Instructions: Select the best answer for each item.

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1. The following items were among those that were reported on Cotabato Company’s
income statement:
Legal and audit fees P2,000,000
Rent for office space 6,000,000
Interest on acceptances payable 1,000,000
Loss on abandoned equipment 500,000
Insurance 200,000
The office space is used equally by the sales and accounting departments. What
amount should be classified as general and administrative expenses?
A. P8,200,000
B. P6,200,000
C. P5,200,000
D. P5,000,000

2. The expenses other than interest expense of Ratio Company for the current year is
40% of cost of sales but only 20% of sales. Interest expense is 5% of sales. The
amount of purchases is 120% of cost of sales. Ending inventory is twice as much as
the beginning. The income after tax of 35% for the current year is P390,000. What
is the amount of inventory at the end of the year?
A. P400,000
B. P480,000
C. P260,000
D. P240,000

3. The "other income" section of Pigeon Company's Statement of Comprehensive

Income contains P5,000 in interest income, P15,000 equity in Hole Co. earnings,
and P25,000 gain on sale of available-for sale securities. Assuming the sale of the
securities increased the current portion of income tax expense by P10,000,
determine the amount of Pigeon's reclassification adjustment to other
comprehensive income.
A. P35,000
B. P5,000
C. P15,000
D. P2,500

4. For the purpose of starting the working capital of Alcano Company on December 31,
2020, the following data are submitted:

Cash on hand and in bank, net of bank overdraft of P50,000 P 550,000

Petty cash (unreplenished petty cash expenses, P4,000) 10,000
Notes receivable 750,000
Accounts receivable, net of accounts with credit balances of P100,000 1,100,000
Merchandise inventory, excluding unrecorded purchase of
 P200,000 on account in transit on December 31, 2020 and
shipped FOB shipping point on December 31, 2020 2,000,000
Prepaid expenses 90,000
Accounts payable, net of accounts with debit balances of P150,000 3,000,000
Note payable, with annual installment of P500,000 payable
every May 31 2,000,000
Accrued expenses 300,000

The total current liabilities of Alcano Company on December 31, 2020 should be
A. P5,800,000
B. P4,100,000
C. P3,950,000
D. P4,300,000

5. When preparing a draft of its 2020 statement of financial position, Mount Inc.
reported net assets totaling P875,000. Included in the asset section of the
statement of financial position were the following:

Treasury shares of Mount, Inc. at cost, which approximates

market value P24,000
Idle machinery 11,200
Cash surrender value of life insurance policy on corporate executives 13,700
Allowance for decline in market value of available-for-sale securities 8,400

At what amount should Mount’s net assets be reported in the December 31, 2020
statement of financial position?
A. P851,000
B. P842,600
C. P850,100
D. P834,500

6. The accounts below appear in the December 31, 2020 trial balance of Luna
Company:
Authorized share capital P30,000,000
Unissued share capital 5,000,000
Subscribed share capital 3,000,000
Subscription receivable 1,000,000
Share premium 10,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 2,000,000
Revaluation surplus 4,500,000
Treasury shares, at cost 1,500,000

In its December 31, 2020 statement of financial position, Luna should report total
equity at
A. P49,000,000
 B. P43,500,000
C. P48,000,000
D. P58,000,000

7. Brett Limited had a net profit after tax of P850,000 for the financial year. Included in
this profit was:
• Depreciation expense of P120,000
• Gain on sale of Investments of P28,000
Also, Accounts Receivable increased by P39,000 and Inventories decreased by
P12,000. The cash flow from operating activities during the year was:
A. P785,000
B. P915,000
C. P969,000
D. P731,000

8. During 2020, Siquijor has the following activities related to its financial operations:

Payment for the early retirement of long-term bonds

payable (carrying amount of bonds payable P5,000,000) P5,500,000
Distribution in 2020 of cash dividend declared in 2019 3,000,000
Carrying amount of convertible preference shares converted
Into ordinary shares 2,000,000
Proceeds from sale of treasury shares (cost, P2,000,000) 2,500,000

In the 2020 statement of cash flows, net cash used in financing activities should be
A. P6,000,000
B. P3,000,000
C. P8,500,000
D. P6,500,000

9. 10. Lange Co. provided the following information on selected transactions during the
current year:

Purchase of land by issuing bonds P200,000

Proceeds from issuing bonds 300,000
Purchases of inventory 650,000
Purchases of treasury shares 90,000
Loans made to affiliated corporations 250,000
Dividends paid to preference shareholders 80,000
Proceeds from issuing preference shares 240,000
Proceeds from sale of equipment 50,000

The net cash provided by financing activities for the current year is
A. P370,000
B. P570,000
C. P460,000
 D. P120,000

10. Australia Company has three business segments with the following Information:
One Two Three
Sales to outsiders P8,000,000 P4,000,000 P6,000,000
Intersegment transfers 600,000 1,000,000 1,400,000
Interest income – outsiders 400,000 500,000 600,000
Interest income –
intersegment loans 300,000 400,000 500,000

What is the minimum amount of revenue that each of those segments must have to
be considered reportable?
A. P1,950,000
B. P2,250.000
C. P2,100,000
D. P2,370,000

11. Fragment Corporation and its divisions are engaged solely in manufacturing. The
following data pertain to the industries in which operations were conducted for
current year:
Segment Operating Profit (Loss)
1 8,000,000
2 2,000,000
3 (1,300,000)
4 3,000,000
5 (1,000,000)

In its segment information, which is(are) reportable segment(s)?

A. Segments 1, 2, 3, 4 & 5
B. Segments 1, 2, 3 & 4
C. Segments 1, 2, & 4
D. Segments 3 & 5

12. CDO Company, a publicly owned corporation, is subject to the requirements for
segment reporting. In its income statement for the current year ended, CDO
reported revenue of P150,000,000, operating expenses of P100,000,000 and net
income of P50,000,000. Operating expenses include payroll costs of P20,000,000.
CDO’s combined identifiable assets of all industry segments at year end were
P80,000,000. The reported revenue includes P120,000,0000 of sales to external
customers. External revenue reported by operating segments must be at least
A. P112,500,000
B. P 90,000,000
C. P 37,500,000
D. P 60,000,000
13. On June 30, Sasa Corp. incurred a P200,000 net loss from disposal of a business
segment. Also, on June 30, Sasa paid P80,000 for property taxes assessed for the
calendar year. What amount of the foregoing items should be included in the
determination of Sasa’s profit or loss for the 6-month interim period ended June 30?
A. P280,000
B. P180,000
C. P140,000
D. P240,000

14. On March 15, Anda Co. paid property taxes of P120,000 on its factory building for
the calendar year. On April 1, Anda made P240,000 in unanticipated repairs to its
plant equipment. The repairs will benefit operations for the remainder of the
calendar year. What total amount of these expenses should be included in Anda’s
quarterly income statement for the 3 months ended June 30?
A. P 60,000
B. P150,000
C. P270,000
D. P110,000

An entity reported a revenue of P50,000,000, excluding intersegment sales of

P10,000,000, expenses of P47,000,000 and net income of P3,000,000 for the current
year. Expenses included payroll costs of P15,000,000. The combines assets of all
segments totaled P45,000,000.

15. What is the minimum amount of sales to a major customer?

A. P5,000,000
B. P4,000,000
C. P4,500,000
D. P6,000,000

16. What is the minimum amount of external revenue to be disclosed by reporting

segments?
A. P30,000,000
B. P45,000,000
C. P33,750,000
D. P37,500,000

An entity reported an operating expense other than interest expense for the current year
at 40% of cost of sales but only 20% of sales. Interest expense is 5% of sales. The
amount of purchases is 120% of cost of sales. Ending inventory is twice as much as
the beginning. The income after tax of 30% for the current year is P2,100,000.
17. What is the amount of sales for the year?
A. P10,000,000
B. P15,000,000
C. P18,000,000
 D. P12,000,000

18. What is the amount of purchases for the year?

A. P6,000,000
B. P7,200,000
C. P3,000,000
D. P3,600,000

19. An entity provided the following information for the current year:
Increase in raw materials inventory P 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. P9,950,000
B. P9,550,000
C. P9,250,000
D. P9,150,000

20. On January 1, 2017, 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 method. The entity changed to the straight line method on January
1, 2019 and the residual value did not change. What is the carrying amount of the
asset on December 31, 2019?
A. P2,825,000
B. P2,800,000
C. P2,625,000
D. P3,200,000