Mercado, Jewel Mae P.

115-0172 / BS Accountancy
Accounting 90

TAXATION
Topics No. of Correct Wrong
Items
General Principles 1 I
Preferential Taxation 1 I
Deductions 8 II IIIIII
Corporation 8 IIII IIII
Individual Taxation 4 III I
Capital Gains Tax 8 II IIIIII
OPT 3 II I
Estate Tax 3 III
Tax Remedies 6 II IIII
Doc Stamp Tax 1 I
Business 4 IIII
Communication
VAT 9 I IIIIIIII
Final Tax 2 II
Partnership 3 II I
Principles ( BIR/CIR ) 2 II
Exclusions 2 II
Tax Filing, Tax Return 4 II II
Donor's Tax 1 I
70 22 48

 VAT (Computation of VAT Payable )

Tsutsuwap Company, a VAT-registered business, had the following data during the
quarter:

Export Sales P 1,900,000

Domestic Sales ( tax included ) 1,232,000
Purchases of goods for export and domestic sales 888,500
Purchases of supplies for export and domestic sales 124,850

1. Assuming that the input taxes paid on purchases of goods for export are claimed as
tax credit, the VAT Payable is –

a. 12,895
b. 10,398
c. 177,895
d. 84,895
  B
Output tax:
Export Sales ( 0%) 0
Domestic Sales ( 1,232,000 x 3/28) 132,000 132,000
Less: Input taxes:
Goods for export ( 888,500 x 12%) 106,620
Supplies ( 124850 x 12% ) 14,492 121602
10,398

2. Assuming that the input taxes attributable to export sales are claimed as refund, the
amount refundable is –

a. 72,000
b. 12,895
c. 77,015
d. Zero

 C
Refundable ( 1,900,000/ 3,000,000 x 121,602) 77,015

Export Sales 1,900,000

Domestic Sales ( 1,232,000/ 1.12 ) 1,100,000
3,000,000

Reference : Ampongan, O. E. (2017). VAT. In O. E. Ampongan, CPA Reviewer in Taxation (pp. 411-412).

Ben Door supplier in Manila, sold merchandise on May 5,2015 for P 100,000 ( exclusive
of VAT) to Bay Yerr, a storeowner in Cebu. The terms are 2/10, n/30 FOB Shipping
point, freight prepaid. Cost of freight per way bill is P 1,120. Payment was made by Bay
on May 12,2015 after a return of defective merchandise worth P 5,600, tax inclusive.

Based on the above transactions, how much is the balance of Output tax to Ben Door?
a. 12,840
b. 11,400
c. 11,172
d. 11,280

 C
On the sale of May 5 ( 100,000 x .12) 12,000
Sales Return ( 5,600 x 3/28) (600)
Sales Discount ( 95,000x.02x.12) (228)
11,172
Based on the above transactions, the balance of the Input Tax on Bay Yerr is –

a. 12,840
b. 11,292
c. 11,520
d. 11,280

 C

On purchases ( 100,000 x.12) 12,000

On freight-in ( 1,120 x 3/28) 120

Purchase Return (5,600 x 3/28 ) (600)

11,520

Reference : Ampongan, O. E. (2017). VAT. In O. E. Ampongan, CPA Reviewer in Taxation (p. 423).

King sold 1,000 square meters of lot with residential house thereon for 5 million. The
assessor’s value of the lot is 1.5 million and the house is 3 million. The land had a zonal
value of P 4,000 per square meter.

How much is capital gains tax?

a. 300,000
b. 420,000
c. 210,000
d. None
 B
Land zonal value 4,000,000
House- assessors value 3,000,000
7,000,000
X .06
420,000

Reference : Ampongan, O. E. (2017). Individual Taxation. In O. E. Ampongan, CPA Reviewer in Taxation

(p. 188).
AUDITING PROBLEM

Topics Correct Wrong No. of Items

Cash II III 5
Receivables III II 5
Inventory II III 5
Investments II IIII 6
PPE II IIIII 7
Intangibles I I 2
Error Correction I IIII 5
Liabilities I II 3
Shareholder's Equity IIIIIII IIIII 12
Cash/Accrual/ Single Entry II III 5
23 32 55

BANK RECONCILIATION

You are auditing general cash for the DION Company for the fiscal year ended July 31,2018.
The client has not prepared the July 31 bank reconciliation.

General Ledger Bank Statement

Beginning balance P 46,110 P 57,530
Deposits 250,560
Cash receipts journal 254,560
Checks cleared (236,150)
Cash disbursement journal (218,110)
July bank service charge (870)
Note paid directly (61,000)
NSF check - (3,110)
Ending balance 82,560 6,960

June 30 Bank Reconciliation

Information in General Ledger and Bank Statement

Balance per bank P 57,530

Deposits in transit 6,000
Outstanding checks 17,420
Balance per books 46,110

Additional information obtained is:

1. Checks clearing that were outstanding on June 30 totaled P 16,920.
2. Checks clearing that were recorded in the July disbursement journal totaled P 204,670.
3. A check for P 10,600 cleared the bank, but had not been recorded in the cash
disbursement journal. It was for an acquisition of inventory. Dion uses the periodic
inventory method.
4. A check for P 3,960 was charged to Dion Company but had been written on a different
company’s bank account.
5. Deposits included P6,000 from June and P 244,560 for July.
6. The bank charged Dion Company’s account for a NSF check totaling P 3,110. The credit
manager concluded that the customer intentionally closed its account and the owner left
the city. The check was turned over to a collection agency.
7. A note for P58,000 plus interest was paid directly to the bank under an agreement
signed four months ago. The note payable was recorded at P 58,000 on Dion Company
book

1. Check outstanding on July 31:

a. 9,980
b. 10,830
c. 13,940
d. 3,340

2. Deposit in transit on June 30:

a. 6,890
b. 10,000
c. 6,000
d. 9,110

3. Adjusted cash balance on July 31 :

a. 6,980
b. 10,940
c. 3,870
d. 3,020

 1. C 2. B 3. A

Outstanding checks, June 30 17,420

Add:
Checks issued on July:
Cash disbursement Journal 218,110
Unrecorded check 10,600 228,710
Less:
Checks paid by bank in July
( 236,150 – 3960 erroneous check
charged by bank) ( 232,190)
 Outstanding Check, July 31 13,940

Deposit in transit, June 30 P 6,000

Add: July deposit per cash receipts journal 254,560
Less: Deposits credited by bank in July 250,560
Deposit in transit, July 31 10,000

Book Bank
Unadjusted balances P 82,560 P 6,960
Outstanding Checks (13,940)
Deposit in Transit 10,000
Bank Service Charge (870)
Unrecorded Check (10,600)
Check erroneously charge to Dion 3,960
NSF Check ( 3,110)
Note payment (P+I) (61,000)
6,980 6,980

Reference: Roque, G. (2018-2019). Audit of Cash and Cash Equivalents. In G. Roque, CPA
Examination Reviewer: Auditing Problems (pp. 64-66).

ACQUISITION OF PPE ITEMS

The following information relates to PIANO Company.

a. On July 1, Piano purchased the plant assets of Yokona Co., which had discounted
operations. The following fair values of the plant assets acquired:
Land P 10,500,000
Building 31,500,000
Machinery and Equipment 21,000,000
Total 63,000,000
Piano issued 550,000 shares of its P100 par value ordinary share capital in exchange for
the above plant assets. On the acquisition date, the stock had a fair value of P160 per
share.
b. Piano expended the following amounts in cash between July 1 and December 20, the
date when the company first occupied the building.

Special Assessment by city on land P 540,000

Repairs to building 3,150,000
Construction of bases for machinery and equipment acquired 4.050,000
Driveways and parking lots 3,660,000
Remodelling of office space in building,
 including new partitions and walls 4,830,000
c. On December 23, Piano paid cash for machinery, P 7,800,000 subject to 2% cash
discount, and freight on machinery of P 315,000.

4. Based on the preceding information, calculate the cost of each of the following PPE
items:

1. Land
a. 10,540,000
b. 14,700,000
c. 14,200,000
d. 11,040,000
2. Buildings
a. 39,480,000
b. 37,980,000
c. 31,500,000
d. 30,000,000

 1. D 2. A

Land Buildings
Acquisition Cost 10,500 31,500
Special Assessment by city on land 540
Repairs to building 3,150
Remodeling of office space 4,830
Totals 11,040 39,480

Reference: Roque, G. (2018-2019). Audit of Property, Plant and Equipment. In G. Roque, CPA
Examination Reviewer: Auditing Problems (pp. 371-372).
AUDITING THEORY

Topics Correct Wrong No. of Items

1.0 Fundamentals of Auditing and Assurance Services Glossary of terms
2002, IIASB Terms of Reference, PhilippineFramework for Assurance
Engagement, Preface to ISA/PSA 120 IIII IIII 8
2.0 The professional Practice of Public Accounting
2.1 RA 9298 I 1
2.2 Public Accounting profession (diff govt agencies) I 1
2.3 The CPA's professional standards on Auditing
a. Philipine standards on Auditing
b. Code of Ethics for professional Accountants in the Philippines II III 5
c. PSQC 1 Quality Control I 1
d. PSA 240 Responsibilities in fraud, error, and noncompliance I 1
e. PSA 220 Quality Control for and audit of FS
3.0 3.1 The Financial Statements Audit- Client Acceptance, PSA 300 Audit
Planning, Supervision and Monitoring
PSA 200, Obj of Auditor, PSA 210 Terms of the audit engagement IIII IIIII 9
3.3 PSA 300 Understanding the entity and its environment I 1
PSA 260 Communication with those charge with governance I I 2
PSA 320 Materiality in plannin and performing an audit
PSA 600 Special Considerations- Audits of Group FS
PSA 610 Using work of an internal auditor
PSA 620 Using work of an expert I 1
3.4 Including its internal control II II 4
PSA 265 Communication deficiencies in Internal Control
3.5 PSA 315 Assessing the Risks of Material Mistatements Shall
include analytic procedures, obsevation and inspection
3.6 PSA 250 Consideration of Laws and Regulations in an audit of FS
3.6 PSA 500 Audit objectives, procedures evidences and PSA 230
5.0 Documentation IIIII II 7
PSA 501- Specific items, PSA 505 External Confirmations
PSA 510 Initial Audit Engagement- Opening balances
PSA 520 Analytical Procedures
PSA 540 Auditing accounting estimates, including fair value
(PFRS 15) and related disclosures
PSA 550 Related Parties
3.6.1 Business process and internal control
3.6.1.1 Revenue process I 1
3.6.1.2 Purchasing I 1
3.6.1.3 HRM
3.6.1.4 Inventory Management
3.6.1.5 PPE, Investments I II 3
3.6.1.6 LTD, Shareholders Equity, Income statement
3.6.1.7 Cash and short term investments
6.0 3.6 PSA 530 Audit Sampling TOC and substantive Test III I 4
 7.0 Completing the audit/post audit responsibilites (11)
Substantive Tests prior to SFP date
Overall analytical review procedures
Identification of related party transactions I 1
PSA 560 Discovery and evaluation of subsequent events I 1
Psa 570 Assessing of going concern assumption I 1
PSA 580 Management Representation Letter I 1
Evaluation of contingencies
Litigation and claims I 1
Communication to those charged with governance and management
Post-audit responsibilities
Long term Commitments
8.0 Reports on Audited Financial Statements
PSA 700 Auditors Report I 1
PSA 705 Modification of opinion I 1
PSA 706 Emphasis of the matter paragraph
PSA 710 Comparative information
PSA 720 Auditors Responsibilities relating to other information on
documents containing Audited FS
PSA 800 Audits using special purpose framework II 2
PSA 805 Audits of single FS and Specific Elements, Accounts, items I I 2
PSA 810 Report on summary FS
Auditing in a Computerized Information Systems (CIS) Environment
PSA 402 Audit Considerations relating to entities using service
9.0 organization IIIII III 8
Other Assurance and non-assurance services
10.0 PSA 220 Quality control for an audit of historical FS
10.1 Procedures and reports on special audit engagements

a. Audit of financiaL statements prepared in accordance with a

comprehensive basis of accounting other than PFRS in the Philippines
b. Audit of a component of financial statements
c. Reports in compliance woth contractual agreements
d. Reports on summarized financial statements
10.2 Non-audit engagements: procedures and reports
a. Examination of prospective financial information
b. Engagements to review financial statements I 1
10.3 non-assurance engagements
10.3.1 Agreed-upon procedures
10.3.2 Engagement to compile financial information
11.0 Updates on special concerns
11.9.1 Globalization
11.9.2 Digital information Technology
11.9.3 Governance and ethics
11.9.4 Regulatory Requirement and Considerations
11.9.5 Effective business communication
TOTAL NO. OF ITEMS 38 32 70
1. Misstatements in batch computer system caused by incorrect programs or data may
not be detected immediately because-
a. The processing of transactions in a batch system is not uniform
b. There are time delays in processing transactions in a batch system.
c. The identification of errors in input data typically is not part of the program
d. Errors in some transactions may cause rejection of other transactions in the
batch.

 B
In batch processing system, similar transactions are processed in groups or
batches periodically, errors in a given batch may be detected only after the lapse
of considerable time from the initiation of transactions.

Reference: Roque, G. (2018-2019). Auditing in CIS or IT Environment. In G.

Roque, CPA Examination Reviewer: Auditing Theory (pp. 359-360).

2. The auditor is required to consider how an entity’s general CIS controls affect the
CIS applications significant to the audit. Accordingly, the auditor should
a. Review the design of the general CIS controls only.
b. Review the design of the CIS application controls only.
c. Review the design of the general CIS controls before reviewing the CIS
application controls
d. Reviewing the design of the CIS application controls before reviewing the design
of the general CIS controls.
 C
General CIS controls are interdependent controls in that their operation is
essential to the effectiveness of CIS application controls. So, it is more efficient
approach to review first the General CIS controls.

Reference: Roque, G. (2018-2019). Auditing in CIS or IT Environment. In G.

Roque, CPA Examination Reviewer: Auditing Theory (pp. 374-375).

3. An employee misappropriates cash receipts from sales on account. Which of the

following acts would conceal this defalcation and be least likely to be detected by an
auditor?
a. Understating the cash receipts journal.
b. Overstating the accounts receivable subsidiary ledger.
c. Overstating the account receivable control account.
d. Understating the sales journal.

 D
The most effective way of concealing theft of cash receipts is by not recording
sales on account. The procedures will not detect defalcation because accounts
remain balanced, yet incomplete.
 Reference: Roque, G. (2018-2019). Risk Assessment and Internal Control. In G.
Roque, CPA Examination Reviewer: Auditing Theory (p. 295).

4. In a well-designed internal control system, employees in the same department most

likely would approve purchase orders and also
a. Negotiate terms with vendors
b. Authorize requisition of goods.
c. Inspect and count goods upon receipt.
d. Reconcile the open invoice file.

 A
In well-designed IC system, the entity’s purchasing department approves
purchase orders and negotiates terms with vendors as part of authorization
process.

Reference: Roque, G. (2018-2019). Risk Assessment and Internal Control. In G.

Roque, CPA Examination Reviewer: Auditing Theory (p. 308).

5. Which of the following questions would an auditor most likely include in the
production cycle internal control questionnaire?
a. Are details of individual disbursements for raw materials compared to the total for
posting to the general ledger?
b. Are vendor invoices for raw materials approved before payment?
c. Are all issuances of raw materials to production based on approved requisition
forms?
d. Are signed checks for the purchase of raw materials sent directly to intended
payees after signing, without being returned to the person who authorized the
invoice processing?

 C
Answers A, B,D are incorrect because it pertain more directly to expenditure or
disbursement cycle.

Reference: Roque, G. (2018-2019). Risk Assessment and Internal Control. In G.

Roque, CPA Examination Reviewer: Auditing Theory (p. 167).
LAW
Topics No. of Correct Wrong
Items
Pledge/ Mortgage 12 IIIII-III IIII
Obligation 8 I IIIII-II
Partnership 15 IIII IIIII-IIIII-I
Contracts 9 IIIII IIII
Corporation IIIII-IIIII- IIIII-IIIII-
29
IIIII IIII
Negotiable
10 IIIII-I IIII
Instrument
Sales 3 I II
Contracts 2 II
Cooperative 6 II IIII
E-commerce Law 1 I
SRC 1 I
IPC 2 I I
AMLA 1 I
Unclaimed
1 I
Balances
100 44 56

 PARTNERSHIP (Application of payment owes to separate demandable debts)

Trevor owes P 3,000 to CHAMP Company, a partnership composed of Charles, Harry,

Albert, Mark and Prince with Mark as the manager who is authorized to collect all credits
of the firm. He also owes Charles the amount of P6,000. Both debts are already due.
Trevor gives P 3,000 to Charles in payment of his debt to the latter. Charles thus issues
his own receipt.
a. Payment will be applied proportionately to the two credits at P 1,000 for Charles’
credit and P2,000 to CHAMP credit.
b. Payment will be applied equally to the two credits.
c. Payment will be applied in its entirety to Charles’ credit.
d. Payment will be applied in its entirety to CHAMP’s credit.

 C

There shall be no proportionate application of payment because the debt is owed to

a partner not authorize to receive payment even if both debts are due.

Reference :

Soriano, F. (2016). Partnership. In F. Soriano, Notes in Business Law (p. 734).

 Lazarte, a limited partner in Bellevue Company, Ltd. received the amount of P100,000
representing his contribution which was being returned on the date stipulated in the
certificate. Partnership records,however, showed that the firm had liabilities of P 220,000
which arose before Lazarte received the return of his contribution, and assets of only P
90,000 after such return of contribution.

a. Lazarte is bound to bring back to the partnership the amount of P100,000

plus interest thereon.
b. Lazarte is bound to give the partnership P220,000 plus interest thereon.
c. Lazarte is bound to give the partnership P 130,000 plus interest.
d. Lazarte is not bound to return to the partnership any amount because he
received the return of his contribution pursuant to a contractual stipulation.
 A
The limited partner is bound to return contribution with interest because
insolvency arose before he received the return of his contribution

Reference : Soriano, F. (2016). Partnership. In F. Soriano, Notes in Business Law (p.

738).

 OBLIGATIONS

D owes C P 50,000. The obligation is secured by the guaranty of G and real mortgage
on D’s lot. Susequently, G, without the knowledge of D, paid C the amount of P50,000.

a. G can go after D to collect and if D cannot pay, G can foreclose the mortgage
because he is entitled to subrogation.
b. G can go after D to collect and if D cannot pay, G can foreclose the mortgage
because he is entitled to compensation.
c. G can go after D to collect and if D cannot pay, G can foreclose the mortgage
because he is entitled to condonation.
d. G can go after D to collect but he is not entitled to any other right because the
payment he made to C was without the knowledge of D.

 A

Subrogation transfers to the person subrogated the credit with all the rights either
against debtors or third persons , be they be guarantors or possessors of
mortgages ( Art. 1303)

Reference : Soriano, F. (2016). Obligation. In F. Soriano, Notes in Business Law (p. 150).

P took a public bus in going to his office. Although P paid his fare, the bus conductor did
not issue to him a ticket. Along the way, the bus met an accident causing a slight injury
to P and other passengers. If P is to recover damages from the bus owner, the source
of the bus owner’s liability is :

a. Contract
b. Quasi-delict
c. Law
d. P cannot recover any amount because no ticket was issued.

 A
In this case even if there is no issued ticket, the bus owner is bound by contracts
because there is a meeting of minds to render some service.

Reference : Soriano, F. (2016). Obligation. In F. Soriano, Notes in Business Law (p. 128).

A, B, and C are indebted to W,X, Y and Z in the amount of P24,000. In this case:
a. W can collect P8,000 each from A, B and C. Then he must give P6,000 each to
X,Y,Z.
b. W can collect P2,000 each from A, B and C. Then he need not give any amount
to X,Y,Z.
c. W can collect P6,000 from either A, Bor C. Then he need not give any amount to
X,Y,Z from the amount collected.
d. W can collect P24,000 from either A, B or C. Then he must give P6,000 each to
X,Y,Z.

 B
If there is no statement whether jointly or solidarily, it is assume that debtors
solidarily liable.

Reference : Soriano, F. (2016). Obligation. In F. Soriano, Notes in Business Law (p. 173).
Management Advisory Services

TABLE OF SPECIFICATIONS
MANAGEMENT ADVISORY SERVICES

EFFECTIVE MAY 2019 EXAMINATION

OUTCOMES
Number of Items
Correct Wrong
(COURSE/CONTENT
1.0 Management Accountingmust be able to:
TOPIC) The examinees
1.1 Describe the objectives, role and scope of management
accounting and differentiate it from financial accounting
1.2 Management accounting concepts & techniques for planning
and control
1.2.a. Identify and differentiate the different types of costs (e.g., direct, IIII
indirect; fixed, variable; inventoriable, period; opportunity cost, sunk
cost) and cost accumulation methods (e.g., job order, process, and
4
ABC costing), and their characteristics and behavior; determine their
usefulness in cost planning and financial and management reporting
1.2.b. Analyze the relationship of costs, volume and sales to calculate IIIII II 7
break-even points and target profit (CVP Analysis)
1.2.c. Apply the concept of standard costing and variance analysis in I I 2
planning and control
1.2.d Differentiate variable costing and absorption costing, analyze IIII I
their effects on the financial performance and condition of the firm
5
and use it for profit planning
1.2.e Prepare a master budget by analyzing the behavior of revenues II I
and costs and use it to calculate and prepare different types of 3
supporting budgets (e.g., production, inventory levels, operating
expenses,
1.2.f Apply cash budget) of
the concept forActivity-based
planning and control
costingpurposes
(ABC) and activity- I 1
based management (ABM) for planning and control purposes
1.2.g Utilize the concept of different strategic cost managements for II 2
planning and control purposes
1.3 Management accounting concepts & techniques for

performance measurement
1.3.a. Identify and differentiate the different types of responsibility III
centers (i.e., profit center, cost center, investment center) and 3
determine the proper accounting of transactions affecting each one.
Determine the proper use of transfer pricing in measuring the
performance
1.3.b. Identifyofand
business operations
differentiate the four perspectives of the balanced II II
scorecard and formulate performance indicators to evaluate, monitor
4
and improve business performance
1.4. Management Accounting Concepts & Techniques for

Decision Making
1.4.1 Identify and differentiate the various quantitative techniques and II 2
apply them properly in making sound management decisions
 1.4.2. Identify and use appropriate relevant costs in making analysis IIIII III 8
and business decision
14.3. Apply the discounted cash flow method and the IRR method in III I
determining cash flows and in making business decisions concerning 4
capital expenditures.
2.0 Financial Management
2.1. Identify and describe the nature, objectives and scope of
Financial Management in making business decisions
2.2. Analyze and use financial data derived from financial statements I II
in evaluating the performance of the management and make
3
business decisions
2.3. Apply different working capital (cash, receivables, inventory and II I
other short-term resources) management methods and techniques in 3
making short-term business decisions
2.4.Utilize various capital and investment management and III IIII
7
techniques, the time value concept of money in making long-term
business decisions, derivatives. Know the capital market, the
workings
2.5. of the Philippine
Differentiate stocktypes
the different exchange and other bourses
and measurement of risks and II
apply their relationships with the rate of returns. Identify and apply
2
various risk measurement models.
2.6. Identify and apply basic concepts and tools of capital structure I II 3
management for long-term financing decision
3.0 Management Consultancy
3.1. Describe the nature, objectives and scope of management I 1
consultancy practice by Certified Public Accountants (CPAs). Know the
IFAC and Philippine Code of Ethics governing accountancy.
Apply the provisions of NOCLAR.
3.2 Prepare a Project Feasibility Study properly by determining
and utilizing essential components
4.0 Economic Concepts essential to obtaining an understanding of
entity’s business and industry
4.1. Identify and describe the basic concepts of II
macroeconomics that are relevant in making business decisions, 2
and apply the concepts properly
4.1. Identify and describe the basic concepts of microeconomics II
that are relevant in making business decisions, and apply the 2
concepts properly
5.0 Auditing in CIS Environment II 2
TOTAL 39 31 55

 Financial Management ( Working Capital Finance )

Using EOQ model, Apple Baby Corporation computed the economic order quantity
for one of the products it sells to be 4,000 units. Apple Baby Corporation maintains
safety stock of 300 units. The quarterly demand for the product is 10,000 units. The
order cost is 200 per order. The purchase price of the product is P 2.40. The
 company sells at 100% markup.The annual inventory carrying cost is equal to 25%
of the average inventory level.
1. Annual inventory carrying costs is
a. 2,300
b. 2,000
c. 4,300
d. 4,000
2. Total inventory order cost per year is
a. 2,300
b. 800,000
c. 2,000
d. 5,520

 1.A 2.C
Annual demand: 10, 000 units x 4 40,000 units
Carrying cost per unit : ( 2.40 x .25) P1

EOQ =√(2𝑎𝑑 ÷ 𝑘)
=√( (2𝑥40,000𝑥200) ÷ 1
= 4,000 units

Average inventory ( EOQ ÷ 2 + safety stock ) 2,300 units

Carrying cost per unit x P1
ANNUAL INVENTORY CARRYING COST 2,3000 units

Frequency of orders:
Annual Demand÷ EOQ ( 40,000 ÷ 4,000) 10 times
Order cost per order x 200
TOTAL ORDER COST P 2,000

Reference : Roque, R. (2016). Working Capital Finance. In R. Roque, Reviewer

in Management Advisory Services (p. 798).

 Management Accounting

A major activity at the Professional Regulation Commission is the processing of

application forms for the Board Examinations of the various profession under its
control.To analyze and control the costs incurred in the Applications Department, the
PRC’s accountant previously prepared the following budgeted data for the year 200A:

Normal number of applications processed per year 150,000

Budgeted variable costs of processing the 150,000 applications
10,500,000
 Fixed costs of the year
2,500,000
Number of hours per 100 applications processed 200 hours
Wage rate per 100 applications P
6,000

During the year 200A, the department processed a total of 120,000 applications using
250,000 hours. The cost incurred were:
Total costs 11,140,000
Labor costs 7,500,000

1. For 200A, the Application Department’s total cost to process the 120,000
applications assuming standard performance should be
a. 13,000,000
b. 10,900,000
c. 10,500,000
d. 8,400,000

2. The total labor cost variance for 200A

a. 300,000 unfavorable
b. 300,000 favorable
c. 1,200,000 unfavorable
d. 1,860,000 favorable

3. The total direct labor cost variance may be broken down into:
Spending Variance Efficiency Variance
a. 1.2M unfavorable 10,000 unfavorable
b. 1.86M unfavorable 300,000 unfavorable
c. 300,000 unfavorable 0
d. 0 300,000 unfavorable

 1. B 2. A 3. D
Standard VC = 10.5M/ 150,000= 70 per application

Variable Cost ( 120,000 *70) 8,400,000

Budgeted Fixed Cost 2,500,000
10,900,000

Actual Labor Cost 7,500,000

Standard Labor Cost 7,200,000
300,000U
Standard Labor Cost:
Actual number X Standard Labor cost/unit
120,000 X 60 = 7,200,000

Time Rate
Actual 250,000 30
Standard 240,000 30
10,000U 0
X 30/unit
300,000 U

Reference : Roque, R. (2016). Standard Costing and Variance Analysis. In R.

Roque, Reviewer in Management Advisory Services (p. 58-60).
ADVANCED FINANCIAL ACCOUNTNG AND REPORTING

Topics Correct Wrong No. of

Items
Partnership IIIIII III 9
Corporation III 3
Joint Arrangement II I 3
Installment Contracts I I 2
Construction IIII I 5
Contracts
Franchise Accounting I 1
Home Office II I 3
Accounting
Business IIIIII IIIIII 12
Combination
Cost Allocation I 1
Job Order Costing I III 4
Foreign Currency IIIII I 6
Hyperinflationary I 1
Revenue Contract III 3
NPO I I 2
FV Measurement I 1
Government Acctg II 2
Related Party I 1
Managerial Services I 1
Insurance I 1
Process Costing IIII II 6
Build Operate I 1
Transfer
Cost Accounting I 1
Consignment I 1
40 30 70

1. X and Y Inc. owes the Xylo Corporation P60, 000 on account, which is secured by
accounts receivable with a book value of P50, 000. The unsecured portion is considered
a claim under the bankruptcy law, X and Y has filed for bankruptcy. Its statement of
affairs lists the accounts receivable securing the Xylo account with an estimated
realizable value of P45, 000. If the dividend to general unsecured creditors is 80%, how
much can Xylo expect to receive?
a. P60, 000
b. P58, 000
c. P57, 000
d. P48, 000
  C

AR at NRV 45,000
Free Assets ( 60,000-45,000)x .8 12,000
57,000

Reference: Dayag, A. (2015). Corporate Liquidation. In A. Dayag, Practical Accounting 2

(p. 97).

2. The following data are provided by the Troubled Company:

Assets at book value......................................................................................... P150, 000
Assets at net realizable value.............................................................................P105, 000
Liabilities at book value:
Fully secured mortgage...........................................................................P60, 000
Unsecured accounts and notes payable.................................................P70, 000
Unrecorded liabilities:
Interest on bank notes............................................................................. P500
Estimated cost of administering state........................................................P6, 000

The court has appointed a trustee to liquidate the company. The journal entry made by
the trustee to record the assets and liabilities should include an estate deficit of:

a. P31, 500
b. P31, 000
c. P25, 500
d. P25, 000

3. Using the same information in Number 2, the statement of affairs prepared by the trustee
at this time should include an estimated deficiency to unsecured creditors of:
a. P45, 000
b. P39, 000
c. P31, 500
d. P25, 000

 2. C 3. C

Assets at book value 105,000

Liabilities:
Per books 130,000
Unrecorded interest 500 (130,500)
(25,500)

Total Assets at NRV 105,000

Less:
 Fully secured (60,000)
Unsecured with priority (6,000)
Net Free Asset 39,000
Unsecured without priority:
AP and NP 70,000
Interest 500 70,500
(31,500)

Reference: Dayag, A. (2015). Corporate Liquidation. In A. Dayag, Practical Accounting 2

(p. 100).

4. Agency FFF’s obligation of rent for three years (3) amounted to P90, 000. The entry to
record this transaction would be:
a. Rent Expenses...............................................................................90, 000
Cash – MDS – Regular.................................................................90, 000
b. Prepaid Rent...................................................................................90, 000
Cash – MDS – Regular.................................................................90, 000
c. Rent Expenses..................................................................................30, 000
Prepaid Rent.................................................................................30, 000
d. Memorandum entry in RAOMO

5. Using the same information in Number 4, Agency FFF paid rent for three (3) years, P90,
000. The entry for this transaction would be:
a. Rent Expenses..................................................................................90, 000
Cash – MDS – Regular.................................................................90, 000
b. Prepaid Rent.......................................................................................90, 000
Cash – MDS – Regular..................................................................90, 000
c. Rent Expenses.....................................................................................30, 000
Prepaid Rent..................................................................................30, 000
d. Memorandum entry in RAOMO

 4. D 5. B
The agency will not journalize appropriations and allotments; it shall maintain four
registries for the allotment it receives and for the obligations it incurs.The asset method
will be followed in recording disbursements.

Reference: Dayag, A. (2015). Government Accounting. In A. Dayag, Practical

Accounting 2 (p. 892).