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Junior Philippine Institute of Accountants College of Business Administration University of the East - Caloocan
Qualifying Exam evie!er "#$% &inancial Accounting and eporting
I.
Development of of Accounting Pr Profession 1. It is the body body authorized authorized by law to to promulgate promulgate rules and and regulations regulations affecting affecting the practice practice of the accountancy professions in the Philippines. a. Philippi Philippine ne Institut Institute e of Certified Certified Public Public Accou Accountan ntants ts b. Boar Board d of Acc Accou ount ntan ancy cy c. Secur Securiti ities es and and Echan Echange ge Commi Commissi ssion on d. Professi Professional onal !egulati !egulation on Commissio Commission n b. Boar Board d of Acc Accou ount ntan ancy cy ". #he inter internati national onal accounti accounting ng stand standards ards are a. !ules$ba !ules$based sed rather rather that that princi principles ples based based b. Principle Principle$bas $based ed rath rather er than than rule based based c. Based Based on on regula regulatio tions% ns% not not conc concept ept d. &ocuse &ocused d on 'ua 'uanti ntitat tati(e i(e rule rules s
b. Principl Principle-ba e-based sed rathe ratherr than than rule rule based. based. ). #his accounting accounting concept *ustifies the usage usage of of accruals accruals and deferrals. deferrals. a. +ate +ateri ria ality ity b. Cash Cash bas basis is of accou accounti nting ng
c. Con Consis sisten tency d. ,oin ,oing g conc concer ern n
d. Goin Going g con conce cern rn -. An item cannot cannot be recogniz recognized ed in the balance balance sheet sheet or the income income statement statement unless unless it meets the two criteria of a. b. c. d.
b. Prob Probab able le econ econom omic ic bene benefi fits ts
Criterion " +easurement reliability +ea +easure surem ment re relia liabilit ility y !ele(ance to others !ele(ance to others
Meas Measur urem emen entt rel relia iabi bili lity ty
/. #he IASB &ramewor0 outlines two underlying assumptions of financial statements. #hese are a. b. c. d.
Assumption 1 Accrual basis of accounting Cash basis of accounting Accrual basis of accounting Cash basis of accounting
Assumption " !ele(ance and reliability Insol(ency assumption ,oing concern assumption Perpetual life concept
c. Accrual basis of accounting; going concern assumption . 2hich of the following statements concerning the &ramewor0 is incorrect3 a. Primary responsibility for the preparation and presentation of the financial statements rests with the management. b. #he &ramewor0 pro(ides that the transactions must be accounted for in accordance with their legal form. c. &inancial statements must not eclude comple matters in order to achie(e understandability. d. 2here any conflict arises between the Framework and a PFRS % the re'uirement of the P&!S pre(ails.
b. he !rame"or# provides that the transactions must be accounted for in accordance "ith their legal form. 4. In respect to information included in financial statements% the accounting concept of 5prudence6 ensures that7 a. #he financial statements report what they purport to report . b. A degree of caution in the eercise of *udgments about estimates is made. c. An appropriate balance is achie(ed between the rele(ance and the reliability of information that has been included. d. Information is pro(ided to users within the time period in which it is most li0ely to bear on their decisions.
b. A degree of caution in the e$ercise of %udgments about estimates is made. II.
&ash and &ash '(uivalents 8. Information about the sources and uses of an enterprise9s cash and cash e'ui(alents is pro(ided in the a. Balance sheet b. Income statement
c. Statement of changes in e'uity d. Cash flow statement
d. &ash flo" statement :. #he following data pertain to Sanghaya Corporation on ;ecember )1% "<17 Current account at BPI
P )%<<<%<<<
Current account at PB =/<%<<<> Payroll account 1%<<<%<<< &oreign ban0 account ? restricted =in peso> 4/<%<<< Postage tamps 1%<<< Employee9s post dated chec0 -%<<< I@ from controller9s sister 1<%<<< Credit memo from a (endor for a purchase return "<%<<< #ra(eler9s chec0 /<%<<< ot$sufficient funds$chec0 1/%<<< +oney order )<%<<< Petty cash fund =-%<<< in currency epenses receipts for %<<<> 1<%<<< #reasury bills% due ))114 =purchased 1")11> )<<%<<< #reasury bills% due 1)114 =purchased 111> 11<%<<< Based on the abo(e information% compute for the cash and cash e'ui(alent that would be reported on the ;ecember )1% "<1 balance sheet. a. P -%))-%<<< b. P -%)8-%<<<
c. P -%-<-%<<< d. P -%-<:%<<<
Current account at BPI Payroll account #ra(elerDs chec0 +oney order Petty cash fund =the amount in currency only> #reasury bills% due ))114 b.
)%<<<%<<< 1%<<<%<<< /<%<<< )<%<<< -%<<< )<<%<<< P )*+,)*
1<. ou noted the following composition of Fiyas Company9s 5cash account6 as of ;ecember )1% "<1 ;emand deposit #ime deposit $ )< days S& chec0 of customer +oney mar0et placement =due Gune )<% "<14> Sa(ings deposit in a closed ban0 I@ from employee Pension fund Petty cash fund Customer chec0 dated Ganuary 1% "<14 Customer chec0 outstanding for 18 months
Additional information are as follows7 a> Chec0 of P 1<<%<<< in payment of accounts payable was recorded on ;ecember )1% "<1 but mailed to suppliers on Ganuary 4% "<14. b> Chec0 of P )<<%<<< dated Ganuary 1/% "<14 in payment of accounts payable was recorded and mailed on ;ecember )1% "<1.
c> #he company uses the calendar year. #he cash receipts *ournal was held open until Ganuary 1/% "<14% during which time P-<<%<<< was collected and recorded on ;ecember )1% "<11. #he cash and cash e'ui(alent to be shown on the ;ecember )1% )<1 balance sheet is a. b. c. d.
P /%<1<%<<< P %/1<%<<< P %//<%<<< P %"/<%<<<
;emand deposit #ime deposit Petty cash fund ndeli(ered chec0 =payment to suppliers> Post dated chec0 =payment to suppliers> 2indow dressing
III.
P )%<<<%<<< "%<<<%<<< 1<%<<< 1<<%<<< )<<%<<< =-<<%<<<> a. P */*
Ban# 0econciliation and Proof of &ash 11. #he *ournal entries for a ban0 reconciliation a. +ay include a debit to accounts payable for an S& chec0. b. +ay include a credit to accounts recei(able for an S& chec0. c. +ay include a debit to office epense for ban0 ser(ice charges. d. Are ta0en from the balance per ban0 only. c. May include a debit to office e$pense for ban# service charges. 1". A proof of cash is a a. Proof of company9s li'uid position. b. Proof of the eistence of a cash deposit in a ban0. c. !econciliation of the cash receipts and payments during the pre(ious period% together with the beginning and ending balances of cash. d. !econciliation of the cash receipts and payments during the current period% together with the beginning and ending balances of cash.
d. 0econciliation of the cash receipts and payments during the current period* together "ith the beginning and ending balances of cash. 1). #he boo00eeper of Sambisig Company recently prepared the following ban0 reconciliation on ;ecember )1% "<17
Balance per ban0 statement
"<%<<<%<<<
Add7 ;eposit in transit Chec0boo0 and other ban0 charge Error made by Sambisig in recording chec0 1< Customer chec0 mar0ed ;AI& #otal ;educt7 @utstanding chec0s ote collected by ban0 =includes P "<<%<<< interest> Balance per boo0
Sambisig has P 1%<<<%<<< cash on hand on ;ecember )1% "<1. #he amount to be reported as cash on the balance sheet as of ;ecember )1% "<1 should be7 a. b. P 1:%<<%<<< c. P 18%<<%<<<
Balance per boo0 Chec0boo0 and other ban0 charge Chec0 mar0ed as ;AI& otes collected Cash on hand Boo0 error Ad*usted cash balance
d. P "<%<<%<<< e. P 1:%4/<%<<<
18%<<<%<<< =/<%<<<> =/<<%<<<> "%)<<%<<< 1%<<<%<<< =1/<%<<<> c. 1*2*
1-. !econciliation of Adliwa Corporation9s ban0 account at o(ember )<% "<1 follows7 Balance per ban0 statement ;eposit in transit Chec0s outstanding Correct cash balance Balance per boo0s Ban0 ser(ice charge Correct cash balance
P )%1/<%<<< -/<%<<< =-/%<<<> P )%///%<<< P )%//8%<<< =)%<<<> P )%///%<<<
;ecember data are as follows7 Chec0s recorded ;eposits recorded Collection by ban0 =P<<%<<< plus interest> S& chec0 returned with ;ecember ban0 statement Balances
#he chec0s outstanding on ;ecember )1% "<1 amount to7 a. b. P-/%<<< c. P1)/%<<<
d. P:<%<<< e. one of the abo(e
Chec0s recorded by boo0 =;ecember> Chec0s recorded by ban0 =;ecember> Chec0s outstanding =o(ember> Chec0s outstanding on ;ecember )1 I3.
)%/-<%<<< =)%-/<%<<<> -/%<<< b. /+*
0eceivables 1/. Credit balances in accounts recei(ables should be classified as a. Current liabilities c. Addition to current assets b. Part of accounts payable d. ;eduction from accounts recei(able
b. Part of accounts payable 1. Firayag Company pro(ided the following transactions affecting accounts recei(able for the year "<17
Sales =cash and credit> Cash recei(ed from credit customers =too0 ad(antage of -1<% n)< discount feature> Cash recei(ed from cash customers Accounts recei(able written off as worthless Credit memorandum issued to credit customers for sales returns and allowances Cash refunds gi(en to cash customers for sales returns and allowances !eco(eries on accounts recei(able written off as uncollectible in prior periods but not included in cash recei(ed from customers stated abo(e
#he balances on Ganuary 1% "<1 were as follows7 Accounts recei(able Allowance for doubtful accounts
:/<%<<< 1<<%<<<
#he entity pro(ided for uncollectible account losses by crediting allowance for doubtful accounts in the amount of P4<%<<< for the current year. 2hat are the balances of accounts recei(able and allowance for doubtful epense on ;ecember )1% "<13 a. 1%)<<%<<< "<<%<<<
b. 1%)<<%<<<% 1)<%<<<
c. 1%-"%<<<% )<<%<<<
Beg. bal Credit sales
Accounts !ecei(able :/<%<<< H)%8<<%<<< HH)%1/<%<<< /<%<<< "/<%<<< a. /*+*
2ritten off
Allowance for ;A 1<<%<<< /<%<<< 4<%<<<
8<%<<<
d. 1%-4%<<<% "<<%<<<
Collections 2ritten off Credit memo
Beg. bal. ;A epense !eco(ery of A!
a. 1* HCredit sales #otal sales ? cash sales )%8<<%<<< /%:<<%<<< ? "%1<<%<<< HHCollection Cash recei(ed J discount or cash recei(ed 1 $ discount rate )%1/<%<<< )%<"-%<<<.: !eco(ered accounts recei(able are subse'uently collected% hence it is not included in computing for ending balance of accounts receu(able 3.
Inventories 14. @n ;ecember )1% "<1% a storm surge damaged the warehouse of Siuala Company. #he following pertains to the data reco(ered.
In(entory Purchases Cash sales Collections of accounts recei(able Accounts recei(able ,ross profit on sales 2hat is the in(entory loss from the storm surge3 a. 1%4"<%<<< b. "%"<%<<< c. 1%18<%<<<
4anuary / 1%/<<%<<<
4<<%<<<
December +/ /%/<<%<<< :<<%<<< 8%-<<%<<< 1%1<<%<<< -
d. "%4<<%<<<
Beg bal Sales =s'ueeze>
Accounts !ecei(able 4<<%<<< 8%8<<%<<<
Beg bal. Purchases
Collections 8%-<<%<<< C@,SH Ending bal 1%1<<%<<< H Cost of ,oods Sold #otal sales =1$,ross Profit on sales> =8%8<<%<< =1$.-<> /%8"<%<<< 3I.
In(entory 1%/<<%<<< /%/<<%<<< /%8"<%<< < c. /*/,*
'(uity Investments 18. &rade*as Company ac'uired an e'uity financial instrument for P-%<<<%<<< on Gune 1/% "<1. #he financial instrument is classified as financial asset at fair (alue through other comprehensi(e income. ;irect ac'uisition cost amounted to P4<<%<<<. @n ;ecember )1% "<1% the fair (alue of the instrument was P/%/<<%<<< and the transaction costs that would be incurred on the sale of the in(estment are estimated at P-<%<<<. 2hat gain should be recognized in profit or loss for the year ended ;ecember )1% "<13 a. P:<<%<<< b. P8<<%<<< c. P< d. P"<<%<<<
c. P 1:. Alipio Company pro(ided the following data for "<17 i. !ecei(ed P/<<%<<< cash di(idend from 2illiam Company. ii. !ecei(ed P<%<<< li'uidating di(idend from #rinidad Company. Alipio owns /K interest in #rinidad. iii. ,onzales Company declared P"%<<<%<<< cash di(idend from which Alipio owns "K interest in ,onzales9s e'uity. ;i(idends are payable on the 1/ th of Ganuary the following year. 2hat amount should Alipio report as di(idend income for "<13 a. P/-<%<<< b. P1<<%<<< c. P<<%<<< d. P-<%<<<
a. P)* Cash di(idend from 2illiam Company Cash di(idend from ,onzales Company ="%<<<%<<
/<<%<<< -<%<<< /-<%<<<
3II.
Property* Plant and '(uipment "<. #he following costs 'ualify for recognition ecept a. Cost of site of operation b. Cost of opening a new facility c. Cost of employee benefits of persons doing the installation d. Professional fees c. &ost of employee benefits of persons doing the installation "1. #he cost model means that the PPE are carried at cost less any accumulated depreciation and any accumulated impairment loss. #he re(aluation model means that the PPE are carried at the fair (alue at the date of re(aluation less any subse'uent accumulated depreciation and subse'uent accumulated impairment loss a. Both statements are false b. Both statements are true c. @nly the first statement is true d. @nly the first statement is false. b. Both statements are true "". @n Ganuary 1% "<1% #hor Company too0 out a loan of P1"%<<<%<<< in order to finance specifically the reno(ation of a building. #he loan carried annual interest at 1
d. P,* Interest incurred Interest income Capitalized borrowing cost 3III.
=1"%<<<%<<< %1< 1<1">
1%<<<%<<< =1/<%<<<> 8/<%<<<
5tatement of !inancial Position "). Coulson Company reported the following assets on ;ecember )1% "<1 Cash =includes P1%<<<%<<< sin0ing fund and P-<<%<<<
-%<<<%<<<
postdated chec0>> Accounts !ecei(able In(entory ;eferred #a Asset oncurrent Asset Feld for Sale #he accounts recei(able is comprised of the following amount Customers9 debit balance% net of customers9 credit balance of P"<<%<<< Allowance for doubtful accounts Selling prince of unsold in(entory sent out on consignment at 1"/K of cost and already included in the ending in(entory at cost Accounts !ecei(able
%8<<%<<< -%/<<%<<< "%/<<%<<< )%<<<%<<<
/%<<<%<<< =4<<%<<<> "%/<<%<<<
%8<<%<<<
@n ;ecember )1% "<1% what amount should be reported as total current assets3 a. P1/%<<<%<<< b. P14%<<<%<<< c. P14%/<<%<<< d. P1%<<%<<< Cash =-%<<<%<<<$1%<<<%<<<$-<<%<<<> Accounts !ecei(able =/%<<<%<< In(entory CA held for sale
I6.
"%<<%<<< -%:<<%<<< -%/<<%<<< )%<<<%<<< a. /**
5tatement of &omprehensive Income "-. Benedict Company pro(ided the following data for the current year Income from continuing operations Income from discontinued operations nrealized gain on a(ailable for sale securities nrealized gain on futures contract designated as a cash flow hedge Actuarial loss during the year fully recognized in the other comprehensi(e income &oreign translation ad*ustment $ debit !e(aluation surplus during the year
2hat is the comprehensi(e income for the current year3 a. P8%-<<%<<< b. P:%<<<%<<< c. P8%<<<%<<< d. P8%"<<%<<< Income from continuing operations Income from discontinued operations
/%<<<%<<< <<%<<<
nrealized gain on a(ailable for sale securities nrealized gain on futures contract Actuarial loss Loss on foreign translation ad*ustment !e(aluation surplus
6.
:<<%<<< -<<%<<< =)<<%<<<> =1<<%<<<> "%/<<%<<< b. 7**
5tatement of &ash !lo"s "/. 2hich of the following is not an ob*ecti(e of cash flow statements3 a. #o pro(ide information to enable assessment of the ability of the entity to generate future cash flows. b. #o pro(ide information to enable assessment of the ability of the entity to pay di(idends and meet financial obligations c. #o pro(ide information to enable assessment of the ability of the entity to generate long term profitability. d. #o pro(ide information to enable assessment of the ability of the entity to finance changes in the nature and scope of acti(ities.
d. o provide information to enable assessment of the ability of the entity to finance changes in the nature and scope of activities. ". Fow would cash recei(ed from the sale of shares in another company be classified in a cash flow statement3 a. @perating acti(ities c. &inancing acti(ities d. one of the abo(e b. In(esting acti(ities
b. Investing activities 6I.
'rror &orrection "4. Gac0son Company9s statement included errors as follows7 ear "<1/ "<1
Fow much should retained earnings be retroacti(ely ad*usted at Ganuary 1% "<143 a. ;educt P"/<%<<< c. Add P)/<%<<< b. Add P"/<%<<< d. Add P1/<%<<<
nderstated depreciation on "<1/ nderstated ending
Effect on et Income
Ad*ustment to retained earnings
@(erstated
;educt /<%<<<
nderstated =due to
Add )<<%<<<
in(entory on "<1 @(erstated depreciation on "<1
o(erstated C@,S> nderstated
Add 1<<%<<< c. 8et ad%ustment9 Add +*
"8. A change in accounting policy from one that is not generally acceptable to one that is generally acceptable should be treated as a. An error and corrected by prior$period ad*ustment. b. A change in accounting policy and the cumulati(e effect included in the net income. c. A change in accounting policy and prior period financial statements are related to profit or loss. d. A change in accounting policy and ad*ustments are made prospecti(ely.
a. An error and corrected by prior-period ad%ustment. 6II.
Accrual Basis and &ash Basis ":. Accrual basis profit is more useful for a. Predicting the performance of an entity for the succeeding reporting period. b. ;etermining the amount of income ta payable to the go(ernment. c. ;etermining the amount that will be paid as interest to creditors and di(idends to shareholders. d. Predicting the long term performance of an entity.
a. Predicting the performance of an entity for the succeeding reporting period. )<. 2hen con(erting from cash basis to accrual basis of accounting% which of the following ad*ustments should be made to cash collections from customers to arri(e at the accrual bases of sales3 a. Add beginning accounts recei(able b. Subtract beginning accounts recei(able c. Subtract ending account recei(able d. Add ending accounts recei(able
d. Add ending accounts receivable )1. Sy Company reported sales re(enue of P"%)<<%<<< in its income statement for the year ended ;ecember )1% "<1. Additional information are as follows7 Accounts recei(able Allowance for uncollectible accounts
1")1"<1/ "%<<<%<<< 4<%<<<
1")1"<1 "%<<%<<< 1"<%<<<
;uring the year. Sy wrote off uncollectible accounts totalling P)<%<<<. nder cash basis of accounting% Sy would ha(e reported "<1 sales of a. P1%4<%<<< c. P1%4"<%<<< d. one of the abo(e b. P1%"<%<<< Accounts !ecei(able Beg. bal. "%<<<%<<< Sales "%)<<%<<< 2rite$off )<%<<< Collections a. /*2:* Ending bal. "%<<%<<< )". &errer Company 0ept its records on a cash basis. At the end of "<1% the accountant prepared the following cash basis income statement7 !e(enue Epenses et income
1%:1<%<<< 8<:%<<< 1%1<1%<<<
In preparing the income statement% the following amounts of accrued% prepaid and unearned items were ignored at the end of "<1/ and "<17
#he net income on the accrual basis for "<1 should be7 a. P1%14%<<< b. P1%<4%<<< c. P1%<)/%<<< d. P1%1<)%<<< nad*usted net income ;ecrease in accrued re(enue Increase in unearned re(enue HIncrease in accrued epense HHIncrease in prepaid epenses Ad*usted net income
1%1<1%<<< =18%<<<> =-"%<<<> =1%<<<> 1<%<<< c. /*+*
H Epense Account 1%<<< Accrued Epense =Liability> 1%<<< #hus% an increase in a trade current liability account is a deduction from net income of cash basis to arri(e at accrual basis net income HHPrepaid Epense =Asset> 1<%<<< Epense Account 1<%<<< #hus% an increase in trade current asset account is an addition to net income of cash basis to arri(e at accrual basis net income
6III.
Bonds Payable
)). @n Ganuary 1% "<1. +adrid Company issued :K bonds in the face amount of P-%<<<%<<<% which mature on Ganuary "% "<"/. #he bonds were issued for P)%4/%<<< to yield 1
;ate
)/. 2hich of the following are the essential characteristics of an intangible asset3 a. Identifiability% controlled by the enterprise% epected future economic benefits and indefinite useful life. b. Identifiiability% controlled by the enterprise% and indefinite useful life. c. Identifiability% owned by the enterprise% epected economic benefits and definite useful life. d. Identifiability% controlled by the enterprise and epected future economic benefits
d. Identifiability% controlled by the enterprise and epected future economic benefits ). 2hich of the following are considered as research and de(elopment acti(ity3 i. Laboratory research aimed at disco(ery of new 0nowledge ii. ;esign% construction and testing of pre$production prototypes and models iii. !outine design of tools% *igs% molds and dies. i(. Conceptual formulation and design of product or process alternati(es. a. i% ii% iii and i( b. ii% iii and i( only c. i% ii and i( only d. i and i( only.
c. i* ii and iv only 63.
Biological Asset Ingat emen company has a herd of 1< " year old animals on Ganuary 1% "<1/. @ne animal aged "./ years was purchased on Guly 1% "<1/ for P1<8% and one animal was born on Guly 1% "<1/. o animals were sold or disposed of during the year. #he fair (alue less cost of disposal per unit is as follows7 " year old animal on Ganuary 1 1<< "./ year old animal on Guly 1 1<8 ew born animal on Guly 1 4< " year old animal on ;ecember )1 1
a. 1%-<< b. 1%)"< &air (alue of ) yo animals on ;ecember =111"<> &air (alue of <./ yo animal on ;ecember =1 8<>
c. 1%--< d. 1%)< 1%)"< 8< a. /*)
)8. 2hat is the gain from change in fair (alue due to price change3 a. b. ":" d. ")4 c. """ e. // 1< " year old animals N=1 1 1O 1 newborn on Guly N=4"$4<> 1O
63I.
/< ) " d.
Property* Plant and '(uipment <0evaluation=
):. ueen #ela Company owned an e'uipment costing P/%"<<%<< with original residual (alue of P-<<%<<<. #he life of the asset is 1< years and was depreciated using the straight line method. #he e'uipment has a replacement cost of P8%<<<%<<< with residual (alue of P"<<%<<<. #he age of the asset is - years. #he appraisal of the e'uipment showed a total re(ised useful life of 1" years and the entity decided to carry the e'uipment at re(alued amount. Before income ta% what amount should be initially reported as re(aluation surplus3 a. b. %8<%<<< d. "%<<%<<< c. 1%8<%<<< e. 1%<<%<<<
-<. Bane Company had earnings per share of P1"< for the current year% before ta0ing any diluti(e securities into consideration. o con(ersion or eercise of diluti(e securities too0 place during the year. Fowe(er% possible con(ersion of con(ertible preference shares
would ha(e reduced earnings per share to P11:. #he effect of possible eercise of ordinary share warrants would ha(e reduced earnings per share by an additional P". 2hat amount should be reported as diluted earnings per share3 a. 1"1 c. 114 b. 1"< d. 11:
Basic earnings per share Effect of possible con(ersion of preference shares Effect of possible eercise of warrants ;iluted earnings per share
