COLLEGE OF ACCOUNTANCY AND BUSINESS ADMINISTRATION

PRELIMINARY EXAMINATION: CFAS

Start: 1:00 PM
End: 4:00 PM

Allowed time to transmit your answers to be considered on time is on or before 4:03 pm only. Do not
copy nor ask anybody for the answer. Do not open (or attempt to open) your book. This exam is good
for 180 minutes. Write your answer in any sheet of paper (Handwritten).

Submission: Send your answer to eaoducayen0403@gmail.com using this title format

CFAS_FINAL_SURNAME Example: CFAS_FINAL_PUA. Take a picture of the “message as sent” then upload
it to the FB Group.
Multiple choice. Write the correct letter of your answer. D. I, II and III
Use capital letters only. E. I, II, III and IV

1. What is the general objective of financial statements?
A. To provide information about economic
resources of an entity, claims against the entity
and changes in the economic resources and
claims
B. To assess future cash flows to the entity
C. To assess management stewardship of economic
resources
D. To satisfy information needs of users of financial
statements
E. All of the above
2. If the reporting entity comprises both the parent and
its subsidiaries, the financial statements are referred
to as
A. Consolidated financial statements
B. Unconsolidated financial statements
C. Combined financial statements
D. Separate financial statements
E. None of the above
3. Which best describes the term going concern?
I. When current liabilities exceed current assets
II. The ability of the entity to continue operation for
the foreseeable future
III. The potential to contribute to the flow of cash and
cash equivalents
IV. The expenses exceed income
A. II only
B. III only
C. II and III
4. Which of the following is false about the basic
assumptions of accounting?
A. Each business is an independent accounting
entity
B. The indefinite life of an entity is subdivided into
accounting periods which are usually of equal
length for the purpose of preparing financial
reports on financial position, performance and
cash flows.
C. The assets, liabilities, equity, income and
expenses should be stated in terms of a unit of
measure which is the peso in the Philippines.
D. Cost principle is the very foundation of going
concern
5. Which is not within the new definition of an asset?
A. An asset is a present economic resource
B. The economic resource is a right that has
potential to produce economic benefit
C. The economic resource if controlled by the entity
as a result of past event
D. Future economic benefit is expected to flow to
the entity
E. All statements are included on the new definition
of an asset.
6. Obligations to transfer an economic resource include
all, except
A. Obligation to pay cash
B. Obligation to deliver goods
C. Obligation to provide services

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 D. Obligation to exchange economic resources with C. Income statement
another party on unfavorable terms D. Statement of changes in equity
E. Obligation to transfer an economic resource even
if a specified future event does not occur 13. It is a form of income statement wherein the expenses
of the same nature are group together and presented
7. Statement 1: Income is increase in asset or decrease in as one item.
liability that results in decrease in equity other than A. Functional Presentation
contribution from equity holders. B. Natural Presentation
C. Report Form
Statement 2: Expense is decrease in asset or increase D. Account Form
in liability that results in increase in equity other than
distribution to equity holders. 14. All of the following are essential characteristics of
A. Statement 1 is true and Statement 2 is false liability, except
B. Statement 1 is false and Statement 2 is true A. The entity has an obligation
C. Both statements are correct B. The obligation is to transfer an economic resource
D. Both statements are incorrect C. The obligation is a present obligation that exists
E. Answer cannot be identified as a result of past events
D. None of the above
8. The statement of financial position is used to evaluate:
A. Liquidity 15. Investors and creditors use the income statement for
B. Financial structure all of the following, except
C. The company’s ability to use resources to adapt A. To evaluate the future performance of an entity
to change B. To provide basis for predicting future
D. All of the above. performance
C. To help assess the risk and uncertainty of
9. Which of the following statements are true about achieving future cash flows
current assets? D. To evaluate the past performance of an entity
A. Cash and other assets expected to be converted
to cash or used within a year or the operating The next three (3) questions are based on the following:
cycle, whichever is shorter. Argentina Company incurred the following costs and
B. Cash and other assets expected to be converted expenses during the current year:
to cash or used within a year or the operating
cycle, whichever is longer. Raw material purchases 4,000,000
C. Items are intended to be held for the term and Direct labor 1,500,000
not currently used in business operations. Indirect labor – factory overhead 800,000
D. None of the above Factory repairs and maintenance 200,000
Taxes on factory building 100,000
10. The following items are classified as current liabilities, Depreciation – factory building 300,000
except Taxes on salesroom and general office 150,000
A. Accrued expenses Depreciation – sales equipment 50,000
B. Warranties Advertising 400,000
C. Deferred tax liability Sales salaries 500,000
D. Dividends payable Office salaries 700,000
Utilities – 60% applicable to factory 500,000
11. Which of the following statements are false?
A. Sole proprietorship and partnership generally Beginning Ending
have one capital account for each owner. Raw materials 300,000 450,000
B. Corporations generally break down owners’ Work in process 400,000 350,000
equity into paid-in capital versus retained Finished goods 500,000 700,000
earnings.
C. Owner’s equity is Measured indirectly as a 16. What is the cost of raw materials used?
residual of assets minus liabilities. A. 4,000,000
D. None of the above B. 4,150,000
C. 4,750,000
12. It shows the financial performance of an entity for a D. 4,300,000
given period. E. ____________________
A. Statement of financial position
B. Statement of comprehensive income

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17. What is the cost of goods manufactured for the current B. 5,600,000
year? C. 6,250,000
A. 7,450,000 D. 6,550,000
B. 7,200,000 E. ____________________
C. 7,300,000
D. 7,050,000 21. Mike Company has reported the following data as of
E. ____________________ December 31, 2020:
• Cash of P5,000,000, net of P500,000 bank
18. What is the cost of goods sold for the current year? overdraft
A. 7,300,000 • Receivables of P2,500,000, net of allowance for
B. 7,600,000 doubtful accounts of P100,000
C. 8,300,000 • Inventories of P3,100,000, including P200,000
D. 6,850,000 shipment in transit as of December 29, 2020,
E. ____________________ which was sold by the Company at FOB
destination
19. Brock Company reported operating expenses in two • Unamortized portion of prepaid insurance
categories, namely distribution and administrative. amounting to P1,500,000, availed on June 30,
The adjusted trial balance at year-end included the 2020 and has a three-year policy
following expense and loss accounts for current year.
One-half of rented premises is occupied by the sales How much will be presented as current assets section
department. of the statement of financial position?
A. 12,100,000
Accounting and legal fees 1,200,000 B. 11,900,000
Advertising 1,500,000 C. 11,500,000
Freight out 800,000 D. 12,600,000
Interest 700,000 E. ____________________
Loss on sale of long-term investment 300,000
Officers’ salaries 2,250,000 22. Monica Corporation reported the following as part of
Rent for office space 2,200,000 its noncurrent assets as of December 31, 2020:
Sales salaries and commissions 1,400,000 • Property, plant and equipment of P2,500,000,
which includes land for undetermined use of
What amount should be reported as distribution P500,000
costs? • Investment property of P1,000,000 which
A. 4,000,000 excludes land classified as held for sale, P300,000
B. 3,700,000 • Deferred tax assets, P600,000
C. 3,600,000
D. 3,300,000 How much will be reported as total noncurrent assets?
E. ____________________ A. 3,900,000
B. 4,400,000
20. Lee Company reported the following data for the C. 3,000,000
current year: D. 3,800,000
E. ____________________
Legal and audit fee 1,700,000
Rent for office space equally shared 23. Jack Corporation’s trial balance reflected the following
by sales and accounting 2,400,000 account balances on December 31, 2020:
Interest on inventory loan 2,100,000
Loss on abandoned data processing Accounts payable, gross of debit balance in
equipment 350,000 supplier’s accounts amounting to P100,000 900,000
Freight in 1,750,000 Estimated expense of meeting warranties 200,000
Freight out 1,600,000
Loans payable – payable in five equal
Officers’ salaries 1,500,000
installments 500,000
Insurance 850,000
Cash 1,000,000
Sales representative salaries 2,150,000
Share dividends payable 300,000
Research and development expense 1,000,000
How much is the total current liabilities for the year
What amount should be classified as administrative
ended, December 31, 2020?
expense?
A. 1,500,000
A. 6,450,000
B. 1,600,000

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 C. 1,400,000 2. Kay Company provided the following information
D. 1,900,000 for the current year.
E. ____________________
Increase in raw materials inventory 150,000
24. Jill Corporation’s trial balance reflected the following Decrease in goods in process inventory 200,000
account balances on December 31, 2020: Decrease in finished goods inventory 350,000
Raw materials purchased 4,300,000
Dividends payable 100,000 Direct labor payroll 2,000,000
Share dividends payable 100,000 Factory overhead 3,000,000
Deferred tax liability 100,000 Freight out 450,000
Loans payable – payable in 3 equal Freight in 250,000
installments 300,000
What is the cost of goods sold for the current
How much is the total noncurrent liabilities for the year? ____________________
year ended, December 31, 2020?
A. 600,000
B. 400,000 3. Corazon Company provided the following
C. 500,000 information for the current year:
D. 200,000
E. ____________________ Sales 7,000,000
Sales returns and allowances 100,000
25. Shown below is a data of a Company in its first year of Cost of goods sold 2,800,000
operations for the year ended December 31, 2020. Utilities expense 1,000,000
Interest revenue 150,000
Outstanding capital shares 3,400,000
Income tax expense 800,000
Redeemable preference shares 2,000,000 Casualty loss due to earthquake 50,000
Share premium 800,000
Finance cost 200,000
Retained earnings appropriated for Salaries expense 600,000
contingencies 1,000,000
Loss on sale of investments 50,000
Determine the total equity as of December 31, 2020:
What amount should be reported as net income?
A. 7,200,000
____________________
B. 6,200,000
C. 5,400,000
4. Darwin Company provided the following
D. 4,400,000
information at year-end:
E. ____________________
Cash 1,500,000
Problem Solving.
Accounts receivable 1,200,000
1. Sheraton Company reported the following Inventory, including inventory expected
information for the current year. in the ordinary course of operations to
be sold beyond 12 months amounting
to P700,000 1,000,000
Ending goods in process 1,000,000
Financial asset held for trading 300,000
Depreciation on factory building 320,000
Equity investment at fair value through
Beginning raw materials 400,000
other comprehensive income 800,000
Direct labor 1,980,000
Equipment held for sale 2,000,000
Factory supervisor’s salary 560,000
Deferred tax asset 150,000
Depreciation on headquarters building 210,000
Beginning goods in process 760,000
What amount should be reported as total current
Ending raw materials 340,000
assets at year-end? ____________________
Indirect labor 360,000
Purchase of raw materials 2,300,000

What is the cost of goods manufactured for the current

year? ____________________

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 5. Gar Company reported the following liability
account balances on December 31, 2019:

Accounts payable 1,900,000

Bonds payable, due December 31, 2020 3,400,000
Discount on bonds payable 200,000
Deferred tax liability 400,000
Dividends payable 500,000
Income tax payable 900,000
Note payable, due January 31, 2021 600,000

On December 31, 2019, what total amount should

be reported as current liabilities?
____________________

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