IntAcc3_Final Departmental

Examination_2nd Sem AY 2020-

2021
Faith is the confidence that what we hope for will happen; it gives us assurance about things we cannot see.
Have faith and always bear in your mind that you can answer everything to the best that you can. Always
observe HONESTY during the examination. GOD BLESS!

Instruction: Choose the letter of the best answer.


Hi Mark Hendrix, when you submit this form, the owner will be able to see your name and email address.

* Required

NAME (ALL IN CAPITAL LETTERS: SURNAME, FIRST NAME MI.) *

SISON, MARK HENDRIX V.

STUDENT NUMBER (EXAMPLE: 2008-00432-MN-0) *

2019-07137-MN-0
 3

SECTION (EXAMPLE: BSA 2-2) *

BSMA 2-2

BRANCH/CAMPUS *

PUP MAIN

PUP Alfonso

PUP Bataan

PUP Lopez

PUP Maragondon

PUP San Juan

PUP San Pedro

PUP Sta. Maria, Bulacan

PUP Sta. Rosa, Laguna

PUP Taguig City

PUP Sto. Tomas

Which of the following statements is incorrect concerning the actuarial assumptions? *

(1 Point)

Post-employment benefit obligation shall be measured on a basis that reflects current salary and
ignores future salary increase
 Actuarial assumptions are unbiased if they are neither imprudent nor excessively conservative

Actuarial assumptions shall beunbiased and mutually compatible

Actuarial assumptions shall be unbiased and mutually compatible

In connection with the share option for the benefit of the key employees, Hairy Company
intends to distribute treasury shares when the options are exercised. These shares were
bought in 2016 at P42 per share. On January 01, 2021, Hairy granted share options for
10,000 shares at P38 per share as additional compensation for services to be rendered
over the next three years. The options are exercisable during a four-year period beginning
January 01, 2024, by grantees still employed by the company. Market price of Hairy’s
share was P47 per share at the date of grant. No share options were terminated in 2021.
What amount should be reported as compensation expense pertaining to the option
in Hairy’s December 31, 2021 statement of comprehensive income? *
(2 Points)

P90,000

P40,000

P30,000

P-0-

Statement1: Upon issue of share rights, the issuing corporation records the transaction by
a memorandum entry, listing the additional number of shares that may be acquired
through the exercise.

Statement2: The expiry of share rights is recorded with a loss on share rights. *
(1 Point)

Both statements are correct

Only statement 1 is correct

Both statements are incorrect

 Only statement 2 is correct

Statement1: The rate used to discount post‑employment benefit obligations (both funded
and unfunded) shall be determined by reference to market yields at the end of the
reporting period on normal quality corporate bonds.

Statement 2: The return on plan assets is interest, dividends and other income derived
from the plan assets, together with realized and unrealized gains or losses on the plan
assets, less: (a) any costs of managing plan assets; and (b) any tax receivable by the plan
itself, other than tax included in the actuarial assumptions used to measure the present
value of the defined benefit obligation. *
(1 Point)

Only Statement 1 is true.

Only Statement 2 is true.

All statements are true.

All statements are false.

On November 1,2020, ABC Company leased a piece of furniture to XYZ Corporation under
a 9-month operating lease.  Total rent for the term of the lease will be P36,000, payable as
follows:

· P5,000 per month for the first 3 months- P15,000

· P4,500 per month for the next 3 months- P13,500

· P2,500 per month for at least 3 months- P7,500

Payments were made in advance on a monthly basis.  XYZ uses the calendar year. The
monthly entries in the books of ABC Company on February 1, March 1 and April 1,
2021 is *
(2 Points)

None of the foregoing

Dr. Cash- P4,500; Cr. Rent Revenue- P4,000; Cr. Unearned Rent- P500
 Dr. Cash- P2,500; Cr. Rent Revenue- P2,000; Cr. Unearned Rent- P500

Dr. Cash- P5,000;Cr. Rent Revenue- P4,000; Cr. Unearned Rent- P1,000

10

Statement1: The surplus in defined benefit plan is subject to a limit. It shall be measured
at the lower of: (a) the surplus in the defined benefit plan; and (b)the asset ceiling
determined using the discount rate which is equal to the present value of the future
economic benefits.      

Statement2: Any change in the effect of the asset ceiling, excluding amounts included in
net interest on the net defined benefit liability (asset) will be recorded as remeasurements
of the net defined benefit liability (asset). *
(1 Point)

Only Statement 2 is true.

Only Statement 1 is true.

All statements are true.

All statements are false.

11

Statement1: A corporation can record the preference share capital at fair value     

Statement2: A corporation can issue all types of preference shares *

(1 Point)

Both statements are incorrect

Only statement 2 is correct

Only statement 1 is correct

Both statements are correct

 12

Statement 1: Current liabilities include accrued expenses with a carrying amount of

P500.The related expense will be deducted for tax purposes on a cash basis. The tax base
of the accrued expenses is zero.

Statement 2: Current liabilities include accrued expenses with a carrying amount of

P500.The related expense has already been deducted for tax purposes. The tax base of the
accrued expenses is P500.

Statement 3: An asset of Permission to Dance Corp. which cost P150 has a carrying
amount of P100. Cumulative depreciation for tax purposes is P90 and the tax rate is 25%.
Therefore, the entity recognizes a deferred tax liability of P10 (P40 at 25%) representing
the income taxes that it will pay when it recovers the carrying amount of the asset. *
(1 Point)

Only Statement 1 and 2 are true.

Only Statement 2 is true.

Only Statement 1 and 3 are true.

All statements are false.

Only Statement 2 and 3 are true.

Only Statement 1 is true.

Only Statement 3 is true.

All statements are true.

13

At the beginning of the current year, Permission to Dance Co. reported P1,750,000 of
appropriated retained earnings for the construction of the newbuilding which was
completed late in the current year. For the current year, P1,200,000 was appropriated for
plant expansion. P1,500,000 cash was restricted for the retirement of bonds payable. Also,
the company acquired treasury shares for a total cost of P500,000. On December 31 of
the current year, the entity should report appropriated retained earnings of *
(2 Points)
 P3,200,000

P2,700,000

P2,950,000

P1,200,000                                                     

14

The following date relate to the defined benefit plan of Bronson Company for the year
ended December 31, 2020:

· Present value of benefit obligation, January 1, 2020- P15,000,000

· Fair Value of plan asset, January 2, 2020- P14,000,000

· Contribution during the year- P1,050,000

· Current service cost- P800,000

· Benefits paid during the year- P1,500,000

· Present value of benefit obligation, December 31, 2020- P17,000,000

· Fair value of plan asset, December 31, 2020- P4,920,000

· Discount rate- 6%

· Expected rate of return- 7%

What amount of net remeasurement gain and loss should be reported in the other
comprehensive income? *
(2 Points)

P1,680,000

P840,000

P530,000                                

P2,210,000
 15

Statement I. Transaction costs related to equity transactions public relations consultant’s

fees are charged to additional paid in capital (share premium).

Statement II. In the share options that vest based on service condition, the amount of
compensation expense is measured based on the fair value of the options at the end of
the vesting period using an option pricing model. *
(1 Point)

Both statements are false.

Statement I is false; Statement II is true.

Statement I is true; Statement II is false.

Both statements are true.

16

Which of the following statement/s are incorrect?

I. An enterprise should not recognize a contingent liability

II. The amount recognized as a provision should be the best estimate of the expenditure
required to settle the present obligation at the end of the reporting period.

III. A provision is a liability of certain timing and amount.

IV. Accruals are liabilities to pay for goods or services that have been received or supplied
but have not been paid. *
(1 Point)

II and IV only

III only

I, II and IV

I and IV only
 17

Statement 1: Appropriation for retained earnings do not change both on the total amount
of shareholder’s equity and total retained earnings.

Statement 2: Appropriated Retained Earnings account is created for the purpose of

insuring the payment of dividends.

Statement 3: Appropriated Retained Earnings does not mean that assets are segregated
for a specific purpose.

Statement 4: The only proper way to eliminate an appropriation of retained earnings after
it has served its purpose is to reclassify/revert to the unappropriated retained earnings. *
(1 Point)

Only three (3) of the statements are correct

All statements are correct

Only two (2) of the statements are correct

Only one (1) of the statements are correct

All statements are incorrect

18

On January 1, 2020, BTS Corporation granted share options to its employees with a fair
value of P4,500,000. The options vest in three years and are exercisable starting January 1,
2023 until Dec. 31, 2023. On December 31, 2020, it was estimated that 5% of the
employees will leave the Company. This estimate was revised to 6% during the year 2021.
On December 31, 2022, it was determined that 80% of the employees remained in the
company.  What is the amount charged to compensation expense in 2022? *
(2 Points)

P780,000

P1,395,000

P1,425,000

P1,500,000     
 19

Saturn Company started business in 2020. It sells printers with a three- year warranty.
Saturn estimates its warranty cost as a percentage of peso sales. Based on past
experience, it is estimated that 2 % will be repaired during the first year of warranty, 4%
will be repaired during the second year of warranty and 6% will be repaired in the third
year.

In 2020 and 2021, the company was able to sell 7,500 units and 8,400 units, respectively at
a selling price of P 5,000 per unit. The company also incurred actual repair costs of
P530,000 and P 1,176,000 in 2020 and 2021, respectively.

What amount should Saturn report as warranty expense in 2020? *

(2 Points)

P 4,500,000

P 3,970,000

P 5,040,000

P 7,834,000

20

A retail store received cash and issued gift certificates that are redeemable in
merchandise.  How would the deferred revenue account be affected by the redemption
and non-redemption of certificates, respectively? *
(1 Point)

No effect; No effect

Decrease; Decrease

Decrease;No effect

No effect; Decrease
 21

STAR CORP. reports pretax financial income of P700,000 for 2021. The following caused
taxable income to be different than financial income:          

· Depreciation on the tax return is greater than depreciation on the income statement by
P160,000.

· Rent collected on the tax return is greater than rent earned on the income statement by
P220,000.

· Fines for pollution appears as an expense of P110,000 on the income statement.

           

STAR’s tax rate is 32% for all years and the company expects to report taxable income in
all future years. There are no deferred taxes at the beginning of 2021.    

Assuming the current tax rate is 32% but enacted tax laws require that beginning
2022 tax rate will be 25%, what total amount of tax expense should STAR report in
its 2021 profit or loss? *
(2 Points)

P258,600

P263,400

P278,400        

P298,200

22

A deferred tax asset shall be recognized for all *

(1 Point)

taxable temporary differences and it is probable that accounting profit will be available against which
the deductible temporary differences can be utilized.

taxable temporary differences and it is probable that taxable profit will be available against which the
deductible temporary differences can be utilized.

deductible temporary differences and it is probable that taxable profit will be available against which
the deductible temporary differences can be utilized.

deductible temporary differencesand it is probable that accounting profit will be available against
which thedeductible temporary differences can be utilized.
 23

On January 1, 2017,  ABC COMPANY acquired an equipment for P8,000,000. The

equipment is depreciated using straight line method based on a useful life of 8 years with
no residual value.

On January 1, 2020, after 3 years, the equipment was revalued at a replacement cost of P
12,000,000 with no change in the useful life. The pretax accounting income before
depreciation for 2020 is P10,000,000. The income tax rate is 30% and there are no other
temporary differences at the beginning of the year.

What is the deferred tax liability on January 1, 2020 arising from revaluation? *
(2 Points)

P0

P450,000

P1,200,000

P750,000

24

Statement1: Whenever necessary in order to classify and account for a lease of land and
buildings, a lessor shall allocate lease payments (including any lump-sum up front
payments) between the land and the buildings elements in proportion to the relative fair
values of the leasehold interests in the land element and buildings element of the lease at
the inception date.

Statement2: For a lease of land and buildings in which the amount for the land element is
immaterial to the lease, a lessor may treat the land and buildings as a single unit for the
purpose of lease classification and classify it as a finance lease or an operating lease. *
(1 Point)

Both statements are true.

Both statements are false.

Only Statement 2 is true.

 Only Statement 1 is true.

25

Saturn Company started business in 2020. It sells printers with a three- year warranty.
Saturn estimates its warranty cost as a percentage of peso sales. Based on past
experience, it is estimated that 2 % will be repaired during the first year of warranty, 4%
will be repaired during the second year of warranty and 6% will be repaired in the third
year.

In 2020 and 2021, the company was able to sell 7,500 units and 8,400 units, respectively at
a selling price of P 5,000 per unit. The company also incurred actual repair costs of
P530,000 and P 1,176,000 in 2020 and 2021, respectively.

What is the amount of liability for warranty reported in Saturn’s December 31,
2021statement of financial position?

*
(2 Points)

P7,834,000

P 4,500,000

P 3,970,000

P 5,040,000
 26

On December 31, 2020,4Ps Company had the following balances in its memorandum
records related to its defined benefit plan:

· Fair value of plan assets- P10,000,000

· Benefit obligation- P12,000,000

           

Other relevant information relating to the plan for 2021 follows:

· Current service cost- P2,000,000

· Past service cost- P1,300,000

· Actual return on plan assets- P1,500,000

· Actuarial gain on benefit obligation- P400,000

· Actuarial gain on plan assets- P500,000

· Present value of benefits settled- P900,000

· Settlement price- P800,000

· Contribution to the plan- P3,100,000

· Discount rate- 12%

How much is the employee benefit expense taken to profit or loss during 2021? *
(2 Points)

P3,540,000

P3,640,000

P3,300,000

P3,440,000

27

Statement 1: Taxable temporary differences are temporary differences that will result in
taxable amounts in determining taxable profit (tax loss) of current periods when the
carrying amount of the asset or liability is recovered or settled.

Statement 2: Offsetting of current tax assets against current tax liabilities shall be allowed
only if the enterprise has a legally enforceable right to set off the recognized amounts and
intends to settle on a net basis, or to realize the asset and settle the liability
simultaneously. *
(1 Point)
 All statements are true.

OnlyStatement 1 is true.

Only Statement 2 is true.

All statements are false.

28

Sariling Sikap Corporation has a convertible preference shares with a 2 for 1 ordinary
share conversion basis. Other relevant information at January 31, 2021 is as follows:

· Preference Share,P40 par, 50,000 shares issued and outstanding- P2,000,000

· Ordinary Share Capital, P50 par, 80,000 shares issued and outstanding- P4,000,000

· Share Premium-Preference- P300,000

· Share Premium-Ordinary- P600,000

· Retained Earnings- P750,000

Assuming a 30,000 preference shares was converted, how much will be charged to
Retained Earnings as a result of conversion?          *
(2 Points)

P0                                                                               

P120,000

P630,000

P112,500
 29

On January 1, 2018, Permission to Dance Inc. grants to an employee the right to choose
either 1,000 phantom shares (i.e. a right to a cash payment equal to the fair value of 1,000
shares) or 1,200 shares with a par value of P10 per share. The grant is conditional upon
the completion of three years’ service. If the employee chooses the share alternative, the
shares must be held for three years after the vesting date.

At the date of grant, the entity’s share price is P50 per share. At the end of year 2018,
2019 and 2020, the share price is P52, P55 and P60, respectively. The entity does not
expect to pay dividends in the next three years. After taking into account the effects of the
post-vesting transfer restrictions, the entity estimates that the grant date fair value of the
share alternative is P48per share.

If the employee has chosen the cash alternative, the amount to be paid at the end of
2020 should be *
(2 Points)

P55,000

P52,000                      

P67,600

P60,000

30

Statement I. The holder oftreasury shares does not have the right to vote, to exercise pre-
emptiverights, to receive dividends, or receive assets upon corporate liquidation.

Statement II. In a treasury shares transactions, the “retained earnings” account may be
debited or credited. *
(1 Point)

Both statements are true.

Statement I is true; Statement II is false.

Both statements are false.

Statement I is false; Statement II is true.

 31

The Pinoy Company has determined that its taxable income for the year 2021
isP3,000,000.   The following related facts were gathered (Income tax rate for current and
future years is 30%):

Cumulative temporary differences, 12/31/2021

> Taxable temporary differences- P1,480,000

> Deductible temporary differences- P750,000

Permanent differences:

> Non-taxable revenue- P200,000

> Non-deductible expenses- P600,000

Deferred tax asset, December 31, 2020- P150,000

Deferred tax liability, December 31, 2020- P300,000

           

How much is the total income tax expense (current and deferred) for the year 2021?
*
(2 Points)

P813,000

P969,000

P831,000

P900,000

32

I. A formula in a defined contribution plan defines the benefits that the employee will
receive at the time of retirement

II. Any unpaid contribution at the end of the period for defined contribution plan shall be
recognized as accrued liability

III. The amount expensed in a defined contribution plan is not necessarily the expense to
be recognized since its accounting is more complex *
(1 Point)
 True, True, False

False, False, True

True, False, False

True, False, True

False, True, False

33

On January 2, 2021, Hydro Company grants 50 shares each to 400 employees, conditional
upon the employees’ remaining in the company’s employ during the vesting period. 

The shares will vest at the end of 2021 if the company’s earnings increased by more than
15%; or at the end of 2022 if the earnings increased by an average of 12%over the two-
year period; or at the end of 2022 if the earnings increased by an average of 10% over the
three-year period. The shares have a fair value of P25 on January 2, 2021, which is equal
to the share price on the grant date.

At the end of 2021, earnings had increased by 13% and the company expects that
earnings will continue to increase at a similar rate in 2022 and expects to vest in 2022.  At
the end of 2022,earnings increased by only 9% and therefore shares do not vest at the
end of 2022.  The company expects that earnings will continue to increase at similar
rate. At the end of 2023, earnings increased by 9%.

The amount of remuneration expense should the company recognize in its December
31,2023 profit or loss? *
(2 Points)

P166,667

P500,000

P250,000

P83,333                                  
34

BTS Company, a grocery retailer, operates a customer loyalty program.  The entity grants
program members loyalty points when they spend a specified amount on groceries. 
Program members can redeem the points for further groceries.  The points have no expiry
date.

During2019, the sales amounted to P7,000,000 and the entity have granted 10,000points. 
Management expects that only 80%of the points will be redeemed. The cost of each
loyalty point is P100.  As of December 31, 2019, 4,800 points have already been
redeemed.

In2020, the management revised its expectations to 90% of the points will be redeemed.
As of December 31, 2020, the entity redeemed 2,400 points. What amount should be
reported as revenue earned from loyalty points in 2020? *
(2 Points)

P210,000

P700,000

P175,000

P200,000
 35

Company gives warranties at the time of sale to purchasers of its product.  The entity
undertakes to make good, by repair or replacement, manufacturing defects that become
apparent within one year from the date of sale.  Sales of P5,000,000 were made evenly
throughout 2019.  The expenditures for warranty repairs and replacements for the
product sold in 2019 are expected to be made 50% in 2019 and 50% in 2020.  The 2020
outflows of economic benefits related to the warranty will take place on December 31,
2020.

The entity estimated that 75% of products sold require no warranty repairs, 15% of
products sold require minor repairs costing P100,000 and 10% of products sold require
major repairs costing P400,000. An appropriate risk adjustment factor to reflect the
uncertainties in the cash flow estimates is an increment of 6% to the probability weighted
expected cash flows.  The appropriate discount factor for cash flows expected to occur on
December 31, 2020 is 0.94.  What amount should be reported as warranty liability as
of December 31, 2019? *
(2 Points)

P249,100

P250,000

P235,000

P265,000
 36

BTS Company entered into a 10-year lease of a commercial space on January 1, 2021.
Annual lease payment payable at the beginning of each year amounted to P500,000.  The
company has paid commissions of P200,000to Army ™, a real estate brokerage firm that
have helped the company closed the reasonable deal with the lessor.

Details found on the signed contract of lease are as follows:

·  Residual value at the end of the lease term (20% is not guaranteed)- P250,000

·  Purchase option at the end of the lease term- P150,000

·  Annual property taxes (amount to be shouldered by the lessee)- P50,000

·  Lessee’s share in annual insurance- P30,000

·   Annual budgeted repairs and maintenance expenses- P20,000

The cost of dismantling the improvements and fixtures and restoring the commercial
space into its original intended use after the end of the lease term is estimated to be at
P350,000. 

Considering the flooding, fault line and deterioration in the vicinity and the current plan
to build a cemetery in front of the leased premises, the appraiser estimated that the fair
value of the leased commercial space at the end of the lease term is just P125,000.  He
also estimated the remaining economic life of the property to be 12 years.

BTS incremental borrowing rate is 8%, which is also the prevailing interest rate in 2020. 
Based on the unrevealed intelligence gathered by Army ™, the implicit interest rate is 6%.

Compute the lease liability and the right of use asset after first payment as of
January 1, 2021 and after determining the most likely decision of the company as to
whether it will purchase or return the commercial space at the end of the lease term
(round off PV factors at 5 decimal places). *
(2 Points)

Lease Liability- P3,761,085; Right of Use Asset- P4,078,205

Lease Liability- P3,692,925; Right of Use Asset- P4,055,045

Lease Liability- P3,192,925; Right of Use Asset- P3,892,925

Lease Liability- P3,761,085; Right of Use Asset- P4,311,085

 37

A deferred tax liability uses *

(1 Point)

either current or expected future tax laws, regardless of whether those expected laws have been
enacted.

current tax laws, unless enacted future tax laws are different.

expected future tax law, regardless of whether those expected laws have been enacted.

the current tax laws, regardless of expected or enacted future tax laws.

38

On My Own Corporation was organized on Feb 01, 2021. The corporation was authorized
to issue 40,000 shares of 8% preference shares, P130 par value, and 150,000 shares of
ordinary shares, P70 par value. Transactions for the year were as
follows:                                                                                              

· Mar 31 - Sold 45,000 shares of ordinary shares at P85 for cash                                           

· Apr 30 - Issued 5,000 shares of ordinary shares in exchange for an equipment with a fair
market value of P400,000                                                                                    

· May 21 - 18,000 shares of ordinary shares were subscribed at P85 and a 60% payment
were received.                                                                                             

How much is the legal capital at the end of the year 2021? *
(2 Points)

P4,760,000

P4,225,000

P5,755,000

P3,500,000
 39

Which of the following is true regarding reporting deferred taxes in the financial
statements? *
(1 Point)

deferred tax assets and liabilities are classified as current and noncurrent based on their expiration
date.

deferred tax assets are netted with deferred tax liabilities to arrive at one amount presented on the
financial statements.

deferred taxes of one jurisdiction shall be offset against another jurisdiction in the netting process.

deferred tax assets andliabilities are classified as noncurrent only.

40

On January 1, 2019, Lotte Company enters into a 10-year lease of machinery with annual
lease payments of P800,000 payable at the beginning of each year. The contract specifies
that the lease payments will increase every two years on the basis of the increase in
consumer price index for the preceding 24 months.  The consumer price index at the
commencement date is 140. The rate implicit in the lease is not readily determinable.
Lessee’s incremental borrowing rate is 8% per annum, which reflects the fixed rate at
which lessee could borrow an amount similar to the value of the right-of-use asset, in the
same currency, for a ten-year term and with similar collateral. At the beginning of third
year (January 1, 2021) of the lease, the consumer price index is 160. How much is the
balance of the lease liability as of December 31, 2021? *
(2 Points)

P4,226,634

P5,140,920

P5,674,397

P3,698,303
 41

Joseph Corporation prepared the following reconciliation for its first year of operations:

· Pretax financial income for 2020- P1,200,000

· Tax exempt interest- P100,000

· Taxable temporary difference - P300,000

The temporary difference will reverse evenly over the next two years at an enacted tax
rate of 40%. The enacted tax rate for 2020 is 28%. What amount should be reported in
its 2020 income statement as the current portion of its provision for income taxes? *
(2 Points)

P320,000

P224,000

P336,000

P480,000

42

Which statement is incorrect if a grant of equity instruments is cancelled or settled during

the vesting period? *
(1 Point)

Any payment made to the employee on the cancellation or settlement of the grant that exceeds the
fair value of the equity instruments granted, measured at the repurchase date shall be recognized as an
expense.

The entity shall account for thecancellation or settlement as an acceleration of vesting, and shall
thereforerecognize immediately the amount that otherwise would have been recognized forservices
received over the remainder of the vesting period.

Any payment made to the employee on the cancellation or settlement of the grant shall be accounted
for as the repurchase of an equity interest.

If the share-based payment arrangement included liability components, the entity shall remeasure the
fair value of the liability and equity components at the date of cancellation or settlement.
 43

If during the current year, taxable profit is greater than accounting profit and the
difference is a temporary difference, *
(1 Point)

a deferred tax liability is recognized at the end of the current year.

a deferred tax asset is recognized at the end of the current year.

deferred tax asset will be recognized in future years.

a deferred tax liability will berecognized in future years.

44

What is measured by the defined benefit obligation? *

(1 Point)

The pension expense, computed bythe plan formula applied to years of service to date, assuming
future salarylevels.

The pension obligation, computed by the plan formula applied to years of service to date, assuming
future salary levels.

The pension obligation, computed by the plan formula applied to years of service to date, using
existing salary levels.

The pension expense, computed by the plan formula applied to years of service to date, using existing
salary levels.
 45

The following facts relate to the Lional Co. postretirement benefits plan for 2021:

· Service cost- P136,000

· Discount rate- 9%

· Post-employment benefit obligation, January 1, 2021- P1,200,000

· Benefit payments to employees- P92,000

The amount of postretirement expense for 2021 is *

(2 Points)

P244,000.

P336,000.

 P136,000.

P280,000.

46

Which of the following transactions involving the issuance of shares does not come within
the definition of a ‘share-based’ payment under IFRS 2? *
(1 Point)

Employee share purchased plans

Share-based payment relating to an acquisition of a subsidiary

Share appreciation rights

Employee share option plans

47

In an operating lease, rent collected in advance by the lessor should be treated as *

(1 Point)

accrued asset
 unearned income

accrued liability

prepaid expense

48

Which of the following would create a deferred tax liability? *

(1 Point)

Subscription received in advance

Accrual of warranty expense

Excess of tax depreciation over financial accounting depreciation

Interest revenue on government issued securities

49

Best, Inc. had pre-tax accounting income of P900,000 in 2020, its first year of operations.
During 2020 the company had the following transactions:

· Received rent from Jane, Co. for year 2021- P32,000

· Government bonds interest income- P40,000

· Depreciation for tax purposes in excess of book depreciation- P20,000

· Installment sales revenue to be collected in 2021- P54,000

                       

At the end of 2020, which of the following deferred tax accounts and balances is
reported on Rex, Inc.’s statement of financial position? (assume income tax rate of
40%) *
(2 Points)

Deferred tax liability- P12,800

Deferred tax asset- P12,800   

Deferred tax asset- P20,800

Deferred tax liability- P20,800

50

In September 2019, West Corp. made a dividend distribution of one right for each of its
120,000 ordinary shares outstanding.  Each right was exercisable for the purchase of 1/100
of a share of West's P50 variable rate preference shares at an exercise price of P80 per
share.  On March 20, 2021, none of the rights had been exercised, and West redeemed
them by paying each shareholder P0.10 per right. As a result of this redemption, West's
shareholders' equity was reduced by *
(2 Points)

P2,400

P12,000

P120

P36,000

51

Based on the following information, what is the 2020 taxable income for West Co.
assuming that its pre-tax accounting income for the year ended December 31,2020 is
P230,000.

·  Installment sales-future taxable amount of P192,000

·  Depreciation -future taxable amount of P60,000

·  Unearned rent-future deductible amount of P200,000 *

(2 Points)

P222,000

P482,000

P282,000        

P178,000
 52

Cris Company reported the following results for the year ended December 31, 2020, its
first year of operations:
· Income (per books before income taxes)- P750,000

· Taxable income-P1,200,000

The disparity between book income and taxable income is attributable to a temporary
difference which will reverse in 2021. What should Cris record as a net deferred tax
asset or liability for the year ended December 31, 2020, assuming that the enacted
tax rates in effect are 40% in 2020 and 35% in 2021? *
(2 Points)

P157,500 deferred tax asset

P180,000 deferred tax liability

P180,000 deferred tax asset

P157,500 deferred tax liability

53

Permission to Dance Company provides retirement benefits to employees through

defined contribution plan. The plan provides Permission to Dance shall contribute
annually 8% of gross payroll to a funding agency. In addition, the entity is also required to
contribute 5% of annual sales exceeding P10,000,000. During 2021, gross payroll of the
company was P6,000,000 and the total sales amounted to P35,000,000. Which of the
following is part of the entries that would be recorded by Permission to Dance
assuming that the company contributed P1,700,000? *
(2 Points)

Credit Cash, P1,730,000

Debit Retirement Benefit Expense, P480,000

Credit Accrued Retirement Benefit Cost, P30,000

Debit Prepaid Retirement Benefit Cost, P30,000

54

On January 1, 2020, Honesty Company had the following data in connection with its
defined benefit plan:

·  Fair value of plan assets- P6,500,000

·  Defined benefit obligation- P7,500,000

The accountant revealed the following information for the current year:

·  Current service costs- P1,600,000

·  Discount rate- 10%

·  Actual return on plan assets- P600,000

·  Expected return on plan assets- 8%

·  Contribution to the plan- P1,500,000

How much is the retirement benefit expense in 2020? *

(2 Points)

P1,600,000

P1,750,000

P2,350,000

P1,830,000

55

Question
What is the correct balance of Accumulated Profits on December 31, 2021?

*
(2 Points)
 P90,000

P76,000

P96,000

P86,000

P-0-

56

Which of the statements concerning plan assets are correct?

I. Plan assets are available to be used only to pay or fund employee benefits.

II. Plan assets are available to the reporting entity’s own creditors.

III. Plan assets can be returned to the reporting entity when the remaining assets of the
fund are sufficient to meet all the related employee benefit obligations of the plan of the
reporting entity.

IV. Plan assets comprise assets held by a long-term employee benefit fund and qualifying
insurance policies. *
(1 Point)

I, II, IV
 II, III, IV

I, III, IV

I,II, III

57

Alease that transfers substantially all the risks and rewards incidental to ownership of an
underlying asset *
(1 Point)

optional lease

operating lease

finance lease

lease

58

Which of the following statements is incorrect?        *

(1 Point)

The holders of ordinary and preference shares elect the corporation's board of directors

The corporation cannot issue shares more than its authorized number of shares

New term for the corporation in the revised corporation code will now be considered perpetual

The trust fund doctrine provides that subscriptions to the capital stock of a corporation constitute a
fund to which creditors have a right to look for the satisfaction of their claims
 59

The following information pertains to a leased contract entered into by Assurance

Company, lessee, on January 1, 2018: Lease term, 5 years, useful life of the leased asset, 20
years; Annual rental payable at year-end, P800,000 and the implicit rate is10%. The lease
contract contains an option for Assurance Company to extend for another 5 years but at
the commencement of the lease, the exercise of the option is not reasonably certain,
however on January 1, 2021, Assurance Company decided to extend the lease term by
another 5 years. However, the annual rental starting 2023 (6th year) will be P1,000,000 and
the new implicit rate is 8%. How much is the depreciation expense in 2021? *
(2 Points)

P643,293

P658,823

P670,723

P667,763

60

On July 1, 2021, Permission to Dance (PTD) Corporation has 200,000shares of P10 par
common stock outstanding and the market price of the stock isP12 per share. On the
same date, PTD declared a 1-for-2 reverse stock split. The par of the stock was increased
from P10 to P20 and one new P20 par share was issued for each two P10 par shares
outstanding. Immediately before the1-for-2 reverse stock split, PTD’s additional paid-in
capital was P450,000. What should be the balance in PTD’s additional paid-in capital
account immediately after the reverse stock split is effected? *
(2 Points)

P0

P650,000

P450,000

P850,000
 61

At the beginning of the current year, KitKat Co. announced the decision to close the
factory located in Cebu and terminate all200 employees as a result of economic
downturn. The entity shall pay P20,000per employee upon termination. However, to
ensure that the windup of the factory occurs smoothly and all remaining customer orders
are completed, the entity needs to retain at least 30% of the employee until closure of the
factory until three months. As a result, the entity announced the employee who agree to
stay until the closing of the factory shall receive P80,000 payment at the end of third
month instead of the P20,000. Based on this offer, the entity expected to retain 60
employees until the factory is close. What is the amount of total employee benefit
expense? *
(2 Points)

P4,000,000

P2,000,000                 

P3,000,000

P7,600,000

P6,000,000
 62

On January 1, 2020,Integrity Company had the following data in connection with its
defined benefit plan:

· Fair value of plan assets- P5,000,000

· Defined benefit obligation- P5,800,000

The following information were gathered relating to the current year:

· Current service costs- P800,000

· Past service costs- P450,000

· Discount rate- 10%

· Actual return on plan assets- P420,000

· Expected return on plan assets- 8%

· Benefits paid- P350,000

· Contribution made- P850,000

How much is the balance of Plan Assets on December 31, 2020? *

(2 Points)

P5,880,000

P5,000,000

P5,920,000

P5,940,000

63

Which statement is incorrect about provisions and contingent liabilities? *

(1 Point)

A provision is a liability of uncertain timing or amount.

Contingent liability is not recognized in the financial statement, but is disclosed in the notes, unless the
outflow of resources embodying economic benefits is considered remote.

Contingent liability isnot disclosed in the financial statement

Provisions may be recognized in the statement of financial position when a reliable estimate can be
made of the amount of the obligation.
 64

Which of the following may not affect retained earnings or earned capital? *
(1 Point)

Loss on reissuance of treasury shares

Profit or loss for the period

Gain on reissuance of treasury shares

Correction of prior period errors

65

On July 31, 2021, Eastern Co. amended its single employee defined benefit pension plan
by granting increased benefits for services provided prior to 2021. This past service cost
will be reflected in the financial statement(s)for *
(1 Point)

Years 2021, and years before and following 2021

Year 2021, and following years only.

Years 2021 only

Years before 2021 only

66

Question
Determine the following: (1) Compensationexpense for 2021; (2) Compensation
expense for 2022; (3) Share premium fromoptions on December 31, 2022.

*
(2 Points)
P19,750; P18,750: P38,500

P19,750; P18,750; P37,500

P18,750; P19,750; P38,500

P18,750;P19,750; P37,500

67

Question

How much is the deferred income tax expense (benefit)recorded for the year 2021?

*
(2 Points)
 P115,000

P(115,000)

P65,000

P(65,000)

68

Statement 1: When the company issued a share-based payment with cash alternative, the
fair value of the equity component is deducted from the total fair value of the compound
financial instrument, the excess being assigned as the value of the debt component.

Statement 2: For share-based payment transactions in which the terms of the

arrangement provide either the entity or the counterparty with the choice of whether the
entity settles the transaction in cash (or other assets) or by issuing equity instruments, the
entity shall account for that transaction, or the components of that transaction, as a cash-
settled share-based payment transaction if, and to the extent that, the entity has incurred
a liability to settle in cash or other assets, or as an equity-settled share-based payment
transaction if, and to the extent that, no such liability has been incurred. *
(1 Point)

Both statements are correct

Only statement 1 is correct

 Both statements are incorrect

Only statement 2 is correct

69

Information on Bates Corp.’s defined benefit plan follows:

· Fair value of plan assets, January 1- P1,620,000

· Present value of defined benefit obligation, January 1- P1,800,000

· Vested past service cost- P180,000

· Unvested past service cost (vesting period is 5 years)- P270,000

· Current service cost- P540,000

· Benefits paid to retirees during the year- P360,000

· Net loss on settlement of plan during the year- P45,000

· Actuarial gains during the period- P18,000

· Return on plan assets during the period- P108,000

· Discount rate-11%

How much is the defined benefit cost for the period? *

(2 Points)

P966,600

P1,107,000

P1,036,800

P1,285,200

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