RIZAL TECHNOLOGICAL UNIVERSITY

Junior Philippine Institute of Accountants

Boni Avenue, Brgy. Malamig, Mandaluyong City

SET A

NAME: 1ST SEM._SY. 17-18

MOCK COMPREHENSIVE EXAMINATION ADVANCED ACCOUNTING 3

Subject in the Actual CPA Board Examination:

Advanced Financial Accounting and Reporting (AFAR)
Pray before taking the examination. God Bless us!

MULTIPLE CHOICE THEORIES: Indicate your answers by writing the letter of your answer choice on the provided answer
sheet.

1. Which of the following statements is true?

I. IFRS 4 Insurance Contracts will be replaced by IFRS 17 as of January 1, 2021.
II. The insurer is liable in case of fortuitous event
a. I only c. Both I and II
b. II only d. Neither I nor II

2. A complete set of financial statements of a cooperative shall include all of the following
a. Statement of financial condition, statement of operations, statement of changes in equity, statement of cash flows as of
reporting period, notes
b. Statement of financial condition, statement of operations, statement of changes in equity, statement of cash flows,
notes
c. Statement of financial position, statement of activities, statement of changes in equity, statement of cash flows, notes
d. Statement of financial condition, statement of operations, statement of changes in surplus/deficit, statement of cash
flows, notes

3. Reserve fund which shall be at least of net surplus; provided that in the first five (5) years of operation after registration,
this amount shall not be less than fifty percent (50%) of the net surplus.
a. 10% c. 5%
b. 7% d. 3%

4. Which of the following types of insurance contract would probably not be covered by PFRS 4?
a. Motor insurance c. Medical insurance
b. Life insurance d. Pension plan

5. The PPE of a not-for-profit hospital should be accounted for as part of

a. Unrestricted funds c. Specific purpose funds
b. Restricted funds d. Other non-operating funds

6. This is a cash authority issued periodically by the DBM to the operating units of agencies to cover their cash
requirements. It specifies the maximum amount of cash that can be withdrawn from a government servicing bank for the
period indicated.
a. Non-Cash Availment Authority c. NCA
b. Non-Cash Allotment Authority d. Cash Disbursement Ceiling

7. Financial statements of not-for-profit organization, focuses on

a. Basic information for the organization as a whole
b. Standardization of funds nomenclature
c. Inherent differences of not-for-profit organizations that impact reporting presentations
d. Distinctions between current fund and noncurrent fund

8. PFRS 4 was introduced principally for what reason?

a. To ensure that insurance companies could comply with IFRS
b. To completely overhaul insurance accounting
c. As a response to recent scandals within the insurance industry
d. Because of pressure from the financial services authorities in several countries
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9. Revenue of a hospital from grants specified by the donor for research would normally be included in
a. Other non-operating revenue c. Patient service revenue
b. Other operating revenue d. Ancillary service revenue

10. A hospital should report earnings from endowment funds that are restricted to a specific operating purpose as
a. Contribution revenue- unrestricted, when expended
b. Contribution revenue- unrestricted revenues, when expended
c. Contribution revenue- unrestricted, when received
d. Contribution revenue- permanent revenues, when received

11. Agencies are required to submit their at the start of budget execution. These documents outline agency plans and
performance targets. And include the physical and financial plan, monthly cash program, estimate of monthly income,
and list of obligations that are not yet due and demandable.
a. Allotment Release Orders c. Agency Budget Matrix
b. Special Allotment Release Orders d. Budget execution document

12. Which of the following statements is true?

I. An insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another
party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain past event (the insured event)
adversely affects the policyholder.
II.The insurer is not liable in case of fortuitous event
a. I only c. Both I and II
b. II only d. Neither I nor II

13. Fund accounting is explained by the equation

a. Assets = Liabilities + Government Equity c. Fund Assets = Liabilities + Government Equity Fund
b. Assets – Liabilities = Government Equity d. Cash inflow – Cash outflow = Fund

14. Education and Training Fund shall not be more than of the net surplus.
a. 10% c. 5%
b. 7% d. 3%

15. Which of the following is required to prepare a statement of functional expenses?

a. An art museum c. A shelter for the homeless
b. A art museum d. A public golf course

16. Which of the following statements is not false in relation to COA

I. The Commission shall have exclusive authority, subject to the limitations, to define the scope of its audit and
examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and
regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures or uses of government funds and properties.
II. The Commission on Audit (COA) is the Philippines' Supreme State Audit Institution.
a. I only c. Both I and II
b. II only d. Neither I nor II

17. Nonprofit organizations include all of the following, except

a. Professional associations c. Hospitals
b. Schools, colleges, and universities d. GOCCs and Korean fans club

18. The contractual adjustment account of a nonprofit hospital is

a. An expense account c. A loss account
b. A revenue offset account d. A contra expense account

19. For a private health organization, which of the following is included in patient service revenue?
a. Contractual adjustment c. Restricted contribution
b. Charity care d. Unrestricted contribution

20. The following are types of Registry of Allotments, Obligations, and Disbursements except
a. Maintenance and Other Operating Expenses c. Financial Expenses
b. Personal Services d. Capital Outlays

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 21. Community Development Fund which shall not be less than of the net surplus.
a. 10% c. 5%
b. 7% d. 3%

22. It is a system of prescribing the procedures for recording appropriations, allotments, and obligations.
a. Fund accounting c. Resource accounting
b. Budgetary accounting d. Obligation accounting

23. Which of the following would result to reclassification of net assets of a nonprofit organization?
I. Expiration of donor-imposed condition
II.Expiration of donor-imposed restriction
a. I only c. Both I and II
b. II only d. Neither I nor II

24. How is charity care accounted for in the financial statements of a nonprofit health care organization?
a. As patient service revenue c. As a separate component of revenue
b. As bad debt expense d. Not included in the FS

25. The type of endowment fund that may be established only by the board of trustees of a nonprofit university is
a. Permanent endowment fund c. Quasi-endowment fund
b. Term endowment fund d. Trustee endowment fund

26. Unrestricted net assets are typically the assets in

a. General fund c. Permanent endowment fund
b. Restricted fund d. Annuity fund

27. The following are characteristics of nonprofit organizations except

a. Finance by the BIR c. Public service
b. Stewardship of resources d. No profit motives

28. Optional Fund which shall not exceed percent of the net surplus.
a. Seven c. Five
b. Ten d. Three

29. The GAM requires each government entity to present financial statements in conformity with the following except
a. Single entry bookkeeping c. Accrual basis
b. Budget basis d. RCAs prescribed by COA

30. The GAM requires each government entity to present financial statements in conformity with the following except
a. Single entry bookkeeping c. Fund cluster accounting
b. Budget basis d. RCAs prescribed by COA

PROBLEM SOLVING. Indicate your answers by writing the letter representing your answer of your choice on the
provided answer sheet. Show your solution in good form at the back of your paper.

Problem 1 (PPSAS No. 17)

The accounting records of Agency ABC show the following depreciable assets, with ten percent fair market value at the end of
useful life, using the straight line method:
Assets Cost Physical life Service life
Buildings 50,000,000 20 20
Machinery 150,000 5 5
Office Equipment 100,000 6 5
Furniture & Fixtures 75,000 10 10
Motor Vehicles 10,000,000 10 10
Books 10,000 6 5

31. The total depreciation expense of the Agency ABC for the current year ended is
a. 3,203,550 c. 3,200,250
b. 3,559,500 d. 3,555,833

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 32. The peso amount adjusting entry to record depreciation of Books in the books of Agency ABC is
a. 0 c. 10,000
b. 1,800 d. 9,000

33. The peso amount adjusting entry to record depreciation of Machinery is

a. 0 c. 27,000
b. 22,500 d. 30,000

Problem 2
Entity XYZ discovered in 2016 that the revenue from its bulk sales to be recognized in 2015 has been inadvertently omitted in the
amount of 3,500,000.

The entity’s Statement of Financial Performance and Statement of Changes in Net Assets/Equity before adjustment of the error for
2015 and 2016 are as follows:
Entity XYZ
Statement of Financial Performance
Particular 2016 2015
Revenue ? 30,500,000
Other Operating Revenue 10,000,000 15,000,000
Total Revenue 50,000,000 ?
Expenses (45,000,000) (35,000,000)
Surplus 5,000,000 ?
Entity XYZ
Statement of Financial Performance
Particular 2016 2015
Opening accumulated surplus 80,500,000 ?
Surplus for the period ? ?
? ? ?

34. Based on the above information, the entity shall make the adjusting entry:
a.
Accounts Receivables (or applicable account) 3,500,000
Accumulated Surplus/(Deficit) 3,500,000
b.
Applicable Account 1,750,000
Accumulated Surplus/(Deficit) 1,750,000
c.
Accumulated Surplus/(Deficit) 1,750,000
Applicable Account 1,750,000
d.
Accumulated Surplus/(Deficit) 3,500,000
Accumulated Surplus/(Deficit) 3,500,000

35. The adjusted revenue in 2015 is

a. 34,000,000 c. 27,000,000
b. 30,500,000 d. 32,250,000

36. The adjusted balance of Surplus in 2015 is

a. 14,000,000 c. 32,250,000
b. 10,500,000 d. 34,000,000

37. Closing accumulated Surplus in 2016 after adjustment

a. 84,000,000 c. 80,500,000
b. 89,000,000 d. 73,500,000

38. Opening accumulated Surplus in 2015 before adjustment

a. 70,000,000 c. 73,500,000
b. 80,500,000 d. 66,500,000
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 39. Expenses for the year ended 2016 is
a. 45,000,000 c. 48,500,000
b. 0 d. 35,000,000

Problem 3
HARLEY QUINN Hospital, a nonprofit affiliated with a religious group, reported the following information for the year ended
December 31, 2016:
Gross patient service revenue at the hospital’s full established rates 980,000
Bad debts expense 10,000
Contractual adjustment with the third-party payors 115,000
Allowance for discounts to hospital employees 15,000

40. On the hospital’s statement of operations for the year ended December 31, 2016, what amount should be reported as net
patient service revenue?
a. 840,000 c. 850,000
b. 865,000 d. 955,000

Problem 4
QUINN QUINN Hospital, a nonprofit affiliated with a religious group, reported the following information for the year ended
December 31, 2016:
Gross patient service revenue at the hospital’s full established rates 980,000
Bad debts expense 20,000
Contractual adjustment with the third-party payors 100,000
Allowance for discounts to hospital employees 15,000

41. On the hospital’s statement of operations for the year ended December 31, 2016, what amount should be reported as net
patient service revenue?
a. 845,000 c. 945,000
b. 880,000 d. 865,000

Problem 5
Presented below are a series of unrelated situations. Answer the question at the end of each situation.

42. University of Santo Tomas unrestricted current funds comprised the following:
Assets 5,000,000
Liabilities (including deferred revenues of P100,000) 3,000,000
The fund balance of net assets of UST unrestricted net assets was
a. 1,900,000 c. 2,100,000
b. 2,000,000 d. 5,000,000

43. Caris Philippines, a private not-for-profit health care entity located in Quezon City, charged a patient of P8,600 for
services. It actually billed this amount to the patient’s third-party payor. The third-party payor submitted a check for
P7,900 with a note stating that the reasonable amount is paid in full per contract. Which of the following statements is
true
a. The health-care facility will rebill the third-party payor for the remaining P700.
b. The health-care facility recorded the P700 as a contractual adjustment that it will not collect.
c. The third-party payor retained the P700 and will convey it to the health-care facility at the start of the next fiscal
period.
d. The patient is responsible for paying the remaining P700.

44. Which entry would be the correct entry to record that a not-for-profit organization collected 80,000 of amounts pledged
and wrote off 3,000 of amounts pledged as amounts uncollectible?
a. debit Pledges Receivable 80,000, credit Cash 80,000.
b. debit Cash 80,000, credit Pledges Receivable 80,000.
c. debit Pledges Receivable 80,000, credit allowance for uncollectible pledges 3,000, credit Cash 83,000.
d. debit cash 80,000, debit allowance for uncollectible pledges 3,000, credit Pledges Receivable 83,000.
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 e. debit cash 80,000, debit allowance for uncollectible pledges 3,000, credit unrestricted net assets contributions
83,000.

45. Which entry would be the correct entry to record that a hospital has provided patient services for 200,000, of which 25%
will be billed to a third party?
a. debit Accounts Receivable-Patients 200,000, credit Patient Service Revenue 200,000.
b. debit Accounts Receivable-Patients 150,000, debit Accounts Receivable-Third Party 50,000, credit Patient Service
Revenue 200,000.
c. debit Accounts Receivable-Patients 50,000, debit Accounts Receivable-Third Party 150,000, credit Patient Service
Revenue 200,000.
d. debit Accounts Receivable-Patients 200,000, credit Patient Service Revenue 50,000, credit Patient Service Revenue
150,000.
e. debit Patient Service Revenue 200,000, credit Accounts Receivable-Patients 150,000, credit Accounts Receivable-
Third Party 50,000.
Problem 6

46. The following gifts are received in Year One by a not-for-profit organization:

I. 2,000 specified by the donor to be used to pay salaries.

II. 10,000 for new conference room furniture.
III. 5,000 to be held for one year before being expended.

The salaries are paid in Year Two and the conference room furniture is purchased in Year One.

How much should be shown as increases as Temporarily Restricted Net Assets in Year One?
a. 7,000 c. 12,000
b. 17,000 d. 15,000

47. How much should be reclassified on the Statement of Activities in Year Two from the Temporarily Restricted column to
the Unrestricted column?
a. 2,000. c. 7,000.
b. 5,000. d. 10,000.

48. The total amount of gifts received in Year One

a. 7,000 c. 12,000
b. 17,000 d. 15,000

Problem 6 (PFRS 4 Insurance Contracts)

Entity A writes a single policy for a 100,000 premium and expects claims to be made of 60,000 in 2013. At the time of writing
the policy, there are commission costs of 20,000. Assume a discount rate of 3% risk-free. The entity says that if a provision for
risk and uncertainty were to be made, it would amount to 25,000 and that this risk would expire evenly over years 2011, 2012,
and 2013.
Under existing policies, the entity would spread the premiums, the claims expense, and the commissioning costs over the first
two years of the policy.
Investment returns in years 2010 and 2011 are 2,000 and 4,000 respectively.

49. What is the profit in year 2010 using the matching and deferral approach?
a. 12,000 c. 26,000
b. 10,000 d. 0

50. What is the profit in year 2011 using the matching and deferral approach?
a. 14,000 c. 0
b. 10,000 d. 26,000

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