Comprehensive Examination I

Reviewer in Fin Acc 3A

I. Multiple Choice:
1. The credit balances in accounts receivable should be classified as:
a. current liabilities c. long-term liabilities
b. part of accounts payable d. deduction from accounts receivable
2. Advances to affiliates are usually treated as:
a. current assets
b. long-term investments
c. either current or non-current assets depending on the expected period of realization
d. partly current and partly non-current
3. The method of estimating bad debts that focuses on the balance sheet:
a. percent of credit sales c. direct write-off
b. aging of accounts receivable d. percent of accounts receivable
4. Proper matching of cost against revenue is achieved in this method of estimating bad debts:
a. percent of sales c. direct write-off
b. aging of accounts receivable d. percent of accounts receivable
5. If accounts receivables are pledged against borrowings, the amount of receivables pledged should be:
a. excluded from total receivables with disclosure
b. excluded from total receivable without disclosure
c. included on total receivables with disclosure
d. included in total receivables without disclosure
6. The company received a one year interest bearing note on July 1, 2012. The note and its interest are due on
June 30, 2013. The account interest receivable will reflect a balance on:
a. July 1, 2012 and December 31, 2012
b. neither on July 1, 2012 nor on December 31, 2012
c. on December31, 2012 and on December 31, 2013
d. on December 31, 2012 and not on December 31, 2013
7. These are included in the initial measurement of the loan receivable
a. both direct and indirect origination costs
b. neither of the direct and indirect origination costs
c. origination cost but not the indirect origination cost
d. indirect origination cost but not the direct origination cost
8. Which of the following statements are correct?
a. direct origination costs are expensed
b. direct origination costs are included in the measurement of receivable but origination fees are not
c. indirect origination costs are deducted from the direct originations costs
d. direct origination costs are offset directly against any unearned origination fees
9. This kind of receivable financing is considered as an ordinary sale of the receivable
a. using the receivable as collateral c. assignment of receivable
b. factoring of receivable d. pledge of receivable
10. Which of the following statements is incorrect?
a. In assignment, specific receivables are used as collateral security for the loan
b. assignment is more formal and general than pledging
c. The rights in the receivable are transferred to the lender in both assignment and factoring
d. all of the above statements are not correct
11. The following items are part of the inventories except:
a. goods that are consigned in another company
b. goods held on consignment for another company
c. items that are in transit purchased under FOB point of shipment term
d. none of the above
12. This method of costing inventories is appropriate for inventories that are segregated for a particular project
and those inventories that are not interchangeable:
a. standard cost c. specific identification
b. net realizable value d. relative sales price
13. One of the items below is not included in determining the unit cost of an inventory
a. commission paid upon purchase
b. interest on the loan used to but the inventory
c. conversion costs such as labor and factory overhead
d. shipping costs shouldered by the buyer
14. A discount given to a customer to encourage purchase in big quantity
 a. volume discount c. quantity discount
b. trade discount d. cash discount
15. In periods of rising prices, this inventory valuation will result to the highest net income.
a. last in, first out c. weighted average
b. first in, first out d. simple average

II. True or False:

16. Trade receivables even if expected to be realized after one year will be classified as current assets if
within the normal operating cycle of the business
17. All cash flows relating to receivables whether short or long-term are discounted
18. The changes in estimate of the allowance for doubtful accounts are treated retroactively.
19. Interest bearing long-term note is measured at face value while non-interest bearing long-term note is
measure at present value.
20. The impairment loss of a loan receivable is the difference between the carrying amount of the loan and
the present value of the cash flows
21. The factors holdback is treated as a deduction from accounts receivable
22. Discounting pertains only to notes receivable as a form of receivable financing
23. In the absence of any evidence to the contrary, the endorsement of the note being discounted is
assumed to be without recourse
24. In the case of a service provider, inventories include the cost of service for which the entity has not yet
recognized the related revenue.
25. In FOB shipping point arrangement, the loss of the item while in transit shall be borne by the buyer.
26. Both trade and cash discounts are recorded in the books
27. Inventories shall be measured at cost or net realizable value, whichever is lower
28. The moving average method of costing inventory is used in conjunction with periodic inventory system
29. Any loss which is expected to arise from a firm and non-cancellable commitment shall be recognized
even if the actual purchase transaction has not yet taken place.
30. Sales returns and sales allowance are not like sales discounts which do not increase the physical
inventory of goods.

III. Multiple Choices

On May 1, 2011, JKL Corp. bought a parcel of land for P 300,000. After 7 months, JKL sold this land to MNO
Corp. for P 450,000 under the following terms : 25% at closing and a first mortgage note (at the market rate of
interest) for the balance. The first payment on the note, plus accrued interest, is due December 1, 2012. JKL
reported this sale on the installment basis in its 2011 tax return.

How much gain should JKL report from the sale of this land in its 2011 profit or loss ?
A. P 150,000 C. 37,500
B. 112,500 D. 0

On January 2, 2011, PQR Corp. sold equipment with a carrying amount of P 480,000 in exchange for a P
600,000 non-interest-bearing note due January 2, 2014. There was no established exchange price for the
equipment. The prevailing rate of interest for a note of this type at January 2, 2011 was 10%. The present
value of P 1 at 10% for 3 periods is 0.7513.

How much should PQR report as interest income in its 2011 profit or loss ?
A. P 60,000 C. 49,586
B. 54,544 D. 45,078
How much should PQR report as gain or loss on sale of equipment in its 2011 profit or loss ?
A. P 270,000 gain C. 29,220 gain
B. 120,000gain D. 29,220 loss
What is the carrying value of the note receivable as of December 31, 2011
A. P 600,000 C. 495,858
B. 545,444 D. 450,780

On December 30, 2011, DEF Corp. sold a machine to GHI Corp. in exchange for a non-interest-bearing note
requiring 10 annual payments of P 50,000. GHI made the first payment on December 30, 2011. The market
interest rate for similar notes at date of issuance was 8%. Information on present value factors is as follows.
Period Present value of P 1 at 8% Present value of ordinary annuity of P 1 at 8%
9 0.50 6.25
10 0.46 6.7
In its December 31, 2011 statement of financial position, what amount should DEF report the note
receivable ?
A. P 335,000 C. 230,000
B. 312,500 D. 225,000
XYZ Corp. factored P 750,000 of accounts receivable to ABC Corp. on December 1, 2011. XYZ retained
significant amount of risks and rewards of ownership and continues to manage the financial asset. ABC
accepted the receivables, assessed a fee of 2% and retains a holdback equal to 4% of the accounts
receivable. In addition, ABC charged 12% interest on the amount advanced.

What amount of finance cost should XYZ report in its December 2011 statement of comprehensive
income related to the factoring of its accounts receivable ?
A. P 22,200 C. 7,200
B. 15,000 D. 0

On December 1, 2011, ABC Corp. assigned P 400,000 of accounts receivable to DEF Corp. as a security for a
loan of P 335,000. ABC charged a 2% commission on the amount of the loan. The interest rate on the note
was 10%. During December, ABC collected P 110,000 on assigned accounts after deducting P 380 of
discounts. ABC accepted returns worth P 1,350 and wrote off assigned accounts totaling P 2,980.

How much cash did ABC receive from DEF at the time of the transfer ?
A. P 335,000 C. 327,000
B. 328,300 D. 301,500

What is the carrying value of the accounts receivable assigned as of December 31, 2011 ?
A. P 290,000 C. 285,290
B. 289,620 D. 0

On December 28, 2011, DEF Corp. sells a loan portfolio to GHI Corp. for P 490,000. The carrying value of the
loan portfolio is P 500,000 on the date of sale. DEF accepted a call option to repurchase the loan portfolio.

Assuming the call option is deep out the money, what amount of financial asset (loans) should DEF
continue to recognize and report in its December 31, 2011 statement of financial position ? (When the
call option is deep out the money, it is not probable that the option will be exercised.)
A. P 500,000 C. 10,000
B. 490,000 D. 0

Assuming the call option is deep in the money, what amount of financial asset (loans) should DEF
continue to
recognize and report in its December 31, 2011 statement of financial position ? (When the call option is
deep in the money, it is highly probable that the option will be exercised.)
A. P 500,000 C. 10,000
B. 490,000 D. 0

On February 1, 2011, PQR Corp. factored receivables with a carrying amount of P 2,000,000 to STU Corp..
STU assesses a finance charge of 3% of the receivables and retains 5% of the receivables.

If the factoring is treated as a sale, what amount of loss from sale should the company report in its
statement of comprehensive income for the year 2011 ?
A. P 160,000 C. 60,000
B. 100,000 D. 0

Assume that PQR retained significant amount of risks and rewards of ownership and had a continuing
involvement on the factored financial asset, what amount of loss from factoring should the company recognize
A. P 160,000 C. 60,000
B. 100,000 D. 0

GHI Corp. accepted a P 200,000, 90-day, 12% interest-bearing note dated November 15, 2011 from a
customer. On December 15, 2011, GHI discounted the note at JKL Finance Corp at 15% discount rate. GHI
informed the maker of the note regarding the discounting arrangement. On maturity date, the maker of the note
did not pay the note and, as a result, JKL charged GHI for the total amount due plus P 2,000 protest fee.

How much should GHI pay to JKL, when the maker failed to pay the note upon its maturity ?
A. P 208,000 C. 202,000
B. 206,000 D. 0
What amount of interest income should GHI recognize related to the notes receivable in its December 31, 2011
statement of financial position ?
A. P 3,000 C. 1,000
B. 2,000 D. 0
ABC Corp. received from a customer a 1-year P 375,000 note bearing annual interest of 8%. After holding the
note for 6 months, ABC discounted the note at DEF Bank at an effective interest rate of 10%.

How much did ABC received from the bank ?

A. P 406,000.00 C. 384,750.00
B. 392,857.50 D. 371,428.50
If the discounting is treated as a sale, what amount of loss on discounting should ABC recognize
A. P 20,250 C. 5,250
B. 9,750 D. 0
If the discounting is treated as a borrowing, what amount of loss on discounting should ABC recognize ?
A. P 20,250 C. 5,250
B. 9,750 D. 0

MNO Corp. reported the following balances on December 31 : (1) inventory : 2015 --- P 2,600,000, 2014 ---
2,900,000; (2) accounts payable : 2015 ---750,000, 2014 --- 500,000. MNO paid its suppliers P 4,900,000
during the year ended December 31, 2015.
How much should MNO report as cost of goods sold in its December 31, 2015 statement of
comprehensive income ?
A. P 5,450,000 C. 4,850,000
B. 4,950,000 D. 4,350,000

The balance in DEF Corp.s inventory account on December 31, 2014 was P 1,225,000 before the following
information was considered. (1) Goods shipped FOB destination on December 20, 2014 from GHI Corp. to
DEF were lost in transit. The invoice cost of P 45,000 for the said merchandise was not recorded by DEF. On
December 28, 2014, DEF notified GHI of the lost shipment. (2) Goods were in transit to DEF on December 31,
2014. The invoice cost was P 60,000 and the goods were shipped FOB shipping point on December 28, 2014.
DEF received the goods on January 1, 2015.

What amount of inventory should be reported in the December 31, 2014 statement of financial position ?
A. P 1,330,000 C. 1,270,000
B. 1,285,000 D. 1,225,000

ABC Corp. imported goods at a cost of P 260,000, including P 40,000 non-refundable import duties and P
20,000 refundable purchase taxes. The risks and rewards of ownership of the imported goods were transferred
to ABC upon collection of the goods from the harbor warehouse. It was required to pay for the goods upon
collection. It incurred P 10,000 to transport the goods to its retail outlet and a further P 4,000 in delivering the
goods to its customer. Further selling costs of P 6,000 were incurred in selling the goods.

At what amount should the inventory be valued ?

A. P 270,000 C. 250,000
B. 260,000 D. 240,000

JKL Corp. has the following information pertaining to its merchandise inventory as of December 31, 2014 : (1)
inventory on hand, including merchandise received on consignment of P 20,000 --- P 200,000; (2) inventory
purchased with a buyback agreement --- 100,000; merchandise in transit, FOB shipping point, including 5,000
freight cost --- 155,000; merchandise in transit, free alongside, including delivery cost alongside the vessel of
6,000 but excluding the cost of shipment of 3,000 --- 250,000; merchandise in transit, CIF, including insurance
costs and freight of 8,000 --- 175,000.

What amount should JKL report as value of its inventory in its 2014 statement of financial position ]
A. P 857,000 C. 757,000
B. 763,000 D. 749,000

GHI Corp. recorded the following data pertaining to its raw materials during January 2014.

Date Received Cost Issued On hand

Jan. 1, 2014 inventory P 8.00 3,200 units
Jan. 11, 2014 issue 1,600 units 1,600 units
Jan. 22, 2014 purchase 4,800 units P 9.60 6,400 units

How much is the moving average cost of the raw materials inventory at January 31, 2014 ?
A. P 9.60 C. 8.96
B. 9.20 D. 8.80

JKL Corp.s records for the first 3 months of its existence show purchases of Commodity A as follows.
 No. of units Cost
---------------------------------- ---------------------------------
August 5,500 P 280,500
September 8,000 416,000
October 5,100 270,300
------------------------- ---------------------------------
Total 18,600 P 966,800
============= ==================
The inventory of Commodity A at the end of October using FIFO is valued at P 363,900.

Assuming that none of Commodity A was sold during August and September, what value would be shown at
the end of October if average cost was assumed ?
A. P 366,700 C. 353,300
B. 358,662 D. 351,900

GHI Corp. sells product A. During the year, the company moved to a new location, and the inventory records
for A were misplaced. The bookkeeper has been able to gather some information from the sales records as
shown below.
July sales : 57,200 units at P 100
July purchases :
Date Quantity Unit cost
July 5 10,000 P 65.00
9 12,500 62.50
12 15,000 60.00
23 14,000 62.00
On July 31, 16,000 units were on hand with a total value of P 988,000. GHI has always used a periodic
FIFO inventory costing system. Gross profit on sales for July was P 2,058,750.

What is the total cost of the beginning inventory

A. P 1,450,000 C. 1,353,538
B. 1,367,100 D. 1,345,400
What is the unit cost of the beginning inventory ?
A. P 66.82 C. 62.38
B. 63.00 D. 62.00

ABC Corp., a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, ABC
paid P 3,000 and received 8,500 pieces of candy that are allocated among 3 groups. Group 1 consists of 2,500
pieces that are expected to sell for P 0.25 each. Group 2 consists of P 5,500 that are expected to sell for P
0.60 each. Group 3 consists of 500 pieces that are expected to sell for P 1.20 each.

Using the relative sales value method, what is the cost per item in Group 1 ?
A. P 0.375 C. 0.200
B. 0.250 D. 0.166

During 2014, DEF Corp. signed a non-cancelable contract to purchase 1,000 sacks of rice at P 900 per sack
with delivery to be made in 2015. On December 31, 2014, the price of rice had fallen to P 850 per sack. On
May 9, 2015, DEF accepts delivery of rice when the price is P 880 per sack.

In the December 31, 2014 statement of comprehensive income, what amount of loss on purchase
commitment should be included
A. P 50,000 C. 20,000
B. 30,000 D. 0

ABC Corp. is a wholesaler of scented candies. The activity for item number 123 during June is presented
below.
Date Transaction Unit Cost
June 1 Inventory balance 6,000 P 20
4 Purchases 9,000 24
12 Sales 10,800
19 Purchases 14,400 26
22 Sales 11,400
29 Purchases 4,800 27

Under the FIFO periodic inventory system, how much is the ending inventory of item 123 at June 30 ?
A. P 316,800 B. 302,400
 C. 278,400 D. 280,800
Under the weighted average cost inventory system, how much is the ending inventory of item 123 at June 30

A. P 316,800 C. 294,720
B. 302,400 D. 278,400

DEF Corp., organized in 2012 has used the average method of inventory valuation. Net income reported under
this method is shown below.
2012 2013 2014
Net income P 180,000 P 250,000 P 360,000
Inventory, end :
Average 600,000 750,000 1,000,000
FIFO 620,000 1,000,000 1,200,000

If the FIFO method of inventory valuation was used, how much would be the total net income for the
three years
A. P 1,250,000 C. 1,000,000
B. 1,230,000 D. 980,000

The following information appears in GHI Corp.s records for the year ended December 31, 2014 : inventory,
Jan. 1 --- P 325,000; purchases --- 1,150,000; purchase returns --- 40,000; freight in --- 30,000; sales ---
1,700,000; sales discounts --- 10,000; sales returns --- 15,000. On December 31, GHI conducted a physical
inventory which revealed that the ending inventory was only P 210,000. GHIs gross profit on net sales has
remained constant at 30% in recent years. GHI suspects that some inventory may have been pilfered by one of
its employees.

How much is the estimated cost of missing inventory on December 31 ?

A. P 292,500 C. 82,500
B. 210,000 D. 75,500

Corp. uses a calendar year and the FIFO retail inventory method (assuming stable prices). Information relating
to the computation of the inventory at December 31 is as follows.
Cost Retail
Inventory, Jan. 1 P 320,000 P 800,000
Sales 5,800,000
Purchases 2,100,000 6,000,000
Freight-in 70,000
Net markups 400,000
Net markdowns 200,000

What is the ending inventory at cost at December 31 using the FIFO retail inventory method ?
A. P 460,000 C. 430,000
B. 440,000 D. 420,000

On the eve of June 15, 2014, a fire destroyed the entire merchandise inventory of DEF Corp.. The
merchandise was not insured with any insurance company. The following data were gathered.
Inventory, Jan. 1 P 250,000
Purchases, Jan. 1 to June 15 1,500,000
Sales, Jan. 1 to June 15 2,000,000
Markup percentage on cost 25%

What is the approximate inventory loss as a result of the fire ?

A. P 500,000 C. 250,000
B. 312,500 D. 150,000

ABC Corp. prepares monthly income statements. A physical inventory is taken only at year-end. Hence,
month-end inventories must be estimated. All sales are made on account. The rate of markup on cost is 50%.
The following information relates to the month of June.
Accounts receivable, June 1 P 102,000
Accounts receivable, June 30 153,000
Collection of accounts receivable during June 255,000
Inventory, June 1 183,600
Purchases of inventory during June 163,200

How much is the estimated cost of June 30 inventory ?

 A. P 224,400 C. 142,800
B. 193,800 D. 122,400

MNO Corp. uses the retail inventory method to estimate its inventory for interim statement purposes. Data
relating to the inventory computation at June 30, 2014 are as follows.
Cost Retail
Inventory, Jan. 1 P 820,000 P 1,262,800
Net purchases 2,280,000 3,607,200
Net mark-ups 450,000
Net markdowns 320,000
Sales 4,350,000
Sales returns 300,000
Employee discount 100,000
Sales discount 80,000
Normal shrinkage 50,000

Compute the cost ratio using the average approach

A. 64 % C. 60%
B. 62% D. 58%

What is the estimated cost of June 30, 2014 inventory using the average approach ?
A. P 800,000 C. 496,000
B. 616,000 D. 466,000

I. True or false:
1. Transaction costs such as fees and commissions paid to agents are to be capitalized in the case of
trading securities
2. Fair value is the price agreed upon by a willing buyer and a willing seller in an independent transaction
3. Realized gain and losses arise from investments that are measured at fair value
4. In the case of reclassification of financial assets, any previously recognized gains, losses and interest
shall not be restated.
5. When an entity reclassifies a financial asset at amortized cost to financial asset at fair value, the fair
value is determined at reclassification date and the difference of the fair value and the previous carrying
amount shall be recognized in other comprehensive income
6. Transaction costs that are capitalizable exclude financing costs, debt premiums and discounts, transfer
taxes and duties and internal administrative costs
7. Substantial or majority ownership by another investor shall exclude an investor from having significant
influence on the investee.
8. An investment in ordinary shares of an investee on which the investor has control over the investee is
described as in vestment in associate.
9. When shares of the company are received instead of the cash dividends declared, they will be treated
like stock dividends and no income will be recognized.
10. When cash is received instead of the stock dividends declared, it will be treated as dividend income.
11. A share split will result to either a reduction, in the case of a split up, or an increase, in the case of a
split down, in the cost of investment.
12. When there is a stock right, a portion of the carrying amount of the original investment in equity
securities is allocated to the stock rights at an amount equal to the fair value of the stock rights at the
time of acquisition.
13. Under the equity method of recording investment in associate, the investment is initially recognized at
cost and are either increased by the investors share in the profit of the investee and decreased only
upon receipt of the dividends.
14. The equity method is appropriate when the investor has significant influence on the investee through its
investment on any of the shares of the investee.
15. If the investor pays more than the carrying amount of the net assets of the investee, the difference is
normally attributable to goodwill.
16. The excess of cost over carrying amount is not amortized when it is attributable to goodwill or
undervaluation of land.
17. The fair value of the investment at the date it ceases to be an associate shall be regarded as the fair
value on initial recognition as a financial asset.
18. An investment in associate classified as held for sale shall be measured at the lower of carrying and
fair value of the investment.
19. Debt investment held for collection is measured at fair value while debt investment not held for
collection is measured at amortized cost.
20. The interest income account is debited ion the amortization of bond discount and is credited in the
amortization of bond premium.
Multiple Choice;
A : If only statement 1 is correct.
B : If only statement 2 is correct.
C : If both statement 1 and statement 2 are correct.
D : If both statement 1 and statement 2 are incorrect.

21. Statement 1 : Redemption fund, replacement, plant expansion fund, contingency fund,
insurance fund and cash surrender value are noncurrent investments.
Statement 2 : In a life insurance policy, both the cash surrender value and loan value are
accounted for as noncurrent investments.

22. Statement 1 : Any change in the fair value of the investment property at the end of the
accounting period shall be recognized as gain or loss in the statement of
comprehensive income under the cost model.
Statement 2 : To qualify for financial statement presentation as investment property, the asset
must be held for appreciation in value and/or for rental revenue.

23. Statement 1 : Land and buildings are the primary assets that can be presented in the statement
of financial position as investment property.
Statement 2 : A property which is not owned by the business but is leased by such business
may be accounted for as investment property.

24. Statement 1 : Cash fund may be presented in the statement of financial position as cash and
cash equivalent or noncurrent investment.
Statement 2 : Sinking fund, as a noncurrent investment, may be established in the form of
cash, securities or other assets like accrued receivables.

25. Statement 1 : In the initial valuation of investment property, the direct acquisition or transaction
costs shall be expensed while the purchase cost shall be capitalized.
Statement 2 : The investment property shall be presented in the statement of financial position
less accumulated depreciation and accumulated impairment loss.

___________________________________________
DEF Corp.s portfolio of trading securities includes the following on December 31, 2013.
Cost Fair value
15,000 ordinary shares of GHI Corp. P 477,000 P 417,000
30,000 ordinary shares of JKL Corp. 546,000 570,000

All of the above securities have been purchased in 2013. In 2014, DEF completed the following
securities transactions.
Mar 1 Sold 15,000 shares of GHI ordinary shares at P 31, less brokerage commission of P 4,500
Apr 1 Bought 1,800 ordinary shares of MNO Corp. at P 45 plus commission, taxes, and other
transaction costs of P 1,650.

The DEF portfolio of trading securities appeared as follows on December 31, 2014.
Cost Fair value
30,000 ordinary shares of JKL Corp. P 546,000 P 580,000 (net of P 6,500 estimated transaction
costs that would be incurred on the
sale of the securities)
1,800 ordinary shares of MNO Corp. 82,650 75,000 (net of P 1,500 estimated transaction
costs that would be incurred on the
sale of the securities)

What amount of unrealized gain on these securities should be reported in the 2014 income statement ?
A. P 28,000 C. 12,000
B. 26,350 D. 10,350
What is the gain or loss on the sale of GHI ordinary shares on March 1, 2014 ?
A. P 48,000 C. 9,000
B. 43,500 D. 4,500
What amount should be reported as trading securities in DEFs statement of financial position on
December 31, 2014 ?
A. P 663,000 C. 636,650
B. 655,000 D. 628,650
________________________________
Supporting records of MNO Corp.s trading securities portfolio shows the following debt and equity securities
on December 31, 2013.
Securities Cost Fair value
200 ordinary shares PQR Corp. P 127,250 P 121,500
P 400,000 STU Corp. 7% bonds 398,250 387,000
P 600,000 XYZ Corp. 7.5% bonds 603,750 609,450

Interest dates on the bonds are January 1 and July 1. MNO uses the income approach to record the
purchase of bonds with accrued interest. During 2014 and 2015, MNO completed the following
transactions related to trading securities.
2014
Jan 1 Received semiannual interest on bonds (Assume that the appropriate adjusting entry was
made on December 31, 2013.)
Apr 1 Sold P 300,000 of 7.5% XYZ bonds at 102 plus accrued interest (Brokerage fees were P
1,000.)
May 21 Received dividend of P 1.25 per share on the PQR ordinary share capital (The dividend was
not recorded on the declaration date.)
Jul 1 Received semiannual interest on bonds and then sold the 7% STU bonds at 97.5 (Brokerage
fees were P 1,250.)
Aug 15 Purchased 100 shares of ABC Corp. ordinary share capital at P 580 per share plus brokerage
fees of P 250
Nov 1 Purchased P 250,000 of 8% DEF Corp. bonds at 101 plus accrued interest (Brokerage fees
were P 625. Interest dates are January 1 and July 1.)
Dec 31 Market prices :
PQR ordinary shares P 550.00
7.5% XYZ bonds 101.75
8% DEF bonds 101.00
ABC ordinary shares P 583.75
2015
Jan 2 Recorded the receipt of semiannual interest on bonds
Feb 1 Sold the remaining 7.5% XYZ bonds at 101 plus accrued interest (Brokerage fees were P
1,500.)

What is the total amount of interest and dividend income for 2014 ?
A. P 82,208 C. 49,402
B. 62,583 D. 45,708
What amount should be reported as gain on sale of trading securities in 2014 ?
A. P 6,376 C. 3,125
B. 4,275 D. 2,025
What amount of unrealized gain or loss should be reported in the income statement for the year ended
December 31, 2014 ?
A. P 10,000 unrealized gain C. 3,075 unrealized gain
B. 10,000 unrealized loss D. 3,075 unrealized loss

What should be the carrying amount of the remaining trading securities on December 31, 2014 ?
A. P 740,500 C. 726,125
B. 736,725 D. 725,225
What is the loss on the sale of the remaining XYZ bonds on February 1, 2015 ?
A. P 6,750 C. 3,750
B. 5,250 D. 375
_________________________________
GHI Corp. purchased the following non-trading equity securities during 2014.
Fair value
Security Cost Dec. 31, 2014
JKL P 450,000 P 500,000
MNO 500,000 800,000

At initial recognition, GHI classified these securities as at fair value through other comprehensive
income. On July 28, 2015, GHI sold all shares of security MNO for a total of P 835,000. As of
December 31, 2015, the shares of security JKL had a fair value of P 200,000. No other activity occurred
during 2015 in relation to the non-trading equity security portfolio.

What amount should GHI report as realized gain in the 2015 income statement ?
A. P 335,000 C. 265,000
B. 300,000 D. 35,000
 What is the cumulative unrealized gain (loss) to be reported in the statement of changes in equity for
2015 ?
A. P 300,000 C. (300,000)
B. 150,000 D. (250,000)
________________________________
In the preparation of the financial statements of GHI Corp. for the year ended December 31, 2014, the
following data about its investment in equity securities were made available.
JKL ordinary shares :
February 14 Purchased 36,000 shares at P 55 per share
July 26 Received 3,600 ordinary shares of JKL as a share dividend
September 28 Sold the 3,600 ordinary shares of JKL received last July 26 at P 70 per share
MNO ordinary shares :
April 30 Purchased 180,000 shares at P 40 per share
October 28 Received dividend of P 1.20 per share
Additional information :
a. The fair value for each security as of the 2014 date of each transaction follows.
Feb 14 Apr 30 Jul 26 Sep 28 Dec 31
JKL P 55 P 62 P 70 P 74
MNO P 40 32
GHI 25 28 30 33 35
b. All of the investments of GHI are nominal with respect to percentage of ownership (5% or less).
c. Each investment is considered by GHI to be non-trading. GHI has made an irrevocable election to
present in other comprehensive income subsequent changes in fair value of its non-trading equity
securities.
What amount should be reported as gain on sale of non-trading equity securities in 2014 ?
A. P 72,000 C. 18,000
B. 54,000 D. 0
The receipt of 3,600 share dividend would cause the investment balance to increase by how much ?

A. P 252,000 C. 198,000
B. 223,200 D. 0
What amount of unrealized gain or loss should be reported in the 2014 statement of comprehensive as
component of other comprehensive income ?
A. P 1,440,000 gain C. 576,000 gain
B. 1,440,000 loss D. 576,000 loss

What amount should be reported as Investment in equity securities in the statement of financial
position on December 31, 2014 ? ]
A. P 9,864,000 C. 8,424,000
B. 9,000,000 D. 7,560,000
_____________________________
JKL Corp. has the following non-trading equity securities on December 31, 2014.
Security Shares Cost Fair value
MNO Corp. ordinary shares 4,500 P 220,500 P 207,000
PQR Corp. ordinary shares 15,000 540,000 525,000
STU Corp. preference shares 1,200 180,000 184,800

All of the above securities were bought in 2014. On initial recognition, JKL made an irrevocable election
to present such securities at fair value through other comprehensive income. In 2015, the company had
the following transactions relating to its investments.

Apr 1 Sold the 4,500 ordinary shares of MNO for P 65 per share
May 1 Bought 2,100 ordinary shares of XYZ Corp. at P 75 plus brokers fee of P 5,200

JKLs portfolio of non-trading equity securities had the following fair values on December 31, 2015 :
PQR, P 525,000; STU, 174,000; XYZ, 151,200.

What is the realized gain or loss on the sale of MNO ordinary shares on April 1, 2015 ?
A. P 85,500 gain C. 72,000 gain
B. 85,500 loss D. 0
At what amount should the 2,100 ordinary shares of XYZ purchased on May 1, 2015 be initially
measured ?
A. P 162,700 C. 156,400
B. 157,500 D. 151,200
How much is JKLs investments in non-trading equity securities be reported in the December 31, 2015
 statement of financial position ?
A. P 916,800 C. 877,500
B. 881,400 D. 850,200
______________________________
On January 1, 2014, STU Corp. purchased debt securities for cash of P 765,540 to be held as financial assets
at amortized cost. The securities have a face value of P 600,000, and they mature in 15 years. The securities
carry fixed interest of 10% that is receivable semiannually on June 30 and December 31. The prevailing market
interest rate on these debt securities is 7% compounded semiannually.

How much is the carrying value of the debt securities on December 31, 2014 at amortized cost using the
effective interest rate method ? ]
A. P 771,840 C. 759,016
B. 765,540 D. 600,000
What is the interest income amount to be reported for 2014 using the effective interest rate method ?
A. P 66,524 C. 53,476
B. 60,000 D. 6,524
________________________________
Shown below is an amortization table (including fair value) related to JKL Corp.s 5-year, P 500,000 bond with
a 7% interest rate and a 5% yield, purchased on December 31, 2014 for P 543,300.
Interest Interest Premium Carrying
Date received income amortization amount Fair value
12/31/14 P 543,300
12/31/15 P 35,000 P 27,165 P 7,835 535,465 P 532,500
12/31/16 ? ? ? ? 537,500
12/31/17 ? ? ? ? 528,250
12/31/18 ? ? ? ? 515,000
12/31/19 ? ? ? ? 500,000

Assuming the bonds are held as financial assets measured at amortized cost, how much is the
investment account on December 31, 2016 ?
A. P 537,500 C. 508,692
B. 527,238 D. 500,000
Compute the amount of interest income recognized in 2016 ?
A. P 35,000 C. 26,773
B. 26,875 D. 26,362
What is the net decrease in the amount of investment in 2017 ?
A. P 9,650 C. 8,638
B. 9,250 D. 8,125
___________________________________
MNO Corp. purchased P 160,000,000 of 8% bonds, dated January 1, on January 1, 2014 to be held as
financial assets at amortized cost. On the acquisition date, the market yield of bonds with similar risk and
maturity was 10%. MNO paid P 132,000,000 for the price of the bonds. Interest is received semiannually on
June 30 and December 31. Due to changes in market conditions, the fair value of the bonds at December 31,
2014 was P 140,000,000.

At what amount will MNO report its investment in the December 31, 2014 statement of financial position
A. P 160,000,000 C. 132,410,000
B. 140,000,000 D. 132,200,000
How much is the unrealized holding gain or loss to be classified as component of other comprehensive
income at December 31, 2014 ?
A. P 8,390,000 holding gain C. 7,590,000 holding gain
B. 8,390,000 holding loss D. 0
What is the amount of interest income to be reported in MNOs income statement for the year ended
December 31, 2014 ?
A. P 13,210,000 C. 6,610,000
B. 12,800,000 D. 6,400,000
_________________________________
PQR Corp. has a policy of investing idle cash in equity securities. It has made periodic investments in its
principal supplier, STU Corp. PQR currently owns 12% of STUs outstanding ordinary shares. The following
information was gathered about PQRs investments in equity securities.
1. PQR has trading equity investments in XYZ Corp. and ABC Corp. During 2015, PQR purchased
100,000 shares of XYZ for P 4,200,000. These shares have a fair value of P 4,800,000 at
December 31, 2015. The investment in ABC consists of 50,000 shares acquired in March 2015 at P
60 per share and currently has a value of P 2,160,000.
 2. PQRs 12% ownership in STU has a fair value of P 66,675,000 on December 31, 2015. On initial
recognition, PQR made an irrevocable election to present in other comprehensive income
subsequent changes in fair value of this investment in equity securities. The securities were
purchased prior to 2014 for P 67,500,000 and were valued at P 64,500,000 on December 31, 2014.
PQR has not changed its holdings in the current year.

What amount of unrealized loss should be reported as component of other comprehensive income on
PQRs
December 31, 2014 statement of comprehensive income ?
A. P 3,000,000 C. 825,000
B. 1,065,000 D. 0
What is the cumulative unrealized gain/loss that should be shown on the statement of changes in equity
for the year ended December 31, 2015 ?
A. P 2,175,000 unrealized gain C. 1,065,000 unrealized loss
D. 825,000 unrealized loss
B. 1,935,000 unrealized gain
What amount of unrealized gain/loss should be reported on PQRs income statement for the year ended
December 31, 2015 ?
A. P 1,065,000 unrealized loss C. 600,000 unrealized gain

B. 825,000 unrealized loss D. 240,000 Unrealized loss

________________________________
The following investment-related transactions were completed by PQR Corp. during
2014.
a. Purchased P 3,000,000 of STU Corp. 7% bonds paying 102.5 plus accrued interest of P 52,500 (In
addition, the company paid brokerage fee of P 15,000. PQR classified these bonds as a trading
security.)
b. Purchased 30,000 shares of XYZ Corp. ordinary shares at P 125 per share plus brokerage fees of
P 28,500 (PQR classified this stock as at fair value through other comprehensive income.)
c. Received semiannual interest on the STU bonds
d. Sold 4,500 shares of XYZ at P 132 per share
e. Sold P 480,000 of STU 7% bonds at 102 plus accrued interest of P 2,790
At what amount should the STU bonds be initially measured and recognized ?
A. P 3,142,500 C. 3,075,000
B. 3,090,000 D. 3,000,000
How much is the realized gain or loss on the sale of STU bonds ?
A. P 4,800 loss C. 2,010 loss
B. 2,400 loss D. 390 gain
Determine the amount that the 30,000 XYZ shares should be initially measured and recognized.
A. P 3,988,500 C. 3,750,000
B. 3,778,500 D. 3,721,500
What is the amount of realized gain or loss on the sale of XYZ stock ?
A. P 31,500 gain C. 27,225 gain
B. 31,500 loss D. 27,225 loss

______________________
ABC Corp. purchased 250,000 shares of DEF Corp. ordinary shares on July 1, 2014 at P
66 per share, which reflected book value as of that date. At the time of purchase, DEF had 1,000,000 ordinary
shares outstanding. ABC had no ownership interest in DEF prior to the purchase. Secret reported net income
of P 3,360,000 for the six months ended June 30, 2014. ABC received a dividend of P 420,000 from DEF on
August 1, 2014. DEF reported net income of P 7,200,000 for the year ended December 31, 2014, and again
paid ABC dividends of P 420,000.

On January 1, 2015, ABC sold 100,000 ordinary shares of DEF for P 68 per share and reclassified the
remaining stock as at fair value through other comprehensive income. The quoted market price of such
investment on January 1, 2015 was P 69 per share. DEF reported net income of P 7,440,000 for the year
ended December 31, 2015, and paid ABC dividends of P 240,000. The fair value of DEF ordinary shares at
December 31, 2015 was P 70 per share.

What is the carrying value of the stock investment at December 31, 2014 ?
A. P 16,620,000 C. 16,380,000
B. 16,500,000 D. 9,972,000
How much is the total amount of gain to be reported in the 2015 income statement ?
A. P 680,000 C. 378,000
B. 530,000 D. 152,000
 What amount of unrealized gain should be reported in the 2015 statement of comprehensive income as
component of other comprehensive income ?
A. P 528,000 C. 150,000
B. 378,000 D. 0
Compute the carrying value of the retained investment to be shown in the statement of financial position
on December 31, 2015.
A. P 10,848,000 C. 10,350,000
B. 10,500,000 D. 9,972,000
_______________________________________
XYZ Corp. purchased 40% of ABC Corp.s outstanding ordinary shares on January 2, 2014 for P 270,000,000.
The book value of ABCs net assets (shareholders equity) at the purchase date totaled P 450,000,000. Book
values and fair values were the same for all financial statement items except for inventory and buildings for
which fair values exceeded book values by P 12,500,000 and P 112,500,000, respectively. All inventory on
hand at the purchase date was sold during 2014. The buildings have average remaining useful lives of 15
years.

ABC reported net income of P 110,000,000 for the year ended December 31, 2014 and paid cash dividends of
P 40,000,000. The fair value of XYZs investment in associate was P 300,000,000 at December 31, 2014.

Of the amount paid for the acquisition of ABCs ordinary shares, how much is attributable to goodwill ?
A. P 90,000,000 C. 45,000,000
B. 50,000,000 D. 40,000,000
What is the investment balance at December 31, 2014 ?
A. P 300,000,000 C. 290,000,000
B. 298,000,000 D. 270,000,000
At what amount will XYZ report its investment income in its 2014 income statement ?
A. P 44,000,000 C. 20,000,000
B. 36,000,000 D. 16,000,000
___________________________________
On January 2, 2014, DEF Corp. acquired a 15% interest in GHI Corp. by paying P 8,000,000 for 100,000
shares. On this date, the net assets of GHI totaled P 40,000,000. The fair values of GHIs identifiable assets
and liabilities were equal to their book values. DEF did not have the ability to exercise significant influence over
the operating and financial policies of GHI. DEF received dividends of P 1.40 per share from GHI on October 1,
2014. GHI reported net income of P 5,000,000 for the year ended December 31, 2014. DEF classified the
investment as at fair value through other comprehensive income. Market price for the 100,000 shares was P
9,000,000 on December 31, 2014.

DEF paid P 30,000,000 on January 1, 2015 for 300,000 additional GHI ordinary shares, which represents a
25% interest in GHI. The fair value of GHIs identifiable assets, net of liabilities, was equal to their book values
of P 92,000,000. As a result of this additional acquisition, DEF has the ability to exercise significant influence
over the operating and financial policies of GHI. DEF received a dividend of P 2.70 per share on October 5,
2015. GHI reported net income of P 6,000,000 for the year ended December 31, 2015. The investments fair
value on December 31, 2015 is P 45,000,000.

In the December 31, 2014 statement of financial position, what is the carrying amount of the investment in
equity securities ?
A. P 9,000,000 C. 8,610,000
B. 8,750,000 D. 8,000,000
What is the total amount of investment-related revenue that should be reported in the 2014 income
statement ?
A. P 1,610,000 C. 750,000
B. 1,140,000 D. 140,000
What amount of gain on remeasurement to equity should be reported in the 2015 income statement ?
A. P 1,320,000 C. 1,000,000
B. 1,080,000 D. 0
What is the goodwill arising from the acquisition of additional 300,000 shares on January 1, 2015 ?

A. P 9,000,000 C. 2,200,000
B. 7,000,000 D. 0
What is the carrying amount of the investment in associate on December 31, 2015?
A. P 45,000,000 C. 39,000,000
B. 40,320,000 D. 38,120,000
_______________________________
The following information relates to noncurrent investments that GHI Corp. placed in trust as required by
underwriter of its bonds.
Bond sinking fund balance, January 1, 2014, P 2,000,000; additional investment during 2014, P 500,000;
interest revenue, P 20,000; administrative costs, P 15,000; carrying value of bonds payable, P 3,000,000.

What amount should GHI report in its December 31, 2014 statement of financial position related to its
noncurrent investment for bond sinking fund requirement ?
A. P 3,000,000 C. 2,500,000
B. 2,505,000 D. 2,000,000

_________________________________
DEF Corp. insures the life of its president for P 4,000,000, the corporation being the beneficiary of an ordinary
life policy. The monthly premium is P 6,000 payable every first day of the month. The policy is dated January 1,
2009 and carries the following cash surrender values.

Year (end of policy) Cash surrender value

2009
2010
2011 P 25,200
2012 30,000
2013 39,600
2014 50,400
The corporation follows the calendar year as its fiscal period. The president dies on October 31, 2014 and the
policy is collected on December 1, 2014.
What is the gain on life insurance settlement ?
A. P 4,000,000 C. 3,939,400
B. 3,951,400 D. 3,913,600

__________________________________
On January 2, 2014, JKL Corp. converted its occupied property to investment property that is to be carried at
fair value. The carrying value of on JKLs books is P 4,000,000.

What should JKL recognize assuming that the fair value of the property on the date of transfer or
conversion is
P 3,800,000 ?
A. P 200,000 loss in the profit or loss
B. 200,000 deferred loss as an asset
C. 200,000 unrealized loss in the shareholders equity
D. 4,000,000 cost of the investment property
What should JKL recognize assuming that the fair value of the property on the date of transfer or
conversion is
P 4,400,000 ?
A. P 400,000 unrealized gain in the profit or loss
B. 400,000 revaluation surplus in the shareholders equity
C. 400,000 unrealized gain in the liability section
D. 400,000 direct credit to accumulated profits and losses
__________________________________
ABC Corp. buys and sells securities expecting to earn profits on short-term differences in price. During 2014,
ABC purchased the following securities.
Security Cost Fair value, Dec. 31
D P 195,000 P 225,000
E 300,000 162,000
F 660,000 678,000
Before any adjustments related to these trading securities, ABC had net income of P 900,000.

What is ABCs net income after making any necessary trading security adjustments ?
A. P 948,000 C. 810,000
B. 900,000 D. 762,000
What would ABCs net income be if the fair value of security E was P 285,000 ?
A. P 933,000 C. 885,000
B. 900,000 D. 867,000
_________________________________
STU Corp.s investments in debt and equity securities include the following information.
a. On January 1, 2013, XYZ Corp. issued P 1,000,000 in debt securities. The stated interest is 9%, with
interest payable semiannually on June 30 and December 31. On February 1, STU purchased these
 debt securities from an investor who acquired them when they were originally issued. STU paid the
investor an amount equal to the face value of the securities plus accrued interest. The securities were
designated as trading securities.
b. On June 1, STU purchased 10,000 shares of equity securities for P 50 per share. These non-trading
equity securities are to be measured at fair value through other comprehensive income. STU paid P
13,000 brokers commission on the purchase.

At what amount should a financial asset or financial liability be measured on initial recognition ?
A. Acquisition cost : i.e., the consideration paid or received plus any directly attributable transaction
costs to the acquisition or issuance of the financial asset or financial liability
B. Consideration paid or received for the financial asset or financial liability
C. fair value : For items that are not measured at fair value through profit or loss, transaction costs are
also included in the initial measurement.
D. Zero
Prepare the entry to record the acquisition of debt securities on February 1.
A. Investment in trading securities P 1,007,500
Cash P 1,007,500
B. Investment in trading securities 992,500
Interest income 15,000
Cash P 1,007,500
C. Investment in trading securities P 1,000,000
Unrealized loss on trading securities 7,500
Cash P 1,007,500
D. Investment in trading securities P 1,000,000
Interest income 7,500
Cash P 1,007,500

What is the entry to record the purchase of equity securities on June 1 ?

A. Investment in equity securities P 500,000
Brokers commission expense 13,000
Cash P 513,000
B. Investment in equity securities 513,000
Cash 513,000
C. Investment in trading securities 513,000
Cash 513,000
D. Investment in trading securities P 500,000
Brokers commission expense 13,000
Cash P 513,000
________________________________
The following investment-related transactions were completed by PQR Corp. during 2014.
f. Purchased P 3,000,000 of STU Corp. 7% bonds paying 102.5 plus accrued interest of P 52,500 (In
addition, the company paid brokerage fee of P 15,000. PQR classified these bonds as a trading
security.)
g. Purchased 30,000 shares of XYZ Corp. ordinary shares at P 125 per share plus brokerage fees of
P 28,500 (PQR classified this stock as at fair value through other comprehensive income.)
h. Received semiannual interest on the STU bonds
i. Sold 4,500 shares of XYZ at P 132 per share
j. Sold P 480,000 of STU 7% bonds at 102 plus accrued interest of P 2,790

At what amount should the STU bonds be initially measured and recognized ?
A. P 3,142,500 C. 3,075,000
B. 3,090,000 D. 3,000,000
How much is the realized gain or loss on the sale of STU bonds ? ]
A. P 4,800 loss C. 2,010 loss
B. 2,400 loss D. 390 gain
Determine the amount that the 30,000 XYZ shares should be initially measured and recognized.
A. P 3,988,500 C. 3,750,000
B. 3,778,500 D. 3,721,500
What is the amount of realized gain or loss on the sale of XYZ stock ?
A. P 31,500 gain C. 27,225 gain
B. 31,500 loss D. 27,225 loss
___________________________________
XYZ Corp. purchased the following securities during January 2014.
Security Classification No. of shares Total cost
ABC Corp. stock Trading 25,000 P 450,000
 DEF Corp. stock Non-trading 5,000 1,100,000
GHI Corp. stock Non-trading 125,000 2,125,000
JKL Corp. bonds Amortized cost 1,200,000
MNO Corp. bonds Trading 550,000

XYZ made an irrevocable election to present changes in fair value of the non-trading equity securities in
other comprehensive income. The following 2014 transactions occurred.

a. Received interest from JKL and MNO bonds totaling P 181,500

b. Received dividends for P 88,000 on the equity securities
c. Sold 10,000 shares of the ABC stock at P 17 per share and 12,500 shares of GHI stock at P 19 per
share
What is the gain (loss) on the sale of ABC stock ?
A. P 78,000 C. (10,000)
B. 10,000 D. 0
What is the gain (loss) on the sale of GHI stock ?
A. P 113,000 C. (25,000)
B. 25,000 D. 0
_______________________________________
ABC Corp. purchased 250,000 shares of DEF Corp. ordinary shares on July 1, 2014 at P 66 per share, which
reflected book value as of that date. At the time of purchase, DEF had 1,000,000 ordinary shares outstanding.
ABC had no ownership interest in DEF prior to the purchase. Secret reported net income of P 3,360,000 for the
six months ended June 30, 2014. ABC received a dividend of P 420,000 from DEF on August 1, 2014. DEF
reported net income of P 7,200,000 for the year ended December 31, 2014, and again paid ABC dividends of P
420,000.

On January 1, 2015, ABC sold 100,000 ordinary shares of DEF for P 68 per share and reclassified the
remaining stock as at fair value through other comprehensive income. The quoted market price of such
investment on January 1, 2015 was P 69 per share. DEF reported net income of P 7,440,000 for the year
ended December 31, 2015, and paid ABC dividends of P 240,000. The fair value of DEF ordinary shares at
December 31, 2015 was P 70 per share.

What is the carrying value of the stock investment at December 31, 2014 ?
A. P 16,620,000 C. 16,380,000
B. 16,500,000 D. 9,972,000
How much is the total amount of gain to be reported in the 2015 income statement ?
A. P 680,000 C. 378,000
B. 530,000 D. 152,000
What amount of unrealized gain should be reported in the 2015 statement of comprehensive income as
component of other comprehensive income ?
A. P 528,000 C. 150,000
B. 378,000 D. 0
Compute the carrying value of the retained investment to be shown in the statement of financial position
on
December 31, 2015. [B = 10,500,000]
A. P 10,848,000 C. 10,350,000
B. 10,500,000 D. 9,972,000
_____________________________________
Corp. purchased 40% of ABC Corp.s outstanding ordinary shares on January 2, 2014 for P 270,000,000. The
book value of ABCs net assets (shareholders equity) at the purchase date totaled P 450,000,000. Book values
and fair values were the same for all financial statement items except for inventory and buildings for which fair
values exceeded book values by P 12,500,000 and P 112,500,000, respectively. All inventory on hand at the
purchase date was sold during 2014. The buildings have average remaining useful lives of 15 years.

ABC reported net income of P 110,000,000 for the year ended December 31, 2014 and paid cash dividends of
P 40,000,000. The fair value of XYZs investment in associate was P 300,000,000 at December 31, 2014.

Of the amount paid for the acquisition of ABCs ordinary shares, how much is attributable to goodwill ?
A. P 90,000,000 C. 45,000,000
B. 50,000,000 D. 40,000,000
What is the investment balance at December 31, 2014 ?
A. P 300,000,000 C. 290,000,000
B. 298,000,000 D. 270,000,000
At what amount will XYZ report its investment income in its 2014 income statement ?
A. P 44,000,000 B. 36,000,000
 C. 20,000,000 D. 16,000,000
__________________________________
On January 2, 2014, DEF Corp. acquired a 15% interest in GHI Corp. by paying P 8,000,000 for 100,000
shares. On this date, the net assets of GHI totaled P 40,000,000. The fair values of GHIs identifiable assets
and liabilities were equal to their book values. DEF did not have the ability to exercise significant influence over
the operating and financial policies of GHI. DEF received dividends of P 1.40 per share from GHI on October 1,
2014. GHI reported net income of P 5,000,000 for the year ended December 31, 2014. DEF classified the
investment as at fair value through other comprehensive income. Market price for the 100,000 shares was P
9,000,000 on December 31, 2014.

DEF paid P 30,000,000 on January 1, 2015 for 300,000 additional GHI ordinary shares, which represents a
25% interest in GHI. The fair value of GHIs identifiable assets, net of liabilities, was equal to their book values
of P 92,000,000. As a result of this additional acquisition, DEF has the ability to exercise significant influence
over the operating and financial policies of GHI. DEF received a dividend of P 2.70 per share on October 5,
2015. GHI reported net income of P 6,000,000 for the year ended December 31, 2015. The investments fair
value on December 31, 2015 is P 45,000,000.

In the December 31, 2014 statement of financial position, what is the carrying amount of the investment
in equity
securities ? ]
A. P 9,000,000 C. 8,610,000
B. 8,750,000 D. 8,000,000
What is the total amount of investment-related revenue that should be reported in the 2014 income
statement ?
A. P 1,610,000 C. 750,000
B. 1,140,000 D. 140,000
What amount of gain on remeasurement to equity should be reported in the 2015 income statement ? [
A. P 1,320,000 C. 1,000,000
B. 1,080,000 D. 0
What is the goodwill arising from the acquisition of additional 300,000 shares on January 1, 2015 ?

A. P 9,000,000 C. 2,200,000
B. 7,000,000 D. 0
What is the carrying amount of the investment in associate on December 31, 2015 ?
A. P 45,000,000 C. 39,000,000
B. 40,320,000 D. 38,120,000
_____________________________________
The following information relates to noncurrent investments that GHI Corp. placed in trust as required by
underwriter of its bonds.

Bond sinking fund balance, January 1, 2014, P 2,000,000; additional investment during 2014, P 500,000;
interest revenue, P 20,000; administrative costs, P 15,000; carrying value of bonds payable, P 3,000,000.

What amount should GHI report in its December 31, 2014 statement of financial position related to its
noncurrent investment for bond sinking fund requirement ?
A. P 3,000,000 C. 2,500,000
B. 2,505,000 D. 2,000,000
____________________________________
ABC Corp. is a supplier of industrial products. In 2013, it purchased a plot of land on the outskirts of a major
city. The land was originally acquired at a cost of P 15,000,000. The area has mainly low-cost public housing
and very limited public transport facilities. The national government has plans to develop the area as an
industrial park in five-year time and land is expected to greatly appreciate in value if the government proceeds
with the plan. ABCs management has not decided what to do with the property. On December 31, 2014, the
property has a current fair value of P 15,400,000.
How should the company classify the property in its December 31, 2014 statement of financial position
?
A. As land at its historical cost of P 15,000,000
B. As land at its current fair value of P 15,400,000
C. As investment property at its current fair value of P 15,400,000
D. As inventory at the lower of cost of P 15,000,000 or current fair value of P 15,400,000
______________________________
On January 2, 2014, JKL Corp. converted its occupied property to investment property that is to be carried at
fair value. The carrying value of on JKLs books is P 4,000,000.
What should JKL recognize assuming that the fair value of the property on the date of transfer or
conversion is P 3,800,000 ?
 A. P 200,000 loss in the profit or loss
B. 200,000 deferred loss as an asset
C. 200,000 unrealized loss in the shareholders equity
D. 4,000,000 cost of the investment property
What should JKL recognize assuming that the fair value of the property on the date of transfer or
conversion is P 4,400,000 ?
A. P 400,000 unrealized gain in the profit or loss
B. 400,000 revaluation surplus in the shareholders equity
C. 400,000 unrealized gain in the liability section
D. 400,000 direct credit to accumulated profits and losses

True or False: .
1. Qualitative and quantitative information are recognized in accounting
2. To recognize means to enter in the accounting records
3. GAAP are like laws that must be followed in financial reporting
4. At present, the accounting standard setting body is the Accounting Standards Council
5. The continuing professional education has become mandatory for all CPAs.
6. In total, there are fourteen members of the Financial Standards Reporting Council
7. A business may be solvent but not liquid
8. The relevance of information is affected by its nature and materiality.
9. Conservatism is included as an aspect of faithful representation
10 Conservatism dictates that when dealing with uncertainties in the measurement process, caution must
be made such that assets and expenses are not overstated and liabilities and income are not understated

Identify:
1. The analytical component of accounting
2. What a business activity should be for it to be recognized I the accounting records
3. The accounting process of assigning peso amounts to the economic transaction
4. The process of preparing and distributing accounting reports to financial users
5. The primary products of accounting
6. The process of systematically maintaining a record of all economic business transactions after they
have been identified and measured
7. The examination of financial statements by independent CPA for the purpose of expressing an opinion
on the fairness with which the financial statements are prepared
8. It is primarily concerned with the recording of business transactions and the preparation of financial
statements
9. This area of accounting emphasis reporting to creditors and investors
10. The basic notions r fundamental premises on which the accounting process is based
11. These are also known as postulates
12. This postulate is also known as the continuity assumption
13. Expenses is recorded when paid
14. This assumption means that the business entity is viewed to continue indefinitely
15. The financial information about the entitys economic resources and the claims against it
16. The availability of cash in the near future to cover currently maturing obligations l
17. Also know as the doctrine of convenience
18. This also means faithful representation
19. This means that the financial information is supported by evidence so that an accountant that would
look into the same evidence would arrive at the same economic decision or conclusion
20. Revenue is earned regardless of when received

Enumeration / discussion:
1. The basic accounting assumptions
2. The fundamental qualitative characteristics of financial information
3. The ingredients of faithful representation
4. The enhancing qualitative characteristics of financial information
5. The main recognition principles
6. The measurement bases of accounting elements
7. The basic financial statements
8. The elements related to the measurement of financial position and financial performance
9. The ways by which the statement of financial position and financial performance may be presented
10. What is an imprest system?

Problem:
Following are the data available from BSA Corp and its account with Bankrupt Commercial Bank:
1. The balances as of November 30, 2013 were: BSA Corp: Php 225,700 Bank: Php 175,500
 2. The deposit in transit as of Nov. 30, 2013 was Php 13,760
3. The outstanding checks were as follows: Chk No. 458 Php 25,900
Chk No. 459 19,270
Chk No. 460 18,790
Bank Book
Deposits Withdrawals Bank Book
Dec.1 13,760 Check Nos.
2 - 55,760 459 19,270
3 55,760 26,300 460 18,790
26,300 461 22,400 22,400
7 - 17,480 462 19,650 19,000
10 17,480 46,500 463 12,980 12,980
11 46,500 464 - 11,600

19 - 38,650 465 - 8,650

22 38,650 7,550 467 24,350 24,350

23 7,550 12,800

26 12,800 468 - 9,720

27 CM 25,400 22,960 NSF 12,800

28 - 34,680 SC 1,000

Other information:
1. The CM represents the amount deposited by a provincial customer as payment for its account
2. The NSF represents unfunded check from a customer
3. The service charge was for the charges for collection of provincial checks
4. Check No. 462 for payment of suppliers account was erroneously recorded in the companys books at
Php 19,600
Required: Prepare the bank reconciliation as of December 31, 2013.

1. Prepare journal entries under: a) allowance method and b) direct write-off method for the following
transactions:
a. Accounts amounting to Php 45,000 were doubtful of collection
b. Half of the above accounts were found to be worthless
c. The accounts amounting to Php 10,000 that were written off were recovered and collected
2. The following account balances were taken from the books of ABC Co.
Accounts Receivable, beg of year 1,000,000
Allowance for doubtful Accounts, beg of year 20,000
Sales 6,800,000
Sales returns and allowances 75,000
Sales discounts 25,000
25% of Sales were from cash customers. Aside from the Cash sales, Php 4,600,000 of the credit sales were
also collected from which the sales returns and sales discounts came. Also, Php 10,000 of accounts were
written off during the year
Required: Compute bad debts at:
a. 1 % of credit sales
b. 2 % of accounts receivable

3. Bravo Co. acquired a note receivable for Php 10,000,000 with 12% interest on January 1, 2012. The note is
payable in installments of Php 2,000,000 every January 1 of the succeeding years together with the accrued
interest. How much will be the amounts to be shown for the balances of the note and the accrued interest on
December 31, 2014?

4. Alpha Co. received a non-interest bearing note in the amount of Php 2,500,000 for an equipment which it
sold on December 31, 2013. The note is to be paid by the buyer in five equal annual installments to be made
every end of the year. The first payment was made at the end of 2014. The interest rate for similar note is 8%
and the applicable present value factors are:
PV of Php 1 at 8% for 5 periods 0.68
PV of an ordinary annuity of at 8% for 5 periods 3.99
a. What is the carrying value of the note receivable at the end of 2013? 3 %
 b. How much is the interest income for 2014? 3%

c. What is the carrying amount of the note on December 31, 2014? 3%

5. A business factored its accounts receivable amounting to Php 700,000 with credit terms of 5/10; n/30. The
factor charged 8% commission and withheld 20% as holdback to cover sales returns. Fifty percent of the
receivables were collected within the discount period. Damaged goods amounting to Php 40,000 were returned
15 days after the sale but the rest of the accounts were collected. Compute the following:
a. The amount received by the business at the time of factoring
b. The amount still due from the factor during the final settlement

6. ABC Co. assigned Php 2,000,000 of its accounts receivable to a bank on a notification basis. The bank gave
a loan for 70% of the amount assigned and 3% service charge. 50% of the accounts were first collected with
2% discount for which the company received a notice from the bank. Later the other remaining accounts were
collected in full.
a. What is/are the correct journal entry/ies during the assignment
b. what is the entry to be made upon receipt of the first notice from the bank?
c. What is/are the entry/ies during the final settlement of the accounts with the bank?
d. Assuming that it took one month before the first collection was made and another month for the
balance and the bank charges a monthly interest of 1%, how much is total interest to be charged by
the bank?

Match the item in column A with those in Column B. One letter may be answer to more that two items:
1. The classification of credit balances of customers accounts A. trade receivables
2. The classification of advances to officers B. present value
3. This method of accounting for bad debts conforms with matching principle C. amortized cost
4. Claims arising from sales of merchandise or services D. direct origination cost
5. Subsequent measurement of accounts receivable E. origination fees
6. This method measures accounts receivable at net realizable value F. factoring
7. Initial amount minus repayment G. face value
8. The sum of all future cash flows discounted using prevailing market rate H. impairment loss
of interest L. discounting
9. Transaction costs directly attributable to the loan receivable M. current liabilities
10. The preferred treatment of this is to offset directly against origination fees N. non-current assets
11. These are included in the measurement of the loan receivable O. assignment
13. The difference between the carrying amount of loan and present value of P. pledge
estimated future cash flows discounted at original effective rate of loan Q. net realizable value
14. Under this arrangement, ownership of receivables is transferred R. allowance method
15. A gain or loss is recognized under this type of receivable financing S. assignment / notification
basis
16. Under this arrangement of receivable financing he only thing to be done T. assignment / non-
notification basis
is the accounting for the loan U. with recourse
17. An arrangement where interest on the loan is deducted in advance
18. In this receivable financing, disclosure in the notes to financial statements is enough
19. The company transfers its rights to some of its accounts receivable
20. Under this arrangement, the customer pays directly to the lender although the company retains ownership
of the receivables