ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 41  May 2021 CPALE  Summary Lecture (14 May 2021)
FINANCIAL ACCOUNTING & REPORTING C. Uberita  G. Macariola  J. Binaluyo

ReSA Batch 41
FAR SUMMARY LECTURE (MCQS)
1. The equity section of Gunkel Corporation as of December 31, 2020, was as follows:
Share capital—ordinary, par value P2;
issued and outstanding 10,000 shares P 20,000
Share premium—ordinary 30,000
Retained earnings 75,000
Total P125,000

On March 1, 2021, the board of directors declared a 25% share dividend, and accordingly additional
shares were issued. On March 1, 2021, the fair value of the share was P4 per share. For the two months
ended February 28, 2021, Gunkel sustained a net income of P15,000.
What amount should Gunkel report as retained earnings as of March 1, 2021?
a. P62,000.
b. P65,000.
c. P80,000.
d. P85,000.

2. On March 1, 2021, Luxent Company purchased its own 10,000, P10 par ordinary shares at P12 per
share. 3,000 of these shares were reissued at P15 each on May 15, 2021. Another 5,000 shares were
reissued at P10 per share on July 1, 2021. And the remaining shares were retired at cost. What is the
effect of the treasury share transactions in 2021 shareholders equity?
a. net increase of P5,000.
b. net decrease of P25,000.
c. net increase of P15,000.
d. net decrease of P49,000

3. In January 2021, Fora Corporation, a newly formed company, issued 10,000 shares of its P10 par
ordinary shares for P15 per share. On July 1, 2021, Fora Corporation reacquired 1,000 shares of its
outstanding shares for P12 per share. The acquisition of these treasury shares
a. decreased total shareholders’ equity.
b. increased total shareholders’ equity.
c. did not change total shareholders’ equity.
d. decreased the number of issued shares.

4. Voltes Co. sells appliances that include a three-year warranty. Service calls under the warranty are
performed by an independent mechanic under a contract with Voltes. The warranty is considered to be
a distinct service. Based on experience, warranty costs are estimated at P300 for each machine sold.
When should Voltes recognize these warranty costs?
a. evenly over the life of the warranty.
b. when the service calls are performed
c. when appliances are reported defective.
d. When the machines are sold

5. On December 31, 2021, Miles Company was a defendant in a pending lawsuit. The suit arose from the
alleged defect of a product that Miles sold in 2021. In the opinion of Miles attorney, it is probable that
Miles will have to pay P500,000, and that Miles will have to pay P600,000 at maximum as a result of
this lawsuit. In its 2021 financial statements, Miles would should?
a. An accrued liability of P500,000 only.
b. An accrued liability of P500,000 and would disclose a contingent liability of an additional
P100,000
c. An accrued liability of P600,000 only
d. Disclosed only the P500,000 as contingent liability.

6. On February 5, 2021, an employee files a P1,000,000 lawsuits against Amkor Co. for damages suffered
when one of Amkor’s plants exploded on December 29, 2020. Amkor’s legal counsel expects the
company will lose the lawsuit and estimates the loss to be between P500,000 and P1,000,000. The
employee has offered to settle the lawsuit out of court for P600,000, but Amkor do not agree to the
settlement. In its December 31, 2021 balance sheet, what amount should Amkor report as liability from
lawsuit?
a. P2,000,000
b. P1,000,000
c. P900,000
d. P 750,000

Page 1 of 10 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR
14 May 2021: SUMMARY LECTURE

7. A temporary difference that would result in a deferred tax asset is

a. accrued warranty expense.
b. accrual commission income.
c. interest revenue on government bonds.
d. excess of tax depreciation over financial accounting depreciation.

Jam Liner Company has taxable income for the year 2021 amounting to P5,000,000, The tax bases for
its assets and liabilities at December 31, 2021 are equal to their carrying amounts except for the
following items:

Book Tax
Accounts receivable P1,900,000 P2,100,000
Inventories 950,000 850,000
Buildings – net 10,000,000 8,200,000
Provision for warranty 800,000 –
Unearned rent 500,000 –

The company’s statement of financial position as of December 31, 2020 showed deferred tax liability of
P1,400,000 and deferred tax asset of P525,000.

The company is subject to income tax rate of 30%. It is believed that any deferred tax asset is fully
realizable. The company paid no income tax during 2021 relating to 2021 operations.

8. How much is the future taxable amount and deferred tax liability, respectively as of 2020?
a. P1,900,000 and P570,000
b. P1,500,000 and P450,000
c. P1,550,000 and P465,000
d. P2,766,667 and P830,000

9. How much is the future deductible amount and deferred tax asset, respectively as of 2020?
a. P1,900,000 and P570,000
b. P1,500,000 and P450,000
c. P1,550,000 and P465,000
d. P2,766,667 and P830,000

10. Which of the following is not included in the lease liability of the lessee at inception of the lease when
payment is made at the end of each year?
a. the present value of the residual value guaranteed by a third party.
b. the discounted value of the initial lease payment.
c. the present value of the bargain purchase option.
d. the discounted value of the variable payment.

11. Which of the following is true about sales type lease?

a. The discounted value of the unguaranteed residual value shall not be included in the net investment of
the lessor.
b. The gross profit is affected by the present value of the unguaranteed residual value.
c. Cost of sales is decreased and affected by the present value of the unguaranteed residual
value and initial direct cost paid by the lessor.
d. The cost of inventory credited at inception of the lease is not affected by the present value of any
unguaranteed residual value.

12. On January 1, 2020, Venson Company enters into a ten-year lease of floor building. Lease payments are
P1,000,000 per year all payable at the beginning of each year. To obtain the lease, Venson Company incurs
initial direct cost of P500,000, of which P300,000 relates to payment to a former tenant occupying that floor
of the building and P200,000 relates to a commission paid to the real estate agent that arrange the lease.

As an incentive to Venson Company for entering the lease, the lessor agrees to reimburse to Venson
Company the real estate commission of P100,000 and leasehold improvements of P120,000. Lessee’s
incremental borrowing rate is 9% per annum, which reflects the fixed rate at which lessee could borrow an
amount similar to the value of the right-of-use asset, in the same currency, for a ten year term and with
similar collateral. The lessee is required to dismantle and restore the floor building at an estimated cost of
P100,000 at the end of lease term.

How much is the carrying value of the right-of-use asset as of December 31, 2021?
a. P5,949,990
b. P5,916,198
c. P5,910,465
d. P5,905,860

Page 2 of 10 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR
14 May 2021: SUMMARY LECTURE

13. Under a defined benefit plan, the retirement benefit expense in the current period includes all of the
following, except
a. current service cost.
b. contribution to a separate fund.
c. the result of any plan termination, settlement, or curtailment.
d. amount recognized in the current period with respect to past service cost of current and retired
employees, experience adjustment and changes in actuarial assumption.

14. Anyong Company has a define contribution plan that covers its existing employees. The terms of the plan
required Anyong to contribute 5% of the annual employee salaries to the retirement plan each year. The
payroll shows the annual salaries and contributions made as follows:
Year Payroll Contribution
2020 P7,500,000 P300,000
2021 8,200,000 540,000

How much is the benefit expense in 2021?

a. P375,000
b. P410,000
c. P785,000
d. P55,000

15. Oppa Company encourages its employees older than 60 years to extend their employment with the entity
by promising a lump sum benefit equal to 2% 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 three (3) employees entitled for the benefit whose 60 th birthday is on January 1,
2021. Their salary rates for the year ended December 31, 2021 is P1,000,000.

In 2021, the entity made the following assumptions:

 Employees salary rate should increase by 6% compounded each year.
 The rate of return on high quality corporate bonds is 10%.
 The employee salary rate for 2022 is P1,060,000.

How much is the current service cost in 2021?

a. P55,781
b. P54,892
c. P52,613
d. P51,737

16. Badyang Co. has an outstanding ten-year bonds payable. At year end, the entity appropriately recorded the
payment of periodic interest but neglected to recognize the amortization of premium. What is the effect of
the failure to record the premium amortization on (i) interest expense and (ii) bonds payable carrying
value, respectively?
a. understate; understate
b. understate; overstate
c. overstate; overstate
d. overstate; understate

17. Upon conversion of bonds to shares, the entity issuing the instruments shall:
a. credit share capital account equivalent to the fair value of the shares issued.
b. pay the accrued interest due to the bondholders and derecognize the liability in its books.
c. record the receipt of cash from the bondholders and any gain or loss on conversion to profit or loss.
d. recognize any difference between the carrying amount of the bonds and the fair value of the shares
issued to share premium.

18. On January 1, 2021, Avocado Corporation issued 3,000 of its 8%, P1,000 face value bonds at 11%
prevailing rate of interest. Interest is payable semiannually on July1 and January 1. The bonds mature on
January 1, 2024. Avocado paid bond issue cost which was appropriately recorded as a deferred charge. The
effective interest after the bond issue cost is 12%. How much is the bond issue cost?
a. P68,286
b. P70,240
c. P72,832
d. P74,095

19. Discount on notes payable should be classified as a(n)

a. current asset.
b. contingent liability
c. contra liability.
d. element of owner’s equity

Page 3 of 10 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR
14 May 2021: SUMMARY LECTURE

20. The amortization of a discount on note payable

a. decreases the carrying amount of debt instrument.
b. decreases the periodic cash payments to creditors.
c. increases the amount of interest expense reported.
d. increases the face amount of the debt instrument.

21. The following information pertains to Nixon Corp. and its divisions for the year ended December 31, 2021.
Sales to unaffiliated customers P2,500,000
Intersegment sales of products similar
to those sold to unaffiliated customers 750,000
Interest earned on loans to other
operating segments 50,000
Nixon and all of its divisions are engaged solely in manufacturing operations. Nixon has a reportable
segment if that segment's revenue exceeds
a. P330,000.
b. P325,000.
c. P255,000.
d. P250,000.

22. Far, Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated
customers. Farr should report segment financial information for each division meeting which of the following
criteria?
a. Segment profit or loss is 10% or more of consolidated profit or loss.
b. Segment profit or loss is 10% or more of combined profit or loss of all company segments.
c. Segment revenue is 10% or more of combined revenue of all the company segments.
d. Segment revenue is 10% or more of consolidated revenue.

23. Which of the following is a current asset?

a. Cash surrender value of a life insurance policy of which the company is the beneficiary.
b. Investment in equity securities for the purpose of controlling the issuing company.
c. Cash designated for the purchase of tangible fixed assets.
d. Trade installment receivables normally collectible in 18 months.

24. Equity or debt securities held to finance future construction of additional plants should be classified on a
balance sheet as
a. current-assets.
b. property, plant, and equipment.
c. intangible assets
d. long-term investments.

Given the following account information for Leong Corporation, prepare a statement of financial position in
report form for the company as of December 31, 2021. All accounts have normal balances.

Equipment P40,000
Interest Expense 2,400
Interest Payable 600
Retained Earnings ?
Dividends 50,400
Land 157,320
Inventory 102,000
Bonds Payable 78,000
Notes Payable (due in 6 months) 24,400
Share Capital–Ordinary 60,000
Accumulated Depreciation - Equip. 10,000
Prepaid Advertising 5,000
Revenue 351,400
Buildings 80,400
Supplies 1,860
Taxes Payable 3,000
Utilities Expense 1,320
Advertising Expense 1,560
Salaries and Wages Expense 53,040
Salaries and Wages Payable 900
Accumulated Depr. – Buildings 15,000
Cash 40,000
Depreciation Expense 8,000

Page 4 of 10 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR
14 May 2021: SUMMARY LECTURE

25. How much is the total current assets?

a. P148,860
b. P150,200
c. P147,280
d. P152,660

26. How much is the total non-current assets?

a. P255,820
b. P252,720
c. P258,280
d. P260,120

27. How much is the total liabilities?

a. P104,700
b. P105,600
c. P106,900
d. P107,200

28. How much is the retained earnings?

a. P220,620
b. P234,680
c. P241,840
d. P250,280

29. The following statements are based on PAS 38 (Intangible Assets):

Statement I: Internally generated goodwill shall not be recognized as an asset.
Statement II: No intangible asset arising from research or research phase of an internal project shall be
recognized.
Statement III: Internally generated brands, mastheads, publishing titles, customer lists and items
similar in substance shall be recognized as intangible assets.
a. All of the statements are true
b. Only statement I is true
c. Only statement II is false
d. Only statement III is false

30. The following statements are based on PAS 40 (Investment Property):

Statement I: An investment property is a property held to earn rentals or for capital appreciation or
both.
Statement II: An investment property shall be measured initially at costs. Transaction costs shall be
excluded in the initial measurement.
Statement III: Under the fair value model, a gain or loss arising from a change in the fair value of
investment property shall be recognized in profit or loss for the period in which it arises.

a. All of the statements are true

b. Only statement I is true
c. Only statement II is false
d. Only statement III is false

31. An entry debiting inventory and crediting cost of goods sold would be made when
a. Merchandise is sold and the perpetual inventory is used.
b. Merchandise is sold and the periodic inventory method is used.
c. Merchandise is returned and the periodic inventory method is used.
d. Merchandise is returned and the perpetual inventory method is used.

32. Which of the following is false about erroneous bank charge?

a. Cash balance per bank is understated
b. Disbursements per bank is overstated
c. It should be recorded as a debit to cash in bank account
d. It should be added to balance per bank in preparing bank reconciliation

33. The statement of financial position may include unrealized gains and losses from which type of
investment securities?
a. FVPL only
b. FVOCI only
c. FVPL & FVOCI
d. FVPLOCI
Page 5 of 10 0915-2303213  www.resacpareview.com
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR
14 May 2021: SUMMARY LECTURE

34. Which receivable financing arrangements do not result to a debit or credit to accounts receivable?
a. Pledging and Assignment
b. Factoring and Discounting
c. Discounting and Pledging
d. Assignment and Factoring

35. A revaluation increase shall be recognized as income

a. Always
b. When the asset revalued for the first time
c. When the asset is revalued frequently than usual
d. When it reverses a revaluation decrease (impairment loss) of the same asset
previously recognized as expense

36. Which of the following transactions shall be included in the statement of cash flows?
a. Acquisition of a property by means of issuing preference shares
b. Purchase of treasury shares for cash at more than par value
c. Conversion of bonds to ordinary shares
d. Acquisition of assets by means of a finance lease

37. For purpose of computing the weighted average number of shares outstanding in EPS calculation, a
midyear event that must be treated as occurring at the beginning of the year is the
a. Issuance of share warrants
b. Purchase of treasury shares
c. Issuance of share certificates
d. Issuance of new shares from share split

38. The following statements are based on PAS 28 (Investment in Associate):

Statement I: An investment in an associate shall be accounted for using the equity method or fair value
method or the cost model
Statement II: An investor shall discontinue the use of equity method from the date when it ceases to
have significant influence over an associate and shall account for the investment in accordance with
PFRS 9.
Statement III: On the loss of significant influence, the investor shall measure at historical cost any
investment the investor retains in the former associate.
a. Only statement I is false
b. Only statement II is true
c. Only statement III is true
d. All of the statements are false

39. Which of the following is not true in relation to bearer plant?

a. It is a living plant that has a remote likelihood of being sold as agricultural produce,
except for incidental scrap sales
b. The bearer plant and the related agricultural produce are accounted as two separate
assets
c. Plants which have a dual use or exclusive to be harvested as agricultural produce is not a
bearer plant
d. Bearer plant should be measured initially at fair value less estimated cost of
disposal

40. If an entity failed to amortize the discount on its investment in bond classified at amortized cost, this
may result to
a. Understatement of net income
b. Overstatement of net income
c. No effect on net income
d. Overstatement on investment account

41. Charm Company showed the following cash items as of December 31, 2019:
Petty cash fund (P 3,500 is expense receipts; P 1,500 is
IOU notes; & P 500 is check dated 12/30/19 from employee) P 10,000
Cash in Security Bank per bank statement (unadjusted) (outstanding
Checks, P 25,000; deposit in transit, P10,000) 45,000
Postdated customers check of P 1,500; Travelers’ check of P 2,500;
Postal money order of P 3,000 7,000
Cash in BPI per book (unadjusted) (credit memo for note collected
of P 15,000; debit memo for bank service charge of P 1,000) 32,000
Sinking fund cash 120,000
Cash surrender value of life insurance 20,000
Cash in PNB (including unrestricted compensating balances of
P 100,000) 500,000
Treasury bills, with 90 days original maturity 50,000

Page 6 of 10 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR
14 May 2021: SUMMARY LECTURE

How much is the Cash and Cash Equivalents on December 31, 2019?
a. 636,500
b. 636,000
c. 636,450
d. 756,500

42. The information that follows is available from the general ledger and the bank statement of Mickey
Company
 Cash in bank, October 31, P939,000
 Deposit in transit, October 31, 35,000; Outstanding checks, October 31, 68,000
 Credit memo, October 60,000; Debit memo, October 20,000
 Included in the October bank receipts was a deposit of Mickey Company for P25,000, erroneously
recorded by the bank to Mc Key Company’s account
 Included in the October bank disbursements was a check issued by Meekly Company for P10,000,
erroneously recorded by the bank in Mickey Company’s account
 Included in the book receipts was a deposit for P45,000 which was recorded as P54,000. No
correction was made yet by Mickey Company
 Included in the book disbursements was a check issued by Mickey Company for P42,000 was
recorded as P24,000

The correct cash balance as of October 31, 2012 is

a. 970,000 b. 927,000 c. 952,000 d. 945,000

43. I Company had the following transactions pertaining to its accounts receivable for the year 2018:
Credit sales 5,700,000
Cash sales 3,150,000
Collection from credit customers taking advantage of cash discount of 4% 4,536,000
Accounts ascertained worthless 75,000
Credit memo issued to credit customers 375,000
Cash refund for sales returns from cash sales 30,000
Recovery of accounts previously written off not included in total collections 120,000

The I Company’s beginning accounts receivable amounted to P1,425,000 and its beginning allowance for
uncollectible accounts amounted to P135,000. For 2018, the company estimates its uncollectible accounts
as 15% of its outstanding accounts receivable.

How much is the Amortized Cost of Account Receivable on December 31, 2018?
a. 1,657,500
b. 1,950,000
c. 2,139,000
d. None of the choices

44. Transactions and other information relating to GMAC Company’s Notes Receivable were as follows:
 Face value of the Notes Receivable from Company A is P2,800,000 and bears interest at 15%. The
note is dated April 1, 2019 and is payable in four equal annual installments of P700,000 beginning
April 1, 2020. The first principal and interest payment were made on April 1, 2020.
 On July 1, 2020, GMAC Company received a ten-year, P2,000,000 face value notes from Company
C. The note bears interest at 10% and the market interest rate of similar notes on July 1, 2020 was
12%. The present value of the note on July 1, 2020, was P1,774,000. Interest is payable every
July 1.
How much is the interest receivable on December 31, 2020?
a. P336,250 b. P236,250 c. P342,690 d. P441,250

45. The inventory on hand at December 31, 2016 for Athena Company is valued as at a cost of P820,000.
The following items were not included in this inventory amount:
 Purchased goods in transit, shipped FOB destination. Invoice price- P 30,000, which includes freight
charges of P 1,500.
 Goods held on consignment by Athena at a sales price of P 28,000.
 Goods sold to Hades Company, under terms FOB destination, invoiced for P 20,000 which includes P
2,000 freight charges to deliver the goods. The goods are in transit.
 Purchased goods in transit, terms FOB shipping point. Invoice price- P48,000. Freight costs,
P3,000.
 Goods out on consignment to Hermes Company, sales price, P 38,400. Shipping cost of P1,000.
 Mark-up on cost is 20%. Consigned goods were still unsold at December 31, 2016.

What is the correct cost of inventory to be reported in Athena’s statement of financial position on
December 31, 2016?
a. 924,400 c. 919,000
b. 918,000 d. 928,400

Page 7 of 10 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR
14 May 2021: SUMMARY LECTURE

46. The following information pertains to the living plant and agricultural produce of Iron Company. On
January 1, 2020, the cost of the living plant was P20,000,000 with an estimated useful life of 10 years.
The company is using the straight-line method of depreciation. As of December 31, 2020, Iron
Company determines the following:
Fair value of the fruits before the harvest on December 31, 2020 P5,000,000
Estimated cost to sell of the fruit 100,000
Estimated cost to sell of the living plant 500,000
With the assistance of valuation experts, Iron Company determines that the fair value of the living plant
including the fruit as of December 31, 2020 is P26,000,000.
How much is the carrying value of the living plant on December 31, 2020 under PAS 16?
a. 18,000,000
b. 20,000,000
c. 20,500,000
d. 25,400,000

47. On March 1, 2020, MAC Corporation purchased 3,000 of the ordinary shares of DONALD Company at
market value of P240 per share. Transfer taxes and broker’s commission totaling P3,600 were paid.
During the same year, the following transactions occurred, and additional information are given below:

August 1: Sold 1,500 shares for P 125 per share.

November 1: 20% bonus issue was declared and distributed by DONALD.
 Market value of DONALD ordinary share at December 31, 2020 was P130.
The DONALD Company shares are designated at Fair Value through Profit or Loss.
How much is the total net amount taken to profit or loss for the year 2020?
a. 0 c. 172,500
b. 126,000 d. 302,100

48. In 2019, All Home Corp. acquired the following portfolio of equity instruments and reported the
following information.

Security Purchase Price Broker’s fee Market Value 12/31/19 Market Value 12/31/20
2Go Group P 300,000 P 5,000 P 350,000 P 345,000
Asiabest 450,000 10,000 410,000 400,000
ACE Enexor 540,000 12,500 640,000 350,000
Aboitiz 610,000 15,000 650,000 700,000
On October 1, 2020, All Home Corp. sold half of the investment ACE Enexor for P325,000.

Assuming All Home Corp. classified the foregoing securities as at fair value through other
comprehensive income, determine the following:

Amount transferred to retained earnings as a result of the sale of ACE Enexor’s security.
a. P43,750
b. P48,750
c. P55,000
d. P0

49. On January 1, 2017, Red Company acquired 40,000 shares of the 160,000 shares outstanding of Pula
Company at P100 per share. Red also paid transaction cost of P100,000. During the year, Pula reported
net income of P2,000,000 and distributed dividends of P10 per share. On December 31, 2017, the
management of Red company determined that the fair value of investment in Pula Company was
P4,300,000.

How much is the carrying value of Investment on December 31, 2017?

a. 4,300,000
b. 4,200,000
c. 4,100,000
d. 3,800,000

On May 1, 2019, Oceania Company purchased a P2,000,000 face value 9% debt instruments for
P1,860,000 including the accrued interest. The business model in managing the financial assets is to
generate short-term profits from changes in fair value of the securities. The debt instruments pay
interest semi-annually on January 1 and July 1. On December 31, 2019, the fair market value of the
instruments is P1,940,000.

50. How much is the interest income for the year 2019?
a. 120,000
b. 108,000
c. 162,000
d. 180,000

Page 8 of 10 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR
14 May 2021: SUMMARY LECTURE

51. How much is the unrealized gain or loss that should be taken to profit or loss for the year 2019?
a. 140,000
b. 60,000
c. 80,000
d. 0

52. Aguinaldo Company has the following property items at December 31, 2017:
Land which at the date of acquisition is not
intended for any specific use in the future P1,000,000
Land held for future plant site 2,000,000
Building in process of construction intended
to be leased under operating leases 8,000,000
Building being leased out under finance lease 2,500,000
Equipment being leased under operating leases 1,500,000
Condominium building that is being constructed
intended for sale in the ordinary course of business 5,000,000
Building constructed on behalf of a third party 4,500,000
Building being leased out under operating lease, an
insignificant portion is used for administrative purposes 6,000,000
Property interest in a building leased from Emilio Corp.
that is being subleased to others from which significant
rental income is derived 3,500,000
Hotel building owned which significant services
are provide to the guests 7,000,000

How much should be classified as investment properties at Dec. 31, 2017?

a. 25,500,000 c. 15,000,000
b. 18,500,000 d. 23,000,000

53. Laser Corporation’s January 1, 2019 balances of its Machinery and Accumulated Depreciation-
Machinery accounts were P5,400,000 and P2,300,000 respectively. On April 30, 2019, the Corporation
acquired a new machine with a list price of P1,800,000; trade discount of 10%, 5%; term 1/10,
n/30 and was paid beyond the discount period. Another machine with an invoice cost of P800,000
was purchased on May 30, 2019 and the Corporation incurred freight and insurance amounting to
P20,000 while the machine is in transit.

What is the balance of the account Machinery on December 31, 2019?

a. 820,000 c. 2,343,610
b. 1,523,610 d. 7,743,610

54. Star Company acquired a land on July 1, 2019 on which a new building will be immediately
constructed. Star Company paid P2,000,000 and other costs related to the acquisition are as follows:
Broker’s Commission 50,000
Option paid for the land acquired 20,000
Option paid for an alternative land not acquired 10,000
Delinquent property taxes for 2018 30,000
Property taxes for 2019 60,000

What is the cost of the land?

a. 2,100,000
b. 2,130,000
c. 2,160,000
d. 2,170,000

55. 57. On January 1, 2017, Pound company acquired both a License and a Trademark in exchange for
1,000 shares of Pound, P100 par ordinary shares. The shares are selling for P125 per share on
January 1, 2017. The trademark is worth thrice as much as the license. The license may be used for
five years while the trademark has a remaining useful life of 6 years. Pound Company intends to renew
the trademark continuously because the said trademark is expected to contribute to net cash flows
indefinitely.

How much is the amortization expense for the year 2017?

a. 21,875 c. 23,958
b. 6,250 d. 0

Page 9 of 10 0915-2303213  www.resacpareview.com

ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR
14 May 2021: SUMMARY LECTURE

56. The following costs are generally incurred Rupee Corporation:

Goodwill purchased in a business combination 500,000
Cost of developing website for the promotion and advertisement of the entity’s 150,000
products and services
Cost incurred in the corporation’s formation and organization 230,000
Operating losses incurred in the start-up of the business 130,000
Initial franchise fees paid 175,000
Continuing franchise fees 50,000
Internally generated goodwill 800,000
Cost of purchasing a patent from an inventor 137,000
Cost of leasehold improvement 70,000
Legal costs incurred in successfully defending a patent 55,500
Internally generated customer list 40,000
Cost of purchasing a trademark 250,000
Computer software for a computer-controlled machine that cannot operate
without that specific software 325,500

How much from the above items can be recognized as intangible assets including goodwill?
a. 1,132,000 c. 1,172,000
b. 1,387,500 d. 1,062,000

Yellow Company reported the following on December 31, 2017:

Bonds payable- 10% 1,000,000

Ordinary share capital, P 100 par, 50,000 shares 5,000,000
Net income 1,735,000

The bonds are convertible into ordinary shares in the ratio of 10 ordinary shares for each P1,000 bond.
The income tax rate is 30%.

57. What is the amount of basic earnings per share?

a. 30.08 c. 34.70
b. 30.58 d. 27.75

58. What is the amount of diluted earnings per share?

a. 30.08 c. 34.70
b. 30.58 d. 27.75

59. Baghdad Corporation’s December 31, 2016 balance sheet reports the following shareholders’ equity:

10% Cumulative Preference share capital, P100 par value per share, 30,000 shares
issued and outstanding, liquidation value of P105 P3,000,000
Ordinary share capital, P100 par value, 60,000 shares issued 6,000,000
Share premium 500,000
Treasury Stock, (ordinary) 5,000 shares at cost 600,000
Retained Earnings 4,000,000
Subscribed ordinary share, net of P400,000 subscription receivable 1,000,000
Revaluation surplus 700,000

Preference dividends have not been paid since last year up to the end of 2016.

What is the book value per share on ordinary share?

a. 173.08 b. 163.04 c. 166.92 d. 157.25

Jupiter Corp.’s transactions for the year ended December 31, 2020 included the following:
 Purchased real estate for P 550,000 cash
 Sold building for P 500,000
 Paid dividends of P 600,000
 Issued 500 shares of ordinary shares for P 250,000
 Purchased machinery and equipment for P 125,000 cash
 Paid P 450,000 bank loan
 Increased accounts receivable by P 100,000
 Increased accounts payable by P 200,000
60. How much is the net cash provided or used in investing activities for 2020?
a. 175,000 c. 675,000
b. (175,000) d. (50,000)

61. How much is the net cash provided or used in financing activities for 2020?
a. (200,000) c. (800,000)
b. (1,050,000) d. 800,000

Page 10 of 10 0915-2303213  www.resacpareview.com