Accounting Intensive Review 2016

Pre-qualifying Exam LEVEL 1

Financial Accounting and Reporting

Name: Date:

Instruction: Shade the letter of the correct answer. Use pencil in shading. NO ERASURE. NO CHEATING.

1. To be relevant, an information should have which of the following?

a. Conformity value
b. Verifiability
c. Understandability
d. Cost and benefit
2. Which of the following relates both relevance and faithful representation?
a. Timeliness
b. Predictive value
c. Completeness
d. Neutrality
3. An investor uses the equity method to account for investments in ordinary shares. The purchase price implies a fair value of
the investee’s depreciable asset in excess of the investee’s net asset carrying amounts. The investor’s amortization of the
excess
a. Decrease the investment account
b. Decrease the goodwill account
c. Does not affect the investment account
d. Increases the investment revenue account
4. Goodwill should be tested for impairment at which of the following levels?
a. Each reporting unit
b. Each acquisition unit
c. Each identifiable long-term asset
d. Entire business as a whole
5. Which of the following is a research and development cost?
a. Research and development performed under contract for others
b. Development or improvement of techniques and processes
c. Offshore oil exploration that is the primarily activity of an entity
d. Market research related to a major product for the entity
6. Which of the following provides the holder the right to sell at an exercise or strike price anytime during a specified period a
gain accrues to the holder as the market price of the underlying falls below the strike price?
a. Forward contract
b. Put option
c. Swap option
d. Call option
7. Which of the following does not qualify as an underlying?
a. Insurance index
b. Equity shares
c. Exchange rate
d. Commodity price
8. When temporary difference will result in taxable amounts in future years
a. A deferred tax liability is recognized in the current year.
b. A deferred tax asset is recognized in the current year.
c. A deferred tax asset may be recognized in the current year if certain conditions are met.
d. A deferred tax liability may be recognized in the current year if certain conditions are met.
9. Deficits accumulated during the development stage of an entity should be
a. Reported as a part of shareholder’s equity
b. Reported as organization costs
c. Capitalized and written off in the first year of principal operations
d. Capitalized and amortized over 5-year period
10. Which is included under financing activities in the statement of cash flows?
a. Cash effect of transactions obtaining resources from owners and providing them with a return on their investment.
b. Cash effects of transaction that enter into the determination of net income.
c. Cash effects of transactions involving making and collecting loans.
d. Cash effects of acquiring and disposing of investments and property, plant and equipment.

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11. Which of the following methods is used to account for defined benefit plans?
a. Projected unit credit method
b. Vested years of service method
c. Benefit years of service method
d. Accumulated benefits method
12. An entity is the plaintiff in a patent infringement case. The entity has a high probability of a favorable outcome and can
reasonable estimate the amount of the settlement. What is the proper accounting treatment of the patent infringement
case?
a. No reporting is required at this time
b. A gain contingency for the minimum estimated amount of the settlement
c. Disclosure in the notes only
d. A gain contingency for estimated probable settlement
13. Reversing entries
a. Impact the income statement only
b. Impact the statement of financial position and the income statement
c. Are not allowed under PFRS
d. Change amounts reported in the financial statements of the reporting period.
14. Which of the following is not a long-term investment?
a. Cash surrender value of life insurance
b. Franchise
c. Land held for speculation
d. A sinking fund
15. The earnings per share computation is not required for
a. Net income
b. Discontinued operations
c. Income from continuing operations
d. Income from operations
16. Which if the following best describes current practice in accounting for leases?
a. Leases are not capitalized
b. Leases similar to installment purchases are capitalized
c. All long-term leases are capitalized
d. All leases are capitalized
17. Depreciation is a variable expense if the depreciation method used is
a. Units of production
b. Straight line
c. Sum of the years’ digits
d. Declining balance
18. If the cost of the asset is recorded net of the government grant
a. Equity will likely be overstated
b. Liability will likely be overstated
c. Asset will likely be understated
d. Net income will likely be understated
19. When an entity has acquired a “passive interest” in another entity, the acquiring entity should account for the investment
a. By using the equity method
b. By using the fair value method
c. By using the effective interest method
d. By consolidation
20. Which of the following statements regarding the term “profit” is true?
I. Profit is any amount over and above that required to maintain the capital at the beginning of the period.
II. Profit is the residual amount that remains after expenses have been deducted from income.
a. I only
b. II only
c. Both I and II
d. Neither I and II
21. An entity is trying to determine which assets and which liabilities are monetary and nonmonetary. Which of the following
should be considered nonmonetary?
a. Trade receivables
b. Deferred tax liabilities
c. Accrued expense and other payables
d. Taxes payable
22. In computing basic loss per share, the required annual preference dividends on cumulative preference shares shall be
a. Ignored
b. Deducted from the net loss whether declared or not

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 c. Added to the net loss whether declared or not
d. Added to the net loss only when declared
23. Under the treasury share method, the number of potential ordinary shares is equal to
a. Option shares
b. Option shares minus assumed treasury shares acquired
c. Assumed treasury shares acquired
d. Option shares actually issued during the year
24. Conditions warranted that an entity should have a quasi-reorganization. Immediately after reorganization, the retained
earnings account
a. Has a zero balance
b. Remains the same as it was before
c. Is frozen and dated, and subsequent transactions will be shown separately
d. Has a debit balance equal to the writedown of the assets which were overstated
25. A redeemable preference share shall be classified in the statement of financial position as
a. Current liability
b. Noncurrent liability
c. Either current liability or noncurrent liability depending on redemption date
d. Component of shareholders’ equity
26. Jabom Company provided the following data on December 31, 2014:
Cash and cash equivalents, including sinking fund of P500,000 2,500,000
Notes receivable (P200,000 pledged as security) 2,000,000
Accounts receivable-unassigned 800,000
Accounts receivable-assigned 300,000
Notes receivable discounted 500,000
Equity of assignor in assigned accounts 250,000
Inventory, including P100,000 cost of goods sent out on consignment 1,000,000
Allowance for doubtful accounts 50,000
Held for trading securities at fair value 1,500,000
Financial asset at FVTOCI 1,000,000
Financial asset at amortized cost 900,000
Noncurrent asset held for sale 600,000
Prepayments including deferred charges of P400,000 700,000
What total amount of current assets should be reported on December 31, 2014?
a. 7,550,000
b. 7,950,000
c. 7,850,000
d. 8,350,000
27. Kaykay Company provided the following information for the month of October:
Cash in bank, per bank statement, October 31 5,600,000
Bank service charge for October 24,000
Interest paid by the bank to Kaykay company for October 20,000
Deposits made but not yet recorded by the bank 700,000
Checks written and mailed but not yet recorded by the bank 1,300,000
Erroneously recorded a check payment for P92,000 that should have
Been recorded as P128,000 36,000
What is the cash balance per ledger on October 31?
a. 5,000,000
b. 5,040,000
c. 5,080,000
d. 5,600,000
28. Mimi Department Store used the conservative retail method and reported the following data for the current year:
Sales 13,000,000 Markdown 1,200,000
Sales allowance 600,000 Markdown cancelations 200,000
Sales return 500,000 Freight on purchases 200,000
Employee discounts 400,000 Purchases at cost 9,400,000
Normal shrinkage 300,000 Purchases returns at cost 480,000
Initial markup on purchases 5,400,000 Purchases returns at sales price 700,000
Additional markup 500,000 Beginning inventory at cost 880,000
Markup cancelations 200,000 Beginning inventory at sales price 1,600,000
What is the estimated cost of ending inventory?
a. 1,500,000
b. 1,200,000
c. 1,600,000

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 d. 1,125,000
29. On January 1, 2014, Bokbok Company purchased 25,000 shares of Tamtam company which represented a 10% interest for
P2,000,000. Bokbok used fair value through OCE method to account for this investment. Tamtam reported net income of
P4,000,000 and paid no dividends in 2014. The fair value of the investment was P2,500,000 on December 31, 2014. On
January 1, 2015, Bokbok paid P7,000,000 for 50,000 additional shares of Tamtam company. the fair value of the identifiable
net assets of Tamtam company equaled the carrying amount of P25,000,000 on January 1, 2015 except for inventory whose
fair value is greater than carrying amount by P1,000,000. For the year ended December 31, 2015, Tamtam reported net
income of P6,000,000 and paid dividends of P10 per share. Also, half of the inventory was sold on December 31, 2015.
What is the carrying amount of the investment in Tamtam company on December 31, 2015?
a. 10,550,000
b. 10,250,000
c. 10,400,000
d. 9,900,000
30. Khael Company was installing new equipment at its production facility and incurred the following costs:
Cash price of the equipment, VAT inclusive of 12% 2,800,000
Initial delivery and handling cost 200,000
Cost of site preparation 600,000
Consultants used for advice on the acquisition of equipment 700,000
Interest charges paid to supplier for deferred credit 200,000
Estimated dismantling cost that may be incurred upon retirement 300,000
Operating losses before commercial production 400,000
What amount should be capitalized as cost of the equipment?
a. 4,300,000
b. 4,000,000
c. 4,200,000
d. 3,300,000
31. Rafa Company owned a machine that was bought on January 1, 2011 for P7,520,000. The machine was estimated to have a
useful life of five years and a residual value of P480,000. The entity used the sum of the years’ digits method of
depreciation. At the beginning of 2014, the entity determined that the total useful of the machine should have been four
years and the residual value P704,000. What is the depreciation expense for 2014?
a. 1,184,000
b. 1,408,000
c. 888,000
d. 755,200
32. On July 1, 2014, Sakuragi Company purchased P1,000,000 face value 8% bonds for P950,000 including accrued interest to
yield 10%. The bonds mature on January 1, 2021, pay interest annually on December 31, and are classified as trading
securities. On December 31, 2014, the bonds had a market value of P960,000. On February 13, 2015, the entity sold the
bonds for P980,000. What total amount of income should be recognized for the year ended December 31, 2014?
a. 130,000
b. 95,500
c. 90,000
d. 50,000
33. Charles Company provided the following information on January 1, 2014 relating to property, plant and equipment.
Land 30,000,000
Building 300,000,000
Accumulated depreciation-building 37,500,000
There were no additions or disposal during 2014. Depreciation is computed using straight line over 20 years for building. On June 30,
2014, all of the PPE were revalued as follows:
Replacement cost Sound value
Land 40,000,000 40,000,000
Building 500,000,000 425,000,000
Ignoring income tax, what is the revaluation surplus on December 31,2014?
a. 160,000,000
b. 170,000,000
c. 180,000,000
d. 175,000,000
34. Lynlyn Company provided the following net of tax figures for the current year:
Net remeasurement loss on defined benefit plan 300,000
Unrealized gain on available for sale securities 1,500,000
Reclassification adjustment for gain on sale of available for sale
Securities included in net income 250,000
Share warrants outstanding 400,000
Net income 7,700,000

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What is the comprehensive income for the current year?
a. 8,650,000
b. 8,900,000
c. 8,950,000
d. 9,050,000
35. Sofia Company provided the following information about accounts receivable on December 31, 2014:
0-60 days outstanding 6,000,000 5% uncollectible
61-120 days outstanding 4,500,000 10% uncollectible
Over 120 days outstanding 5,000,000 1,250,000 uncollectible
During 2014, the entity wrote off P700,000 in accounts receivable and recovered P300,000 that had been written off in prior years.
On January 1, 2014, the allowance for uncollectible accounts was P500,000. Under the aging method of uncollectible accounts
expense should be reported for 2014?
a. 2,000,000
b. 1,900,000
c. 2,200,000
d. 2,100,000
36. Meekhael Bank granted a 10-year loan to a borrower in the amount of P1,500,000 with stated interest rate of 6%.
Payments are due monthly and are computed to e P16,650. The bank incurred P40,000 of direct loan origination cost and
P20,000 of indirect loan origination cost. In addition, the bank charged the borrower a 4-point nonrefundable loan
origination fee. What is the carrying of the loan to be reported initially by the bank?
a. 1,440,000
b. 1,480,000
c. 1,500,000
d. 1,520,000
37. On January 1, 2014, Bajon Company purchased 10% of Nojab Company’s outstanding ordinary shares for P4,000,000. Janob
is the largest single shareholder in Nojab and Janob’s officers are majority of Nojab’s board of directors. The investee
reported net income of P5,000,000 for 2014 and paid dividends of P1,500,000. On December 31, 2014, what amount should
be reported as investment in Nojab Company?
a. 4,500,000
b. 4,350,000
c. 4,000,000
d. 3,850,000
38. Bernadeth Dance Floor Company reported the following portfolio of available for sale securities:
Aggregate cost 12/31/2014 150,000
Unrealized gains 12/31/2014 14,000
Unrealized losses 12/31/2014 26,000
Net realized gains during 2014 30,000
The entity elects the fair value option for reporting all available for sale securities. What total amount should be reported in the
income statement for 2014?
a. 4,000 gain
b. 18,000 gain
c. 30,000 gain
d. 44,000 gain
39. Supremo Company purchased for P4,500,000 a tract of land as a factory site. An existing building on the property was razed
and construction was begun on a new factory building. The entity incurred the following costs:
Cost of razing old building, net of proceeds from salvaged materials 300,000
Title insurance and legal fees to purchase land 200,000
Architect fee 950,000
New building construction cost 8,000,000
What is the cost of building in accordance with PIC interpretation?
a. 9,250,000
b. 9,450,000
c. 8,950,000
d. 9,150,000
40. During the year, Tengteng Company made the following expenditures relating to plant building:
Continuing and frequent repairs 40,000
Repainted the plant building 10,000
Major improvements to the electrical wiring system 32,000
Partial replacement of roof tiles 14,000
How much should be charged to repair and maintenance expense?
a. 96,000
b. 82,000
c. 64,000

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 d. 54,000
41. Pochoy Company purchased a trademark and incurred the following costs:
One-time trademark purchase price 100,000
Nonrefundable 5,000
Training sales personnel on the use of new trademark 7,000
Research expenditures associated with the purchase of the new trademark 24,000
Legal costs incurred to register the trademark 10,500
Salaries of the administrative 12,000
What is the initial cost of the trademark?
a. 100,000
b. 115,500
c. 146,500
d. 158,500
42. Jian Company incurred the following costs during the current year:
Laboratory research aimed at discovery of new knowledge 75,000
Design tools, jigs, molds and dies involving new technology 22,000
Quality control during commercial production, including routine testing 35,000
Equipment acquired two years ago, having an estimated useful life of 5 years
with no residual value, used in various R and D projects the entire year 150,000
Research and development services performed by Stone company for Jian 23,000
Research and development services performed by Jian Company for Mary Jane 2,000
What amount of research and development expense should be reported in the current year?
a. 120,000
b. 150,000
c. 187,000
d. 217,000
43. Jeett Company invested P20,000 in a call option for 1,000 shares of P50 par, when the market price was P100 per share.
The option expired in three months and had an exercise price of P90 per share. What was the intrinsic value of the call
option at the time of initial investment?
a. 90,000
b. 10,000
c. 20,000
d. 5,000
44. Plingpling Company reported that in the first year of operations the pretax financial income was P6,000,000. In addition,
the following differences existed:
Tax return Accounting record
Uncollectible accounts expense 200,000 250,000
Depreciation expense 800,000 500,000
Tax exempt interest revenue -- 150,000
The current tax rate is 3% and the enacted rate for future year is 40%. What amount should be reported as total tax
expense in the income statement for the year?
a. 1,755,000
b. 1,680,000
c. 1,800,000
d. 1,780,000
45. Prince Marwin Company provided the following pension information for the current year:
Projected benefit obligation 3,500,000
Accumulated benefit obligation 2,800,000
Pension benefits paid during the year 250,000
Past service cost during the year 500,000
Projected obligation – December 31 5,000,000
Accumulated benefit obligation – December 31 3,900,000
Discount or settlement rate 10%
What is the current service cost for the year?
a. 1,400,000
b. 1,070,000
c. 900,000
d. 570,000
46. Paulo Company provided the following information for the current year:
Current service cost 500,000
Interest on PBO 600,000
Interest income on plan assets 350,000
Loss on plan settlement 250,000

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 Past service cost during the year 300,000
Actual return on plan assets 850,000
Actuarial loss during the year 200,000
Contribution to the plan 1,500,000
a. 1.300,000
b. 1,050,000
c. 1,500,000
d. 1,100,000
47. Patrick Company reported the following shareholders’ equity on January 1, 2014:
Share capital, P10 par, outstanding 225,000 shares 2,250,000
Share premium 900,000
Retained earnings 2,190,000
During the current year, the entity had the following share transactions:
 Acquired 6,000 treasury shares for P270,000.
 Sold 3,600 treasury shares at P50 a share.
 Sold the remaining treasury shares at P41 per share.
What is the total amount of share premium on December 31, 2014?
a. 891,600
b. 870,000
c. 908,000
d. 927,600
48. Noah Company had 1,200,000 ordinary shares outstanding on January 1 and December 31, 2014. In connection with the
acquisition of a subsidiary in June 2013, the entity is required to issued 50,000 additional ordinary shares on July 1, 2015 to
the former owners of the subsidiary. The entity paid P200,000 preference dividend in 2014 and reported net income of
P3,400,000 for the year. What amount should be reported as diluted earnings per share for the current year?
a. 2.83
b. 2.72
c. 2.67
d. 2.56
49. Jojay Company provided the following information on December 31, 2014:
Preference share capital, P100 par, 8% 500,000
Ordinary share capital, P100 par 1,100,000
Retained earnings 460,000
Treasury ordinary shares – 1,000 shares at cost 150,000
The preference shares are cumulative and dividends are in arrears for two years. What is the book value per ordinary share?
a. 125
b. 191
c. 133
d. 141
50. Sannee Company reported the following on December 31, 2014:
Unsercured
10% registered bonds, P25,000 maturing annually beginning in 2016 275,000
11% convertible bonds, callable beginning in 2022, due 2034 125,000
Secured
12% guaranty security bonds, due 2024 275,000
13% commodity backed bonds, P50,000 maturing annually
beginning in 2020 200,000
What are the total amounts of serial bonds and debenture bonds?
Serial bonds debenture bonds
a. 475,000 400,000
b. 475,000 125,000
c. 450,000 400,000
d. 200,000 650,000
51. On January 1, 2014, JV Company issued 9% bonds in the amount of P500,000 which mature on January 1, 2024. The bonds
were issued for P469,500 to yield 10%. Interest is payable annually on December 31. The entity uses the interest method of
amortizing bond discount and does not elect the fair value option for reporting liabilities. On June 30, 2014, what amount
should be reported as bonds payable?
a. 469,500
b. 470,475
c. 471,025
d. 500,000

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52. Bombastic Company leased office premises to a lessee for a five year term beginning January 1, 2014. Under the terms of
the operating lease, rent for the first year is P80,000 and rent for year two through five is P125,000; per annum. However,
as an inducement to enter the lease. Bombastic granted the lessee the first six months of the lease rent-free. What amount
should be reported as rental income for 2014?
a. 120,000
b. 116,000
c. 108,000
d. 80,000
53. Abakada Company leased a building for produce showroom. The ten-year nonrenewable lease will expire on December 31,
2019. In January 2014, the entity redecorated showroom and made leasehold improvement of P48,000. The estimated
useful life of the improvement is eight years. The entity used the straight-line method of depreciation. What amount of
leasehold improvement, net of depreciation, should be reported on June 30,2014?
a. 45,600
b. 45,000
c. 44,000
d. 43,200
54. Epe Company leased equipment to a lessee on January 1, 2014 for an eight-year period expiring December 31, 2021. Equal
payments under the lease are P600,000 and are due on January 1 of each year. The first payment was made on January 1,
2014. The list selling price of the equipment is P3,520,000 and the carrying amount is P2,800,000. The lease is appropriately
accounted for as a sales-type lease. The present value of the lease payments is P3,300,000. What amount of profit on the
sale should be reported for 2014?
a. 720,000
b. 500,000
c. 90,000
d. 0
55. On December 31, 2014, Ammae Company sold equipment and simultaneously leased it back for twelve years. Pertinent
information at this date is as follows:
Sale price 480,000
Carrying amount 360,000
Estimated remaining economic life 15 years
On December 31, 2014, what amount should be reported as deferred gain from the sale?
a. 120,000
b. 110,000
c. 112,000
d. 0
56. On December 31, 2014, Enteng Company sold land with cost of P3,000,000 for P4,600,000. The fair value of the land on the
date of sale was P4,300,000. The entity immediately entered into a cancelable lease to use the land for two years at annual
rental of P50,000. What amount of gain on sale of land should be recorded in 2014?
a. 1,600,000
b. 1,300,000
c. 1,450,000
d. 300,000
57. On January 1, 2014, Gigo company sold a machine for P5,000,000. The fair value of the machine was P6,500,000 on the
date of sale. The machine had a carrying amount of P7,000,000 and remaining useful life of 15 years. The entity
immediately leased back the machine for 5 years at annual rental that was determined to be sufficiently lower than the
market rent. What total amount of loss should be recognized immediately in 2014?
a. 400,000
b. 800,000
c. 500,000
d. 0
58. Pato Company operates a chain of seafood restaurants. On July 1, 2014, the entity determined that it will need to purchase
50,000 kilos of deluxe fish on July 1, 2015. Because of the volatile fluctuation in the price of deluxe fish, on July 1 ,2014, the
entity negotiated a forward contract as a cash flow hedge with a reputable bank to purchase 50,000 kilos of deluxe fish on
July 1, 2015 at a strike price of P50 per kilo or P2,500,000. This derivative forward contract provides that if the market price
of deluxe fish on July 1, 2015 is more than P50, the difference is paid by the bank to the entity. On the hand, if the market
price on July 1, 2015 is less than P50, the entity will pay the difference to the bank. The market price per kilo of the deluxe
fish is P55 on December 31, 2014 and P52 on July 1, 2015. What is the derivative asset or liability on December 31, 2014?
a. 100,000 asset
b. 100,000 liability
c. 250,000 asset
d. 250,000 liability

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Aherm Dairy produces milk for local ice cream producers. The entity began operations on January 1, 2014 by purchasing milking
cows for P5,000,000. The entity provided the following information at year-end relating to the milking cows:
Carrying amount – January 1 5,000,000
Change in fair value due to growth and price change 2,000,000
Decrease in fair value due to harvest 250,000
Newborn calf at year-end at fair value 400,000
Milk harvested during the year but not yet sold 850,000
59. What amount of gain on biological asset should be reported in the current year?
a. 2,400,000
b. 2,150,000
c. 3,000,000
d. 3,250,000
60. What amount of gain on agricultural produce should be recognized in the current year?
a. 1,250,000
b. 1,000,000
c. 850,000
d. 0
61. What is the carrying amount of the biological asset on December 31, 2014?
a. 8,000,000
b. 8,250,000
c. 7,150,000
d. 7,600,000
62. On January 1,2014, Charles Company purchased a new machine for P6,000,000 for the purpose of leasing it. The machine
has an estimated 10-year life. On April 1, 2014, the entity leased the machine to a lessee for three years at a monthly rental
of P400,000. The lessee paid the renta; for one year of P4,800,000 on April 1, 2014 and additionally paid P900,000 to the
lessor as a lease bonus to obtain the three-year lease. On April 1, 2014, the entity paid P300,000 to a broker as a finder fee.
What is the net rental income for 2014?
a. 3,150,000
b. 4,350,000
c. 3,200,000
d. 4,400,000
63. Egcasama Company decided to enter the leasing business. The entity acquired a specialized packaging machine for
P2,300,000. On January 1, 2014, the entity leased the machine for a period of six years, after which title to the machine is
transferred to the lessee. The six annual lease payments are due each January 1 and first payment was made on January 1,
2014. The residual value of the machine is P200,000. The lease terms are arranged so that a return of 12% is earned by the
lessor. The present value of 1 at 12% for six periods is 0.51, the present value of an annuity in advance of 1 at 12% for six
periods is 4.60 and the PV of an ordinary annuity of 1 at 12% for six periods is 4.11. What is the annual lease payment
payable in advance required to yield the desired return?
a. 500,000
b. 477,826
c. 559,610
d. 460,000
64. On January 1, 2014, Mokoy Company entered into a 6-year lease with lessor. Annual lease payments of P1,500,000
including annual executory cost of P300,000 are payable at the end of each year. The entity knows that the lessor expects a
10% return on the lease. The entity has a 12% incremental borrowing rate. The equipment is expected to have an estimated
useful life of 6 years. In addition, a third party has guaranteed to pay the lessor a residual value of P500,000 at the end of
the lease. The present value of an ordinary annuity of 1 for 6 years at 10% is 4.35 and at 12% is 4.11. The present value of
10% for 6 periods is 0.56 and at 12% for 6 periods is 0.51. On December 31, 2014, what is the principal amount of the lease
obligation?
a. 5,220,000
b. 4,542,000
c. 4,323,840
d. 4,850,000
65. On January 1, 2014, Racan Company granted 100 share options each to 500 employees, conditional upon the employee’s
remaining in the entity’s employ during the vesting period. The share options vest at the end of a three-year period. On
grant date, each share option has a fair value of P30. The par value per share is P100 and the option price of P120. On
December 31,2015, 30 employees have left and it is expected that on the basis of a weighted average probability, a further
30 employees will leave before the end of the three-year period. On December 31, 2016, only 20 employees actually left
and all of the share options are exercised on such date. What is the compensation expense for 2016?
a. 500,000
b. 880,000
c. 380,000
d. 470,000

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On January 1, 2014, Batman Company granted to an employee the right choose either shares or cash payment. The choices are as
follows:
 Share alternative – equal to 25,000 shares with par value of P30.
 Cash alternative – cash payment equal to the market value of 20,000 shares.
The grant is conditional upon the completion of three years of service. On grant date, on January 1, 2014, the share price is P51. The
share prices for the three-year vesting period are P54 on December 31, 2014, P66 on December 31, 2015 and P65 on December 31,
2016. After taking into account the effect of vesting restrictions, the entity has estimated that the fair value of the share alternative
is P48.
66. What is the compensation expense for 2016?
a. 480,000
b. 420,000
c. 600,000
d. 580,000
67. What is the share premium if the employee has chosen the share alternative on December 31, 2016?
a. 730,000
b. 750,000
c. 550,000
d. 880,000
68. What is the share premium if the employee has chosen the cash alternative on December 31, 2016?
a. 730,000
b. 180,000
c. 700,000
d. 0
69. At year-end, Larlar Company reported cash and cash equivalents comprising cash on hand P500,000, demand deposit
P4,000,000, certificate of deposit P2,000,000, postdated customer’s check P300,000 petty cash fund P50,000, traveler’s
check P200,000, manager’s check P100,000 and money order P150,000. What total amount of cash should be reported at
year-end?
a. 7,000,000
b. 4,800,000
c. 6,800,000
d. 5,000,000
70. Marimar Company reported the following information in relation to imprest petty cash fund at year-end:
Coins and currency 22,000
Petty cash vouchers:
Gasoline 3,000
Medical supplies 1,000
Repairs 1,500
IOU from an employee 3,500
Check drawn payable to the order of Recardo, petty cash custodian,
representing her salary 15,000
Check of an employee returned by bank marked “NSF” 3,000
A sheet of paper with names of several employees together with
contribution for a birthday party and attached to the sheet
of paper is a currency of 5,000
The petty cash ledger account had a balance of P50,000. What amount of petty cash fund should be reported at year-end?
a. 42,000
b. 27,000
c. 37,000
d. 22,000

“SACRIFICE and know your PRIORITIES.”

-LordBat

AIR 2016| 10