INTERMEDIATE ACCOUNTING II -

FINAL EXAMINATION

1. A.
2. D.
3. B.
4. C.
5. A.
6. C.
7. C.
8. C.
9. B.
10. A.
11. D.
12. B.
13. B.
14. C.
15. A.
16. B.
17. A.
18. A.
19. C.
20. A.
21. C.
22. D.
23. D.
24. B.
25. B.
26. A.
27. D.
28. D.
29. D.
30. B.
31. A.
32. C.
33. D.
34. C.
35. C.
36. A.
37. D.
38. D.
39. C.
40. C.
41. D.
42. B.
43. A.
44. D.
45. D.
46. B.
47. D.
48. B.
49. D.
50. C.
51. D.
52. D.
53. A.
54. C.
55. C.
56. B.
57. D.
58. B.
59. C.
60. C.
61. D.
62. A.
63. D.
64. D.
65. C.
66. A.
67. B.
 68. D.
69. D.
70. C.
71. C.
72. B.
73. B.
74. B.
75. B.
76. B.
77. C.
78. B.
79. B.
80. B.
81. A.
82. D.
83. D.
84. A.
85. B.
86. B.
87. A.
88. A.
89. A.
90. B.
91. D.
92. C.
93. A.
94. A.
95. D.
96. D.
97. A.
98. C.
99. A.
100. C.

The liability for compensated absences of AGUINALDO CORP. has an unadjusted

balance of P300,000 as of December 31, 2018. The following information pertains
to such liability account:

• The liability for compensated absences was the accrual at year end of 750
days cumulative unused vacation and sick leave employees by the end of the year
at current daily salary rate.

• 50 days were earned by employees in 2016, 350 days in 2017, with the
balance in 2018.

• The company’s policy is to allow employees to carry over unused leaves up

to two years from the year there were earned, thereafter it shall expire.

• According to past experience, 80% of allowed leaves to be carried-forward

are ultimately exercised by the employees.

• The current daily salary rates of employees were P350 in 2016, P380 in 2017
and P400 in 2018.

What is the correct balance of liability for compensated absences for the year
ended December 31, 2018?
a. 224,000
b. 240,000
c. 220,000
d. 244,000
Incorrect
0/1 Points
2
The deficit or surplus is the difference between the present value of the defined
benefit obligation and the fair value of plan assets.

If the present value of the defined benefit obligation is greater than the fair value
of plan assets, there is a deficit.
A. True, false
B. False, true
C. False, false
D. True, true
Incorrect
0/1 Points
 3

a. P3,500,000
b. P3,570,000
c. P3,770,000
d. P4,100,000
Correct
1/1 Points
4
S1: If treasury shares are reissued for noncash consideration, the proceeds shall
be measured by carrying amount of the noncash consideration received

S2: If treasury shares are subsequently retired and its cost is higher than the
original issue price of shares, the difference is presented as loss on retirement
within profit or loss.
A. True, false
B. False, true
C. False, false
D. True, true
Incorrect
0/1 Points
5
Which of the following is within the scope of PAS 19?

I. Semi-monthly salaries and wages

II. One sack rice allowance
III. Bonus in the form of entity’s shares
a. I and II
b. II and III
c. I and III
 d. I, II and III
e. Answer not given
Correct
1/1 Points
6
In relation to warrants and stock rights, which of the following statements is
false?
A. Rights are issued to general stockholders while warrants may be given to non-stockholders.
B. Issuance of rights does not require a journal entry while issuance of warrants requires a journal
entry.
C. Journal entry upon exercise of rights and warrants are the same.
D. None from the choices is incorrect.
Correct
1/1 Points
7
Which is not a characteristic of short-term employee benefits?
a. There is no possibility of any actuarial gain or loss.
b. No actuarial assumptions are required to measure the benefit obligation.
c. Short-term employee benefit obligations are measured on a discounted basis.
d. Short-term employee benefits are payable no later than twelve months after the end of the
reporting period.
Incorrect
0/1 Points
8
DEL PILAR CORP. amends its retirement plan on January 1, 2018. Information is
shown below

Jan. 1, 2018 Jan. 1,

2018
(before amendment) (after
amendment)
Projected benefit
obligation 1,900,000 2,400,000
Accumulated benefit
obligation 1,500,000 1,800,000
Fair value of plan
assets 1,200,000 1,400,000
How much is the past service cost to be recognized in 2018?
a. 800,000
b. 600,000
 c. 500,000
d. 300,000
Correct
1/1 Points
9
GREGORIO COMPANY provided the following information pertaining to a
pension plan for 2018:

Actuarial value of projected benefit obligation on January 1 600,000

Assumed discount rate 8%
Current service cost 200,000
Past service cost 50,000
Pension benefits paid 180,000
Decrease in PBO due to actuarial assumptions 40,000

What is the projected benefit obligation on December 31, 2014?

a. 1,128,000
b. 678,000
c. 680,400
d. 1,118,000
Correct
1/1 Points
10
1. Which of the following shows proper distinction between redeemable and
callable preference shares?

Redeemable PS Callable
PS

I. Classification Liability Equit

y

II. Option of redemption rests with The Holder The

Issuer

III. Presentation of gain on redemption Profit or Loss Profit

or Loss
A. I and II
 B. II and III
C. I and III
D. I, II and III
Correct
1/1 Points
11
MARCELO CORP. has established a defined benefit pension plan for an
employee. Annual payments under the pension plan are equal to the employee's
highest lifetime salary multiplied by 3% multiplied by number of years with the
entity. On December 31, 2014, the employee had worked for MARCELO CORP. for
15 years. The current salary is P500,000. The employee is expected to retire in 5
years and the salary increases are expected to average 4% per year during that
period. The employee is expected to live for 6 years after retiring and will receive
the first annual pension payment one year after retirement. The discount rate is
12%. The relevant present value and future value factors are:

Future value of 1 at 4% for 5 periods 1.217

PV of an ordinary annuity of 1 at 12% for 6 periods 4.111
PV of 1 at 12% for 5 periods 0.567

What is the projected benefit obligation on December 31, 2014?

a. 225,000
b. 524,460
c. 608,500
d. 638,269
Incorrect
0/1 Points
12
On January 1, 2013, DIEGO CORP. agreed to pay a lump sum pension to the
employees equal to 5% of their final salary times the number of years worked
after January 1, 2013. It is estimated that the salary of a certain employee for
2022, the last year with the entity, will be P1,500,000. The appropriate interest
rate is 12%. The PV of 1 at 12% is .452 for seven periods, .404 for eight periods,
and .361 for nine periods. What is the estimated pension liability on December
31, 2015?
a. 91,275
b. 101,799
c. 150,000
d. 225,000
Incorrect
0/1 Points
13
Which of the following statements characterizes defined benefit plans?

I. The investment risk is borne by the employee.

II. The employer commits to pay retiring employees a definite amount.
III. The formula in a defined benefit plan ensures that enough fund would be
available at retirement.
a. I and II
b. II and III
c. I and III
d. I, II and III
e. Answer not given
Incorrect
0/1 Points
14
An entity uses Philippine Financial Reporting Standards to prepare its financial
statements, but the defined benefit obligation has been calculated using
assumptions that are different from PFRS. The financial statements of the entity
also do not take into account unrecognized past service costs. How should the
entity measure its net pension liability?
A. The net present value of the defined benefit obligation less the fair value of the plan assets.
B. The net present value of the defined benefit obligation less the fair value of plan assets less the
unrecognized past service costs.
C. The net present value of the defined benefit obligation less the fair value of the plan assets. In
addition, a review of the assumptions should be undertaken to remeasure the obligation.
D. The value in the entity’s balance sheet will simply be used in the consolidated financial
statements
Correct
1/1 Points
15
Accumulating compensated absences are those that
A. can be carried over to the next period if not fully used during the year of entitlement.
B. expire if not fully used during the year of entitlement.
C. can be carried over to the next period if not fully used during the year of entitlement and are
paid in cash when the employee leaves the company
D. are recognized only when actually taken by employees
Correct
1/1 Points
 16
In computing the ending balance of defined benefit obligation, which of the
following is deducted from the beginning balance?

(1) Current service cost (3) Actuarial gain

(2) Actuarial loss (4) Benefits paid

a. 1 and 4
b. 3 and 4
c. 1 and 3
d. 2 and 3
Correct
1/1 Points
17
A pension asset is reported when
a. Plan assets at fair value exceed the defined benefit obligation.
b. Plan assets at fair value exceed the accumulated benefit obligation.
c. The accumulated benefit obligation exceeds the fair value of plan assets.
d. The accumulated benefit obligation exceeds the fair value of plan assets but a past service cost
exists.
Correct
1/1 Points
18
Mars Co. has a defined benefit plan. On December 31 (the end of the financial
year), the company received the DBO report from the actuary. The following
information was included in the report: ending DBO, P 110,000; benefits paid to
retirees, P 10,000; interest cost, P 7,200. The discount rate applied by the actuary
was 8%. What was the beginning DBO?
a. 90,000
b. 100,000
c. 107,200
d. 112,000
Correct
1/1 Points
19
Which of the following is not a characteristic of a defined contribution plan?
a. The employer contribution each period is based on a formula.
b. The accounting for a defined contribution plan is straightforward and uncomplicated.
c. The benefits to be received are usually determined by an employee's highest salary
d. The benefit of gain or the risk of loss from the assets contributed to the plan are borne by the
employee.
Correct
1/1 Points
20
In rare circumstances, when a retirement benefit plan has attributes of both
defined contribution and defined benefit plan, it is deemed
a. Defined benefit plan
b. Defined contribution plan
c. Both defined benefit plan and defined contribution plan
d. Neither defined benefit plan nor defined contribution plan
Correct
1/1 Points
21
At the beginning of the current year, WANWAN CORP., a closely held entity,
issued 6% bonds with a maturity value of P6,000,000, together with 10,000
ordinary shares of P50 par value, for a combined cash amount of P11,000,000. If
the bonds were issued separately, they would have sold for P4,000,000 on an 8%
yield to maturity basis. What amount should be reported for share premium on
the issuance of the ordinary shares?
A. 4,500,000
B. 5,500,000
C. 6,500,000
D. 7,500,000
Incorrect
0/1 Points
22
In terms of classification of short-term compensated absences, which of the
following is incorrect?
a. Under vesting short-term compensated absences, employees are entitled to a cash payment
for unused entitlement on leaving the entity.
b. Under non-vesting short-term compensated absences, employees are not entitled to a cash
payment for unused entitlement on leaving the entity.
c. Accumulating short-term compensated absences are those that are carried forward and can be
used in future periods if the current period's entitlement is not used in full.
d. Non-accumulating short-term compensated absences are those that are carried forward and
can be used in future periods if the current period's entitlement is not used in full.
Incorrect
0/1 Points
23
Which of the following statements is incorrect concerning the actuarial
assumptions?
 A. Actuarial assumptions shall be unbiased and mutually compatible.
B. Actuarial assumptions are unbiased if they are neither imprudent nor excessively conservative.
C. Actuarial assumptions comprise of demographic assumptions and financial assumptions.
D. Postemployment benefit obligations shall be measured on a basis that reflects current salary
and ignores future salary increases.
Incorrect
0/1 Points
24
RIZAL CORP. grants its employees 10 days of paid vacation leave per year. Per
company’s policies, employees are required to take vacation leave each year but
not necessarily to take the whole vacation leave credits each year. Vacation leaves
not taken during a year can be carried over indefinitely.

RIZAL CORP. has 400 employees with an average salary of P800 per day. There is
an average increase in salary of 5% every year. During 2018, total leave vacation
taken by employees were 3,200 days. Based on past experience, 80% of unused
vacation leave for a year are taken immediately next year.

If the unused vacation leaves vest, what amount should be reported as vacation
pay expense in 2018?
a. 3,097,600
b. 3,232,000
c. 3,200,000
d. 2,560,000
Incorrect
0/1 Points
25
Which of the following statements is true in relation to the recognition of
defined benefit cost for other long-term employee benefits?

I. The accounting for other long-term employee benefits is more complex than
post-employment benefit plans.
II. "Remeasurements" are fully recognized through profit or loss.

A. I only
B. II only
C. Both I and II
D. Neither I nor II
Incorrect
0/1 Points
 26
ATLAS CORP. received the following donations during the year 2018:
a) Land from ATLANTIS INC., parent of the entity, with a fair value on the date
of transaction amounting to P500,000.
b) 10,000 shares of another entity from a rich entrepreneur. The market value
of the shares on that date is P30 per share.
c) Cash of P100,000 from a stockholder owning 20% of the total outstanding
shares of the company.

How much is the total credit to donated capital?

A. 600,000
B. 900,000
C 100,000
D. 500,000
Incorrect
0/1 Points
27

a. 0
b. 30,000
c. 40,000
d. 50,000
Correct
1/1 Points
28
What is the relationship between the amount funded and the amount reported
for defined benefit cost?
A. Defined benefit cost must equal the amount funded.
B. Defined benefit cost is less than the amount funded.
C. Defined benefit cost is more than the amount funded.
 D. Defined benefit cost may be more than, equal to, or less than the amount funded.
Correct
1/1 Points
29
If the employee requested the termination of his/her employment, any benefits
given by the entity are not termination benefits.

Termination benefits should not be conditional on future service being provided.

A. True, false
B. False, true
C. False, false
D. True, true
Incorrect
0/1 Points
30
Loss on reissuance of treasury shares shall be debited to
A. Retained earnings
B. Share premium from treasury shares and then retained earnings
C. Share premium from treasury shares, share premium from original issuance and then retained
earnings
D. Share premium from original issuance, share premium from treasury shares and then retained
earnings
Incorrect
0/1 Points
31

a. 160,000
b. 100,000
c. 200,000
d. 600,000
Correct
1/1 Points
32
In computing the current service cost component of pension expense
a. The accumulated benefit obligation provides a more realistic measure of the pension
obligation on a' going concern basis.
b. An entity should employ an actuarial funding method to report pension expense that best
reflects the cost of benefits to employees.
c. The defined benefit obligation using future compensation levels provides a realistic measure of
present pension obligation and expense.
d. All of these.
Incorrect
0/1 Points
33

a. P50,000
b. P75,000
c. P100,000
d. P170,000
Incorrect
0/1 Points
34
Which is not a characteristic of short-term employee benefits?

I. Actuarial assumptions are required to measure the benefit obligation.

II. Short-term employee benefit obligations are measured on an undiscounted
basis.
III. Short-term employee benefits are recognized at each year-end regardless of
services rendered by an employee.
a. I and II
 b. II and III
c. I and III
d. I, II and III
e. Answer not given
Incorrect
0/1 Points
35
1. Which of the following is both part of contributed capital and legal capital?

(1) Long-term subscription receivable

(2) Ordinary share warrants outstanding
(3) Share dividends payable
(4) Subscribed share capital of no par value shares
A. 1 and 2
B. 2 and 3
C. 3 and 4
D. 1 and 4
Correct
1/1 Points
36

a. P3,725,000
b. P3,825,000
c. P3,975,000
d. P4,825,000
Incorrect
0/1 Points
37
Plan assets are assets held by a long-term benefit fund and must satisfy all of the
following conditions, except
 A. The assets in the fund are available to pay only employee benefits.
B. The assets in the fund are not available to the reporting entity's own creditors.
C. The assets are held by an entity, the fund itself, that is legally separate from the reporting
entity.
D. The assets in the fund can be returned to the entity even if the remaining assets are
insufficient to meet all employee benefit obligations.
Correct
1/1 Points
38
If the lessee is expected to take ownership of a leased asset at the end of the
lease term, the lessor must use an estimated residual value when calculating the
lease payments necessary to achieve a desired rate of return.

When the lessee guarantees an estimated residual value of $75,000, the amount
the lessee records as a right-of-use asset and as a lease liability is increased by
$75,000.
A. Statement 1 is correct
B. Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
Correct
1/1 Points
39
Alt Corp. issues 5,000 shares of Php10 par value common stock at Php14 per
share. When the transaction recorded, credits are made to:
A. Common Stock Php50,000 and Paid-in Capital in Excess of Stated Value Php20,000.
B.Common Stock Php70,000.
C.Common Stock Php50,000 and Paid-in Capital in Excess of Par Value Php20,000.
D.Common Stock Php50,000 and Retained Earnings P20,000
Correct
1/1 Points
40
In 2013, RUBY INC. issued 5,000 shares of P10 par value for P100 per share. In
2014, the entity acquired 2,000 of the shares at P150 per share and immediately
canceled these 2,000 shares. In connection with the retirement of the shares,
what amount is debited respectively to share premium and retained earnings?
A. 20,000 and 280,000
B. 100,000 and 180,000
C. 180,000 and 100,000
D. 280,000 and 0
Incorrect
0/1 Points
41
GABRIELA CORP. gives each of the 50 employees 12 days of vacation a year if
they are employed at the end of the year. The vacation accumulates and may be
taken starting January 1 of the next year. The employees work 8 hours per day. In
2014, they made P70 per hour and in 2015 they made P80 per hour. During 2014,
they took an average of 9 days of vacation each. The entity's policy is to record
the liability existing at the end of each year at the wage rate for that year. What
amount of vacation liability should be reported on December 31, 2015?
a. 336,000
b. 384,000
c. 468,000
d. 480,000
Incorrect
0/1 Points
42
I. A formula in a defined contribution plan defines the benefits that the
employee will receive at the time of retirement.

II. Any unpaid contribution at the end of the period for defined contribution plan
shall be recognized as accrued liability.

III. The amount expensed in a defined contribution plan is not necessarily the
expense to be recognized since its accounting is more complex.
a. True, false, false
b. False, true, false
c. True, true, false
d. False, false, true
e. True, false, true
Incorrect
0/1 Points
43
S1: In rare circumstances, when a retirement benefit plan has attributes of both
defined contribution and defined benefit plan, it is deemed a defined
contribution plan.

S2: Accounting for a defined contribution plan is straightforward because the

obligation of the entity is determined by the amount contributed for each period.
S3: Under a defined benefit plan, the risk that the fund may be insufficient to
pay for the promised benefits rests with the employer.
a. False, true, true
b. True, false, false
c. False, false, true
d. True, true, false
e. True, false, true
Correct
1/1 Points
44
KARRIE CORP. undertakes an initial public offering for the listing and issuance of
40,000 new shares and listing of 60,000 old existing shares. The issued shares are
issued for P30 per share with a par value of P20 per share.

The entity incurred the following costs:

Documentary stamp tax P10,000
Fairness opinion 50,000
Tax opinion, 25,000
Newspaper publication 20,000
Listing Fee 50,000
Prospectus design 10,000
Other joint cost 15,000

How much is the share premium in excess of par resulting from the above
transactions?

A. 390,000
B. 370,000
C. 350,000
D. 330,000
Incorrect
0/1 Points
45
MATTEW CORP. undertakes an initial public offering for the listing and issuance
of 40,000 new shares and listing of 60,000 old existing shares. The issued shares
are issued for P30 per share with a par value of P20 per share.

The entity incurred the following costs:

Documentary stamp tax P10,000
Fairness opinion 50,000
Tax opinion 25,000
Newspaper publication 20,000
Listing Fee 50,000
Prospectus design 10,000
Other joint cost 15,000

What amount should be expensed immediately?

A. 50,000
B. 60,000
C. 800,000
D. 110,000
Correct
1/1 Points
46

a. 110,000
b. 170,000
c. 220,000
d. 270,000
Correct
1/1 Points
47
What is the treatment of actuarial gains and losses?
a. As remeasurements recognized immediately in profit or loss.
b. As remeasurements recognized immediately in retained earnings
 c. As remeasurements recognized immediately in other comprehensive income and subsequently
recycled to profit or loss.
d. As remeasurements recognized immediately in other comprehensive income and permanently
excluded from profit or loss.
Incorrect
0/1 Points
48
If shares are issued for a non-cash consideration, the measure should be
A. Fair value of shares issued
B. Fair value of property received
C. Par value of shares issued
D. Carrying amount of asset received
Correct
1/1 Points
49
The difference between the fair value of a financial liability and consideration
paid in cash or through transfer of noncash assets or assumption of liabilities is
recognized in profit or loss.

The initial selling price of bonds represents the sum of all the future cash
outflows required by the obligation.
A. Statement 1 is correct
B. Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
Incorrect
0/1 Points
50
KIMMY COMPANY has the following items on its post-closing trial balance as of
December 31, 2018:
Share capital – ordinary shares (P10 stated value) P2,000,000
Share capital – preference shares (P20 par value) 5,000,000
Subscribed share capital – ordinary shares 1,000,000
Treasury ordinary shares (@ P16 cost) 200,000
Subscription receivable – ordinary shares (10 months) 200,000
Share premium in excess of stated value – ordinary shares 500,000
Share premium in excess of par – preference share 1,000,000
Foreign exchange translation – debit 300,000
Revaluation increment 200,000
Retained earnings – unrestricted 1,500,000

Additional information:
· It was determined that a P2 per ordinary share cash dividend was
declared but unrecorded as of year-end

· Redeemable preference share capital account issued at par amounting

to P500,000 was unrecorded during the year.

· Based on the contract entered by the company with regards to

issuance of bonds, it was agreed that the company must appropriate retained
earnings amounting to P10,000 each month starting at the end of July 2018.

What is the total amount of legal capital of KIMMY COMPANY?

a. 8,300,000
b. 7,000,000
c. 8,500,000
d. 9,000,000
Will be reviewed
51
Which of the following components of defined benefit obligation (DBO) is
properly accounted?

I. Current service cost – Increases DBO

II. Actuarial gain – Increases DBO
III. Interest cost – Increases DBO
A. I and II
B. II and III
C. I and III
D. I, II and III
E. Answer not given
Correct
1/1 Points
52
EMILIO CORP. adopted a defined benefit plan on January 1, 2014. The pension
funding payment is made to the trustee on December 31 each year. The
following information is available:
 2014
2015
Service
cost 1,500,000 1,650,000
Funding
payment 1,700,000 1,850,000
Interest on defined benefit obligation 150,000
Interest income and actual return on plan assets 170,000

What is the prepaid pension cost on December 31, 2015?

a. 200,000
b. 220,000
c. 250,000
d. 420,000
Correct
1/1 Points
53
JUAN INC. has an agreement to pay its sales manager a bonus of 5% of the
income after bonus and after tax. The income for the year before bonus and tax is
P5,250,000. The income tax rate is 30% of income after bonus. What is the bonus
for the year?
a. 177,536
b. 186,548
c. 250,000
d. 262,500
Incorrect
0/1 Points
54
 a. 250,000
b. 450,000
c. 355,000
d. 340,000
Incorrect
0/1 Points
55
In accounting for issuance and subscription of shares, determine whether the
following statements are true or false:

I. If the entity is using the memorandum entry approach, share capital is a

residual account rather than a maintained account.

II. Any share premium or additional paid-in capital in relation to subscription

shall be recorded upon full payment of such subscription.
A. True, false
B. False, true
C. False, false
D. True, true
Incorrect
0/1 Points
56
The actuarial valuation report of an entity shows the following information:

Present value of defined benefit obligation, Jan. 1 340,000

Current service cost 30,000
Discount rate 10%
Benefits paid to retirees 100,000
Actuarial gain 60,000

How much is the year-end balance of the present value of defined benefit
obligation?
a. 210,000
b. 244,000
c. 304,000
d. 364,000
Correct
1/1 Points
57
A formula in a defined contribution plan
A. Ensures that enough fund would be available at retirement.
B. Ensures that the defined benefit cost and funding are different.
C. Defines the benefits that the employee will receive at the time of retirement.
D. Requires an employer to contribute a certain sum each period based on the formula.
Incorrect
0/1 Points
58
Actual return on plan assets is included in net income, while remeasurement gain
or loss arising from the difference between actual and expected return on plan
assets is taken to OCI.

Calculation of the obligation of postretirement medical benefits does not require

the use of a defined benefit formula.
A. Statement 1 is correct
B. Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
Correct
1/1 Points
59
Giada Foods reported P 940 million in income before income taxes for 2028, its
first year of operations. Tax depreciation exceeded depreciation for financial
reporting purposes by P100 million. The company also had non-tax-deductible
expenses of P80 million relating to permanent differences. The income tax rate
for 2028 was 35%, but the enacted rate for years after 2028 is 40%. The balance
in the deferred tax liability in the December 31, 2028 balance sheet is ______
a. 16 million
b. 35 million
c. 40 million
d. 56 million
Correct
1/1 Points
60
TIGREAL CORP. was incorporated on June 1, 2015 with an authorized 200,000,
no-par, ordinary shares, stated value P10 and 10,000, 9% par value P30,
preference shares. Transactions affecting company's equity as of July 31, 2015
were as follows:

June 1 50,000 ordinary shares were issued at P10.

June 5 Assets with a total appraised value of P600,000 were acquired in

exchange for 50,000 ordinary shares.

June 15 Subscriptions were received for 100,000 ordinary shares at P15 and
for 5,000 preference shares at P35.

June 25 Payments in full for the ordinary and preference shares subscribed
June 15 were received and the corresponding shares were issued.

The total shareholders' equity as of July 31, 2015 is

A. P2,300,000
B. P2,750,000
C. P2,775,000
D. P2,875,000
Incorrect
0/1 Points
61
DEL PILAR INC. agrees to provide lump-sum retirement benefits to employees
equal to 5% of final salary for each year of service. Information on such employee
is as follows:

Average annual salary level on January 1, 2018 P2,000,000

Average annual salary increase starting January 1, 2019
and every year thereafter 4%
Average service lives before entitlement to retirement benefits 6 years
Discount rate 10%

What is the balance of the defined benefit obligation as of December 31, 2019?
a. 172,846
b. 170,289
c. 151,089
d. 166,198
Incorrect
0/1 Points
62
Which of the following statements is incorrect in relation to termination
benefits?
a. A benefit that is in any way dependent on providing service in the future is a termination
benefit.
b. The event that gives rise to an obligation for termination benefit is the termination of
employment.
c. A benefit resulting from mandatory retirement is a postemployment benefit rather than a
termination benefit.
d. A benefit resulting from termination of employment at the request of an employee without an
entity offer is not a termination benefit
Incorrect
0/1 Points
63
The projected unit credit method is the measure of pension obligation that
A. can no longer be used under GAAP as an estimate for reporting the service cost component of
pension expense.
B. is not an allowable estimate for reporting the service cost component of pension expense for
defined benefit plans.
C. is one of several allowable estimates for reporting the service cost component of pension
expense.
D. is required under PAS 19.
Correct
1/1 Points
64
What is the meaning of "net interest" in relation to a defined benefit cost?
A. Interest expense on defined benefit liability.
B. Interest income on the fair value of plan assets.
C. Interest expense on defined benefit liability less applicable income tax.
 D. The difference between interest expense on defined benefit liability and interest income on the
fair value of plan assets.
Correct
1/1 Points
65
Short-term employee benefits include profit-sharing and bonuses payable in
more than twelve months after the end of the period in which the employees
render the related service.

Accumulating compensated absences are those that expire if not fully used
during the year of entitlement.
a. True, false
b. False, true
c. False, false
d. True, true
Correct
1/1 Points
66
Which of the following components of defined benefit cost is presented in profit
or loss?

I. Current service cost

II. Interest on effect of asset ceiling
III. Actuarial gain
A. I and II
B. II and III
C. I and III
D. Answer not given
Correct
1/1 Points
67
KGA CORP’s post-employment benefit plan states that employees will receive
retirement benefits equal to one month salary, at the salary level on retirement,
for each year of service with maximum service period of 10 years. The plan is a
a. Defined contribution plan
b. Defined benefit plan
c. Contributory plan
d. Funded plan
Correct
1/1 Points
 68
What is the treatment of actuarial gains and losses?
A. As remeasurements recognized immediately in profit or loss.
B. As remeasurements recognized immediately in retained earnings
C. As remeasurements recognized immediately in other comprehensive income and subsequently
recycled to profit or loss.
D. As remeasurements recognized immediately in other comprehensive income and permanently
excluded from profit or loss.
Option 2
Correct
1/1 Points
69
In accounting for defined benefit plan, which of the following statements is
incorrect?
a. The defined benefit obligation and plan assets accounts are NOT presented in the statement of
financial position.
b. NOT all defined benefit costs are presented in profit or loss.
c. If the balance of the defined benefit obligation is higher than the balance of plan assets, the
difference is presented in the statement of financial position.
d. If the balance of the defined benefit obligation is lower than the balance of plan assets, the
difference is presented in the statement of financial position.
Correct
1/1 Points
70
A company's defined benefit plan had a DBO of P 265,000 on January 1, 2018.
During 2018, defined benefits paid were P 40,000. The discount rate for the plan
for this year was 10%. Service cost for 2018 was P 80,000. Plan assets (fair value)
increased during the year by P 45,000. The amount of the DBO on December 31,
2018 was ______.
a. 225,000
b. 305,000
c. 331,500
d. none of these
Incorrect
0/1 Points
71
BONIFACIO CORP. has an agreement to pay its sales manager a bonus of 4% on
the company’s annual profit. The income for the year before bonus and tax is
P2,600,000. The income tax rate is 30% of income after bonus. If the bonus is
based on income after bonus and after tax, what is the bonus for the year?
a. 100,000
 b. 104,000
c. 70,817
d. 73,684
Incorrect
0/1 Points
72

a. 300,000
b. 330,000
c. 500,000
d. 800,000
Incorrect
0/1 Points
73

a. 40,000
b. 80,000
c. 100,000
d. 200,000
Incorrect
0/1 Points
74

a. Prepaid pension P155,000

b. Accrued pension P155,000
c. Prepaid pension P325,000
d. Accrued pension P325,000
Incorrect
0/1 Points
75

a. 800,000
b. 830,000
c. 870,000
d. 900,000
Correct
1/1 Points
76
 a. 400,000
b. 450,000
c. 500,000
d. Answer not given
Correct
1/1 Points
77
At the inception of a lease, if it is reasonably certain that the lessee will exercise
an option to renew a lease, the lease term is the noncancelable period plus the
renewal period for both the lessee and the lessor.

On a transaction that qualifies for sale-leaseback accounting, any gain on the

"sale" portion of the transaction is recognized immediately.
A. Statement 1 is correct
B. Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
Incorrect
0/1 Points
78
 a. 650,000
b. 700,000
c. 750,000
d. Answer not given
Correct
1/1 Points
79
The accounts shown below appear in the December 31, 2014 trial balance of
FARAMIS INC.:

Preference share, authorized, P50 par P10,000,000

Unissued preference share 3,600,000
Ordinary share, authorized, P20 par 4,000,000
Unissued ordinary share 2,000,000
Subscription receivable, preference share 380,000
Subscription receivable, ordinary share 360,000
Subscribed preference share 600,000
Subscribed ordinary share 440,000
Treasury share, preference, at cost 1,360,000
Share premium 1,700,000
Accumulated profits and losses 2,000,000

All subscription receivables are due in year 2015.

How much is the total shareholders' equity of FARAMIS INC.?

A. P11,040,000
B. P11,780,000
C. P12,400,000
D. P13,760,000
Incorrect
0/1 Points
80
In relation to issuance and subscription, which of the following statements is
incorrect?
A. Under the memorandum entry approach, share capital account is a maintained account in the
records of an entity.
B. Any share premium or additional paid-in capital in relation to subscription shall be recorded
upon full payment of such subscription.
C. Under PAS 32 and PIC rules, any transaction costs related to issuance of shares shall be
deducted from equity net of tax benefit.
D. If shares are issued for a non-cash consideration, the measure should be at fair value of
property received
E. If two shares were issued for a lump-sum consideration, the allocation basis of the
consideration should be the fair value method.
Correct
1/1 Points
81

a. P675,000
b. P725,000
c. P1,025,000
d. P1,075,000
Correct
1/1 Points
 82
When there is a surplus, the entity shall measure the net defined benefit asset at
A. The surplus where the fair value of plan assets exceeds the present value of defined benefit
obligation
B. The asset ceiling
C. Either the surplus or asset ceiling depending on the entity’s discretion
D. The lower between the surplus or asset ceiling
Incorrect
0/1 Points
83
Which of the following statements is correct regarding treasury shares?

S1: The purchase of treasury shares does not affect the total number of shares
issued

S2: The acquisition of shares of another entity is not treasury but an investment.

S3: No corporation shall redeem, repurchase, or reacquire its own shares of

whatever class unless it has adequate amount of unrestricted retained earnings to
support the cost of said shares.
A. S1 and S2
B. S2 and S3
C. S1 and S3
D. All of the statements
E. Answer not given
Correct
1/1 Points
84
The carrying value of zero-coupon bonds increases by the periodic amount of
interest recognized.

Past service cost is recognized as defined benefit expense over a period of several
years.
A. Statement 1 is correct
B. Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
Incorrect
0/1 Points
85
 a. 5,650,000
b. 5,250,000
c. 5,350,000
d. Answer not given
Correct
1/1 Points
86

a. 150,000
b. 200,000
c. 260,000
d. 350,000
Incorrect
0/1 Points
87
RIZAL CORP. grants its employees 10 days of paid vacation leave per year. Per
company’s policies, employees are required to take vacation leave each year but
not necessarily to take the whole vacation leave credits each year. Vacation leaves
not taken during a year can be carried over indefinitely.

RIZAL CORP. has 400 employees with an average salary of P800 per day. There is
an average increase in salary of 5% every year. During 2018, total leave vacation
taken by employees were 3,200 days. Based on past experience, 80% of unused
vacation leave for a year are taken immediately next year. If the unused vacation
leaves do not vest, what amount should be reported as vacation pay expense in
2018?
a. 3,097,600
b. 3,232,000
c. 3,200,000
d. 2,560,000
Correct
1/1 Points
88

a. 5,750,000
b. 5,950,000
c. 5,350,000
d. Answer not given
Correct
1/1 Points
89
 DAGOHOY INC. plans to close one of its branches in 3 months’ time. There are
20 employees in the branch. Because DAGOHOY wants to fill in some pending
customer order, it offers employees the following:

a) Each employee who stays and renders service until the closure of the branch
will receive on the termination date a cash payment of P130,000.
b) Employees leaving before closure of the branch will receive P40,000.

DAGOHOY expects that half of the employees will leave before closure.

How much is the termination benefits?

a. 800,000
b. 400,000
c. 900,000
d. 1,800,000
Correct
1/1 Points
90
PHARSA CORP. undertakes an initial public offering for the listing and issuance of
30,000 new shares and listing of 20,000 old existing shares. The issued shares are
issued for P40 per share with a par value of P25 per share.

The entity incurred the following costs:

Documentary stamp tax P15,000

Fairness opinion 100,000
Tax opinion 50,000
Newspaper publication 40,000
Listing Fee 90,000
Prospectus design 20,000
Other joint cost 30,000

How much is the share premium in excess of par resulting from the above
transactions?

A. 450,000
B. 275,000
C. 395,000
 D. 243,000
Correct
1/1 Points
91
LUNA COMPANY provided the following information with respect to the defined
benefit plan for the current year:

Projected benefit obligation:

January 1 3,000,000
December 31 3,500,000
Contribution to the plan 600,000
Benefits paid to retirees 500,000
Settlement discount rate 10%

What is the current service cost for the current year?

a. 300,000
b. 500,000
c. 600,000
d. 700,000
Incorrect
0/1 Points
92
Louie Company has a defined benefit plan. On December 31 (the end of the
financial year), the company received the DBO report from the actuary. The
following information was included in the report: ending DBO, P 110,000; benefits
paid to retirees, P 10,000; interest cost, P 8,000. The discount rate applied by the
actuary was 8%. What was the service cost for the year?
a. 2,000
b. 12,000
c. 18,000
d. 92,000
Correct
1/1 Points
93
The following information relates to the defined benefit pension plan for the
TANDANG SORA CORP. for the year ending December 31, 2002.

Present value of defined benefit obligation, January 1 4,600,000

Present value of defined benefit obligation, December 31 4,729,000
Fair value of plan assets, January 1 5,035,000
Fair value of plan assets, December 31 5,565,000
Expected return on plan assets 450,000
Amortization of deferred gain on settlement of plan 32,500
Employer contributions 425,000
Benefits paid to retirees 390,000
Discount rate 10%

Current service cost for the year would be

a. 59,000
b. 94,000
c. 129,000
d. 390,000
Incorrect
0/1 Points
94
Which of the following shows proper distinction between redeemable and
callable preference shares?

Redeemable PS Callable PS
I. Classification Liability Equity
II. Dividends is deducted from Income Retained Earnings
III. Presentation of gain on redemption Profit or Loss Profit or Loss
A. I and II
B. II and III
C. I and III
D. I, II and III
Option 2
Incorrect
0/1 Points
95
Reserves, as required by PAS 1 as a minimum line item, do not include which of
the following?
A. Appropriation of retained earnings for plant expansion.
B. Accumulated balance of unrealized gain of FVOCI investments.
C. Ordinary share warrants outstanding
D. Subscribed share capital
Incorrect
0/1 Points
 96
Which of the following is a component of a defined benefit cost?

I. Amortization of transition gain or loss

II. Benefits paid
III. Interest on effect of asset ceiling
A. I and II
B. II and III
C. I and III
D. Answer not given
Correct
1/1 Points
97

a. 200,000 asset
b. 200,000 liability
c. 400,000 asset
d. 400,000 liability
Incorrect
0/1 Points
98
1. Subscribed share capital on ordinary shares is part of which of the
following?

Contributed Capital Legal Capital

A. Yes No
B. No Yes
C. Yes Yes
 D. No No
Incorrect
0/1 Points
99
Capital stock is said to be watered when
A. Assets are overstated
B. Liabilities are overstated
C. It is issued for assets other than cash
D. It is sold at a price in excess of book value
Correct
1/1 Points
100
Mandatorily redeemable preference shares are reported as a liability.

Investors should be wary of share buybacks during downtimes because the

resulting decrease in shares and increase in earnings per share can be used to
mask a slowdown in earnings growth.
A. Statement 1 is correct
B. Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect