Professional Documents
Culture Documents
EASY
1. Which of the following statements comparing straight-line depreciation methods to alternative
depreciation methods is least accurate? Companies that use:
a. accelerated depreciation methods will increase the total amount of depreciation expense
in the latter years of the asset's life.
b. accelerated depreciation methods will decrease the amount of taxes in early years.
c. straight-line depreciation methods will have higher book values for the assets on the balance
sheet than companies that use accelerated depreciation in the early years.
d. units-of-production methods to depreciate assets will overstate income during periods of low
production.
2. In accordance with PAS7 Statement of cash flows, and treating it as a nonrecurring event, which
classification of the cash flow arising from the proceeds from an earthquake disaster settlement
would be most appropriate?
a. Cash flows from operating activities
b. Cash flows from investing activities
c. Cash flows from financing activities
d. Does not appear in the cash flow statements
5. The following materials standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
Actual materials purchased ............................. 6,200 grams
Actual cost of materials purchased ................. P81,530
Actual materials used in production ............... 5,700 grams
Actual output .................................................. 1,800 units
What is the materials price variance for the month?
P4,030 U
6. Persechino Corporation is developing standards for its products. One product requires an input
that is purchased for P82.00 per kilogram from the supplier. By paying cash, the company gets a
discount of 2% off this purchase price. Shipping costs from the supplier's warehouse amount to
P6.55 per kilogram. Receiving costs are P0.47 per kilogram. The standard price per kilogram of
this input should be: P87.38
7. A limit test is a
a. Test to ensure that a numerical value does not exceed some predetermined value
b. Check to ensure that the value in a field falls within an allowable range of values
c. Check to ensure that the data in a field have the proper arithmetic sign
d. Check on a field to ensure that it contains either all numeric or alphabetic characters
8. Which of the following terms best describes the audit of a taxpayer’s return by a BIR auditor?
a. Operational audit.
b. Internal audit.
c. Compliance audit.
d. Government audit.
9. The audit working paper that reflects the major components of an amount reported in the
financial statements is the
a. Interbank transfer schedule.
b. Carry forward schedule.
c. Supporting schedule.
d. Lead schedule.
1. The Board of Accountancy has the power to conduct an oversight into the quality of audits of financial
statements through a review of the quality control measures instituted by auditors in order to ensure
compliance with the accounting and auditing standards and practices. This power of the BOA is called
a. Quality assurance review c. Appraisal
b. Peer review d. Quality control
2. Which of the following auditing procedures most likely would assist an auditor in identifying
conditions and events that may indicate substantial doubt about an entity's ability to continue as a
going concern?
A. Inspecting title documents to verify whether any assets are pledged as collateral
B. Confirming with third parties the details of arrangements to maintain financial support
C. Reconciling the cash balance per books with the cut-off bank statement and the bank
confirmation
D. Comparing the entity's depreciation and asset capitalization policies to other entities in the
industry
3. Food Factory, Inc. sells loose biscuits for P5 per unit. The fixed costs are P210,000 and the variable
costs are 45% of the selling price. What would be the amount of sales if Food Factory, Inc. were to
realize a profit of 15% of sales?
ANSWER: P525,000
4. A company has two divisions, A and B; each are operated as a profit center. A charges B P35 per unit
for each unit transferred to B. Other data follow:
A is planning to raise its transfer price to P50 per unit. Division B can purchase units at P40 each
from outsiders, but doing so would idle A's facilities now committed to producing units for B.
Division A cannot increase its sales to outsiders. From the perspective of the company as a whole,
from whom should Division B acquire the units, assuming B's market is unaffected?
a. outside vendors
b. Division A, but only at the variable cost per unit
c. Division A, but only until fixed costs are covered, then should purchase from outside
vendors
d. Division A, in spite of the increased transfer price
5. External factors considered in setting transfer prices in multinational firms typically do not include
a. the corporate income tax rates in host countries of foreign subsidiaries.
b. foreign monetary exchange risks.
c. environmental policies of the host countries of foreign subsidiaries.
d. actions of competitors of foreign subsidiaries.
6. The Markab Company has acquired a trademark relating to the introduction of a new
manufacturing process. The costs incurred were as follows:
Cost of trademark PHP 3,500,000
Expenditure on promoting the new product PHP 50,000
Employee benefits relating to the testing of the
proper functioning of the new process PHP 200,000
According to IAS38 Intangible assets, what is the total cost that should be capitalized as an intangible
non-current asset in respect of the new process? 3,700,000
7. The White Company set up a defined benefit post-employment plan with effect from 1 January 20X7.
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 ended 31 December
20X7, according to IAS19 Employee benefits?
a. P8,000
b. P3,500
c. P7,000
d. P2,500
8. An entity has investment property that is held to earn rental income. The entity uses the fair value model
for reporting the investment property. Which of the following statements is true?
a. Changes in fair value are reported in profit or loss in the current period
b. Changes in fair value are reported as an extraordinary gain
c. Changes in fair value are reported in other comprehensive income for the period
d. Changes in fair value are reported as deferred revenue for the period
9. Special assessment is an enforced proportional contribution from owners of land especially benefited
by public improvement. Which one of the following is not considered as one of its characteristics?
a. It is levied on land.
b. It is based on the government’s need of money to support its legitimate objectives.
c. It is not a personal liability of the persons assessed.
d. It is based solely on the benefit derived by the owners of the land.
The preference share capital is 10% cumulative and convertible into 100,000 ordinary shares.
Dividends on preference shares are in arrears for two years. The 12% bonds are convertible into 80
ordinary shares for each P1,000 bond. Unexercised share options to purchase 90,000 ordinary shares at
P20 per share were outstanding at the beginning and ending of 2016. The average market price of the
ordinary share was P30 per share and the market price on December 31, 2016 was P40 per share.
May 1 Issued 60,000 ordinary shares at P25 per share.
July 1 Purchased 100,000 ordinary shares at P15 to be held as treasury.
Oct. 1 Converted bonds with face amount of P2,000,000.
Dec. 31 The net income for 2016 was P5,000,000. The tax rate is 30%.
What is the amount of basic earnings per share? 5.72
3. Loeb Corp. frequently borrows from the bank in order to maintain sufficient operating cash. The
following loans were at a 12% interest rate, with interest payable at maturity. Loeb repaid each loan on
its scheduled maturity date.
Date of loan Amount Maturity date Term of loan
11/01/2017 5,000 10/31/2018 1 year
02/01/2018 15,000 07/31/2018 6 months
05/01/2018 8,000 01/31/2019 9 months
Loeb records interest expense when the loans are repaid. As a result, interest expense of 1,500 was
recorded in 2018. If no correction is made, by what amount would 2018 interest expense be
understated? 540
4. Brandon Company manufactures a single product. Each unit sells for P15. The firm's projected costs
are listed below:
Variable costs per unit:
Production P5
SG&A P1
Fixed costs:
Production P40,000
SG&A P60,000
Estimated volume 20,000 units
What is Brandon's projected margin of safety for the current year?
ANSWER: P133,333
5. Selected information from the accounting records of the Blackwood Co. is as follows:
Net A/R at December 31, 2016 P 900,000
Net A/R at December 31, 2017 P1,000,000
Accounts receivable turnover 5 to 1
Inventories at December 31, 2016 P1,100,000
Inventories at December 31, 2017 P1,200,000
Inventory turnover 4 to 1
What was the gross margin for 2017?
ANSWER: P150,000
6. Almos Corporation produces a product that sells for P10 per unit. The variable cost per unit is P6 and
total fixed costs are P12,000. At this selling price, the company earns a profit equal to 10% of total
peso sales. By reducing its selling price to P9 per unit, the manufacturer can increase its unit sales
volume by 25%. Assume that there are no taxes and that total fixed costs and variable cost per unit
remain unchanged. If the selling price were reduced to P9 per unit, the company’s profit would have
been .
ANSWER: P3,000
7. An independent auditor discovers that a payroll supervisor of the company being audited has
misappropriated P50,000. The company’s total assets and income before tax are P70 million and P15
million, respectively. Assuming no other issues affect the report, the auditor’s report will most likely
contain a/an
A. Unmodified opinion C. Adverse opinion.
B. Disclaimer of opinion D. Scope qualification
8. Which of the following statements is not correct about materiality?
A. The concept of materiality recognizes that some matters are important for fair presentation of
financial statements in conformity with GAAP, while other matters are not important
B. An auditor considers materiality for the aggregate level of misstatements that could be
material to any one of the financial statements individually
C. Materiality judgments are made in light of surrounding circumstances and necessarily involve
both quantitative and qualitative judgments
D. An auditor's consideration of materiality is influenced by the auditor's perception of the needs
of a reasonable person who will rely on the financial statements
2. Responding to a question such as "What would happen if…" is an attribute of which of the following
types of engagements?
a. Financial projection
b. Financial forecast
c. Financial forecast and financial projection
d. Review
Cash 500,000
Accounts receivable 2,500,000
Inventory 2,000,000
Prepaid expenses 100,000
Total current assets 5,100,000
Doubtful accounts are provided for a percentage of credit sales. The accountant calculates the
percentage annually by using the experience of the three years prior to the current year.
How much should be reported as allowance for doubtful accounts on December 31, 2017?
ANSWER: 1,100,000
5. Tax of a fixed proportion of the amount or value of the property with respect to which the tax is
assessed.
A. Specific C. Excise
B. Ad-valorem D. Percentage