EXCEL PROFESSIONAL SERVICES, Inc.
Management Firm of Professional Review and Training Center (PRTC)
CPA REVIEW
Final Pre-Board Examination
Practical Accounting Problem 1
Instructions: Select the best answer for each of the following questions. Mark only one answer for each
item on the answer sheet provided. Strictly NO ERASURE ALLOWED. Erasure will render your
examination answer sheet INVALID. Use PENCIL NO . 2 only. GOOGLUCK!
1. The Humphreys Company issued 10,000 warrants for P2 cash each on June 2010. Each warrant
gives the holder the right to acquire one new P1 ordinary share for P16 during the next four
years. The market value of each warrant at 31 December 2010 was P5.
In accordance with PAS32 Financial instruments: presentation, at what amount should the
warrant be presented in Humphrey’s statement of financial position at 31 December 2010?
a. P20,000
b. P10,000
c. P160,000
d. P50,000
2. The Polar Company issued 200 new P1 ordinary shares at a fair value of P1.80 each. Polar
identification the following costs in relation to the share issue:
1. Professional fees of P40.
2. Internal management time in managing the process of P30.
These costs are deductible arriving at the entity income tax liability. The current rate of tax is
30%.
In accordance with PAS32 Financial instruments: presentation, the increase in equity in the
statement of financial position of Polar as a result of the transaction will be
a. P360
b. P332
c. P311
d. P320
3. Smertin is a company listed on a recognized stock exchange. Given below is an extract from
its statement of comprehensive income for the year ended 31 December 2010.
Profit before tax P580,000
Income tax expense 150,000
Profit after tax 430,000
In addition to the above information the company paid during the year an ordinary dividend
of P40,000 and a dividend on its redeemable preference shares of P50,000. The company
had P100,000 of P0.50 ordinary shares in issue throughout the year and authorized share
capital of 1,000,000 ordinary shares.
What should be the basic earnings per share figure for the year according to PAS33 Earnings
per share?
a. P2.15
b. P1.90
c. P0.38
d. P0.43
Use the following information for the next two questions.
The information below pertains to Prancer Company for 2010.
Profit for the year P1,200,000
8% convertible bonds issued at par (P1,000 per bond).
Each bond is convertible into 40 ordinary shares 2,000,000
6% convertible, cumulative preference shares, P100 par value.
Each share is convertible into 3 ordinary shares. 3,000,000
Ordinary shares, P10 par value 6,000,000
Share options (granted in a prior year) to purchase 50,000
ordinary shares at P20 per share 500,000
Tax rate for 2010 40%
Average market price of ordinary shares P25 per share
There were no changes during 2010 in the number of ordinary shares, preference shares, or
convertible bonds outstanding. There is no treasury share.
4. Compute basic earnings per share for 2010.
a. P2.00
b. P1.70
c. P1.82
d. P1.07
5. Compute diluted earnings per share for 2010.
a. P1.70
b. P1.62
c. P1.66
d. P1.26
6. Statement of financial position extracts for The Anisus Company show the following:
31 Dec 2010 (Draft) 31 Dec 2009
Development costs P816 P584
Amortization (180) (120)
636 464
The capitalized development costs relate to a single project that commenced in 2008. It
been discovered that one of the criteria for capitalization has never met.
According to PAS8 Accounting policies, changes in accounting estimates and errors, what
adjustment is required to restate retained earnings at 31 December 2010?
a. P636
b. P172
c. P1,100
d. P464
7. The draft financial statement for an entity for the year ended 31 December 2010 have
prepared. A final review reveals an overvaluation of the closing inventory of P200,000 at 31
December 2009. Further investigation shows that there was an overvaluation at 31
December 2008 of P120,000.
According to PAS8 Accounting policies, changes in accounting estimates and errors, what
adjustments should made to the profit for the year 31 December 2009 presented as the
comparative figure in the 2010 financial statements?
a. P120,000 decrease
b. No change
c. P80,000 decrease
d. P200,000 decrease
8. The Comprehensive Entity chief accountant provided the following information:
Note payable:
Arising from purchase of goods 304,000
Arising from 5 year-bank loans, on which marketable
securities valued at P600,000 have been pledged as
security, P400,000 due on June 30,2011; P100,000
due on December 31, 2011 500,000
Arising from advances by officers, due June 30, 2011 50,000
Reserve for general contingencies 400,000
Employees’ income tax withheld 20,000
Advances received from customer on purchase orders 64,000
Containers’ deposit 50,000
Accounts payable arising from purchase of goods, net of debit
balances of P30,000 170,000
Accounts receivable, net of credit balances P40,000 360,000
Cash dividends payable 80,000
Stock dividends payable 100,000
Dividends in arrears on preferred stock, not yet declared 200,000
Convertible bonds, due January 31, 2012 1,000,000
First mortgage serial bonds, payable in semi-annual installments
of P50,000, due April 1 and October 1 of each year 2,000,000
Overdraft with Allied Bank 90,000
Cash in bank balance with PNB 390,000
Estimated damages to be paid as a result of unsatisfactory
performance on a contract 160,000
Estimated expenses on meeting guarantee for service
Requirements on merchandise sold 120,000
Estimated premiums payable 75,000
Deferred revenue 87,000
Accrued interest on bonds outstanding 360,000
Share warrants outstanding 120,000
Share options outstanding 210,000
Unused letters of credit 400,000
Deficiency VAT assessment being contested 500,000
Notes receivable discounted 200,000
On March 1, 2011, the P400,000 note payable was replaced by an 18-month note for the same
amount. The entity is considering similar action on the P100,000 note payable due on December
31, 2011. The 2010 financial statements were issued on March 31, 2011.
On December 1, 2010, a former employee filed a lawsuit seeking P200,000 for unlawful
dismissal. The entity’s attorneys believe that the suit is without merit. No court date has been
set.
On January 15, 2011, the BIR assessed the entity an addition income tax of P300,000 for the
2009 tax year. The entity’s attorneys and tax accountants have that it is likely that the BIR will
agree to a P200,000 settlement.
Compute the total current liabilities as of December 31, 2010
a. P2,500,000
b. P2,300,000
c. P2,100,000
d. P2,400,000
9. The Stone Company has an account receivable from The Knowles Company of P55,000. Stone
also has an account payable to Knowles of P15,000. Local law allows the enforceable right of
set-off of the recognized amounts. It is not normal business practice to settle the amounts net.
What amount for account receivable and account payable should be presented of financial
position, according to PAS32 Financial instruments: presentation?
a. b. c. d.
Account receivable P55,000 P40,000 P55,000 Nil
Accounts payable P15,000 Nil Nil P15,000
10. The Elder Company’s draft financial statements show the profit before taxation for the year to
31 December 2010 as P9 million. The board of directors is to authorize the financial statements
for issue on 20 March 2011. A fire occurred at one of Elder’s sites on 13 January 2011 with
resulting damage costing P7 million, only P4 million of which is covered by insurance. The
repairs will take place and be paid for in April 2011. theP4 million claim from the insurance
company will however be received on 14 February 2011.
Taking account of these events in accordance with PAS10 Events after the reporting period,
what should be Elder’s profit before taxation in its financial statements?
a. P2 million
b. P9 million
c. P13 million
d. P6 million
11. the B corporation presented the following multiple step income statement and statement of
retained earnings for the year ended December 31, 2010 as developed by its bookkeeper who has
completed 12 units of accounting:
B Corporation
Revenue statements
31 December 2010
Net sales P390, 000
Less: dividends declared P3.50
Per ordinary shares 15, 000
Revenues P375, 000
Less: selling expenses 41, 000
Gross profit P333, 400
Less operating expenses:
Interest expenses 8, 200
Cost of goods sold P227, 400
Provision for income tax 23, 920
Net operating income 73, 880
Add: dividend revenue 3, 600
Less: general and administrative expense 48, 600
Net profit P28, 880
B Corporation
Retained Earnings statements
31 December 2010
Beginning retained earnings 116, 000
Add: net profit 28, 880
Adjusted retained earnings P144, 880
Less: loss on sale of land 8, 000
Ending retained earnings P136, 880
The correct net profit is
a. P43, 880
b. P39, 000
c. P34, 000
d. P35, 880
12. the statements of financial position of Lai company showed the following on January 1 and
December 31, 2010:
January 1 December 31
Total assets 10, 000, 000 15, 000, 000
Total liabilities 3, 000, 000 4, 000, 000
Contributed capital 5, 000, 000
During the year 2010,Lai issued ordinary shares with par value of P2, 000, 000 at a premium of P1, 000,
000. On December 31, 2010 Lai paid dividends of 2, 500, 000. What was the profit for 2010?
a. P3, 500, 000
b. P4, 500, 000
c. P4, 000, 000
d. P5, 500, 000
13. The following information pertains to Furama Company for 2010:
a. The company had net monetary items of P1, 600, 000 on January 1.
b. Sales of P6, 000, 000 and purchases of P2, 400, 000 were made evenly throughout the year
c. Operating expenses of P1, 800, 000 and income tax expenses of P1, 200, 000 were incurred
evenly throughout the year
d. Cash dividends of P400, 000 were declared on November 30 and paid on December 31. Selected
values of the CPI-U during 2010 Appear below;
Jan. 1 110.0
Average for year 121.0
Nov. 30 131.0
Dec. 31 133.1
The purchasing power loss for 2010 expressed in constant year end pesos is
a. P53, 588
b. P360, 000
c. P396, 000
d. P386, 588
14. The equity of the Kaiaho Company is traded on a recognized stock exchange. Kaiaho regularly
reports the financial results of five different business units to its chief operating decision maker. The
relevant revenues for the year ended 31 December 2010 for these five operations as a percentage of
total external and internal revenue were as follows:
Business operations % internal % external % total
1 3 35 38
2 10 14 24
3 15 5 20
4 0 9 9
5 0 9 9
28 72 100
In accordance with PFRS 8 operating segments the reportable segments of Kaiaho are
a. 1 and 2 only
b. 1, 2 and 3 only
c. 1, 2,3 and 4 only
d. 1, 2,3,4 and 5
15. The coral company accounts for noncurrent assets using the cost model, on 20 July 2010 Coral
classified a non current asset as held for sale n accordance with PFRS5 noncurrent assets held for sale
and discontinued operations. At that date the asset carrying amount was P14, 500 its fair value was
estimated at P21, 500 and the cost to sell at P1, 450
The asset was sold on 18 October 2010 for p21, 200.
In accordance with PFRS 5 at what amount should the asset be stated in Corals statements of financial
position at 30 September 2010?
a. P20, 050
b. P21, 500
c. P21, 200
d. P14, 500
16. the terms and conditions of employment with the pleasing company include entitlement to share in
the staff bonus system, under with 5% of the profits for the year before charging the bonus are allocated
to the bonus pool, provided the annual profits exceed P50 million. The profits (before accrual of any
bonus) for the first half of 2010 amount to P40 million and the latest estimate of the profits (before
accrual of any bonus) for the year as a whole is P60 million
How much should be recognized in profit or loss in respect of the staff bonus for the half year to 30 June
2010 according to PAS 34 interim financial reporting?
a. Nil
b. P3.0 million
c. P2.0 million
d. P1.5 million
17. on July 1, 2009, the Pyretus Company a manufacturer of office furniture supplied goods to the Natiso
Company for P120, 000 on condition that this amount was paid in full on 1 July 2010. Natiso had earlier
rejected an alternative offer from Pyretus whereby they could bought the same goods by paying cash of
P108, 000 on 1 July 2009.
Under PAS 18 revenue, how much relating to this transaction should Pyretus recognize in profit or loss in
respect of revenue and interest income for the year ended 30 June 2010?
A B C D
Revenue P108, 000 P120, 000 P108, 000 P120, 000
Interest income P12, 000 Nil Nil P12, 000
18. On January 2, 2010, Kamprad Company assigned its patent to Alive for royalties of 10% of patent
related sales. On the same date kamprad received a P400, 000 advances to be applied against royalties
for 2010 sales. Royalties are payable every six months alive reported the following sales:
Six months ended amounts
June 30, 2010 P1, 500, 000
December 31, 2010 2, 000, 000
How much royalty revenue should Kamprad report in its 2010 income statements?
a. P750, 000
b. P400, 000
c. P350,000
d. P200, 000
19. The Motmot Company has partially completed inventory located in its factory, to which the
following estimates relate:
Production cost incurred to date
Production cost to complete
Transport cost to customer
Future selling cost
Selling price
According to PAS 2 inventories, what is the net realizable value of Motmot’s inventory?
a. P2, 100
b. P2, 800
c. P400
d. P100
20. Dragon reported P70, 000 of inventory on December 30, 2010, based on physical count. Additional
information was given as follows:
a. Included in the physical count were goods billed to a customer, FOB shipping point, on
December 31, 2010 the goods had a cost of 3, 000 and have been billed at P5, 000. The
shipment is ready for pick up by the delivery contractor
b. Goods were in transit from a vendor. The invoice cost was P8, 000 and goods were shipped FOB
shipping point on December 31, 2010
c. Work in process costing P500 was sent to an outside processor for finishing on December 30,
2010
d. Goods out on consignment amounted to P4, 600 (sales price) shipping costs P120 (markup is
15% on cost)
The correct amount of inventory on December 31, 2010 is
a. P85, 620
b. P85, 500
c. P82, 620
d. P82, 500
21. a flood recently destroyed of the financial records of review manufacturing company. Management
has hired you to re-crate as much financial information as possible for a month of July. You are able to
find out that the company uses an average cost inventory valuation system. You also learn that review
makes a physical count at the end of each month in order to determine monthly ending inventory
values. By examining various documents you are able to gather the following information:
Ending inventory at July 31 50, 000 units
Total cost of units available for
Sale in July P118, 800
Cost of goods sold during July 99, 000
Cost of beginning inventory, July 1 P0.35/ unit
Gross profit on sales for July P101, 000
July purchases
Date units units cost
July 5 60, 000 P0.40
11 50, 000 0.41
15 40, 000 0.42
16 50, 000 0.45
The value of inventory at July 31 is
a. P25, 300
b. P28, 000
c. P19, 800
d. P24, 600
22. The following information relates to a machine constructed by Newcastle ltd.
Cost of material to construct machine, including VAT of P7, 000 77, 000
Labor cost to construct machine 43, 000
Allocated overhead costs- electricity, factory space, etc. 22, 000
Allocated interest cost of financing machine 10, 000
Cost of installation 12, 000
Insurance for the current year 2, 000
Profit saved by self- construction 15, 000
Safety inspection costs prior to use 4, 000
Determine the amount at which the machine should be recorded.
a. P168, 000
b. P161, 000
c. P153, 000
d. P146, 000
23. The national government condemned Sagigilid Co;s parcel of real estate. Sagigilid will receive P750,
000 for this property which has a carrying amount of P575, 000. Sagigilid incurred the following costs as
a result of the condemnation:
Appraisal fees to support a P750, 000 values P2, 500
Attorney fees for the closing with the government 3, 500
Attorney fees to review contract to acquire replacement property 3, 000
Title insurance on replacement of property 4, 000
What amount of cost should Sagigilid use to determine the gain on the condemnation?
a. P581, 000
b. P582, 000
c. P584, 000
d. P588, 000
24. The Quenie Co. on May 31, 2010 acquired the rights to a coal mine containing an estimated reserves
of 1, 000, 000 tons of coal. The company estimated that 12, 500 tons of coal would be extracted and
sold each month. Cost allocable to coal was P3, 500, 000.
Also on May 31, 2010, the Company purchased an equipment to be used in the production, costing P95,
000 which has an estimated useful life of 10 years,. The equipment was expected to become obsolete
after all the coal deposits had been extracted from the mine and only 5, 000 selling price of the
equipment could be expected. Production was in full blast since June 1, 2010.
What would be the depletion expense for the year ended December 31, 2010?
a. P525, 000
b. P262, 500
c. P153, 125
d. P306, 250
Use the following information for the next two questions:
On 1 January 2009, Fojas corporation acquires two assets within the same class of plant and equipment.
Information on these assets is as follows.
Cost expected useful life
Machine A P100, 000 5 years
Machine B P60, 000 3 years
The machines are expected to generate benefits evenly over their useful lives. The class of plant and
equipment is measured using fair values.
At 31 December 2009, information about the assets is as follows.
Fair value expected useful life
Machine A P84, 000 4 years
Machine B P38, 000 2 years
On 1 July 2010, machine B was sold for 32, 000 cash. On the same day, Fojas corporation acquired
machine C for P80, 000 cash. Machine C had expected useful life of four years
At 31 December 2010, information on the machines is as follows:
Fair value expected useful life
Machine A P61, 000 3 years
Machine C P68, 500 1.5 years
25. the amount to be recognized in 2009 profit or loss related to the revaluation of the asset is
a. P4, 000
b. P2, 000
c. P(2, 000)
d. P0
26. the amount to be recognized in 2010 profit or loss related to the revaluation of the assets is
a. (P3, 500)
b. (P1, 500)
c. (P500)
d. P0
27. The Negara Company owns three properties which are classified as investment properties according
to PAS 40 investment property. Details of the properties are given below.
P’000 Initial cost fair value at 31 Dec. 2009 Fair value at 31 Dec. 2010
Property 1 270 320 350
Property 1 345 305 285
Property 3 330 385 360
Each property was acquired in 2006 with a useful life of 50 years. The company accounting policy is to
use the fair value model of investment properties
What is the gain or loss to be recognized in Negara’s profit or loss for the year ending 31 December
2010?
a. P18, 900 loss
b. P15, 000 loss
c. P30, 000 gain
d. P45, 000 loss
28. the Makopa Companys ledger showed a balance in its cash account at December 31, 2010 of P68,
225 which was determined to consist of the following:
Petty cash fund P360
Cash in Metro Bank per bank statements with a
Check for P600 still outstanding 33, 675
Notes receivable in the possession of a collecting agency 2, 500
Undeposited receipts, including postdated
Check for P1, 050 and a traveler check for
P1, 000 17, 800
Bond sinking fund cash 12, 750
IOUs signed by employees 495
Paid vouchers, not yet recorded 645
Total P68, 225
At what amount should cash on hand and in bank be reported on Makopa’s statements of financial
positions?
a. P50, 185
b. P62, 935
c. P53, 475
d. P66, 225
29. Carefree company’s newly hired assistant prepared the following bank reconciliation on March 31,
2010:
Book balance P1, 405, 000
Add: March 31 deposit P750, 000
Collection of note 2,500, 000
Interest on note 150, 000 3, 400, 000
Total 4, 805, 000
Less: careless company deposit
To our account 1, 100, 000
Bank service charge 45, 000 1, 145, 000
Adjusted book balance 3, 660, 000
Bank balance P5, 630, 000
Add: error on check no. 175 45, 000
Total 5, 675, 000
Less: preauthorized payments for
Water bills 205, 000
NSF check 220, 000
Outstanding check 1, 650, 000 2, 075, 000
Adjusted bank balance P3, 600, 000
Check no. 175 made for the proper amount of P249, 000 in payment of account. However it was entered
in the cash payments journal as P294, 000. Carefree authorized the bank to automatically pay its water
bill as submitted directly to the bank. The correct cash in bank balance is
a. P3, 660, 000
b. P3, 600, 000
c. P3, 630, 000
d. P2, 880, 000
30. Gomez Company net account receivable were P400, 000 at December 31, 2009 and P440, 000 at
December 31, 2010 net cash sale for 2010 were P260, 000. The accounts receivable turnover for 2010
was 7.0 what were Gomez’s total net sales for 2010?
a. P1, 820, 000
b. P3, 200, 000
c. P2, 940, 000
d. P2, 680, 000
31. Boy Company sold a machine to Golden Corporation on January 1, 2010. For which the cash sales
price was P379, 100. Golden entered into an installments sales contract with Boy, calling for annual
payments of P100, 000 for five years, including interest at 10%. The first payment was due on December
31, 2010. How much interest income should be recorded by Boy in 2011?
a. P27, 910
b. P37, 910
c. P31, 701
d. P50, 000
32. On December 31, 2008 Ms. Leading signed a P1, 000, 000 note to ABC bank. The market interest rate
at that time was 12%. The stated interest rate on the note was 10%, payable annually, the note matures
in five years, unfortunately, because of lower sale, Ms. Leadings financial conditions worsened. On
December 31, 2010 ABC bank determined that it was probable that the company would pay back only
P600, 000 of the principal at maturity. However, it was also considered likely that interest would
continue to be paid based on the P1, 000, 00 loan how much should be recognized as loan impairment
loss in 2010?
a. P272, 002
b. P260, 654
c. P284, 673
d. P524, 896
33. The Red mires company acquired an equity investment a number of years ago for P300, 000 and
classified it as available for sale. At December 2009 the cumulative loss recognized in other
comprehensive income was P40, 000 and the carrying amount of the investment was P260, 000.
At December 2010 the issuer of the equity was in severe financial difficulty and the fair value of the
equity investment had fallen to P120, 000.
In accordance with PAS 39 financial statements, recognition and measurement, what amount should be
recognized in profit or loss in the year ended 31 December 2010?
a. P140, 000
b. P180, 000
c. P100, 000
d. Nil
34. the pink Company acquired an available for sale financial instrument for P800, 000 on 31 March
2010. The direct acquisition costs incurred were P140, 000.
On 31 December 2010 the fair value of the instrument was P1, 100, 000 and the transaction costs that
would be incurred on sale were estimated at P120, 000.
In accordance with PAS 39 financial instruments: recognition and measurement, what gain would be
recognized in the financial statements for the year ended 31 December 2010?
a. Nil
b. P40, 000
c. P420, 000
d. P160, 000
35. The hanwell Company acquired a 30% equity interest n the Northfield Company for P400, 000 on
January 2009. In the year to 31 December209 Northfield earned profits of P80, 000 and paid no
dividend. In the year to 31 December 2010 Northfield incurred losses of P32, 000 and paid a dividend of
P10, 000.
In Han well’s consolidated statements of financial position at 31 December 2010, what should be the
carrying amount of its interest in Northfield, According to PAS 28 investment in associates.?
a. P438, 000
b. P411, 400
c. P414, 400
d. P400, 000
36. The Champlain Company owns 25% of the Berger Company the following figures are from their
separate financial statements:
Champlain: trade receivables P840, 000
Including P30, 000 due from Berger.
Berger: trade receivables P215, 000
Including P50, 000 due from Champlain
According to PAS 28 investment in associates, what figures should appear for trade receivables in
Champlain’s consolidated statements of financial positions?
a. P840, 000
b. P832, 500
c. P1, 035, 000
d. P1, 055, 000
37. the Rattigan Company purchases P2, 000, 000 of bonds. The asset has been designated as one at fair
value through profit and loss.
One year later, 10% of the bonds are sold for P400, 000. Total cumulative gains previously recognized in
Rattigan’s financial statements in respect of the asset are P100, 000.
In accordance with PAS 39 financial instruments: recognition and measurement, what is the amount of
the gain on disposal to be recognized in profit or loss.
a. P190, 000
b. P90, 000
c. P200, 000
d. P100, 0000
38. The Murrie Company has hedged the cash flows relating to its interest rate risk by purchasing an
interest rate cap. Interest rates have risen and the hedge has proved to be 90% effective based on the
amount hedged. Additional interest charges up to the end of the financial year amount to P24, 000.
In accordance with PAS 39 financial instruments: recognition and measurement what amount relating to
the additional interest cost should be recognized in profit or loss?
a. Nil
b. P2, 400
c. P21, 600
d. P24, 000
39. on February 1, 2009. Americas sold P300, 000, 12 percent ten year bonds at 96 plus accrued interest.
Interest in payable semiannually on June1 and December 1. The bond issue was dated December 1,
2008. On July 31, 2010, P150, 000 of the issue was reacquired at 95 plus accrued interest.
Assuming the entity uses the straight line amortization method, the gain or loss on bond retirement to
be recognized on July 31, 2010 is
a. P2, 415 gain
b. P2, 669 loss
c. P2, 500 gain
d. P2, 669 gain
40. on 31 December 2010 the Grenfell Company issued 200 convertible bonds with a nominal interest
rate of 7% for P2, 000 each. Each bond can be converted into 5 new equity shares or redeemed for cash,
at the option of the holder in 5 years time
The fair value at that date of similar bonds without the convertibility option was estimated at P1, 800
each.
In accordance with PAS 32 financial instruments presentation the amount recognized in equity in
respect of the convertible bonds at 31 December 2010 will be
a. P400, 000
b. P360, 000
c. P40, 000
d. Nil
41. The Chemsee Company leased a canning machine with a fair value of P165, 000 the initial direct
costs included in negotiating the lease were P1, 250. The present value of the minimum lease payments
discounted at the rate implicit in the lease is P158, 400. The asset has a useful life of 5 years and the
lease is not a period of 4 years, after which the asset can be acquired for a near zero cost,, which is
substantially below the expected value of the asset at that date.
The asset is depreciated on a straight line basis. According to PAS 17 leases, what amount should be the
annual depreciation
a. P39, 912
b. P31, 930
c. P39, 600
d. P31, 680
42. The Junior Company leased a freehold building for 20 years with effect from 1 January 2010. The
useful life of the building is 40 years. As part of the negotiations for the lease the less or granted Junior a
rent free period. Annual rentals of P1.6 million are payable in advance on 1 January, commencing in
2012.
What expenses should Junior recognize in profit or loss in the ear ended 31 December 2010. According
to PAS 17 leases?
a. P1.6 million
b. Nil
c. P1.52 Million
d. P1.44 Million
43.the Minor Company leased a freehold building for 20 years the useful life of the building with effect
from 1 January 2010. At that date the fair value of the leasehold interest was P7.5 million of which P6.0
million was attributable to the building annual rentals of P800, 000 are payable in advance on 1 January.
How much should Minor recognize as an operating lease expenses in the year ended 31 December 2010,
according to PAS 17 leases?
a. Nil
b. P640, 000
c. P160, 000
d. P800, 000
44. The Maconie Company is a car dealer. On 1 January 2010 at entered into a finance lease with a
customer under which the customer would pay P200, 000 on 1 January each year for 5 years,
commencing in 2010. The car cost maconie P600, 000 and its normal ash selling price was P750, 000 .
Maconie paid legal fees of P20, 000 to a law firm in connection with the arrangement of the lease.
Ignoring finance income, what net amount should Maconie recognize in profit or loss in the year ended
31 December 2010, according to PAS 17 leases?
a. Net income of P15, 000
b. Nil
c. Net expenses of P2, 000
d. Net income of P13, 000
45. the Tuarua Company operates a defined benefit post employment plan and recognizes actuarial
gains losses in profit or loss under the corridor approach
At 1 January 2010 the plan assets were P800, 000 the defined benefit obligations was P900, 000 and the
unrecognized actuarial losses were P120, 000. During the year ended 31 December 2010 actuarial gains
of P15, 000 arose. The average remaining working lives of participating employees was 20 years at both
PAS 19 employee benefits?
a. P1, 500
b. P1, 250
c. P2, 000
d. P750
46. The Makarangu Company operates a defined benefit post employment plan. At 31 December 2010
the present value of the defined benefit obligation was P40 million, the fair value of the plan assets was
P10 million, the unrecognized actuarial gains were P8 million and the past service cost not recognized
was P6 million
What is the defined benefit liability to be recognized by makarangu at 31 December 2010, According to
PAS 19 employee benefits?
a. P16 million
b. P28 million
c. P44 million
d. P32 million
47. The White Company set up a defined post employment plan with effect from 1 January 2010. In the
first year the expected return on plan assets was P5, 000 the actual return on plan assets was P4, 000
the current service cost was P12, 000 and White’s contributions paid into the plan were P7, 500.
What is the net expense to be recognized in profit or loss for the year end 31 December 2010, according
to PAS 19 employee benefits?
a. P8, 000
b. P3, 500
c. P7, 000
d. P2, 500
48. the Giggs Company has interest receivable which has a carrying amount of P55, 000 in its statements
of financial position at 31 December 2010. The related interest revenue will be taxed on a cash basis in
2011?
Gigs has trade receivables that have a carrying amount of P100, 000 in its statements of financial
position as 31 December 2010. The related revenue has been recognized in profit or loss for the year to
31 December 2010.
According to PAS 12 income taxes, what is the total tax base of interest receivable and trade receivables
for Giggs at 31 December 2010?
a. Nil
b. P155, 000
c. P100, 000
d. P55, 000
49. The Kolpa Company purchased a building in January 2007 for P150, 000. The accounting depreciation
charges is 5% straight line for tax purposes, depreciation of 2% straight line is deducted annually. The
remaining cost will be deducted in future periods. Either as depreciation or though a deduction on
disposal. The tax rate is 25%.
According to PAS 12 income taxes, what should be the deferred tax balance at 31 December 2010?
a. P4, 500 deferred tax liability
b. P3, 375 deferred tax liability
c. P4, 500 deferred tax assets
d. P3, 375 deferred tax assets
50. The Waloneke Company has a policy of using noncurrent assets until they can no longer be
operated and are worthless on 1 January 2010 it acquired an item of plant and machinery for P100, 000
it is being depreciated over 10 years on a straight line basis. For tax purposes there is an allowance of
20% per annum on a reducing balance basis. There are two rates of tax: 15% on trading profits and 25%
on gains on disposals
What deferred tax balance should Waloneke recognize at 31 December 2010, according to PAS 12
income taxes?
a. Deferred tax assets of P2, 500
b. Deferred tax asset of P1, 500
c. Deferred tax liability of P2, 500
d. Deferred tax liability of P1, 500
