CPA REVIEW SCHOOL OF THE PHILIPPINES. Manila FINANCIAL ACCOUNTING AND REPORTING —_ VALIX/SIY/VALIX/ESCALA/SANTOS(DELA CRUZ, STATEMENT OF COMPREHENSIVE INCOME 1. An entity reported the following data for the current year: Legal and audit fees 1,700,000 Rent for office space 2,400,000 Advertising 300,000 Interest on inventory loan 2,100,000 Loss on abandoned data processing equipment 350,000 Freight in 1,750,000 Freight out 1,600,000 Officers’ salaries 1,500,000 Insurance 850,000 Sales representative salaries 2,150,000 Research and development expense 1,000,000 ‘The office space is used equally by the sales and accounting departments, 1, What amount should be classified as general and administrative expenses? a. 5,250,000 b. 6,450,000 5,600,000 * 4. 6,250,000 2. What amount should be reported as selling expenses? a. 5,450,000 . 4,250,000 ©. 6,300,000 4. 6,450,000 2. Am entity provided the following information for the eurrent year: Increase in raw materials inventory 150,000 ‘Decrease in goods in process inventory 200,000 Decrease in finished goods inventory 350,000 Raw materials purchased 4,300,000 Direct labor payroll 2,000,000 Factory overhead 3,000,000, Freight out 450,000 Freight in 250,000 ‘What is the cost of goods sold for the current year” a. 9,950,000 b. 9,550,000 9,250,000 4. 9,150,000 3, Am entity reported operating expenses other than interest expense for the year at 40% of cast of goods sold but only 20% of sales. Interest expense is 5% of sales. The amount of purchases is 120% of cost of goods sold. Ending inventory is twice as much as the beginning inventory. The net income for the year is P2,100,000. The income tax rate is 30%. 1, What is the amount of sales forthe year? 10,000,000 ’. 15,000,000 e. 18,000,000, 4. 12,000,000 2. What is the amount of purchases forthe year? ‘a. 6,000,000 ’. 7,200,000 «. 3,000,000 4. 3,600,000 67284, An entity provided the following information for the current year: Page 2 Income from continuing operations 4,000,000 Income from discontinued operation 00,000 ‘Unrealized gain on financial asset - FVPL. 800,000 Untealized loss on equity investment - FVOCI 1,000,000 ‘Unrealized gain on debt investment - FVOCT 1,200,000 ‘Unrealized gain on futures contract designated as a cash flow hedge 400,000 ‘Translation loss on foreign operation 200,000 [Net“remeasurement” gain on defined benefit plan during the year 600,000 Loss on eredit risk ofa financial lability designated at FVPL, 300,000 Revaluation surplus during the year 2,500,000 1, What net amount should be reported es other comprehensive income for the current year? 1. 4,000,000 ». 3,500,000 . 3,200,000 4. 7,000,000 2. What amount should be reported as comprehensive income for the current year? a 5.200,000 ’. 7,700,000 ©. 8,500,000 a. 7,200,000 5. An entity reported net income of P7,400,000 for the current year, The auditor raised questions about the following amounts that had been included in né Equity in eamings of an associate ~ 25% interest Dividend received from the associate Unrealized loss on equity investment at FVOCI Gain on carly retirement of bonds payable Adjustment of profit of prior year for error in depreciation, net of tax effect Loss from fire Gain from change in fair value of financial liability designated at FVPL, ‘What amount should be reported as adjusted net income? 8,300,000 . 7,800,000 9,500,000 4. 8,800,000 6. An investment entity provided the following data for the current year: Dividend income from investments Distibution income from trusts Interest income on deposits Income from bank treasury bills Income from dealing in securities held for trading ‘Writedown on securities held for trading Other income Finance cost ‘Aduninistratve staff costs Sundry administrative costs Income tax expense 1, What is the total income before tax? 12,000,000 b. 12,150,000 ©. 11,750,000 4. 11,550,000 2. What is the net income for the year? 6,500,000 . 4,500,000 ©. 4,650,000 d. 4,250,000 1,500,000 ‘400,000 $50,000) 2,200,000 (750,000) (1,400,000) '500,000 10,000,000 500,000 700,000 100,000 600,000 150,000 250,000 300,000 3,800,000 1,400,000 2,000,000 6728Page 3 7. An entity had the following events and transactions during 2020: ‘+ Depreciation for 2019 was understated by P500,000 ‘© A litigation settiement resulted in a loss of P2,000,000 ‘© The inventory on December 31, 2018 was overstated by P800,000 ‘© The entity disposed of a recreational division at a loss P1,500,000 ‘© The income tax rate is 30% ‘What total amount of loss should be included in income from continuing operations for 2020? a. 2,000,000 b. 1,400,000 ©, 3,500,000 d. 2,450,000 8. During 2020, an entity decided to change from the FIFO method of inventory valuation to the ‘weighted average method. Inventory balances under each method were: FIFO Weighted Average December 31, 2017 4,500,000 5,400,000 December 31, 2018 7,800,000 7,100,000 Devember 31, 2019 8,300,000 7,800,000 The income tax rate is 30%. What amount should be reported as the effect of this accounting change in the statement of retained earnings for 2020? a, 3$0,000 decrease . 350,000 increase ©. 490,000 decrease 4. 490,000 increase 9. On January 1, 2018, an entity purchased a machine for P7,200,000 and depreciated it by the straight line method using an estimated usoful life of eight years with no residual value. On January 1, 2020, the entity determined that the machine had a useful life of six years ffom the date of acquisition with a residual value of P600,000, What isthe accumulated depreciation on December 31, 20202 a 4,200,000 ». 3,600,000 . 3,000,000 & 4,600,000 10. On January 1, 2018, an entity purchased for P5,000,000 a machine with useful life of ten years and residual value of P200,000. The machine was depreciated by the double declining balance method. ‘The entity changed to the straight line method on January 1, 2020 and the residual value did not change. What is the carrying amount ofthe asset on December 31, 2020? a. 2,825,000 b. 2,800,000 ©. 2,625,000 4. 3,200,000 - END- 6728