ACCOUNTING REVIEW WORKSHOP MAY 09, 2020

ONLINE LONG QUIZ (2ND HALF OF THE 2ND SEMESTER)

PART 3

Instructions: You have 168 hours to answer this online long quiz. Answer this through the google
form link. Just select the correct answer from the choices. Then click "Submit" after finishing the exam.
Unlike sa ginawa ng friend mo na binigyan ng Second Chance ang ex nya, you only have One Chance to
answer this exam, so make sure to properly review your answers before submitting. Good Luck! But I
guess you won't need it, nakayanan mo nga noong iniwan ka niya, so kakayanin mo rin tong exam. :D

TAXATION

1. The taxpayer did not file his income tax return for the calendar year 2008. He was notified by the BIR
of his failure to file the tax return, for which reason he filed his tax return and paid the tax only after said
notice on October 15, 2010. The tax due per return is P100,000. The total amount due on October 15,
2010 (excluding compromise penalty) is

A. P150,000
B. P155,000
C. P180,000
D. P205,000

2. Individual self-employed taxpayers are required to file their Income Tax Returns:

A. On a yearly basis, once a year.

B. On a quarterly basis, non-cumulative system
C. On a quarterly basis, cumulative system
D. On a quarterly basis, cumulative system and on a yearly basis, once a year.

3. A resident citizen taxpayer is allowed to pay his income tax due on installment basis if:

A. Basic income tax is P2,000 or below

B. Basic income tax is over P2,000
C. Basic income tax is over P5,000
D. Basic income tax is over P1,000.

4. Generally, the following individuals are required to file an income tax return. Who is the exception?

A. Every Filipino citizen residing in the Philippines.

B. Every Filipino citizen residing outside the Philippines, on his income from sources outside the
Philippines.
C. Every alien residing in the Philippines on income derived from sources within the Philippines.
D. Every non-resident alien engaged in trade or business in the Philippines.
5. Where compromise penalties is not allowed

A. Failure to preserve or keep books of accounts and accounting records.

B. Failure to keep records of accounts or records in a native language or in English.
C. Failure to have books of accounts audited and have financial statements attached to income
tax return certified by an independent CPA.
D. Keeping two (2) sets of books of accounts or records.

6. All criminal violations may be compromised:

I. Except those already filed in court.

II. Except those involving fraud.

A. True; True
B. True; False
C. False; True
D. False; False

7. For filing a false and fraudulent return, a surcharge is imposed at:

A. 25% as criminal penalty

B. 25% as administrative penalty
C. 50% as criminal penalty
D. 50% as administrative penalty

8. This is not an administrative remedy available to a taxpayer in connection with collection of taxes.

A. Filing a petition for reconsideration or reinvestigation

B. Filing a claim for tax refund or credit
C. Entering into a compromise
D. Filing a criminal complaint against erring BIR officials or employees.

9. A compromise for a tax liability on the ground of financial incapacity to pay shall still involve a
payment of tax from the taxpayer at a minimum compromise rate of

A. 10% of the basic assessed tax

B. 20% of the basic assessed tax
C. 30% of the basic assessed tax
D. 40% of the basic assessed tax

10. Using the preceding number, with regard to compromises other than on the ground of financial
incapacity to pay, the compromise shall involve a minimum compromise rate of

A. 10% of the basic assessed tax

B. 20% of the basic assessed tax
C. 30% of the basic assessed tax
D. 40% of the basic assessed tax
11. I. The taxpayer shall respond to a pre assessment notice, and if he fails to respond, an assessment
shall be issued.
II. An assessment issued may be questioned administratively with the BIR.

A. True; True
B. True; False
C. False; True
D. False; False

12. Where a return was filed, as a general rule, the prescriptive period for assessment after the date the
return was due or was filed, whichever is later, is within

A. 3 years
B. 5 years
C. 7 years
D. 10 years

13. Statement I – The Commissioner of Internal Revenue shall have the power to inquire into a
taxpayer’s bank deposit in relation to all internal revenue taxes
Statement II – The Commissioner of Internal Revenue shall have the power to prescribe real property
values.

A. True ; False
B. True ; True
C. False ; True
D. False ; False

14. Where any national internal revenue tax is alleged to have been erroneously or illegally
collected. As a remedy, the taxpayer should first file an action for refund with the

A. Regional Trial Court

B. Court of Tax Appeals
C. BIR
D. Commission on Audit

15. The power of the Commissioner of Internal Revenue include the following, except

A. Abate a tax liability of a taxpayer.

B. Compromise the payment of any internal revenue tax.
C. Credit or refund a tax that has been erroneously paid by the taxpayer.
D. Inquire into bank deposits of a taxpayer.

16. Commissioner of BIR may compromise any internal revenue tax when, except one

A. A reasonable doubt as to the validity of the claim against the taxpayer exists.
B. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
C. The tax or any portion thereof appears to be unjustly or excessively assessed.
 D. The taxpayer has been granted by the SEC or by any competent tribunal a moratorium or
suspension of payments to creditors, or otherwise declared bankrupt or insolvent.

17. Which of the following is not the remedies of the government in tax collection?

A. Tax lien
B. Compromise
C. Forfeiture
D. Protest

18. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under the Tax Code or other laws
administered by the BIR is vested with

A. The Commissioner of the BIR

B. The Secretary of Finance
C. The Court of Tax Appeals
D. The Regular Courts

19. It is the official action of an administrative officer in determining the amount of tax due from a
taxpayer, or it may be a notice to the effect that the amount stated therein is due from the taxpayer
with a demand for payment of the tax or deficiency stated therein

A. Tax investigation
B. Tax audit
C. Tax assessments
D. Tax mapping

20. Statement I – A party adversely affected by a resolution of a division of the CTA has no other
recourse but to appeal to the Court of Appeals.
Statement II – A party adversely affected by a resolution of a division of the CTA on a motion for
reconsideration or new trial, may file a petition for review with the CTA en banc.

A. True ; False
B. True ; True
C. False ; True
D. False ; False
 FINANCIAL ACCOUNTING AND REPORTING

1. Which of these is not a major characteristic of a plant asset?

A. Possesses physical substance

B. Acquired for use in operations
C. Yields services over a number of years
D. All of these are major characteristics of a plant asset.

2. Accounting recognition should be given to some or all of the gain realized on a nonmonetary
exchange of plant assets except

a. when the exchange is one with no commercial substance and no cash is involved and that no
impairment losses are needed to be recognized.
b. where the assets exchanged are dissimilar and additional cash is paid
c. where the assets exchanged are dissimilar and additional cash is received
d. when the exchange is one with no commercial substance whether or not there is cash involved and
that no impairment losses are needed to be recognized

3. Decrease in equity arise from

a. transfers from an entity to its owners

b. investments in an entity by its owners
c. non-reciprocal transfers to an entity from other than owners
d. upward valuation of property, plant and equipment

4. Which of the following statements are correct per PAS16 Property, plant and equipment?

I. Assets are depreciated even if their fair value exceeds their carrying amount
II. Land and buildings are accounted for separately, even when acquired together
III. A non-current asset acquired as the result of an exchange of assets is not recognized
IV. A gain on disposal of a non-current asset is classified as revenue

a. I, II
b. I, II, III
c. I, II, IV
d. I, II, III, IV

5. Plant assets purchased on long-term credit contracts should be accounted for at

a. the total value of the future payments.

b. the future amount of the future payments.
c. the present value of the future payments.
d. none of these.

6. Which of the following is not a necessary characteristic for an item to be classified as property, plant
and equipment?

a. used in operations of the business

b. not acquired for resale
c has a useful life beyond one year
d. subject to depreciation

7. Land was purchased to be used as the site for the construction of a plant. A building on the property
was sold and removed by the buyer so that construction on the plant could begin. The proceeds from
the sale of the building should be

a. classified as other income.

b. deducted from the cost of the building.
c. netted against the costs to clear the land and expensed as incurred.
d. netted against the costs to clear the land and amortized over the life of the plant.

8. Accounting recognition should be given to some or all of the gain realized on a nonmonetary
exchange of plant assets except where

a. the assets exchanged are similar and additional cash is paid.

b. the assets exchanged are similar and additional cash is received.
C. the assets exchanged are dissimilar and additional cash is paid.
d. the assets exchanged are dissimilar and additional cash is received.
e. the exchange transaction lacks commercial substance

9. Noun Co. and Nameword Co. exchanged similar plots of land with fair values in excess of carrying
amounts in an exchange transaction that lacks commercial substance. In addition, Noun received cash of
less than 10% of the total consideration received from Nameword to compensate for the difference in
land values. As a result of the exchange, Noun should recognize:

a. A gain equal to the difference between the fair value and the carrying amount of the land given up.
b. A gain in an amount determined by the ratio of cash received to total consideration.
c. A loss in an amount determined by the ratio of cash received to total consideration.
d. Neither a gain nor a loss.

10. Adverb Co. and LY Co. exchanged similar trucks with fair values in excess of carrying amounts in an
exchange with commercial substance. In addition, Adverb paid LY to compensate for the difference in
truck values. As a consequence of the exchange, Adverb recognizes:

a. A gain equal to the difference between the fair value and carrying amount of the truck given up.
b. A gain determined by the proportion of cash received to the total consideration.
C. A loss determined by the proportion of cash received to the total consideration.
d. Neither a gain nor a loss.

11. I.E. Co. recently purchased the That-Is Hotel and the land on which it is located. The plans are to
demolish the That Is Hotel and to build a new luxury hotel on the site. I.E. Co. should account for the
total purchase cost of the That-Is Hotel as follows:

a. capitalize it as part of the cost of the new hotel.

b. depreciate it over the period from the acquisition until the Majestic is torn down.
c. allocate between the land and the That-Is Hotel building, then charge the allocated cost of the That Is
Hotel building to loss.
d. capitalized it as part of the cost of the land.

12. What is the general principle of capitalizing costs to property, plant and equipment?

a. All costs which will provide a benefit beyond one year are capitalized.
b. Only depreciable costs are capitalized.
C. All cost associated with the acquisition or construction of a plant asset are capitalized.
d. All cost incurred to bring the asset to its intended condition and location are capitalized.
e. All costs relevant to the acquisition and long-term maintenance of a plant asset are capitalized.

13. Stings Co. recently purchased an old building and the land on which it is located. The old building will
be demolished at a net cost of P10,000. A new building will be built on the site. The demolition cost
should be:

a. capitalized as part of the cost of the new building

b. capitalized as part of the cost of the land
c. depreciated over the remaining life of the old building
d. written off as an extraordinary loss in the year of the demolition

14. Adjective Co. and Relating 2 Company exchanged assets with equal fair values.
The retail price of the asset that Adjective gave up is less than the retail price of the asset received.
What gain or loss should Adjective Co. recognize on the nonmonetary exchange?

a. Again or loss is not recognized.

b. A gain equal to the difference between the retail prices of the asset received and the asset foregone.
C. A gain equal to the difference between the retail price and the cost of the asset received.
d. A gain or loss equal to the difference between the fair value and the cost of the asset given foregone.

15. Theoretically, which of the following costs incurred in connection with a machine purchased for use
in a company's manufacturing operations would be capitalized?

1. Insurance on machine while in transit

II. Testing and preparation of machine for use

a. Yes, Yes
b. Yes, No
c. No, Yes
d. No, No
16. The following statements relate to accounting for property, plant and equipment. Choose the
incorrect statement.

a. Accumulated depreciation is a contra account to an asset reported in the property, plant and
equipment section of the statement of financial position.
B. Improvements to leased facilities are included under property, plant and equipment as long as the
amount is not material and if the terms of the lease extend over a long period of time, otherwise, the
amount maybe shown among deferred charges or other assets.
c. When a unit of property is retired or disposed of by sale, trade, scrapping and removal or
abandonment, its cost is credited to the appropriate property account; the related accumulated
depreciation is removed and any gain or loss adjusted for salvage value and cost of disposition is
reported in the statement of profit or loss and other comprehensive income.
d. Assets subject to depreciation may take the form of buildings, machinery and equipment, furniture,
improvements to leased facilities, bookplates, fruit trees and breeding animals for which the fair value
cannot be determined.

17. Which of the following correctly relate(s) to accounting for property, plant and equipment?

I. Devin Co.'s building with an estimated useful life of 20 years was constructed on a land leased for a
term of 15 years. The cost of the building should be depreciated over 20 years, the life of the building. II.
Vaughn Company acquired a site for the construction of a new plant. The title examination fees,
surveying fees and property taxes accruing during the period of plant construction should be charged to
the land account of the company.
III. At the time Meagan Corp became a subsidiary of Andre Corp., Meagan switched depreciation of its
plant assets from the straight-line method of depreciation to the sum-of-the-year digits method used by
Andre. As to Meagan, this change is a change in reporting entity.
IV. Functional depreciation is the wear and tear, deterioration and decay, and damage, reducing the
usefulness of the asset.
V. Revaluation surplus in property is an element constituting shareholders' equity.

a. IV, V
b. II, IV, V
c. II, III, IV, V
d. V

18. Burnham Corp.'s forestland was condemned for use as a national park. Compensation for the
condemnation exceeded the forestland's carrying amount. Burnham purchased similar, but larger,
replacement forest land for an amount greater than the condemnation award. As a result of the
condemnation and replacement, what is the net effect on the carrying amount of forestland reported in
Burnham 's balance sheet?
a. The amount is increased by the excess of the replacement forestland's cost over the condemned
forestland's carrying amount.
b. The amount is increased by the excess of the replacement forestland's cost over the condemnation
award.
C. The amount is increased by the excess of the condemnation award over the condemned forestland's
carrying amount.
d. No effect, because the condemned forestland's carrying amount is used as the replacement
forestland's carrying amount.

19. Choose the correct statement.

a. An operational asset received in exchange for ordinary shares issued by the buyer should be recorded
at the par value of the securities issued if the cash price of the asset is not known.
b. Sales tax paid upon acquisition of an operational asset should be expensed because such amounts are
usually immaterial with respect to the cost of the acquired asset.
c. Purchased operational assets acquired on a long-term payment plan should be recorded at full cost
(including interest and financing charges) only if the cost cannot be estimated by the purchaser.
d. A primary principle in recording and reporting operational assets is that they are recorded at cost
when acquired and subsequently are reported at cost or cost less accumulated depreciation.

20. PFRS 6 is applied to which of the following?

a. the search for mineral resources before the entity has obtained legal rights to explore in a specific
area.
b. the search and evaluation of mineral resources, agricultural produce, and biological assets prior to
commencement of actual production
C. the search for mineral resources after the entity has obtained legal rights to explore in a specific area.
d. the development of mineral resources after the entity has in fact established the existence of mineral
deposits in an area.

21. Liquidating dividends received by a shareholder in a wasting asset corporation

a. are return to capital and thus treated as reduction to investment account

b. are return of capital and thus treated as income
c. are return on capital and thus treated as income
d. are return of capital and thus treated as reduction to investment account

22. Which of the following incorrectly refer to accounting for property, plant and equipment?

I. Land improvements should never be depreciated since they are attached to the land.
II. The cost of original installation of a machine should be credited to a machinery account.
III. Natural resources are generally recorded at cost, including the cost of exploration and development
IV. In calculating depletion for a period, the residual value of acquired land containing an ore deposit
should be deducted from the total purchase price.
V. If property, plant and equipment are stated at current valuation, the financial position and progress
of an enterprise will be more realistically portrayed. The impression that the company is more profitable
than what it really is, is avoided.

a. III, IV, V
b. I, II, V
c. II, III, IV, V
d. I, II

PROBLEMS

Problem 1
On January 1, 2012, the management of Milan Company determined that a revision in the estimate
associated with the depreciation of plant facilities was necessary. The facilities, purchased on January 1,
2010, for 7,500,000, had been depreciated using the straight-line method with an estimated residual
value of 500,000 and an estimated useful life of 15 years. Management has determined from recent
appraisal reports that the expected remaining useful life of the facilities is only 10 years and the
estimated residual value should be increased by 200,000. What is the depreciation expense that should
be recognized for the year 2012?

A. 536,667
B. 633,333
C. 293,333
D. 586,667

Problem 2
Marangal Furnitures Corporation was incorporated on January 1, 2009. In its audited financial
statements for the year ended December 31, 2011, the Company used the following original cost and
useful lives for its property plant and equipment

Building 12,000,000 12 years

Machinery 9,000,000 10 years
Furniture 3,000,00 6 years

On January 1, 2012 the company decided to review the useful lives of the property, plant and
equipment and consequently hired independent valuation experts who can certify the remaining useful
lives of the property, plant and equipment. The results are as follows: Building 10 years, Machinery 7
years, Furniture 4 years. The Company uses the straight line method of depreciation. What is the
amount of depreciation expense for 2012?

A. 2,400,000
B. 2,175,000
C, 2,528,571
D. 5,742,857

Problem 3
On January 1, 20x1, KNAVE RASCAL Co. acquired machinery for a total cost of P80,000,000. The
machinery is depreciated using the SYD method over a period of 10 years. On January 1, 20x4, KNAVE
Co. changed its depreciation method to double declining balance method. How much is the depreciation
expense in 20x4?

A. 40,727,272
B. 11,635,782
C. 12,556,780
D. 13,556,702

Problem 4
On January 1, 2009, Kazoo Company acquired a factory equipment at a cost of P150,000. The equipment
is being depreciated using the straight-line method over its projected useful life of 10 years. On
December 31, 2010, a determination was made that the asset's recoverable amount was only P96,000.
Assume that this was properly computed and that recognition of the impairment was warranted. On
December 31, 2011, the asset's recoverable amount was determined to be P111,000 and management
believes that the impairment loss previously recognized should be reversed. You have been asked to
assist the company's accountant in the application of PAS 36, the standard on impairment of assets.

Req 1. How much impairment loss should be recognized on December 31, 2010?

A. 54,000
B. 9,000
C. 24,000
D. O

Req 2. Refer to the previous number, how much impairment recovery should be reported in the 2011
income statement?

A. 27,000
B. O
C. 6,000
D. 21,000

Problem 5
At the beginning of the current year, Leonora Company purchased a parcel of land as a factory site for
P3,200,000. An old building on the property was demolished and construction started on a new building
that was completed at the end of the current year. Costs incurred on the construction project are listed
below:

Demolition of old building 230,000

Architect fee 300,000
Insurance during construction 40,000
Construction Cost 8,500,000
Imputed interest based on stock financing 140,000
Landfill for building site 190,000
Clearing of trees from building site 100,000
 Temporary building used for construction activities 290,000
Cost of survey 40,000
Excavation for basement 130,000
Proceeds from sale of salvage materials 30,000

What is the cost of the new building?

A. 9,600,000
B. 9,750,000
C. 9,500,000
D. 9,460,000

Problem 6
In 2020, Innocuous Harmless, Co. acquired land to be used to mine coal. Total costs of acquisition,
exploration, and intangible development amount to P40,000,000. It was estimated that total
recoverable reserves is 50,000,000 units. Total units extracted from 2020 through 2024 totaled
30,000,000 units. In 2025, after extracting 5,000,000 units, it was estimated that the remaining
recoverable reserves is 20,000,000 units. How much is the depletion charge in 2025?

A. 3,200,000
B. 3,300,000
C. 3,266,667
D. 3,400,000

Problem 7
Betty Company purchased a jewel polishing machine for P6,600,000 on January 1, 2009 and received a
government grant of P600,000 towards the capital cost. Company policy is to treat the grant as a
reduction in the cost of the asset. The machine was to be depreciated on a straight-line basis over 10
years and was estimated to have a residual value of P500,000 at the end of this period. What should be
the depreciation expense in respect of the machine for the year ended December 31, 2009?

A. P610,000
B. P600,000
C. P660,000
D. P550,000

End for Part 3