QUIZ – 1 FAR

Which statement is incorrect?

Select one:
A. The chairman of the FRSC should have been or presently a senior practitioner in public accountancy
B. The Bureau of Internal Revenue is represented in the FRSC
C. The Insurance Commission is represented in the Philippine Interpretations Committee
D. Bicol is not a PICPA Geographical Area

The net realizable value of the quantity of inventory held to satisfy firm sales or service contracts is
based on the
Select one:
A. General selling prices
B. Quoted prices in an active market for identical assets
C. Contract price.
D. Quoted prices in an active market for similar assets

Gatas Dairy produces milk to sell to local and national ice cream producers. Gatas Dairy began
operations on January 1, 2018 by purchasing 840 milk cows for P1,176,000. The company controller
had the following information available at year end relating to the cows:

At December 31, 2018, what is the value of the milking cows on Gatas Dairy’s statement of financial
position?
Select one:
A. P1,499,000
B. P1,445,000
C. P1,553,000
D. P1,583,000

Which of the following generally provides the best evidence of fair value of an investment property?
Select one:
A. Recent prices on less active markets with adjustments to reflect the changes in economic conditions
B. Discounted cash flow projections based on reliable estimates of future cash flows
C. Current prices for properties of a different nature or subject to different conditions
D. Current prices in an active market for similar property in the same location and condition
Contract prices are not necessarily relevant in determining fair value, and the fair value of a biological
asset or agricultural produce is not adjusted because of the existence of a contract

External independent valuation is an acceptable fair value measurement for biological assets and
agricultural produce
Select one:
A. True, False
B. True, True
C. False, False
D. False, True

Which statement is correct?

Select one:
A. The Insurance Commission is not represented in the FRSC
B. FINEX is the accredited professional organization of CPAs by the PRC.
C. The Bangko Sentral ng Pilipinas is not represented in the AASC
D. The chairman of the FRSC should have been or presently a senior practitioner in public
accountancy.

January 1, 2018, Uptown Company disclosed the following balances

During the current year, the following transactions occurred:

·Land was acquired for ₱2,000,000 cash as a building site.
·A plant facility consisting of land and building was acquired In exchange for 200,000 shares of the
entity. On the acquisition date, each share had a quoted price of ₱45 on a stock exchange.
Current appraised values for the land and the building, respectively, are ₱2,000,000 and ₱8,000,000.
The building has an expected life of 40 years with a ₱200,000 residual value.
·Items of machinery and equipment were purchased at a total cost of ₱4,000,000. Additional costs
incurred were freight and unloading of ₱100,000 and installation ₱300,000. The equipment has a useful
life of ten years with no residual value.
·Expenditures totaling ₱1,200,000 were made for new parking lot, street and sidewalk at the entity’s
various plant locations. These expenditures had an estimated useful life of fifteen years.
·Research and development costs amounted to ₱1,100,000.
·A machine costing ₱200,000 on January 1, 2011 was scrapped on June 30, 2018. Straight line
depreciation had been recorded on the basis of a 10-year life with no residual value.
·A machine was sold for ₱500,000 on July 1, 2018. Original cost of the machine sold was ₱700,000 on
January 1, 2015, and it was depreciated on the straight line basis over an estimated useful life of eight
years and residual value of ₱50,000.
What is the total cost of land on December 31, 2018?

Select one:
A. P7,600,000
B. P6,800,000
C. P8,000,000
D. P7,800,000

On January 1, 2013, Farm Company planted trees on its land. The entity purchased the land
two years ago at a cost of P1,000,000.
The trees were considered bearer plants and had accumulated cost of P500,000 on December 31,2017.
By January 1, 2018, the trees had matured and were expected to bear produce for a period of 5 years.
On December 31 ,2018 the trees produced fruit and the fair value less cost of disposal on such date was
P50,000. There was no harvest during 2018.
On December 31, 2019, the fruits were harvested and the fair value less cost of disposal on such date
was P75,000.
What is the carrying amount of the biological asset on December 31, 2018?
Select one:
A. II, III and IV only
B. II and IV only
C. I and II only
D. I, II, III and IV

The Financial Reporting and Standards Council (FRSC)

Select one:
A. Has the authority to establish the accounting framework to be used by companies under its
jurisdiction
B. Is the accredited professional organization of CPAs by the PRC.
C. Is composed of a chairman and six (6) members
D. Establishes generally accepted accounting principles in the Philippines

Which statement is incorrect regarding the fair value hierarchy in PFRS 13?
Select one:
A. To increase consistency and comparability in fair value measurements and related disclosures, PFRS
13 establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques
used to measure fair value.
B. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for
identical assets or liabilities and the lowest priority to unobservable inputs
C. Adjustments to arrive at measurements based on fair value, such as costs to sell when measuring fair
value less costs to sell, shall be taken into account when determining the level of the fair value
hierarchy within which a fair value measurement is categorized.
D. The fair value hierarchy prioritizes the inputs to valuation techniques, not the valuation techniques
used to measure fair value

QUIZ 2 – FAR

Muscat Company purchased a patent on January 1, 2012, for P3,570,000.The patent was being
amortized over its remaining legal life of 15 years. During 2015 Muscat determined that the economic
benefits of the patent would not last longer than ten years from the date of acquisition. What amount
should be reported in the statement of financial position as patent, net of accumulated amortization, at
December 31, 2015?
A. P2,618,000
B. P2,520,000
C. P2,142,000
D. P2,448,000

Which of the following distinguishes investment property from owner occupied-property?

A. Investment property does not generate cash flows largely independently of the other assets held by
an entity
B. Investment property is normally classified as a noncurrent asset
C. Investment property is held to earn rentals
D. Investment property generates cash flows largely independently of the other assets held by an entity

On January 1, 2015, Sunflower Company purchased for P240,000 a machine with a useful life of ten
years and no salvage value. The machine was depreciated by the double-declining balance method and
the carrying amount of the machine was P153,600 on December 31, 2016. Sunflower changed to the
straight-line method on January 1, 2017. Sunflower can justify the change. What should be the
depreciation expense on this machine for the year ended December 31, 2017?
A. P30,720
B. P15,360
C. P24,000
D. P19,200

As generally used in accounting, what is depreciation?

A. It is a process of asset valuation for balance sheet purposes
B. It applies only to long-lived intangible assets\
C. It is an accounting process which systematically allocates long-lived asset cost to accounting periods
D. It is used to indicate a decline in market value of long-lived asset
Towsey Manufacturing acquired a new milling machine on April 1, 2011. The machine has a special
component that requires replacement before the end of the useful life. The asset was originally recorded
in two accounts, one representing the main unit and the other for the special component. Depreciation
is recorded by the straight-line method to the nearest month, residual values being disregarded. On
April 1, 2017, the special component is scrapped and is replaced with a similar component. This
component is expected to have a residual value of approximately 25% of cost at the end of the useful
life of the main unit, and because of its materiality, the residual value will be considered in calculating
depreciation.
Specific asset information is as follows:

What is the depreciation charge to be recognized for the year 2017?

A. P5,930
B. P6,775
C. P8,800
D. P9,100

In the 30 June 2017 annual report of Johnston Ltd, the equipment was reported as follows:

The equipment consisted of two machines, machine A and machine B. Machine A had cost P3,000,000
and had a carrying amount of P1,800,000 at 30 June 2017, while machine B had cost P2,000,000 and
was carried at P1,700,000. Both machines are measured using the cost model, and depreciated on a
straight-line basis over a ten-year period.
On 31 December 2017, the directors of Johnston Ltd decided to change the basis of measuring the
equipment from the cost model to the revaluation model. Machine A was revalued to P1,800,000 with
an expected useful life of six years, and machine B was revalued to P1,550,000 with an expected useful
life of five years.
The amount to be recognized in profit or loss as a result of the revaluation of assets on December 31,
2017 is
A. P(50,000)
B. P150,000
C. P100,000
D. P(150,000)