EASY ROUND

1. To operate effectively, an internal auditor must be independent of:

a. The line functions of the organization.

b. The entity.

c. The employer-employee relationship which exists for other employees in the organization.

d. All of these.

2. Which of the following makes the statement true about the accounting treatment of a revaluation?

The accounting treatment of revaluations follows the principle that _______________________.

a. any revaluation surplus is realized and forms part of earnings

b. any revaluation surplus is realized but does not form part of earnings

c. any revaluation surplus is not realized but does form part of earnings

d. any revaluation surplus is neither realized nor forms part of earnings

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3. Which of the following is not an area related to the performance of MAS by independent accounting firms?
a.
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Improvement of existing policies, methods and procedures

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b. Performance of management functions and making decisions
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c. Introduction of new ideas, concepts and methods to management
d. o.
Conduct of special studies, preparation of recommendations and formulation of plans and programs
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4. It is the state's power to take away private property for public purposes upon payment of just compensation, which is governed
by special law:
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a. Escheat c. Eminent Domain

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b. Expropriation d. Police Power

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5. When treating exchange differences, what is included in income for the period?
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A.Gains or losses arising when monetary items are settled at amounts different from their carrying value

B.Differences arising when monetary items held at the year-end are retranslated at the closing rate
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C. Exchange differences arising from the translation of a foreign operation previously classified in equity
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D.A and B

E. B and C
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6. Republic Act No. 9160 dated March 8, 2002, is also known as:

a. General Banking Law

b. Intellectual Property Law
c. Anti-Money Laundering Act
d. Secrecy of Bank Deposits and Unclaimed Balances Law

7. Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) changes the accounting policy requirements for
biological assets that meet the definition of bearer plants. The amendment defines a bearer plant as “living plant that:
(Select the true statement/s)
Statement I: is used in the production or supply of agricultural produce
Statement II: is expected to bear produce for more than one period
Statement III: has a remote likelihood of being sold as agricultural produce, even for incidental scrap sales
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 a. I, II and III
b. I and II only
c. II and III only
d. I and III only

8. A lessee when accounting for a lease incentive received under an operating lease treats is as a:

A. increase in rental income over the lease term; C. reduction in rental expense over the lease term;
B. increase in rental expense over the lease term; D. reduction in rental income over the lease term

9. In microeconomics, what will affect the demand of a product rather than its supply?
a. Increasing labor productivity
b. Increasing costs of materials
c. Increasing average household income
d. Increasing market price of the product

10. Which of the following is a correct response of the auditor when he allows a lower acceptable level of detection risk?
Nature of substantive tests Timing of substantive tests Extent of substantive tests
a. Less effective Year-end More extensive
b. Less effective Interim Less extensive
c. More effective Year-end More extensive

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d. More effective Interim Less extensive

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11. Which of the following dependents does not qualify a taxpayer for an additional exemption?
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A. Recognized natural son who celebrated his 21st birthday during the taxable year
B. Son who is 25 years old, unmarried, but incapable of self-support due to mental defect
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C. Minor son who got employment in the previous taxable year
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D. Minor son who died in December 31 of the taxable year

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12. A offers to B 100 electric fans for P80,000 payable in 60 days with 12% interest per annum. B accepted the offer by telegram
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provided that interest is reduced to 6%. If there is a no further communication between A and B relating to the terms
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a. The contract is perfected because of the acceptance by B

b. There is no contract yet between A and B because B made a counter offer
c. The contract is perfected under the terms of A
d. There is no contract yet unless B gives earnest money
ed d
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13. Which of the following is not an example of required disclosure under IAS 1?
A. Entity A is a joint stock company registered under the laws of Luxembourg on 20 April 20X0.
B. Entity B had 50 and 60 employees as of 31 December 20X2 and 20X1, respectively.
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C. Entity C and its subsidiaries are primarily engaged in the retail and distribution of consumer goods.
D. The amount of unrecognized cumulative preference dividends as at 31 December 20X2 and 20X1 comprised 30,000
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and 20,000, respectively.

14. To which financial statements is IAS 29 applied?

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A.The primary statements of any entity that reports in the currency of a hyperinflationary economy

B.The interim statements of any entity that reports in the currency of a hyperinflationary economy

C. The cash flow statements of any entity that reports in the currency of a hyperinflationary economy

D.The balance sheet of the parent entity that owns an entity located within a hyperinflationary economy

15. ABC Transport Services is a bus company with license to operate from the LTFRB, as such it is subject to –

a. 3% Common Carriers Tax. c. Excise tax.

d. 3% International Carriers Tax
b. 12% Value Added Tax.

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 AVERAGE ROUND

1. During 2016, the Company acquired shares of stocks classified as FVOCI investment for an acquisition cost of P100,000. Any gain
(difference between the acquisition cost and selling price) from sale is subject to 5% capital gains tax for the first P100,000 gain and
10% for all the excess over P100,000. The fair market value of the related equity investment as of December 31, 2016 amounted
P120,000. Determine the amount to be recognized in profit or loss in relation to the deferred income tax liability to be recognized
on this investment.

b. P6,000 c. P2,000 d. 0
a. P20,000

2. BTS Company acquired all of the outstanding shares of BigBang Company by issuing its own P15 par value ordinary shares
totaling 46,667 shares at market price of P 15.70. BTS Company had the following expenditures incurred:

Finder’s fee paid P 50,000

Pre-acquisition audit fee/accounting due diligence, 30% was paid 40,000
General administrative costs 15,000
Legal fees for the combination paid 32,000
Audit and legal fees for SEC registration of share issue 46,000
Listing fees paid for the shares issued 10,000
Other share issuance costs paid (inclusive of any tax cost) 10,000
Other indirect costs paid 16,000
Documentary stamp tax (DST) paid on the original issuance 3,500

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The total amount debited to expense should be

b.
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P 163,000 c. P 176,333 d. P 179,833

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a. P 153,000

o.
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o
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3. An investment center’s return on sales is 20% when its return on investment (RoI) is 25%. What is the center’s investment turnover?

a. 0.05 b. 0.45 c. 0.80 d. 1.25

ed d

3. Romualdez recently bought five units of HD television sets with home theater system from SDK Appliances with a list price of Php
ar stu

72,500. Romualdez was given a trade discount of 15%, purchase discount is 3/10, n/30. Cost of freight as reflected in the bill of
lading of the forwarder is Php 1,648 per television set, FOB shipping point, freight collect. How much shall be the input tax on the
purchase of television sets?
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a. Php 38,839 b. Php 33,013 c. Php 33,896 d. Php 39,722

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4. On January 2, 2015, Super Company invested in a 5-year 10% debt instrument with a face value of P3,000,000 in
which interest is to be received every December 31. The debt instrument has an effective interest rate of 8% and was
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acquired for P3,239,563. Super Company has a business model of collecting the contractual cash flows related to the
instrument. On December 31, 2015, the debt instrument has a prevailing market rate of 9%.
The following are relevant present value factors:
PV factor of 8% after 4 years 0.7350298
PV factor of annuity of 8% after 4 years 3.3121268
PV factor of 9% after 4 years .7084252
PV factor of annuity of 9% after 4 years 3.2397198
What amount of interest income should the company report in its December 31, 2015 statement of comprehensive
income?
a) P259,165 c) P300,000
b) P291,561 d) P323,956

5. The bank statement of Night Crawler Corporation for February 2015 showed an ending balance of P169,700. Deposit in
transit on February 28 was P18,200. Outstanding checks as of February 28 were P59,000, including a P5,000 check which the
bank had certified on February 25. During the month of February, the bank charged back NSF checks in the amount of P3,000
of which P1,000 had been redeposited in February. On February 20, the bank charged the account of Night Crawler for P2,000

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 which should have been charged against the account of another company; the error was not detected by the bank. During
February, the proceeds from the note collected by the bank for Night Crawler was P7,500 and bank charge for this services
was P50. The adjusted cash balance on February 28, 2015 is
a. P141,350 b. P136,350 c. P135,900 d. P130,900

6. Charlie Chan produces two products, A and B. Relevant data follow:

Product A Product B
Direct materials P 28 P 25
Direct labor 3 2
Variable overhead 6 4
Variable selling expenses 4 2
Fixed costs P 50,000
Production/sales (units) 2,000 1,000
The company allocates fixed costs the basis on the direct labor cost. What should be the selling price of Product B if the markup
based on full cost is 30%?
a. P 59.00 b. P 59.15 c. P 60.00 d. P 63.15

7. Dotonbori Comapany has a standard variable overhead rate of P 5 per machine hour, with each completed unit
expected to take three machine hours to produce. A review of the company's accounting records found the following:
Actual production: 19,500 units
Variable-overhead efficiency variance: P 9,000 U
Variable-overhead spending variance: P 21,000 F
What was Dotonburi's actual variable overhead during the period?
a. P 262,500 b. P 280,500 c. P 304,500 d. P 322,500

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8. Grey Worm Company, a VAT registered entity, purchased in the beginning of CY 2014, a delivery from a VAT-registered

er as
dealer of automobiles. Due to recent flooding, the only record/document available related to the said purchase was an

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official receipt with an amount of P 1,145,520 (inclusive of VAT of P 123,840). How much would be the depreciation
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expense that can be claimed as deductible expense in CY 2014 if the equipment has useful life of 4 years?
a. P 288,960 b. P 259,000 c. P 286,380 d. P 317,340
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9. Minor Corporation reports net assets of P300,000 at book value. These assets have an estimated market value of P350,000.
If Major Corporation buys 80 percent ownership of Minor for P275,000,
Goodwill will be reported in the consolidated balance sheet in the amount of:
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a. P0 b. P25,000 c. P35,000 d. P40,000

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10. For the year ending December 31, 2016, the following data relates to GG Ltd.
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1. At January 1, there were 200,000 ordinary shares on issue

2. 100,000 fully paid ordinary shares issued on March 1
3. 25,000 ordinary shares repurchased on August 1
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4. 70,000 partly paid ordinary shares issued on October 1, for P2.00 partly paid to P1.30, with right to participate in
dividends in proportion to the amount paid relative to the issue price
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5. 1,000,000 10% cumulative preference shares of P1.00 (classified as equity) were on issue for the entire year
Which items above will have an impact on the WANOS outstanding during the year for basic EPS?

b. Items 1 to 3 c. Items 1 to 4 d. Items 1 to 5

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a. Items 1 to 2

11. On December 31, 2016, Conti’s Inc. authorized Mary Grace Co. to operate as a franchisee for an initial franchise fee of P3.40
million (M). Upon signing the contract, P0.90M was received and the balance is paid by a note, due in 5 equal annual installments,
beginning December 31, 2017. The prevailing market rate is 12%. The down payment is nonrefundable and it represents a fair
measure of the services already performed by Conti’s and substantial future services are still required.
How much is the deferred revenue to be recognized as of December 31, 2016?

b. P 1,802,390 c. P 2,500,000 d. P 2,702,390

a. P 1,518,677

12. A home office ships inventory to its branch at a mark-up of 125% above cost. The required balance of the allowance for
overvaluation account is P 1,425,000. During the year, the home office sent merchandise to the branch costing P 9,000,000. At
the start of the year, the branch’s Statement of Financial Position shows P1,800,000 of inventory on hand that was acquired

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 from the home office. By what amount will the Allowance for Unrealized Gross Margin in Branch Inventory account be
debited at the end of the year?
a. P10,825,000 b. P2,610,000 c. P1,185,000 d. P12,250,000

13. On January 1, 2014, Ken Company grants 1,000 cash share appreciation rights to each of its 500 employees, on the
condition that the employees remain in its employ for the next three years. During the year, 35 employees left the firm. Ken
Company estimates that around 60 employees will leave over the next two years In 2015, 22 employees left the firm and Ken
Company expects that 25 employees will leave by next year. At the end of 2016, 150 employees exercise their share
appreciation rights. In 2017 another 140 employees exercise their share appreciation rights. At the end of 2016, 150 employees
exercise their share appreciation rights. In 2017 another 140 employees exercise their share appreciation rights.
At the end of 2018 all the remaining 150 employees exercise their share appreciation rights
Year Fair value of the SAR Intrinsic value of the SAR
2014 20
2015 25
2016 28 26
2017 32 28
2018 31 31

Compensation expense in 2014

a. 0 b. 2,700,000 c. 3,100,000 d. 8,100,000

14. Candice Company reported net income of P34,000 for the year ended December 31, 2016 which included depreciation expense
of P8,400 and a gain on sale of equipment of P1,700. The equipment had an historical cost of P40,000 and accumulated
depreciation of P24,000. Each of the following accounts increased during 2016 (Assume that the increases in the following accounts
are due to cash transactions only.):

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Patent P9,800
Prepaid rent*
er as 4,500

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Available for sale investment 8,000
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Bonds payable 5,000
*To be consumed within 12 months from the balance sheet date
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What amount should be reported as net cash provided (used) by investing activities for the year ended December 31, 2016?
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b. (P 1,800) c. (P 17,800) d. P 16,000

a. (P 100)
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15. Totoy obliged himself to deliver to Buboy the following:

1) Apple ipad 5
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2) Honda CR-V 2012 model with plate number AMB 115

First statement – In case Totoy failed to deliver an apple ipad 5, the court may compel him to deliver any apple ipad5
plus damages
Second statement¬ – In case Totoy failed to deliver the car, the court may compel him to deliver the car plus
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damages.
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A. True, true B. True, false C. False, true D. False, false

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DIFFICULT
1. Aiza Co. determined that one of its cash-generating units is impaired. Information on the assets of the CGU is shown below:
Assets Carrying Amount
Inventory P 800,000
Investment property (at cost 1,600,000
model)
Building 2,400,000
Goodwill 1,200,000
It was estimated that the value in use of the CGU is P3,600,000 and its fair value less costs to sell is P2,400,000. How much
is the carrying amount of the building after the impairment testing?
Ans. 1,680,000

2. On January 1, 2016 an entity purchased a tract of vacant land that is situated overseas for Baht90,000. The entity classified the
land as investment property. The fair value of the land at December 31, 2013 is Baht100,000. The entity’s functional currency is
Php (Peso).

Spot currency rates:

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 January 1, 2013 : 1 Baht= P2
Weighted average exchange rate in 2013 : 1 Baht = P2.04
December 31, 2013 : 1 Baht = P2.10

What is the carrying amount of the investment property at December 31, 2016 and what amount would be
presented in profit or oss for the year ended December 31, 2016?
A. Carrying amount of investment property = P210,000. Profit for the year includes P30,000 increase in the
fair value of the investment property.
B. Carrying amount of investment property = P210,000. Profit for the year includes P20,400 increase in the fair
value of the investment property and P9,600 foreign exchange (forex) gain.
C. Carrying amount of investment property = P180,000. Profit for the year includes no amount in respect of the
investment property.
D. Carrying amount of investment property = P189,000. Profit for the year includes P9,000 forex gain.

3. Robert Baratheon, a resident citizen, single with 5 qualified dependent illegitimate children had the following during the calendar
year 2015:
Compensation income 250,000
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13 month pay 20,000
Christmas bonus 75,000
Employment Expenses 120,000
SSS premium contributions 3,600
PhilHealth contribution 2,400
Pag-ibig contribution 2,000
Union dues 1,000
Premiums on health insurance 4,000

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1st Statement: The taxable income after total personal exemption is P104,000.

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2nd Statement: The total personal exemption is P50,000.

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3rd Statement: The non-taxable 13th month pay and other benefits is P30,000.
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4th Statement: The deductible premiums on health insurance is zero since the annual gross income of the family exceeds
P250,000. o.
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Which of the above statements is/are correct?

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a. 1st and 2nd statements c. 3rd and 4th statements

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b. 2 and 3 statements d. 4th and 1st statements
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4. Mabi Corp. was contracted by Mr. Tristan P. to construct 35 condominium units. The estimated total cost
of construction was P28,000,000. Mabi bills its clients at 120% of total costs estimated to complete a
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project. Details regarding the contract are given below:

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Units finished Costs incurred to Estimated cost at

date completion
2011 10 P8,412,500 P33,650,000
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2012 18 P20,735,000 P31,900,000

2013 7 P31,500,000 ?
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What is the RGP during 2012 using the output measures?

Ans. P 1, 410,000
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5. On January 2, 2014, Renzel Company sold equipment with a carrying value of P480,000 in exchange for a P600,000 non-
interest-bearing note due January 2, 2016. There was no established exchange price for the equipment. The prevailing
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interest rate for a note of this type at January 2, 2014 was 10%.The present value factor of 1 at 10% for three periods is
0.7513. What is the carrying value of the receivable as of December 31, 2014 statement of financial position?
Ans. P 545,444
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6. Sashimi Company reported the following data at the end of 2015:

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 Sales (75% on credit) P 300,000
Expenses (26% on credit) 60,000
Accounts receivable (P 4,000 decrease during 2015) 8,000
Total assets 200,000
Shareholders’ equity 150,000
Assuming a 365-day year, what was the average number of days to collect receivables during 2015?
Ans. 16.2 days
`
7. On December 31, 2016, the following figures were taken from the trial balances of Blackpink Company and 2ne1 Co.:

Black
pink 2ne1
Current assets P P
175,0 65,000
00
Noncurrent assets 72 425,
5,000 000

Liabilities 6 35,
5,000 000
Ordinary Share Capital, P20 par 55 300,
0,000 000
Share Premium 3 25,
5,000 000
Accumulated profits (losses) 25 130,
0,000 000

On January 1, 2017, Blackpink issues 35,000 shares with a market value of P25/share for the net assets of 2ne1. The book value
reflects the fair value of the assets and liabilities, except that the noncurrent assets of 2ne1 have fair value of

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P630,000 and Blackpink discovered an error on its books that resulted into an overstated noncurrent asset of P30,000. Contingent

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consideration payable after 2 years if profit target will be achieved, which is determinable, have an expected value of P18,151.

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Applicable discount rate on this type of agreement is 10%. Blackpink also paid for the share issuance costs worth P34,000 and other
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acquisition related costs amounting to P19,000. Combined total assets after the merger is

Ans. P 1,742,000 o.
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8. During April 2013, Faithfully Inc. incurred the following costs for Job 522 (450 drum sets):
Direct materials P42,500
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Direct labor P65,250

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P78,300
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Factory overhead
45 units of drum sets were found to be defective and Faithfully Inc. had to incur the following to remedy the said defects:
Direct materials P13,550
Direct Labor P15,250
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If the rework cost is normal but specific to Job 522, the cost per finished unit is:
Ans. 518. 11
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9. For the period just ended, Fettucine Company generated the following operating results in percentages:
Revenues 100%
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Cost of sales:
Variable 50%
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Fixed 10% 60%

Gross profit (P 1.2 M) 40%
Operating expenses:
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Variable 20%
Fixed 15% 35%
Net operating income 5%
What is the degree of operating leverage?
Ans. 6 times

10. Bolognese Company, Inc. expects the following monthly results for the coming year:
Shoes Slippers Sandals TOTAL
Sales P 90,000 P 110,000 P 350,000 P 550,000
Variable costs P 50,000 P 30,000 P 160,000 P 240,000
Fixed costs 60,000 40,000 100,000 200,000
Total costs P 110,000 P 70,000 P 260,000 P 440,000
Profit (loss) (P 20,000) P 40,000 P 90,000 P 110,000

Bolognese could avoid P 25,000 in fixed costs by dropping the Shoes segment. However, the managers believe that if they drop
Shoes, sales of each of other lines will fall by 10%. What will be the company profit if Bolognese drops the Shoes segment?
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 Ans. 68,000

11. Monica, Adrian and Nicole were partners in The Legal Wife Partnership. Their profit ratio is 5:3:2 while the original
interest ratio is 4:4:2. On July 1, 2014, Max was admitted by the partnership for 20% interest in capital and 25% in
profits by contributing P87,500 cash, and the old partners agree to bring their interest to their original capital ratio. Max
is the recipient of the transfer of capital of P280,000 from the existing partners. The partnership had a net income of
P210,000 before admission of Max. Prior to the admission of Max, the partners agree to revalue its overvalued
equipment by P35,000. Capital balance of Adrian increased by P10,500 as a result of the admission of Max while the
capital balance of Nicole at the start of the year is P700,000. The capital balance of Monica at the start of the year is:

Ans. P 350,000

12. At the end of January 2015, the city government provided Hesington Company a zero interest P30,000,000 3-year loan used by
the Company in acquiring a building on the same date. The prevailing market rate of interest for this type of loan is 8%. The
government imposes that the building must be used for social housing for ten years. The Company estimated that there is
reasonable assurance that it will meet the terms of the grant. The Company will classify the building as owner occupied property
after the socialized housing project. The Company opted to use the cost model of accounting the building with a 15-year life from
the date of acquisition. (Round PV factors to 4 decimal places)
Applying provisions of PAS 20 – Accounting for Government Grants and Disclosures of Government Assistance, what is the amount
recognized as income from the grant as of December 31, 2015?
Ans. P 567,050

13. The Pesto Company has the following historical pattern on its credit sales:
70% collected in the month of sale

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15% collected in the first month after sale

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10% collected in the second month after sale

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4% collected in the third month after sale
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1% uncollectible
The sales on open account have been budgeted for the last six months of 2016 are shown below:
o. July P 60,000
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August 70,000
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September 80,000
October 90,000
November 100,000
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December 85,000
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Determine the projected net accounts receivable balance as of January 1, 2017.

Ans. P 42,250

14. On January 2, 2016, GCC Corporation purchase 80% of VIP Company’s outstanding shares for P19,000,000. Included in the
ed d

price paid is control premium amounting to P500,000. The direct cost (acquisition related) amounted to P45,000 was debited
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as part of the investment in subsidiary account since GCC opted to use the cost method of accounting its investment in
accordance with PAS 27. NCI is measured at the present ownership instruments' proportionate share in the recognized
amounts of the VIP's identifiable net assets. At that date, VIP had P16M of ordinary shares outstanding and accumulated
profits of P6.40M. GCC’s accumulated profits at the date of acquisition was P13.80M.
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VIP’s equipment with remaining life of 5 years had a book value of P9.00M and a fair value of P10.52M. VIP’s remaining
assets had book value equal their fair values. All intangible assets except goodwill are expected to have remaining lives of 8
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years. The income and dividend figures on the separate financial statements (SFS) for both GCC and VIP are as follows: Net
income of GCC in 2016 is P3.60M; 2017 is P4.40M. Net income of VIP in 2016 is P1.36M; 2017 is P2.04M. Dividends declared
by GCC in 2016 is P0.88M; 2017 is P1.56M. Dividends declared by VIP in 2016 is P0.28M; 2017 is P0.52M.
sh

Determine the Non-controlling interest in net assets (NCINAS) in 2017

Ans. P 5,182,400

15. X subscribed 10,000 shares in the capital stocks of AAA Corporation. He paid 50% of the 10,000 shares. X asked the Corporate
Secretary to issue him the corresponding stock certificate representing the 50% of what he already paid. The Corporate
Secretary of the corporation refused. Was the Corporate Secretary correct?
a. The Corporate Secretary is correct because the Corporation Code provides that no certificate of stock shall be issued
to a subscriber until the shares as subscribed have been fully paid.
b. The Corporate Secretary cannot refuse because a Stock Certificate can be issued corresponding to the percentage of
shares which were paid.
c. The Corporate Secretary cannot refuse because a Certificate of Stock can be issued provided it is indicated in the
Certificate the actual percentage of what has been paid.
d. The Corporate Secretary cannot refuse because it is his legal duty to issue a stock certificate corresponding to the
number of shares actually subscribed regardless of the actual payment.

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