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
Boardd of Acc
Accou
ountntan
ancy
cy
c. Secur
Securiti
ities
es and
and Echan
Echange ge Commi
Commissi
ssion
on
d. Professi
Professional
onal !egulati
!egulationon 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 onon 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 c. Con
Consis
sisten
tency
b. Cash
Cash bas
basisis of accou
accounti
nting
ng 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 

Criterion 1 Criterion "

a. Completeness +easurement reliability
b. Prob
robable econ
conomic benefit
fits +ea
+easure
surem
ment re
relia
liabilit
ility
y
c. +ateriality !ele(ance to others
d. eutrality !ele(ance to others

b. Prob
Probab
able
le econ
econom
omic
ic bene
benefi
fits
ts Meas
Measur
urem
emen
entt rel
relia
iabi
bili
lity
ty
 /. #he IASB &ramewor0 outlines two underlying assumptions of financial statements.
#hese are

 Assumption 1 Assumption "

a. Accrual basis of accounting !ele(ance and reliability
b. Cash basis of accounting Insol(ency assumption
c. Accrual basis of accounting ,oing concern assumption
d. Cash basis of accounting 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 eclude 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 eercise 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 c. Statement of changes in e'uity

b. Income statement d. Cash flow statement

d. &ash flo" statement

:. #he following data pertain to Sanghaya Corporation on ;ecember )1% "<17

Current account at BPI P )%<<<%<<<

 Current account at PB =/<%<<<>
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 epenses receipts for %<<<> 1<%<<<
#reasury bills% due ))114 =purchased 1")11> )<<%<<<
#reasury bills% due 1)114 =purchased 111> 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 -%))-%<<< c. P -%-<-%<<<
b. P -%)8-%<<< d. P -%-<:%<<<

Current account at BPI )%<<<%<<<

Payroll account 1%<<<%<<<
#ra(elerDs chec0 /<%<<<
+oney order )<%<<<
Petty cash fund =the amount in currency only> -%<<<
#reasury bills% due ))114 )<<%<<<
b. P )*+,)*

1<. ou noted the following composition of Fiyas Company9s 5cash account6 as of
;ecember )1% "<1

;emand deposit P )%<<<%<<<

#ime deposit $ )< days "%<<<%<<<
S& chec0 of customer -<%<<<
+oney mar0et placement =due Gune )<% "<14> 1%/<<%<<<
Sa(ings deposit in a closed ban0 1<<%<<<
I@ from employee "<%<<<
Pension fund "%<<<%<<<
Petty cash fund 1<%<<<
Customer chec0 dated Ganuary 1% "<14 /<%<<<
Customer chec0 outstanding for 18 months -<%<<<
:%4<%<<<

 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. P /%<1<%<<<
b. P %/1<%<<<
c. P %//<%<<<
d. P %"/<%<<<

;emand deposit P )%<<<%<<<

#ime deposit "%<<<%<<<
Petty cash fund 1<%<<<
ndeli(ered chec0 =payment to suppliers> 1<<%<<<
Post dated chec0 =payment to suppliers> )<<%<<<
2indow dressing =-<<%<<<>
a. P */*

III. 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 epense 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 eistence 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% "<17

Balance per ban0 statement "<%<<<%<<<

 Add7 ;eposit in transit 1%/<<%<<<
Chec0boo0 and other ban0 charge /<%<<<
Error made by Sambisig in recording chec0 1<</ =issued in
;ecember> 1/<%<<<
Customer chec0 mar0ed ;AI& /<<%<<< "%"<<%<<<
#otal ""%"<<%<<<
;educt7 @utstanding chec0s 1%:<<%<<<
ote collected by ban0 =includes P "<<%<<< interest> "%)<<%<<< -%"<<%<<<
Balance per boo0 18%<<<%<<<

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:%<<%<<< d. P "<%<<%<<<
c. P 18%<<%<<< e. P 1:%4/<%<<<

Balance per boo0 18%<<<%<<<

Chec0boo0 and other ban0 charge =/<%<<<>
Chec0 mar0ed as ;AI& =/<<%<<<>
otes collected "%)<<%<<<
Cash on hand 1%<<<%<<<
Boo0 error =1/<%<<<>
 Ad*usted cash balance c. 1*2*

1-. !econciliation of Adliwa Corporation9s ban0 account at o(ember )<% "<1 follows7

Balance per ban0 statement P )%1/<%<<<

;eposit in transit -/<%<<<
Chec0s outstanding =-/%<<<>
Correct cash balance P )%///%<<<
Balance per boo0s P )%//8%<<<
Ban0 ser(ice charge =)%<<<>
Correct cash balance P )%///%<<<

;ecember data are as follows7

Ban0 Boo0s
Chec0s recorded P)%-/<%<<< P)%/-<%<<<
;eposits recorded "%-)<%<<< "%4<<%<<<
Collection by ban0 =P<<%<<< plus interest> )<%<<< $
S& chec0 returned with ;ecember ban0 statement 1/%<<< $
Balances "%4-/%<<< "%41/%<<<
 #he chec0s outstanding on ;ecember )1% "<1 amount to7
a.

b. P-/%<<< d. P:<%<<<
c. P1)/%<<<
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  b. /+*

I3. 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 "<17

Sales =cash and credit> /%:<<%<<<

Cash recei(ed from credit customers =too0 ad(antage of -1<% n)< )%<"-%<<<
discount feature>
Cash recei(ed from cash customers "%1<<%<<<
 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  8<%<<<
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 epense on
;ecember )1% "<13

a. 1%)<<%<<< "<<%<<< b. 1%)<<%<<<% 1)<%<<<

 c. 1%-"%<<<% )<<%<<< d. 1%-4%<<<% "<<%<<<

 Accounts !ecei(able
Beg. bal :/<%<<<
Credit sales H)%8<<%<<< HH)%1/<%<<< Collections
/<%<<< 2ritten off  
"/<%<<< Credit memo
a. /*+*

 Allowance for ;A

1<<%<<< Beg. bal.
2ritten off /<%<<< 4<%<<< ;A epense
!eco(ery of
  8<%<<<  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.

4anuary / December +/
In(entory 1%/<<%<<<
Purchases /%/<<%<<<
Cash sales :<<%<<<
Collections of accounts recei(able 8%-<<%<<<
 Accounts recei(able 4<<%<<< 1%1<<%<<<
,ross profit on sales -<K

2hat is the in(entory loss from the storm surge3

a. 1%4"<%<<<
b. "%"<%<<<
c. 1%18<%<<<
 d. "%4<<%<<<

Accounts !ecei(able In(entory

Beg bal 4<<%<<< Beg bal. 1%/<<%<<<
Sales =s'ueeze> 8%8<<%<<< Purchases /%/<<%<<<
/%8"<%<<
Collections 8%-<<%<<< C@,SH <
Ending bal 1%1<<%<<< c. /*/,*
H Cost of ,oods Sold  #otal sales  =1$,ross Profit on sales>
 =8%8<<%<<<J:<<%<<<>  =1$.-<>
 /%8"<%<<<

3I. '(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% "<13
a. P:<<%<<<
b. P8<<%<<<
c. P<
d. P"<<%<<<

c. P

1:. Alipio Company pro(ided the following data for "<17

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 "<13
a. P/-<%<<<
b. P1<<%<<<
c. P<<%<<<
d. P-<%<<<

a. P)*
Cash di(idend from 2illiam Company /<<%<<<
Cash di(idend from ,onzales Company ="%<<<%<<<H.<"> -<%<<<
/-<%<<<
3II. Property* Plant and '(uipment

"<. #he following costs 'ualify for recognition ecept

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<K. 2or0
on the building% started from Ganuary 1% was substantially completed on @ctober )1 of 
the same year. #he load was repaid on ;ecember )1% "<1 and P1/<%<<< in(estment
income was earned in the period to @ctober )1 on the proceeds of the loan not yet
used for the reno(ation. Compute for the amount of borrowing cost to be included in
the cost of the building.
a. P1%</<%<<<
b. P1%)/<%<<<
c. P1%"<<%<<<
d. P8/<%<<<

d. P,*

Interest incurred =1"%<<<%<<<  %1<  1<1"> 1%<<<%<<<

Interest income =1/<%<<<>
Capitalized borrowing cost 8/<%<<<

3III. 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 %8<<%<<<
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 =4<<%<<<>
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<<%<<<

@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 =/%<<<%<<<J"<<%<<<$4<<%<<<J-<<%<<<> -%:<<%<<<
In(entory -%/<<%<<<
CA held for sale )%<<<%<<<
 a. /**

I6. 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 1<<%<<<
!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 =1<<%<<<>
!e(aluation surplus "%/<<%<<<
b. 7**

6. 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
b. In(esting acti(ities d. one of the abo(e

b. Investing activities

6I. 'rror &orrection

"4. Gac0son Company9s statement included errors as follows7

ear Ending In(entory ;epreciation

"<1/ "<<%<<< o(erstated /<%<<< understated
"<1 )<<%<<< understated 1<<%<<< o(erstated

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/<%<<<

Effect on et Income Ad*ustment to retained earnings

nderstated depreciation on
@(erstated ;educt /<%<<<
"<1/
nderstated ending nderstated =due to Add )<<%<<<
 in(entory on "<1 o(erstated C@,S>
@(erstated depreciation on
nderstated Add 1<<%<<<
"<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
1")1"<1/ 1")1"<1
 Accounts recei(able "%<<<%<<< "%<<%<<<
 Allowance for uncollectible accounts 4<%<<< 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"<%<<<
b. P1%"<%<<< d. one of the abo(e

 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 1%:1<%<<<
Epenses 8<:%<<<
et income 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 "<17

"<1/ "<1
 Accrued re(enue :1%<<< 4)%<<<
nearned re(enue %<<< 1<8%<<<
 Accrued epenses -:%<<< /%<<<
Prepaid epenses -%<<< /%<<<

#he net income on the accrual basis for "<1 should be7
a. P1%14%<<<
b. P1%<4%<<<
c. P1%<)/%<<<
d. P1%1<)%<<<

nad*usted net income 1%1<1%<<<

;ecrease in accrued re(enue =18%<<<>
Increase in unearned re(enue =-"%<<<>
HIncrease in accrued epense =1%<<<>
HHIncrease in prepaid epenses 1<%<<<
 Ad*usted net income c. /*+*

H Epense Account 1%<<<

Accrued Epense =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 Epense =Asset> 1<%<<<

Epense 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<K resulting in bond discount of P"--%<<<. sing the effecti(e interest method%
compute for the unamortized bond discount if the interest is payable annually on
;ecember )1.
a.
b. P"/:%<< d. P1/%<<
c. P""8%-<< e. P)4/%<<

;ate =A> =B>

=C> =;>
ominal Effecti(e
;iscount Carrying Malue
Interest Interest
 Amortization =Pre(ious ; J
=-%<<<%<<<  . =;  .1<>
=B$A> C>
<:>
111 )%4/%<<<
1")11 )<%<<< )4/%<< 1/%<< )%441%<<

namotized bond discount  &ace amount ? carrying (alue

 -%<<<%<<< ? )%441%<<
 11,*) <B=

)-. @n Ganuary 1% "<1% ;elos Santos Company issued ) year bonds with face (alue of 
P/%<<<%<<< at :8. Additionally% the entity paid bond issue cost of P1-<%<<<. #he nominal
rate is 1<K and the effecti(e rate is 1"K. #he interest is payable annually on ;ecember 
)1. #he entity used the effecti(e interest method in amortizing bond discount and issue
cost.

2hat is the carrying amount of bonds payable on ;ecember )1% "<13

a. P-%8)1%"<<
b. P-%88%8<<
c. P-%4<%<<<
d. P-%:-)%"<<

Issue price =/%<<<%<<<  .:8> -%:<<%<<<

Bond issue cost =1-<%<<<>
Carrying (alue% 111 -%4<%<<<

;ate =A> =B> =C> =;>

ominal Effecti(e ;iscount Carrying Malue
Interest Interest  Amortization =Pre(ious ; J
=/%<<<%<<<  .1> =;  .1"> =B$A> C>
 111 -%4<.<<<
1")11 /<<%<<< /41%"<< 41%"<< a. )*,+/*1

6I3. Intangibles

)/. 2hich of the following are the essential characteristics of an intangible asset3
a. Identifiability% controlled by the enterprise% epected future economic benefits and
indefinite useful life.
b. Identifiiability% controlled by the enterprise% and indefinite useful life.
c. Identifiability% owned by the enterprise% epected economic benefits and definite
useful life.
d. Identifiability% controlled by the enterprise and epected future economic benefits

d. Identifiability% controlled by the enterprise and epected 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</
"./ year old animal on ;ecember )1 111
ew born animal on ;ecember )1 4"
) year old animal on ;ecember )1 1"<
<./ year old animal on ;ecember )1 8<

)4. 2hat is the fair (alue of the biological assets on ;ecember )13
 a. 1%-<< c. 1%--<
b. 1%)"< d. 1%)<
&air (alue of ) yo animals on ;ecember =111"<> 1%)"<
&air (alue of <./ yo animal on ;ecember =1  8<> 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<<>  1<O /<

1 "./ year old animal N=111$1<8>  1O )
1 newborn on Guly N=4"$4<>  1O "
d. 

63I. 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%<<%<<<

Cost !eplacement Cost Appreciation

E'uipment /%"<<%<<< 8%<<<%<<< "%8<<%<<<
!esidual (alue ="<<%<<<> ="<<%<<<> $
;epreciable amount /%<<<%<<< 4%8<<%<<< "%8<<%<<<
 Accumulated
depreciation
=-1<  -%8<<%<<<> 1%:"<%<<<
=-1<  4%8<<%<<<> )%1"<%<<< 1%"<<%<<<
Balance )%<8<%<<< -%8<%<<< d. /*2*

63II. Diluted 'arnings Per 5hare

-<. Bane Company had earnings per share of P1"< for the current year% before ta0ing any
diluti(e securities into consideration. o con(ersion or eercise 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 eercise 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 1"<
Effect of possible con(ersion of preference shares =1>
Effect of possible eercise of warrants =">
;iluted earnings per share c. //: