Professional Documents
Culture Documents
2022 April Far
2022 April Far
CPA Review Batch 43 May 2022 CPALE 24 April 2022 8:00 – 11:00 AM
INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
1. On December 31, 2022, the cash account of Shop Company shows the following
composition:
Petty cash fund, P180,000; Cash in bank (payroll fun +d), P2,000,000; Interest and
dividend fund, P250,000; Tax fund, P120,000; Cash in bank (current account),
P3,000,000; Certificate of deposit (terms 90 days), P1,000,000; Certificate of
deposit (terms 180 days), P1,500,000; Cash in foreign bank-restricted, P500,000;
Money market fund, (60 days), P500,000; Money market funds (6 months), P900,000;
Customer’s check dated February 15, 2023, P60,000; Customer’s check dated December
30, 2022 returned for lack of funds, P40,000; A 30-day BSP treasury bill, P1,000,000;
A 3-year BSP treasury bill acquired three months prior to maturity, P1,200,000;
Sinking fund cash, P800,000;Contingent fund, P900,000 Fund for the acquisition of
fixed asset, P500,000; Travelers’ checks, P60,000; and Cashiers’ checks, P100,000.
What is the correct cash and cash equivalents balance to be reported by Shop Company
on December 31, 2022?
a. P9,410,000
b. P9,320,000
c. P9,170,000
d. P9,780,000
2. The cash balance of Winter Company had the following information:
Descriptions November December
Cash balances per book P1,200,000 P1,450,000
Cash balances per bank 1,400,000 1,838,500
Bank service charges 12,000 11,500
NSF checks 100,000 150,000
Notes collected by the bank 350,000 410,000
Deposit in transit 320,000 ?
Outstanding checks ? 185,000
Book debit error 25,000 –
Book credit error 50,000 70,000
Bank credit error – 65,000
Bank debit error 75,000 90,000
Bank receipts 2,550,000
Book disbursements 1,920,000
Note: errors were corrected in the following period. No other errors
affecting the cash balances.
The following transactions were included in the recorded transactions during the
year:
a. Invoice dated December 28, 2022 for P350,000 was shipped and received by the
buyer on December 31, 2022, this invoice was recorded in the book at P35,000.
b. Invoice dated and recorded on November 30, 2022 was erroneously priced at P32
per unit. There were 11,000 units of goods delivered which were received on
December 10, 2022. The agreed price should be at P22 per unit only.
Dolomite’s policy is to provide 5% of the outstanding balance of accounts receivable
as uncollectible and there is beginning balance of allowance for bad debts of P40,000.
4. Statement 1: The amount of bad debt expense in 2022 is P158,250.
Statement 2: The ending balance of allowance for bad debts is P108,250
a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false
5. Statement 1: Adjusting entry to adjust the balance of allowance for bad debts
include a credit of P102,250
Statement 2: The net realizable value of accounts receivable as of December 31,
2022 is P2,056,750.
a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false
6. On January 1, 2022, Decathlon Company sold an equipment costing P10,000,000 and
accumulated depreciation of P2,500,000. Decathlon received a P1,000,000 cash and a
10%, 7-year, P7,000,000 note receivable every December 31 in equal annual
installment of P1,000,000 plus interest starting December 31, 2022. Interest
effective on this note when received is at 8%.
Statement 1: The amount of gain (loss) on sale should Decathlon recognized on January
1, 2022 is P948,407.
Statement 2: The interest income in Decathlon’s statement of comprehensive income
for the period ending December 31, 2022 is P595,873.
a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false
7. Jude Company has several manufacturing plants all over the country. On December 29,
2022, a super typhoon hit the province of Bicol where one of the entity’s large and
major manufacturing plant is located. Because of the damages caused by the calamity,
the entity decided to abandon the plant which constitute a major line of business.
All work stop at the manufacturing plant during the year ended 2022. The carrying
amount of the entire manufacturing plant amounted only to P2,000,000 as of the end
of the year. The operations of this manufacturing plant managed to generate P100,000
profit from operations before tax. The prevailing tax rate was at 30%. The fair
value less cost to sell was determined to be P1,990,000 and the value in use was at
P1,950,000 at the end of the year. How much should be reported as non-current asset
held for sale as of December 31, 2022?
a. P0
b. P1,990,000
c. P1,950,000
d. P2,000,000
8. Lany Incorporated had the following balances of assets and liabilities in 2022:
Beginning balances:
Cash and cash equivalents P250,000 Accounts payable P120,000
Trade and other receivables 150,000 Notes payable 80,000
Inventories 210,000 Bonds payable 200,000
Prepaid expenses 50,000 Mortgage payable 240,000
Property, plant and equipment -
net 350,000
Ending balances:
Cash and cash equivalents P230,000 Accounts payable P100,000
Trade and other receivables 250,000 Notes payable 60,000
Inventories 300,000 Bonds payable 170,000
Prepaid expenses 40,000 Mortgage payable 240,000
Property, plant and equipment -
net 300,000
How much is the net income in 2022 if Lany Incorporated have contributed a total of
P250,000 and withdrawn P150,000 during the year?
a. P180,000
b. P150,000
c. P120,000
d. P80,000
9. On January 2, 2021, Puma Company receives a government loan of P2,000,000 paying a
coupon interest of 1% per year. The loan is repayable at the end of year 6. Puma
Company’s borrowing cost is 7% per annum. The below-market interest is provided by
the government to enable Puma Company to bear cost of 1% per annum on the nominal
value of the loan.
Statement 1: Puma Company should recognize income from government grant amounting
to P85,558 for the year ended December 31, 2022?
Statement 2: Puma Company should report P314,918 deferred income from government
grant on December 31, 2023?
a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false
10. Matcha Company asks you to review its December 31, 2022, inventory values and
prepare the necessary adjustments to the books. The following information is given
to you.
[1.] Matcha uses the periodic method of recording inventory. A physical count
reveals P2,348,900 inventory on hand at Dec. 31, 2022.
[2.] Not included in the physical count of inventory is P134,200 of merchandise
purchased on Dec. 15 from Standing. This merchandise was shipped F.O.B. shipping
point on Dec. 29 and arrived in Jan. The invoice arrived and was recorded on
Dec. 31.
[3.] Included in inventory is merchandise sold to Oval on Dec. 30, F.O.B.
destination. This merchandise was shipped after it was counted. The invoice was
prepared and recorded as a sale on account for P128,000 on Dec. 31. The
merchandise cost P73,500, and Oval received it on Jan. 3.
[4.] Included in inventory was merchandise received from Owl on Dec. 31 with an
invoice price of P156,300. The merchandise was shipped F.O.B destination. The
invoice, which has not yet arrived, has not been recorded.
[5.] Not included in inventory is P85,400 of merchandise purchased from Oxygen
Industries. The merchandise was received on Dec. 31 after the inventory had been
counted. The invoice was received and recorded on Dec. 30.
[6.] Included in inventory was P104,380 of inventory held by Matcha on consignment
from Ovoid Industries.
[7.] Included in inventory is merchandise sold to Kemp F.O.B. shipping point. This
merchandise was shipped after it was counted. The invoice was prepared and
recorded as a sale for P189,000 on Dec. 31. The cost of this merchandise was
P105,200, and Kemp received the merchandise on Jan. 5.
[8.] Excluded from inventory was carton labeled “Please accept for credit.” This
carton contains merchandise costing P15,000 which had been sold to a customer
for P25,000. No entry had been made to the books to reflect the return, but none
of the returned merchandise seemed damaged.
18. Tomato Company should report liability for compensated absences at the end of
December 31, 2022 of?
a. P302,625
b. P418,340
c. P507,180
d. P523,735
Use the following for the next four (4) questions:
Information provided relative to three different companies follows:
Jollibee Company purchased an equipment at P6,500,000 on January 1, 2020 which will be
used for a total of 10 years, no salvage value. Jollibee accounted for this equipment
using the revaluation model. The value in use of the assets during the three revaluation
dates were P5,556,000, P4,413,000 and P4,240,000 on December 31, 2020; 2021; and 2022.
While the fair values are P5,500,000, P4,620,000; and P4,770,000; respectively for
2020, 2021 and 2022 with cost to sell of P100,000; P120,000; and P110,000, respectively.
On February 1, 2022 McDonalds Company purchased an equipment from Shakey’s Corporation
in exchange for a seven-year, non-interest-bearing note requiring five payments of
P110,500 and two payments of P140,500. The first five payment of P110,500 is to be
made on February 1, 2023 – 2027, and the others are due annually on February 2, 2028
and 2029. At date of issuance, the prevailing rate of interest for this type of note
was 9%. In addition, McDonalds paid cash of P75,000 as down-payment, and incurred
installation cost of P15,000; Testing cost of P10,000 and paid insurance of P5,000
while the equipment is in transit.
Popeye’s Company constructed its own building which qualifies for interest
capitalization. Popeye’s incurred the following cost and had the following outstanding
borrowings while the building is under construction.
January 1, 2022 P3,000,000
March 31, 2022 2,500,000
June 30, 2022 2,100,000
November 1, 2022 1,275,000
September 1, 2023 5,575,200
Outstanding borrowings:
Dated January 1, 2022 - 3,000,000; 7% (specific)
Dated January 1, 2022 - 2,000,000; 10% (general)
Dated January 1, 2023 - 4,000,000; 8% (general)
The construction was completed on December 31, 2023 and ready for its intended use.
19. How much is the gain on reversal should Jollibee Company recognize in its income
statement for the year ended December 31, 2022?
a. P110,000
b. P412,650
c. P612,500
d. P722,500
20. What amount should McDonalds initially recognized the equipment on February 2,
2022?
a. P620,440
b. P695,440
c. P1,136,936
d. P1,241,936
21. How much is the initial cost of the building when completed on December 31, 2023
in Popeye’s financial position?
a. P15,590,200
b. P15,673,267
c. P15,889,711
d. P15,925,333
22. How much of interest should Popeye capitalized in 2023 related to self-constructed
building?
a. P915,761
b. P865,333
c. P730,000
d. P715,711
42. On January 1, 2022, Dire Corporation signed a ten-year noncancelable lease for
certain machinery. The terms of the lease called for Dire to make annual payments
of P150,000 at the end of each year for ten years with title to pass to Dire at
the end of this period. The machinery has an estimated useful life of 15 years.
Dire uses the straight-line method of depreciation for all of its fixed assets.
Dire accordingly accounted for this lease transaction as a finance lease. The
interest rate of 8% is implicit in the lease. Dire has an option to purchase the
asset at the end of lease term at P120,000 which is reasonably certain to exercise
by Dire. Estimated residual value at the end of 10 years is P100,000 and end of 15
years is P80,000. Dire incurred a total of P350,000 direct cost to enter the lease.
Dire should record for 2022:
a. lease expense of P150,000.
b. interest expense of P80,521 and depreciation expense of P85,101.
c. interest expense of P84,968 and depreciation expense of P88,806.
d. interest expense of P85,681 and depreciation expense of P131,210.
43. Porcha Corp.'s transactions for the year ended December 31, 2022 included the
following:
• Acquired 50% of Ford Corp.'s ordinary shares for P180,000 cash which was borrowed
from a bank.
• Issued 5,000 shares of its preference shares for land having a fair value of
P320,000.
• Issued 500 of its 11% debenture bonds, due 2026, for P392,000 cash.
• Purchased a patent for P220,000 cash.
• Paid P120,000 toward a bank loan.
• Sold available-for-sale securities for P796,000.
• Had a net increase in returnable customer deposits (long-term) of P88,000.
Porcha’s net cash provided by investing activities for 2022 was
a. P296,000
b. P396,000
c. P476,000
d. P616,000
Use the following for the next two (2) questions:
On January 1, 2022, Guevara’s Company reported the fair value of plan assets at
P6,700,000 and defined benefit obligation at P6,100,000. Transactions affecting the
balances for the current year are as follows:
Current service cost P1,125,000
Past service cost 325,000
Contribution to the plan 1,290,000
Benefits paid to retirees at scheduled date 800,000
Actual return on plan assets 837,500
Decrease in defined benefit obligation due to changes
in actuarial assumption 135,000
Rate of return on high quality corporate bonds 10%
44. How much is the amount of benefit expense reported in its statement of comprehensive
income as a component of profit or loss?
a. P948,000
b. P1,074,000
c. P1,390,000
d. P1,510,000
45. How much is the amount reported in its December 31, 2022 statement of financial
position as pension asset or liability?
a. P532,500 asset
b. P532,500 liability
c. P802,500 asset
d. P802,500 liability
46. Juancho Company encourages its employees older than 60 years to extend their
employment with the entity by promising a lump sum benefit equal to 5% of final
salary for each year of service they remain employed by the entity after their 60th
birthday provided they remain employed until they are 65, at which time, in
accordance with local laws, employees are required to retire. The benefit is payable
to the employees on retirement. There are five (5) employees entitled for the
benefit whose 60th birthday is on January 1, 2021.
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