ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 48  October 2024 CPALE  Pre-Week Summary Lecture

FINANCIAL ACCOUNTING & REPORTING S. IRENEO  G. MACARIOLA  C. ESPENILLA  J. BINALUYO

FAR PREWEEK LECTURE

The controller of Antman Company is attempting to determine the amount of cash and cash equivalents to be
reported as of December 31, 2024. The following items are included in the cash and cash equivalent of the
Company:
BDO special checking used for payroll payments P950,000
BPI special account used as a bond sinking fund 400,000
MBTC checking account (per bank statement), checks of P100,000 are
Outstanding as of December 31, 2024 1,300,000
DBP, checking account (per book) of P150,000 are
Outstanding as of December 31, 2024 1,600,000
EWB, includes a P250,000 compensating balance
maintained in relation to a short loan arrangement 1,000,000
PNB, includes a P300,000 compensating balance
maintained in relation to a long-term loan arrangement 1,500,000
DBP, (bank under liquidation) realizable value was
P0.50 of every P1.00 deposit 500,000
China Bank, current account – bank overdraft (150,000)
3-month treasury note, maturity date January 31, 2025 600,000
1-year treasury note, maturity date on January 31, 2025
(Acquired February 1, 2024) 950,000
2-months BSP treasury bills 225,000
Zuko Bank, US dollar denominated deposit (opened in October 17);
Exchange rate on October 17 was P52; average (October 17 to
December 31) was P54; December 31 was P55 $15,000

1. Statement 1: The amount of cash in Antman’s December 31, 2024, statement of financial position is
P6,525,000.
Statement 2: The amount of cash equivalent in Antman’s December 31, 2024, statement of financial position
is P825,000.
a. Only statement 1 is correct. c. Both statements are correct.
b. Only statement 2 is correct. d. Both statements are incorrect.

On December 31, 2024, Batman Company reported cash and cash equivalents of P6,505,000 comprised of the
following:
Petty cash fund (imprest balance) P15,000
Undeposited collections 120,000
Cash in Bank – JP Bank checking account 900,000
Cash in Bank – JP Bank payroll fund 1,950,000
Cash in Bank – JP Bank dividend fund 1,050,000
Cash in Bank – Binaluyo Bank of Asia (Foreign currency) 800,000
Cash in Bank – money market instrument, maturing in 60 days 250,000
Time deposit – dated November 1, 2024, due on January 31, 2025 420,000
Redeemable preference shares, due in 2 months 1,000,000
Total cash and cash equivalents P6,505,000

Additional information as of December 31, 2024:

The petty cash fund includes unreplenished vouchers amounting to P8,350 (of which P2,000 dated January 3,
2025); P4,500 of bills and coins and an employee check for P2,100 dated January 2, 2025. Included in the
undeposited collections were NSF check received from customer on December 29, 2024, for P15,000 and
P20,000 of customers check received on December 30, 2024, dated January 4, 2025. Included in the checks
drawn and recorded against JP Bank checking account were: P180,000 payable to Moira Company dated
January 3, 2025, and P145,000 of check issued to Sila Company dated June 15, 2024 (not encashed as of
12/31/2024). The $16,000 cash in Binaluyo Bank of Asia is not restricted, closing rate on December 31, 2024,
is P57.50 =$1. The redeemable preference shares were originally purchased by Batman Company last
November 1, 2024, and the money market instrument maturing on March 1, 2025, were originally acquired on
April 1, 2024.
2. Statement 1: The balance of petty cash fund as of December 31, 2024, is P6,500 and a shortage in PCF
of P50.
Statement 2: The amount of total “cash” disclosed in the statement of financial position as of December 31,
2024, is P5,236,500.
Statement 3: The total amount of “cash and cash equivalents” reported in its statement of financial position
as of December 31, 2024, is P6,906,500.
a. Only 1 statement is correct. c. All statements are correct.
b. Only 2 statements are correct. d. All statements are incorrect.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
3. Which of the following is not considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks, and personal checks
c. Coin, currency, and available funds
d. Postdated checks and I.O.U.’s
4. A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of
cash and
a. is acceptable as a means to pay current liabilities.
b. has a current market value that is greater than its original cost.
c. bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation.
d. is so near its maturity that it presents insignificant risk of changes in interest rates.
The petty cash fund of Cruella Company (P30,000 of imprest balance) was counted on January 3, 2025. The
following items were found:
Total bills and coins P6,000
Certified check of general manager dated January 2, 2025 2,500
Petty cash vouchers not yet replenished:
Postage stamps (dated December 28, 2024) 1,500
Supplies (dated December 29, 2024) 1,200
IOU of employee (dated December 30, 2024) 800
Meals and transportation (dated January 2, 2025) 900
Unused supplies 700
Unused postage 800
Company’s check representing replenishment of petty cash fund 7,200
Currency in an envelope containing contributions of employees for the birthday employee (total
collection is P4,000) 3,000
Currency in an envelope representing unclaimed salaries of an employee who resigned (pay slip
shows net pay of P3,700) 3,000
5. Statement 1: The correct amount of petty cash fund as of December 31, 2024, is P14,100.
Statement 2: If the petty cash fund was replenished on January 4, 2025, the amount credited to cash in bank
is P16,000.
a. Only statement 1 is correct. c. Both statements are correct.
b. Only statement 2 is correct. d. Both statements are incorrect.
On November 30, 2024, Dragarys Company received its bank statement. The following data are available in
preparing a bank reconciliation:
November 30 unadjusted bank balance P2,210,000
Note collected by the bank 200,000
Interest earned on note 20,000
NSF check of customer 110,000
Bank service charge on NSF check 8,000
Outstanding checks 320,000
Deposit on November 30 placed in night depository 215,000
Check issued by Dragonys Corporation charged by the bank to Dragarys Company
30,000
account in error
Check issued by Dragarys Company recorded in the book at P25,500 25,000
6. Statement 1: The unadjusted cash balance per book as of November 30 is P2,135,000.
Statement 2: The adjusted cash balance per bank as of November 30 is P2,132,500.
a. Only statement 1 is correct. c. Both statements are correct.
b. Only statement 2 is correct. d. Both statements are incorrect.
The following is the summary of transactions of Elmo Company related to its accounts receivable in 2024:
Accounts receivable, January 1, 2024 P7,000,000
Allowance for bad debts, January 1, 2024 700,000
Total credit sales recorded 9,100,000
Total cash received from customers including recovery 8,500,000
Accounts written off as uncollectible 200,000
Recovery of accounts previously written off 100,000
Total sales return 175,000
Total sales discount 120,000
Total provision for bad debts made during the year 140,000
Additional information:
a) 20% of the total credit sales granted sales allowance equivalent to 15% of the selling price.
b) The company’s policy is consistent to provide 10% of the outstanding balance of accounts receivable as of
December 31, 2024, as uncollectible.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
7. Statement 1: The balance of accounts receivable (gross) as of December 31, 2024, is P6,932,000.
Statement 2: The amount of bad debts expense in Elmo Company’s Income statement for the year ended
December 31, 2024, is P93,200.
a. Only statement 1 is correct. c. Both statements are correct.
b. Only statement 2 is correct. d. Both statements are incorrect.
8. Statement 1: The balance of the allowance for bad debts as of December 31, 2024, is P693,200.
Statement 2: The accounts receivable – net reported in Elmo Company’s Statement of Financial Position as
of December 31, 2024, is P6,238,800.
a. Only statement 1 is correct. c. Both statements are correct.
b. Only statement 2 is correct. d. Both statements are incorrect.
The following is the summary of transactions of Frodo Company in 2023 and 2024:
2023 2024
Credit sales P7,600,000 P8,200,000
Collections of outstanding receivables 5,325,000 7,250,000
Sales return and allowances 95,000 125,000
Write – off – 45,000
Provision for bad debts during the year 60,000 110,000
Days invoice outstanding on December 31
0 – 30 980,000 1,020,000
31 – 90 610,000 ?
91 – 180 ? 850,000
Over 180 100,000 130,000
The company’s policy to provide allowance on its account receivable at year end as follows: 0-30 days –
1%; 31-90 days – 4%; 91-180 days – 15%; and over 180 days – 22%.
9. Statement 1: The balance of accounts receivable (gross) as of December 31, 2024, is P2,470,000.
Statement 2: The bad debts expense for year 2024 is P110,000.
a. Only statement 1 is correct. c. Both statements are correct.
b. Only statement 2 is correct. d. Both statements are incorrect.
10. Statement 1: The balance of the allowance for bad debts as of December 31, 2024, is P204,700.
Statement 2: The amortized cost of the accounts receivable as of December 31, 2024, is P2,755,300.
a. Only statement 1 is correct. c. Both statements are correct.
b. Only statement 2 is correct. d. Both statements are incorrect.
11. What is the journal entry for recording bad debt expense under the allowance method?
a. Debit Allowance for bad debts, credit Accounts Receivable
b. Debit Allowance for bade debts, credit Bad Debt Expense
c. Debit Bad Debt Expense, credit Allowance for bad debts
d. Debit Accounts Receivable, credit Allowance for bad debts
12. Which of the following is the journal entry to record the collection of accounts receivable previously written
off when using the allowance method?
a. Debit Allowance for bad debts, credit Accounts Receivable
b. Debit Allowance for bade debts, credit Bad Debt Expense
c. Debit cash, credit Miscellaneous income
d. Debit cash, credit Allowance for bad debts
13. If a company employs the gross method of recording accounts receivable from customers, then sales
discounts taken should be reported as
a. an addition to sales in the income statement.
b. an item of "other income and expense" in the income statement.
c. a deduction from accounts receivable
d. should not be used.
14. When the allowance method of recognizing uncollectible accounts is used, the entry to record the write off
of a special account would
a. Increase the allowance for uncollectible accounts and decrease net income.
b. Decrease both accounts receivable and net income
c. Decrease accounts receivable and increase allowance for uncollectible accounts.
d. Decrease both accounts receivable and the allowance for uncollectible accounts.
15. When an accounts receivable aging schedule is prepared, a series of computations is made to determine
estimated uncollectible accounts. The resulting amount from this aging schedule
a. Is the amount that should be added to the beginning allowance for doubtful accounts to get the doubtful
accounts expense for the year.
b. Is the amount of desired credit balance of the allowance for doubtful accounts to be reported at year
end.
c. When added to the total accounts written off during the year is the desired credit balance of the allowance
for doubtful accounts at year-end.
d. Is the amount of doubtful accounts expense for the year

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
On January 1, 2024, Groot Company sold an equipment costing P10,000,000 and accumulated depreciation of
P2,500,000. Groot Company received a P200,000 cash and a 10%, 3-year, P6,900,000 note receivable on
December 31, 2026. Interest effective on this note when received is at 7%.
16. How much is the gain (loss) on sale of equipment should Groot Company recognized on January 1, 2024?
a. P56,767 loss b. P243,233 gain c. P199,767 loss d. P143,233 gain

17. How much is the amount of interest income and carrying value of the note in 2025, respectively?
a. P521, 026 and P7,274,260 c. P503,972 and P7,062,594
b. P509,198 and P7,093,458 d. P496,542 and P7,024,623

On January 1, 2023, Harley Quin Company received a 4%, P9,000,000, note collectible in installment plus
interest every December 31 of each year until December 31, 2025. The note is collectible in principal as follows:
December 31, 2023 P2,000,000
December 31, 2024 3,000,000
December 31, 2025 4,000,000
The interest effective on January 1, 2023, is at 6%.

18. Statement 1: The carrying value of the note receivable on December 31, 2023, of P3,924,528 is reported as
non-current asset in the statement of financial position.
Statement 2: The amortization of discount for year 2024, is P127,803 and the interest income in 2024 is
P407,803.
Statement 3: The carrying value of the note receivable on December 31, 2024, of P235,472 is reported as
current portion in the statement of financial position.
a. Only one statement is true c. All three statements are true.
b. Only two statements are true d. Only one statement is false.

19. If the present value of a note received is less than its face value, the difference should be:
a. Treated initially as a premium on notes receivable
b. Amortized as interest income over the life of the note
c. Amortized as interest expense over the life of the asset
d. Included in interest income in the year of issuance

20. Which of the following statements concerning interest-bearing notes receivable is generally a false
statement?
a. Discount on notes receivable should be deducted to arrive at the carrying value of notes receivable
b. Amortizing the discount causes the carrying amount of the notes receivable to gradually increase over
the life of the note
c. Amortizing the premium causes the carrying amount of the notes receivable to gradually decrease
over the life of the note
d. Interest income is increased by the amortization of premium.

21. Which of the following statements concerning non-interest-bearing notes receivable is generally a false
statement?
a. Discount on notes receivable should be deducted to arrive at the carrying value of notes receivable
b. Amortizing the discount causes the carrying amount of the notes receivable to gradually increase over
the life of the note
c. Amortizing the premium causes the carrying amount of the notes receivable to gradually decrease
over the life of the note.
d. Interest income is increased by the amortization of discount.

22. On October 1 of the current year, an entity received a one-year note receivable bearing interest at the market
rate. The face amount of the note receivable and the entire amount of the interest are due on September 30
of next year. The interest receivable on December 31 of the current year would consist of an amount
representing
a. Three months of accrued interest income
b. Nine months of accrued interest income
c. Twelve months of accrued interest income
d. The excess on October 1 of the present value of the note receivable over its fact amount

Iron Man Company’s inventory on June 30, 2024, was P75,000 based on a physical count of goods on this
date:
• Included in the physical count were goods billed to a customer FOB shipping point on June 30, 2024. These
goods had a cost of P5,500 and were picked up by the carrier on July 3, 2024.
• Goods shipped FOB destination on June 28, 2024, from Iron Man to a customer and were received on July
3, 2024. The goods cost was P2,500.
• Goods out on consignment costing P11,500 to Captain America Incorporated shipped on June 29, 2024.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
• Goods purchased on June 28, 2024, with a repurchase agreement costing P8,000, the goods were shipped
and received on same day. Buyback price is cost plus 15%.
• Goods in the warehouse of Iron Man costing P12,500 was sold to Blue Bettel Company on June 29, 2024.
The bill and invoice totaling to P22,000 was sent to Blue Bettel on June 30 but the goods were delivered
only on July 4, 2024, under a bill and hold agreement.
• Goods purchased on June 29, 2024, in transit to Iron Man’s warehouse, FAS. The invoice price of the goods
is P18,500. Iron Man paid transport cost of P2,500 up to port of destination and P3,000 transport cost back
to warehouse.
23. What amount should Iron Man report as inventory on its June 30, 2023, statement of financial position?
a. P90,000 b. P87,500 c. P83,500 d. P82,000

Jack Sparrow Corporation is a wholesaler of office supplies. The activity for Model V calculators during August
is shown below:
Date Balance/Transaction Units Cost
Aug. 1 Inventory 4,000 40.00
7 Purchase 3,000 45.00
12 Sales 3,500
21 Purchase 4,900 50.00
22 Sales 5,200
27 Purchase 1,200 55.00
29 Sale 2,000

24. Statement 1: The cost of ending inventory of Model V calculators using the periodic average method on
August 31, should be reported by Jack Sparrow Corporation’s at P111,024.
Statement 2: The cost of ending inventory of Model V calculators using the first in; first out method on August
31, should be reported by Jack Sparrow Corporation’s at P126,000.
Statement 3: The cost of ending inventory of Model V calculators using the moving average method on
August 31, should be reported by Jack Sparrow Corporation’s at P117,555.
a. Only 1 statement is correct. c. All statements are correct.
b. Only 2 statements are correct. d. All statements are incorrect.

Katnis Everdeen Company has the policy of valuing inventory at lower of cost and net realizable value. Data
pertaining to its three classes of sugar products for year 2024 are as follows:
CoCo Sugar Refined Washed
Estimated selling price/unit P3,000 P2,000 P2,500
Estimated cost to sell/unit 600 400 500
Cost per unit 2,500 1,500 2,200
Number of units 200 500 250
25. How much inventory should be shown in the company’s December 31, 2024, statement of financial position?
a. P1,555,000 b. P1,575,000 c. P1,650,000 d. P1,730,000

26. Using same information on Katnis Everdeen Company, if on January 1, 2024, the balance of allowance for
inventory write down were P3,000 for CoCo Sugar, P5,000 for Refined and P7,500 for Washed. Which of
the following is true regarding the amount that should be recognized in the Income Statement for year 2024?
a. A loss of P15,000 for CoCo Sugar, a loss of P5,000 for Refined and P42,500 gain on recovery for
Washed.
b. A loss of P20,000 for CoCo Sugar, a loss of P5,000 for Refined and gain on recovery of P5,000 for
Washed.
c. A loss of P17,000 for CoCo Sugar, P5,000 gain on recovery for Refined and P5,000 loss for Washed.
d. A loss of P17,000 for CoCo Sugar, a gain of P5,000 for Refined and a loss of P42,500 for Washed.

The following information were gathered to the work in process inventory of Luigi Company as of December
31, 2024:
Direct Overhead Cost to Selling price upon
Description Direct mats Labor complete completion
Merchandise inventory – A P55,000 P60,000 P25,000 P15,000 P180,000
Merchandise inventory – B 120,000 210,000 60,000 24,000 450,000
Merchandise inventory – C 125,000 110,000 75,000 32,000 378,000

It was estimated that cost to sell of each merchandise is equivalent to 10% of its selling price and the gross
profit rate is constant for all merchandise.
27. How much is the amount of work in process inventory should Luigi Company report in its December 31,
2024, statement of financial position using LCNRV approach?
a. P846,500 b. P829,200 c. P822,400 d. P805,000

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
On April 30, 2024, a fire at Macbeth Company’s warehouse caused a severe damage to its inventory. Based on
the recent history, Macbeth Company has a gross profit of 20%. The following information is available from
Macbeth’s records for the four months ended April 30, 2024:
Inventory, Jan 1 P500,000
Total purchases received and recorded, Jan. 1 – April 30, 2024 3,700,000
Total purchases of goods in transit and recorded April 30, 2024 (FOB SP) 500,000
Total freight costs of goods purchased and received 100,000
Total freight costs of goods purchased in transit 20,000
Total credit memo received on goods purchased and received 220,000
Total sales delivered and recorded, Jan. 1 – April 30, 2024 3,900,000
Total sales returns accounted and recorded, Jan. 1 – April 30, 2024 160,000
Total sales discounts taken by customers on recorded sales 90,000
Total discounts granted to favored customers and employees 150,000
A physical inventory disclosed usable damaged goods costing P285,000 which can be sold for P120,000,
undamaged goods in the warehouse having selling price of P300,000 and total selling price of goods out on
consignment to consignee, P450,000.
28. Statement 1: Assuming the gross profit rate of 20% is based on sales, the amount of loss on fire recognized
in its 2024 Income Statement is P248,000.
Statement 2: Assuming the gross profit rate of 20% is based on cost, the amount of loss on fire recognized
in profit or loss in its 2024 Income Statement is P93,333.
a. Only statement 1 is correct. c. Both statements are correct.
b. Only statement 2 is correct. d. Both statements are incorrect.
29. Culver Company purchases the majority of its inventory from three primary suppliers for re-sale to customers
around the world. Culver Company’s statement of financial position will include
a. Finished goods inventory.
b. Work-in-process inventory.
c. Merchandise inventory.
d. All of the choices are correct.
30. Companies must allocate the cost of all the goods available for sale (or use) between
a. The cost goods on hands at the beginning of the period as reported on the statement of financial
position and the cost of goods acquired or produced during the period.
b. The cost of goods on hand at the end of the period as reported on the statement of financial position
and the cost of goods acquired or produced during the period.
c. The income statement and the statement of financial position.
d. All of the choices are correct.
31. Mineral Makers Company keeps its inventory records using a perpetual system. On December 31, 2024,
the unadjusted balance in the inventory account is P64,000. Through a physical count on December 31,
2024, Mineral Makers Company determines that its actual merchandise inventory at year-end is P62,500.
Which of the following is true regarding the statement of financial position and the income statement of
Mineral Makers Company on December 31, 2024?
a. Inventory is increased and cost of goods sold is decreased by P1,500.
b. Inventory is decreased and cost of goods sold is increased by P1,500.
c. Inventory is increased and cost of goods sold is increased by P1,500.
d. Inventory is decreased and cost of goods sold is decreased by P1,500.
32. Train Inc. sells collectible jewelry on consignment from various manufacturers. Additionally, Train sells its
own line of specialty jewelry manufactured in-house. On December 31, 2024, during Train Inc 's annual
inventory count, an inexperienced new staff member included in Train’s ending inventory P350,000 worth of
inventory held on consignment from Metcalf Associates. Which of the following is correct regarding the
impact of this error on Train’s income statement and statement of financial position on December 31, 2024?
a. Ending inventory is understated by P350,000.
b. Retained earnings is overstated by P350,000.
c. Cost of goods sold is overstated by 350,000.
d. The financial statements are correctly stated.
33. If a company uses the periodic inventory system, what is the impact on the current ratio of including goods
in transit f.o.b. shipping point in purchases, but not ending inventory?
a. Overstate the current ratio.
b. Understate the current ratio.
c. No effect on the current ratio.
d. Not sufficient information to determine effect on the current ratio.
34. What is consigned inventory?
a. Goods that are shipped, but title transfers to the receiver.
b. Goods that are sold, but payment is not required until the goods are sold.
c. Goods that are shipped, but title remains with the shipper.
d. Goods that have been segregated for shipment to a customer.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
35. When using a perpetual inventory system,
a. no Purchases account is used.
b. a Cost of Goods Sold account is used.
c. two entries are required to record a sale.
d. All of these are correct.

36. Shake Company’s inventory experienced a decline in value necessitating a write-down to lower of cost or
net realizable value (LCNRV) of P230,000. This amount is material to Shake’s income statement and the
company follows IFRS. Where should Shake Company report this decline in value according to IFRS?
I. As a loss on the income statement.
II. As a separate component of other comprehensive income on the statement of comprehensive
income.
III. As part of cost of goods sold on the income statement.
a. Shake must use I.
b. Shake must use I, II or III.
c. Shake must use I, or III.
d. Shake must use III.

37. Which of the following statements is incorrect regarding the lower-of-cost-or-net realizable value (LCNRV)?
a. Net realizable value (NRV) is the selling price less estimated costs to complete and estimated costs to
make a sale.
b. In most situations, companies price inventory on a total-inventory basis.
c. One of two methods may be used to record the income effect of valuing inventory at net realizable
value.
d. Companies use an allowance account, the “Allowance to Reduce Inventory to Net Realizable Value.”

38. Artist Company owns a number of herds of cattle. Where changes in the fair value of herd of cattle should
be recognized in the financial statements, according to PAS 41, Agriculture?
a. In profit or loss only.
b. In the statement of cash flows only.
c. In other comprehensive income only.
d. In profit or loss or other comprehensive income.

39. Which of the following statements are correct according to PAS 41 (Agriculture)?
Statement I: A biological asset shall be measured on initial recognition and at the end of each reporting
period at its fair value less costs to sell without exception.
Statement II: Agricultural produce harvested from an entity’s biological assets shall be measured at its fair
value less costs to sell at the point of harvest.
a. I only. c. Both I and II.
b. II only. d. Neither I nor II.

The following information relates to biological assets of Norture Company for year 2024:
Price in the principal market P550,000
Commission to broker 20,000
Transport cost 12,000
Levies by commodity exchange 10,000
Transfer taxes and duties 22,000
Advertising cost 43,000

40. How much is the amount of biological asset reported in its December 31, 2024, Statement of Financial
Position?
a. P527,000 b. P538,000 c. P498,000 d. P486,000

Orleans Company began business in January of 2023. During the year, Orleans Company purchased a portfolio
of securities listed below. The composition of the securities did not change during the year 2024. Pertinent data
are as follows:
Shares FV + TC
Equity 1/1/23 TC paid 1/1/2023 FV 12/31/23 FV 12/31/24
Orton shares (FVPL) 15,000 P30,000 P3,450,000 237 240
Portun shares (FVPL) 25,000 75,000 3,750,000 165 166
Quarter shares (FVOCI) 30,000 60,000 4,500,000 145 157
Robust shares (FVOCI) 45,000 110,000 4,905,000 115 125

During year 2024, Orleans Company purchased additional 5,000 shares of Orton shares for 240 per share on
July 1, 2024, and additional 2,000 Robust shares for P115 per share on September 30, 2024. Half of Portun
shares were sold on August 1, 2024, for P167 per share. A P2 per share cash dividends were declared for all
shares on December 31, 2024.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
41. How much is the amount of unrealized gain (loss) in Orleans Company’s statement of financial position as
of December 31, 2024?
a. P950,000 UG b. P950,000 UL c. P1,180,000 UG d. P1,180,000 UL

42. How much is the amount of unrealized gain (loss) in Orleans Company’s Income Statement for the year
ended December 31, 2024?
a. P85,500 UG b. P85,500 UL c. P57,500 UG d. P57,500 UL

43. Statement 1: The total amount reported in Orleans Company’s Income Statement for year 2024 is P301,500.
Statement 2: The total amount of financial assets at fair value reported in Orleans Company’s December 31,
2024, Statement of Financial Position is P17,460,000.
a. Only statement 1 is true c. Both statements are true
b. Only statement 2 is true d. Both statements are false

44. Equity investments acquired by a corporation which are accounted for by recognizing unrealized holding
gains or losses as other comprehensive income and as a separate component of equity most likely are?
a. non-trading where a company has holdings of less than 20%.
b. trading investments where a company has holdings of less than 20%.
c. Investments where a company has holdings of between 20% and 50%.
d. investments where a company has holdings of more than 50%.

45. Which securities are purchased with the intent of selling them in the near future?
a. Investment in associates
b. Equity investment at fair value through other comprehensive income
c. Equity investment at fair value through profit or loss
d. Debt investment at amortized cost

46. Makati Incorporated has an equity investment at FVOCI purchased in 2023, the fair value of its investment
changes every year. Which if the following is true for year 2024?
a. The cumulative UGOL – OCI shall be reported in its statement of financial position as of December 31,
2024.
b. The cumulative UGOL – OCI shall be reported in its statement of comprehensive income for the period
ending December 31, 2024.
c. The transaction cost incurred in 2023 shall be capitalized in 2023 and expensed in 2024.
d. The UGOL – OCI in 2024 shall be reported in its income statement for the period ending December 31,
2024.

47. Under PFRS 9, transaction cost incurred are expensed in acquiring this type of equity securities:
a. FVPL only c. Both FVPL and FVOCI.
b. FVOCI only d. Neither FVPL nor FVOCI

48. A credit balance in UGOL at FVOCI at the end of the year should be interpreted as:
a. the net realized holding gain to date c. the net unrealized holding gains for that year
b. the net unrealized holding loss to date d. the net unrealized holding loss for that year

On January 1, 2023, Philippines Company acquired 10% of the outstanding voting shares of Maharlika
Incorporated for P2,000,000. These shares were designated as equity investments at fair value through other
comprehensive income. On August 1, 2024, Philippines Company gained the ability to exercise significant
influence over financial and operating policies of Maharlika Incorporated by acquiring additional 20% of the
outstanding shares for P5,000,000. The two purchases were made at prices proportionate to the value assigned
to Maharlika Incorporated’s net assets, which is equal to their carrying amounts except for an equipment with
book value of P3,000,000 and fair value of P4,000,000 and has estimated remaining useful life is 5 years and
inventories which fair value exceeds carrying value by P250,000. For the years ended December 31, 2023, and
2024, Maharlika Incorporated reported the following:
Description 2023 2024
Dividends declared and paid on 12/31 P3,000,000 P4,200,000
Profit for the year 7,000,000 8,000,000
Unrealized gain (loss) – oci reported on 12/31 (300,000) 200,000
Revaluation surplus reported on 12/31 – 500,000
49. Statement 1: The investment income reported by Philippines Company for year 2024 is P1,000,000.
Statement 2: The balance of investment in associate should Philippines Company report in its December
31, 2024, Statement of Financial Position is P7,350,000.
a. Only statement 1 is true c. Both statements are true
b. Only statement 2 is true d. Both statements are false

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
Quantum Company acquired on January 1, 2023, a 5-year, 10%, P5,000,000 face value bonds, for P4,639,522
dated January 1, 2023. The bonds which pay interest every December 31 had a 12% prevailing interest rate on
the date of acquisition. On October 31, 2025, the P4,000,000 face value was disposed of when the bonds were
quoted at 99 plus accrued interest. The bonds at the end of December 31, 2023, 2024 and 2025 were quoted at
101, 102 and 100, respectively.

The amortization table for this investment up to date of sale follows:

Date NI (10%) EI (12%) Amort AC
1/1/23 4,639,522
12/31/23 500,000 556,743 56,743 4,696,265
12/31/24 500,000 563,552 63,552 4,759,816
10/31/25 416,667 475,982 59,315 4,819,131

The amortization table for this investment after of sale follows:

Date NI (10%) EI (12%) Amort AC
10/31/25 963,826
12/31/25 16,667 19,039 2,373 966,199
12/31/26 100,000 115,944 15,944 982,143
12/31/27 100,000 117,857 17,857 1,000,000

50. If the debt investment was classified based on business model that do not have objective of collecting
contractual cash flows:
Statement 1: Quantum Company shall recognize loss on sale of P120,000 on October 31, 2025, in profit or
loss.
Statement 2: The total interest income for year 2025 income statement is P416,833.
Statement 3: The carrying value of the debt investment reported in its December 31, 2025, statement of
financial position is P1,000,000.
a. Only 1 statement is true c. All statements are true
b. Only 2 statements are true d. All statements are false

51. If the debt investment was classified based on business model that has an objective of collecting contractual
cash flows and to sell the investment when circumstances warrants:
Statement 1: Quantum Company shall recognize loss on sale of P104,695 on October 31, 2025, in profit or
loss.
Statement 2: The total interest income for year 2025 income statement is P495,021.
Statement 3: The carrying value of the debt investment reported in its December 31, 2025, statement of
financial position is P1,000,000.
a. Only 1 statement is true c. All statements are true
b. Only 2 statements are true d. All statements are false

52. If the debt investment was classified based on business model that has an objective of collecting contractual
cash flows only:
Statement 1: Quantum Company shall recognize loss on sale of P120,000 on October 31, 2025, in profit or
loss.
Statement 2: The total interest income for year 2025 income statement is P495,021.
Statement 3: The carrying value of the debt investment reported in its December 31, 2025, statement of
financial position is P966,199.
c. Only 1 statement is true c. All statements are true
d. Only 2 statements are true d. All statements are false

53. If the company’s cash flows test determined that the cash flows were representing payment solely for
principal and interest. What is the proper classification of the debt investment?
a. Debt investment at fair value through profit or loss
b. Debt investment at fair value through other comprehensive income
c. Debt investment at amortized cost
d. Either choice b or choice c of whether to sell or not to sell

54. Statement 1: Debt investments at fair value through other comprehensive income is initially measured at fair
value plus transaction cost and shall recognized interest income based on the effective interest on initial
recognition.
Statement 2: If an entity reclassifies a financial asset out of the amortized cost measurement category and
into the fair value through other comprehensive income measurement category, its fair value is measured at
the reclassification date with any gain or loss arising from a difference between the previous amortized cost
of the financial asset and fair value is recognized in other comprehensive income.
a. Only statement 1 is true c. Both statements are true
b. Only statement 2 is true d. Both statements are false

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
On August 1, 2024, Roller Company purchased a machine, an additional 5% cash discount can be availed if the
account is paid within 30 days from the date of invoice. The machinery has residual value of P250,000.
Information related to this acquisition were as follows:
Amount paid to acquire the machine (paid on August 31, 2024) P6,200,000
Freight, unloading, and delivery charges for machinery acquired 155,000
Custom duties and other charges for machinery acquired 390,000
Allowances and hotel accommodation paid to foreign technicians during installation and
test run of machine 750,000
Estimated dismantling cost at the end of 10-year useful life (10% effective interest) 285,312
Cost of training for personnel who will use the machine 310,000
55. How much is the initial cost of the machine acquired by Roller Company on August 1, 2024?
a. P6,581,000 b. P6,596,000 c. P7,305,000 d. P7,605,000
56. Statement 1: The amount of depreciation expense for year 2025 is P760,500 had Roller Company uses
straight line method of depreciation.
Statement 2: The amount of depreciation expense for year 2025 is P1,281,553 had Roller Company uses
sum-of-the-years-digit (SYD) method of depreciation.
Statement 3: The amount of depreciation expense for year 2025 is P1,069,453 had Roller Company uses
150% declining balance method of depreciation.
a. Only statements 1 and 2 are true c. Only statements 2 and 3 are true.
b. Only statements 1 and 3 are true d. All statements are true.
57. The cost of land typically includes the purchase price and all the following costs except ______?
a. grading, filling, draining, and clearing costs.
b. broker’s commission
c. private driveways and parking lots.
d. assumption of any liens or mortgages on the property.
58. Which of the following statements is/are true concerning property, plant and equipment (PPE)?
I. PPE acquired by donation (from a shareholder) should be recorded at the fair value of the donated asset
at the time of donation and credited to share premium.
II. When a group of assets is acquired for a lump-sum price, the total cost should be allocated to the individual
assets based on their carrying amounts.
III. Property acquired in exchange for shares of an enterprise should always be recorded the fair value of
the securities issued.
IV. When a property is acquired in exchange for another asset and the fair value of the asset given up is
clearly determinable, its cost is determined by reference to the fair value of the asset given up plus any cash
paid.
V. When an asset is acquired under a deferred payment plan, and the cash equivalent price is not reliably
determinable, the asset cost is the total of the undiscounted future cash payments required by the debt.
a. I and IV b. I, IV and V c. I, III and IV d. I only
59. Which of the following assets do not qualify for capitalization of interest costs incurred during construction
of the assets?
a. Assets under construction for a company's own use.
b. Assets intended for sale or lease that are produced as discrete projects.
c. Assets financed through the issuance of long-term debt.
d. Assets not currently undergoing the activities necessary to prepare them for their intended use.
60. Assets that qualify for interest cost capitalization include
a. assets under construction for a company's own use.
b. assets that are ready for their intended use in the earnings of the company.
c. assets that are not currently being used because of excess capacity.
d. All of these assets qualify for interest cost capitalization.
61. When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to
a. the total interest cost actually incurred.
b. a cost of capital charge for equity.
c. that portion of total interest cost which would not have been incurred if expenditures for asset
construction had not been made.
d. that portion of average accumulated expenditures on which no interest cost was incurred.
Solano Company had the following loans outstanding in 2024:
Specific construction loan, 8% interest, P1,000,000; General purpose loans, 11% interest, P10,000,000 and
another 9% interest, P10,000,000. The entity begun the self-construction of a building on January 1, 2024, and
the building was completed on December 31, 2024. The following expenditures were made during the year:
January 1, P3,000,000; July 1, P6,000,000; and November 1, P9,000,000.
62. The total cost of Solano Co’s new building is ______?
a. P18,000,000 b. P18,730,000 c. P19,440,000 d. P19,800,000

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
Toledo Company reported an impairment loss of P500,000 in 2023 related to an equipment acquired on January
1, 2015 for P4,000,000 with no residual value. Straight line annual depreciation was recorded at P160,000 until
2023. Depreciation for 2024 was computed based on the recoverable amount on December 31, 2023. The entity
decided to measure the asset using the revaluation model on December 31, 2026. On such date, the asset had
a fair value of P3,300,000.
63. Statement 1: The depreciation expense for the year 2024 is P128,750.
Statement 2: The amount of gain on reversal of impairment in 2026 is P406,250.
Statement 3: The balance of revaluation surplus on December 31, 2026 is P1,220,000.
a. Only statements 1 and 2 are true c. Only statements 2 and 3 are true.
b. Only statements 1 and 3 are true d. All statements are true.

64. Lany Printing Company determines that a printing press used in its operations has suffered an impairment
in value because of technological changes. An entry to record the impairment should?
a. recognize extra depreciation expense for the period.
b. include a credit to the equipment accumulated depreciation account.
c. include a credit to the equipment account.
d. not be made if the equipment is still being used.

65. All of the following are true with regard to impairment testing of long-lived assets except:
a. If impairment indicators are present, the company must conduct an impairment test.
b. The impairment test compares the asset’s carrying value with the lower of its fair value less cost to sell
and its value-in-use.
c. If the recoverable amount is lower than the carrying value, an impairment loss will be reported on the
period’s income statement.
d. If either the fair value less cost to sell or the value-in-use is higher than the carrying amount, no
impairment loss will be recorded.

66. All of the following are true of the recoverable amount used in the impairment test of a long-lived asset
except:
a. An asset’s recoverable amount is the lower of its value-in-use and its fair value less cost to sell.
b. An asset’s recoverable amount is the higher of its fair value less cost to sell and its value-in-use.
c. The recoverable amount is calculated as the asset’s value in use less costs to sell.
d. If an asset’s recoverable amount is higher than the carrying amount, no impairment loss will be reported
on the period’s income statement.

67. Ulysses Company entity acquired a building on January 1, 2022 for P9,000,000. At that date, the building
had a useful life of 30 years. On December 31, 2022, the fair value of the building was P9,600,000 and on
December 31, 2023, the fair value was P9,900,000. The building was classified as an investment property
and accounted for under the fair value model. On January 1, 2024, the entity decided to use the building as
property, plant and equipment. What is the measurement of the building as property, plant and equipment
on January 1, 2024?
a. P8,000,000 b. P8,400,000 c. P9,600,000 d. P9,900,000

68. When a non-current asset held for sale was re-measured at the end of the reporting period and there is a
decrease in its fair value less cost to sell, the decrease shall:
a. be recognized as impairment loss in profit or loss as part of continuing operation.
b. be recognized as impairment loss in profit or loss as part of discontinued operation.
c. be recognized as impairment loss directly in equity.
d. not be recognized since the asset is no longer subject to depreciation.

Voltes Five Company has several manufacturing plants all over the country. On October 29, 2024, a super
typhoon hit the province of Bicol where one of the entity’s large and major manufacturing plant is located.
Because of the damages caused by the calamity, the entity decided to sell the plant which constitute a major
line of business. All work stop at the manufacturing plant during the year ended 2024. The carrying amount of
the entire manufacturing plant amounted only to P2,000,000 on this date and the fair value less cost to sell is
P1,900,000. The operations of this manufacturing plant managed to generate P250,000 profit from operations
before tax. Termination and relocation cost of P60,000 was incurred in relation to this plant. The prevailing tax
rate was at 30%. The fair value less cost to sell was determined to be P1,990,000 and the value in use was at
P1,980,000 at the end of the year.
69. Statement 1: The single amount reported as discontinued operations in its income statement for year 2024,
is P126,000.
Statement 2: The amount reported in its statement of financial position as non-current asset held for sale as
of December 31, 2024, is P1,990,000.
a. Only statement 1 is true c. Both statements are true
b. Only statement 2 is true d. Both statements are false

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
Wallace Company purchased a trademark and incurred the following costs on January 1, 2024:
Net purchase price P3,000,000
Nonrefundable purchase taxes 200,000
Training cost of personnel who will use the trademark 250,000
Research expenditures associated with the purchase of the new trademark 480,000
Legal cost incurred to register the new trademark 320,000
Administrative salaries 240,000
The trademark is estimated to have an indefinite life. On December 31, 2024, the entity tested the trademark for
impairment. The entity determined that the trademark would generate annual cash flows of P330,000 for an
indefinite period. The appropriate discount rate is 9%.
70. Statement 1: The initial cost of the trademark is P3,520,000.
Statement 2: Wallace Company should record no impairment loss for the year 2024.
Statement 3: The impairment loss for year 2024 is P146,667.
a. Only statements 1 and 2 are true. c. All statements are true.
b. Only statement 1 is true. d. Only statements 1 and 3 are true.

Xyborg Corporation provided the following information regarding its Research XXY-10 included in the company’s
Intangible account as of December 31, 2024:
Research XXY-10 is for a research project which consists of the following charges:
Salaries of research staff P30,000
Patent acquired solely for the use in the project 15,000
Special equipment acquired and useful for various
Similar research activities 45,000
Patent acquired for use in several research
Projects including XXY-10 20,000
The equipment and patents have been found to be useful for approximately five years. Both the patents and
equipment were acquired at the beginning of 2024.
71. How much should be recognized as research and development expense for the year 2024?
a. P47,000 b. P52,850 c. P55,500 d. P58,000

Zorida Company insured the life of its president for P16,000,000, Zorida Company being the beneficiary of an
ordinary life insurance policy. The premium is P400,000. The policy is dated January 1, 2020. The cash surrender
value on December 31, 2023, and 2024 are P120,000 and P160,000, respectively. Zorida Company follows the
calendar year as its year-end. The president died on October 31, 2024, and the policy was collected on
December 31, 2024. No premium was refunded on the insurance settlement.
72. Statement 1: Zorida Company’s gain on life insurance settlement is P15,780,000.
Statement 2: The life insurance expense for year 2024 is P400,000.
a. Only statement 1 is true. c. All statements are true.
b. Only statement 2 is true. d. All statements are false.

73. A debtor firm’s 12/31/24 statement of financial position is to be issued of 4/15/25. A long-term obligation
contracted in 2021 for settlement on 1/15/25 was extinguished through cash payment on its due date. On
1/20/25, a 5-year note was issued to replace the cash used up for the payment made on 1/15/25. Which of
the following statements is correct?
a. The original obligation should be reported in the 2024 statement of financial position as a current liability
because the entity does not have an unconditional right to defer settlement of the liability for at least
twelve months after the reporting period.
b. The original obligation should be reported in the 2024 statement of financial position as a non-current
liability because the entity does have an unconditional right to defer settlement of the liability for at least
twelve months after the reporting period.
c. The new obligation entered on 1/20/25 should be reported in the 2024 statement of financial position as
a non-current liability because it is due to be settled beyond twelve months after the reporting period.
d. There should be no liability to be reported in the 2024 statement of financial position since the original
obligation was already extinguished before the date of the authorization for issuance.

74. Which of the following statements is incorrect concerning provisions?

a. A provision is a liability of uncertain timing and amount.
b. Provisions shall not be recognized for future operating losses.
c. A provision shall be used only for expenditures for which the provision was originally recognized.
d. Provisions shall be reviewed at the end of each reporting period and adjusted to reflect the current best
estimate.

Antonov Company operates a customer loyalty program. The entity grants loyalty points for goods purchased.
The loyalty points can be used by the customers in exchange for goods of the entity. The points have no expiry
date. During 2024, the entity issued 50,000 award credits and expected that 80% of these award credits shall
be redeemed. The total stand-alone selling price of the award credits granted is reliably measured at P1,000,000.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
In 2024, the entity sold goods to customers for a total consideration of P7,000,000 based on stand- alone selling
price. The award credits redeemed and the total award credits expected to be redeemed each year are:
Redeemed Expected to be redeemed
2024 15,000 80%
2025 7,950 85%
2026 2,550 85%
2027 15,000 90%
75. Statement 1: Antonov should recognize revenue from the awards credits in 2024 of P262,500.
Statement 2: Antonov should recognize revenue from the award credits in 2026 of P525,000.
a. Only statement 1 is true. c. All statements are true.
b. Only statement 2 is false. d. All statements are false.
76. Bond issuance costs, including the printing costs and legal fees associated with the issuance, should be __?
a. expensed in the period when the debt is issued.
b. recorded as a reduction in the initial carrying value of the bonds payable.
c. accumulated in a deferred charge account and amortized over the life of the bonds.
d. reported as an expense in the period the bonds mature or are retired.
77. The amortization of a premium on bonds payable should _____?
a. decreases the balance of the bonds carrying value.
b. increases the amount of interest expense reported.
c. increases the carrying amount of the bond.
d. increases the cash payment to bondholders.
On January 1, 2024, Boston Company issued 4,000 convertible bonds payable. The bonds have a three-year
term and are issued at 110 with a face amount of P1,000 per bond. Interest is payable annually in arrears at a
nominal 8% interest rate. Each bond is convertible at any time up to maturity into 100 ordinary shares with par
value of P5. When the bonds are issued, the prevailing market interest rate for similar debt instrument without
conversion option is 10%. The present value of 1 at 10% for 3 periods is 0.7513 and the present value of an
ordinary annuity of 1 at 10% for 3 periods is 2.4869. On December 31, 2024, the bonds were converted into
share capital.
78. Statement 1: Convertible bonds have both a liability component of P3,902,008 and an equity component of
P598,992.
Statement 2: Interest expense for the year 2024 is P380,100
Statement 3: The share premium will increase by P1,861,109 because of the conversion.
a. Only statements 1 and 3 are true. c. Only statement 3 is true.
b. Only statement 1 is false. d. Statements 2 and 3 are false.
79. The gain or loss from extinguishment of a financial liability by issuing equity instruments is presented as
___?
a. component of finance cost.
b. separate line item in the income statement.
c. component of other comprehensive income.
d. other income or other expense.
80. When treasury shares are purchased for more than the par value of the shares and the cost method is used
to account for treasury shares, what account(s) should be debited?
a. Treasury shares for the purchase price.
b. Treasury shares for the par value and retained earnings for the excess of the purchase price over the
par value.
c. Treasury shares for the par value and share premium for the excess of the purchase price over the par
value.
d. share premium for the purchase price.
81. Cushion Corp. purchased its own par value shares on January 1, 2024, for P20,000 and debited the treasury
shares account for the purchase price. The shares were subsequently sold for P12,000. The P8,000
difference between the cost and sales price should be recorded as a deduction from?
a. retained earnings.
b. net income.
c. share premium treasury to the extent that previous net “gains” from sales of the same class of shares
are included therein; otherwise, from retained earnings.
d. share premium treasury without regard as to whether or not there have been previous net “gains” from
sales of the same class of shares included therein.
82. Any gain from the sale of treasury shares shall be reported as?
a. gain on sale of treasury shares to be reported as other income.
b. share premium from treasury shares.
c. addition to retained earnings.
d. share premium – ordinary shares.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
83. In January 2024, Patty Corporation, a newly formed company, issued 10,000 shares of its P10 par ordinary
shares for P15 per share. On July 1, 2024, Patty Corporation reacquired 1,000 shares of its outstanding
shares for P12 per share. The acquisition of these treasury shares will:
a. did not change total shareholders’ equity.
b. decreased the number of issued shares.
c. decreased total shareholders’ equity.
d. increased total shareholders’ equity.

Presented below is the equity section of Oaks Corporation at December 31, 2023:
Share capital—ordinary, par value P20; authorized 75,000 shares;
issued and outstanding 45,000 shares P 900,000
Share premium—ordinary 250,000
Retained earnings 500,000
Total P1,650,000
During 2024, the following transactions occurred relating to equity:
3,000 shares were reacquired at P30 per share.
4,000 shares were reacquired at P35 per share.
1,800 shares of treasury shares were sold at P30 per share.
84. For the year ended December 31, 2024, Oaks reported net income of P480,000. Assuming Oaks accounts for
treasury under the cost method, what should it report as total equity on its December 31, 2024, statement
of financial position?
a. P1,965,000. b. P1,954,000. c. P1,952,800. d. P1,915,000.

85. On January 1, 2024, Culver Corporation had 110,000 shares of its P5 par value ordinary shares outstanding.
On June 1, the corporation acquired 10,000 shares to be held in the treasury. On December 1, when the
market price of the shares was P8, the corporation declared a 10% share dividend to be issued to
shareholders of record on December 16, 2024. What was the impact of the 10% share dividend on the
balance of the shareholders equity?
a. P50,000 decrease b. P80,000 decrease c. P88,000 decrease d. No effect
On January 1, 2024, an entity was organized with authorized capital of 500,000 shares of P100 par value.
January 5 Issued 30,000 shares at P220 a share. Share issue cost amount to P500,000.
June 30 Issued 5,000 shares for legal services when the fair value was P340 a share.
November 15 Issued 10,000 shares for a tract of land when the fair value was P360 a share.
86. Which of the following statements is false?
a. Upon issuance of share capital, any excess over the par or stated value is credited to share
premium.
b. Any share issue cost incurred is a direct deduction from equity.
c. On December 31, 2024, share capital should be reported at P4,500,000.
d. On December 31, 2024, share premium should be reported at P7,400,000.
87. At the beginning of current year, an entity issued 200,000 shares of P10 par value for P50 per share. During
the year, the entity reacquired 20,000 shares to be held as treasury at P150 per share. The entity sold 25%
of the treasury shares at P110 per share. Which of the following statements is true?
a. Purchase of treasury shares increase issued shares but decrease outstanding shares.
b. Treasury shares are presented as financial assets.
c. Entity shall debit retained earnings of P200,000 when reissuing 25% of the treasury shares.
d. Entity shall debit share premium – treasury shares of P200,000 when reissuing 25% of the treasury
shares.
On December 31, 2024, an entity issued 3,000 ordinary shares of P100 par value in connection with a share
dividend. The market value per share on the date of declaration was P150. The shareholders’ equity accounts
immediately before issuance of the share dividend were:
Ordinary share capital P100 par, 20,000 shares issued and outstanding P2,000,000
Share premium 3,000,000
Retained earnings 1,500,000
88. Statement 1: Declaration and issuance of share dividends increase total assets and total equity.
Statement 2: The entity shall report retained earnings of P1,200,000 after the share dividend.
a. Only statement 1 is true. c. All statements are true.
b. Only statement 2 is true. d. All statements are false.
89. In the cash flow statement, proceeds from short-term or long-term bank loan received are classified as cash
flow from?
a. Operating activities b. Investing activities c. Financing activities d. Revenue activities
Porcha Corp.'s transactions for the year ended December 31, 2024 included the following:
• Acquired 50% of Ford Corp.'s ordinary shares for P180,000 cash which was borrowed from a bank.
• Issued 5,000 shares of its preference shares for land having a fair value of P320,000.

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BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
• Issued 500 of its 11% debenture bonds, due 2026, for P392,000 cash.
• Purchased a patent for P220,000 cash.
• Paid P120,000 toward a bank loan.
• Sold equity securities classified as at FVOCI for P796,000.
90. Porcha’s net cash provided by investing activities for 2024 was?
a. P296,000 b. P396,000 c. P476,000 d. P616,000

Muyong Corporation reported pretax income of P4,500,000 for the year ended December 31, 2024. The following
temporary and permanent differences were recorded in the company’s book in reconciling taxable income to
pretax financial income.
Tax depreciation more than book depreciation P350,000
Proceeds from life insurance policy upon death of an officer* 450,000
Commission receivable 120,000
Accrued expenses 70,000
Prepaid expense 40,000
Fines and penalties 120,000
Interest revenue on bank deposits 25,000
Provision for litigation 340,000
*The beneficiary of the insurance policy is Muyong Corporation.
Tax rate is 25% in 2024 and in the future. Payments in previous quarters totaled P250,000.

91. How much is the total income tax expense for year 2024?
a. P266,667 b. P253,333 c. P1,036,250 d. P545,000

92. How much is the balance of deferred tax asset and deferred tax liability in its December 31, 2024, Statement
of Financial Position, respectively?
a. P127,500 and P102,500 c. P130,500 and P101,000
b. P102,500 and P127,500 d. P101,000 and P130,500

93. Net income after tax is:

a. The difference of taxable income and current income tax expense.
b. The financial income less any current income tax expense plus any income tax benefit.
c. The difference of financial income and total deferred income tax expense.
d. Cannot be determined.

94. A liability in 2024 is reported for financial reporting purposes but not for tax purposes. When this liability is
settled in 2025, a future taxable amount will:
a. pretax financial income will exceed taxable income in 2024.
b. the Company will record a decrease in a deferred tax liability in 2024.
c. total income tax expense for 2024 will exceed current tax expense for 2024.
d. will not be affected.

95. A long-term employee benefit obligation should reflect the amount which, if invested at measurement date,
would provide the necessary pre-tax cash flows to pay the accrued obligation when expected to be settled.
Where a deep market exists for all relevant financial instruments, PAS 19R requires that this amount is
invested in ___?
a. Risk-free securities c. Government bonds
b. A portfolio of high-quality shares d. A portfolio of high-quality corporate bonds

96. Which of these events will not cause a change in a defined benefit obligation?
a. Changes in the return on plan assets.
b. Changes in the estimated employee turnover.
c. Changes in the estimated salaries or benefits that will occur in the future.
d. Changes in mortality rate or the proportion of employees taking early retirement.

On January 1, 2024, Guevara’s Company reported the fair value of plan assets at P6,700,000 and defined
benefit obligation at P6,100,000. Transactions affecting the balances for the current year are as follows:
Current service cost P1,125,000
Past service cost 325,000
Contribution to the plan 1,290,000
Benefits paid to retirees at scheduled date 800,000
Actual return on plan assets 837,000
Decrease in defined benefit obligation due to changes in actuarial
assumption 135,000
Rate of return on high quality corporate bonds 10%

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
97. Statement 1: The amount of benefit expense reported in its statement of comprehensive income as a
component of profit or loss for year 2024, is P1,390,000.
Statement 2: The amount reported on the face of statement of financial positions is P802,000 surplus.
Statement 3: The balance of the fair value of plan asset at the end of 2024, is P8,027,000 and the balance
of the defined benefit obligation at the end of 2024, is P7,225,000.
a. Only 1 statement is true c. All statements are true
b. Only 2 statements are true d. All statements are false
98. The interest expense of the lessee during the year when payment is made in advanced shall be:
a. Total present value of lease liability after initial payment multiplied by effective rate of interest.
b. Lease liability at inception of the lease multiplied by implicit rate of interest.
c. Annul lease payment divided by implicit rate of interest multiplied by effective rate.
d. Cost of ROUA plus PV of restoration cost multiplied by implicit rate of interest.
99. Statement 1: The lessor will recognize the same gross profit whether the residual value is guaranteed by the
lessee or not guaranteed by the lessee in a sales type lease.
Statement 2: Any initial direct cost paid by the lessor shall reduce the amount of unearned interest income
at inception of the lease in a sales type lease.
a. Only statement 1 is correct c. Both statements are correct
b. Only statement 2 is correct d. Both statements are incorrect.
100. Statement 1: When the residual value guaranteed by the lessee at the end of lease term is higher than
the fair value of the underlying asset, settlement shall be made by the lessee and recognized as a loss.
Statement 2: When the residual value guaranteed by the lessee at the end of lease term is higher than
the fair value of the underlying asset, no settlement shall be made by the lessee and no recognition of any
gain or loss.
a. Only statement 1 is correct c. Both statements are correct
b. Only statement 2 is correct d. Both statements are incorrect.
On January 1, 2024, Precious Company leased an equipment with a useful life of 10 years from Care Company.
The lease term is for a period of 8 years. The annual rental is P210,100 payable every January 1 of each year
starting 2024. Precious Company incurred and paid P60,000 associated with the contract of lease. A P30,000
lease incentive was received by Precious Company at the commencement of the lease in form of reimbursement
from the P60,000 paid by Precious. Precious Company has the option to purchase the equipment at the end of
the lease term at P50,000 and it is reasonably certain that the option will be exercised. The implicit rate is 8%.
The equipment is estimated to have P80,000 of residual value at the end of lease term and P60,000 at the end
of its useful life.
101. Statement 1: The balance of lease liability as of December 31, 2024, is P1,213,779.
Statement 2: The interest expense for year 2024 is P89,670.
a. Only statement 1 is correct c. Both statements are correct
b. Only statement 2 is correct d. Both statements are incorrect.
102. Statement 1: The carrying value of the right-of-use asset as of December 31, 2024, is P1,233,572.
Statement 2; The depreciation expense of the ROUA for year 2024, is P130,097.
a. Only statement 1 is correct c. Both statements are correct
b. Only statement 2 is correct d. Both statements are incorrect.
Northgate Co. leased equipment from Sander Co. on July 1, 2024, for an eight-period expiring June 30, 2032.
Equal annual payments under the lease are P200,000 and are due on July 1 of each year. The first payment
was made on July 1, 2024. The rate of interest contemplated by Northgate and Sander is 10%. The cash selling
price of the equipment is P1,240,000 and the cost of equipment on Sander’s accounting records was P1,100,000.
103. The amount of profit on sale and the interest income that Sander Co. would record for the year ended
December 31, 2024, shall be ______?
a. P140,000 and P52,000. c. P140,000 and P104,000.
b. P340,000 and P104,000. d. P340,000 and P52,000.
Nestor Company’s owners’ equity was affected by the following transactions during 2024. At the beginning of
the year, there are 100,000 ordinary shares outstanding.
February 1 21,000 ordinary shares were sold in the market.
April 1 Purchased 5,000 ordinary shares to be held in treasury.
July 1 Issued P1,000,000, 5-year, 10% bonds at face value. Each P1,000 bond is convertible in 50
ordinary shares.
July 1 35,000 ordinary shares were sold.
October 1 A 10% bonus issue was declared and distributed.
Profit for the year ended December 31, 2024, is P2,926,000. The tax rate is 30%.
104. Nestor’s basic earnings per share and diluted earnings per share, respectively, shall be _____?
a. P19.45 and P16.84 c. P20.00 and P16.84
b. P20.00 and P17.04 d. P19.45 and P17.04

105. When EPS is computed, dividends on preference shares are?

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BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
a. reported separately on the income statement.
b. ignored because they do not pertain to the ordinary shares.
c. added because they represent earnings to preference shareholders.
d. subtracted because they represent earnings to preference shareholders.

106. Nikos Company has declared and paid cash dividends of P210,000 and net income of P620,000. At
yearend, its ordinary shareholders’ equity is P2,000,000 and it has 200,000 ordinary shares outstanding.
The book value per share for the Nikos Company:
a. P2,000,000 divided by 200,000 shares
b. (P2,000,000 – 210,000) divided by 200,000 shares.
c. P620,000 divided by 200,000 shares
d. Cannot be determined based on the information provided.

107. An entity has 5%, cumulative, fully participating preference share outstanding at the end of current year
with 2 years dividend in arrears. To compute the book value per share of the preference share:
a. (Liquidating value + current year dividends + participation in remainder) / outstanding share
b. (Liquidating value + Liquidating premium + dividends in arrears + current year dividend + participation
in remainder) / outstanding shares
c. (Total par of outstanding preference shares + Liquidating premium + dividends in arrears + current year
dividend + participation in remainder) / outstanding shares
d. (Liquidating value + dividends in arrears + current year dividend + participation in remainder) / Total
shares issued

108. Book value per share is:

a. Amount allocated from total shareholder’s equity / (Shares issued + treasury shares – subscribed
shares)
b. Amount allocated from total shareholder’s equity / (Shares issued – treasury shares – subscribed
shares)
c. Amount allocated from total shareholder’s equity / (Shares issued – outstanding shares + subscribed
shares)
d. Amount allocated from total shareholder’s equity / (Shares issued – treasury shares + subscribed
shares)

Richard Company and its divisions are engaged solely in manufacturing. The data pertain to the industries
in which operations were conducted for the year ended December 31, 2024:
Segments Intersegment Sales External Sales
Car Division 10,000,000 12,000,000
Toy Division 3,000,000 5,000,000
Shoes Division 5,000,000 8,000,000
Bags Division 1,200,000 2,000,000

109. What is the minimum total external revenue of the reportable segments of Richard Company must be?
a. P2,100,000 b. P6,900,000 c. P15,750,000 d. P20,250,000

110. Which of the following is not true with regards to accounting for small and medium-sized entities are entities?
a. Listed companies, no matter how small, may use the IFRS for SMEs
b. The standard does not contain a limit on the size of an entity that may use the IFRS for SMEs provided
that it does not have public accountability.
c. A subsidiary whose parent or group uses full IFRSs may use the IFRS for SMEs if the subsidiary itself
does not have public accountability.
d. The standard does not require any special approval by the owners of an SME for it to be eligible to use
the IFRS for SME

111. Notes to the financial statements SMEs are normally in this sequence:
I. Basis of preparation (i.e. IFRS for SMEs)
II. Summary of significant accounting policies, including information about judgements and information about
key sources of estimation uncertainty.
III. Supporting information for items in financial statements.
IV. Other disclosures
a. I, II, III b. II, I, III, IV c. I, II, III, IV d. III, I, II, IV

112. Small and medium-sized entities are entities that, except:

a. holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.
b. do not have public accountability.
c. publish general purpose financial statements for external users.
d. publish general purpose financial statements that present fairly the financial position, operating results,
and cash flows.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BATCH 48 – October 2024 CPA Licensure Examination
FAR-Preweek
113. An SME shall recognize revenue from the sale of goods when the following conditions are satisfied, except:
a. the entity has transferred to the buyer the insignificant risks and rewards of ownership of the goods.
b. the entity retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold.
c. the amount of revenue can be measured reliably.
d. it is probable that the economic benefits associated with the transaction will flow to the entity.
e. the costs incurred or to be incurred in respect of the transaction can be measured reliably.

114. Which of the following is not an acceptable subsequent measurement of financial instruments by SMEs:
a. Debt instruments that are classified as current assets or current liabilities are measured at the dis-
counted amount of the cash or other consideration expected to be paid or received.
b. Debt instruments at amortized cost using the effective interest method.
c. If the arrangement constitutes a financing transaction, the entity shall measure the debt instrument at
the present value of the future payments discounted at a market rate of interest for a similar debt
instrument.
d. Investments in non-convertible preference shares and non-puttable ordinary or preference shares that
are publicly traded or their fair value shall be measured at fair value with changes in fair value recognized
in profit or loss.
Reference: IFRS for SMEs Section 11 undiscounted

115. On the first-time adoption of the IFRS for SMEs, the following shall not be retrospectively adjusted but rather
continued to be accounted for under the entity’s previous financial reporting framework until derecognized,
except:
a. Continuing operations
b. Hedge accounting.
c. Accounting estimates
d. Measuring non-controlling interests
Reference: IFRS for SMEs Section 35 discontinued operations

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