1. In 20x0, Newt Corp. acquired 6,000 shares of its own ₱1 par value ordinary share at ₱18 per share.

In
20x1, Newt issued 3,000 of these shares at ₱25 per share. Newt uses the cost method to account for
its treasury stock transactions. What accounts and amounts should Newt credit in 20x1 to record the
issuance of the 3,000 shares?
Treasury sh. Sh. premium Retained earnings Ordinary sh.
a. ₱54,000 ₱21,000
b. ₱54,000 ₱21,000
c. ₱72,000 ₱3,000
d. ₱51,000 ₱21,000 ₱3,000

2. On September 20x1, West Corp. made a dividend distribution of one right for each of its 120,000
shares of outstanding common stock. Each right was exercisable for the purchase of 1/100 of a share
of West's ₱50 variable rate preference share at an exercise price of ₱80 per share. On March 20, 20x3,
none of the rights had been exercised, and West redeemed them by paying each stockholder ₱0.10 per
right. As a result of this redemption, West's stockholders' equity was reduced by
a. a. 120
b. 2,400
c. 12,000
d. 36,000

3. Entity A reacquires 10,000 of its own shares for ₱50. The shares have par value of ₱10 and were
originally issued at ₱15 per share. Subsequently, Entity A reissues the 10,000 shares at ₱48 per share.
The journal entry to record the reissuance involves which of the following?
a. Debit to Retained earnings for ₱20,000
b. Credit to Cash for ₱480,000
c. Debit to Share premium for ₱50,000
d. Debit to Treasury shares for ₱500,000

4. Entity A reacquires 10,000 of its own shares for ₱50. The shares have par value of ₱10 and were
originally issued at ₱15 per share. Subsequently, Entity A reissues half of the reacquired shares at ₱58
per share and retires the other half. The journal entry to record the retirement of the shares includes
which of the following? (Hint: Provide the entries for both the reissuance and the retirement.)
a. Debit to Retained earnings for ₱175,000
b. Credit to Share premium - retirement for ₱40,000
c. Debit to Share premium for ₱50,000
d. Debit to Retained earnings for ₱135,000

5. Entity A reacquires 1,000 of its own shares for ₱25 and immediately retires them. The shares have par
value of ₱10 and were originally issued at ₱30 per share. The journal entry to record the retirement of
the shares includes which of the following?
a. Debit to Retained earnings for ₱5,000
b. Credit to Treasury shares for ₱30,000
c. Credit to Share capital for ₱10,000
d. Credit to Share premium - retirement for ₱5,000

6. Entity A received a subscription for 2,000 shares at ₱18 per share on March 31, 20x1. Entity A’s shares
have a par value ₱5 per share. Entity A collected the subscription receivable on May 15, 20x1. Which
of the following statements is correct?
a. Entity A should credit share premium for ₱13,000 on March 31, 20x1.
b. Entity A should credit share premium for ₱26,000 on March 31, 20x1.
c. Entity A should credit share premium for ₱13,000 on May 15, 20x1.
d. Entity A should credit share premium for ₱26,000 on May 15, 20x1.
7. Entity A has the following share capital transactions during the year:
Issued 10,000 shares with par value of ₱10 per share for a total consideration of ₱160,000.
Received share subscriptions for 20,000 shares at a subscription price of ₱22 per share. Only half of the
subscriptions were collected by the end of the year.
How much is the total share premium arising from the share transactions above?
a. 60,000 c. 300,000
b. 320,000 d. 180,000

8. Entity A’s total shareholders’ equity was ₱900,000 before recording the following share transactions:
• Received cash subscriptions for 10,000 shares with par value of ₱1 at ₱14 per share. Share
issuance costs amounted to ₱2,000.
• Received subscriptions for 20,000 shares at ₱20 per share. Twenty-five percent down payment
was collected on subscription date.
• Collected the remaining unpaid subscription price of 15,000 subscribed shares and issued the
related share certificates. Share issuance costs amounted to ₱3,000.
How much is the balance of Entity A’s total shareholders’ equity after recording the transactions above? (Hint:
Preparing journal entries makes this problem easier to solve.)
a. 1,490,000 c. 1,360,000
b. 1,510,000 d. 1,610,000

9. The residual interest in a corporation belongs to the

a. management.
b. common stockholders.
c. creditors.
d. preferred stockholders.

10. The pre-emptive right of a common stockholder is the right to

a. share proportionately in corporate assets upon liquidation.
b. share proportionately in any new issues of stock of the same class.
c. receive cash dividends before they are distributed to preferred stockholders.
d. exclude preferred stockholders from voting rights.

11. On settlement (distribution) date, any difference between the carrying amounts of the property dividend
payable and the non-cash asset distributed is
a. ignored
b. recognized in profit or loss
c. recognized directly in retained earnings
d. recognized but subject to a limit

12. If shareholders are given a choice of receiving either property dividends or cash dividends, the entity
shall
a. estimate the dividend payable by considering both the fair value of each alternative and the
associated probability of shareholders selecting each alternative.
b. treat the dividends declared as if they are cash dividends.
c. treat the dividends declared as if they are property dividends.
d. not account for the dividends until their final settlements
13. Imagine you are a CPA. You are preparing the financial statements of your company for the year ended
December 31, 20x1. The board of directors declared dividends on February 1, 20x2. The dividend
declaration is not subject to further approval. The financial statements were authorized for issue on April
1, 20x2. How should the dividends declared be accounted for in the 20x1 financial statements?
a. included in current liabilities c. disclosed only
b. included in noncurrent liabilities d. neither accrued nor disclosed

14. Which of the following may cause a change in the total shareholders’ equity?
a. “small” share dividends d. “large” share dividends
b. share splits e. none of these
c. recapitalization

15. Non-current assets declared as property dividends are

a. reclassified as “non-current assets held for distribution to owners” if the conditions under PFRS 5
are met.
b. reclassified as current assets.
c. not reclassified but presented separately from the other assets.
d. not reclassified but disclosed only.

16. A share-based payment transaction may be

a. equity-settled
b. cash-settled
c. the entity or the counterparty is given the choice of settlement between equity or cash payment.
d. any of these

17. When a share-based payment transaction is with a non-employee, the goods or services received are
measured at the
a. Fair value of the goods or services received
b. Fair value of the equity instrument granted
c. Choice (a) except when this cannot be determined reliably, then the goods or services received
are measured using choice (b)
d. a or b at the option of the entity

18. Intrinsic value is

a. Subscription price minus fair value of shares
b. Fair value of share minus subscription price
c. Subscription price minus fair value of share options
d. Fair value of share options minus subscription price

19. Which of the following statements is correct?

a. PAS 1 Presentation of Financial Statements prescribes the basis for presentation of general and special
purpose financial statements to improve both inter-comparability and intra-comparability.
b. Intra-comparability is also referred to as horizontal comparability while inter-comparability is also referred
to as vertical comparability.
c. Working capital is the net amount of a company’s relatively liquid resources. It is the excess of total assets
over total liabilities.
d. Equity is the residual interest in the net assets of an entity.
20. According to PAS 1, these are financial statements intended to serve the needs of users who do not have
the authority to demand financial reports tailored for their own needs.
a. General purpose financial statements
b. Common purpose financial statements
c. Regular financial statements
d. All-purpose financial statements

21. The assessment of an entity’s going concern shall cover a minimum period of
a. one year c. three years
b. three months d. any of these

22. In which of the following instances would a liability that would otherwise be presented as current is presented
as noncurrent?
a. The liability is payable on demand but the entity estimates that it is probable that the lender will not
demand payment within 12 months after the reporting period.
b. The liability is payable on demand but the lender promises the entity after the reporting period that the
lender will not demand payment in the next 12 months.
c. The entity enters into a refinancing agreement after the reporting period but before the financial
statements are authorized for issue.
d. The entity enters into a refinancing agreement and the refinancing agreement is completed by the
balance sheet date.

23. In a classified balance sheet, deferred tax assets/liabilities are presented as

a. non-current items if the deferred taxes are not expected to reverse within 12 months after the reporting
period
b. noncurrent items
c. current items
d. a or c

24. All of the following statements are correct, except

a. The operating cycle of an entity is the time between the acquisition of assets for processing and their
realization in cash or cash equivalents.
b. When the entity’s normal operating cycle is not clearly identifiable, its duration is presumed to be twelve
months.
c. Current assets include assets (such as inventories and trade receivables) that are sold, consumed or
realized as part of the normal operating cycle even when they are not expected to be realized within
twelve months after the balance sheet date.
d. Some liabilities are part of the working capital used in the entity’s normal operating cycle. Such operating
items are classified as current liabilities even if they are due to be settled more than twelve months after
the balance sheet date.
e. When an entity presents current and non-current assets and current and non-current liabilities as
separate classifications on the face of its balance sheet, it shall classify deferred tax assets (liabilities) as
current assets (liabilities) if the deferred tax assets (liabilities) are expected to reverse within twelve
months after the end of reporting period.

25. Certain criteria must be met before a contract with a customer is accounted for under PFRS 15. Which of the
following precludes a contract from being accounted for under PFRS 15?
a. The consideration is collected in advanced
b. The contract is made orally
c. The contract does not result to a change in the risk, timing or amount of the entity’s future cash flows.
d. The contract is neither oral nor written but rather implied by the entity’s business practices.

26. ABC Co. enters into a contract with XYZ, Inc. to deliver 2 apples, 3 mangoes, and 5 potatoes for a total
consideration of ₱100. In accounting for the contract, which of the following is probably not true?
a. ABC Co. identifies three performance obligations in the contract.
b. ABC Co. allocates the ₱100 transaction price over the promises to deliver the apples, mangoes and
potatoes on the basis of relative stand-alone selling prices of those goods.
c. The allocation of the transaction price may result to the identification of a discount.
d. No revenue is recognized until all of the 2 apples, 3 mangoes and 5 potatoes are delivered even though
the 2 apples were delivered first before the mangoes and potatoes.

27. ABC Co., a manufacturer and dealer of printing machines, had the following transactions during the period:
I. ABC Co. receives an order for the manufacture of a customized machine for a customer. The customer
pays half of the consideration at contract inception. The manufacturing lead time is 1 year. ABC Co.
subcontracts a portion of the manufacturing to XYZ, Inc., another manufacturer.
II. ABC Co. receives an order for a standard machine. Payment is due only after ABC Co. has delivered
and installed the machine. Additionally, the contract requires ABC Co. to perform free maintenance
services over a 3-month period after the machine is installed. ABC Co. completes the delivery and
installation by the end of the reporting period; however, the maintenance period is not yet over.
III. ABC Co. receives an order for 2 machines. The first machine is delivered at contract inception but the
second machine will be delivered after two months. Payment is due only after both machines are
delivered. By the end of the reporting period, the second machine is not yet delivered and the
consideration is not yet collected.
Identify the contracts to which PFRS 15 Revenue from Contract with Customers may be applied.
a. Contract 1 c. Contracts 1, 2 and 3
b. Contract 3 d. None of these

28. It is an agreement between two or more parties that creates enforceable rights and obligations.
a. obligation c. revenue
b. contract d. any of these

29. According to PFRS 15 Revenue from Contracts with Customers contracts with customers are
a. written c. implied
b. oral d. any of these

30. The best evidence for the stand-alone selling price of a good or service is
a. the list price of the good or service
b. the contractually stated price of the good or service
c. the observable price at which the good or service can be sold separately under similar circumstances
and to similar customers
d. the entity’s estimate of the stand-alone selling price

31. Revenue is recognized when (or as) the entity satisfies a performance obligation. According to PFRS 15
Revenue from Contracts with Customers, revenue is measured at
a. the fair value of the consideration received or receivable
b. the transaction price
c. the stand-alone selling price of the good or services transferred
d. the amount of the transaction price allocated to the performance obligation satisfied.
32. The records of SURLY BAD TEMPERED Co. showed the following information:
Decrease in accounts payable 60,000
Disbursements for purchases 440,000
Increase in raw materials 100,000
Direct labor is 50% of raw materials used in production
Manufacturing overhead is 20% of prime costs
Increase in work-in-process inventory 40,000
Decrease in finished goods inventory 50,000
How much is the cost of goods sold?
a. 380,000
b. 464,000
c. 514,000
d. 546,000

33. PRENTICE A LEARNER Co. reported profit after tax of ₱210,000. PRENTICE’s income tax rate is 30%.
Operating expenses for the year is 15% of sales and 25% of cost of sales. Other expenses were 10% of
sales. How much is the total sales?
a. 1,800,000
b. 2,000,000
c. 2,200,000
d. 2,240,000

34. The records of HACK TO CHOP Co. on December 31, 20x1 showed the following information:
Sales 2,000,000
Sales discounts 20,000
Cost of sales 800,000
Distribution costs 96,000
Administrative costs 240,000
Casualty loss on typhoon 40,000
Dividends received from investments in FVPL 24,000
Dividends received from investment in associate 48,000
Share in the profit of an associate 72,000
Dividends declared and paid 28,000
Interest expense 44,000
Unrealized gain on investments in FVPL 30,000
Unrealized gain on investments in FVOCI 38,000
Income tax expense 300,000
Loss on revaluation 26,000
Remeasurements of the net defined benefit liability (asset) – gain 22,000
Correction of understatement in depreciation in prior year 32,000
Translation adjustment of foreign operation – loss 8,000
How much is the profit for the year?
a. 886,000
b. 586,000
c. 612,000
d. 626,000

35. During the period ABC Co. transfers goods to XYZ, Inc. Which of the following does not indicate that the
transaction is a consignment arrangement?
a. ABC Co. retains legal title over the goods until XYZ, Inc. sells them to third parties.
b. ABC Co. can require the return of any unsold goods within 60 days.
c. If XYZ, Inc. is not satisfied with the goods, XYZ, Inc. has the right to return them to ABC Co.
d. ABC Co. can require XYZ, Inc. to transfer the goods to 123 Corporation.
e. XYZ, Inc. is not obligated to remit any payment to ABC Co. unless XYZ, Inc. sells the goods

36. A non-refundable upfront fee that relates to administrative tasks to set up a contract is most likely accounted
for as
a. a prepayment and recognized as revenue only when the related goods or services are transferred to the
customer.
b. a contract asset that is presented separately from contract liability in the statement of financial position
c. as an outright expense
d. all of these

37. On 1 July 20X7, The Pyretus Company, a manufacturer of office furniture, supplied goods to The Natiso
Company for ₱120,000 on condition that this amount was paid in full on 1 July 20X8. Natiso had earlier
rejected an alternative offer from Pyretus whereby they could have bought the same goods by paying cash
of ₱108,000 on 1 July 20X7. Under PFRS 15, 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 20X8?
Revenue Interest income
a. 108,000 12,000
b. 120,000 Nil
c. 108,000 Nil
d. 120,000 12,000

38. On 1 July 20X7 The Otakamiro Company handed over to a client a new computer system. The contract price
for the supply of the system and after sales support for 12 months was ₱800,000. Otakamiro estimates the
cost of the after-sales support at ₱120,000 and it normally marks up such costs by 50% when tendering for
support contracts. Under PFRS 15, the revenue Otakamiro should recognize in its financial year ended 31
December 20X7 is
a. 620,000 b. 800,000 c. 710,000 d. Nil

39. According to PAS 1, dividends declared by an entity are disclosed in the

a. Statement of financial position d. Notes
b. Statement of profit or loss and OCI e. Any of these
c. Statement of changes in equity f. c or d

40. Which of the following shows a correct effect on equity?

Transaction Effect on equity
a. Issuance of shares Decrease
b. Retirement of shares Increase
c. Profit Decrease
d. Loss Decrease

41. The amount of profit or loss appears in which of the following financial statements?
a. Statement of financial position
b. Statement of comprehensive income
c. Statement of changes in equity
d. b and c

42. The statement of changes in equity is dated

a. as of a point in time. c. after some time.
b. for a period of time. d. Not dated

43. INORDINATE EXCESSIVE Co. had the following information for 20x2:
 Acquired 3-month treasury bills for ₱200,000.
 Acquired equipment with a purchase price of ₱4,000,000 by paying 20% in cash and issuing a note
payable for the balance. There were no payments made on the note during the year.
 Acquired land with fair value of ₱3,200,000 by issuing shares with aggregate par value of ₱2,400,000. The
excess is credited to share premium.
 Extended a ₱1,600,000 loan to a director.
 Borrowed ₱1,280,000 from a bank. Used the cash proceeds as follows: ₱800,000 for additional working
capital and ₱480,000 to settle scrip dividends declared in 20x1.
 Settled an outstanding note payable by issuing shares with aggregate par value of ₱800,000. Share
premium resulted from the transaction amounted to ₱280,000.

How much is the net cash flows from (used in) investing activities?
a. 2,400,000
b. 800,000
c. (800,000)
d. (2,400,000)

44. REMNANT REMAINDER Co.’s cash balances as of December 31, 20x2 and 20x1 were ₱7,040,000 and
₱400,000 respectively. REMNANT’s December 31, 20x2 statement of cash flows reported net cash used in
investing activities of ₱1,500,000 and net cash from financing activities of ₱4,080,000.

How much is the net cash flows from (used in) operating activities?
a. (4,060,000)
b. 4,060,000
c. 4,600,000
d. (4,600,000)

45. On January 1, 20x1, PRISTINE UNCORRUPTED Co. acquired an equipment for ₱4,000,000. The
equipment will be depreciated using the straight-line method over 20 years. The estimated residual value is
₱400,000.

In 20x6, following a reassessment of the realization of the expected economic benefits from the
equipment, PRISTINE Co. changed its depreciation method to sum-of-the-years digits (SYD). The
remaining useful life of the asset is estimated to be 4 years and the residual value is changed to
₱200,000. How much is the depreciation expense in 20x6? On January 1, 20x1, PRISTINE
UNCORRUPTED Co. acquired an equipment for ₱4,000,000. The equipment will be depreciated using the
straight-line method over 20 years. The estimated residual value is ₱400,000.

In 20x6, following a reassessment of the realization of the expected economic benefits from the equipment,
PRISTINE Co. changed its depreciation method to sum-of-the-years digits (SYD). The remaining useful life of
the asset is estimated to be 4 years and the residual value is changed to ₱200,000. How much is the
depreciation expense in 20x6?
a. 1,160,000 b. 1,140,000 c. 1,233,560 d. 1,110,669