interest?
A.P675,000
C.P540,000
B.P856,000
D.P756,000
E.
F. 34. Gilmore Inc. uses the instalment method of accounting for revenue. The following information are
obtained from its books:
G.
19X4
19X5
H.Instalment sales
P375,000
P412,000
I. Cost of instalment sales
131,250
164,800
J. Instalment accounts receivables
K. On 19X4 sales
225,000
125,000
L. On 19X5 sales
275,000
M.
N.What is the total realized gross profit of Gilmore for 19X5?
A. P35,000
C. P89,900
B. P87,950
D. P54,800
E.
F.
G.
H.
I.
J.
K.
L.
M. 35. Before the withdrawal of aliysa from Aliysa Benetta Cathyn, Lawyers, the partners collectively agreed to
adjust the values . The respective asset accounts were debited fro increase and the corresponding credit(s) will
be able to:
A. Deferred credit
B. Partner’s capital accounts
A1 PASSERS REVIEW CENTER///144
C. Income and expense summary
D. Appraisal increase-capital
E.
F. 36. Tondo Branch of Tyler Company was billed for merchandise shipments at 125% of cost. At the end of its
first month of operation, Tondo branch submitted the following information:
G.
H. Merchandise shipments from home
I. office(at billed price)
P150,000
J.
K. Merchandised purchased locally
L. by Tondo branch
40,000
M.
N. Closing inventory
O. from home office
75,000
P. from local purchases
20,000
Q.
R. Net sales
180,000
S.
T. What is the correct closing branch inventory at cost?
A. P75,000
C. P95,000
B. P80,000
D. P125,000
E.
F. 37. Rhapsody Inc. is an 80% owned subsidiary of Sonata Company. On December 31, 19X5, working paper
elimination for the consolidated final statements of Sonata and Rhapsody amounting to P3, 000,000.
Rhapsody’s bonds were to mature on December 31, 2001. Ignoring tax impact, working paper eliminations
entry for December 31, 19X6 includes a
A. P3,000,000 credit to Retained earnings- Rhapsody
B. P500,000 debit to minority Interest in Net assets of Rhapsody
C. P2,400,000 credit to Retained earnings-Rhapsody
D. P3,000,000 credit to Retained earnings – Sonata
G.
H. 38.Person Company acquired 80 percent of the outstanding common stock
I. Of sonar, Inc, by issuing 20,0000 of its P 10 par value shares which are selling at 16, Fees paid to
consultants and attorneys in connection with the exchange of shares amounted to P 30,000. Immediately
prior to the acquisition ,. The trial balances of the two companies were as follows:
J.
K. Current assets
PARSON
BOOK VALUE
SONAR
L. Plant assets
P1, 800,000
P 975,000
FAIR VALUE
M. Investment in marketable
3,000, 000
1,300,000
P 1,025,000
N.
Securities
(1,100,000)
300,000
1,400,000
O. Current liabilities
( 600.000)
(800,000)
280,000
P. Noncurrent liabilities
( 400,000)
(400,000)
800,000
Q. Common stock
( 800,000)
(200,000)
530,000
R. Additional paid in capital
(1,900,000)
(775,000)
S. Retained earnings
T.
U. On the consolidated balance sheet after acquisition, how much will be the additional paid in capital of the
controlling interest, assuming that all the requirements for pooling of interest, have been met?
V.
A. P 1,000,000
X.
C. P 1, 160,000
W.
B. P 1,200,000
Y.
D. P 800,000
Z. 39. The following information pertains to a river- control project or Rathaus Konstrukt Inc. In Tabuk, Kalinga
which was commented in 19X3 and completed the following year:
AA.
AB.
Cost incurred to date
AC.
At June 30, 19X3
P 9, 750,000
AD.
At June 30, 19X4
15, 750,000
AE. Estimated total cost
AF. At completion
AG.
At June 30, 19X3
19,500,000
AH.
At June 30, 19X4
20,250,000
AI.
AJ.
AK.
AL.
AM.
AN.The project is a P22,500 fixed- price construction contract and Rathaus uses the percentage- of completion
method of accounting. What is the income reported by Rathaus on its Kalinga project on June 30, 19X4?
A1 PASSERS REVIEW CENTER///145
AO.
A. P 750, 000
AQ.
C. P 1, 750,000
AP.
b. P 1, 500,000
AR.
D. P 250, 000
AS. 40. Ovid company makes use of the two-way analysis of overhead variances. Ovid’s budgeted factory
overhead for fixed costs is p 1,200,000 per month, plus a variable factory overhead rate of P96 for every
direct labor hour. The standard direct labor hours allowed for May, 19X 6 productions are 432,000 hours. An
analysis of the factory overhead showed that, in May, Ovid had an unfavourable budget (controllable)
variance of P24,000 and a favorable volume balnce of P 12,000. What is the applied factory overhead in
May?
AT.
A. P5, 371,200
AV.
C. P5, 335, 200
AU.
B. P5, 359, 200
AW.
D. P5, 347, 200
AX. 41. Paradim Co. recently paid P5,000,000 cash for the net assets of Supreme Co. which had a book value
of P 5,000,000 of P4, 000,000 . The book values of the assets and liabilities approximate their fair values
except as noted below.
AY.
AZ.
BOOK VALUE
FAIR VALUE
BA. Inventory.............................
.P 400,000
P 450,000
BB. Land......................................
300,000
500,000
BC.Building and equipment, net...............1,400,000
1,550,000
BD.
BE. 68. Which of the two methods ( the present of the automated has higher income at the level of sales of
26,000 units?
BF.
a. Present, P 60,000
BH.
c. Present, P 240,000
BG.
b. Automated P60,000
BI.
d. Automated, P 240,000
BJ. 69. A fira has the following capital structures : 70 debt and 320 equity interest rate on debt is 12 and on
common stock is 14 if the weighted average cost of the capital is 9.66 then what is the marginal tax rate?
BK.
a. 350
BM.
c 600
BL.
b. 400
BN.
d. 650
BO.
70. Samantha Manufacturing recently completed and sold an order of 50 units that had the following
costs:
BP.
Direct materials
P1, 500
BQ.
Direct labor
8,500
BR.
Variable overhead
4,000
BS.
Fixed overhead
1,400
BT.
TOTAL
P 15,400
BU.
BV.
BW.
Applied on the basis of direct labor hours.
BX. Applied at the rate of 10 of variable cost.
BY.
BZ. The company has now been requested to prepare a bid order for another set of 50 units of the same
product.
CA.
CB.If an 80 learning curve were applied, Samantha’s total cost on this order would be estimated at
CC.
a. P 6,400
CE.
c. P 9,900
CD.
b. P 8,600
CF.
d. P 15,400
CG.
47. Timepieces Company manufactures and sells watches that carry a 2- year unconditional
warranty against product failure. Based on a reliable statistical, timepieces knows that between the sale and
the lapse of the product warranty; 10% of units sold will require an average cost of P 250 per unit for repairs.
The following data reflect the recent experience of the company for the past 3 years.
CH.
CI. Number of units sold
2008
2009
2010
CJ. Number of units repaired:
6,000
8,500
10,000
CK.2008
80
150
200
CL. 2009
CM.
2010
250
350
CN.
400
CO.
48. Millennium Company provided the following information for 2010.
CP.
CQ.
Net Income
2, 5000,000
CR.
Total Assets
5,600,000
CS.
Share Capital
1,000,000
CT.
Share Premium
800,000
CU.
Treasury shares at cost
200,000
CV.
Dividends declared
1,500,000
CW.
400,000
CX.
A1 PASSERS REVIEW CENTER///146
CY.
CZ.
DA.
DB.
DC.
Prior period adjustment for overstatement of 2009 ending inventory
DD.
The debt to equity ratio 40% ( total liabilities divided by total shareholders’ equity) at December
31,2010 . What was the retained earnings balance on January 1, 2010?
DE.
a. 1, 000,000
DG.
c. 1, 6000,000
DF.
b. 1,800,000
DH.
d. 1, 4000,000
DI. 49. On July 1, 2010, Dakota Corporation Issued office space for 5 years at a monthly rental of P 75,000. On
that date , Dakota paid the lessor P 950,000 which included the following:
DJ.
DK.
Rent deposit
300,000
DL.
First months deposit
75,000
DM.
Last month’s deposit
75,000
DN.
Installation of new walls and offices
500,000
DO.
DP. The entire amount of P 950,000 was charged to rent expense in 2010 . Monthly rentals were paid as
scheduled from August to December 31, 2010 under the operating lease?
DQ.
a. 530,000
DS.
c. 125,000
DR.
b. 500,000
DT.
d. 450,000
DU.
50. Brisbane company reported the following information for 2010 Sales revenue of P 2,800,000
cost of goods sold of P 1,000,000, distribution costs of P 400,000, administrative expenses of P 350,000,
depreciation of P 250,000, interest expense of P 80,000 and income tax expense of P 280,000. All sales
were made for cash and all expenses other than depreciation and bond premium amortization of P 20,000
were paid in cash. All current assets and current liabilities remained unchanged. What is the net cash
provided by operating activities during 2010?
DV.
a. 440, 000
DX.
c. 670,000
DW.
b. 690,000
DY.
d. 710. 000
DZ.
EA.
EB.
EC.
ED.
EE.
EF.
EG.
EH.
EI.
EJ.
EK.
EL.
EM.
EN.
EO.
EP.
EQ.
ER.
ES.
ET.
EU.
EV.
EW.
EX.
EY.
EZ.
FA.
FB.
FC.
FD.
FE.
FF.
FG.
FH.
FI.
FJ.
A1 PASSERS REVIEW CENTER///147
FK.
FL.
FM.
FN.
FO.
FP.
FQ. ANSWERS
FR.
FS. PRACTICAL ACCOUNTING PROBLEMS
FT.
FU. 1. Understatement of 2009 warranty cost
FV.
FW.
2. Cumulative additional depreciation ( 1M/ 10X6)
FX.
Depreciation on carrying amount (2.5M)/5)
FY.
FZ.
GA.
ANSWERS
600,000 A
600,000
500,000
2010 Depreciation
3.
GB.
Unadjusted balances
GC.
Unrecorded sales
GD.
Goods sold FOB SP
GE.
Goods sold FOB destination
GF. Goods held on consignment
GG.
Goods purchased FOB Dest (arrived)
GH.
Obsolete inventory
GI. Adjusted inventory
1,100,000 B
Perpetual
Periodic
3,600,000
(200,000)
(500,000)
(150,000)
3,450,000
400,000
(150,000)
(, 100,000)
(500,000)
(150,000)
300,000
3,360.000
3,300,000 D
GJ.
GK.
GL. 4.
Fair value of share alternative 60,000X35)
2,100,000
GM.
Less. Fair value of cash alternative (30,000 X 50)
GN.
Grant date fair value of equity component
GO.
2009
GP.FV of equity component (60,000//3)
GQ.
FV of liability component (30,000X 60/ 3)
GR.
Compensation expense
GS.
2010
GT. FV equity component (60,000/3)
GU.
Fair value of liability component (30,000X75)/ 3X2) – 600,000
GV.Compensations expense
GW.
GX.
GY.5. Lobstar ( 10,000)X 150)
GZ.Shrimp (50,000X. 80)
HA.Salmon( 30,000X 200) – 400,000 payment
HB.Net unrealized gain
HC.
HD.
6. net investmen
HE.Less: PV of GRV (500,000 x.58)
HF. Net Investment to be recovered from rentals
HG.
Rentals (3,924,000/4.36)
HH.
Gross investment (900,000x6)+ 500,000 residual value
HI. Less : Net Investment
HJ. Financial revenue
HK.
HL. 7. Average earnings (4M-500,000)/5
HM.
Capitalization rate
HN.
Net assets with goodwill
HO.
Less: Fair value without goodwill
HP. Goodwill
1,500,000
600,000
200,000
600,000
800,000
200,000
900,000
1,100,000 C
1,5000,000
4,000,000
5,600,000
3,100,000 B
4,204,000
280,000
3,924,000
900,000
5,900,000
4,204,000
1,696,000 B
700,000
10%
7,000,000
5,500,000
1,500,000 C
A1 PASSERS REVIEW CENTER///148
HQ.
HR.
HS.8. Total market value (except Stellar Company treasury share)
HT. Less: Total cost
HU.
Unrealized gain on trading securities
HV.
HW.
9. Accrued pension cost 1/1 (6,500,000-5,000,000)
HX.Pension expense
HY. Contributions
HZ. Accrued pension cost 12/31
IA.
IB.
IC.
ID.
IE. 10. Accounting Profit
IF. Fines and penalties
IG. Cash dividends received
IH. Accounting profit subject to tax
II. Unrealized gain on trading securities (taxable)
IJ. Reversal of deductible temporary difference
IK. Reversal of taxable temporary difference
IL. Taxable profit
IM.
IN. 11. Gross profit from instalment accounts receivable(120,000/30%)
IO. Instalment accounts receivable (400,000/40%)
IP.
IQ. 12. average general price index number (150 +300)/2
IR. Cash
IS. AR
IT. Inventory (1,200,000 x 300/225)
IU. PPE (2,000,000 x 300/125)
IV. Total assets
IW.
IX. Accounts payable
10,600,000
10,300,000
300,000
(1,500,000)
(1,000,000)
1,200,000
(1,300,000) D
1,200,000
500,000
(800,000)
900,000
(200,000)
(600,000)
350,000
450,000 B
400,000
1,000,000 C
225
300,000
800,000
1,600,000
4,800,000
7,500,000
400,000
IY. Bonds payable
IZ. Total liabilities
JA.
JB. Contributed capital (1.2 M x 300/100)
JC. RE (SQUEEZE)
JD. Less ; Treasury shares (350,000 x 300/140)
JE. SHE (7,500,000-1,100,000)
JF.
JG. 13. Replacement cost
JH. Less:Accumolated depreciation (9M x 25%)
JI. Sound Value
JJ. Less: Carrying amount
JK. Revaluation surplus-gross 6/30/10
JL. Less: Deferred tax lability (1.5 Mx 30%)
JM. Revaluation surplus-net 6/30/10
JN. Less Realization (1,050,000/5x6/12)
JO. Revaluation surplus-net 12/31/10
JP. Percentage of accumulated depreciation (1,750/7,000)
JQ.
JR. 14. Payment for operating expenses
JS. (1,000-120-30+400-550+100-150)
JT.
JU. 15. cost
JV. Less: Accumulated depreciation (3M x 10% x 3)
JW.Carrying amount 1/1/10
JX. 2010 Depreciation (2.6 M-500)x 7/28) (7 years remaining)
700,000
1,100,000
JY. 16. PBO (5M +600+ (12% x 5M)-900-100)
JZ.
KA. 17. 10 dairy cattle- 3 years old
KB. 2 hogs-4 years old
5,200,000 B
3,000,000
3,550,000 B
750,000
6,400,000
9,000,000
2,250,000
6,750,000
5,250,000
1,500,000
450,000
1,050,000
105,000
945,000 A
25%
650,000 B
3,500,000
900,000
2,600,000
525,000 D
580,000
600,000
A1 PASSERS REVIEW CENTER///149
KC.15 horses-2 year old
KD.8 Carabao’s -3.5 years old
KE. 4 dairy cattle-1.5 years old
KF. 6 carabaos-1 yr old
KG.
Carrying amount on 12/31/10
KH.
KI. 18.FV of land and building (lower than PV of minimum lease payments)
KJ. 19. Net. Income to ordinary shareholders (900,000 x 15)
KK. Dividends on preference shares
KL. Total net income
KM.
Divide by : (900,000 plus (400,0000)
KN.Diluted EPS
KO.
KP. 20. Deficit eliminated (1M +200+400+300)
KQ.
KR.
KS.
KT.
KU.21. Total shareholders
KV. Less: PSHE (1.25 M +250)+(1.25 M x 10% x 4 years)
KW.
Ordinary shareholders’ equity
KX. Divide by (230,000 treasury)
KY. Book value per ordinary share
KZ.
LA. 22. Increase in contributed capital (8.5 M -5M)
LB. Stock dividend (4M x 25%)
LC. Donated capital
LD. Proceeds from share issuance
LE.
LF. Accumulated profits beg
LG. Stock dividends (4M x 25%)
LH. Cash dividends declared during the year (SQUEEZE)
LI. Net income
LJ. Accumulated profits end
LK. Barrowing paid
LL. Proceeds from shares issued
LM.Dividends paid (800,000 + 500,000 beginning dividends payable)
LN. Net cash used in financing activities
LO.
LP. 23. total cash dividends (500+300)
LQ. Fair value of property dividend at date of payment on 5/1/2010
LR. Fair value of share dividend at date of declaration (10% x 200,000 x 15 )
LS. Decrease in RE
LT.
LU. 24. Royalty income for first half of the year
LV. Royalty income for second half of the year (10M x 10%)
LW.2011 Royalty Income
LX.
LY. 25. Account receivable
LZ. Less: Required allowance
MA.
NRV.
MB.
MC.
26. Proceeds
MD.
Cash Surrender Value
ME.
Unexpired Insurance premium (90,000/ 12 x 2)
MF.Gain
MG.
MH.
27. Accrued liability on Dec. 31 , 2010
MI. 28. profit (900,000/30%)
MJ. 29. 2010 compensation expense –market value on 12/31/2010
MK.
30. balance per bank statement’
ML.Deposit in transit
MM.
Outstanding checks
MN.
Bank service charges
MO.
Interest income
MP.Error in recording check (73,000-37,000)
1,350,000
290,000
200,000
140,000
3,160,000 A
5,950,000 B
13,500,000
500,000
14,000,000
1,200,000
11.67 C
1,900,000 A
10,400,000
2,000,000
8,400,000
210,000
4000 A
3,500,000
(1,000,000)
(800,000)
1,700,000
1,500,000
(1,000,000)
(800,000)
2,500,000
2,200,000
(1,500,000)
1,700,000
(1,300,000)
(1,100,000) B
800,000
1,400,000
300,000
2,500,000C
800,000
1,000,000
1,800,000 A
4,000,000
300,000
3,700,000 A
3,000,000
(145,000)
(15,000)
2,840,000 B
1,200,000 C
3,000,000 B
2,100,000 B
1,250,000
200,000
(80,000)
25,000
(75,000)
(36,000)
A1 PASSERS REVIEW CENTER///150
MQ.
31 Adjusted accounts payable (2.5 M +150T-300T)
MR.
MS.
32. Accumulated depreciation 12/31/09
MT.Impairment loss
MU.
Depreciation expense in 2010 (4M/4 years)
MV.Total
MW.
MX.
33. option price (50,000x 100)
MY.Share options outstanding
MZ.
Total
NA.Less : Par value of shares issued (50,000 x 100)
NB.Share premium
NC.
ND.
34. Payment for real property
NE.Sale of AFS (500 + 100)
NF. Purchase of H & E
NG.
Advances to other companies
NH.
Cost of patent
NI. Net cash used
NJ.
NK.
NL. 35. Cost
NM.
Less: 2006 and 2009 amortization (5M/ 5 x 2) ( Lease term)
NN.
Carrying amount 12/31/09
NO.
Less: 2010 amortization (3M / 4 years) ( remaining life of asset)
NP. CA 12/31/10 depreciation
NQ.
NR.
36. Adjusted RE 1/1/10 (3M-400,000x 70%)
NS.
NT. 37. Collections
NU.
Rent receivable and
NV.White off
NW.
Total
NX.Less: Rent receivable beginning
NY. Rental revenue-accrual
NZ.
OA.
38. Accrued liability-12/31/2010 (25 x 50,000)
OB.
Less: Accrued liability or 12/31/2009 (17 x 50, 000)
OC.
2010 compensation expense
OD.
OE.
39. B=552,250-10B
OF. 1,108=550,000
OG.
Bonus =(550.000/1.10)
OH.
OI. 40. Preference dividend in 2009 (10M x 12%)
OJ. Preference dividend in 2010 (10M x 24%)
OK.
Ordinary dividends (130,000 -30,000)x 12
OL. Total dividend declaration
OM.
2010 ordinary dividend rate (12.00 divided by 50.00)
ON.
OO.
41. BI
OP.Net purchases
OQ.
TGAS
OR.
Less: Adjusted EI (600,000 + 80,000)
OS.
COS
OT.
OU.
42. 10% preference shares issued (4M-3M equals 1 M/100 par
OV.Subscription price (300,000/25%)
OW.
Less: Par value
OX.
Increase in share premium from subscription
OY.
OZ.Increase in share premium-10% PS (1,500,000-300)
PA. Increase in share premium from subscription
PB.Share premium from issuance
PC.
PD.Proceeds from shares issued (1M par +500T share premium)
1,284,000
3,000,000
2,000,000
1,000,000
6,000,000
6,000,000
2,000,000
8,000,000
5,000,000
3,000,000 B
2,000,000
600,000
(800,000)
(2,000,000)
(150,000)
4,350,000 B
5,000,000
2,000,000
3,000,000
750,000
2,250,000 A
3,220,000 A
5,000,000
400,000
50,000
5,450,000
700,000
4,750,000B
1,250,000
850,000
400,000 B
500,000 B
1,200,000
2,400,000
1,200,000
2,800,000 A
24%
500,000
5,300,000
5,800,000
680,000
5,120,000 A
10,000
1,200,000
500,000
700,000
1,200,000
(700,000)
500,000
1,500,000
A1 PASSERS REVIEW CENTER///151
PE. Divide by shares issued
PF. Average issue price
PG.
PH.43. Fair value on Dec. 31, 2010
PI. Less: Amortized cost on Dec 31,2010
PJ. Unrealized gain on available for sale securities
PK.
PL. 44. carrying amount of the liability extinguished (5M + 1.2M)
PM.
Carrying amount of inventory
PN.Fair value of shares (40,000 x 60)
PO.
Gain on extinguishment
PP.
PQ.
45.Issued price (6M x 110%)
PR.Less: FV of bonds ex-warrants
PS. Equity component
PT. Excess over par from issuance of shares (150-100) x ( 6,000 x 20)
PU.Total share premium
PV.
PW.
PX.
PY.
PZ.
QA.
QB.
QC.
46. PCF (18,000 + 5,000)
QD.
47. 2009 Warranty expense (850x250)
QE.
Less: 2009 Warranty services from 20009 sales (250 x 250)
QF. 12/31/09 warranty liability
QG.
2010 Warranty expense (1,000 x 250)
QH.
Total
QI. Less : 2010 Warranty services from 2009 and 2010 sales (750 x 250)
QJ. 12/31/10 Warranty liability
QK.
QL.
QM.
QN.
48. Total shareholders’ equity (5.6 M/140%)
QO.
Contributed capital (1M + 800,000)
QP.Treasury shares
QQ.
Retained earnings 12/31
QR.
QS.
Retained earnings on Jan. 1 (SQUEEZE)
QT. Net income
QU.
Dividend declared
QV.Error
QW.
Retained earnings –Dec. 31
QX.
QY.49. Rental expense from July 1 to December (75,000 x 8)
QZ.Amortization of improvements (500,000/ 5x6/12)
RA.Total expense related to operating lease
RB.
RC.
50. Net cash provided by operating activities
RD.
(2,800-1,000-400-350-100-280)
RE.Interest paid (80,000+20,000)
RF.
RG.
RH.
RI.
RJ.
RK.
RL.
RM.
RN.
RO.
RP.
RQ.
RR.
10,000
150 B
5,600,000
5,248,700
251,300 A
6,200,000
(2,500,000)
(2,400,000)
1,300,000 B
6,600,000
5,600,000
1,000,000
6,000,000
7,000,000 A
23,000 C
212,500
62,500
150,000
250,000
400,000
167,500
212,500 D
4,000,000
(1,800,000
200,000
2,400,000
1,600,000 B
2,500,000
(1,500,000)
(400,000)
2,400,000
450,000
50,000
500,000 B
670,000 C
100,000 B
A1 PASSERS REVIEW CENTER///152
RS.
RT.
RU.
RV.
RW.
RX.
RY.
RZ.
SA.
SB.
SC.
SD.
SE.
SF.
SG.
SH.
SI.
SJ.
SK.
SL.
SM.
SN.
SO.
SP.
SQ.
SR.
SS.
ST.
SU.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
SV.
2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
SW.
Tel. No.: (033) 320-2728; 09106547262
SX.
Email Address:
[email protected]
SY.
SZ.BOARD OF CERTIFIED PUBLIC ACCOUNTANT
TA.
TB.CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A
TC.
TD. AUDITING
PROBLEMS
TE.
INSTRUCTION: Select the correct answer for each of the following questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on the
answer sheet provided. STICTLY NO ERASURES ALLOWED. Use pencil no. 1 only.
TF.
TG. MULTIPLE CHOICE:
TH.
TI. PROBLEM I
TJ. The following information was obtained in the audit of the cash account of CHELSEE COMPANY as of
December 31, 2010. Assume that the CPA satisfied himself as to the propriety of the cash book the bank
statements and the returned checks, except as noted:
TK.
1. The bookkeepers bank recon dilation at November 30, 2010
TL. Balance per bank statement
P 194,000
TM.
Add: Deposit in transit
11,000
TN. Total
P 205,000
TO.
TP. Less: Outstanding checks
TQ.
No. 1434
P 1,400
TR.
1562
7,500
TS.
1571
5,800
TT.
1584
8,000
TU.
1591
300
23,000
TV.
Balance per books
P182,000
TW.
TX.
A1 PASSERS REVIEW CENTER///153
2. A summary of the bank statement for December 2010.
TY.
TZ. Balance brought forward
P 194,000
UA.Deposits
1,487,000
UB.Total
P 1,681,000
UC.
Charges
(1,325,000)
UD.
Balance, December 31, 2010
P356,000
UE.
3. Included with cancelled checks returned with the December bank statement were the checks listed below
4. The Chelsee Company discounted its. Own 60 day note for P 90,000 with the bank on December 1, 2010.
The discount rate was 6 percent. The accountant recorded the proceeds as a cash receipt at the face value
of the note.
5. The accountant records customers dishonoured checks as a reduction of cash receipts. When the
dishonoured checks are red posited they are recorded as regular cash receipt. Two NSF checks for P 1,800
and P 2,200 were returned by the bank during December. Both checks were redeposit and were recorded by
the accountant.
6. Cancellations of Chelsee Company checks are recorded by a reduction of cash disbursement
7. December bank charges were P200; in addition, a P100 service charge was made in December for the
collection of a note receivable in November. These charges were not recorded on the books.
8. Check no. 1434 listed in the November outstanding checks was drawn in 2008. Since the payee cannot be
located, the president of Chelsee Company agreed to the CPA’s suggestion that the check be written back
into the accounts by a journal entry.
9. Outstanding checks at December 31,2010, totalled P 49,400 including checks 1432 and 1584
10. The cut-off bank statement disclosed that the bank had recorded a deposit of P 24,000 on January 2, 2011.
The accountant had recorded this deposit on the books of December 31, 2010 and then mailed the deposit
to the bank.
UF.
UG.
UH.
UI.
UJ.
UK.
UL. Cancelled checks returned with the December Bank statement
UM.
UN.
UO.
UP. Comments
Num
Date
Amo
b
of
u
e
ch
n
r
ec
t
k
o
f
c
h
e
c
k
UQ.
UR.
US.7
UT. This check was in payment of invoice for 57,500 and was recorded in
1562
11/28/
5
the cash book as P 7,500
10
0
UU.
UV.11/
UW.
UX.This check was in the payment of an invoice for P 5, 800 and was
1571
28/
5800
recorded in the cash book as P 5,800
10
UY. 1
UZ. 12/
VA. 1
VB. Examination of this check revealed that it was unsigned A discussion
5
04/
,
with the client disclosed that it had been mailed inadvertently before it
8
10
5
was signed. The check was endorsed and deposited by the payee and
3
0
processes by the bank even though it was a legal nullity. The check
0
was recorded in the cash disbursements journal.
VC.1
VD.12/
VE. 8
VF. This check replaces 1584. Which was returned by the payee because it
5
12/
,
was mutilated? Check 1584 was not cancelled on the books
8
10
0
8
0
0
VG.
VH.12/
VI. 2
VJ. This was counter check drawn at the bank by the president of the
A1 PASSERS REVIEW CENTER///154
19/
10
,
company as a cash advance for travel expense. The president
0
overlook informing the bookkeeper about the check
0
0
VK.
VL. 12/
VM.
VN.The drawer of this check was the Celsea Company
20/
3,00
10
0
VO.
VP. 12/
VQ.
VR.This check had been NSF and returned to the payee because the bank
1595
20/
3,50
had erroneously believed that the check was drawn by the Chelseen
10
0
company. Subsequently, the payee was advised to redeposit the check
VS. 1
VT. 01/
VU.1
VV. This check given to the payee on December 30, 2010 as a post dated
5
05/
0
check with the understanding that it would not be deposited until
9
11
0
January 5. The check was not recorded on the books in December.
9
,
0
0
0
1. What is the correct amount of outstanding checks on December 31?
a. P41,400
c. P48,000
b. P33,250
d. P40,000
2. What is amount of cash receipts per book in December?
a. P1,496,900
c. P1,495,100
b. P1,504,900
d. P1,487,000
3. What is amount of cash disbursement per book in December?
a. P1,254,850
c. P1,256,850
b. P1,252,850
d. P1,248,850
4. What is the cash in bank balance per book as of December 31?
a. P426,050
c. P430,050
b. P428,250
d. P343,050
5. What is the adjusted cash balance as of December 31?
a. P343.000
c. P347,000
b. P340,200
d. P344,200
e.
f. PROBLEM NO. 2
g.
CALACHUCHI CORP.
h. ACCOUNT
i. INVOICE
BALANCE
j.
k.
l.
m. AMOU
CU
D
D
NT
n.
Ar
o.
P
p.
1
r. 14,600
s. 21,180
q.
1
t.
Na
u.
2
v.
0
x. 2,000
y. 8,920
w.
0
z.
Sy
aa.
3
ab.
1
ad. 20,000
ae. 10,600
ac.
1
af.
Tri
ag.
4
ah.
1
aj. 23,140
ak. 22,000
A1 PASSERS REVIEW CENTER///155
ai.
1
al.
Uy
am.
3
an.
1
ap. 19,200
aq. 12,400
ao.
1
ar.
Xa
6.
7.
8.
9.
as.
1
at.
0
au. 17,400
av.
aw. The estimated bad debt rates below are based on Calachuchi crop’s receivable collection
experience.
ax. Age of Accounts
Rate
ay. 0-30 days
1%
az. 31-60 days
1.5%
ba. 61-90 days
3%
bb. 91-120 days
10%
bc. Over 120 days
50%
bd.
be.
bf.
bg. The allowance for bad debts account had a debit balance of P5,500 on December 31, 2010
before adjustment.
The company’s accounts receivable under 61-90 days category should be
a. P 32,600
c. P 44,600
b. P44,320
d. P 42,000
The company’s accounts receivable under 91-120 category should be
a. P 38,320
c. P 29,400
b. P 40,000
d. P 12,000
The allowance for bad debts to be reported on the statement on financial position at December 31, 2010 is
a. P 9,699
c. P 4,199
b. P 15, 199
d. P5, 500
What entry should be made on December 31, 2010, to adjust the allowance for bad debts account?
a. Bad debt expense
15,199
10.
Allowance for bad debts
15,199
a. Bad debt expense
4,199
11.
Allowance for bad debts
4,199
a. Allowance for bad debts
5,500
12.
Bad debts expense
5,500
a. Bad debt expense
9,699
13.
Allowance for bad debts
9,699
14.
15. PROBLEM NO. 3
16. The MALAWI COMPANY is an importer and wholesaler. Its merchandise is purchased from a number
of suppliers and is warehoused until sold to consumers.
17.
18. In conducting his audit for the year ended December 31,2010, the company CPA determined that the system
of internal control was good. Accordingly, he observed the physical. Inventory at an interim date, November
30, 2010 , instead of at year end.
19.
20. The following information was obtained from the general ledger.
21. Inventory, January 1, 2010
22. P 90,000
23. Inventory, November 30, 2010
24. 225,000
25. Sales for eleven months ended November 30, 2010
26. 800,000
27. Sales for year ended December 31, 2010
28. 950,000
29. Purchases for eleven months ended November 30,2010 (before audit
adjustments)
31. Purchases for year ended December 31, 2010 (before audit adjustment)
33.
30. 720,000
32. 810,000
A1 PASSERS REVIEW CENTER///156
34. Additional Information is as follow:
a. Goods received on November 28 but recorded as purchases in December
10,000
b. Deposits made in October 2010 for purchases to be made in 2011 but charge
35. To purchase
14,000
c. Defective merchandise returned to suppliers:
36. Total at November 30, 2010
5,000
37. Total at December 31, 2010, excluding November items
7,000
d. Goods shipped in November under FOB destination and received in
38. December were recorded as purchase in November
18,500
e. Through the carelessness of the client warehouseman, certain goods
39. Were damaged in December and sold in the same month at its cost.
20,000
f. Audit of the clients November inventory summary revealed the following:
40. Items duplicated
3,000
41. Purchases in transit
42. Under FOB
shipping point
12,000
43. Under FOB destination
18,500
44. Items counted but not included in the inventory summary
7,000
45. Errors in extension that overvalued the items
4,000
46.
11. What is the correct amount of net purchases for the month of December 2010?
a. P83,000
c. P82,500
b. P91,500
d. P101,500
12. The correct inventory on November 30, 2010 is
a. P206,500
c. P237,000
b. P214,500
d. P218,500
13. What is the gross profit for eleven months ended November 30, 2010?
a. P234,000
c. P224,000
b. P217,000
d. P237,500
14.
15.
16.
17.
18. What is the cost of sales ratio for eleven months ended November 30, 2010?
a. 73%
c. 28%
b. 70%
d. 72%
19. What is the estimated inventory on December 31, 2010?
a. P183,100
c. P184,400
b. P175,900
d. P190,000
e.
f. PROBLEM NO. 4
g. You have been asked by the proprietor of the SOMALIA CO. to verify the accountability of the
cashier bookkeeper, who was allowed to take a vacation leave a few days ago
h.
i. A. The bank reconciliation statements prepared by the cashier bookkeeper are presented below:
j.
k. November 30, 2010
l. Balance per bank statement
P 21,500
m. Cash on hand
500
n. Total
22,000
o.
p. Outstanding checks:
q. No. 2520
P2, 000
r. 2521
1,400
s. 2522
1,900
(3,300)
t. Erroneous bank charge
2,000
u. Erroneous bank credit
(500)
v. Book balance
P20,200
w.
x. December 31, 2010
y. Balance per bank statement
P 135,000
z. Cash on hand
6,300
aa. Total
141,300
ab. Outstanding checks
ac. No. 2674
P31, 000
ad. 2675
10,300
ae. 2676
5,000
(41,300)
A1 PASSERS REVIEW CENTER///157
a.
b.
c.
16.
17.
18.
19.
20.
af. Erroneous bank charge
3,000
ag. Erroneous bank credit
(600)
ah. Book balance
P 102,400
ai.
aj. B. The cash in Bank account in the general ledger shows the following debits and credits during
December
ak. Cash in bank
al. Dec.
av. Dec.
am.1balance
aw. 1Checks Issued
P 20,200
P2,000
an. 2 Received from
ax. 5 Checks Issued
customers
4,500
5,200
ao. 7 Received from
ay. 14 Checks Issued
customers
5,000
31,000
ap. 12 Received from
az. 24 Checks Issued
customers 20,000
46,000
aq. 17 Received from
ba. 28 Checks Issued
customers 30,000
7,600
ar. 23 Received from
bb.
customers
9,000
bc.
as. 27 Received from
bd. 31balaced
customers 70,000
102,400
at. 31 Received from
be. Total
customers 48,500
P198,200
au. Total
P198,200
bf.
bg. C. the following summarized transactions were taken from the bank statements for the months of
December 2010.
bh. Balance, December 1, 2010
bi. Total deposits
bj. The total deposits per bank statement include:
Collection of notes receivable
P 5,000
Correction of November erroneous bank charge
2,000
December 10 deposit of Lava, Inc. Credited in error to Somalia
600
bk. Total
P3, 500
bl.
bm.D. cash on hand per count in the morning of January 2, 2011 amounted to P 6, 300
bn. E. before leaving his company for a one week vacation, the proprietor had left several signed blank
checks that the cashier bookkeeper had cashed for his personal use.
bo.
bp.
bq.
br.
bs.
bt.
What is the adjusted cash balance on November 30, 2010?
a.P16,500
c.P20,200
b.P13,200
d.P14,500
The amount of uncounted in December is
a.P11,000
c.P9,000
b.P13,200
d.P15,100
The amount of unrecorded/unsupported disbursements in December is
a.P15,100
c.P7,000
b.P10,900
d.P5,000
What is the total cash shortage as of December 31, 2010?
a.P26,000
c.P33,000
b.P15,100
d.P7,000
What is the adjusted cash balance on December 31, 2010
a.P102,400
c.P87,400
b.P125,000
d.P111,400
e.
A1 PASSERS REVIEW CENTER///158
f.
g.
h.
i.
j.
k.
l.
Indicators that the assets of the unit were impaired. The carrying amounts of the assets and
liabilities of the unit at December 31, 2010 were:
Buildings
Accumulated depreciation –buildings
Factory machinery
Accumulated depreciation –machinery
Goodwill
P4, 200,000
(1,800,000)
2,200,000
(400,000)
150,000
m. Inventory
800,000
n. Receivables
400,000
o. Allowance for doubtful accounts
p. Cash
(50,000)
200,000
q. Accounts payable
300,000
r.
200,000
Loans
-
21.
22.
23.
24.
25.
Depreciated at P 600,000 per annum
Depreciated at P 450,000 per annum
s.
t. POTPOT: determined the value use of the unit to be P 5,350,000. The receivables were considered
to be collectible, except those considered doubtful.
u.
v. During the year 2011, POTPOT increased the depreciation charge on building to P650, 00 per
annum, and to P 500,000 per annum for factory machinery. The inventory on hand at January 1,
2011 was sold by the end of the year, at December 31, 2011, POTPOT Company, due to a retum in
the market to use of the traditional barrels for wines and an increase in wine production, assessed
the recoverable amount of the cash generating unit to be P 300,000 greater than the carrying
amount of the unit. As a result, POTPOT recognized a reversal of the impairment loss.
w.
What amount of impairment loss on December 31, 2010 should be allocated to inventory?
a.P56,000
c.P32,000
b.P 28, 829
d.P 0
What is the factory Machinery net carrying amount (after allocation of impairment kiss) on December
31,2010?
a.P 1, 735, 135
c.P 1,800, 000
b.P 1, 674, 000
d.P 1, 728, 000
What amount or reversal of impairment loss should be recognized on December 31, 2011?
a.P 300, 000
c.P 168, 000
b.P 268, 000
d.P 200, 000
Assume that the recoverable amount at December 31, 2011 was P 200,000 greater than the carrying
amount of the cash generating unit. What is the net carrying amount of the buildings after recognition of the
impairment recovery?
a.P 1,313, 219
c.P 1, 800, 000
b.P 1, 768, 781
d.P 1,750, 000
Assume that the recoverable amount at December 31, 2011 was P 200,000 greater than the carrying
amount of the cast generating unit and that the recoverable amount of the Buildings was P 1,750,000. What
is the next carrying amount of the factory machinery after the recognition of the impairment recovery?
a.P 1,332,000
b.P1,313,219
c.P1,228,000
d.P 1,324,000
26.
27.
28.
29.
30. Goding , Inc. preference
60,000
31. Sonata Co. ordinary
32.
(30% ownership)
investment in
1,200,000
600,000
1,290,000
34,200,000
33.
34.
trading
33,900,000
Associate
A1 PASSERS REVIEW CENTER///159
35. Jordan Co. ordinary
750,000
2,025,000
1,500,000
available for
sale
36.
37.
38. BORDO COMPANY’S investment had the following market values at December 31, 2010
39. Omar Co. ordinary
P 3,060,000
40. Goding, Inc. preference
1,290,000
41. Sonata Co. ordinary
33,450,000
42. Jordan Co. ordinary
1,700,000
43.
44. Assume that all of the above securities were acquired in 2009 and none of the indicated declines in market
value are considered other than temporary.
45.
46. Which of the following should be reported in Bordo’s 2009 income statement?
a.Unrealized loss of P 60,000
c.Unrealized loss of P 200, 000
b.Unrealized loss of P 585, 000
d.Unrealized loss of P 150, 000
47. What amount of loss in the above securities should be included in Bordo’s statement of comprehensive
income for the year ended December 31, 2009 as component of other comprehensive income?
a.P 675,000
c.P 585, 000
b.P 465, 000
d.P525,000
48. Assume that Jordan Co.s ordinary shares market decline is other than temporary. What valuation entry is
required for this investment at December 31, 2009 under this change in assumption?
a.Impairment loss
525,000
49.
Investment in AFS securities
525,000
a.Unrealized loss on AFS securities
525,000
50.
Investment in AFS securities
525,000
a.Impairment loss
525,000
51.
Unrealized loss on AFS securities
525,000
a.No valuation entry is necessary
525,000
52.
53. Assume that the investment categories remain the same and that all declines in 2009 and 2010 are
temporary except for the 2009 decline in Jordan Co.s ordinary shares
54. In its 2009 income statement, Bordo should report
a.Unrealized gain of P 150, 000
c.Gain on impairment recovery of P 200,
b.Unrealized gain of P 410, 000
000
d.Unrealized gain of P 210, 000
55. What amount of gain should be included in Bordo’s statement of comprehensive income for the year ended
December 31, 2010 as component of other comprehensive income?
a.P 0
c.P 325,000
b.P 200,000
d.P525,000
e.
f. 2008
P 127,000
g. 2009
150,000
h. 2010
128,500
i.
j. You are performing the audit for the year ended December 31,2010. During your examination you
discover the following errors
a. As a result of errors in the physical count, ending inventories were misstate as follows:
k.
December 31, 2009
P14, 000
overstated
l.
December 31, 2010
P23, 000
understated
m.
b. On December 29, 2010. Dominica recorded as a purchase, merchandise in transit which cost P
15,000. The merchandise was shipped FOB Destination and had not arrived by December 31. The
merchandise was not included in the ending inventory.
n.
c. Dominica records sales on the accrual basis but failed to record sales on account made the end of
each year as follows
o.
2008
P4, 000
p.
2009
5,000
q.
2010
3,500
r.
s.
t.
u.
v.
d. The company failed to record accrued office salaries as follows
A1 PASSERS REVIEW CENTER///160
56.
57.
58.
59.
63.
w.
December 31, 2008
P 10,000
x.
December 31, 2009
14,000
y.
e. On March 1, 2009, a 10% stock dividend was declared and distributed. The par value of the shares
amounted to 10,000 and market value was P 13,000. The stock dividend was recorded as follows
z.
Miscellaneous expense
13,000
aa.
Ordinary share capital
10, 000
ab.
Retained earnings
3,000
ac.
f. On July 2009, Dominica acquired a three year insurance policy. The three year premium of P6,000
was paid on that date , and entire premium was recorded as insurance expense.
ad.
g. On January 1, 2010 Dominica retired bonds with a book value of P 120, 000 for P 106, 000 the gain
was incorrectly deferred and is being amortized over 10 years as a reduction of interest expense on
other outstanding obligations.
ae.
What is the adjusted net income for the year ended December 31, 2008?
a.P 133,000
c.P121,000
b.P 117, 000
d.P 113, 000
What is the adjusted net income for the year ended December 31, 2009/
a.P 151, 000
c.P 104, 400
b.P 187, 000
d.P 203, 600
What is the adjusted net income for the year ended December 31, 2010?
a.P129, 600
c.P 104, 400
b.P131,000
d.P 203, 600
What adjusting entry should be made on December 31, 2010, to correct the error describe in item B?
a. Purchases
15,000
60.
Accounts payable
15,000
a. Accounts payable
15,000
61.
Purchases
15,000
a. Accounts payable
15,000
62.
Cash
15,000
a. No adjusting journal entry is necessary
The adjusting entry on December 31, 2009, to correct the error described in item E should include a debit to
a. Retained earnings of P 16, 000
b. Ordinary share capital of P 10,000
c. Share premium of P 3,000
d. Miscellaneous expenses of P 3,000
64.
65. PROBLEM NO. 8
66.
67. In making the first adult of the Delivery Equipment account of DELTA CORPORATION as of
December 31, 2010, you encounter the following facts.
68. DAT
69. PARTICULARS
70. DEBIT
71. CREDIT
E
72. 1/1/0
73. Tracks 1,2,3, and 4
74. P3,200
75.
8
,000
76. 3/15/
77. Replacement of Truck 3 tires
78. 25,000
79.
09
80. 7/01/
81. Truck 5
82. 800,00
83.
09
0
84. 7/10/
85. Reconditioning of truck 4, which was damaged in a
86. 35,000
87.
09
collision
88. 9/1/0
89. Insurance recovery on truck 4 accident
90.
91. P33,000
9
92. 10/0
93. Sale of truck 2
94.
95. 600,000
1/09
96. 4/01/
97. Truck 6
98. 1,000,
99. 150,000
10
000
100.
101.
Repainting of truck 1
102.
103.
5/2/10
27,000
104.
105.
Truck 7
106.
107.
6/30/10
720,000
108.
109.
Cash received on lease of truck 7
110.
111.
2
A1 PASSERS REVIEW CENTER///161
12/1/10
2,000
112.
113.
Accumulated Depreciation
114.
115.
PARTICULARS
116.
117.
C
DATE
DEBIT
REDIT
118.
119.
Depreciation expense
120.
121.
P
12/31/08
300,000
122.
124.
125.
3
123.
Depreciation expense
12/31/09
00,000
126.
128.
129.
3
127.
Depreciation expense
12/31/10
00,000
130.
131.
132.
133.
134.
Additional information:
1. On July 1,2009, Truck 3 was traded in for a new truck , truck 5 costing P 850,000 the selling party allowed a
P 50, 000 trade in value for the old truck
2. On April 1, 2010, truck 6 was purchased for P 1,000,000; truck 1 and cash of p 850,000 being given for the
new truck
3. You are instructed by the senior in charge of the audit to accept the depreciation rate of 20% by unit basis
4. Unit cost of trucks 1 to 4 is at P 800,000 each
135.
136.
The net increase (decrease) in retained earnings should be
a.(P1,102,000)
c.P 80,000
b.(P545,000)
d.(P1,022,000)
137.
What is the loss on trade in of Truck No. 3?
a.P430,000
c.P560,000
b.P510,000
d.P0
138.
What is the gain on sale of Truck no. 2?
a.P120,000
c.P80,000
b.P200,000
d.P 0
139.
What is the loss on trade in of Truck No.1?
a.P290,000
c.P150,000
b.P170,000
d.P 0
140.
What is the correct cost of truck No. 5?
a.P850,000
c.P900,000
b.P800,000
d.P560,000
141.
What is the correct cost of truck No. 6?
a.P440,000
c.P800,000
b.P305,000
d.P1,000,000
142.
What is the correct depreciation expense for 2009?
a.P725,000
c.P605,000
b.P305,000
d.P600,000
143.
The entry correct depreciation expense for 2010?
a.P552,000
c.P712,000
b.P592,000
d.P300,000
144.
The entry correct the depreciatin charges for the years 2008/through 2010 should include a credit to
accumulated depreciation of
a.P645,000
c.P900,000
b.P937,000
d.P292,000
145.
The balance of the Delivery Equipment accounts at December 31, 2010 should be.
a.P5,770,000
c.P4,170,000
b.P3,320,000
d.P3,370,000
e.
f. PROBLEM NO. 9
g.
h. The GUNDING Co. is on calendar year basts. The following data were found during your
audit.
i.
a. Goods in transit shipped FOB shipping point on December 28 by a supplier in the amount of P 100,000 had
been excluded from the inventory and further testing revealed that the purchase had been recorded.
b. Goods costing P 30, 000 had been received, included in inventory, and recorded as a purchase. However,
upon your inspection the goods were found to be defective and would be immediately returned.
A1 PASSERS REVIEW CENTER///162
c. Materials costing P170,000 and billed on December 30 at a selling price of P 264,000 had been segregated
in the warehouse of shipment to a customer. The materials had been excluded from inventory as a signed
purchase order had been received from the customer. Terms FOB destination.
d. Goods costing P 70, 000 was out on consignment with Gundara Inc. since the monthly statement from
Gundara listed those materials as on hand, the items had been excluded from the final inventory and
invoiced on December 31 at P 80,000.
e. The sale of P 150,000 worth of materials and costing p 120,000 had been shipped FOB point of shipment on
December 31. However, this inventory was found to be included in the final inventory.
f. Goods costing P 100,000 and selling for P140,000 had been segregated , but not shipped at December 31,
and were not included in the inventory. A review of the customer’s purchase order set forth terms as FOB
destination. The sale had not been recorded.
g. Your client has an invoice from a supplier, terms FOB shipping point, but the goods had not arrived as yet.
However, these materials costing P134,000 had been included in the inventory count, nut no entry had been
made for their purchase.
h. Merchandise costing p 200,000 had been recorded as a purchase but not included in Inventory. Terms of
sale are FOB shipping point according the supplier warehouse which had arrived by December 31.
j.
k.
l.
m.
n.
o. Further Inspection of the clients records revealed the following December 31 balances: Inventory, P
1,350,000; Accounts receivable, P 630,000 ; accounts payable, P 690,000; sales P6,032,000;
Purchases, P 3, 150,000; Net Income , P727,000.
p. Based on the preceding information, determine the adjusted balances of the following:
46. Inventory
a.P700,000
c.P1,900,000
b.P934,000
d.P1,840,000
47. Accounts receivable
a.P286,000
c.P146,000
b.P380,000
d.P405,000
48. Purchases
a.P3,354,000
c.P3,254,000
b.P3,150,000
d.P3,120,000
49. Sales
a.P5,848,000
c.P5,683,000
b.P6,376,000
d.P5,768,000
50. Net Income
a.P769,000
c.P829,000
b.P569,000
d.P709,000
e. PROBLEM 10:
f. Presented below are COMBANTRIN COMPANY’S comparative statements of financial position and
income statements
g. COMBANTRIN COMPANY
h. COMPARATIVE STATEMENTS OF FINANCIAL POSITION
i. December 31, 2010 and 2009
j. Assets
k.
2010
l.
2009
m.
Current assets
n.
o.
p.
Cash
q.
P119,000
r.
P98,000
s.
Accounts receivable
t.
312,000
u.
254,000
v.
Inventory
w.
278,000
x.
239,000
y.
Prepaid expenses
z.
35,000
aa.
21,000
ab. Total current assets
ac.
744,000
ad.
612,000
ae. Available for sale securities
af.
59,000
ag.
ah. Property, plant and equipment
ai.
536,000
aj.
409,000
ak. Accumulated depreciation
al.
(76,0000)
am.
(53,000)
an. Total noncurrent assets
ao.
519,000
ap.
356,000
A1 PASSERS REVIEW CENTER///163
aq. Total assets
ar.
at.
au. Liabilities and shareholders’ equity
av.
aw. Current assets
ax. Accounts payable
ba. Accrued expenses
bd. Dividends payable
bg. Total current liabilities
bj. Notes payable-due 2012
bm.Total liabilities
bp.
bq. Shareholder equity:
br. Ordinary share capital
bu. Retained earnings
bx. Total shareholders’ equity
ca. Total liabilities and shareholders’
equity
cd.
ce.
cf.
P1,263,000
ay.
bb.
be.
bh.
bk.
bn.
as.
P968,000
P212,000
98,000
10,000
350,000
125,000
475,000
bs.
bv.
by.
cb.
az.
bc.
bf.
bi.
bl.
bo.
600,000
188,000
788,000
P1,263,000
P198,000
76,000
_________
274,000
__________
274,000
bt. 550,000
bw. 144,000
bz. 694,000
cc. P968,000
cg. COMBANTRIN COMPANY
ch. CONDENSED COMPARATIVE INCOME STATEMENTS
ci. For the Years Ended December 31, 2010 and 2009
cj.
ck. Net sales
2010
cl. Cost of goods sold
P3, 561,000
cm. Gross income
2,789,000
cn. Expenses
772,000
co. Net income
521,000
cp.
P251,000
cq.
cr. Additional information for COMBANTRIN COMPANY
a. All accounts receivable and accounts payable relate to trade merchandise
b. The proceeds from the notes payable were used to finance plant expansion
c. Ordinary shares were sold to provide additional working capital
cs.
ct. Compute the following for 2010.
146.
Cash collected from accounts receivable (assume all sales are on account)
a.P3,619,000
c.P3,561,000
b.P3,503,000
d.P3,249,000
147.
Total purchases (assume all purchases of inventory are on account)
a.P2,828,000
c.P2,550,000
b.P2,789,000
d.P2,750,000
148.
Cash payments made on accounts payable to suppliers
a.P2,630,000
c.P2,828,000
b.P2,842,000
d.P2,814,000
149.
Net cash provided by operations
a.P689,000
c.P222,000
b.P191,000
d.P199,000
150.
Cash receipts not provided by operations
a.P175,000
c.P50,000
b.P177,000
d.P125,000
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
2009
P3, 254,000
2,568,000
686,000
486,000
P200,000
A1 PASSERS REVIEW CENTER///164
o.
p.
q.
r.
s.
t.
u.
v.
w.
x.
y.
z.
aa.
ab.
ac.
ad.
ae.
af.
ag.
ah.
ai.
aj.
ak.
al.
am.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT
COMPANY
nd
an. 2 Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
ao. Tel. No.: (033) 320-2728; 09106547262
ap. Email Address:
[email protected]
aq.
ar. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
as.
at. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A
au.
av. BUSINESS
LAW AND TAXATION
aw.
INSTRUCTION: Select the correct answer for each of the following questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on the
answer sheet provided. STICTLY NO ERASURES ALLOWED. Use pencil no. 1 only.
ax.
ay. MULTIPLE CHOICE:
az.
1. A, B and C are partners in a universal partnership of profits engaged in operation of taxis. The partners
contributed:
ba. A- 100 Toyota Vios
bb. B- 3,000 aqm land
bc. C- Fuel and oils
bd. Which of the following is correct?
a. In case of loss due to fortuitous event, the partnership bears the loss
b. The partnership becomes the owner of the things contributed to the partnership
c. The partners retained the ownership over the things they contributed hence; they will bear the risk of
loss.
d. The partnership begins from the moment of the execution of the contract , except if stipulated
otherwise
2. Which of the following statements is not correct?
a. The creditor acquires real right to the fruits of the thing from the time they have been delivered
b. An oral sale of land made by its owner in unenforceable
c. The buyer acquires real right to the fruits of the thing from the perfection of the sale
d. A sale of land made by an agent without a written authority from the owner is void
3. A 16 years old sold his property to B, who did not notice that A is a minor. One year later B sold the property
to C who knew that A is a minor. Can A ask for annulment of the sale?
a. Yes, because C is in bad faith
b. No, because B is in good faith
c. No, because B is not capable of returning the property
A1 PASSERS REVIEW CENTER///165
d. Yes, whether C is in good faith or in bad faith because the title of B is voidable
4. A promissory note reads I Promise to pay A,B, C and D P24,000 Sgd. E, F and G. B can collect from E
a. P 24,000
c. P 6,000
b. P 8,000
d. P 2,000
5. Today, S sold to B in S is name the land of O, without authority from O, B bought the land in good faith. The
contract provides that the delivery will be 30 days from today. The contract is
a. Valid if S owns the land on the day of delivery
b. Void , because S was not the owner of the land when the contract was perfected
c. Unenforceable, because S had no authority to sell the land
d. Voidable, because S is guilty of fraud
6. A, B and C are solidary debtors of D for P90, 000 where the due date is on April 1, 2011. On January 1,
2011, A paid D P90, 000. Later A demanded reimbursement from B. if B effects reimbursement to A on July
1, 2011. Which of the following is correct?
a. B pays A P60,000 plus interest from January 1,2011 to July 1, 2011
b. B pays A P30,000 plus interest from January 1,2011 to July 1, 2011
c. B pays A P30,000 plus interest from April 1,2011 to July 1, 2011
d. B pays A P45,000 plus interest from April 1,2011 to July 1, 2011
7. S sold his agricultural land to B for P1M .The FMV is P1.5 M. B. paid s in counterfeit peso bills. The sale is
a. Void, because the cause is illegal
b. Valid, because the cause is the selling price of PIM
c. Rescissible, because of lesion which is more than ¼ of the value of the property
d. Voidable, because of the fraud committed by B.
8. As regard cash dividend, which of the following is correct/
a. Declared by the board of majority vote and ratified by the stockholders by the majority vote.
b. Declared by the board of majority vote and ratified by the stockholders by ½ vote of the outstanding
capital stock
c. Declared by the board of majority vote and need not be ratified by the stockholders
d. Declared by the board by 3/2 vote and need not be ratified by the stockholders
9.
10.
11.
12.
13. A barrowed from B P2M and the secure its payment A orally agreed to deliver his 8 hectare agricultural land
by way of antichresis and to pay 12% interest per annura. Which is correct?
a.The contracts of loan and antichresis are both valid
b.The contracts of loan is valid but antichresis is void
c.The contracts of antichresis is valid but loan is void
d.Both contracts of loan and antichresis are void
14. Elements of contracts of pledge and mortgage , except.
a.Both are necessary contracts
b.Both are real contracts
c.Both cannot exist without a valid obligation
d.In case of default, the creditors cannot appropriate the things pledged or mortgaged
15. Which of the following statements is not correct
a.An agreement to constitute a commodatum is binding and is perfected from the moment there is
meeting of minds
b.Fixed, savings and current deposits of money in banks and similar institutions shall be governed by the
provisions concerning muthium
c.Precarium is a kind of commodatum where the bailor may demand the thing loaned at will
d.In case of extraordinary expenses , the debtor in mutuum will shoulder 50% if he is in actual use of the
thing barrowed
16. A contributed PIM, B contributed PIM and C contributed services. they agreed to divide the profits and
losses equality . in case of loss of P3M for how much, if any, is C liable?
a.Nothing because an industrial partner is exempt from losses
b.PIM but with reimbursement from A and B equality
c.A and B shall shoulder the loss equality at P1.5M each
d.PIM, as stipulated
17. As regards the corporate by-laws , which of the following is true?
a.To adopt, amend or repeal 3/2 of the outstanding capital stock is needed
b.To delegate to the board of directors the power to amend, repeal or adopt new by-laws, majority of the
outstanding capital stock
c.To revoke the power delegated to the board to amend, repeal or adopt new by-laws 3/2 of the
outstanding capital stock
d.To amend, repeal or adopt new by-laws, majority of the outstanding capital stock.
18. A contract of antichresis is
a.A contract of mortgage whereby possession of the mortgaged property is given to the creditor
A1 PASSERS REVIEW CENTER///166
19.
20.
21.
22.
b.A contract of loan secured by a real property, where possession is retained by the debtor
c.A contract of loan without security
d.A consensual contract as it is perfected by mere consent
A subscribed to 1,000 voting shares of stock of X Corporation. She paid 25% of the said subscription during
the stockholders meeting can A vote all her subscribed shares/
a.No, because the subscription has not yet been fully paid
b.No, because A’s shares have become delinguent which cannot be voted
c.Yes, as to the paid percentage of subscription
d.Yes, because unpaid shares not delinquent can be voted
To defraud his creditor , A sold his property to B (who was in good faith). Later B sold the property to C, who
was in bad faith. May the creditor rescind the sale?
a.Yes, because C, is bad faith
b.No, because B is in good faith
c.No, because B is not capable of returning the property
d.Yes, because the contract is rescissible
A was having his house repaired by B, who needed construction materials , so A orally told the seller C, give
B the materials , I shall be responsible. I shall pay in 30 days. C delivered the materials As a result,
a.The contract is unenforceable because A made an oral agreement to answer for the debt of B
b.The contract is enforceable because A did not make a special promise to answer for the default of
another person
c.The contract shall be enforceable if there is ratification by A
d.The contract shall be unenforceable if the value is at least P 500.00
Under the negotiable instruments law to be a holder in due course , the holder must have acquired the
instrument before it is overdue . does this apply to the payee to whom the maker issued an overdue note?
a.Yes, because the payee is still considered a holder
b.Yes, because issuance to the payee is not considered a negotiation
c.No, because the law does not distinguish between payee and subsequent holder
d.No, because the payee is privy to the contract between himself and the maker
23.
24.
25.
26.
27.
28.
29. In which of the following is demand necessary to make the debtor in delay in the performance of his
obligation?
a.When the time of performance is of the essence
b.When the time of performance has been stipulated
c.When the law so provides
d.When demand would be useless
30. With written authority from his principal, the agent sold orally the land of the principal. The sale is
a.Rescissible
c.Uncoforceable
b.Voidable
d.Void
31. Without authority from B, A orally sold B’s house in B’s name. The sale is
a.Rescissible
c.Uncoforceable
b.Voidable
d.Void
32. S sold B his land on September 19, 2010. On September 25, an absolute deed of sale was executed and
notarized on September 30, the sale was registered with the Registry of Deeds , On October 5, B took
actual possession of the land by building a fence thereon. When did B acquire ownership of the land?
a.On September 19
c.On September 30
b.On September 25
d.On October 5
33. S sold to B his car on September 19, 2010. On September 25, an absolute deed of sale was executed and
notarized . on September 30, the sale was registered with the LTO. On October 5, B took actual possession
of the car. When did B acquire title to the car?
a.On September 19
c.On September 30
b.On September 25
d.On October 5
34. A and B are co owners of a percel of land A donated his share to C can B redeem the said share from C?
a.Yes, because the law looks with disfavour at co-ownership
b.No, because legal redemption applies only in case of onerous transfers
c.No, unless he enforce his right through count action
d.Yes, but in proportion to his interest in the land as co-owner
35. D’owes C a sum of money with M as mortgagor of his land to secure the loan. Is the mortgage valid even if
the mortgagor is not the debtor?
a.Yes, provided M is the absolute owner of the property mortgaged
b.Yes, provided it is in writing and registered
c.No, the mortgagor must be the debtor himself
A1 PASSERS REVIEW CENTER///167
d.No, unless the mortgagor is a co-debtor
36. In three of the following case s, the agency cannot be revoked without a just cause except:
a.It is means of fulfilling an obligation already existing
b.A bilateral contract depends upon it
c.It is coupled with interest common to the great and principal
d.Partner is appointed manager in the articles of partnership
37. P appoints A as guarantee commission agent to sell his products A sold them to B who failed to pay despite
the diligent efforts of A in collecting is A still liable for the purchase price?
a.Yes, because of the guarantee commission given to him
b.No, because he was not at fault in the collection
c.No, if her returns to guarantee commission
d.Yes, but he is not entitled anymore to the commissions
38. P appointed A1 and A2 as his agents for a common transaction and they agreed that they shall be solidarity
liable for P for damages in case of violations of their obligations as such. What is the agent at fault the only
one liable for damages even if solidarity has been stipulated?
a.If the other agent is not at fault
b.Both of them shall be liable always since solidarity was agreed upon
c.If the one at fault shall answer for all the damages
d.If the one at fault acted in excess of authority
39. A, B, and C entered into an oral contract of partnership each contributing P2M each of the common fund but
failed to register the partnership with the SEC. In the partnership valid/
a.No, because every contract of partnership having a capital of three thousand pesos or more in money
or property must be in public instrument and registered with the SEC
b.Yes, because public instrument is necessary is case of contributions of immovable’s
c.Yes, because a partnership contract does not require a specific form to be valid
d.No, because registration with the SEC is essential for a partnership to be valid and acquire judicial
personality
40. A and B are co-owners of a parcel of land from where they share the profits equally as co-heirs in
inheritance. Is there a partnership
a.There is a prima facie presumption of partnership because of the equal sharing of profits
b.There is no partnership because co-ownership by itself does not establish a partnership despite the
sharing of profits
c.There is no partnership since in partnership, division of profits is not always necessary among partners
d.There is a prima facie presumption of partnership they being co-owners and co-possessors
41.
42.
43.
44.
45. A and B are partners in AB partnership. While A was performing his duties as a partner in the course of
business , he negligently cause damage to X and third person. Who shall be liable to X and up to what
extent?
a.Only the partnership is still liable it being a juridical person separate and distinct from the partners
b.Only A shall be liable for he is the only one at fault
c.Both A and B shall be liable solidarity to X
d.A,B and the partnership are all liable solidarity to X
46. A, B, and C as partners in a partnership stipulated that A shall not share in the profits and losses. Is the
agreement valid?
a.Yes, among the partners but not valid to third persons
b.Yes, valid as long as third persons are not prejudiced
c.Not valid stipulations exempting a partner from sharing in the profits and losses
d.Not valid as against third persons or partnership creditors
47. In the matter of management of the corporation this is supreme
a.President
c.Stockholders
b.Chairman of the Board of Directors
d.Board of Directors
e.
f. 34-37 A promissory note reads
g. “I promise to pay P or order Php 100,000. Sgd. M, The promissory note was issued by M to P
in payment of merchandise purchased from P. However, P delivered only Php 60,000. Later P.
made a qualified endorsement to A, who was not aware of the partial absence of
consideration. Thereafter, A made a special endorsement to B, then B made a blank
endorsement to C both B and C are aware of the partial absence of consideration.
48. In the hands of A, A can collect from M
a.Php 100,000
c.Php 40,000
b.Php 60,000
d.P 0
49. In the hands of B, B can collect from M
a.Php 100,000
b.Php 60,000
A1 PASSERS REVIEW CENTER///168
c.Php 40,000
d.P 0
50. Using the preceding number, if M dishonours the nota, B can collect from P
a.Php 100,000
c.Php 40,000
b.Php 60,000
d.P 0
51. In the hands of C, C can collect from M
a.Php 100,000
c.Php 40,000
b.Php 60,000
d.P 0
52. Which of the following is not negotiable?
a.I promise to pay P or order Php 100,000 , 30 days after date
Sgd M
b.I promise to pay P or bearer Php 100,000
Sgd M
c.Pay to P or order Php 100,000 on Dec. 25, 2010
Sgd M
d. Pay to P or bearer Php 100,000 and charge the name against my deposit with you Sgd M to Y
53.
54. 39-40
55.
56. M male a negotiable promissory note payable to the order of P. later made a special endorsement to A. Then
B stole the note from A and indorsed it to C who received the note in good faith. Later C indorsed the note
to D. which of the following is correct?
a.D can collect from M but not from A
c.C can collect from endorsers P and B
b.If M will not pay , D can collect from P
57.
58. Using the preceding number, if M pays D in good faith, which of the following is incorrect?
a.The obligation of M is extinguished
c.The obligation of P is extinguished
b.A can collect from M
d.A should collect from B, the thief
59.
60. When a property is transferred during lifetime to relieve the transferor from the burden of the management of
such property, and the transfer of its subject to tax, the basis of the tax is
a.The FMV at the time of donation
b.The FMV at the time of death of the donor
c.The FMV at the time the donor required the property
d.The cost of the property in the hands of the donor
61.
62. Which of the following taxes had been replaced by the VAT?
a.Percentage tax on international air and shipping carriers doing business in the Philippines
b.Tax on life insurance premiums
c.Caterer a tax on operators of restaurant and eating places
d.Tax on agents of foreign insurance companies
63.
64.
65.
66.
67. The DOC RESTAURANT, a VAT registered taxpayer , issued the following official receipt dated September
18, 2010.
68. 2 pieces of crispy chicken
P200.00
69. Siomai special
45. 00
70. Sago gulaman
85.00
71. Mushroom and chicken soup
100.00
72. Braised beef with cauliflower
240.00
73. Coke light in can (2xP40)
80.00
P750.00
74. Locat tax
15.00
75. Service charge
60.00
76. Total
P825.00
77.
78. The output vat on the sale is
a.P99.00
c.P80.36
b.P 88.39
d.P90.00
79. Mr. And Mrs. A donated a conjugal agricultural land to their son who is getting married with ten (10) months
after the date of donation. The fair market value at the time of marriage was P 800,000, but its fair market
value at the time of donation was P 600,000. The donated property was subject to P100,000 mortgage
which was assumed by the donors.
80. The taxable net gift of Mr. A is
a.P240,000
c.P390,000
b.P290,000
d.P 340,000
81. An individual taxpayer is qualified to substituted filing of income tax return if he meets the following requisite
except:
a.Pure compensation income only
b.One employer during the calendar year
A1 PASSERS REVIEW CENTER///169
c.Creditable withholding tax is correct
d.Should be a minimum wage earner
82. A taxpayer received as assessment notice on February 14, 2010. He filed a motion for consideration with the
BIR on February 22, 2010. The submission of necessary documents to support his motion for consideration
is
a.March 14, 2010
c.April 15, 2010
b.April 23, 2010
d.March 22, 2010
83. Under absolute community of property, which of the following is a community property?
a.Property inherited by the surviving spouse during the marriage
b.Property bought during the marriage using the money inherited of the decedent before marriage
c.Personal belongings (e.g. clothes , shoes, etc.) bought during the marriage for the exclusive use of the
decedent
d.Jewelry inherited by the decedent during the marriage
84. Which of the following properties owned by a non resident alien decedent is not subject to the rule of
reciprocity?
a.Shares of stock in a Philippine domestic corporation
b.Investment in stock in a US corporation 80% of the business of which is in the Philippines
c.Investment in bonds in a US corporation that have acquired business suits in the Philippines
d.40% share in a Philippines partnership
85. Which of the following shall not be exempt from value added tax?
a.Sales by the agricultural cooperatives duly registered with the Cooperative Development Authority to
their members as well as sale of their products, whether in its original state or processes form to non
members
b.Gross receipts from the lending activities by credit of multipurpose cooperatives duly registered with
the Cooperative Development Authority whose lending operation is limited to their members
c.Sales of non agricultural, non-electric and non credit cooperatives duly registered with Cooperative
Development authority if the capital contribution of each member does not exceeds P 15,000
d.Sales of electric cooperatives duly registered with Cooperative Development Authority relative to the
generation and distribution of electricity
86. A common carrier by land is engaged in the transport of passenger , goods and cargoes . A’s gross receipts
amounted to P3M, 50% of which came from transport of passengers. He is not VAT registered, what
business taxes will A pay?
a. 12% value added tax
b. 3% common carrier tax
c. 3% tax on VAT exempt persons on gross receipts from transport of goods and cargoes and 3 ½
common carrier tax on gross receipts from transport of passengers
d. 12% VAT on gross receipts from transport of goods and cargoes and 3% common carriers tax on
gross receipts from transport of passengers.
87. A keeper of garage whose gross receipts for the year exceed P 1,500,000 is subject to:
a. Value added tax
c. Excise tax
b. Common carrier tax
d. Franchise tax
88.
89.
90.
91.
92. The following are related to the tax assessment of a tax payer
93. Assessment received
January 1,2010
94. Petition for reconsideration filed with BIR
February 1,2010
95. Documents supporting the petition filed with BIR
February 7, 2010
96. Decision of BIR denying the petition received by the taxpayer
March 22, 2010
97. Second request for reconsideration filed with BIR
March 30, 2010
98. Decision of denial of second request for reconsideration was received
April 12, 2010
99.
100.
Last day to appeal to the Court of Tax Appeals
a.May 12, 2010
c.May 4, 2010
b.July 4, 2010
d.June 4, 2010
101.
Which of the inherent powers may be exercised even by public service corporations and public
utilities?
a.Power of taxation
c.Police power
b.Power of eminent domain
d.A and B
102.
A law was passed by Congress which granted tax amnesty to those who have not paid income taxes
for a certain year without at the same time providing for the refund of taxes to those who have already paid
them . the law is:
a.Valid because Congress provided for a valid classification
b.Not valid because those who did not pay their taxes are favoured over those have paid their taxes
c.Valid because Congress has the sole discretion of determining whom to tax
d.Not valid because only the grant amnesty is the sole prerogative of the precedent
A1 PASSERS REVIEW CENTER///170
103.
How long must the books of accounts be kept?
a.For a period beginning to preceding taxable year until the last day of the current taxable year
b.For a period beginning the current taxable until the last day of the following taxable year
c.For a period beginning from the last entry in each book until the last day prescribed within which the
Commissioner is allowed to make an assessment
d.For a period of 3 years beginning from the current taxable year until the last day of the third taxable
year
104.
Due to financial difficulties , ABC Corp requested that its 2009 income tax liability of P400,000 be paid
in four (4) equal monthly instalments , starting April 15, 2010. Its request for instalment payment was
approved on April 8, 2010. The tax due on May 15, 2010 is.
a.P 100,000
c.P 105, 000
b.P 101, 667
d.P106, 667
105.
Which of the following is not correct?
a.A tax credit certificate validity issued by the BIR may be used as credit against internal revenue taxes
except against withholding tax
b.All taxes imposed and collected by the BIR are internal revenue taxes
c.Public Officials who acquire information on violation of internal revenue laws in the performance of
their duties during their incumbency are entitled to informer reward.
d.The proceedings on the protest in the BIR is an administrative proceedings
106.
On March 31, 2010, A received 100 shares of stock with a fair market value P 120/share as of March
31, 2010. The shares of stock were intended to pay the services rendered by A on November 20, 2009, at
which time the fair market value was P 100/share. The per value per share if P50. The income A is
a.P12,000
c.P5,000
b.P 10,000
d.P7,000
107.
Which of the following statements is not correct?
a.An article subject to excise tax may be exempt from vat
b.An article subject to excise tax may be subject to vat
c.A tax payer may be have two business where one as subject to vat and the other is subject to
percentage tax
d.Manufacturers and importers of goods are subject to excise tax
108.
Mr. Araki a non resident alien stockholders, received a dividend income of P300,000 in 2010 from a
domestic corporation whose gross income from within and without the Philippines for three years preceding
2010 show:
109. SOURCE OF INCOME
110.
2007
111.
2008
112.
2009
113.
From within the Philippines
114.
P
115.
P12,00
116.
P24,000
16,000,000
0,000
,000
117.
From without the Philippines
118.
18,000,00
119.
14,000, 120. 16,000,
0
000
000
121.
122.
How much of the individual income received by Mr. Araki considered income from sources within the
Philippines?
a.Zero
b.P156,000
c.P300,000
d.P144,000
123.
124.
125.
126.
127.
Which of the following is not a condition imposed by the constitution for the exercise of the power of
eminent domain?
a.The consent of the owner of the private property to sell the same to the government
b.The payment of just compensation
c.The observance of due process in making of private property
d.The existence of public use of the taking of a private property
128.
Mr. Bagongbahay acquired his old principal residence in 1990 at a cost of P4M. he sold the said
property on January 1, 2010 for P16M, although the FMV on that date was P20M. within the reglementary
period, Bagongbahay acquired his new principal residence for P 12M.
129.
Which of the following is incorrect?
a.Bagongbahay has to pay capital gains tax of P 300,000
b.The cost basis for the new principal residence is P3.2 M
c.The utilized amount of the gross selling price is P 12M
d.If the proceeds were not used to buy a new principal residence, the capital gains
130.
131.
63-64- For the month of August and September 2010, ABC Bank has the following income/loss
A1 PASSERS REVIEW CENTER///171
132.
INTEREST INCOME WITH MATURITY
-
Of less than 5 years
-
Of more than 5 years
139.
rentals
142.
Net trading gain (Loss)
133.
ST
135.
00
137.
0
140.
0
143.
00)
AUGU
P800,0
134. SEPTE
MBER
136. P1M
800,00
138.
1M
400,00
141.
800,000
(100,0
144.
200,000
145.
146.
The gross receipts tax of ABC Bank for August is
a.P76,000
c.P69,000
b.P68, 000
d.P63,000
147.
The gross receipts tax of ABC Bank for September is
a.P125,000
c.P116,000
b.P130,000
d.P123,000
148.
Which of the following is not subject to vat?
a.Non life insurance premiums
c.Non life insurance commissions
b.Non life reinsurance
d.Non life reinsurance commissions
149.
It is aspect of taxation that administrative in character and the power to exercise it is vested on the
Department of Finance
a.Levying
c.Imposition
b.Collection
d.Legislation
150.
For donor tax purposes this is a stranger to the donor
a.Daughters of a brother
c.Grandson of sons granddaughter
b.Son of an uncle
d.Granddaughter of mother’s sister
151.
152.
68-70
153.
A , caregiver , is under three year employment contract with a hospital in USA . His wire , B and a
minor child live in the Philippines. He earns P70,000 (converted) a month for the annual income of
P840,000, A shall pay income tax
a.For the entire amount it being taxable in the Philippines
b.Of nothing because as OFW, he is considered a non resident citizen
c.For half the full amount because the other half pertains to his wife
d.For the ½ share of his wife because the wife is a resident citizen
154.
Using the above data, if A puts 30% of his earnings in a dollar deposit account with a local , interest
income therein
a.Is taxable for the full amount at 7.5% final withholding tax
b.Of P 126,000 shall be taxed at 7.5% final withholding tax
c.Maybe exempt from income tax provided he presents proof of non residency to the bank
d.Of P840, 000 shall be taxed at 7.5% final withholding tax
155.
If the dollar deposits account above is joint ( with B) with the same percentage of earning invested ,
interest income in that account
a.Is capable for the full amount at 7.5 % final withholding tax
b.Of P126,000 shall be taxed at 7.5% final withholding tax
c.May be exempt from the income tax provided he presents proof of non residency to the bank
d.Of P840,000 shall be taxed at 7.5% final withholding tax
156.
A filed his income tax return for the calendar year 2007 on March 20, 2008. When is the last day for
the BIR to collect assuming A did not pay the tax due upon filing?
a.March 20, 2011
b.April 15, 2011
c.April 15, 2013
d.March 20, 2013
157.
158.
159.
160.
161.
Using the above data, assuming A filed his income tax return on April 20, 2008 and the return is not
fraudulent, when is the last day for the BIR to make an assessment ?
a.April 20, 2011
c.April 20, 2013
b.April 15, 2011
d.April 15, 2013
162.
Using the above data , if the BIR issued a deficiency income tax assessment on March 10, 2010, when
is the last day for the BIR to collect?
a.March 10, 2013
b.April 15, 2013
A1 PASSERS REVIEW CENTER///172
c.March 10, 2015
d.April 15, 2015
163.
A filed his ITR for 2008 on April 15, 2009 and will pay his tax liability in instalment. The return shown
an income tax due of P100,000 and income tax withheld of P60,000. If A pays the 2 nd instalment only on
October 15, 2009, the amount to be paid (excluding compromise penalty)is
a.P26,000
c.P55,000
b.P35,000
d.P37,500
164.
On April 15, 2010 , A filed his income tax return for his 2009 income and paid the tax due thereon. In
2011. A discovered that he made an overpayment in his income tax return. He filed a written claim for refund
of tax erroneously collected with the CIR on October 1, 2011. On April 14, 2012, without receiving a decision
on his claim for refund, A filed in the CTA a petition for review on his claim for refund of tax erroneously
collected. Which of the following is incorrect?
a.The CTA did not acquire jurisdiction over the petition for review because the appeal is premature, there
being no decision yet on said claim for refund
b.The CTA jurisdiction is to review by appeal decisions of the BIR Commissioner so if there is no
decision there is nothing to review
c.The CTA acquired jurisdiction over the petition since it is the right of a taxpayer to go to the CTA with or
without decision rendered by the BIR Commissioner
d.The CTA acquired jurisdiction over the petition as the peremptory period of 2 years within which a
claim for refund is about to expire and the failure of the CIR to act on the claim is tantamount to
denial of the claim
165.
One of the following is not exempt from VAT
a.Lease of the residential units with a monthly rental not exceeding P10,000
b.Services subject to percentage tax
c.Services rendered by individuals pursuant to employer –employee relationship
d.Export sales by persons who are vat-registered
166.
A sold a personal property held as capital asset be acquired 9 years ago with an acquisition cost
P50,000 for P 270,000. The payment shall be made of the following terms. Cash down payment of P40,000
and additional P 10,000 at the end of the year sale. The property sold has been mortgaged for P 160,000
which assumed by the buyer issued a note payable for the balance which is to be paid equally in two years
following the year of sale. The contract price is.
a.P 270,000
c.P 120,000
b.P110,000
d.P130,000
167.
The taxable profit for the first year is
a.P120,000
c.P30,000
b.P60,000
d.P15,000
168.
XYZ filed its income tax return and paid the tax due for calendar year 2008 showing a tax liability of
P175,000. However, upon audit, it was discovered that its income tax return was false or fraudulent
because it did not report other taxable income. Per investigation the correct income tax due is P 350,000.
The corporation was duly informed of this finding through a preliminary assessment notice. Failing to protect
on time against the preliminary assessment notice, a formal letter of demand and assessment notice was
issued on May 31, 2010 calling for payment of deficiency income tax on or before July 15, 2010. The
amount due on July 15, 2010 is
a.P 306,250
b.P 437, 500
c.P240, 625
d.P612, 500
169.
Where no notice or audit or investigation of tax return, statement or declaration has been actually
served upon the taxpayer, the tax return may be modified, changed or amended by the taxpayer , from the
date of such filing, within.
a.30 days
b.180 days
c.3 years
d.5 years
170.
171.
172.
173.
174.
175.
176.
177.
178.
179.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
180.
2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
181.
Tel. No.: (033) 320-2728; 09106547262
A1 PASSERS REVIEW CENTER///173
182.
Email Address:
[email protected]
183.
BOARD OF CERTIFIED PUBLIC ACCOUNTANT
185.
CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A
187.
184.
186.
188. MANAGEMENT ADVISORY SERVICES
189.
INSTRUCTION: Select the correct answer for each of the following questions. Mark only one answer
for each item by shading the box corresponding to the letter of your choice on the answer sheet
provided. STICTLY NO ERASURES ALLOWED. Use pencil no. 1 only.
190.
191. MULTIPLE CHOICE:
192.
1. In comparing management accounting, which of the following statements is true?
a.Both are historical cost as their primary unit of measurement
b.Both depend on the double entry system of accounting
c.Both require adherence to PFRS
d.Financial accounting reports are more objectives , whereas management accounting reports are more
subjective
2. Management accounting and financial accounting are similar in which of the following respects?
a.Both use the sense unit of measurement
b.Both rely heavily on the double entry systems
c.Both produce almost all of their respective informational reports on a routine monthly basis
d.Both provide relevant and useful information to management
3. Firms with a high degree of operating leverage
a.Will have a more significant shift in income as sales volume changes
b.Have lower fixed costs
c.Have low contribution margin ratios
d.Are less dependent volume to add profits
4. The treasurer function includes
a.Tax administration
c.Investor relations
b.Evaluating and consulting
d.Economic appraisal
5. The use of information systems facilities on focus on the collection, organization, integration and long term
storage of entity wide data is known as
a.Data independence
c.Data redundancy
b.Data mining
d.Data warehousing
6. Which of the following technologies would an organization use to prevent access to its private network?
a.Digital signature
c.Web assurance service
b.Firewall
d.Encryption
7. Which of the following systems is one where the transactions are posted and the master and open files are
updated, immediately?
a.Microcomputer system
c.Batch system
b.Mainframe computer system
d.Real times system
8. Which of the following controls most likely would assure that an organization can reconstruct its files?
a.Hardware controls that are built into the computer by the computer manufacturer
b.Back up copies of the data and program files that are stored away from originals
c.Personnel, who are independent of data input , perform parallel simulations
d.System flowcharts that provide accurate descriptions of input and output operations
9. Which of the following statements about the visual fir method is (are) true?
10. I. The method results in the creation of a scatter diagram
11. II. The method is not totally objective because of the manner in which the cost line is determined
12. III. The method is especially helpful in the determination of outliers
a.II only
c.I and III
b.I and II
d.I, II and III
13. A flatter slope is the variable cost line indicates a
a.High variable cost per unit
b.High influence of activity on total variable cost
c.Low influence of activity on total variable costs
d.Large amount of fixed costs
14.
15.
16.
17.
A1 PASSERS REVIEW CENTER///174
18. Cielo’s Hotdog Stand sells hotdogs for P25 each. The variable costs per hotdog are P10. Cielo’s fixed costs
are currently P 8,000 per month. Cielo is considering expending her business to three hotdog stands which
will increase fixed costs per month by P 12,000.
19. If Cielo’s does expand her business to three stands, how many additional hotdogs will need to be sold per
year in order to break even
a.800
c.9600
b.600
d.7200
20. Do Dante Corporation is contemplating to method a new product that requires an increases in fixed costs by
P 1,400,000 for production of 50,000 units or less and P1,800,000 for more than 50,000 units. The variable
costs ratio is 60 percent of sales. The product is expected to sell for P80 per unit. How any units must Don
Dante sell just breakeven?
a.43,750
c.50,000
b.56,250
d.Either 43,750 or 56,250
21. In most companies , machines break down occasionally and employees are often less than perfect which
type of standard acknowledges these characteristics when determining the standard cost of a product?
a.Efficiency standard
c.Practical standard
b.Ideal standard
d.Budgeted standard
e.
f. Question number 14 and 15 are based on the following
g. Moon Products applies fixed overhead at a rate of P3 per direct labor hour. Each unit
produced is expected to take 2 direct labor hours. Moon expected production in the current
year to be 10,000 units but 9,000 units were actually produced. Actual direct labor hours were
19,000and actual fixed overhead costs were P 62,000
22. Moons fixed overhead spending variance is:
a.P 8,00 F
c. P 2,000 F
b. P 8,000U
d.P 2,000U
23. Moons fixed overhead volume variance is:
a.P 2,000
c.P 8,000
b.P 6,000
d.P0
24. Which of the following statements is correct regarding budgeting?
a.Is a primary focused on past performance
b.Is primarily bookkeeping task
c.It should be build from the ground up each year
d.It involves input from a broad range of managers
25. It is most budget in the master budget is likely the
a.Cash budget
c.Personnel budget
b.Capital budget
d.Purchases budget
26. Which of the following is not a typical cash outflow associated with a capital investment?
a.Repairs and maintenance needed for purchased equipment
b.Additional operating costs resulting from the capital investment
c.Salvage value received when the newly purchased equipment is sold
d.Purchase price of a new equipment
27. Depreciation charges indirectly affect the after tax flow because the company
a.Can deduct depreciation expenses on their financial statements, reducing reported income before tax
b.Can deduct depreciation expenses on their financial statements , increasing cash inflows
c.Can deduct depreciation expenses on their income tax returns, reducing cash outflow for taxes
d.Cannot deduct depreciation expenses on their income tax returns
28. The calculation of the profitability index (PI) is most helpful for which type of decisions?
a.Screening
c.Qualitative
b.Preference
d.Short term
29. O Mai Mai Company purchased an asset costing P 90,000. Annual operating cash inflows are expected to
be P 20,000 each year for six years. No salvage value is expected at the end of the asset life. The company
applies a 16 percent minimum acceptable rate of return for this kind of investment . the details of the present
values at 16% sex periods and
30. Present value of ordinary annuity of 1
3.6847
31. Present value of annuity due of 1
4.2743
32.
33. Assuming O’maimai cost of capital is 16 percent , what is the asset net present value? ( ignore income
taxes)
a. P 16,306
b.P30,000
c.P4,514
d.P4,800
34.
35.
36.
A1 PASSERS REVIEW CENTER///175
37.
38.
39.
40.
41. Pacam, Inc. Requires all its capital investment to generate an internal rate of return of 14 percent the
company is considering an investment costing P80,000 that is expected to generate equal annual cash
inflows for 5 years. The present value of 1 . end of 5 years is 0.51937 and the present value inequity of 1 is
3.4331 based on 14 percent required rate of return.
42. To meet the 14% minimum acceptable rate return, the estimated annual cash inflow (ignoring income taxes)
is :
a.P23,803
c.P274,648
b.P51,550
d.P154,033
e.
f. Question Nos. 23 through 25 are based on the following
g.Lakewood Company is considering the purchases of a purpose bottling machine for P 280,000. It is
expected to have a useful life of 7 years with a zero terminal disposal price. The plant manager
estimates the following savings in cash operating costs
h.
i.
j. ANNUAL CASH
SAVINGS
k.
m.
o.
q.
s.
u.
w.
l. P140,000
n.110,000
p.80,000
r. 60,000
t. 40,000
v. 30,000
x.30,000
y.
z.Lakewood uses required rate of return of 12% in its capital budgeting decisions. remittal tax rate of
40%. The company uses straight-line depreciation. The present value of annuity of 1 at 12% for
years 4,56376. The details of the present value
aa.
ab. ANNUAL CASH
SAVINGS
ac.
ae.
ag.
ai.
ak.
am.
ao.
ad. 0.89286
af. 0.79719
ah. 0.71178
aj. 0.63552
al. 0.56743
an. 0.50663
ap. 0.45235
aq.
43. The number of years to recover the amount investment is
a.4.83 years
c.2.38 years
b.3.63 years
d.4.00 years
44. What is the net present value of this investment?
a.P4,723
c.P(2.159)
b.P8,559
d.P0
45. What is the accounting rate of return based on initial investment
a.6.43%
c.20.71%
b.12.86%
d.41.42%
46. Escape Company regularly pays its accounts payable on the tenth day and enjoys the 2 percent cash
discount , term: net 30. Because of an oversight, one supplier invoice is not paid within the discount period
but paid 10 days after. What is the annual cost of that incident of paying an invoice on the 20 th day instead of
the tenth day? Use 360 days a year
a.73.44%
c.30.02%
b.36.73%
d.2.04%
47. P18,591,650 at 8 persons on a one year discounted loan, what is the effective interest rate?
a.8.00 percent
c.9.07 percent
b.8.70 percent
d.7.41 percent
A1 PASSERS REVIEW CENTER///176
48. Toledo, Inc. Has recently calculated the inventory turnover for current year to be 30 . in prior years , the
same ratio was always lower. Which of the following statements would be the best interpretation for the
reason for the ratios change?
a.The company had less sales in the current year than in prior years
b.The company purchased less inventory in the current year than in prior years
c.The company took fewer days to sell its inventory in the current year than in prior years
d.The company took more days to sell its inventory in the current year than in prior years
49.
50.
51.
52.
53.
54.
55. Which of the following statements is true regarding a company’s segment margin?
a.It is primarily used to make short term decisions such as cost volume profit (CVP) analysis and special
order decisions
b.It ignores all fixed costs
c.It is primarily a measure of long term profitability
d.It should not be used to make decisions on whether or not to drop a product line
56. Which of the following statements about the balanced scorecard approach is false?
a.It requires managers to focus on financial measures more than nonfinancial measures
b.It looks at performance from the following perspectives, financial, customer, internal business and
learning and growth
c.It helps balance short term operating performance with long term strategies
d.It recognizes that traditional measures of performance are often not adequate to fully assess
company’s performance
57. Determining the market share for a company’s product would be a measure of performance , which
perspective of the balanced scorecard?
a.Internal business
c.Financial
b.Customer
d.Learning and growth
58. Which of the following statement about quality costs is true?
a.Even in theory , external failure costs can never be reduced to zero
b.The less of company’s spreads on prevention costs, the less they will have to spend on internal failure
costs in the future
c.If a company produces and sells a defective product, external failure cost are likely to exceed all the
other types of quality costs
d. Low level of internal failure costs usually indicators that more attention needs to be paid to
prevention and appraisal costs
59. HNW Ltd. Manufactures and sells food processors. A popular consumer magazine has recently evaluated
food processors and has ranked HNWs processors as being of “poor quality”. As a result HNWs
management team has begun to analyze all costs associated with their food processors in more detail and
the following data has been compiled:
60.
Scrap costs
61.
P 80,000
62.
Quality training 63.
75,000
64.
Warranty
65.
100,000
claims
66.
Rework costs
67.
50,000
68.
Inspection of
69.
30,000
incoming materials
70.
Product quality 71.
60,000
audits
72.
Statistical
73.
40,000
process control
74.
75. What are HNW’s total internal failure costs?
a.P 50,000
c.P230,000
b.P130,000
d.P170,000
76. Which of the following items used to measure customer response time would not be used to measure
manufacturing cycle time?
a.Time it takes to process raw materials into a completed product
b.Time spent waiting for a machines availability
c.Time spent inspecting the materials for quality control
d.Time spent delivering the product to the customer
77.
78. Question Nos. 35 and 36 are based on the following information
A1 PASSERS REVIEW CENTER///177
79. Polka Devices normally produces and sells 62,000 units CK-6 each month. CK -6 is a small electrical relay
used in the automotive industry as a component part in various products. The selling price is P46 per unit,
variable costs are P42 per unit, fixed manufacturing overhead expenses total P280,000 per month, and fixed
selling expenses total P88,000 per month.
80. Strikes in the companies that purchase the bulk of the CK-6 units have caused Polks Devices sales to
temporarily drop to only 26,000 units per month. Polka devices estimates that the strikes will last for about
two months, after which sales of CK-6 should return to normal. Due to the current low level of sales,
however, Polica Devices is thinking about closing down its own plant during the strikes. If Polks Devices
does close down its plant, it is estimated that fixed manufacturing overhead expenses can be reduced to
P210,000 per month and that fixed selling expenses can be reduced by 10% . start up expenses at the end
of two months shutdown period would total P4,000. Since Polica Devices uses just in time production
methods, no inventories are on hand.
81. Assuming that the strikes continue for two months as estimated, how much would the advantage or
disadvantage of closing the plant?
a.P 54,400 disadvantage
c.P 50,400 disadvantage
b.P 58,400 disadvantage
d.P 29,200 disadvantage
82.
83.
84.
85.
86. At what level of sales (in units) for two month period should Polica Devices be indifferent between closing
the plant or keeping it open?
a.38,400 units
c.39,000 units
b.39,400 units
d.38,000 units
87. Vera Cruz Company has projected cost of goods sold P 2 million including fixed costs of P100,000 and
variable costs are expected to be 75 percent of net sales. What will be the projected net sales/
a.P 2,133,333
c.P2,666,667
b.P2,400,000
d.P3,200,000
88. Gibo Zamora sells helium balloons in Luneta Park on Saturdays as a means on making some extra
spending money. He buys balloons from a party store at P12 each and sells them at a price of P30.00 each.
Demand of the balloons ranges between 35 and 45 per day. Gibo normally purchases 40 balloons. The
helium losca its resilence in a couple of days, so balloons not sold cannot be saved for the following
Saturday. Gibo usually just releases the balloons that do not sell. As he watched the most recent batch of
the five balloons floating into space, he thought surely, there must be some way to void this waste.
89. What is the estimated on Gibo profit if the helium canister is rented assuming there are 5 balloons being
unsold?
a.No effect
c.Increase the profit by P90
b.Increase the profit by P150
d.Decrease the profit by P80
e.Use the following data for Ulap Company in answering numbers 39 and 40
f.
g.
h. 2010
i. 2009
j. Net sales
k.P5,520,000
l. P4,000,000
m. Cost of
n.3,795,000
o.3,000,000
goods sold
p.Gross profit
q.P1,725,000
r. P1,000,000
s.
90. Assume that the selling price increased by 20 percent effective January 1, 2010. What is the amount of
increase in sales due to change in selling price and units sold, respectively?
a.P920,000 and P 600,000
c.P720,000 and P800,000
b.P 1,104,000 and P416,000
d.P (1,380,000) and P2,900,000
91. Independent of question number 39 , assuming that the cost price per unit decreased by 4 percent effective
January 1, 2010. How much were the change in sales due to change in quantity sold and change in cost of
goods sold due to change in unit cost?
92.
Change in sales
change to cost of Goods Sold Due
93.
Change in Quantity
to change in unit cost
a.P1,270,800 increase
P158,125 decrease
b.P249,200 increase
P953,125 decrease
c.P1,262,400 increase
P151,800 decrease
d.P1,262,400 increase
P953,125 decrease
94. The primary purpose of management advisory service is
a.To conduct special studies, preparation of recommendations , development of plans and provision of
advice and assistance in their implementation
b.To provide services or to fulfil some social need
c.To improve the clients use of its capabilities and resources to achieve the objectives of the
organization
A1 PASSERS REVIEW CENTER///178
d.To earn the best rate of return on resources entrusted to its care with safety of investment being taken
into account and consistent with the firms social and legal responsibilities
95. The fixed overhead application rate is a function of a predetermines normal activity level. If standard hours
allowed for good output equal predetermined activity level for a given period the volume variance will be
a.Zero
c.Unfavourable
b.Favorable
d.All of the above
96. The AMVians is planning its annual Blast Extravaganza. The extravaganza committee has assembled the
following expected costs for the event:
97. Dinner per person
P70
98. Programs and souvenier per person
30
99. Orchestra
15,000
100.
Tickets and advertising
7,000
101.
Auditorium rental
48,000
102.
Floor show and strolling entertainment
10,000
103.
104.
The committee members would like to charge P300 per person for the evening activities
105.
Assuming that only 250 persons are expected to attend the extravaganza, what ticket price must be
charged to breakeven?
a.P420
c.P320
b.P350
d.P390
106.
107.
108.
109.
110.
111.
Gabgalang Company uses a monthly cost formula for overhead of P50,000 + 30,000 for each direct
labor hour worked. For the coming year, gabgalang plans to manufacture 200,000 units. Each unit requires
five minutes of direct labor. Gabgalang total budgeted overhead for the coming year is
a.P550,000
c.P1,100,000
b.P1,200,000
d.P650,000
112.
How will a favorable volume variance affect net income under each following methods?
113.
ABSORPTION
VARIABLE
a.Reduce
no effect
b.Reduce
increase
c.Increase
no effect
d.Increase
reduce
114.
The following information has been extracted from Bautista & Magsombol Company’s financial records
for its first year of operations?
115.
116.
Units produced
10,000
117.
Units sold
7,000
118.
Variable costs per unit
119.
Direct materials
P8
120.
Direct labor
9
121.
Factory overhead
3
122.
Selling
4
123.
Fixed costs:
124.
Manufacturing overhead
P70, 000
125.
Selling
30,000
126.
127.
Based on absorption costing, Bautista & Magsombol’s income in its first year of operations will be
a.P21,000 higher than it would be under variable costing
b.P70,000 higher than it would be under variable costing
c.P30,000 higher than it would be under variable costing
d.Higher than it would be under variable costing, but he exact difference cannot be determinable from
this information
128.
Balara Company has intra company service transfers from Internal Division , a cost center, to World
Division , a profit center. Under stable economic conditions, which of the following transfer prices is likely to
be most conductive to evaluating whether both divisions have met their responsibilities?
a.Actual cost
c.Standard variable cost
b.Market price
d.Negotiated price
129.
De Chavez Company is considering an investment in a new casting machine to replace its existing
one. Information on the existing machine and the replacement machine follows:
130.
131.
Cost of new machine
P40,000
132.
Net annual savings in operating costs
9,000
A1 PASSERS REVIEW CENTER///179
133.
134.
135.
136.
137.
138.
Salvage value now of the old machine
Salvage value of the old machine in 8 years
Salvage value of the new machine in 8 years
Estimated
6,000
0
5,000
8 years
What is the expected payback period for the new machine?
a.4.44 years
c.4.00 years
b.3.22 years
d.3.78 years
139.
Kiel Dimayaga Company has a total assets turnover of a 0.30 and a profit margin of 10 percent
Patrick. The President , is unhappy with the current return on assets and be thinks it could be doubled. This
could be accomplished (1) by increasing the profit margin to 12 percent , and (2) by increasing the total
assets turnover. What new asset turnover ratio, along with the 12 percent profit margin, is required to double
the return on assets?
a.25%
c.36%
b.50%
d.60%
140.
The examples of activating at the product level include
a.Scheduling , setting up and moving
c.Beating, lighting and security
b.Designing changing and advertising
d.Cutting, painting and packaging
141.
A systematized approach knows as acro-based budgeting
a.Presents the plan for only one level of activity and does not adjust to changes in the level of activity
b.Presents a statement of expectations for a period of time but does not present a firm commitment
c.Divides the activities of individual responsibility centers into a series of packages which are ranked
ordinally
d.Classifies budget requests by activity and estimates the benefits arising from each activity
142.
The CEO of a rapidly growing high technology firm has exercised centralized authority over all
corporate functions. Because the company now operates in four geographically dispersed locations. The
CEO is considering the advisability of decentralizing operation control over production and sales. Which of
the following conditions probably would result from and be a valid reason for decentralizing?
a.Greater local control over compliance with government regulations
b.More efficient use of headquarters staff officials and specialists
c.Quicker and better operating decisions
d.Greater economies in purchasing
143.
The following are details of the monthly unit cost to manufacture and sell a particular product for Grace
Company:
144.
Manufacturing cost:
145.
Direct materials
P3.00
146.
Direct labor
4.00
147.
Variable indirect
2.00
148.
Fixed indirect
1.50
149.
150.
Marketing costs:
151.
Variable
2.00
152.
Fixed
1.00
153.
154.
Grace must decide to continue making the product or buy it from outside supplier. The supplier has
offered to make the product at the same level of quality that the company can make it. Fixed marketing costs
would be unaffected, but variable marketing costs would be reduced by 25% if the company were to accept
the proposal. What is the minimum amount per unit that Grace can pay the suppliers without decreasing its
operating income?
a.P9.50
c.P11.50
b.P10.50
d.P12.50
155.
The Salinas Division of Soriano Company expects the following result for 2011.
156.
Unit sales
70,000
157.
Unit selling price
P10
158.
Unit variable cost
P4
159.
Total fixed cost
160.
Total fixed costs
P300, 000
161.
Total investment
P500, 000
162.
163.
The minimum required RO1 is 15percent, and divisions are evaluated on residual income. A foreign
customer has approached Salinas manager with an offer to buy 10,000 units at P7 each. If Salinas accepts
the order, it would not lose any of the 70,000 units at the regular price. Accepting the order would increase
fixed costs by P10,000 and investment by P40,000
164.
165.
What is the minimum price that Salinas could for the order and still maintain its expected residual
income?
A1 PASSERS REVIEW CENTER///180
a.P5.00
c.P5.60
b.P4.75
d.P9.00
166.
Morr Co. has a total annual cash requirement of P 9,075,000 which are be paid uniformly. Morr has
the opportunity to invest the money at 24% per annum. The company spends, on the average P40 for every
cash conversion to markeable securities.
167.
What is the optimum average cash balance?
a.P60,000
c.P55,000
b.P45,000
d.P27,500
168.
The dividends and stock price of Feudo Company are expected to grow at 7 percent per year by the
end of this year. Feudos common stock sells for P25 per share, it last dividend was P2.50 and the company
will pay P2,675 at the end of the current year. Feudo should pay P 2.50 flotation cost.
169.
What are the expected returns on retained earnings for Feudo Company?
a.17.7 percent
c.18.89 percent
b.18.45 percent
d.19.72 percent
170.
Baguio Company’s accounts receivable were P600, 000 at the beginning of the year and P 800,000
the end of the year. Cash sales for the year were P300, 000. The accounts receivable turnover for the year
was 5 times. Baguio Company’s total sales for the year were
a.P 800,000
b.P 3,300,000
c.P1,300,000
d.P3,800,000
171.
172.
173.
174.
175.
The Baraguio Corporation purchases 60,000 headbands per year. The average purchase lead time is
20 working days. Maximum lead time is 27 working days. The corporation works 240 days per year.
176.
The appropriate safety stock level and the recorder point for the company are
177.
178.
Safety Stock
Recorder Point
a. 1,750
6,750
b.1,750
5,250
c.1,167
6,750
d.1,167
5,250
179.
Almires Building company uses the critical path method to monitor construction jobs. The company’s is
currently 2 weeks behind schedule on Job WW. Which subject to a P10,500 per week completion penalty.
Path A-B-C-F-G-H-I has a normal completion time of 20 weeks and critical path A-D-E-F-G-H-I- has a
normal completion time of 22 weeks. The following activities can be crashed.
180.
Activities
cost to crash 1 week
cost to
crash 2 weeks
181.
B-C
P8,000
P15,000
182.
D-E
10,000
19,600
183.
E-F
8,800
19,500
184.
185.
Almires desires to reduce the normal completion time of job WW and at the same time, report the
highest possible income for this year. Almires should crash
a.Activity B-C 1 week and Activity EF 1 week
b.Activity B-C 2 weeks
c.Activity D-E 1 week and activity B-C 1 week
d.Activity D-E 1 week and activity E-F 1 week
186.
The capital asset pricing model (CAPM) computes the expected return on a security by adding the risk
rate return to the incremental yield of the expected market return which is adjusted by the company’s beta.
What is MNO’s expected rate of return if the equity market is expected to earn 12 percent; the treasury
bonds are currently yielding 5 percent. The beta coefficient for MNO is estimated to be 0.60. MNO is subject
to an effective corporate income tax rate of 40%.
a.12.00 percent
c.12.20 percent
b.9.20 percent
d.7.20 percent
187.
Trading on the equity refers to the
a.Amount or working capital
b.Amount of capital provided by owners
c.Use of barrowed money to increase the return to owners
d.Number of times interest in caned
188.
Demand for a product tends to be price inelastic if
a.The product is considered a hourly item
b.Few goods complements for the product are available
c.The population in the market area is large
A1 PASSERS REVIEW CENTER///181
d.People spend a large share of their income on the product
Because of the existence of economies of scale , business fines may find that
a.Each additional unit of labor is less efficient than the previous unit
b.As more labor is added to a factory, increases in output will diminish in the short run
c.Increasing the size of a factory will result in lower average cost
d.Increasing the size of a factory will result in lower total costs
190.
For a given level of tax collections , prices and interest rates, a decrease in governmental purchases
will result in a (an)
a.Increase aggregate demand
c.Increase in aggregate supply
b.Decrease in aggregate demand
d.Decrease in aggregate supply
191.
The most effective fiscal polity program to help reduce demand pull inflation would be to
a.Decrease the rate of growth of the money supply
b.Increase both taxes and government spending
c.Decrease taxes and increase government spending
d.Increase taxes and decrease government spending
192.
193.
CABRAL industries received an order for a piece of special machinery from Tigok Company. Just as
CABRAL completed the machine, Tigok declared bankruptcy, defaulted on the order , and for feted the 10
percent deposit paid on these selling price P72,500
194.
195.
196.
197.
198.
199.
200.
201.
CABRAL’s manufacturing manager identified the cost already incurred in the production of the special
machinery for Tigok as follows
202.
Direct material
P16,600
203.
Direct labor
21,400
204.
Manufacturing overhead
205.
Variable
P10,700
206.
Fixed
5,350
16,050
207.
Fixed selling and administrative costs
5,405
208.
Total
P59, 455
209.
210.
Another company , kay Corporation , will buy the special machinery if it is reworked to Kay’s
specification. CABRAL offered to sell the reworked machinery to Kay as a special order for P68, 400 Kay
agreed to pay the price when it takes delivery in two months. The additional identifiable costs to rework the
machinery to Kay specifications are as follows.
211.
Direct materials
P6,200
212.
Direct labor
4,200_____
213.
Total
P10,400
214.
215.
A second alternative available to CABRAL is to convert the special machinery to the standard model .
which sells for P62,500. The additional identifiable costs for this conversion are as follows.
216.
Direct materials
P2,850
217.
Direct labor
3,300
218.
Total
P6,150
219.
220.
The third alternative for CABRAL is to sell the machine as is for a price P52,000, However , the
potential buyer of the unmodified machine does not want it for 60 days. This buyer has offered a P7,000
down payment , with the reminder upon delivery.
221.
222.
The following additional information is available regarding CABRAL’s operations:
1. The sales commission rate on sales of standard models is 2 percent, while the rate on special orders is 3
percent
2. Normal credit terms for sales of standard models are 2/10, net /30. This means that the customer receives a
2 percent discount if payment is made within 10 days, and payment is due no later than 30 days after billing.
Most customers take the 2 percent discount. Credit terms for a special order are negotiated with the
customer.
3. The allocation rates for manufacturing overhead and fixed selling and administrative costs are as follows
223.
Manufacturing costs:
224.
Variable
50% of direct labor costs
225.
Fixed
25% direct labor costs
226.
Fixed selling and administrative costs
10% of the total manufacturing costs
189.
A1 PASSERS REVIEW CENTER///182
227.
4. Normal time required for rework is one month
66. How much peso contribution would the sale to Kay Corporation add to CABRAL before tax profit?
a.P53,848
c.P55,900
b.P55,948
d.P9,300
67. How much peso contribution would the alternative of converting the special machinery to standard model
add to CABRAL’s before tax profit?
a.P52,200
c.P52,825
b.P54,475
d.P7,650
68. If Kay makes CABRAL a counteroffer, what is the lowest price CABRAL should accept fot the reworked
machinery from Kay?
a.P10,400
c.P10,722
b.P12,500
d.P12,887
69. How much would the alternative of selling unmodified machinery to the potential buyer contribute to
CABRAL’s before tax profit?
a.P50,440
c.P49,920
b.P1,740
d.P49,400
70. A construction company has just completed two bridges over the Visayan area. The first bridge the company
ever built required 100 weeks to complete. Now having hired a bridge construction crow with some
experience, the company would like to continue building bridges. Because of the investment in heavy
machinery needed continuously by this crew, the company believes it wound have to bring the average
construction time less than a year (52 weeks) per bridge to earn a sufficient return on investment. The
average construction time will follow an 80% learning curve. To bring the average construction time (over all
bridges constructed) below one year per bridge, the crew would have to build approximately
a.6 additional bridges
c.3 additional bridges
b.7 additional bridges
d.8 additional bridges
e.
f. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
g. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
h. Tel. No.: (033) 320-2728; 09106547262
i. Email Address:
[email protected]
j.
k. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
l.
m. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET B
n.
o. MANAGEMENT SERVICES
p.
q. INSTRUCTION: Select the correct answer for each of the following questions. Mark only
one answer for each item by shading the box corresponding to the letter of your choice
on the answer sheet provided. STICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
r.
s. Items 1 to 3 are items based on the following information
t. Rafa enterprises is contemplating a major investment in a new flexible manufacturing systems
(EMS). The company’s minim desired rate of return is 16%. The total investment is P2.5 million
with a 10 percent residual value at the end of its 8 year expected life. The company uses
straight line depreciation. The FMS should produce P1.4 million of additional revenue additional
revenue annually. Annual cash operating costs area expected to be P776,375
u.
v. 1. What is expected payback period for the proposed FMS purchase?
A. 4.009 years
C. 3.625 years
B. 3.954 years
D. 3.125 years
E. 2. What is the expected net present value of the proposed FMS? (Round off factors to three decimal
places).
A. Positive net present value of P4,051,450
C.Positive net present value of P285,277
B. Negative net present value of P12,455
D.Negative net present value of P62,205
E. 3. Using the accounting rate of return method, what is the expected rate of return from the proposed
FMS purchases?
A. 37.7 percent
C. 24.9 percent
B. 26.6 percent
D. 19.2 percent
E. 4. Dividend payout ÷ dividend yield=
A. Price earnings ratio
C. Plowback ratio
B. Retention ratio
D. No meaningful amount
A1 PASSERS REVIEW CENTER///183
E. 5. Nadal Corporation produces custom designed safety gear for police vehicles. During September
20,2010, the company incurred the following cost of quality:
F. Produce testing costs
P11,200
G. Product warranty claims
13,000
H. Scrap and rework costs
10,500
I. Product engineering design costs
18,900
J. Employee training costs
10,100
K. Product simulation costs
16,400
L.
M. Total quality costs of conformance for September were
A. P80,100
C. P42,400
B. P56,600
D. P40,200
E. 6. Roger Company expects to incur P4, 000 per month of five costs during the first three months of the
year, and P10 per unit variable overhead costs. Expected [production for January, February and March
is 4,000, 5,000 and 3,000 respectively. Based on this information, the predetermined overhead rate for
the first three months of the year is
A. P11.00 per unit
C.P0.80 per unit
B. P10.00 per unit
D.P0.33 per unit
E. 7. a general rule in choosing among alternative investments is the greater the risk taken, the
A. Greater the return required
B. Lower the profits expected
C. Greater the price of the investment
D. Greater the price of the investment
F.
G.
H.8. The following financial ratios relate to Novak Company:
Debt ratio
Return on sales
Assets turnover: 2 times
Times interest earned: 4 times
I. What is the Novak’s return on equity?
A. 6.25%
C. 25.00%
B. 9.38%
D. 37.50%
E. 9. What type of responsibility center are accounting personnel and legal departments?
A. Cost center
C. Revenue center
B. Profit center
D. Investment center
E. 10. Federer Company operates two segments. Income statement for both segments are shown below
F.
G. Segments
Segment “Áussie Open”
Segment ÜS Open”
H. Sales
P500,000
P750,000
I. Unit Level Variable Costs
(400,000)
(550,000)
J. Contribution Margin
100,000
200,000
K. Facility –level Fixed Costs
(135,000)
(120,000)
L. Income (loss)
(P35,000)
P80,000
M.
N. Management is considering discontinuing the operation of Segment “Aussie Open” is eliminated?
A. P35,000 increase
C. P100,000 decrease
B. P35,000 decrease
D. P135,000 decrease
E. 11. Which of the following would be the nonvalue-added activity for a pizerria?
A. Home delivery
C. Recording daily cash receipts
B. Buying fresh pepperoni
D. Preparing thick pizza dough
E. 12. Complete the following table assuming the cost is a fixed cost
F. Units of products sold
15
25
G. Total expected sold
P7,500
“X”
H. Average per unit
P500
“Y”
I.
J. The amounts in the cells labelled “X” and “Y” is , respectively
A. P12,500 and P500
C. P12,500 and P625
B. P7,500 and P500
D. P7,500 and P300
E. 13. Which of these events will cause an increase in both current ratio and quick ratio assuming both
ratios are greater than 1 at present?
A. Payment of long term loan
B. Sale of merchandises on account
A1 PASSERS REVIEW CENTER///184
C. Purchase of inventories on account
D. Approval of short term loan application
E. 14. Consider the following events that occurred at Andy Company during 2010:
January 1: issued bonds for P100,000
January 20: used cash from the sale of bonds to purchase equipment for P80,000
October 1: sold used equipment for P15, 000. This equipment had been acquired in 2003, and was sold
at a P15,000. This equipment had been acquired in 2003, and was sold a P5,000 glass
December 31: paid interest of P8,000 on the bonds
F.
G. Based on the factor above, what would be Andy’s net cash flow from investing activities for 2010?
A. P95,000 decrease
C. P10,000 increase
B. P65,000 decrease
D. P5,000 increase
E. 15. Which of the following activities is not a batch level activity?
A. Production line set up
C. Installation of vehicle engine
B. Production line inspection
D. Scheduling
E. 16. The Soderling Company is in the process of preparing a purchases budget for the second quarter
of 201. Forecast of sales for the second quarter follow:
F. April
14,900 units
G. May
13,500 units
H. June
16,200 units
I. The March sales were P12, 500 units. Cost of goods sold is expected to be P8 per unit. Soderling would
like to have ending inventory each month equal to 151 of the following month’s predicted sales.
J. What is the total cost of purchases in April?
A. P119,200
C. P108,000
B. P117,600
D. P104,560
E.
F. 17. the most effective fiscal program to help reduce demand pull inflation would be to
A. Decrease the rate growth of the money supply
B. Increase both taxes and government spending
C. Decrease taxes and increase government spending
D. Increase taxes and decrease government spending
G. 18. Murray Legal Services Company has fixed costs of P56,000 and variable cost of P120 per hour of
service rendered. Clients are charged an hourly rate of P120 per hour . According to Company budget,
the company expect to provide clients with 1,200 hours of service
H.
I. What is the margin of sotety as a percentage of budgeted hours?
A. 80%
C. 20%
B. 40%
D. 10%
E. 19. Which ratio is preferred to be lower for a large retail company?
A. Price earnings ratio
C. Inventory turnover ratio
B. Defensive interval ratio
D. Times interest earned ratio
E.
F. Items 20 to 22 are based on the following information
G. Robin Company produces two automotive parts, carburettors and air filters. Both products are made in
the same manufacturing facilities but are produced under processes. To accomplish an accurate
allocation of production costs, the company uses the activity based costing. The cost accountant for the
company provided information about the activity used to produce the company’s products. The
activities were organized into the following overhead cost categories. The most appropriate cost driver
for each category is also provided.
H.
I. Category
Estimate cost
Cost Driver
Carburettors
Air Filters
J. Unit- level
P60,000
labor hours
900
700
K. Batch- level
P22,000
Set ups
20
30
L. Product- level
P45,900
Storage space
2,000 sq. Ft
4,000 sq. Ft.
M. Facility –level
P100,000
Machine hours
7,500
12,500
N.
O. 20. The amount of batch level cost that should be allocated to the carburetor product line would be
A. P14,250
C. P9,625
B. P13,200
D. P8,800
E. 21. The amount of facility level coat that should be assigned to air filters is
A. P37,500
C. P62,500
B. P50,000
D. P100,000
A1 PASSERS REVIEW CENTER///185
E. 22. If carburettors and air filters require the same amount of direct labor, what will be effect if labor hours
are used as the allocation base for product level cost?
A. Air filters will be over costed
B. Carburettors will be over costed
C. Air filters and carburetors will be over costed
D. Air filters and carburetors will be under costed
F. 23. Gonzales Company has annual demand of 5,000 units for its lone product. If the unit carrying cost is
P0.40 and optimal order quantity is 500 units, what would be the annual ordering costs?
A. P20
C. P100
B. P40
D. P200
E. 24. Which of the following statements is true?
A. As an advantage of the payback period is that it consider the time value of money
B. The internal ratio of return of a project will be equal to its unadjusted rate of return.
C. If an investment opportunity is acceptable based on its net present value, it will also be acceptable
based on its internal rate of return
D. All methods of capital planning are based on cash flows only
F.
G. Items 25 and 26 are based on the following information
H. Williams Company makes a white liquid substance that is used to correct errors made on printed
documents. Williams expect to use 4 ounces of a chemical known as Fatal per bottle of the correction
fluid. Fatal is expected to cost P0.40 per ounce. Actual materials cost amounted to P0.46 per ounce.
Williams expected to make and sell 1,000,000 bottles of correction fluid during the accounting period.
Actual production amounted to 900,000 bottles and 4,095,000 ounces.
I.
J. 25. The materials price variance for Fatal is
A. P245,700 favorable
C. P40,000 favorable
B. P245,700 unfavorable
D. P40,000 unfavorable
E.
F. 26. The materials usage variance for Fatal is
A. P198,000 favorable
C. P245,700 favorable
B. P198,000 unfavorable
D. P245,700 unfavorable
E. 27. Debt is generally the least expensive source of capital. This is primarily due to
A. Fixed interest payments
B. Its position in the priority of claims on assets and earnings in the event of liquidation
C. The tax deductibility of interest payments
D. The secured nature of a debt obligation
F. 28. The following information is for Serena Company:
G. Product A-Revenue P8.00
H.
Variable cost
P2.00
I. Product B- Revenue
P4.00
J.
Variable cost
P1.00
K.
L. Total fixed costs are P400, 000. Actual sales are 300,000 units (sales mix is one unit of product A and
two units of product B). What is the degree of operating leverage?
A. 3 times
C. 2 times
B. 2.5 times
D. 1.5 times
E. 29. The difference between variable costing and absorption costing net income centers on how to
account for
A. Direct material cost
C. Variable indirect costs
B. Fixed indirect costs
D. Variable and fixed indirect cost
E. 30. Roddick Company reports the following December 31, 2010 balance sheet data:
F. Current liabilities
P280, 000
G. Bonds payable, 16%
120,000
H. Preferred stock, P100 par
200,000
I. Common stock, P 25 per value, 16,800 shares
420,000
J. Premium on common stock
240,000
K. Retained earnings (adjusted)
180,000
L.
Total liabilities and Stockholders equity
P1, 440,000
M.
Market price per share of common stock is P35
Income before tax for 2010 is P160,000
The tax rate is P40%
No additional contribution from stockholders was made during 2010
A1 PASSERS REVIEW CENTER///186
Common stockholders equity in the previous year was P860,000
N.
O. If 2010 earnings per share is P3.50, then what should be the preferred dividend rate?
A. 18.6%
C. 48.0%
B. 29.4%
D. 50.6%
E. 31. Which is a term not associated with working capital management?
A. Baumol model
C. Du Point technique
B. Lockbox system
D. Materials requirement planning system
E. 32 Kim laboratory is considering acquiring new equipment that management estimates will reduce its cash
operating expenses by P 50,000 each year for the next five years. After five years, the company believes the
equipment will be technologically obsolete and will have no salvage vale. The equipment will cost P180, 000
and the company will have to spend P20, 000 immediately to train its staff to use the new equipment
F.
G. What is the closest internal rate of return of this investment project?
A. 25%
C. 8%
B. 12%
D. 5%
E. Items 33 and 34 are based on the following information
F. Caroline Company planned to make 50,000 units of product. Caroline actually produced 51,000 units of
product. The fixed cost predetermined overhead rate was P1. 50 per unit. Actual fixed overhead costs
amounted to P210, 000.
G. 33. The fixed cost volume variance for Caroline Company is
A. P19,500 favorable
C. P4,500 favorable
B. P19,500 unfavorable
D. P4,500 unafavorable
E. 34. The fixed cost spending variance for Caroline Company is
A. P15,000 favorable
C. P19,500 favorable
B. P15,000 unfavorable
D. P19,500 unfavorable
E. 35. The opportunity cost of funds invested receivable refers to
A. The firms cost of short term borrowing
B. The cost of credit analysis and bad debt expense
C. The rate of return on the best alternative use of funds
D. The lost sales involved with a tight credit policy
F. 36. Maria is going to sell ad-hoc disks for P40 a box; on; box is planning to rent a booth at the upcoming Area
Computer show. She has three options for attending the show:
G.
H. Option 1: paying a fixed fee of P3, 000
I. Option 2: paying a P1, 000 fee plus 10% of hr revenue made at the show
J. ,or
K. Option3: paying 25%of her revenue made at the convention
L.
M. What would be the indifference point between option 1 and option 2?
A. 5000 units
C. 300 units
B. 4000 units
D. 200 units
E. 37. The basic objective of financial management is to
A. Maximize corporate profits
B. Maximize the wealth of shareholders in the long run
C. Maximize sales revenue
D. Maximize the wealth of the society in the long run
F. 38. Ana computer expects to pay a P2 dividend in the coming year. Security analysis expects Ana’s
dividends and earnings to grow at a rate of 9% for the indefinite future.
G.
H. If the market’s required rate of return on Ana stock is 25% what is the current stock price?
A. P 4.00
C. P8.00
B. P7.50
D. P12.50
E. 39. A highly automated plant would generally have
A. More variable than fixed cost
C. All fixed costs
B. More fixed than variable costs
D. All variable costs
E. 40. Justine Corp. Plans to replace a [production machine that was acquired several years ago. The old
machines acquisition cost was P450, 000 with salvage value of P50, 000. The machine being considered is
worth P800, 000 and the supplier is willing to accept the old machine at a trade in value of P60, 000. Should
the company decide or not to acquire the new machine, it needs to repair the old one at a cost of P200, 000.
Tax-wise, the trade in transaction will not have any implication but the cost to repair is tax-deductible. The
effective corporate tax rate is 35% of net income subject to tax.
F.
G. For purpose of capital budgeting, the net investment in the new machine is
A. P540,000
C. P660,000
B. P610,000
D. P800,000
A1 PASSERS REVIEW CENTER///187
E. 41.Mauresmo Company presented to you its budgeted data for the year 2010. It is estimated that the
company will sell P40 units for the year 2010. The estimated costs of these sales are follows:
F.
Amount
Per Unit
G. Materials
P240,000
P1,000
H. Direct labor
40,800
170
I. Fixed overhead
98,400
410
J. Administrative expenses
100,800
420
K.
L. Selling expenses are expected to be 20% of sales. Pre-tax profit amounts to P500 per unit. The selling price
per unit must be set as at:
A. P2,000
C. P2,625
B. P2,500
D. P3,125
E. 42. An IT auditor is least likely to use computer software to
A. Construct parallel simulations
C. Prepare spreadsheets
B. Access client data files
D. Assess computer control risk
E. 43. Using 360 day year, what is the annual cost of trade credit if a supplier gives a credit term of 2/10 n/60
and the customer delays payment as a means of short term credit financing?
A. 14.69%
C. 12.24%
B. 14.40%
D. 12.00%
E. 44. Host firm choose accelerated depreciation method because
A. Reported net income is higher
B. Tax payments are made sooner, resulting in lower deferred tax liability
C. Operating expenses are correspondingly reduced
D. Income taxes are deferred, providing the firm with a significant present value benefit.
F. 45. Elena Company’s budgeted sales for the coming year are P40, 500,000 of which are 80 to be expected to
be credit sales at terms of n/30. Elena estimates that a proposed relaxation of credit standards would
increase credit sales 200 and increase in the average collection period from 30 days to 40 days. Cost of
money is 15%. Based on a 360 day year, how much opportunity cost is involved with the proposed
relaxation of credit standard?
A. P243,000
C. P900,000
B. P540,000
D. P1,620,000
E. 46. Simple regression analysis provides the means to evaluate a line of regression which is fitted to a plot of
data and represents
A. The way cost change in respect to independent variable
B. The way cost change in respect to dependent variable
C. The variability of expense with peso of operation
D. The variability of expense with peso of production
F. 47. If the investment turnover decreased by 20% and profit margin decreased by 30%, then ROI would
A. Increase by 30%
C. Decrease by 44%
B. Decrease by 20%
D. Not be determined without more information
E. 48. Each unit of product Ivanovic taxes five direct labor hours to make. Quality standards are high and 8% of
units produced are normally rejected due to substandard quality. Next month’s budgets are as follows:
F. Beginning inventory of finished goods
3,000 units
G. Planned ending inventory of finished goods
7,600 units
H. Budgeted sales of Ivanovic
36,800 units
I.
J. All stocks of finished goods must have successfully passes the quality control check. What is the direct labor
budget for the month?
A. 198,720 hours
C. 223,500 hours
B. 200,000 hours
D. 225,.500 hours
E. 49. Which of the following statements pertains to a batch processing system?
A. Data are immediately available to users upon entry
B. It permits both immediate posting and inquiry of master files as transactions occur
C. It accumulate transaction records into groups for processing against the master file
D. It is in direct communication with computer, giving it the capability to handle transactions as they are entered.
F. 50. Sharapova Company has total debt of P360,000 and shareholders equity of P500,000sharapova is
seeking capital to fund an expansion . sharapova is planning to issue an additionalP300,000 in common
stock and is negotiating with a bank to borrow additional funds. The bank requires a debt to equity ratio of
0.75.
G. What is the maximum additional amount Sharapova will be able to borrow?
A. P240,000
C. P440,000
B. P330,000
D. P600,000
E. 51. Which is not considered in determining the cash conversion cycle?
A. Age of receivable
C. Age of marketable securities
B. Inventory conversion period
D. Payable deferral period
A1 PASSERS REVIEW CENTER///188
E. 52. Stosur Company is a producer and distributor of various motorized recreational scooter, bike and
motorcycle products. The first division handles scooters and would like to earn a long run rate of return 0f
20%. The first division will change its unit selling price as necessary to provide this return. The following data
are available on the division and its product:
F. Variable cost per scooter
P200
G. Total annual fixed cost
P1,220,00
H. Long run normal demand
10,000 units to each year
I. Average operating assets
P1,400,00
J.
K. Compute the per unit selling price that will provide the desired rate of return.
A. P2.82
C. P3.22
B. P2.94
D. P3.50
E. 53. The following data was taken from the records of Wilfred Corporation:
F.
2009
2010
G. Inventory, 12/31
P120, 000
P100,000
H. Receivable 12/31
88,000
62,000
I. Cash sales
800,000
1,000,000
J. Average age, inventory
30 days
45 days
K. Average age, receivable
24 days
36 days
L. What is the 2010 gross profit? (Assume 360 day year)
A. P870,000
B. P820,000
C. P200,000
`
D. P120,000
M. 54. Electronic fund transfer (EET) is a service provided by financial institutions worldwide that is based on
electronic data interchange (EDI) technology. Which of the following risk is not greater in an EET
environment than in a manual system using paper transactions?
A. Unauthorized access and activity
B. Duplicate transaction processing
C. Highest per transaction
D. Inadequate backup and recovery capabilities
N. 55. At the end of 2010, ABC Plastic Products had P240, 000,000 total capital. ABC Management desires to
increase its production machinery during 2010 by P40, 000,000 in order to provide for new product lines.
Bond financing will be
O. 13% and wills ell at par. Preferred will be sold at a par value of P100 and will have a 12 percent dividend
payment. Common stock, which currently is selling at P30 per share, can be sold at P28, net of related
flotation costs. Internal funding available from retained earnings is estimated to be P5, 000,000. The firm has
a 9% dividend yield and a growth rate is 40%. ABC’s present capital structure listed below is considered
optimal.
P.
Q. Debt (8% coupon bonds)
P20,000,000
R. Debt (10% coupon bonds)
__40,000,000__
S. Total Debt
P60,000,000
T.
U. Preferred stock
P36,000,000
V. Common stock (P10 par)
60,000,000
W. Retained earnings
_84,000,000__
X. Total equity
_P180,000,000
Y. TOTAL
_P240,000,000_
Z.
AA. In order to maintain the present capital structure , how much the new capital assets must be financed by
equity capital?
A. P24,000,000
C. P25,000,000
B. P24,500,000
D. P25,500,000
E. 56. The income statement for Martin Company for 2010 shows cost of sales of P7, 420. The following
information is also available.
F. Inventory, `1/1
P520
G. Inventory, 12/31
610
H. Accounts payable, 1/1
280
I. Accounts payable, 12/31
480
J.
K. Cash paid in 2010 for merchandise was
A. P 7,130
C. P7,710
B. P7,310
D. P7,790
E.
F. Items 57 to 61 are based on the following information
A1 PASSERS REVIEW CENTER///189
G. Boston Company’s income statement for last month is given below
H. Sales(15,000 units @ P30)
450,000
I. Less variable expenses
315,000
J. Contribution margin
135,000
K. Less fixed expenses
90,000
L. Net income
45,000
M.
N. The industry in which Boston Company operates is quite sensitive to cyclical movements in the economy.
Thus, profits very considerably from year to year according to general economic conditions.. the company
has a large amount of unused capacity and is studying ways of improving profits.
O.
P. 57. New equipment has come onto the market that would Boston Company to automate a portion of its
operations. Variable costs would be reduced by P9 per unit. However, fixed costs would increase to a total of
P225,000 each month.
Q.
R. How much income for the month would the company earn if the new equipment is purchased?
A. P45,000
C. P60,000
B. P30,000
D. P75,000
E. 58. How many units as increase or decrease in breakeven point if the equipment is purchased?
A. Zero
C. 3,200 units
B. 2,500 units
D. 4,000 units
E. 59. The degree of operating leverage during the month where the new equipment is used is:
A. 3.0 times
C. 6.0 times
B. 4.5 times
D. 5.0 times
E. 60. Refer to the original data. Rather than purchase new equipment, the president is thinking about changing
the company’s marketing method. Under the new method, sales would increase by 20% each month and net
income would increase by one third. Fixed costs could be slashed to only P48, 000 per month. Compute the
break even point for the company after the change in marketing method.
A. 8,000 units
B. 9,000 units
C. 10,000 units
D. 12,500 units
F. 61. Assuming that during the month following the month that the new equipment has been started in use, the
unit sales increased by 4,500 units. The variable expenses per unit and the monthly fixed costs as affected
by the acquisition of the new equipment are expected to remain constant..
G.
H. What is the expected profit of the company for that month?
A. P126,000
C. P81,000
B. P85,500
D. P45,000
E.
F. Items 62 to 68 are based on the following information
G. Due to erratic sales of its sole product – a high capacity for laptop computers, New York Company has been
experiencing difficulty for sometime. The company’s income statement for the most recent month is given
below:
H. Sales (19,500 units @P300)
P5, 850,000
I.
Less variable expenses
4,095,000
J. Contribution margin
1,755,000
K. Less fixed expenses
1,800,000
L. Net loss
P(45,000)
M.
N. 62. The break in peso sales for New York Company is:
A. P6,000,000
C. P7,500,000
B. P2,571,429,
D. 63. The president believes that a P160, 000 increases in the monthly advertising budget, combined with an
intensified effort by the sales staff, will result in P800, 000 increases in monthly sales. If the president is
right, what will be the effect on the company’s monthly net income or loss?
A. P120,000 increase
C. P120,000 decrease
B. P80,000 increase
D. P80,000 decrease
E. 64. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price,
combined with P600, 000 increases in the monthly advertising budget, will cause unit sales to double. What
will the new profit or loss if these changes are adopted?
A. P60,000
C. P45,000
B. P(60,00)
D. P(45,000)
E. 65. Refer to the original data. The marketing department thinks that a fancy new package for the laptop
computer battery would help sales. The new package could increase packaging costs by P7.50 per unit.
A1 PASSERS REVIEW CENTER///190
A.
B.
E.
A.
B.
E.
Assuming no other changes, how many units would have to be sold each month to earn a profit of P97,
500?
21,818
C. 25,450
23,000
D. 28,000
66. Refer to the original data. By automating certain operations, the company could reduce variable costs by
P3 per unit.. However, fixed costs would increase by P72, 000 each month. How would be the break even
point in units change if the company automated the operations?
I,000 units increase
C. 3,000 units increase
1,000 units decrease
D. 3,000 units decrease
67. At what level of production the automation of the production process be indifferent to the present
process?
18,000
C. 24,000
21,000
D. 28,000
A.
B.
E.
F. Patents, net.................................
100,000
60,000
G. Long term debt.......................... (500,000)
(400,000)
H.
I. At how much will the building and equipment and land be recorded, respectively?
A. P1,400,000 and P500,000
C. P1,550,000 and P500,000
B. P1,400,000 and P300,000
D. P1,550,000 and P300,000
E. 42. The condensed balance sheet accounts of Lani Inc. and magi Inc, are shown below:
F.
Lani
Magi
G.
H. Assets
P3, 125,000
P875,000
I. Liabilities
1,625,000
250,000
J. Capital stock (par P100)
K. Lani
1,250,000
L. Mani
500,000
M. Retained earnings
250,000
125,000
N.
O. Lani buys all of the issued and outstanding shares of Magi at P140 per share. In the consolidated balance
sheet, the total asset is:
A. P4,000,000
B. P3,150,000
C. P4,025,000
D. P4,075,000
P. 43. Triad Corporation’s shipments to and from Olongapo City branch are billed at 120% of cost. On
December 31, Olongapo branch reported the following data, at billed prices: inventory, January 1, of
P33,600; shipments received from home office of P840,000: shipments returned of P48,000; and inventory,
December 31, of P36,000. What is the balance of the allowance for over valuation of branch inventory on
December 31 before adjustments?
A. P5,600
C. P6,000
B. P137,600
D. P145,600
E. 44. Paro Company acquires all the shares of Subido Co. for a consideration valued at P5, 000,000. Costs of
registering and issuing securities used in the business combination were P60, 000, and direct costs
amounted to P40,000. Subido’s stockholders equity is P4, 000,000.
F.
G. After the business combination, how much is the goodwill under the purchase method?
A. P1,060,000
C. P1,040,000
B. P1,100,000
D. P1,000,000
E. 45. Pre-consolidation data on the balances sheet accounts of Mulligan Corp; and Northrop Corp. Show:
F.
Mulligan
Northrop
G.Assets
P212,500
P150,000
H.
I. Liabilities
62,500
50,000
J. Capital stock (par P100)
100,000
62,500
K. Additional paid in capital
12,500
25,000
L. Retained earnings
37,500
12,500
M. Liabilities and Equity P212, 500
P150, 000
N.
O.The shareholders of Mulligan and Northrop agree to consolidate whereby Obet Inc. a new corporation, it p
acquire the net assets of the constituent corporation. Obets share are to be issued in exchange for shares
of Mulligan and Northrop on 5-for -1 basis. The consolidation is appropriately reckoned as pooling of
A1 PASSERS REVIEW CENTER///191
interests. if the share of Obet have a par value of P25, what is the additional paid in capital to be recorded in
its books?
A. P0
C. P78,125
B. P37,500
D. P46,875
E. 46. Nona Inc. acquired on January 1, 19X6 all the issued and outstanding common share of Olga Inc. for
P310, 000 in a transaction properly treated as a purchase. On this day, the assets and liabilities of Olga. Inc.
show
F.
G. Cash
P30, 000
H. Merchandise inventory
90,000
I. Plant and equipment
160,000
J. Goodwill, net
50,000
K. Liabilities
(60,000)
L.
M. Net Assets
P270, 000
N.
O. The additional paid in capital to be recorded in its books?
A. P0
C. P78,125
B. P37,500
D. P46,875
E. 46. Nona Inc. acquired on January 1, 19X6 all the issued and outstanding common shares of Olga Inc. for
P310, 000 in a transaction properly treated as purchased. On this day, the assets and liabilities of Olga Inc.
show:
F.
G. Cash
P30,000
H. Merchandise inventory
90,000
I. Plants and equipment
160,000
J. Goodwill, net
50,000
K. Liabilities
(60,000)
L.
M. Net assets
P270,000
N.
O. Per appraisal, plan t and equipment and merchandise inventory were valued at P190, 000 and P75,000,
respectively. What is the amount of goodwill resulting from this transaction?
A. P125,000
C. P75,000
B. P40,000
D. P0
E.
F.
G.
H.
I.
J.
K. 47.Rado owns a 70% interest in a partnership, and has an capital balance of P80,0000. Seto owns a 30%
interest and has a capital balance of P60,0000. Tato invest P50, 000 for a 20 percent
L.
M. Under the goodwill method, how much goodwill will be recorded and to whom will it be given?
A. P12,000 goodwill to radio and Seto
C. P15,000 goodwill to Rado and Seto
B. P15,000 goodwill to Tato
D. P60,000 goodwill to Rado and Seto
E.
F. 48. Ingram Julian and Keno form a partnership and agree to maintain average investment of P100, 000, P50,
000 and P 50,000, respectively. Interest on an excess or deficiency (as the case may be) in capital
contributions to be computed at 6%. After interest allowances, residual sums shall be shred by Ingram,
Julian and Keno at 5:3:2. A net loss of P2, 500 is incurred by the partnership for the first six months.
Average amounts invested by the partners during these six months. Average amounts invested by the
partners during these six-months are:
G.
H. Ingram P120,000
I. Julian 55,000
J. Keno
40,000
K.
L. How much is Ingram’s share in the net loss?
A. P875
B. P1,475
C. P1,250
D. P1,750
A1 PASSERS REVIEW CENTER///192
M. 49. Debbie Jones a senior partner in law firm, has a 30% participation in the firm’s profits and losses during
the year 19X5. Jones withdrew P130, 000 against her capital but contributed property with a fair value to
the firm of P25,000. What was the net income of the law firm for 19X5?
A. P150,000
B. P550,000
C. P233,333
D. P350,000
N. 50. Bureau MNO’s appropriation for the year amounted to P1, 000,000. MNO received from the Department
of Budget and Management (DBM) a General Allotment Release Order (GARO) in the amount of
P900,000. The receipt of the Advice of Allotment from the DBM will be recorded in the books of:
A. Bureau of Treasury
B. Department of Finance
C. Bureau MNO and Commission on Audit
D. Bureau MNO only
O.
P. ***END***
Q.
R.
S.
T.
U.
V.
W.
X.
Y.
Z.
AA.
AB.
AC.
AD.
AE.
AF.
AG.
AH.
AI.
AJ.
AK.
AL.
AM.
AN.
AO.
AP.
AQ.
A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
AR.
2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
AS.
Tel. No.: (033) 320-2728; 09106547262
AT.Email Address:
[email protected]
AU.
AV. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
AW.
AX.CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
AY.
AZ.
AUDITING PROBLEMS
BA.
BB.PCF voucher dated Dec. 31,19X7
BC.
For Miscellaneous expenses
100
BD. Cash in the bank balance per books
48,200
BE. A bank debit memo for
P10, 200
BF. representing returned customer check
BG.
marked “DAUD” including a service charge of P200 has not been recorded
BH.
on December 31, 19X7.
BI.
BJ. 3. Marketable securities at cost declined by P50, 000 in 19X7. In 19X7, a sale was made at a gain of
P10, 000 and P60, 000 was credited to Sales.
A1 PASSERS REVIEW CENTER///193
BK.
BL. 4.
One percent of total sales has to be set up for uncollectible accounts, the allowance of which is
maintained by the home office.
BM.
BN. 5. Accumulated depreciation balance for 19X5 and 19X6 were P175, 000 and P350, 000, respectively.
BO.
BP.6. The bank loan carries a 20% interest per annum which was secured on July 1, 19X6. The amount
of P250, 000 has been paid in 19X7 together with the accrued interest thereon. Interest on this loan
was paid up to July 1, 19X7. A second loan worth P1, 000,000 was secured on July 1, 19X7 to buy
additional equipment. The interest for one year at 18% was deducted in advance and charged to
operating expenses.
BQ.
BR. 7. Patent amortization was charged to operations.
BS.
BT. 8. In January, 19X7, the company established a branch in Baguio which reported the following data
on December 31, 19X7:
BU.
Debit (Credit)
BV.Cash.....................................................P 50,000
BW. Receivables..........................................60,000
BX.Inventories...........................................110,000
BY.Furniture and equipment (net).............400,000
BZ.Payables............................................ (120,000)
CA. Sales.................................................. (1,000,000)
CB. Cost of goods sales..............................800,000
CC. Operating expense, including
CD.
Depreciation..............................100,000
CE.
CF.9. The inventories excluded the
CG. * unsold goods with consignees at cost 50,000 and
CH. *freight cost corresponding to the
CI.
unsold consigned goods
2,000
CJ.
not yet recorded , but included
CK. * goods received from consignor............50,000
CL.
CM. 10. The payables include the accrued interest for 19X7 on the bank loan, which amount was debited
to operating expenses.
CN. Based on the foregoing information and any additional assumption which may be given in each
number, you have to answer the following 40 questions. Your choice must be the one nearest to the
correct answer.
CO.
CP.
CQ.
CR.
CS. 1. The journal entry to correct the recording of stock premium will credit.
A. Subscribed common stock
CT.
CU. INSTRUCTION: Select the correct answer for each of the following questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on the
answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use the pencil no. 1 only.
CV.
CW. SITUATIONAL
CX.
CY.Situation 1. You were requested by the board of the directors of the WW Industries to audit its books for
the year ending December 31, 19X7. The condensed comparative balance sheet items of the company
for December 31, 19X6 and 19X7 are shown below.
CZ.
19X7
19X6
DA. Cash
P50, 000
P100, 000
DB. Marketable securities
150,000
200,000
DC. Receivables
500,000
350,000
DD. Inventories
DE. Property and equipment (net)
DF.Patents
750,000
550,000
4,750,000
3,000,000
250,000
300,000
A1 PASSERS REVIEW CENTER///194
DG. Branch
500,000
0
DH.
DI. Payables
900,000
160,000
DJ. Accrued expenses
50,000
40,000
DK. Bank loan
3,250,000
2,500,000
DL.Common stock
2.000,000
1,500,000
DM. Subscribed common stock (net
DN.
of Subscriptions rec’ble of P125,000)225,000
0
DO. Retained earnings
525,000
300,000
DP.
DQ. Income operating and other data are
DR.
Sales
7,500,000
5,000,000
DS.
Cost of goods sold
4,500,000
3,200,000
DT. Operating expenses, including
2,535,000
1,500,000
DU.
Depreciation
250,000
175,000
DV.
Bad debts
20,000
7,500
DW.
Amortization of patents
50,000
25,000
DX.
Taxes
400,000
150,000
DY. Net profit
465,000
300,000
DZ. Dividends:
400,000
EA.
19X7, cash, P200, 000, stock, P200, 000
EB.
EC. Your examination revealed the following additional information:
ED. 1.The company was organized on January 3, 19X6 with an authorized common shares worth
P6,000,000, par value per share , P1,500,000. The shares issued in 19X7 were at a premium
amounting to P325, 000 which was credited to retained earnings. a 10% stock dividend was declared
on December 31, 19X6 but recorded on January 10, 19X7 and issued February 1, 19X7. The company
shares were selling at 110.
1. The cash balance in 19X7 consists of the following:
Imprest petty cash fund showed the following as per count:
EE. Currency and coin
P2,700
EF. Post dated check of an officer
2,000
EG. A. Common stock
EH. B. Retained earnings
EI.C. Additional paid in capital
EJ. 2. The 19X6 10% stock divedends need approval of all the following except one
A. Bangko Sentral ng Pilipnas
C. Stockholders
B. Board of Directors
D. Securities and Exchange commission
E. 3. The 19X6 dividends will be recorded using per share
A. Market value
C. Par value
B. Book value
D. Liquidating value
E. 4. The journal entry to take up the issuance of the stock dividends will be debit
A. Paid in capital
C. Stock dividends payable
B. Retained earnings increase
D. Common stock
E.
F. 5. The 19X7 cash dividends will result to
A. Retained earnings decrease
C. Common stock decrease
B. Paid in capital decrease
D. Retained earnings increase
E. 6. The 19X7 subscribed common stock will be at
A. P300,000
C. P250,000
B. P225,000
D. P350,000
E. 7. The 19X6 stock dividend in number of shares will be
A. 1,650
C. 2,000
B. 1,500
D. 1,815
E. 8. The 19X7 stock dividend will be based on the number of shares issued and outstanding?
A. 20,000
C. 18,150
B. 16,500
D. 15,000
E. 9. If treasury shares were in the books, they will be
A. Shown as current asset
C. Deducted from common stock
B. Deducted from paid capital
D. Deducted from total stockholders equity
E. 10. Treasury stocks are recorded at
A. Cost
C. Book value
B. Market value
D. Par value
A1 PASSERS REVIEW CENTER///195
E. 11. The petty cash funds will be shown in the 19X7 balance sheet at
A. P4,800
C. P5.400
B. P4,700
D. P5,900
E. 12. Replenishment of patty cash fund will mean a debit to
A. Miscellaneous expense
C. Receivable- officer and Miscellaneous
B. Petty cash fund
expense
D. Receivable- officer
E. 13. The customer’s returned check will be recorded debiting
A. Accounts receivable P10,000 & Miscellaneous expense P200
B. Accounts receivable P10,200
C. Cash in bank P10,200
D. Accounts receivable P10,000
F. 14. Subscription receivable, common will be shown in the 19X7 balance sheet as
A. Deduction form subscribed common stock
C. Deduction from common stock
B. Deduction from paid in capital
D. Current asset
E. 15. The cash storage amounts to
A. P0
C. P200
B. P100
D. P300
E. 16. The marketable securities will be shown in the 19X7 balance sheet at
A. P110,000
C. P90,000
B. P150,000
D. P100,000
E. 17. Allowance for doubtful accounts will have a 19X7 balance of
A. P85,000
B. P75,000
C. P74,400
D. P84,400
A1 PASSERS REVIEW CENTER///196
E. 18. The property and equipment original cost was
A. P2,075,000
C. P4,825,000
B. P3,675,000
D. P3,350,000
E. 19. Patent amortization in 19X7 is
A. P60,000
C. P50,000
B. P30,000
D. P40,000
E. 20. Property and equipment acquired in 19X7 amounted to
A. P4, 825,000
C. P2,200,000
B. P2,400,000
D. P3,675,000
E. 21. The accrued interest on the bank loan on December 31, 19X6 is
A. P250,000
C. P225,000
B. P450,000
D. P325,000
E. 22. The 19X6 patent amortization was
A. P40,000
C. P25,000
B. P35,000
D. P50,000
E. 23. The branch reported profit / loss in 19X7 is
A. P110,000 profit
C. P90,000 profit
B. P80,000 profit
D. P100,000 profit
E. 24. The home office will record the branch profit by debiting and crediting respectively
A. Profit and loss debit; Branch credit
C. Branch debit; retained earnings credit
B. Branch debit; branch profit and loss credit
D. Branch debit; profit and loss credit
E. 25. The 19X7 combined the net income of the WW Industries Company will be
A. P255,600
C. P427,500
B. P365,600
D. P315,600
E. 26. The 19X6 retained earnings and as adjusted was
A. P135,000
C. P150,000
B. P200,000
D. P300,000
E. 27. The 19X7 balance sheet will show combined cash account of
A. P100,000
C. 93,000
B. P103,000
D. P89,700
E. 28. The combined 19X7 book value property and equipment amounts to
A. P5,330,000
C. P5,000,000
B. P5,150,000
D. P5,550,000
E. 29. the corrected 19X7 combined Sales will be
A. P8,500,000
C. P8,440,000
B. P8,400,000
D. P7,440,000
E. 30. The 19X7 combined net realizable value of receivable amounts to
E. 33. Inventories received from consignor will be
A. Not recorded but included in the inventories total
B. Either recorded or not recorded
C. Not recorded, but included in the notes to the balance sheet
D. Recorded with a debit to inventories
F. 34. The 19X7 combined operating expenses will be
A. P2,770,000
C. P2,660,000
B. P2,635,000
D. P2,812,500
E. 35. The 19X7 combined accounts payable will be
A. P1,020,000
C.P902,000
B. P572,000
D.P452,000
E. 36. The reciprocal accounts will be eliminated at
A. P600,000
B. P690,000
C. P500,000
D. P590,000
F. 37. The 19X7 combined inventories will be
A. P612,000
A1 PASSERS REVIEW CENTER///197
B. P852,000
C. P602,000
D. P862,000
G.38. The 19X7 combined accrued expenses will be
A. P300,000
B. P400,000
C. P450,000
D. P500,000
H.39. The accrued interest on December 31, 19X7 will be
A. P250,000
B. P225,000
C. P450,000
D. P375,000
I. 40. The 19X7 stock dividend was issued at
A. Market value
B. Book value
C. Par value
D. Liquidation value
J.
K.
L. ***END***
M. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
N. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
O. Tel. No.: (033) 320-2728; 09106547262
P. Email Address:
[email protected]
Q.
R. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
S.
T. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
U.
V. BUSINESS LAW AND TAXATION
W.
X. INSTRUCTION: Select the correct answer for each of the following questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on the
answer sheet provided. STICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
Y.
Z. MULTIPLE CHOICES:
AA.
AB. 1. Takes place when two persons in their own right, are creditor and debtor of each other
A. Remission
C. Novation
B. Confusion
D. Compensation
E. 2. Whenever in an obligation a period is designated, it is presumed to have been established for the benefit
of:
A. Both creditor and the debtor
C. The debtor
B. The creditor
D. The third party
E. 3. An act of liberality whereby a creditor condones the obligation of the debtor:
A. Confusion
C. Remission
B. Compensation
D. Novation
E. 4. When the thing deteriorates pending the fulfilment of the suspensive condition without the fault of the
debtor, the impairment is
A. To be borne by the party who is caused the deterioration
B. To be borne partly by the debtor and partly by the creditor
C. To be borne by the debtor
D. To be borne by the creditor
F. 5. A owes P10, 000. With consent of both, C pays B P5, 000. Now B and C and the creditors of A to the
amount of P5,000 each. Suppose A bus only P5, 000. Which is correct?
A. B and C should divide the P5,000 equally
C. A may choose whom to pay
B. C should be preferred
D. B should be preferred
E. 7. An obligation where only the prestation has been agreed upon but the debtor may render another in
substitution is:
A. Conjoint obligation
C. Simple obligation
B. Facultative obligation
D. Alternative obligation
A1 PASSERS REVIEW CENTER///198
E. 8. XYZ are solidarily liable to A for P30, 000 which mature on July 1, 1993. On May 1, 1993, X paid A fort he
whole amount of the debt. If on December 1, 1993, X will be reimbursed by Y; the latter will be liable for:
A. P10,000 with interest from July 1993 to December 1, 1993
B. P10,000 without interest
C. P10,000 with interest from May 1, 1993 to July 1, 1993
D. P10,000 with interest from May 1, 1993 to December 1, 1993
F. 9. A thing is not deemed lost when it:
A. Perishes
B. Disappear in such a way its existence is unknown or it can not be recovered
C. Goes out of commerce
D. Deteriorates
G. 10. Which of the following is not a fundamental obligation of the agent?
A. To subordinate his interest in favor of his principal if there is a conflict of interest
B. To borrow if he is authorized to lend
C. To render an accounting of the transactions
D. Not to carry out the agency even if that is the instruction if he knew it would result in a loss or damage to his
principal
H. 11. a form of delivery which takes place after the seller of the property continues possession of said property
no longer as owner but as a mere possessor:
A. Traditio constitutum possessorium
B. Ttraditio calvis
C. Tradito brevi manu
D. Quasi-tradition
I. 12. When goods are delivered to the buyer on sale or return for a period of seven days, ownership of the
goods passes to the buyer,
A. Upon delivery of the goods
C. Upon acceptance by the buyer of the offer of
B. Upon expiration of seven days
the seller
D. Upon perfection of the contract
E. 13. A sold to B a parcel of land for P30,000. The sale is evidenced by memorandum of agreement of sale
written in Cebuano dialect. One week later, A sold the same parcel of land to C for 40,000 which was
evidenced by a formal deed of sale. upon buying the property C who is aware of the first sale, immediately
took possession of the land and registered the deed of sale on her favor with the register of deeds. When
informed of the second sale, B subsequently registered an adverse claim to the property. The parcel of land
shall belong to:
A. B, because sha has got an older title
B. C, because the sale was made on a formal deed of sale
C. C, because she is the first to register the deed of sale
D. C, because she is the first to take possession of the land
F. 14. 1st statement: if the agent contracts in the name of the principal and the principal does not ratify the
contract, the contract shall be void if the party with whom agency contracted is aware of the limits of the
powers granted by the principal.
G. 2nd statement: a third person cannot set up the fact that the agent has exceeded his powers if the principal
has ratified or has signified his willingness to ratify the agents acts.
A. Both statements are false
C. 1st statement is false, 2nd statement is true
B. Both statements are true
D. 1st statement is false, 2nd statement is false
E. 15. In case redemption is made, which of the following will not be paid by the seller to the buyer?
A. Expenses incidental to the sale paid by the buyer
B. All necessary expenses on the thing sold and to be redeemed
C. The consideration of the sale paid by this buyer
D. Interest on the price paid by the buyer
F. 16. Dacion en pago as distinguished from sale:
A. The object is always existing and specific
C. There is no pre existing obligation
B. There is a greater degree of freedom in fixing
D. The cause is the price
the price
E. 17. Ben pledged his watch to V.Y.. Domingo Agencia for P5, 000, On due date, Ben failed to redeem his
watch. The pawnshop sold the watch at a public auction to the highest bidder at P4, 000
A. The pawnshop can recover the deficiency of P1,000 from Ben
B. The pawnshop cannot recover the deficiency of P1,000 unless there is stipulation
C. The pawnshop cannot recover the deficiency of P1,000 even if there is a stipulation
D. The pawnshop can recover the deficiency of P1,000 even without a stipulation
F. 18. The following are instances of pledged created by operation of law, except:
A. Hotel keeper retains the thing brought into the hotel by guest who cannot pay his hotel bills
B. An agent retains in pledge the thing which is the object of the agency
C. A mechanic retains the car her repaired until he is paid
D. A depository retains the thing in pledge until full payment of what is due him
A1 PASSERS REVIEW CENTER///199
G. 19. Basco pledged his Omega watch to Cruz pawnshop for P10,000. Basco failed to pay the pawnshop the
P10,000 on due date.. Cruz sold the Omega at a public auction to the highest bidder P8,000.
A. Cruz can recover the deficiency of P2,000 from Basco
B. Cruz cannot recover the deficiency of P2,000 even if there is a stipulation
C. Cruz can recover the deficiency of P2,000 even without a stipulation
D. Cruz cannot recover the deficiency of P2,000 unless there is stipulation
H. 20. A distribution by a corporation of shares held by it in another corporation is
A. Stock dividend
C. Sale of treasury stock
B. Sale of capital assets
D. Property dividend
E. 21.if the proceeds of the sale of the thing pledged sold at public auction is less than the principal
obligation , can the creditor recover the deficiency from the debtor?
F.
G. 1st answer: No, the creditor is not entitled to recover the deficiency from the debtor.
H.
I. 2nd answer: Yes, if there is a stipulation to that effect in the contract of pledge.
A. 1st answer correct, 2nd answer wrong
C. Both answers are correct
B. Both answers are wrong
D. 1st answer wrong, 2nd answer correct
E. 22. Partner who does not participate in the management though he shares in the profits or losses:
A. Nominal
C. Silent
B. Ostensible
D. Liquidating
E. 23. Which of the following liabilities of the partnership shall rank first in the order of payment?
A. Those owing to partners in respect to capital
B. Those owing to creditors other than partners
C. Those owing to partners other than capital and profits
D. Those owing to partners in respect to profits
F. 24. Alan, Ben and Cris are partners with capital contribution of P15, 000, P10, 000 and P5, 000 respectively.
Suppose on dissolution, the assets of their partnership amounts to only P46,000 and it owes Dan the
amount of P50,000. Cris owes Ely on his personal account P6, 000. The partners have no separate personal
property except Cris separate property amounts to P7, 000. Which is correct?
A. Dan and Ely shall divide Cris separate property equally
B. Dan and Ely shall divide Cris separate property pro- rata
C. Dan shall be preferred as regards Cris separate property
D. Ely shall be preferred as regards Cris separate property
G. 25. X,Y and Z, capitalist partners, each contributed P10,000 and A, the industrial partner contributed his
industry. The partnership is indebted to B in the amount of P90,000. The remaining assets of the partnership
amounted to only P30,000. Suppose B got the P30, 000, how can he recover the deficiency of his credit?
A. B can recover P15,000 each from X,Y,Z and A
B. B can recover P60,000 from either X,Y, and Z
C. B can recover P15,000 each from X,Y and Z, but A is exempt because he is an industrial partner
D. B can recover P20,000 each from X,Y and Z only
H. 26. The change in the relation of the partners caused by any partner ceasing to be associated in the carrying
on of the business is:
A. Winding up
C. Liquidation
B. Dissolution
D. Termination
E. 27. Which of the following is not correct? In a limited partnership composed of A, B and C, the contributed
may be as follows:
A. A- property (limited partner); B-services (general partner); C- cash ( general partner)
B. A- cash ( limited partner); B- property (general partner); C- services (general partner)
C. A- services (limited partner); B- cash ( general partner); C- services ( general partner)
D. A- cash (limited partner); B- cash ( general partner) C- services ( general partner)
F. 28. Partner who is both a secret and silent partners:
A. Limited
C. Dormant
B. Nominal
D. Ostensible
E. 29. A person who directly represents himself or consents or allows him to be represented as a partner in an
existing partnership or with one or more persons who are not actually partners is:
A. Partner by estoppels
C. Ostensible partner
B. Silent partner
D. Nominal partner
E. 30. They are issued to those who helped in incorporating the company or for services rendered in launching
the welfare of the company:
A. Preferred stock
C. Founders stock
B. Stock in escrow
D. Promotion stocks
E. 31. Any direction of a corporation may be removed from office by a vote of the stockholders holding or
representing:
A. Majority of stockholders present
C. 2/3 of the outstanding capital stock
B. ¾ of the outstanding capital stock
D. Majority of the outstanding capital stock
E. 32. Three (3) of the following are attributes of a corporation. Which is the exception?
A1 PASSERS REVIEW CENTER///200
A. Created by agreement of the incorporators
B. An artificial being
C. Has right of succession
D. Has powers, attributes and properties expressively authorized by the law incident to its existence
F. 33. As regards to corporate by-laws, which of the following rules is not correct?
A. To adopt by-laws, majority of the outstanding capital stock is needed
B. To delegate to the Board of Directors or trustees the power to amend or repeal the bylaws, 2/3 of the
outstanding capital stock is needed
C. To revoke the power delegated to the Board of Directors to adopt new by-laws, 2/3 of the outstanding capital
stock or of its member is needed.
D. To amend or repeal the by-laws, majority of the Board of Directors and of outstanding capital stock is needed.
G. 34. ABC partnership becomes insolvent due to mismanagement and cannot pay its liability to XYZ corp. With
the approval of its directors and stockholders, XYZ Corp.., entered into a management contract with ABC
Partnership to manage their partnership business with the agreement that 50% of the net profits will be
applied to the payment of the partnership debt to the corporation.
H. Question 1. Can XYZ. Validly enter into the above management contract?
I. Question 2. Is XYZ Corp. Considered as partner of ABC partnership by the fact that is receiving a share of
the net profits of the partnership?
J. ANSWER I: Yes, a corporation has the power to enter into such management contract provided by the
contract is approved by the Board of Directors and majority of outstanding capital stock.
K. ANSWER 2: No, XYZ Corp. Cannot be considered a partner because it is receiving a share of the net profits
not as actual share of the profits but merely as payment for the partnership’s obligation to corporation.
A. 1st answer correct; 2nd answer wrong
B. 1st answer wrong; 2nd answer correct
C. Both answers are correct
D. Both answers are wrong
L. 35. The power to deny pre-emptive rights as corporate power is classified as:
A. Incidental power
C. Implied power
B. Express power
D. Discretional power
E. 36. As regards treasury stocks, which is not correct?
A. They have no voting rights as long as they remain in the treasury
B. They may be distributed as property dividend if there are retained earnings from operations
C. They are not entitled to dividends
D. They are considered part of earned or surplus profits and therefore distributable as dividends
F. 37 Issued to those who in some way worked for incorporating the company or for services rendered i
launching the welfare of the corporation is called:
A. Common stock
C. Founders stock
B. Promotion stock
D. Shares in escrow
E. 38. The drawee bank is not primarily liable:
A. Cashier’s check
C. Manager’s check
B. Certified check
D. Traveller’s check
E. 39. If the instrument is payable to the order of the third person
A. He is liable to all parties subsequent to the payee
B. He is not liable to any party
C. He is liable to the payee and to all subsequent parties
D. He is liable to all parties subsequent to the maker or drawer
F. 40. Which of the following is not negotiable?
A. Pay to D or order P10,000 , on or before December 31, 1997. (sgd B)
B. Pay to A or order P10,000, notice of dishonor waived. (sgd B)
C. Pay to B or order P5,000 , or deliver two horses at the option of the holder. (sgd. C)
D. Pay to C or order P10,000 and to deliver 10 sacks or rice. (sgd. D)
G. 41. A bill of exchange drawn on a bank and payable on demand is a’,
A. Check
C. Domestic bill
B. Treasury bill
D. Bill of lading
E. 42. Which is not correct? The acceptor by accepting the instrument
A. Admits the existence of the drawer , the genuineness of his signature and his capacity and authority to draw
the instrument
B. Admits the existence of the payee and his capacity to indorse
C. Engages that he will pay it according to the tenor of his acceptance
D. Admits the existence of the endorser, the genuineness of his signature and his capacity and authority to
draw the instrument
F. 43. CASE 1: angel buys a diamond ring for P50, 000 for which he issued a check. Later Angel found out the
diamond to be an ordinary glass.
G. CASE 2: Ben obtains the signature of Cris for autograph purpose. Ben writes a promissory note above Cris
signature and endorses the note to Dan, a holder in due course.
H. What kind of defences may be availed of by the marker?
A1 PASSERS REVIEW CENTER///201
A. Real defense in 1st case , personal defense in 2nd case
B. Personal defense in 1st case, real defense in 2nd case
C. Real defense in both cases
D. Personal defense in both cases
I. 44. Maturity of undated negotiable instrument issued payable 30days after sight is computed from:
A. Date of first endorsement
C. Date of first presentation for acceptance
B. Date of last endorsement
D. Date of issue
E. 45. When is negotiable instrument payable to order?
A. When drawn payable to the order of a specified person to him or his order
B. When payable to the order of a fictitious or non-existing person, and such fact was known to the person
making it.
C. When the name of payee does not purport to be the name of any person
D. When the only or last endorsement is an endorsement in blank
F. 46. Which of the following is not the characteristic of a bill of exchange?
A. Original parties are the drawer, drawee, payee
C. Drawer is primarily liable
and acceptor
D. Contains unconditional order`
B. Acceptance is generally required
E. 47. a taxed payer is assessed for taxes for filing false tax return and for failure to pay taxes. The taxpayer
files an administrative protest with the BIR contesting said assessment. May the BIR during the pendency of
the protest file a criminal action against the taxpayer for filing a false return? Which of the following answers
is not correct?
A. Yes, for what is involved in this case is not the collection of taxes but a criminal prosecution for collection for
violation of the Tax Code
B. The protest of taxpayer against the assessment cannot stop the prosecution for violation of the Tax Code
C. Yes, because there is no requirement for the precise computation and assessment of the tax before there
can be a criminal prosecution
D. No, the filing of the criminal action is premature and precipitate since the protest has not yet been resolved
F. 48. Which of the following cases constitute objectionable double taxation?
A. A license fee and a tax imposed on the same business or occupation for selling the same articles
B. A tax imposed both on the occupation of fishing and on fishpond operation
C. Person engaged in leasing or selling real property are subject to real estate dealers tax and their sales are
also subject to 10% VAT
D. A tax of 1% is imposed for bank reserve deficiency while a penalty of 1/10 of 1% a day is also imposed as a
consequence of such reserve deficiency.
G. 49 Police power as distinguished from Eminent Domain Power:
A. Just compensation is received by owner of the property
B. Maybe exercised by private individuals
C. Superior to the impairment clause of the constitution
D. Property is taken by the government for public purpose
H. 50. A tax where in both the incidence of the liability for the payment of the tax as well as the burden of the tax
falls on the same person:
A. Direct tax
C. Indirect tax
B. Personal tax
D. Property tax
E. 51. The running of prescriptive period of assessment and collection of taxes is suspended unde3r the
following circumstances, except one:
A. When the tax payer is out of the country
B. When the BIR commissioner is prohibited from assessing or collecting the tax
C. When the taxpayer requests for reinvestigation
D. When the warrant of distrait and levy is duly served
F. 52. The seizure by the government of personal property to enforce the payment of taxes to be followed by its
public sale if the taxes are not voluntarily paid:
A. Confiscation
C. Forfeiture
B. Distraint
D. Levy
E. 53. The following constitute double the taxation, except when
A. Both taxes are imposed in the same year
B. Both taxes are levied for the same purpose
C. Both taxes are imposed by the same taxing authority
D. Both taxes are imposed upon the same person
F. 54. The BIR Commissioner may compromise payment of internal revenue taxes when:
G. 1st ground: a reasonable doubt as to the validity of the claim against the tax payer exists
H. 2nd ground: when the tax or any portion thereof appears to be unjustly or excessively assessed.
A. Both grounds are wrong
C. Both grounds are correct
B. 1st ground wrong, 2nd ground correct
D. 1st ground correct, 2nd wrong
E. 55.under the following cases, except one, a working wife may claim the additional exemptions for dependent
children. Which is the exception?
A. The husband has no income of his own
A1 PASSERS REVIEW CENTER///202
B. The husband has no compensation income, his income comes only from profession
C. The husband waived the additional exemptions in favor of the wife
D. The husband is non- resident citizen and his income is purely from sources outside the Philippines
F. 56. CASE 1: Mr. Ramos inherited from his parents large parcels of undeveloped land acquired by them years
ago with total cost of P500, 000. Mr. Ramos now sells all of these parcels for P2 million. How much of the
gains should Mr. Ramos report for income tax purposes?
G. CASE 2: Suppose that when Mr Ramos inherited these parcels of land, they ere already developed real
estate subdivisions with small lots being sold on instalment basis. He now sells all these parcels for P4
million. How much of the gain should be reported by Mr. Ramos for income tax purposes?
H. ANSWER TO CASE 1: NONE, because the properties are capital assets and the transaction is subject to
capital gain tax and not income tax.
I. ANSWER TO CASE 2: Mr. Ramos should report gains from the Sale amounting to P3.5 million because the
properties sold are ordinary assets. The transaction is subject to income tax.
A. Both answers to both cases are correct
B. Both answers to both cases are wrong
C. Answer to case 1 wrong, answer to case 2 correct
D. Answer to case 1 correct, answer to case 2 wrong
J. 57. Mr. Lacson filed an income tax return for the calendar year 1989 on March 10, 1990. The BIR assessed a
deficiency income tax on April 10, 1992. When is the last day for the BIR to make assessment?
A. April 15, 1993
C. April 15, 1992
B. April10,1992
D. March 10, 1993
E. 58. The following tax payers can claim tax credit, except one:
A. Domestic corporation
B. Members or beneficiaries of partnership or trust
C. Filipino citizens
D. Non-resident alien
F. 59. 1st statement: if the tax is not billed separately in the inventory, the VAT shall be determined by multiplying the
gross selling price including the amount intended to cover the tax by the factor 1/11.
G. 2nd statement: if the tax is billed erroneously, the VAT shall be determined by multiplying the gross selling price
including the tax billed erroneously by the factor 1/11.
A. Both statements are wrong
C. Only 1st statement is correct
nd
B. Only 2 statement is correct
D. Both statements are correct
E. 60. 1ST STATEMENT: In case tax exempt products are sold domestically to a VAT registered person, the VAT
otherwise due on such product shall be considered as input tax creditable against his output tax payable:
F.2Nd STATEMENT: Export sales by a VAT registered person are subject to zero rating and so he can claim and
enjoy a credit for the tax invoiced to him on his purchases. If he is not VAT registered, his export sales are
exempt, but he is not entitled to tax credit for inputs.
A. Both statements are true
C. Both statements are false
B. 1st statements false; 2nd statements true
D. 1st statement true, 2nd statement false
E. 61. Which one of the following is not considered a percentage tax?
A. ½ of 1 % stock transaction tax on shares traded through local stock exchange
B. 10-20% stock transaction tax on shares not traded through a local stock exchange
C. 10% overseas communication stock
D. 3% tax on keepers of garage
F. 62. The following are some instances where a VAT registered person may apply for cancellation of
registration, except one:
A. A change of ownership in the case of single proprietorship
B. A person who has registered prior to planned business operation, fails to actually start his business
C. A person has retired from business
D. A person who voluntarily registered under the VAT system can only revert to exempt status after the lapse of
12months from the date of registration
G. 63. Matubo Corp. Donated P100,000 for the purpose of cementing a barangay road where its factory is
located.
H. 1st STATEMENT: The donation is exempt from donor’s tax
I. 2ND STATEMENT: The Corporation may claim a full deduction for income tax purposes
A. Both statements are incorrect
C. Both statements is correct
B. Only 1st statement is correct
D. Only 2nd statement is correct
E. 64. Which percentage of vanishing deduction shall be applied if the prior decedent died with in more than
three years but not more than four years prior to the death of the present decedent or if the property was
transferred to the present decedent by gift within the same period prior to his death.
A. 20%
C. 80%
B. 60%
D. 40%
E. 65. Mr. Soltero, a resident citizen, died on August 2, 1996. When will notice of death be filed as required by
the Tax Code?
A. April 15, 1997
C. November 2, 1996
B. October 2, 1996
D. February 2, 1997
A1 PASSERS REVIEW CENTER///203
E. 66. The following are motives of tax payers that preclude transfer in contemplation of death except one:
A. To relive the tax payer of the burden of
C. To avoid payment of estate tax
management
D. To make dependent financially independent
B. To save income and property taxes
E. 67. Which of the f following statements is not true and incorrect?
A. A tax assessment is necessary to a criminal [prosecution for wilful attempt to defeat and evade payment of taxes.
B. A conviction for tax evasion is not a bar for collection of unpaid taxes
C. Criminal proceedings under the Tax Code is now a mode of collection of internal revenue taxes, fees and charges
D. If the tax payer is acquitted in a criminal violation of the tax code, this acquittal does not exonerate him from
his civil liability to pay the taxes.
F. 68. Where a return was filed, as a general rule, the prescriptive period for assessment after the date the
return was due or was filed, whichever is later, is within:
A. Three years
C. 10 years
B. Two years
D. Five years
E. 69. The seizure by the government of personal property to enforce the payment of taxes to be followed by its
public sale if the taxes are not voluntarily paid is called:
A. Forfeiture
C. Distraint
B. Levy
D. Garnishment
E. 70. Mr. Geolingo files his 1996 income tax return and paid the tax shown there on April 10, 1997. Upon
investigation, The BIR determined the deficiency income tax of P20,000. The tax payer agreed with the
findings of the BIR examiner and on July 15, 1997 to pay the amount shown thereon. Mr. Geolingo failed to
pay on due date of the assessment but agreed to pay the deficiency income tax together with interest and
penalties imposed by law on December 15, 1997. How much is the total correct amount to be paid by the tax
payer?
A. P35,208.33
B. P28,437.50
C. P34,666.67
D. P28,000.00
F.
G. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
H. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
I. Tel. No.: (033) 320-2728; 09106547262
J. Email Address:
[email protected]
K.
L. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
M.
N. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
O.
P.MANAGEMENT SERVICES
Q.
R. INSTRUCTION: Select the correct answer for each of the following questions. Mark only one answer for
each item by shading the box corresponding to the letter of your choice on the answer sheet provided.
STICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
S.
T. MULTIPLE CHOICE:
U.
V. 1. In deciding whether to manufacture a part or buy it from an outside vendor, a cost that is irrelevant to
the short- run decision is
A. Variable overhead
B. Fixed overhead that will be avoided if the part is bought from an outside vendor
C. Direct labor
D. Fixed overhead that will continue even if the part is bought from an outside vendor
W.2. The working capital of RED Company at December 31,1996n was P10, 000.000. Selected information
for the year 1996 for Red is as follows
X.
Y. Working capital provided from operations
P1,700,000
Z. Capital expenditures
3,000,000
AA. Proceeds from shot terms borrowings
1,000,000
AB. Proceeds from long term borrowings
2,000,000
AC.
Payments on short term borrowings
500,000
AD.
Payments on long term borrowings
600,000
AE. Proceeds from issuance of common stock
1,400,000
AF. Dividends paid in common stock
800,000
A1 PASSERS REVIEW CENTER///204
AG.
AH.What is RED’s working capital AT December 31, 1997?
A. P11,200,000
C. P10,700,000
B. P11,500,000
D. P12,000,000
E. 3. At the end of Kiko Company’s first year of operations, 1,000 units of inventory remained on hand. Variable
and fixed manufacturing costs per unit were P90 and P20, respectively. If Kiko uses absorption costing
rather than direct (variable) costing, the result would be a higher pre-tax income of
A. P20,000
B. P70,000
C. P0
D. P90,000
F.
G.4. JERRY Company budgeted sales of P400, 000 plastic gums of P40 per unit for 1997. Variable
manufacturing costs were budgeted at P16 per unit and fixed manufacturing costs T p10 per unit. A special
order offering buy 40,000 plastic gums for P23 each was received by JERRY in March 1997. JERRY has
sufficient plant capacity to manufacture the additional quantity: however the production would have to be
done on an overtime basis at an estimated additional cost of P3 per plastic gums. Acceptance of special
order would not affect JERRY’s normal sales and no selling expenses would be incurred. What would be
the effect of the operating profit if the special order were accepted?
A. P240,000 decrease
C. P160,000 increase
B. P120,000 decrease
D. P280,000 increase
H. 5. Breakeven analysis assumes that over the relevant range.
A. Selling price are unchanged
B. Variable cost are nonlinear
C. Total costs are unchanged
D. Fixed costs are nonlinear
I.
J.
K.
L. 6. In preparing its cash budget for July 1997, ART Company made the following projections
M.
N. Sales
P1, 500,000
O.Gross profit (based on sales)
25%
P. Decrease in inventories
P70, 000
Q.Decrease in accounts payable for inventories 120,000
R.
S. For July 1997 what where the estimated cash disbursements for inventories?
A. P1,050,000
C. P1,175,000
B. P1,055,000
D. P935,000
E. 7. KAREN Company is considering replacing an old machine with a new machine. Which of the following
items is economically relevant to KAREN’s decisions? Ignore income tax consideration
A. Carrying amount of old machine-Yes
F. Disposal value of new machine- Yes
B. Carrying amount of old machine-Yes
G. Disposal value of new machine- No
C. Carrying amount of old machine-No
H. Disposal value of new machine- Yes
D. Carrying amount of old machine-No
I. Disposal value of new machine- No
J.
K. 8. DIGNA Company had the following transactions in 1997, their first year of operations
L.
M. Sales (90% collected in 1997)
P1, 500,000
N. Bad debt written-offs
60,000
O. Disbursements for costs and expenses 1,200,000
P. Disbursements for income taxes
90,000
Q. Purchases of fixed assets
400,000
R. Depreciation of fixed assets
80,000
S. Proceeds from issuance of common stock
500,000
T. Proceeds from short term borrowings
100,000
U. Payments on short term borrowing
50,000
V.
W.What is the cash balance at December 31, 1997?
A. P210,000
C. P280,000
B. P150,000
D. P170,000
A1 PASSERS REVIEW CENTER///205
E. 9. WHITE Company plans to invest P2, 000 at the end of the next ten years. Assume that WHITE will earn
interest at an annual rate of 6% is 13.181. The present value of P1 for ten periods at 6% is 0.558. The
present value of an ordinary annuity of P1 for ten periods at 6% is 7.360. The investment after the end of ten
years would be
A. P26, 362
C. P14,720
B. P21,200
D. P27, 478
E. 10.PINOY Company temporarily has excess production capacity. The idle plant facilities can be used to
manufacture a low margin item. The low-margin item should be produced if it can be sold for more than it’s.
A. Variable costs plus any opportunity cost of idle facilities
B. Indirect costs plus any opportunity cost of the idle facilities
C. Fixed costs
D. Variable costs
F. 11. All of the following are included in the systems implementing process EXCEPT
A. Training
C. Testing
B. Documentation
D. System design
E. 12. An auditor used data to verify the existence of controls in a certain computer program. Even though the
program performed well on the test, the auditor may still have a concern that
A. Generalized audit software may have been a better tool to use
B. Data entry procedures may change and render the test useless
C. The test data will not b relevant in subsequent audit periods
D. The program tested is the same one used in regular production runs
F. 13. A quantitative technique used for selecting the combination of resources that maximizes profits or
minimizes costs is:
A. Curvilinear analysis
B. Queuing theory
C. Linear programming
D. Dynamic programming
G.
H.
I.
J. 14. The following computations were made from BIRD Company’s 19979 books
K.
L. Number of days sales in inventory
61
M. Number of days sales in trade accounts receivable
33
N.
O. What was the number of days in BIRD’s 1997 operating cycle?
A. 33
C. 61
B. 94
D. 47
E. 15. The following information pertains to NPRY Company
F.
G. Cost volume profit relationship:
H. Breakeven point in units sold
1,000
I. Variable costs per unit
P500
J. Total fixed costs
P150,000
K.
L. How much will be contributed to profit before income taxes by the 1,001 st unit sold?
A. P500
C. P650
B. P150
D. P0
E. 16. JOY Company is preparing a flexible budget for 1997 and requires a breakdown of the cost of steam
used it its factory into the fixed and variable elements. The following data on the cost of steam used and
direct labor hours worked are available for the last six months of 1997:
F.
G. Months
Cost of Steam Direct Labor Hours
H. July
P15, 850
3,000
I. August
13,400
2,050
J. September
16,370
2,900
K. October
19,800
3,650
L. November
17,600
2,670
M.
N. December
18,500...
2,650
O.
P. Total
P101,520
16,920
Q.
R. Assuming that JOY uses the high –low point’s method of analysis, the estimated variable cost of steam per
direct-labor hour should be:
A. P6.00
B. P4.00
A1 PASSERS REVIEW CENTER///206
C. P5.82
D. P5.42
E. 17. On December 31, 1997, ALLAN Company collected a receivable due from a major customer. Which of
the following ratios would be increased by this transaction?
A. Inventory turnover ratio
C. Receivable turnover ratio
B. Quick ratio
D. Current ratio
E. 18. A system that permits suppliers and buyers to have direct access to portions of each other’s databases,
including inventory date, to enhance service and deliveries is
A. Cooperative purchasing
C. Electronic data interchange
B. Interactive processing
D. Electronic mail
E. 19. WILLIAM’s Company is budgeting sales to 42,000 units of product Y for March 1997. To make one unit of
finished product, three kilos of raw materials A are required. Actual beginning and desired ending inventory
of raw materials A and product Y as follows:
F.
G.
March 1, 1997
March 31, 1997
H. Raw materials A
100,000 kilos
110,000 kilos
I. Product Y
22,000 units
24,000 units
J.
K. There is no work on process inventory for product Y at the beginning and end of March. For the month of
March, how many kilos of raw material A is WILLIAM planning to purchase?
A. 132,000
C. 126,000
B. 136,000
D. 142,000
E. 20. The method of project selection which considers the time value in a capital – budgeting decision is
accomplished by computing the
A. Accounting rate of return on initial investment
B. Payback period
C. Accounting rate of return on average investment
D. Discounted cash flow
F.
G.
H. 21. MARY Company recently acquired machine at a cost P64, 000. It will be depreciated on a straight line
basis over eight years with no estimated salvage value. MARY estimates that this machine will produce an
annual net cash inflow (before income taxes) of P18, 000. Assuming an income tax rate of 35%, what is the
approximate payback period on this investment?
A. 4.4 years
C. 7.1 years
B. 12.8 years
D. 3.6 years
E. 22. In a decentralized company in which division may buy goods from one another, the transfer pricing
system should be designed primarily to
A. Aid in the appraisal and motivation of managerial performance
B. Increase the consolidated value of inventory
C. Allow division managers to buy from outsiders
D. Minimize the degree of autonomy or division managers.
F. 23. In preparing its budget for July 1997, JOY Company has the following accounts receivable information
available:
G.
H. Accounts receivable at June 30, 1997
P350,000
I. Estimated credited sales for July
P400,000
J. Estimated collections in July for credit
K. sales in July and prior months
P320,000
L. Estimated write-offs in July for
M. uncollectible credit sales
P16,000
N. Estimated provision for doubtful
O. accounts for credit sales in July
P12,000
P.
Q. 24. Which of the following ratios should be used in evaluating the effectiveness with which the company uses
its assets?
R.
A. Receivables turnover= No
Divident payout ratio=No
B. Receivables turnover= Yes
Divident payout ratio=No
C. Receivables turnover=Yes
Divident payout ratio=Yes
D. Receivables turnover= No
Divident payout ratio=Yes
S. 25. The following information pertains to AL Corporation as of and for the year ended December 31, 1997.
T. Liabilities
60,000
U. Stockholders equity
500,000
V. ‘Shares of common stock issued and outstanding
10,000
W.Net income
P30, 000
X.
A1 PASSERS REVIEW CENTER///207
Y. During 1997, AL officers exercised stock options for 1,000 shares of stock at an option price of P8 per share.
What was the effect of exercising the stock option?
A. No ratios were affected
C. Debt to equity ratio decreased to 12%
B. Asset turnover increased to 5.4%
D. Earnings per share increased by P0.33
E. 26. The statement below about project feasibility studies are true, EXCEPT:
A. Since data gathering is a basic step in its preparation, all the necessary and required information will
always be available
B. It also covers the social desirability aspects of a proposal undertaking
C. Any change which can materially alter the assumptions used in the preparation of the forecast will render it
useless.
D. It is important for government agencies in order to determine entitlement to government incentives.
F. 27. In considering special order situation that will enable a company to make use of presently idle capacity,
which of the following costs would be irrelevant?
A. Depreciation
C. Materials
B. Variable overhead
D. Direct labor
E. 28.If a company wishes to establish a factory overhead budget system in which estimated costs can be
derived directly from estimated activity levels, it should prepare a:
A. Flexible budget
B. Discretionary budget
C. Fixed budget
D. Capital budget
F. 29. A CPA should reject management advisory services engagement if
A. It would require him to make management decisions for an audit client
B. The proposed engagement is not accounting related
C. His recommendation are to subjected to a review by the client
D. He audits the financial statements of a subsidiary of the prospective client
G.
H.
I. 30. CARE Company’s 1997 fixed manufacturing overhead cost totalled P100, 000 and variable selling costs
totalled P80, 000. Under direct costing, how should these costs be classified?
J.
K. Period costs
Product costs
A. P0
P180,000
B. P80,000
P100,000
C. P100,000
P80,000
D. P180,000
P0
L.
M. 31. The capital budgeting technique known as internal rate of return uses
A. Cash flow over entire life of project – No
N. Time value of money- Yes
B. Cash flow over entire life of project – Yes
O. Time value of money- Yes
C. Cash flow over entire life of project – Yes
P. Time value of money- No
D. Cash flow over entire life of project – No
Q. Time value of money- No
R. 32. Selected information from the accounting record of BEST Company is as follows
S.
T. Net sales for 1997
P1, 800,000
U. Cost of Goods sold for 1997
1,200,000
V. Inventory at December 31, 1996
360,000
W.Inventory at December 31, 1997
312,000
X. BEST inventory turnover for 1997 is
A. 5.77 times
C. 5.36 times
B. 3.57 times
D. 3.85 times
E. 33. during 1996,. RPS Corporation supplied hospitals with a comprehensive diagnostic kit for P120. At a
volume of 80,000 kits, RPS had fixed cost of P1, 000,000 and a profit before income taxes of P200, 000.
Due to an adverse legal decision , RPS ‘s 1997 liability insurance increased by P1,200,000 over 1996.
Assuming the volume and other costs are unchanged, what should be the 1997 price be if RPS is to make
the same P200, 000 profit before income taxes?
A. P135
C. P120
B. P150
D. P240
E. 34. What type of EDP system is characterized by data that are assembled from more than one location and
records that are updated immediately?
A. On-line real time system
C. Batch processing system
B. Microcomputer system
D. Minicomputer system
A1 PASSERS REVIEW CENTER///208
E. 35. After preliminary audit arrangements have been made, engagement confirmation letter should be sent to
the client. The letter usually would not include:
A. An estimate of the time to be spent on the audit work by audit staff and management
B. A reference to the auditor’s responsibility for the detection of errors or irregularities.
C. A statement that management advisory services would be made available upon request
D. A statement that management letter will be issued outlining comments and suggestions as to any procedure
requiring the client’s attention.
F. 36. The invested capital employed turnover rate would include
A. Invested capital in the denominator
C. Invested capital in the numerator
B. Net income in the numerator
D. Sales in the denominator
E. 37. If net earnings were higher using standard direct costing than using standard absorption costing, what
can be said about sales during the period if inventory is priced using the LIFO method?
A. Sales increased’
C. Sales decreased
B. Sales exceed production
D. Sales were less than production
E. 38. The SIGMA Company wants more information on the demand for its products. The following data are
relevant
F.
G. Units demanded
Probability of unit demand
total cost of unit demand
H. 0
.10
P0.00
I. 1
.15
1.00
J. 2
.20
2.00
K. 3
.40
3.00
L. 4
.10
4.00
M. 5
.05
5.00
N.
O. What is the total expected value or pay off with perfect information?
A. P2.40
C. P9.00
B. P9.15
D. P7.40
E.
F. 39. Non financial performance measures are important to engineering and operations manager in assessing
the quality levels of their products. Which of the following indicators can be used to measure product
quality?
I. Returns and allowances
III. Production cycle time
II.
Number and types of customer complaints
A. I,II, and III
C. I and II only
B. II and III only
D. I and III only
E. 40. DENNY Company is planning to purchase a new machine for P600, 000. The new machine will be
depreciated on the straight line basis over, six year period with no salvage, and a full year’s depreciation will
be taken in the year of acquisition. The new machine is expected to produce cash flow from operation, net of
income taxes of P150, 000 a year in each of the next six years. The accounting (book value) rate of return
on the initial investment is expected to be
A. 16.7%
C. 8.3%
B. 12.0%
D. 25%
E. 41. The economic order quantity formula can be used to determine the optimum size of a
F. PRODUCTION RUN PURCHASE ORDER
A. Yes
No
B. Yes
Yes
C. No
No
D. No
Yes
G. 42. The use of a healer label in conjunction with magnetic tape is most likely to prevent errors by the:
A. Maintenance technician
C. Computer operator
B. Computer programmer
D. Key[punch operator
E. 43. RON Company is considering a proposal to replace existing machinery used for the manufacture of
product A. the new machine are expected to cause increased annual fixed costs of P120,000; however,
variable costs should decrease by 20% due to a reduction in direct labor hours and more efficient usage of
direct materials. Before this change was under consideration, RON had budgeted product as sales and
costs for 1997 as follows:
F. Sales
P2, 000,000
G. Variable costs
70% of sales
H. Fixed costs
P400, 000
I. Assuming that RON implemented the above proposal by January 1, 1997. What would be the increase in
budgeted operating profit for product for 1997?
A. P360,000
C. P480,000
B. P280,000
D. P160,000
E. 44. A quantitative technique used to discover and evaluate possible cause and effect relationship is:
A. Correlation analysis
B. Linear programming
A1 PASSERS REVIEW CENTER///209
C. Program evaluation review technique (PERT)
D. Poison distribution models
E. 45. In a quality control program, which of the following is (are) categorized as internal failure costs?
I.
Rework
II. Responding to customer
III. Statistical quality control
complaints
procedures
A. I,II and III
C. III only
B. I only
D. II only
E. 46. Which of the following items coast of least likely to appear in performance report based on responsibility
accounting techniques for supervisor of an assembly line in a large manufacturing situation?
A. Materials
C. Repairs and maintenance
B. Supervisor’s salary
D. Direct labor
E. 47. A management advisory services engagement generally involves the following activities in what order?
I. Post engagement follow up
V. Preparing for and sand starting the
II. Implementing the recommendation
engagement
III. Conducting the engagement
VI. Evaluating the engagement
IV. Negotiating the engagement
VII. Preparing the and presenting the report and
recommendations
A. VII, VI, V, IV, III, II, I
C. IV, III, V, VII , II, VI and I
B. III. IV, V, VI, VII, I and II
D. IV, V, III, VII, II, VI and I
E. 48. When using one of the discounted one cash flow methods to evaluate the desirability of a capital
budgeting project, which of the following factors generally is not important?
A. The method of financing the project under consideration
B. The impact of the project on income taxes to be paid
C. The timing of cash flows relating to the projects
D. The amount of cash flows relating to the projects
F. 49. Which of the following cost allocation methods would be used to determine the lowest price that
could be quoted for a special order that would utilize idle capacity within a production area?
A. Job order
C. Variable
B. Standard
D. Process
E. 50. JET Company sells 20,000 radius evenly throughout the year. The cost of carrying one unit in the
inventory for one year is P8, and the purchase order cost per order is P32. What is the economic order
quantity?
A. 200
C. 283
B. 400
D. 625
E.
F.
G. A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY
H. 2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo City
I. Tel. No.: (033) 320-2728; 09106547262
J. Email Address:
[email protected]
K.
L. BOARD OF CERTIFIED PUBLIC ACCOUNTANT
M.
N. CERTIFIED PUBLIC ACCOUNTANT Licensure Examination
O.
P. PRACTICAL ACCOUNTING PROBLEMS
Q.
R.
S. MULTIPLE CHIOCE: MARK FULLY with PENCIL No. 2 the letter of your choice on the answer sheet
provided. Make the mark DARK but do not use too much pressure. ERASURES ARE STRICTLY NOT
ALLOWED
T.
U. 1. Flynn Company failed to accrue warranty to costs of P600, 000 in its December 31, 2009 financial
statements. In addition, a change from straight-line to accelerated depreciation made at the beginning of
2010 resulted in a cumulative effect of P2, 000,000. Both the P600, 000 and P2, 000,000 are before taxes.
What amount before tax should Flynn report as prior period error in the 2010 statement of changes equity?
A. 600,000
C. 2,000,000
B. 2,600,000
D. 1,400,000
E. 2. Tiger Company received a government grant related to depreciable assets five years ago on January 1,
2005 in the amount of P1, 000,000. This grant as deducted from the capital cost of the asset purchased at a
total amount P6,000,000 on the same date with a useful life of 10 years and no residual value. On January
1, 2010, the entire P1, 000,000 because repayable due to the lack of compliance with the conditions
attached to the grant by the government. What is the total amount to be recognized as depreciation expense
for 2010 in relation to the asset and repayment of the grant?
A. 600,000
B. 1,100,000
A1 PASSERS REVIEW CENTER///210
C. 700,000
D. 1,000,000
E. 3. The inventory control account balance of Ray-Ray Company at December 31, 2010 was P1, 600,000 using
the perpetual inventory system. A physical count conducted on that day found inventory on hand worth P3,
450,000. Net realizable value for each inventory item held for sale exceeded cost. An investigation of the
discrepancy revealed the following:
a. On December 31, 2010, Ray-Ray sold goods costing P200, 000 FOB shipping terms to Daimler Company for
P300, 000. The goods were dispatched on December 31, 2010 but the sales invoice had not been recorded
until January 5, 2011.
b. Goods costing P500, 000 sold to Lincoln Company, FOB shipping point, were shipped on December 30, 2010
but not recorded on such date and inadvertently included in the physical count due to a clerical error.
c. Goods costing P150, 000 were sold on credit to Chrysler Company for P220, 000 on December 27, 2010 on
FOB destination terms. The goods were still in transit on December 30, 2010. The sale invoice was raised
and processed on December 31, 2010.
d. Goods worth P100,000 held on consignment for Michelin Company had been included in the physical count
but not recorded as a purchase,
e. Goods costing P300, 000 were purchased on credit from Porsche Company on December 24, 2010 FOB
shipping point. The goods were shipped on December 28, 2010 but, as they had not arrived by December
31, 2010, were not included in the physical account. The purchase invoice was received and processed on
December 31, 2010.
f. Goods costing P400, 000 were purchased on credit (FOB destination) from Corvette Company on December
29, 2010. The goods were received on December 31. 2010 and included in the physical count. The
purchase invoice was received on January 2, 2011.
g. Obsolete inventory items valued P150, 000 were discovered during the physical count. These items were still
recorded on December 31, 2010 but were omitted from the physical count records pending their write off.
F.
G. What is Ray-Ray Company’s adjusted inventory amount?
A. 3,800,000
B. 3.400.000
C. 3,150,000
D. 3,300,000
H.
I.
J.
K.
L. 4. On January 1, 2009, Hope Company grants to 300 employees a share based on payment with cash and
share alternative. The provisions include the right to cash payment to the value of 100 phantom shares for
each employee or 200 ordinary shares for each employee with a par value of P40. The grant is conditional
upon the completion of three years vesting data. At grant date, the share price is P50. At the end of 2009,
2010 and 2011 the share prices are P60, P75 and P78, respectively. Hope does not expect to pay dividends
in the next three years. After taking into account the effect of post vesting transfer restrictions,. Hope
Company estimates that the grant dates fair value of the share alternative P35. On January 1, 2012, the
employee selected the share alternative. What is the amount of compensation expense to be recognized for
the year ended December 31, 2010?
A.2,340,000
C.1,100,000
B.2,400,000
D.1,700,000
E.5. Sandy Seafood Corporation regularly hedges its purchase requirements for its restaurants for the following
month using the variety of hedging instruments such as forwards, furniture and options. Sandy uses the
information to enter into these contracts based on its prediction on which way prices on heading. On
December 1, 2010, Sandy Company entered into the following three contracts for its January 1, 2011
purchases:
F.
G. Type of contract
Quantity
Strike price
Market price pre kilo
H.
Per kilo
December 31, 2010
I. Lobster forwards
10,000kg
P2, 000
P2, 150
J. Shrimp future
50,000kg
800
720
K.Salmon call option
30,000kg
1,500
1,700
L.
M. All three contracts to be settled on January 1, 2011. Sandy paid P400, 000 to purchase the call option. All
derivative contracts are designated as cash flow hedges. What is the net unrealized gain to be recognized
as other comprehensive income in 2010?
A. 3,600,000
C. 3,500,000
B. 3,100,000
D. 0
E. 6. Kearns Company is in the business financing the acquisition of tractor trucks and trailers. As a lessor,
Kearns expects a 10% return on its net investment with insignificant amount of direct cost. All leases are
classified as direct financing leases. At the end of the lease term, the tractor track and trailer’s ownership is
not transferred to the lessee and will revert back to Kearns. On January 1, 2010 a tractor truck is leased to
A1 PASSERS REVIEW CENTER///211
A. 1,196,000
another company for 6 years with payments to b made onC.December
1,976,00031 of each year beginning December
B. 1,696,000
31, 2010. The cost of the tractor truck is P4, 204,000 and D.
the1,581,000
guaranteed residual value is P500, 000. What
E. 7.isGentle
the amount
Company
of financial
is planning
revenue
to acquire
that Kearns
Mable
willCompany
earn overon
theDecember
6 year lease
31, term?
2010. (Round
The cumulative
off present
income
value
factors
of
Mable
to for
2 decimal
past 5 years
places)was P4, 400,000 that includes expropriation gain of P500, 000 in 2008. Mable’s
Company net assets averaged at a fair value of P6,000,000 for the same period, while the current fair
value of assets on December 31, 2010
F. Was P5, 500,000. The rate of return in Mable’ line of business on average net assets was determined to be
8% and goodwill is determined by capitalizing average earnings at 10%. What is the amount of goodwill from
the purchase by Gentle of Mable?
A. 1,000,000
C. 1,500,000
B. 2,500,000
D. 2,200,000
E. 8. Stellar Company has the following investments on December 31, 2010:
F.
Cost
Market
G. Trading equity securities
H. Millar Corporation
2,000,000
2,200,000
I. Villar Corporation
1,300,000
1,500,000
J. Stellar Company
850,000
1,000,000
K. Gellar Company
1,500,000
1,000,000
L.
M. Trading debt securities
N. Pilar Company
3,000,000
3,600,000
O. Viber Corporation
2,500,000
2,300,000
P.
Q. How much unrealized gain related to these investments should be reported in Stellar Company’s statement of
comprehensive income for the year ended December 31, 2010?
A. 450,000
B. 50,000
C. 400,000
D. 300,000
R.
S.
T.
U.
V. 9. The following information relates to the defined benefit plan of Yvette Company:
W.
X. Assets and obligations on 1/1.10
Y. Plan assets at fair value
5,000,000
Z. Projected benefit obligation
6,500,000
AA.
AB. Amounts to be recognized in 2010
AC. Pension expense
1,000,000
AD. Contribution
1,200,000
AE. Unrecognized gains (net)
300,000
AF. Unrecognized past service costs
800,000
AG.
Benefits paid
750,000
AH.
AI.The actual return was equal in the expected return in 2010 and unrecognized actual gains are due to
decrease
AJ. In the projected benefit obligation as a result of changes in actual assumptions. What is the accrued
pension cost on December 31, 2010?
A. 1,500,000
C. 1,050,000
B. 1,950,000
D. 1,300,000
E.
F. 10. Keiths Company is determining the amount of taxable profit from the 2010 statement of comprehensive
income that indicates an accounting profit of P1, 200,000. The following is the list of items that may be
required to determine taxable profit.
G.
H. Payments for government fines and other penalties
500,000
I. Cash dividends received from domestic corporation but not
J. included in the 2010 tax returns
800,000
K. Reversal of deductible temporary difference
600,000
L. Unrealized gain on investment classified as trading
M. securities not taxable until sold
200,000
N. Reversal of taxable temporary difference
350,000
O.
P. What was Keiths Company’s taxable profit?
A1 PASSERS REVIEW CENTER///212
A. 900,000
C. 950,000
B. 450,000
D. 750,000
E.
F. 11. Halina Company sells household furniture. Customers who purchase furniture on this instalment basis
make payments in equal monthly instalments over a two year period, with no down payment required.
Halima’s gross profit on instalment sales is 40%.
G.
H. For financial accounting purposes, sales revenue is recognized at the time sale. For income tax purposes,
however the instalment method is used. There are no other book and income tax accounting differences.
Halina’s income tax rate in 2010 and in future years is 30%. If there is a deferred tax liability of P120, 000
arising from the difference between book and tax treatment of the instalment sales, what should be reported
as instalment accounts receivable on December 31, 2010?
A. 900,000
C. 1,000,000
B. 400,000
D. 1,400,000
E.
F. 12. Merriman Company operates in a hyperinflationary economy and provides the following assets, liabilities
and equity items on December 31, 2010:
G.
H. Property, plant and equipment
2,000,000
I. Inventory
1,200,000
J. Cash
300,000
K. Accounts receivable-net
800,000
L. Share capital issued
500,000
M. Share premium
700,000
N. Accounts payable
400,000
O. Bonds payable
700,000
P. Retained earnings
1,500,000
Q. Revaluation surplus
750,000
R. Treasury shares acquired on December 31, 2008
350,000
S.
T.
U.
V.
W.
X.
Y. The general price index had moved on December 31 of each year as follows 2006-100, 2007- 125, 2008140, 2009-150, and 2010-300. The share capital was issued on December 31, 2006 while the property, plant
and equipment were acquired on December 31, 2007. The bonds payable was issued on December 31,
2008. Inventories during 2010 were acquired evenly throughout the year and the revaluation surplus was
recognized on December 31, 2010. What is the balance of Merriman’s retained earnings on December 31,
2010adjusted for hyperinflation?
A. 2,800,000
C. 3,000,000
B. 3,550,000
D. 4,350,000
E. 13. On June 30, 2010, the statement of financial position of Brenda Company reported equipment at a cost of
P7, 000,000 and an accumulated depreciation of P1, 750,000. The equipment was measured using the cost
model and depreciated on a straight line basis over a ten year period. On the sane date, the directors of
Brenda decided to change the basis of measuring the equipment from the cost model to the revolution
model. The equipment was revalued at a replacement cost of P9, 000,000 and an expected remaining
useful life of five years with no residual value from the date of revaluation. If the income tax rate is 30%,
what amount should Brenda report as revaluation surplus on December 31, 2010?
A. 945,000
C. 840,000
B. 1,400,000
D. 1,050,000
E. 14. Affleck Company provided the following data for the year 2010:
F.
G. Sales
5,500,000
H. Cost of gold sold
2,300,000
I. Rent income
150,000
J. Operating expenses
1,000,000
K. Casually loss
200,000
L. Tax expense
650,000
M.
N.
December 31
January 1
O. Prepaid operating expenses
400,000
550,000
P. Accounts payable
300,000
900,000
Q. Inventory
800,000
500,000
R. Accounts receivable
500,000
150,000
A1 PASSERS REVIEW CENTER///213
S. Salaries payable
150,000
100,000
T. Unearned rent income
30,000
90,000
U. Income tax payable
80,000
140,000
V.
W.Operating expense include depreciation and doubtful account expense of P120, 000 and P30, 000
respectively. Using the direct what is the cash payment for operating expenses in 2010?
A. 850,000
C. 800,000
B. 650,000
D. 750,000
E. 15. Cameron Company acquired delivery equipment on January 1, 2007 at a cost of P3,500,000 and a
residual value of P500,000 and depressed it at 10% per annum, using the straight line method. On January
1, 2010, the entity decided to use the sum of year’s digits method to depreciate its delivery equipment with
no change in residual value and remaining useful life. What is depreciation expense for the year ended
December 31, 2010?
A. 300,000
C. 260,000
B. 650,000
D. 525,000
E. 16. The following information relates to the defined benefit plan of Brandon Company on January 1, 2010:
F.
G. Projected benefit obligation
5,000,000
H. Fair value of plan assets
3,500,000
I. Past service cost
1,000,000
J. Unrecognized actuarial gain
700,000
K.
L. The actuary provided the following data for the year ended December 31, 2010:
M.
N. Current service cost
600,000
O. Benefit payments to retire
900,000
P. Contribution to the fund
1,000,000
Q. Actual return on plan assets
500,000
R. Decrease in projected benefit obligation due to
S. changes in actuarial assumptions
100,000
T. Expected return on plan assets
10%
U. Settlement discount rate
12%
V.
W.
X. The vesting period for the employees covered by the past service cost is 10years while the average
remaining service life of the employees is 5 years. What is the proposal benefit obligation on December 31,
2010?
A. 5,300,000
C. 5,400,000
B. 5,200,000
D. 5,800,000
E. 17. The Aniston Company has different kinds of farm animals on January 1, 2010. During 2010, several
acquisitions occurred related to these farm anima’s. A detailed summary of these transactions is as follows:
F.
G. Carrying amounts on January 1, 2010:
H. 10 Dairy cattle (2 years old)
I. 20 Hogs (3years old)
J. 15 Horses (1 year old)
K. 8 Carabaos (2.5 years old)
L.
M. Purchase on June 30, 2010
N. 4 Dairy Cattle (1 year old)
O. 6 Carabaos (6 months old)
P.
Q. Fair value less cost to sell on December 31, 2010:
R. 10 Dairy cattle (2 years old)
S. 20 Hogs (3 years old)
T. 15 Horses ( 1 year old)
U. 8Carabaos (2.5 years old)
V. 4 Dairy Cattle (1 year old)
W. 6 Carabaos (6 months old)
X. 10 Dairy cattle (3 years old)
Y. 20 Hogs (4 years old)
Z. 15 Horses ( 2 year old)
AA. 8 Carabaos (3.5 years old)
AB. 4 Dairy Cattle (1.5 year old)
AC. 6 Carabaos (1 year old)
AD.
A1 PASSERS REVIEW CENTER///214
AE. There were no farm animals sold during the year and neither were there any newborns nor deaths. What is
the carrying amount of the biological asset s on December 31, 2010?
A. 3,160,000
C. 2,800,000
B. 2,350,000
D. 2,380,000
E. 18. On January 1, 2010, Hogan Company leased land and building for 40 years and after that time, title to the
land and building will pass to Hogan. The useful life of the building is also 40 years. On January 1, 2010, the
present value of the 40 animal lease payments of P500, 000 at the end of each year is P5, 962,500 at a rate
of 8%. It was ascertained that land’s fair value is P2, 380,000 while the building’s fair value is P3, 570,000.
What total amount of asset should be recognized initially in relation to the lease?
A. 5,962,500
C. 3,570,000
B. 5,950,000
D. 2,380,000
E. 19. Tory Company is a listed entity. Tory’s financial statements for the year ended December 31, 2010
reported basic earnings per share of P15 on each of its 900,000 ordinary shares. On April 1, 2010, Tory
issued 100,000 preference shares that can be converted to 400,000 ordinary shares. During the year, Tory
paid dividends of P600,000 to ordinary shareholders and P500,000 to shareholders of the convertible
preference shares. What is the amount of diluted earnings per share for 2010?
A. 10.76
C. 11.67
B. 11.25
D. 10.38
E. 20. Mathew Company has been incurring net losses for the several years due tot the negative impact of
globalization that has affected Mathew’s industry. On the recommendation of its president, the board of
directors voted to quasi- recognized the company by reducing the per value of its shares subject to approval
of the Securities and Exchange Commission. Immediately prior to the restatement, the shareholders equity
of Mathew on December 31, 2010 showed the following balances:
F.
G. Ordinary shares, P40 par, 100,000 shares
4,000,000
H. Share premium
500,000
I. Accumulated losses
(1,000,000)
J.
K. The SEC approved the quasi-reorganization and Mathew Company determined that some assets and
liabilities amounted to P300, 000. After quasi-reorganization, what is the amount of profit to be accumulated
before Mathew can declare dividends to its shareholders?
A. 1,900,000
B. 1,000,000
C. 1,400,000
D. 0
L. 21. The shareholders equity of Wilma Company on December 31, 2010 included the following capital
balances:
M.
N. Preference share capital, 105 cumulative, P50 par 25,000 shares
O. Ordinary share capital, P20 par, 23,000 shares
P. Ordinary treasury shares, 20,000 shares at cost
Q. Share premium
R. Accumulated profits
S.
T. Preference share dividends are in arrears for 3 years as of January 1, 2010 and will be paid par and a
liquidation premium of P250, 000 upon liquidation. What is the book value per ordinary share on December
31, 2010?
A. 40.00
C. 40.60
B. 39.00
D. 36.50
E. 22. The following information has been extracted from the accounting recorded of Armani Company at the
end of each year:
F.
G.
2010
2009
H. Borrowings
1,500,000
3,000,000
I. Dividends
0
500,000
J. Share capital
6,000,000
4,000,000
K. Share premium
2,500,000
1,000,000
L. Accumulated profits
2,200,000
1,500,000
M.
N. During the year Armani paid half of its borrowing. Also on January 1, 2010, the company declared and issued
a 25% stock dividend and on June 1, 2010, one of its shareholders donated real property with a fair value of
P800, 000. All other movements in contributed capital came from the issuance of shares for cash. Net
income for the year ended December 31, 2010 was P2, 500,000 and all dividends declared were paid.
What is the net cash used in financing activities in the 2010 statement of cash flows?
A. 300,000
C. 600,000
B. 1,100,000
D. 2,100,000
A1 PASSERS REVIEW CENTER///215
E. 23. De Niro Company declared cash dividends twice during 2010. The first was on June 30, 2010 to
shareholders of record on July 31, 2010 and paid on August 10, 2010 amounting to P500,000. The second
one was declared December 20, 2010 to shareholders of record on January 10, 2011 to be paid on February
1, 2011 amounting toP300, 000. Property dividends were also declared and paid in the form of inventories
with a carrying amount of P1, 000,000. The fair value of inventories on March 1, 2010, the date of
declaration was P1, 200,000 and the fair value of May 1, 2010, the date of payment was P1, 400,000. In
addition, De Niro declared a 10% stock dividend on its P10 par value ordinary shares on December 30,
2010, to be issued on January 31, 2011, at which time De Niro had 200,000 ordinary shares issued and
outstanding that had a fair value of P15 per share. At the time the shares were issued in 2011, the fair value
was P20 per share. What was the decrease in retained earnings during 2010 as a result of dividends during
the year?
A. 1,500,000
C. 2,500,000
B. 2,300,000
D. 2,100,000
E. 24. During 2010, an erotic novel written by Dr. Dante Dela Cruz was sold to Ace Publishing Corporation, for
royalties of 10% on sales. Royalties are received semi-annually on March 31; for sales in July through
December of the prior year, and on September 30, for sales in January through June of the same year.
F.
Royalty income of P650,000 was received on March 31, 2011 and P800,000 on September 30, 2011
Dr. Dante learned from Ace that sales subject to royalty were estimated at P10, 000,000 for the last half of
2011.
G.
H. What amount of royalty income should Dr. Dante Dela Cruz recognize for the year ended December 31,
2011?
A. 1,800,000
C. 2,450,000
B. 1,450,000
D. 1,650,000
E. 25. At the close of its first year of operations, December 31, 2010, Archibald Company had accounts
receivable of P4, 000,000 after it had written off uncollectible accounts of P100,000 that it had charged to
expense under direct write-off method. But before preparing its 2010 financial statements, Archibald decided
to use the allowance method and determined that the required allowance is P300, 000. In a treated matter,
P30, 000 of receivables write-off were collected after the end of the reporting period. What is the carrying
amount of accounts receivable on December 31, 2010?
A. 3,700,000
B. 3,770,000
C. 3,870,000
D. 3,830,000
F.
G.
H.
I. 26. During 2010, Apolinario Company pays an insurance premium of P90,000 on a P3,000,000 life insurance
policy covering the president, Mr. Casket. Apolinario is the beneficiary under the life policy. The cash
surrender value of the policy will increase from P120, 000 to P150, 000 by the end of 2010. Dividends of
P10, 000 were received fro, the insurance company in 2010. Mr Casket died at the end of October 2010 and
the policy indicates that the cash surrender value is P145, 000 at that date. What is the gain on life
insurance?
A. 2,835,000
C. 2,855,000
B. 2,840,000
D. 3,000,000
E. 27. During 2010, Atty. Jack De Vera became involved in a tax dispute with the BIR resuming the non-payment
of taxes with regard to his undisclosed income. At December 31, 2010. Atty. De Vera tax adviser believed
that an unfavourable outcome was probable and a reasonable estimate of additional taxes was P1, 500,000
but could be as much a P2, 100,000. However, before the 2010 financial statements were issued, Atty. De
Vera through several connections received and accepted a BIR settlement offer of P12, 200,000. What
amount t of accrued liability should be reported by atty. De Vera on December 31, 2010?
A. 1,500,000
C. 1,200,000
B. 1,800,000
D. 2,100,000
E. 28. The following information was taken from Angelina Corporation 2010 statement of comprehensive
income:
F.
G. Income before taxes
2,000,000
H. Income tax expense:
I. Current
900,000
J. Decrease in deferred tax liability
(300,000)
600,000
K. Net income
1,400,000
L.
M. The company has 30 percent tax rate. Angelina reported a deferred tax liability of P500, 000 on January 1,
2010 and P200, 000 on December 31, 2010 while there were no deferred tax assets at the beginning and of
A1 PASSERS REVIEW CENTER///216
A.
B.
E.
2010. Assuming no other differences existed between accounting profit and taxable profit, what was the
amount of taxable profit for 2010?
2,000,000
C. 1,000,000
3,000,000
D. 1,400,000
29. Nicholas Company issued fully paid shares to 300 employees on December 31, 2010. Normally, shares
issued to employees vest over a three year period but these shares have been given as bonus to employees
because of their above average performance during the year. The shares have a market value of P2,
100,000 on December 31, 2010 and an average fair value of P1, 800,000 for the year. What amount would
be expensed for this share based payment transaction?
600,000’
C. 700,000
2,100,000
D. 1,800,000
30. Falcon Company’s bank statement for the month of December included the following information:
A.
B.
E.
F.
G. Ending balance, December 31
H. Bank service charge for December
I. Interest by bank to Falcon for December net of withholding tax
J.
K. In comparing the bank statement to its own cash records, Falcon found the following
L. Deposits made but nit yet recorded by bank
M. Checks written and ailed but not yet recorded by the bank
N.
O. In addition, Falcon discovered that it had drawn erroneously recorded a check for P73, 000 that should have
been recorded for P37, 000. What is Falcon’s cash balance per ledger December 31, 2010?
A. 1,456,000
C. 1,356,000
B. 1,284,000
D. 31. Arguille Company is preparing its financial statements fro the year ended December 31, 2010. Accounts
payable amounted to P2, 500,000, before any necessary year and adjusting entry related to the following
items
E. :
At December 31, 2010. Arguille has a P150,000 debt balance in its accounts payable to a supplier resulting
from P150,000 advance payment for goods to be delivered in 2011
A check in the amount of P300, 000 was written to vendors and recorded on December 31, 2100. This
withdrawal caused Arguille’s account in BDO to be overdrawn by P100, 000. The check was mailed on
January 2, 2011
F.
G.What amount should Arguille report as accounts payable on December 31, 2010?
A. 2,950,000
B. 2,800,000
C. 3,050,000
D. 2,650,000
H.
I. 32. Keaton Company determined that due to obsolescence, equipment with an original cost of P9,000,000
and accumulated depreciation on December 31, 2009 of P3,000,000 had suffered permanent impairment
and as a result should be written down to its recoverable amount of P4,000,000 as of the end of the year.
In addition, the remaining useful life of the equipment was reduced from 6 years to 4 years. In its
December 31, 2010 statement of financial position, what amount should Keaton report as accumulated
depreciation?
A. 6,000,000
C. 7,000,000
B. 4,000,000
D. 4,500,000
E. 33. On January 1, 2010, Cervelli Corporation, granted share options for P50, 000 of its P100 par value
ordinary shares to its key employees. The market price of its ordinary shares on that date was P180 per
share and the option price was P120. “The Monte Carlo “option pricing determine total compensation
expense to P2, 000,000. The options are exercisable beginning January 1, 2013, provided those key
employees are still in the employ of Cervelli at the time the options are exercised. The share options expire
on January 1, 2014. On January 1, 2013, when the market price of the share was P200, all 50,000 share
options were exercised. What was the amount of share premium recorded by Cervelli from the issuance of
ordinary shares?
A. 1,000,000
C. 5,000,000
B. 3,000,000
D. 4,000,000
E. 34. Donovan Corporation provided the following transactions for the year ended December 31, 2010:
Borrowed P2, 000,000 from a local bank and disbursed the entire amount for the purchase of real property.
Sold available for sale securities costing 500,000 at a gain of P100,000
Paid dividends of P700,000
Issued 50,000 ordinary shares for P3,000,000 for cash
Purchased machinery and equipment for P800,000 cash
A1 PASSERS REVIEW CENTER///217
Made advances tom other companies amounting to P2,000,000 and collected P100,000 as interest at year
end
Filing and registration of a patent amounted to P150,000
F.
G. What was the net cash used in investing activities for 2010?
A. 2,350,000
C. 3,350,000
B. 4,350,000
D. 4,200,000
E. 35. Ondoy Company completed least hold improvements costing P5, 000,000 in December 31, 20017. The
improvements had an estimated useful life of 6 years and were depreciated using the straight line method.
The related lease which would have terminated on December 31, 2012, was renewable for an additional for
five year term and exercisable until December 3, 2010. On December 31, 2010. Ondoy exercised the
renewal option. What is the carrying amount of the leasehold improvement on December 31, 2010?
A. 2, 250,000
C. 2,000,000
B. 2,625,000
D. 2,500,000
E. 36. Piedra Company reported retained earnings balance of P3, 500,000 at January 1, 2010. In preparing the
2010 financial statement, Piedra determined that rentals received in advance of P600, 000 in March 2009 for
a three year period beginning January 1, 2009 had been received and recognized as income in full in 2009.
Piedra has a tax rate of 30%. What is the corrected balance retained earnings on January 1, 2010?
A. 3,220,000
C. 3,900,000
B. 4,100,000
D. 3,780,000
E. 37. Donald Company reported revenue of P5, 000,000 in its rash basis income tax return for the year ended
December 31, 2010. Additional information as follows:
F.
G. Rent receivable on December 31, 2010
400,000
H. Rent receivable ob December 31, 2009
700,000
I. Uncollectible rent written off during year
50,000
J.
K. Under the accrual basis, what is the rental revenue for 2010?
A. 4,700,000
C. 4,650,000
B. 4,750,000
D. 5,350,000
A1 PASSERS REVIEW CENTER///218
E. 38. On January 1, 2008, Maldives Corporation established a share appreciation rights plan for its executive. It
entitled them to receive cash at any time during the next four years or until December 31, 2011 for the
difference between the market price of its ordinary shares and the pre established price of P100 on 50,000
shares. Current market price of the shares is as follows:
F.
G. January 1, 2008
100 per share
H. December 31, 2008
120 per share
I. December 31, 2009
117 per share
J. December 31, 2010
125 per share
K. December 31, 2011
130 per share
L.
M.
N. On December 31, 2010, Maldives executive exercised 30,000 share appreciation rights. What amount of
compensation expense should Maldives recognize for the year ended December 31, 2010?
A. 512,500
B. 400,000,.kl
C. 312,500
D. 375,000
O.
P. 39. Miami C heats Corporation has an incentive compensation plan under which the president receives
a bonus equal to 10 percent of the company’s income after deduction for bonus but before income tax.
Income before bonus and income tax is P5, 500,000. Miami Cheat has an income tax rate of 30%.
What is the bonus for the year?
A. 550,000
B. 500,000
C. 400,000
D. 450,000
Q.
R. 40 The stockholders equity of Garrison Corporation at December 31, 2010 is as follows:
S.
T. 12% fully participating cumulative preference
U. shares, P100 par authorized 150,000 shares issued
10,000,000
V. Ordinary shares, P50 par authorizes 500,000, 130,000 issued
6, 500,000
W.Share premium
5,000,000
X. Retained earnings
6,000,000
Y. Treasury ordinary shares- 30,000 shares
(2,000,000)
Z. Total shareholders’ equity
25,500,000
AA.
AB.Dividends on the preference shares are arrears for two years. On December 31, 2010, Garisson wants
to pay cash dividends of P12.00 per share to its ordinary shareholders. What total amount of dividends
should be declared on December 31, 2010?
A. 5,120,000
B. 4,900,000
C. 5,200,000
D. 4,980,000
AC.
AD.42. The shareholders equity of Mc Nutty Corporation at the of 2010 and 2009 is as follows:
AE.
AF.
2010
2009
AG. 10% preference share capital P100 par
4,000,000
3,000,000
AH.12% cumulative preference share capital P50 par
5,000,000
2,500,000
AI.Ordinary share capital P20 par
10,000,000
7,000,000
AJ. Share premium-10% preference shares
1,500,000
300,000
AK. Share premium-12% preference shares
1,500,000
800,000
AL. Share premium- ordinary shares
5,000,000
2,000,000
AM. Subscribed 10% preference share capital
500,000
AN.Subscribed ordinary share capital
1,000,000
AO. Subscription receivable-preference share
(300,000)
AP. Subscription receivable- ordinary share
(800,000)
AQ. Retained earnings
3,000,000
2,000,000
AR.Treasury shares at cost
(500,000)
(500,000)
AS.
AT. Mc Nutty has 100,00 authorized 10% preference shares, 200,000 authorized 12% preference shares
and 1,000,000 authorized ordinary shares. During 2010, subscribers of the ordinary share capital from
2009 fully paid their subscription that represents 50% of the total subscription price and Mc Nutty
issued the corresponding shares, while the subscribers of 10% preference share capital paid 75% of
the subscription price. All other increases in share capital and share premium represent shares issued
for cash. What is the average issue price per share of the 105 preference shares issued in 2010?
A. 220
B. 150
C. 200
D. 180
AU.
AV.
AW.
AX.
AY.
AZ.43. On January 1, 2010, Hermanos Company purchased P5, 000,000race value boxes of Ocho’s
Company to be held as “available for sale securities” for P5,317,000 that includes direct transaction
cost of P117,000 at an effective rate of 10%. These bonds have a nominal rate of 12% and pay interest
annually every December 31. Hermanos Company uses the effective interest method of amortization.
The entire issue will be redeemed at its maturity on December 31, 2013. Ocho’s debt securities are
actively traded in bond market and market price December 31, 2010 is P5, 500,000. What is the
unrealized gain in Hermanos statement of changes in equity on December 31, 2010?
A. 251,300
B. 114,700
C. 500,000
D. 183,000
BA.
BB.44. Moreland Company owes owed its lenders P5, 000,000 in the form of 12% four year are dated
January 1, 2008. Because of Moreland’s financial difficulties in 2011 as a result of a major- major
problem, unpaid interest had accumulated on this note for 2 years or a total of P1, 200,000 as of
December 31, 2011. To pay of this debt, Moreland offered equity interest in the company in the form of
40,000 P50 par value ordinary shares that are currently trading at P60 per share and inventory
currently carried in Moreland’s books at P2, 500,000, but with a fair value of P2, 800,000. The lenders
accepted the offer to release Moreland from the debt and accrued interest. How much is the gain on
extinguishment of debt that will be recognized by Moreland in the 2011 statement of comprehensive
income?
A. 1,700,000
B. 1,000,000
C. 1,400,000
D. 1,300,000
BC.
BD. 45. On January 1, 2010, Willis Company issued P6, 000 of 12% bonds payable maturing in five years.
The bonds pay interest semi-annually on July 1 and January 1. Each P1, 000 bonds includes
nondetachable share warrant that gives the bond holder the right to purchase twenty, P100 per value
ordinary share Willis at a price of P150 per share within the next three years. The bonds and warrants
were issued at 110. The value of the warrants at the time of issuance was P800, 000. However it was
ascertained that Willis Company‘s bonds would have sold for only P5, 600,000 without the share
warrants. On December 31, 2010, the bondholders exercised all the share warrants wand Willis issued
the corresponding shares. What is the credit to share premium in 2010 from the issuance of the shares
through the exercise of the share warrants?
A. 7,000,000
B. 6,000,000
C. 6,800,000
D. 6,825,000
BE.
BF. 46. The petty cash fund of Brian Company showed the following details:
BG.
BH. Coins and currency
18,000
BI.Paid vouchers
BJ. Transportation
6,000
BK. Gasoline
4,000
BL. Office supplies
1,500
BM.
Postage stamps
1,300
BN.
Due from employees
8,200
21,000
BO. Employee’s check returned by bank marked “DAIF”
6,000
BP.Check drawn by the company to the order of the petty cash custodian
5,000
BQ.
BR. What is the correct amount of petty cash fund?
A. 29,000
B. 18,000
C. 23,000
D. 50,000
BS.
BT.
BU.
BV.
BW.
BX. `
BY.
BZ.
CA.
CB.
CC.
CD.
CE.
CF.
CG.
CH.
CI.
CJ.
CK.
CL.
CM.
CN.
CO.
CP.
CQ.
CR.
CS.
CT.
CU.
CV.
CW.
CX.
CY.
CZ.
DA.
DB.
DC.
DD.
DE.
DF.
DG.
DH.
DI.
DJ.
DK.
DL.
DM.
DN.
DO.