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Since 1977

FAR OCAMPO/OCAMPO
FIRST PRE-BOARD EXAMINATION AUGUST 7, 2022

Multiple Choice. Select the letter that corresponds to the a. P538,000 c. P479,000
best answer. This examination consists of 70 items and the b. P530,000 d. P441,000
exam is good for three (3) hours. Good luck!
5. An entity with an accounting date of June 30, 2022
1. The Insurance Commission is represented in carried out a physical check inventory on July 4, 2022,
leading to an inventory value at cost at this date of
I. FRSC
P483,700.
II. PIC
III. AASC Between July 1, 2022 and July 4, 2022 the following
transactions took place:
a. I, II and III c. II and III only • Goods costing P38,400 were received from
b. I and II only d. III only suppliers.
• Goods that had cost P14,800 were sold for
2. Which statement is correct regarding the Professional P20,000.
Regulatory Board of Accountancy (BOA)? • A customer returned, in good condition, some
a. It is composed of a chairman and six (6) members goods which had been sold to him in June for P600
appointed by the Professional Regulation and which had cost P400.
Commission. • The entity returned goods that had cost P1,800 in
b. It has the authority to establish the accounting June to the supplier, and received a credit note for
framework to be used by companies under its them.
jurisdiction.
What figure should appear in the entity’s financial
c. The BOA has a chairman who had been or
statements at June 30, 2022 for closing inventory,
presently a senior practitioner in public
based on this information?
accountancy.
a. P458,700 c. P505,900
d. A member of BOA must be a duly registered
b. P461,500 d. P508,700
Certified Public Accountant with at least ten (10)
years of work experience in any scope of practice
6. At June 30, 2022 the closing inventory of an entity
of accountancy.
amounted to P386,400.
3. Under IFRS, LIFO is not permitted for financial The following items were included in this total at cost:
reporting purposes. Why? • 1,000 items which had cost P18 each. These items
a. The use of LIFO is not permitted in the United were all sold in July 2022 for P15 each, with selling
States. expenses of P800.
b. The use of LIFO may not match the costs of • Five items which had been in inventory since 2020,
recently purchased inventory with current prices. when they were purchased for P100 each, sold in
c. The use of LIFO results in inventories being July 2022 for P1,000 each, net of selling expenses.
recognized in the statement of financial position at
amounts that may bear little relationship to recent What figure should appear in the entity’s statement of
cost levels of inventories. financial position at June 30, 2022 for inventory?
d. The use of LIFO results in a measurement of profit a. P382,600 c. P387,100
or loss for the period that is consistent with the b. P384,200 d. P400,600
measurement of inventories in the statement of
financial position. 7. A physical inventory taken on Dec. 31, 2022 resulted
in an ending inventory of P1,440,000. Sun Company
4. The physical inventory of Hug Co. at December 31 suspects some inventory may have been taken by
showed inventory with a cost of P441,000. It was employees. To estimate the cost of missing inventory,
discovered that the following items were all excluded the following were gathered:
from that amount. Inventory, Dec. 31, 2021 P1,280,000
a. Merchandise of P61,000 which is held by Hug on Purchases during 2022 5,640,000
consignment. The consignor is Kisses Company. Cash sales during 2022 1,400,000
b. Merchandise costing P38,000 which was shipped Shipment received on Dec. 26, 2022,
by Hug f.o.b. destination to a customer on included in physical inventory, but not
December 31. The customer was scheduled to recorded as purchases 40,000
receive the merchandise on January 2. Deposits made with suppliers, entered
c. Merchandise costing P46,000 which was shipped as purchases. Goods were not
by Hug f.o.b. shipping point to a customer on received in 2022 80,000
December 29. The customer was scheduled to Collections on accounts receivable,
receive the merchandise on January 2. 2022 7,200,000
d. Merchandise costing P83,000 shipped by a Accounts receivable, Jan. 1, 2022 1,000,000
vendor f.o.b. destination on December 30 and Accounts receivable, Dec. 31, 2022 1,200,000
received by Hug on January 4. Gross profit percentage on sales 40%
e. Merchandise costing P51,000 shipped by a
At Dec. 31, 2022 what is the estimated cost of missing
vendor f.o.b. seller on December 31 and received
inventory?
by Hug on January 5.
a. P200,000 c. P240,000
The adjusted cost of Hug Company's inventory at b. P160,000 d. P320,000
December 31 should be

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8. The following information is available for an entity: e) Factory building 4,000,000

f) Research and development building 2,000,000
Cost Retail
g) Head office building 3,800,000
Beginning inventory P1,987,200 P2,760,000
h) Machinery used in production 1,700,000
Sales 7,812,000
i) Store building 1,300,000
Purchases 4,688,640 6,512,000
j) Delivery vehicle 900,000
Freight in 94,560
k) Office furniture and fixtures 760,000
Mark ups 720,000
l) Equipment for rental to others
Mark up cancellations 120,000
under operating leases 540,000
Markdown 240,000
m) Equipment for rental to others
Markdown cancellations 40,000
under finance leases 710,000
The entity uses the average retail inventory method in n) Equipment held for sale in the
estimating the values of its inventories and cost of ordinary course of business 2,800,000
goods sold. o) Equipment held for sale in
accordance with PFRS 5 230,000
The estimated ending inventory at cost is p) Dogs used in rendering security
a. P1,275,588 c. P1,302,000 services 150,000
b. P1,287,120 d. P1,412,786 q) Plants displayed in administrative
office 70,000
9. Bearer plant is carried at r) Bearer plants related to agricultural
a. Its cost less any accumulated depreciation and any activity (excluding produce growing
accumulated impairment losses. on bearer plants valued at
b. Its fair value at the date of the revaluation less any P240,000) 740,000
subsequent accumulated depreciation and s) Bearer animals related to
subsequent accumulated impairment losses. agricultural activity 620,000
c. Its fair value less costs to sell. t) Annual crops related to agricultural
d. Either a or b. activity 880,000

10. An entity in agribusiness produces cacao to sell to How much of these items would typically be reported
chocolate factories. Its statement of financial position as property, plant and equipment in the consolidated
at 31 December 2018 presents: two tractors statement of financial position?
(P500,000 each), three computers (P20,000 each) and a. P15,220,000 c. P15,960,000
software (P50,000) to manage the cultivation of cacao b. P15,420,000 d. P16,200,000
on its farmland, which is planted with cacao-bearing
trees (estimated value, P10 million). The entity’s 13. An entity has a machine costing P480,000, with an
assets also included pods of recently harvested cacao annual depreciation of P96,000, and has accumulated
(estimated value, P2 million). How much should be depreciation of P240,000 on Dec. 31, 2021. On Apr. 1,
classified as biological assets? 2022, when the machine has a fair value of P192,000,
a. P13 million c. P10 million it is exchanged for a similar machine with a fair value
b. P12million d. Nil of P576,000 and the proper amount of cash is paid.
The loss to be recognized on exchange is
11. An entity is engaged in agricultural activity. Its trial a. P48,000 c. P168,000
balance at Dec. 31 presents the following assets b. P24,000 d. P 0
related to its farmland:
• Two tractors (P500,000 each) 14. An entity takes a full year’s depreciation in the year of
• Four computers (P25,000 each) an assets acquisition, and no depreciation in the year
• Computer software (P50,000) of disposition. Data relating to one depreciable asset
• Fruit-bearing trees (estimated value, P20 million of acquired in 2020, with residual value of P400,000 and
which P3 million is attributed to the fruits attached to estimated useful life of 8 years, at Dec. 31, 2021 are:
the trees). Cost P5,400,000
• Harvested fruits (estimated value, P2 million) Accumulated depreciation 2,362,500
• Trees grown for use as lumber (estimated value, P10
million) Using the same depreciation method in 2020 and
• Trees that are cultivated both for their fruit and their 2021, how much depreciation should the entity record
lumber (estimated value, P8 million) in 2022 for this asset?
• Maize and wheat (estimated value, P4 million) a. P625,000 c. P659,375
b. P703,125 d. P759,375
How much should be accounted for as biological
assets? 15. A non-current asset was purchased on the first day of
a. P25 million c. P7 million an accounting period, Jan. 1, 2020 for P34,000 and
b. P17 million d. P3 million depreciated by 20% per annum using the reducing
balance method. On June 30, 2022 the asset was sold,
12. Presented below is a list of items that may or may not realizing a loss on disposal of P2,100. What were the
be reported as property, plant and equipment in a proceeds of sale?
diversified company’s consolidated statement of a. P14,900 c. P19,660
financial position. b. P17,484 d. P21,684

a) Land held for capital appreciation P3,000,000 16. In the June 30, 2022 annual report of an entity, the
b) Land and building for rental to equipment was reported as follows:
others under operating leases 5,000,000
Equipment (at cost) P5,000,000
c) Land and building for rental to
Accumulated depreciation 1,500,000
others under finance leases 8,000,000
P3,500,000
d) Land and building held for resale in
the ordinary course of business 6,000,000

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The equipment consisted of two machines, machine A 17. Determine the amount at which machine A should be
and machine B. Machine A had cost P3,000,000 and recorded in the records of Newcastle Corp.
had a carrying amount of P1,800,000 at June 30, a. P105,500 c. P116,000
2022, while machine B had cost P2,000,000 and was b. P113,500 d. P121,500
carried at P1,700,000. Both machines are measured
using the cost model, and depreciated on a straight- 18. The depreciation on the machine to be recognized by
line basis over a ten-year period. Utah Corp. in 2022 is
a. P212,000 c. P1820,000
On Dec. 31, 2022, the directors of the entity decided
b. P190,000 d. P197,000
to change the basis of measuring the equipment from
the cost model to the revaluation model. Machine A
19. On Mar. 31, 2022, what amount of loss should
was revalued to P1,800,000 with an expected useful
Nathaniel recognize on the exchange?
life of six years, and machine B was revalued to
a. P60,000 c. P23,000
P1,550,000 with an expected useful life of five years.
b. P37,000 d. P 0
The amount to be recognized in profit or loss as a
result of the revaluation of assets on Dec. 31, 2022 is 20. What is the value of Bloxden’s revaluation surplus at
a. P150,000 c. (P150,000) Dec. 31, 2022?
b. P100,000 d. (P 50,000) a. P1,167,000 c. P1,257,000
b. P1,249,000 d. P1,339,000

Information relevant to four different entities follows. 21. An entity’s properties included the following items:
- Land held as potential plant site, P5,000,000.
• Newcastle Corp. uses many kinds of machines in its - A vacant building to be leased out under an
operations. It constructs some of these machines operating lease, P20,000,000.
itself and acquires others from the manufacturers. - Property held for sale in the ordinary course of its
The following information relates to machine A that it business, P30,000,000.
has recorded during the current year. - Property acquired exclusively with a view to
Cash paid for equipment, including VAT of subsequent disposal in the near future,
P9,600 P89,600 P4,000,000.
Costs of transporting machine - insurance - Property occupied by employees paying market rent,
and transport 3,000 P3,000,000
Labor costs of installation by expert fitter 5,000 - Property occupied by employees paying below
Labor costs of testing equipment 4,000 market rent, P1,000,000
Insurance costs for current year 1,500 - Property held for administrative purposes,
Costs of training for personnel who will P10,000,000.
use the machine 2,500 - A hotel owned and managed, P50,000,000.
Costs of safety rails and platforms - A building being leased out to a subsidiary,
surrounding machine 6,000 P8,000,000.
Costs of water devices to keep machine - A building, which cannot be sold or leased out
cool 8,000 separately, used in the production of goods and
Costs of adjustments to machine to make around 2% of the area being leased out to canteen
it operate more efficiently 7,500 operators, P2,000,000.
- Property that is being constructed for use as an
• In Jan. 2022, Utah Corp. entered into a contract to investment property, P7,000,000.
acquire a new machine for its factory. The machine,
How much should be reported as investment
which had a cash price of P2,000,000, was paid for as
properties in the entity’s separate financial
follows:
statements?
Down payment P 300,000 a. P43,000,000 c. P38,000,000
5,000 ordinary shares of Utah b. P40,000,000 d. P35,000,000
with an agreed-upon value
of P370 per share 1,850,000 22. An entity has just acquired the net assets of another
P2,150,000 entity for P100,000. In acquiring the other entity, the
owners of acquirer felt that the acquiree had
Prior to the machine's use, installation costs of unrecorded goodwill. They decided to capitalize the
P70,000 were incurred. The machine has an estimated estimated annual superior earnings of the acquiree at
useful life of 10 years and an estimated salvage value 20% to determine the amount of goodwill. The
of P100,000. The straight-line method of depreciation computation resulted in an estimated goodwill of
is used. P10,000. A rate of 10% on net assets before
recognition of goodwill was used to determine normal
• On Mar. 31, 2022, Nathaniel Corp. traded in an old annual earnings of the acquiree, because it is the rate
machine having a carrying amount of P168,000, and that is earned on net assets in the industry in which
paid a cash difference of P60,000 for a new machine the acquiree operates. All other assets of acquiree
having a total cash price of P205,000. The cash flows were properly recorded. The estimated annual earnings
from the new machine are expected to be significantly of the acquiree is
different than the cash flows from the old machine. a. P2,000 c. P10,000
b. P9,000 d. P11,000
• At Jan. 1, 2022, the revaluation surplus of Bloxden
was P1,257,000. This was in respect of the company’s
head office. During the year to Dec. 31, 2022, the
value of the head office increased by a further
P82,000. In the same period, the company’s factory
suffered an impairment of P90,000.

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23. On Jan. 2, 2021, an entity purchased land with Information relevant to five different entities follows.
valuable natural ore deposits for P10 million. The
• On Jan. 1, 2018, the Kyung-ho Corp. purchased
estimated residual value of the land was P2 million. At
machinery for P650,000. It is depreciating the
the time of purchase, a geological survey estimated 2
machinery over 12 years by the straight-line method
million tons of removable ore were under the ground.
to a residual value of P50,000. Late in 2022, because
Early in 2021, roads were constructed on the land to
of increasing competition in the industry, the entity
aid in the extraction and transportation of the mined
believes that its asset may be impaired and will have
ore at a cost of P750,000. In 2021, 50,000 tons were
a remaining useful life of 5 years, over which it
mined. In 2022, the entity fired its mining engineer
estimates the asset will produce total cash inflows of
and hired a new expert. A new survey made at the end
P1,000,000 and will incur total cash outflows of
of 2022 estimated 3 million tons of ore were available
P825,000. The cash flows are independent of the
for mining. In 2022, 150,000 tons were mined. All the
entity’s other activities and will occur evenly each
ore mined was sold. Compute the amount of depletion
year. The entity is not able to determine the fair value
for 2022.
based on a current selling price of the machinery. The
a. P372,000 c. P426,000
entity’s discount rate is 10%.
b. P433,500 d. P406,500
• Han-yeol Corp. reported an impairment loss of
24. In accordance with PAS 36, external sources of
P250,000 in its income statement for the year 2019.
information indicating that an asset may be impaired
This loss was related to an item of property, plant and
include
equipment which was acquired on Jan. 1, 2011 with a
a. Significant changes with an adverse effect on the
cost of P2,000,000. Depreciation on the asset is
entity have taken place during the period, or are
computed on a straight-line basis and annual
expected to take place in the near future, in the
depreciation on cost is P80,000. Depreciation for the
extent to which, or manner in which, an asset is
year 2020 was computed on the asset’s recoverable
used or is expected to be used.
amount at Dec. 31, 2019. On Dec. 31, 2022, Han-yeol
b. Evidence is available from internal reporting that
decided to measure the asset using revaluation
indicates that the economic performance of an
model. This asset was then appraised at a fair value of
asset is, or will be, worse than expected.
P1,650,000.
c. Market interest rates have decreased during the
period and are likely to affect the discount rate
• The Joo-ah Corp. accounts for non-current assets using
used in calculating an asset’s value in use.
the revaluation model. On June 30, 2022, Joo-ah
d. The carrying amount of the net assets of the entity
classified a freehold property as held for sale in
is more than its market capitalization.
accordance with PFRS 5. At that date the property's
carrying amount was P290,000 and the balance on the
25. At the current year-end, an entity has undertaken
revaluation reserve was P20,000. At that date its fair
impairment tests on two items of machinery. The
value was estimated at P330,000 and the costs to sell
following information is relevant:
at P20,000. At Dec. 31, 2022 the property's fair value
Machine 1 Machine 2 was estimated at P325,000 and the costs to sell at
Cost P450,000 P250,000 P25,000.
Useful life 10 years 15 years
Age 4 years 3 years • On Jan. 1, 2022 GG Corp. purchased a plating machine
Fair value P300,000 P230,000 with a 5-year useful life for P135,000. The entity
Costs of disposal P15,000 P35,000 received a grant of P13,500 towards the capital cost.
Value in use P260,000 P198,000 GG’s policy is to treat the grant as a reduction in the
cost of the asset. GG uses straight-line method of
At what carrying amount should machinery be
depreciation.
recognized in the accounts of the entity?
a. P498,000 c. P468,000
• Yu Tang Corp. commenced the construction of a new
b. P470,000 d. P455,000
packaging plant on Feb. 1, 2022. The cost of
P1,800,000 was funded from existing borrowings. The
26. An entity has determined that one of its cash-
construction was completed on Sept. 30, 2022.
generating units (CGUs) has sustained an impairment
loss of P50,000. The carrying amounts of the assets The entity’s borrowings during 2022 comprised:
within the CGU are as follows. o Loan from Allied Bank: P800,000 at 6% per annum;
Asset 1 P150,000 o Loan from BDO Bank: P1 million at 6.6% per
Asset 2 200,000 annum; and
Asset 3 50,000 o Loan from Metro Bank: P3 million at 7% per annum.
Total P400,000
27. The impairment loss to be recognized by Kyung-ho
The estimated fair value less costs of disposal of Asset Corp. in its 2022 profit or loss is
2 is P190,000, which is greater than its value in use. a. P317,322 c. P246,490
b. P267,322 d. P217,322
How much is the carrying amount of Asset 1 after
impairment loss is recognized?
28. The revaluation increase to be recognized by Han-yeol
a. P135,000 c. P125,625
Corp. in 2022 other comprehensive income is
b. P131,250 d. P120,000
a. P748,125 c. P563,125
b. P610,000 d. P530,000

29. The balance of Joo-ah’s revaluation reserve as of Dec.

31, 2022 is
a. P60,000 c. P30,000
b. P40,000 d. Nil

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30. GG Corp. will recognize depreciation expense for the 38. The following pertains to an entity on Dec. 31 of the
year ended Dec. 31, 2022 of current year: Checking account balance P925,000; an
a. P27,000 c. P21,600 overdraft in special checking account at same bank as
b. P24,300 d. P19,440 normal checking account of P17,000; certificate of
deposit P400,000; cash held in a bond sinking fund
31. The amount of borrowing costs to be capitalized by Yu P200,000; postdated check from customer P11,000;
Tang Corp. in relation to the packaging plant is certified check from customer P9,800; NSF check
a. Nil c. P 91,125 received from customer P15,000; cash advance to
b. P81,000 d. P121,500 subsidiary of P300,000; postage stamps on hand
P620; utility deposit paid to electric company P8,000;
32. An entity has an asset, carried at P450,000, that was currency and coins in a petty cash fund (the company
classified as held for sale. However, the criteria for it has not replenished the fund to the imprest amount of
to remain as held for sale no longer apply. P5,000) P800. The correct amount that should be
reported as cash is
Additional information:
a. P908,800 c. P1,318,600
Carrying amount b. P918,600 d. P1,322,800
(on the basis that it had never
been classified as held for sale) P400,000
Fair value less costs of disposal 380,000 Use the following information for the next two questions.
Value in use 350,000
An entity’s accountant is preparing its October bank
reconciliation and has collected the following data:
The asset should be measured at
a. P350,000 c. P400,000 Per Books Per Bank
b. P380,000 d. P450,000 October 1 balance P11,600 P10,000
October deposits 24,600 21,200
33. An entity received a P1,800,000 subsidy from the October checks 27,800 26,500
government to purchase manufacturing equipment on Note collected
Jan. 2, 2022. The equipment has a cost of P3,000,000, (includes 10% interest) - 4,800
a useful life of five years, and no salvage value. The October service charge - 500
entity depreciates the equipment using sum-of-the- October 31 balance 8,400 9,000
years’ digits method.
Additionally, deposits in transit and outstanding checks
If the entity chooses to account for the grant as from September's reconciliation were, P4,400 and P2,800
deferred income, the grant income to be recognized in respectively.
2022 is
a. Nil c. P400,000 39. The deposits in transit at October 31 is
b. P360,000 d. P600,000 a. P12,600 c. P7,800
b. P 8,200 d. P3,400
34. A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for its intended 40. The outstanding checks at October 31
use or sale. This may include a. P4,600 c. P1,800
a. Financial assets b. P4,100 d. P1,300
b. Inventories that are manufactured, or otherwise
produced, over a short period of time 41. When the allowance method of recognizing
c. Building that is ready for its intended use when uncollectible accounts is used, the entry to record the
acquired write-off of a specific account
d. Intangible assets a. Decreases both accounts receivable and the
allowance for uncollectible accounts.
35. The following assets are measured initially at cost, b. Decreases accounts receivable and increases the
except allowance for uncollectible accounts.
a. Property, plant and equipment c. Increases the allowance for uncollectible accounts
b. Investment property and decreases net income.
c. Intangible asset d. Decreases both accounts receivable and net
d. Biological asset income.

36. The following assets may be measured subsequently 42. Credit memos are normally issued to:
using the revaluation model, except a. Inform the customer of the balance due.
a. Property, plant and equipment b. Reduce customer frustration and sales losses.
b. Investment property c. Adjust the customer’s balance to the amount owed
c. Intangible asset to the company because of returned goods or an
d. Exploration and evaluation asset allowance.
d. Assist in the aging of accounts receivable.
37. As defined in PAS 7, cash comprises
I. Cash on hand 43. On Dec. 31, 2021, an entity sold used equipment and
II. Demand deposits received a noninterest-bearing note requiring payment
III. Cash equivalents of P50,000 annually for ten years. The first payment is
due Dec. 31, 2022, and the prevailing rate of interest
a. I, II and III c. I only for this type of note at date of issuance is 12%. In its
b. I and II only d. III only Dec. 31, 2022 statement of financial position, the
entity should report the carrying amount of the note at
a. P316,410 c. P282,510
b. P304,380 d. P266,410

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44. In accordance with PFRS 9, at what stage is interest 48. If the bond investment is classified as FA at AC, the
revenue calculated based on the amortized cost of the amount to be recognized on the entity’s Dec. 31, 2022
financial asset? statement of financial position is
a. Stage 1 c. Stage 3 a. P10,110,000 c. P10,356,300
b. Stage 2 d. All stages b. P10,277,550 d. P10,362,950

45. Seller Corp. factored P400,000 of accounts receivable

with Buyer, Inc., on a without-recourse basis. The Use the following information for the next two questions.
factor charge was 1.75% of the amount of receivables,
On July 1, 2022, an entity purchased 10,000 of another
and an additional 4% was retained to cover probable
entity’s 50,000 outstanding shares at a price of P6.00 per
adjustments. In addition to the factor charge, a
share. The investee had earnings of P3,000 per month
finance charge was withheld equal to 12% annually for
during 2022 and paid dividends of P10,000 on Mar. 1,
any amounts advanced prior to the due dates of the
2022 and P12,500 on Dec. 1, 2022. The fair value of
receivables. This charge was based on 100% of the
investee’s shares was P6.50 per share on
Dec. 31, 2022.
face value. The average credit term was 30 days from
the date of transfer. According to the terms of the
factoring agreement, Seller was to handle returned 49. Assuming that the entity accounts for its equity
goods, allowances, and shipping disputes. Buyer was investment as a held-for-trading, what would be the
to collect the cash and acknowledge sales discounts, total effect on the entity’s profit or loss for the year
but such discounts were to be charged to Seller. ended Dec. 31, 2022?
Credit losses were to be absorbed by Buyer. Seller has a. P2,500 c. P6,500
not recorded any bad debt expense related to the b. P4,500 d. P7,500
factored receivables. The following transactions
pertain to this factoring arrangement: 50. Assuming that the entity had significant influence over
the investe, what would be the balance in the entity’s
Aug. 1 The receivable records were transferred to “Investment in Associate” account on its statement of
Buyer. financial position on Dec. 31, 2022?
31 Buyer collected P234,000 during August a. P61,100 c. P64,700
after allowing for P9,000 of sales b. P62,700 d. P65,000
discounts. Sales returns and allowances
during August totaled P2,400. 51. An entity purchased a P1 million life insurance policy
Sept. 20 Buyer wrote off a P2,000 account after on its president, of which the entity is the beneficiary.
learning of the company's bankruptcy. Information regarding the policy for the year ended
30 Buyer collected P151,720 during Dec. 31, 2022 follows:
September. Sales returns and allowances
during September totaled P880. Cash surrender value, 1/1/22 P87,000
Oct. 10 Seller and Buyer made a final cash Cash surrender value, 12/31/22 108,000
settlement. Annual advance premium paid 1/1/22 40,000
During 2022, dividends of P6,000 were applied to
Which statement is incorrect? increase the cash surrender value of the policy. What
a. This transaction is best described as a sale of amount should the entity report as life insurance
Seller's accounts receivable to Buyer with the risk expense for 2021?
of uncollectible accounts transferred to Buyer. a. P40,000 c. P19,000
b. The net cash proceeds ultimately realized by Seller b. P21,000 d. P13,000
from the factoring is P376,720.
c. The factor's net income from the factoring is 52. If an entity is required by PFRS 9 to separate the
P9,000. embedded derivative from its host, but is unable to
d. The Seller received P1,720 as final settlement from measure the embedded derivative separately either at
the factor. acquisition or at the end of a subsequent financial
reporting period, it shall
a. Designate the entire hybrid contract as at fair
Use the following information for next three questions. value through profit or loss.
On June 30, 2022, an entity purchased a two-year bond b. Designate the entire hybrid contract as at fair
investment. The bond had a stated principal amount of value through other comprehensive income.
P10,000,000, which the entity will receive on June 30, c. Designate the entire hybrid contract as at
2024. The stated coupon interest rate was 10% per year, amortized cost.
which is paid semiannually on Dec. 31 and June 30. The d. Any of these.
bond was purchased at a quoted annual yield of 8%. On
Dec. 31, 2022, the bonds are quoted at 101.1. (Round off 53. At initial recognition, an entity shall measure which of
present value factors to four decimal places) the following financial assets at their fair value plus
transaction costs that are directly attributable to the
46. If the bond investment is classified as FA at FVTPL, the acquisition of the financial assets?
amount to be recognized as fair value adjustment loss a. Those that the entity intends to sell immediately or
in the entity’s 2022 profit or loss is in the near term.
a. P 85,400 c. P246,300 b. Those that the entity upon initial recognition
b. P110,000 d. P252,950 designates as at fair value through profit or loss.
c. Those that qualify as FA at FVTOCI.
47. If the bond investment is classified as FA at FVTOCI, d. None of these.
the amount to be recognized in the entity’s 2022 profit
or loss is 54. An entity paid P200,000 to purchase 10,000 options on
a. Nil c. P414,252 the shares of another entity. How should this
b. P167,550 d. P414,518 investment be classified on the entity’s statement of
financial position?

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a. Financial asset at fair value through profit or loss 57. In relation to the note payable, the interest expense to
b. Financial asset at fair value through other be recognized by the entity for the year ended Dec.
comprehensive income 31, 2022 is
c. Financial asset at amortized cost a. P27,685 c. P13,842
d. Any of these b. P15,600 d. Nil

55. Which of the following is subject to impairment in 58. What amount should the entity record as gain on early
accordance with PFRS 9? extinguishment of debt?
a. Financial asset acquired principally for the purpose a. P204,000 c. P140,000
of selling it in the near term b. P192,000 d. P120,000
b. Financial asset that is part of a portfolio of
identified financial instruments that are managed 59. What amount would be recorded as a liability from
together and for which there is evidence of a lawsuit?
recent actual pattern of short-term profit-taking a. Nil c. P250,000
c. Financial asset that is a derivative b. P198,450 d. P314,928
d. Finance lease receivable
60. A discount on notes payable is charged to interest
expense
Use the following information for the next four questions. a. Equally over the life of the note.
b. Only in the year the note is issued.
The following information relate to an entity’s liabilities as
c. Using the effective-interest method.
of and for the year ended Dec. 31, 2022:
d. Only in the year the note matures.
• The entity had accounts payable of P5,000,000
61. Which statement is incorrect regarding PFRS 16
recorded in the general ledger as of Dec. 31, 2022
Leases?
before consideration of the following unrecorded
a. PFRS 16 eliminates the classification of leases as
transactions:
either operating leases or finance leases as
required by PAS 17 and, instead, introduces a
Invoice Date Date
single lessee accounting model.
date Amount shipped received FOB terms
b. A lessee is required to recognize assets and
1-3-23 P400,000 12-22-22 12-24-22 Destination
liabilities for all leases with a term of more than 12
Shipping
1-2-23 650,000 12-28-22 1-2-23 months, unless the underlying asset is of low
point
value.
Shipping
12-26-22 600,000 1-2-23 1-3-23 c. A lessee is required to recognize depreciation of
point
lease assets separately from interest on lease
1-10-23 450,000 12-31-22 1-5-23 Destination
liabilities in the income statement.
d. A lessor shall classify its leases as operating
• On July 1, 2022, the entity purchased a noncash asset
leases.
with a list price of P260,000 by issuing a five-year
noninterest-bearing note. The market or "going" rate
62. Lessee Corp. prepares the following lease payments
of interest for this note was 12%. The note will; be
schedule for the lease of machine from Lessor Corp.
paid in five equal annual P64,000 installments each
The machine has an economic life of six years. The
June 30, 2023 through 2027.
lease agreement requires four annual payments of
P33,000, and the machine will be returned to Lessor at
• In order to finance the entity’s planned expansion, a
the end of the lease term. The lease payments
12% P10,000,000 face value bonds were issued for
schedule is:
P10,800,000, including accrued interest of P200,000
on Dec. 1, 2019. Interest is payable every Oct. 1 and Lease Interest Reduction Balance
Apr. 1. By the end of the year 2021, the carrying payments expense in liability of liability
amount of the bonds was reported at P10,300,000. 1/1/22 98,512
The entity uses the straight-line method to amortize 1/1/23 30,000 9,851 20,149 78,363
premium and discount. On Sept. 1, 2022, the entity 1/1/24 30,000 7,836 22,164 56,199
decided to reacquire the bonds at face value plus 1/1/25 30,000 5,620 24,380 31,819
accrued interest. 1/1/26 35,000 3,181 31,819 -
125,000 26,488 98,512
• The entity was sued for P1,000,000. Lawyers have How much annual depreciation expense would Lessee
advised that the obligating event has occurred, but Corp. record?
that the probability of making a payout is 25%, which a. P15,585 c. P23,378
is deemed not certain. It is expected to take at least 3 b. P16,419 d. P24,628
years before the lawsuit is finalized. The entity uses
an 8% discount rate. 63. Lessor Corp. purchased a machine on Jan. 1, 2022, for
P1,250,000 for the express purpose of leasing it. The
QUESTIONS: machine was expected to have a 10-year life from Jan.
1, 2022, no salvage value, and to be depreciated on a
56. On the Dec. 31, 2022 statement of financial position, straight-line basis. On Mar. 1, 2022, Lessor leased the
the accounts payable should be reported in the machine to Lessee Corp. for P300,000 a year for a 4-
amount of year period ending Feb. 28, 2026. The appropriate
a. P5,000,000 c. P6,050,000 interest rate is 12% compounded annually. Lessor paid
b. P5,400,000 d. P7,100,000 a total of P 15,000 for maintenance and insurance on
the machine for the year ended Dec. 31, 2022. Lessee
paid P300,000 to Lessor on Mar. 1, 2022. Lessor
retains title to the machine and plans to lease it to
someone else after the 4-year lease period.

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How much depreciation expense would Lessor Corp. Investment in X Co. shares
record for the year ended Dec. 31, 2022? (20% of outstanding shares 76,500
a. Nil c. P125,000 owned)
b. P104,167 d. P260,417 Investment in Y Co. shares
(trading securities) 21,000
64. In accordance with PAS 19, the discount rate used to Share premium 42,500
determine defined benefit cost reflects Premium on Bonds Payable 6,000
a. Time value of money Prepaid Insurance 6,000
b. Actuarial risk Rent revenue 37,000
c. Investment risk. Rent revenue received in advance 12,000
d. All of the above (4 months)
Retained earnings 97,500
65. An entity showed income before income taxes of Taxes payable 10,000
P250,000 on Dec. 31, 2022. On your year-end Tools 52,000
verification of the transactions of the entity, you
The entity’s working capital is
discovered the following errors:
a. P72,000 c. P62,000
a) P100,000 worth of merchandise was purchased in
b. P66,000 d. P46,000
2022 and included in the ending inventory.
However, the purchase was recorded only in 2023.
68. An entity had the following cash flows during the
b) A merchandise shipment valued at P150,000 was
reporting period:
properly recorded as purchases at year-end. Since
• Purchase of intangibles - P30,000
the merchandise were still at the port area, they
• Proceeds from sale of plant - P28,000
were inadvertently omitted from the inventory
• Receipts from customers - P832,000
balance at Dec. 31, 2022.
• Payments to suppliers - P593,000
c) Business taxes for the 4th quarter of 2022,
• Interest received - P17,600
amounting to P50,000, was recorded when
• Income taxes paid - P45,500
payment was made by the entity in Jan. 2023.
d) Rental of P30,000 on an equipment, applicable for The net cash connected to operating activities was:
six months, was received on Nov. 2, 2022. The a. P269,100 c. P239,100
entire amount was reported as income upon b. P256,600 d. P211,100
receipt.
e) Insurance premium covering the period from July 69. Changes in economic resources and claims not
1, 2022 to July 1, 2023, amounting to P120,000, resulting from financial performance are reported in
was paid and recorded as expense on July 31, a. Statement of Financial Position
2022. The entity did not make any adjustment at b. Statement of Profit or Loss and Other
the end of the year. Comprehensive Income
c. Statement of Cash Flows
The corrected income before income taxes for 2022
d. Statement of Changes in Equity
should be
a. P340,000 c. P280,000
70. An entity was incorporated on Jan. 1, 2022 with
b. P290,000 d. P240,000
proceeds from issuance of shares of P750,000 and
borrowed funds of P 110,000. During the first year of
66. Which of the following is (are) essential to the
operations, total income amounted to P82,000 and
existence of an asset?
expenses totaled P64,000. On Dec. 15, the entity
a. Legal right c. Both a and b
declared a P3,000 cash dividend, payable to
b. Physical form d. Neither a nor b
shareholders on Jan. 15, 2023. No additional activities
affected owners' equity in 2022. The entity's liabilities
67. An entity furnishes you with the following list of
increased to P120,000 by Dec. 31, 2022. On the
accounts:
entity's Dec. 31, 2022 statement of financial position,
Accounts payable P 66,000 total assets should be reported at
Accounts receivable 40,000 a. P878,000 c. P882,000
Accumulated depreciation 44,000 b. P875,000 d. P885,000
Advances to sales persons 10,000
Advertising Expense 72,000
Allowance for Bad Debts 10,000 End of Examination
Bonds payable 80,000
Cash 22,000 Please ignore the extra answer options after no. 70.
Certificates of deposit 16,000
Share capital, (par) 100,000 Thank you for participating in Team PRTC
Deferred income tax liability 46,000 Nationwide Online First Pre-Board Examination.
Equipment 215,500
Inventory 55,000

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