1

AAB Construction Company uses the percentage-of-completion method of accounting. In 2014 AAB
began work under contract #1348, which provided for a contract price of P 20,000,000. Other details
follow:

2014 2015

Cost incurred during the year P 3,000,000 P 15,750,000

Estimated costs to complete, as of December31 12,000,000 -0-

Billing during the year 3,600,000 15,400,000

Collections during the year 2,500,000 15,500,000

The portion of the total contract price to be recognized as revenue in 2014 is

Minecraft Company quarries marble at two locations and sells it to be used in construction of buildings.
The Company provides for a depletion rate of 5%. The quarry is leased on a year-to-year basis with the
Company paying a royalty of Php 0.05 per ton of marble quarried. Other data relevant to the
requirements are:

Estimated total reserves, tons Php 60,000,000

Tons quarried through December 31, 2014 4,000,000

Tons quarried, 2014 1,600,000

Sales, 2014 1,200,000

How much would the depletionfor 2014 for financial reporting purposes?

Which of the following is the most likely strategy to reduce the breakeven point?

A. Increase both the fixed costs and the contribution margin

B. Decrease both the fixed costs and the contribution margin

C. Decrease the fixed costs and increase the contribution margin

D. Increase the fixed costs and decrease the contribution margin

Which of the following situations is most likely to be the subject of a written interim report to the
engagement client?

A. 70% of the planned audit work has been completed with no significant adverse observations
 B. The auditors have decided to substitute survey procedures for some of the planned detailed
review of certain records

C. The engagement program has been expanded because of indications of possible fraud

D. Open burning at a subsidiary plant poses a prospective violation of pollution regulations

5.

(LW) Which of the following terms is normally not associated with extinguishing an obligation through
process of novation?

A. Expromission

B. Subrogation

C. Delegacion

D. Remission

6.

Which of the following is true in relation to law of diminishing marginal utility?

A. Marginal utility will decline as a consumer acquires additional units of a specific product.

B. Total utility will decline as a consumer acquires additional units of a specific product

C. Declining utilities causes the demand curve to slope upward

D. Margin is excess of cost over sales

7.

The inventory on hand at December 31, 2015 for FLASH Company is valued at a cost of Php 947,800. The
following items were not included in the inventory amount:

A. Purchased goods in transit, shipped FOB destination invoice price Php 32,000 which included
freight charges of Php 1,600.

B. Goods held on consignment by FLASH Company at a sales price of Php 28,000, including
sales commission of 20% of the sales price

C. Goods sold to ARROW Company, under terms FOB destination, invoiced for 18,500 which
includes Php 1,000 freight charges to deliver the goods. Goods are in transit.

D. Purchased goods in transit, terms FOB shipping point, invoice price P48,000 freight cost Php
3,000.

E. Goods out on consignment to COCO Company, sales price Php 36,400.

Assuming that the Companys selling price is 140% of inventory cost, the adjusted cost of Arrow
Companys inventory at December 31, 2015 should be:

8.
Diamante Motors sells locally manufactured jeeps on instalments. Information presented below relates
to Diamantes operations for the last three calendar years.

2015 2014 2013

Cost of instalment sales P 8,765,625 P 7,700,000 P 4,950,000

Gross profit on instalment sales 32% 30% 28%

Outstanding instalment recl, Dec. 31:

From 2015 P 9,728,125

From 2014 3,025,000 P 8,387,500

From 2013 1,512,500 P 4,812,500

Diamante Motors uses the instalment method of accounting

How much is the total realized gross profit for calendar year 2015?

9.

The following shall be considered as de minimis benefits not subject to income tax as well as
withholding tax on compensation income of both managerial and rank and file employees, except:

A. Monetized value of vacation and sick leave credits paid to government officials and
employees

B. Monetized unused sick leave credits of private employees not exceeding ten (10) days during
the year

C. Medical cash allowance to dependents of employees, not exceeding P750 per employee per
semester or P125 per month;

D. Rice subsidy of P 1,500 or one (1) sack of 50 kg rice per month amounting to not more than
P 1,500;

10.

Under a royalty agreement with another company, W and Co. will pay royalties for the assignment of a
patent for three years. When should the company recognize the royalty payment as an expense?

A. In the period paid

B. In the period incurred

C. At the date the royalty agreement began

D. At the date the royalty agreement expired

Average
1.

A race track bettor won on the following bets:

On double, a bet of P200 and divided of P100 per P10 ticket

On winner take all, a bet of P500 and a dividend of P700 per P50 ticket

On forecast, a bet of P 1,000 and dividend of P 150 per P 50 ticket

The total percentage tax due from the winnings is

2.

The following are types of hedging relationships except?

A. Fair Value Hedge

B. Cash Flow Hedge

C. Hedge of a Net Investment in a Foreign Operation

D. Hedge of Foreign Currency Risk of a Firm Commitment

3.

Spouses Ramsay and Sansa sold their family home, a capital asset for P 10,000,000. It was acquired in
1980 at P 3,000,000. The fair market value as determined by the BIR is P 12,000,000 but the fair market
shown in the schedule of values of the City Assessor is P 11,000,000. Later, the spouses utilized P
8,000,000 for the acquisition of their new family home. The capital gains tax due is

4.

Which statement is incorrect?

A. To assess whether an internally generated intangible asset meets the criteria for recognition,
an entity classifies the generation of the asset into a research phase and a development
phase.

B. The cost of an internally generated asset comprises all directly attributable costs necessary
to create, produce and prepare the asset for its intended use.

C. Internally generated brands, mastheads, publishing titles, customer lists and items similar in
substance shall be recognized as intangible assets

D. Internally generated goodwill shall not be recognized as an intangible asset

5.

Kings Landing Corporation has the following sales during the month:

Sales:

Sales to private entities subject to 12% P 50,000

 Sales to private entities subject to 0% 150,000

Sale of exempt goods 200,000

Total sales for the month 400,000

The following input taxes were passed on by its VAT suppliers:

Input tax:

Input tax on taxable goods P 5,000

Input tax on zero-rated sales 3,000

Input tax on sale of exempt goods 2,000

Input tax on depreciable capital goods

Not attributable to any specific activity

(pertains to monthly amortization for 60 months) 20,000

How much is the creditable input tax for the month?

6.

On January 2, 2014, Keith Urban Corporation purchased 70% of the ordinary shares of Mimi Company
for P 4,675,000. At the date, Mimi Company had P 4,887,500 of ordinary shares outstanding and
accumulated profits of P 1,572,500. Mimis equipment with a remaining life of 5 years had a book value
of P 2,380,000 and a fair value of P 2,550,000. Mimis remaining assets had a book value to their fair
values. All intangible assets except goodwill are expected to have remaining lives of 10 years. Non-
controlling interest shall be measured at fair value. The income and dividend figures for both Keith Urban
and Mimi Company are as follows:

Income Dividends

Keith Urban Corporation: 2014 P 1,572,500 P 425,000

2015 1,785,000 510,000

Income Dividends

Mimi Company: 2014 P 340,000 P 55,000

2015 569,500 127,500

Keith Urbans income shown does not include any dividend income from Mimi. Keith Urbans
accumulated profits balance at the date of acquisition was P 5,958,500. Assume that Mimi has
outstanding 6% P 100 par value cumulative preference shares with an aggregate value of P 1,000,000
that are classified as equity and are held by non-controlling interests. What is the income attributable to
parent on December 31, 2014?

7.
An asset is sold in three different active markets at different prices. An entity enters into transactions in
all markets and can access the price of those markets for the asset at the measurement date.

Market A Market B Market C

Price that would be received Php 26 Php 25 Php 23

Transaction costs in that market (3) (1) (1)

Costs to transport the asset to the market (2) (2) (2)

Net amount that would be received 21 23 20

Assuming none of these markets is the principal market, which of the three markets is the most
advantageous market and what is the fair value of the asset?

8.

The McGraw Company manufactures and sells Abriza handbags to assorted prints. Data for 2014 follows:

Selling price per piece P 8.00

Variable cost per piece P 2.00

Number of handbags to breakeven 25,000

Net post-tax income (35% tax rate) P 5,850

In 2015, the company estimates that the selling price will be P9.50 per piece, variable cost to
manufacture will increase by 25%, and fixed costs will increase by 20%. Income tax rate of 35% will not
change.

How many units of handbags does McGraw Company must see in 2015 in order to maintain the same
net income after tax in 2014 (27,000)

9.

(LW) Under the cumulative voting system of electing directors of a 5-member board of a duly organized
corporation, a stockholder owning 100 shares is enticed to cast a total of

A. 20 votes, distributed equally among 5 candidates that the stockholder wishes to elect

B. 100 votes, distributed equally among 5 candidates that the stockholder wishes to elect

C. 100 votes , all casted in favour of a single candidate that the stockholder wishes to elect

D. 500 votes, with majority of votes casted in favour a single candidate and remaining votes
distributed equally among 4 other candidates that the stockholder wishes to elect

10.

The manager of a production line has the authority to order and receive replacement parts for all
machinery that require periodic maintenance. The internal auditor received an anonymous tip that the
manager ordered substantially more parts than were necessary from a family member in the parts
supply business. The unneeded parts were never delivered. Instead, the manager processed receiving
documents and charged the parts to machinery maintenance accounts. The payments for the
undelivered parts were sent to the supplier, and the money was divided between the manager and the
family member.

Which of the following tests would best assist the auditor in deciding whether to investigate this
anonymous tip further?

A. Comparison of the current quarters maintenance expense with prior-period activity

B. Physical inventory testing of replacement parts for existence and valuation

C. Analysis of repair parts charged to maintenance to review the reasonableness of the number
of items replaced

D. Review of a test sample of parts invoices for proper authorization and receipt

Difficult

1.

Cersei owns shares of stocks of Castle Black Corporation which she purchased several years ago for P 1
million. The stocks have a current fair value of P 10 million. She donates one-half of the stocks to her
daughter Myrcella on December 31, 2014 and the remaining half to her daughter Myrcella again on
January 2, 2015 when the fair market value of the stocks was P 5 million. Assuming Myrcella
subsequently sold all the shares of stocks to Ellaria Sand for P 10 million, how much did Cersei gain on
the sale?

2.

An audit committee is concerned that management is not addressing all internal audit observations and
recommendations. What should the audit committee do to address this situation?

A. Require managers to provide detailed action plans with specific dates for addressing audit
observations and recommendations.

B. Require all managers to confirm when they have taken action

C. Require the chief executive officer to report why action has not been taken

D. Require the chief audit executive to establish procedures to monitor progress

3.

Which of the following is not a source of obligation?

A. Culpa Aquiliana C. Negotiorum Gestio

B. Mora Accipendi D. Solutio Indebeti

4.

On April 1, 2014 a company engages in the development of a property, which is expected to take 5 years
to complete, at a cost of P 6M. The statements of financial position at December 31, 2013 and December
31, 2014, prior capitalization of interest are as follows:

12/31/13 12/31/14

Development property P - P 1,200,000

Other assets 6,000,000 6,000,000

P 6,000,000 P 7,200,000

Loans

5.5% debenture stock P 2,500,000 P 2,500,000

Bank loan at 6% per annum - 1,200,000

Bank loan at 7% per annum 1,000,000 1,000,000

P 3,000,000 P 4,700,000

Shareholders equity 2,500,000 2,500,000

The bank loan with effective interest rate at 6% was drawn down to match the development expenditure
on April 1, July 1, and October 1, 2014. The 5.5% debenture stocks were irredeemable. Expenditure was
incurred on the development as follows: April 1- P 600,000; July 1- P 400,000; October 1 P 200,000. If
all the borrowing were general ( i.e., the bank loan 6% was not specific to the development ) and would
have been avoided but for the development, then the amount of interest to be capitalized would be

(Round-off to 2 decimal % for the general borrowing rate)

5.

Sarah Company, a manufacturing entity, owns 75% of the ordinary shares of Sandra Company, an
investment entity. Sandra Company owns 60% of the ordinary shares of Vanessa Company, an insurance
entity. Sandra Company has control over Vanessa Company. In Sarah Companys consolidated financial
statements, should consolidation accounting or equity method be used for Sandra Company and Vanessa
Company?

A. Consolidation used for Sandra and equity method used for Vanessa

B. Consolidation used for both Sandra and Vanessa

C. Equity method used for Sandra and Consolidation used for Vanessa

D. Equity method used for both Sandra and Vanessa

6.

Jon Snow Company had the following results of operations for the taxable year 2015:
 Gross Income P 500,000

Business expenses 200,000

Capital Gain (capital asset held for one (1) year) P 50,000

Capital Loss (capital asset held for 24 months) P 100,000

How much is the taxable income of Jon Snow Company for the year 2015?

7.

On December 31, 2015, an entity has an asset of Php 4,000 for interest receivable that will be taxed
when the cash is received in 2016. Tax is payable at 20 percent on the first Php 500,000 of taxable profit
earned and 30 percent on any remainder. In 2015, the entity earned taxable profit of Php 450,000. In
2016, the entity expects to earn taxable profit of Php 550,000. What amount should the entity recognize
for the deferred tax liability relating to the interest receivable?

8.

During 2014, Diana Corp. experienced the following power outages:

Number of outage per month Number of months

0 3

1 2

2 4
3 3

12

Each power outage results in out-of-pocket costs of P 400. For P500 per month, Diana can lease an
auxiliary generator to provide power during outages. If Diana leases an auxiliary generator in 2015, the
estimated savings (or additional expenditures) for 2015 would be?

9.

Statement I: A corporation may be a partner in a partnership

Statement II: A corporation may be a stockholder of another corporation

Statement III: A limited partner may contribute money to a partnership but not services

A. Only statement I is false C. Only statement III is false

B. Only statement II is true D. All of the statements are true

10.

What computer-assisted audit technique would an auditor use to identify a fictitious or terminated
employee?

A. Parallel simulation of payroll calculations

B. Exception testing for payroll deductions

C. Recalculations of net pay

D. Tagging and tracing of payroll tax-rate changes

SEMI FINALS ROUND

1.

Which of the following observations by an auditor is most likely to indicate the existence of control
weaknesses over safeguarding of assets?

I. A service departments location is not well suited to allow adequate service to other units.

II. Employees hired for sensitive positions are not subjected to background checks.

III. Managers do not have access to reports that profile overall performance in relation to other
benchmarked organizations.

IV. Management has not taken corrective action to resolve past engagement observations
related to inventory controls.

A. I and II only

B. I and IV only

C. II and III only

D. II and IV only

2. Ant (37y/o), Bug (27 y/o), Cat (17 y/o) are indebted to Dog in the amount of P 27,000, jointly and
severally. What is the maximum amount Dog can collect from Ant?

3.

Boyz Corporation developed in the following income statement that shows the expected percentage
results at a sales level of P 1,400,000:
 Sales 100%

Cost of Sales 60%

Gross Margin 40%

Other expenses 30%

Income 10%

The cost of sales is all variable. Commissions are computed at 5% of sales, and are included in other
expenses category. Compute for Boyz Corporations margin of safety.

4.

Being made liable to a third person, a partner by estoppel may be considered a

A. Silent partner

B. Secret partner

C. Nominal partner

D. Dormant partner

5.

As of December 31, 2014, Passive Company has the following deferred tax items in its accounting
records:

Deferred tax asset Php 443,800

Deferred tax liability 1,092,000

At the beginning of January 2015, the government reduced the company tax rate from 35% to 32%
effective January 2, 2015. The recorded tax balances represent the tax effect of future taxable amounts
and future deductible amounts at 35%. What amount of tax expense or savings should Passive Company
recognize as a result of the change in the tax rates?

6.

If the ending inventory is understated, then

A. Current ratio is overstated and EPS is understated

B. Current ratio is understated and EPS is overstated

C. Current ratio is overstated and EPS is overstated

D. Current ratio is understated and EPS is understated

7.
In reconciling the Cash in bank of INA Company with the bank statement balance for the month of
November 2015, the following data are summarized:

Book debits for November, including October CM for note collected, Php 800,000

Php 60,000

Book credits for November, including NSF of Php 20,000 and service 620,000

Charge of Php 800 for October

Bank credits for November including CM for November for bank loan of 700,000

Php 100,000 and October deposit in transit for Php 80,000

Bank debits for November including October outstanding checks of 600,000

Php 170,800 and November service charge of Php 200

What is the amount of the outstanding checks for November?

8.

While testing a divisions compliance with company affirmative-action policies, an auditor found that:

i. Five percent of the employees are from minority groups.

ii. No one from a minority group has been hired in the past year

The most appropriate conclusion for the auditor to reach is that:

A. Insufficient evidence exists of compliance with affirmative-action policies

B. The division is violating the companys policies

C. The companys policies cannot be audited and hence cannot be enforced

D. With five percent of its employees from minority groups, the division is effectively complying

9.

A constructive delivery of an immovable property subject to a sale and leaseback transaction.

A. Traditio brevi manu

B. Traditio longa manu

C. Traditio clavium simbolica

D. Traditio constitutum possessorium

10.

Management of Rappler Corporation is considering a lockbox system. The bank will charge P10,000
annually for the service, which will save the firm approximately P5,000 in processing costs. The lockbox
system will reduce the float for cash receipts by three days. Assuming that the average daily receipts are
equal to P100,000, and short-term interest costs are 5%, calculate the benefit or loss from adopting the
lockbox system. (indicate if benefit or loss)

11.

Happy, Inc. opens a sales agency in Davao City, and a working fund for P20,000 is established on an
imprest basis. The first payment from the funds is P3,000 for rent. Which of the following entry should
the Happy, Inc. record in its books for the payment of rent?

A. No entry

B. Dr. Rent 3,000

Cr. Cash 3,000

C. Dr. Davao Agency 3,000

Cr. Cash 3,000

D. Dr. Davao Agency 3,000

Cr. Working Fund 3,000

12.

The memorandum records of Smile Inc. for its defined benefit plan, show the following balances:

Plant asset, 01/01/2015 P 5,000,000

Defined benefit obligation, 01/012015 5,200,000

2015 Information:

Current service cost 750,000

Market yields on government bonds at year-end 10%

Contributions made P 1,800,000

Benefits paid 480,000

Past service cost as a result of plan amendment 2,300,000

Plan asset, 12/31/2015 8,000,000

Defined benefit obligation, 13/31/2015 8,350,000

The fair value of the plan asset at year-end includes the unpaid contribution due from Smile Inc., to the
fund as well as the non-transferable FVPL issued by Smile Inc. and held by the fund amounting to
P700,000 and P300,000 respectively. Determine the amount recognized in profit or loss in accordance
with PAS 19 Employee Benefits.
13.

Identify the term that does not belong to the group: prescription, performance, presentation, merger.

14.

The following amounts were taken from the statement of affairs for Bagsik Company:

Unsecured liability without priority P 90,000

Stockholders equity 36,000

Loss on realization of assets 45,000

Estimated administrative expenses that have not 4,500

been entered in the accounting records

Unsecured liability with priority 10,000

How much is the estimated payment for the unsecured liabilities without priority?

(81,000)

15.

If everything else remains constant and a firm increases its cash conversion cycle, which of the following
will most likely to happen to the firms profitability?

A. Increase

B. Increase if earnings are positive

C. Decrease

D. Not be affected

16.

An auditor is conducting a survey of perceptions and beliefs of employees concerning an organizations

health-care plan. The best approach to selecting a sample would be to:

A. Focus on people who are likely to respond so that a larger sample can be obtained

B. Focus on managers and supervisors because they can also reflect the opinions of the people in their
departments

C. Use stratified sampling where the strata are defined by marital and family status, age, and salaried or
hourly status
D. Use monetary-unit sampling according to employee salaries

17.

A manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the
contract for sale the manufacturer undertakes to make good, by repair or replacement, manufacturing
defects that become apparent within one year from the date of sale. On the basis of experience, it is
probable that there will be some claims under the warranties.

Sales of P 10,000,000 were made evenly throughout 2015.

At December 31, 2015 the expenditures for warranty repairs and replacements for the
product sold in 2015 are expected to be made 50 percent in 2015 and 50 percent in
2016. Assume for simplicity that all 2016 outflows of economic benefits related ti rye
warranty repairs and replacements take place on June 30, 2016.

Experience indicates that 95 percent of products require no warranty repairs, 3 percent

of products sold require minor repairs costing 10 percent of sales price; and 2 percent of
products sold require major repairs and replacements costing 90 percent of sales price. There is no
reason to believe future warranty claims will be different from its experience.

At December 31, 2015 the discount rate for expected cash flows is 10.25 percent for
2016. Furthermore, an appropriate risk adjustment factor to reflect uncertainties in
the cash flow estimates is an increment of 6 percent.

On December 31, 2015, the entity recognizes a warranty provision measured at:

18.

For Job Order No. 369, Escalera Company incurred the following costs for the manufacture of 200 units
of a novelty gadget:

Original cost accumulation:

Direct Materials P 13,200

Direct Labor 16,000

Factory Overhead( 150% of direct labor) 24,000

 Direct costs of ten reworked units:

Direct Materials P 2,000

Direct Labor 3,200

Total P 5,200

The rework cost was attributable to exacting specifications required by the job and was charged to the
specific order. The units cost of Job Order No. 369 is:

19.

Caine, Osman, and Roberts formed a partnership on Jan. 1, 2012, agreeing to distribute profits and
losses in the ratio of their original capitals. Original investments were P625,000, P250,000, P 125,000
respectively. Earnings of the firm and drawings by each partner for the period 2012-2014 follows:

Drawings

Net income(loss) Caine Osman Roberts

2012 P 440,000 P150,000 P78,000 P52,000

2013 185,000 150,000 78,000 52,000

2014 (105,000) 100,000 52,000 52,000

At the beginning of 2015, Caine and Osman agreed to permit Roberts to withdraw from the partnership.
Since the books for the partnership had never been audited, the partners agreed to an audit in arriving
at the settlement amount. In withdrawing, Roberts was allowed to take certain furniture and was
charged P15,000, although the book value was P45,000; the balance of Roberts interest was paid in
cash.

The following items were revealed in the course of the audit.

End of 2012 End of 2013 End of 2014

Understatement of accrued expenses P 4,000 P 5,000 P 6,500

Understatement of accrued revenue 2,500 1,000 1,500

Overstatement of inventories 15,000 20,000 20,000

Understatement of depreciation expense 1,500 3,500 2,000

on assets still held

How much must Robert receive from the partnership?

20.

A chief audit executive (CAE) suspects that several employees have used desktop computers for personal
gain. In conducting an investigation, the primary reason that the CAE chose to engage a forensic
information systems auditor rather than using the organizations information systems auditor is that a
forensic information systems auditor would possess:

A. Knowledge of the computing system that would enable a more comprehensive assessment of the
computer use and abuse

B. Knowledge of what constitutes evidence acceptable by the law

C. Superior analytical skill that would facilitate the identification of computer abuse

D. Superior documentation and organization skills that would facilitate in the presentation of findings to
senior management and the board.

21.

Which of the following is encouraged by PAS 41, Agriculture to be separately disclosed when there is a
production cycle of more than one year for a biological asset?

A. Physical Change only

B. Price Change only

C. Total Change in value

D. Physical Change and Price Change

(D)

22.

On estate taxation, a statement duly certified by a CPA is necessary if the estate tax return shows a gross
value exceeding P________

23.

Wiggle Company reported current assets of P3,900,000 and current liabilities of P2,000,000 on its
statement of financial position as of December 31,2014. The following items may have been recorded
incorrectly. The company uses the periodic inventory system.

A. Goods purchased costing P220,000 were shipped FOB shipping point by a vendor on December 26,
2014. Wiggle received and recorded the invoice on December 29, 2014, but the goods were not
included in Wiggles physical count of inventory because they were not received until January 4,
2015.

B. On December 31, 2013, Wiggle purchased and received goods for P750,000. Goods were shipped
FOB seller. The invoice was recorded and paid January 2014. Goods are still unsold and were
included in the physical count as of the reporting date
C. Goods purchased costing P200,000 were shipped FOB destination by a supplier on December 28,
2014. Wiggle received and recorded the invoice on December 31,2014, but the goods were not
included in Wiggles 2014 physical count of inventory because they were not received until January
2, 2015

D. Goods held on consignment from Jason Company were included in Wiggles December 31,2014
physical count of inventory at P130,000

What is the working capital based on Wiggles statement of financial position?

24.

Determine the false statement.

A. Donations between spouses during marriage are void; this rule applies to persons living-in without
the benefit of a legal marriage and persons guilty of adultery or concubinage.

B. A conditional promise to pay renders an instrument to be non-negotiable while a negotiable

instrument issued, accepted or endorsed when overdue is considered to be payable on demand.

C. Consignment of goods is essentially an agency contract, insolvency of the consignor results in the
extinguishment of the agency.

D. A pledge must be in a public instrument showing a description of the thing pledged and the data of
the pledge to bind third persons; a real mortgage must be registered and accompanied by an
affidavit of good faith to take effect against third persons.

25.

A company has six million ordinary shares in issue at the beginning of Year 1. At the very end of the third
quarter of Year 2, it announces a rights issue whereby all existing shareholders will be entitled to buy one
share for every four they hold, at a price of 30. Immediately prior to the issue, the share price was 50.
The profits for year 1, 2, and 3 were 225 million, 230 million, and 245 million, respectively. The rights
were exercised immediately upon issuance. What is the (restated) basic earnings per share for year 2?

26.

PAS 24 requires disclosure of compensation of key management personnel. Which of the following
would not be considered compensation for this purpose?

A. Short-term benefits

B. Share-based payments

C. Termination benefits

D. Reimbursement of out-of-pocket expenses

27.

What is the ceiling on entertainment, amusement, and recreations (EAR) expense?

A. 0.50 percent(%) of net sales taxpayers engaged in sale of goods or properties; or 1.00 percent (%) of
net revenue for taxpayers engaged in sale of services, including exercise of profession and use or lease of
properties.

B. 1.00 percent(%) of net sales taxpayers engaged in sale of goods or properties; or 0.50 percent(%) of
net revenue for taxpayers engaged in sale of services, including exercise of profession and use or lease of
properties.

C. 0.50 percent(%) of net sales for taxpayers engaged in sale of goods or properties; or 1.00 percent(%)
of net revenue for taxpayers engaged in sale of services, excluding exercise of profession and use or lease
of properties.

D. 0.50 percent(%) of net revenue for taxpayers engaged in sale of goods or properties; or 1.00
percent(%) of net sales for taxpayers engaged in sale of services, including exercise of profession and use
or lease of properties.

28.

The use of an analytical review rot verify the correctness of various operating expenses would not be a
preferred approach if: 14,00
Carrying Amount 10,00 Carrying Amount
0
A. An auditor notes strong indicators of a specific fraud involving these accounts. 0

B. Fair 12,00
Valueare relatively stable
Operations Fairover
and have not changed much Value
the past year. 15,00
0 0
C. An auditor would like to identify large, unusual, or non-recurring transactions during the year.
Value in Use 9,000 Value in Use 13,500
D. Operating expenses vary in relation to other operating expenses, but not in relation to revenue.
Legal Fees 1,500 Legal Fees 1,000
29.
Termination 1,000 Termination 500
On January 1, 2014, Applied Co. acquired 10%, P1M bonds for P951,963. The principal is due on January
benefits benefits
1, 2017 but interest is due annually starting December 31,2014. The yield rate on the bonds is 12%. The
entity adopts the calendar year reporting.
Documentary 500 Applied Co. prepares and publishes quarterly reports
Documentary 500 in
15,00 Carrying Amount 14,00
Carrying
accordance
stamp with Amount
taxPAS34- Interim Financial Reporting as required by SEC.tax
stamp
0 0
In August 1, 2015, ABC Co. changed its business model. It was ascertained that the investment in bonds
5,500 Accumulated 2,000
Accumulated
at amortized cost should be reclassified to held for trading securities on reclassification date. On October
Depreciation
1 to December 31, 2015, the bonds were quoted at 103. On JanuaryDepreciation
1, 2016, the bonds were quoted at
104. 12,00 Fair Value 15,00
Fair Value
0 PFRS 9 - Financial Instruments last 2013. Determine the 0
Assume that Applied Co. early adopted
reclassification
Value in Use date. 10,50 Value in Use 13,50
0 0
30.
1,500 Legal Fees 1,000
Legal
In which of Fees
the following will an entity not record impairment loss? (choose one or more)
1,000 Termination 500
A. Termination B.
benefits benefits

500 Documentary 500

Documentary
stamp tax stamp tax
C. D.

31.

ABC Company has a building that it occupies as office space. During the year, ABC Company decided to
lease out the building to third party. Consequently, the building is carried in ABC Companys books from
cost to fair value. How should ABC Company account for the resulting increase in carrying amount of the
building?

A. The increase is recognized in other comprehensive income to the extent that the increase reverses a
previous impairment loss.

B. The increase is recognized as part of other comprehensive income or revaluation surplus within
equity, if no previous impairment has been recorded

C. The increase is recognized directly to profit or loss

D. None of the above

32.

At the beginning of the year entity H invests P5 million to acquire a 30% equity interest in an associate ,
entity A. In addition, H lends P9 million to the associate, but does not provide any guarantees or commit
itself to provide further funding. Hs loan to A is considered part of the net investment in the associate.
Assume the associate generated a P20 million loss during the year.
Determine the equity interest in the associate and the loan carrying value.

33.

Summary adjusted trial balance for the home office and branch of TJ Corporation at December 31, 2014
are as follows:

Home Office Branch

Debits:

Other assets P 530,000 P 165,000

Inventories, January 1,2014 50,000 45,000

Branch 200,000 -

Purchases 500,000 -

Shipments from home office - 240,000

Expenses 120,000 50,000

Dividends 100,000 -

Total Debits P 1,500,000 P 500,000

Credits

Other liabilities P 90,000 P 25,000

Capital Stock 500,000 -

Retained Earnings 100,000 -

Home office - 175,000

Unrealized profit in branch inventor/ loading 100,000 -

Sales 537,000 300,000

Shipments to branch 200,000 -

Branch Profit 62,500 -

Total credits P1,500,000 P 500,000

Additional Information

1. The home office ships merchandise to its branch at 120% of home office cost.
 2. Inventories at December 31, 2014 are P70,000 for the home office and P600,000 for
the branch. The branch inventory is at transfer price.

How much is the net income of the home office and the branch (own books and in the home offices
books) for the year ended December 31, 2014?

34.

Sarah Company, a manufacturing entity, owns 75% of the ordinary shares of Sandra Company, an
investment entity. Sandra Company owns 60% of the ordinary shares of Vanessa Company, an insurance
entity. Sandra Company has control over Vanessa Company. In Sarah Companys consolidated financial
statements, should consolidation accounting or equity method be used for Sandra Company and Vanessa
Company?

A. Consolidation used for Sandra and equity method used for Vanessa

B. Consolidation used for both Sandra and Vanessa

C. Equity method used for Sandra and consolidation used for Vanessa

D. Equity method used for both Sandra and Vanessa

35.

Entity G acquires Entity H and as part of the arrangement, Entity G agrees to pay an additional amount of
consideration to the seller in the future, as follows:

- if the 12 month earnings in two years time (also referred to as the trailing 12
months) are P1 million or less - nothing will be paid.

- if the trailing 12 months earnings in two years time are between P1 million and P2
million - 2 x 12 month earnings will be paid.

- if the trailing 12 months earnings in two years time is greater than P2 million - 3 x
12 month earnings will be paid

At the date of acquisition, the possible twelve-month earnings of Entity H in two years time are
determined to be, as follows:

- P0.8 million - 40%

- P1.5 million - 40%

- P2.5 million - 20%

Applying IFRS 13 - Fair Value Measurement, determine the amount to be discounted at the date of
acquisition to determine its fair value.

36.

Mr. Eddard Stark, a resident citizen, died during the year leaving the following:
 Gross estate P 5,000,000

Family home 1,500,000

Funeral expenses 300,000

Judicial expenses 500,000

Medical expenses 600,000

Claims against the estate 200,000

Taxes 25,000

Losses 15,000

Vanishing deduction 30,000

Standard deduction 1,000,000

Net share of the surviving spouse in the conjugal/community estate 800.000

Amounts receivable under Republic Act 4917 20,000

How much are the ordinary and special deductions from the gross estate, respectively?

37.

A newly organized corporation issues 10,000 no-par shares with an issue price of P 50.00. How much is
the required minimum paid-in capital?

38.

Grey Worm Company, a VAT registered entity, purchased in the beginning of CY 2014, a delivery from a
VAT-registered dealer of automobiles. Due to recent flooding, the only record/document available
related to the said purchase was an official receipt with an amount of P 1,145,520 (inclusive of VAT of
P123,840).

How much would be the depreciation expense that can be claimed as deductible expense in CY 2014 if
the equipment has useful life of 4 years?

39.

Riverlands Corporation, a VAT-registered entity, is engaged in the business of selling books, school
supplies and novelty items. The following were taken from the records of the Company:

Sale of school supplies - Domestic P 560,000

Sale of school supplies - Export ( in USD 28,000) 1,120,000

Sale of books - Domestic 520,000

Sale of novelty items - Domestic 160,000

Purchases of books 400,000

 Purchases of school supplies and novelty items 1,150,000

Purchase of computer (used in all transactions) 180,000

Compute for the VAT payable/(Overpayment).

40.

Storms End Corporation, organized in 2010, was engaged in a large-scale distribution of poultry
products. For the taxable year 2015, the company reported the following result of operations:

Sales P 3.2 million

Sales discounts 0.2 million

Beginning inventory 1.8 million

Cost of goods available for sale 3.0 million

Ending inventory 1.0 million

Operating expenses 0.7 million

General and administrative expenses 0.3 million

The company opted to use optional standard deduction in filing its 1st quarter income tax return.

How much is the Companys income tax?

41.

Candice Company reported net income of P34,000 for the year ended December 31, 2013 which
included depreciation expense of P8,400 and a gain on sale of equipment of P1,700. The equipment had
an historical cost of P40,000 and accumulated depreciation of P24,000. Each of the following accounts
increased during 2013( Assume that the increases in the following accounts are due to cash transactions
only.):

Patent P9,800

Prepaid rent* 4,500

Available for sale investment 8,000

Property and plant (vehicle held for rent)** 6,000

Bonds payable 5,000

*To be consumed within 12 months from the balance sheet date

** Will be subsequently held for sale

What amount should be reported as net cash provided (used) by investing activities for the year ended
December 31, 2013?
42.

On January 1, 2009, an entity invested P1 million in a loan with a par value of P1 million. The loan pays
interest stated at 7.5% on December 31 annually in arrears and is to be redeemed at par on December
31, 2018. The entity accounts for the loan at amortized cost.

On January 1, 2014, it unconditionally sells the right to receive the remaining five interest payments to a
back. The derecognition provisions of IAS 39 (IFRS 9) are applied to the Interest payments as in
identifiable part of the asset, leading to the conclusion that they are required to be derecognized. On the
same date, the current market interest rate available to the borrower is 5%.

Determine the gain (loss) on derecognition of part of a financial asset, if any.

43.

A corporation organized for business or profit is called Civil Corporation while one which is organized for
public charity is called _________.

44.

An entity plans to dispose of a group of its assets (as an asset sale). The assets form a disposal group,
and are measured as follows:

Carrying amount before Carrying amount as

reclassification as held re-measured immediately

for sale before reclassification as

held for sale

Goodwill P 1,500,000 P 1,500,000

PPE (carried at revalued amount) 4,600,000 4,000,000

PPE (carried at cost) 5,700,000 5,700,000

Inventory 2,400,000 2,200,000

Investment in equity securities 1,800,000 1,500,000

Total P16,000,000 P14,900,000

The entity measures the fair value less costs to sell of the disposal group as P13,000,000

Determine the carrying value of the PPE (carried at revalued amount) after classifying the group as held
for sale. (round off amounts in nearest peso)
45.

What is in the scope or affected by IFRS 15?

I. Contracts with customers

II. Sale of non-financial assets that are not an output of the entitys ordinary activities (e.g., PPE, leasing
assets)

III. Leasing contracts

IV. Insurance contracts

V. Financial instruments and certain other contracts

VI. Certain non-monetary exchanges

VII. Certain put options on sale and repurchase agreement

46.

A lessee is required to pay a refundable deposit of P100,000 to the lessor at the inception of an
operating lease for which no interest is receivable. The fixed lease term is 10 years. The market interest
rate is 5% (i.e., that is the interest rate the lessor would have to pay if he borrowed P100,000 for a 10
year term from a third party). The date of inception is February 1, 2013.

Assuming the annual lease payment is P60,000. determine the net amount recognized in lessees profit
or loss as of December 31,2014 applying PAS 17- Leases and Financial Instruments standards (Round PV
factor to 4 decimal places)

47.

At the end of January 2013, the city government provided SUNJI Company a zero interest P30,000,000 3-
year loan used by the company in acquiring a building on the same date. The prevailing market rate of
interest for this type is 8%. The government imposes that the building must be used for social housing
for ten years. The company estimated that there is reasonable assurance that it will meet the terms of
the grant. The company will classify the building as owner occupied property after the socialized housing
project. The company opted to use the cost model of accounting the building with a 15-year life from
date of acquisition.

Applying provisions of PAS 20 - Accounting fro Government Grants and Disclosures of Government
Assistance, what is the amount recognized as income from the grant as of December 31,2013? (Round
PV factors to 4 decimal places)

48.

A written contract of sale of a lot is made between two parties for P50,000. The lot is the only property
of the seller who sold it to defraud a creditor. Assuming that the buyer is aware of the fraudulent intent
of the seller, which term correctly describes that status of the contract of sale? Void, Voidable,
Rescissible, Unenforceable
49.

During 2014, a departments 3-variance overhead standard costing system reported unfavorable
spending and volume variances. The activity level selected for allocating overhead to the product was
based on 80% of practical capacity. If 100% of practical capacity had been selected instead, how would
the reported unfavorable spending and volume variances be affected?

Spending Variance Volume Variance

A. Increased Unchanged

B. Increased Increased

C. Unchanged Increased

D. Unchanged Unchanged

50.

You have obtained the latest actuarial report for SHOULD-BE Corps pension plan. Information about the
actuarial reports are presented below: From the December 31, 2015 actuarial report

12/31/2014 12/31/2015

Present value of defined benefit 3,600,000 3,500,000

obligation

Fair value of plan assets at end of 3,900,000 3,800,000

year

Current service cost for year 345,000 320,000

Benefits paid in year 240,000 230,000

Contributions paid in year 430,000 410,000

Discount rate at end of year 4.5% 5.0%

Assume contributions and benefit payments occurred evenly throughout the year.

Based on the above information and assumptions determine the OCI component to of the PBO to arrive
at the ending balance on December 31, 2015: (Round off any components in the computation to the
nearest thousands) Indicate if debit or credit.