ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 44  October 2022 CPALE  Pre-Week Summary Lecture

FINANCIAL ACCOUNTING & REPORTING G. MACARIOLA  J. BINALUYO

FAR PREWEEK LECTURE

Jordan Company had the following items in its “Cash and cash equivalents” account as of December 31, 2022:
Cash on hand P125,000
Bank time deposit (acquired 12/30/2022; due in 2/28/2023) 150,000
Petty cash fund – including P2,550 unreplenished vouchers dated December 27-30, 2022; and
P1,200 dated January 4, 2023. 10,000
Cash in foreign bank – unrestricted ($5,000; average rate – P50; closing rate – P52) 250,000
Cash restricted for additions to plant (to be disbursed in 2025) 1,200,000
Cash in bank – to be used for payment of 2023 dividends and taxes 1,380,000

1. How much should be reported as cash and cash equivalents as of December 31, 2022?
a. 1,875,450 c. 1,922,450
b. 1,921,250 d. 1,944,250

Comet Company provided the following data for the purpose of reconciling the cash balance per book:
Balance per Book P220,000
Outstanding checks (including certified check of P20,000) 50,000
Deposit in transit 90,000
December NSF checks (of which P10,000 had been re-deposited
and cleared on December 27) 30,000
Erroneous credit to Comet’s account, representing proceeds
of loan granted to another company 60,000
Proceeds of note collected by bank for Comet, net of service charge of P4,000 150,000
Erroneous bank charge 3,000
A check of P5,000 in payment of account was recorded by Comet as 50,000

2. How much is the Cash in Bank balance as shown in the bank statement on December 31?
a. 382,000 c. 392,000
b. 385,000 d. 395,000

Taguig Company had the following transactions pertaining to its accounts receivable for the year 2022:

Credit sales 5,700,000

Cash sales 3,150,000
Collection from credit customers taking advantage of cash discount of 4% 4,536,000
Accounts ascertained worthless 75,000
Credit memo issued to credit customers 375,000
Cash refund for sales returns from cash sales 30,000
Recovery of accounts previously written off not included in total collections 120,000

Taguig Company’s beginning accounts receivable amounted to P1,425,000 and its beginning allowance for
uncollectible accounts amounted to P135,000. For 2022, the company estimates its uncollectible accounts as 15%
of its outstanding accounts receivable.

3. How much is the bad debts expense for the year 2022?
a. 112,500 c. 130,500
b. 292,500 d. 472,500

On August 31, 2022, Makati Company sold goods to Ayala Company. Ayala Company signed a non-interest-
bearing note requiring payment of P80,000 annually for five years. The first payment was made on August 31,
2022. The prevailing rate of interest for this type of note at the date of issuance was 12%. Information on
present value factors is as follows:

Present value PV of Ordinary

Periods of 1 at 10% annuity of 1 at 10%
4 0.636 3.037
5 0.567 3.605

4. What is the amount of interest income for the year 2022?

a. 9,719 c. 11,536
b. 12,918 d. 14,736

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR Preweek
BATCH 44 – October 2022 CPA Licensure Examination

The inventory on hand at December 31, 2019 for Goblin Company is valued as at a cost of P500,000. The
following items were not included in this inventory amount:
➢ Purchased goods shipped FOB destination costing P30,000. The goods were received on December
30, 2019.
➢ Purchased goods in transit, terms FOB shipping point. Invoice price- P48,000; freight costs of P3,000.
➢ Goods out on consignment to Dots Company, sales price, P 35,000.
➢ Purchased goods shipped FOB Buyer still in transit. The invoice price is P47,500 including freight of
P500.
➢ Inventory purchased and received with a buyback agreement costing P100,000.
➢ Inventory purchased and received, Free Alongside, costing P 245,000. Delivery cost alongside the
Vessel is P3,000 while cost of shipment is P5,000.
➢ Mark-up based on sales is 20%. It was noted that 30% of the consigned goods were sold as of
December 31, 2019.

5. How much is the correct cost of inventory to be reported in Goblin’s statement of financial
position on December 31, 2019?
a. 898,100 c. 853,600
b. 839,400 d. 850,600

The records of Ben Company revealed the following information on Sept. 30, 2022:
Cost Retail
Inventory, January 1, 2022 412,400 620,000
Purchases, 2,614,100 4,275,500
Freight in 40,000
Sales 3,200,000
Purchase returns 10,000 28,000
Sales allowance 25,500
Purchase allowance 8,000
Sales returns 48,500
Sales discounts 22,500
Purchase discounts 6,200
Abnormal shrinkages 45,000 50,000
Normal shoplifting losses 150,000
Discounts granted to employees 15,500
Departmental transfer in 25,700 51,600
Departmental transfer out 31,500 68,000
Mark-ups 146,900
Mark-downs 116,000
Mark-up cancellation 25,000
Markdown-cancellation 18,000

6. What is the estimated cost of September 30, 2022 inventory using the average approach?
a. 1,508,000 c. 934,960
b. 1,037,570 d. 964,720

A new machine was acquired on July 31, 2022 by Jakie Company with the following considerations:
Down-payment 1,000,000
Total par value of 5,000 ordinary shares issued (FV is P140) 600,000
Notes payable in three equal annual installment every July 31, starting 2023 (3 years non-
interest bearing; effective rate on this date 9%) 900,000
Estimated dismantling after five (5) year life of the machine (at 9% effective rate) 100,000

7. What is the initial cost of the machine on July 31, 2022?

a. P2,459,958 c. P2,582,291
b. P2,524,380 d. P2,611,388

8. Assuming the machine is depreciated using 1.5 declining balance and estimated to have P100,000
of residual value. How much is the depreciation of the machine in 2023?
a. P757,314 c. P315,548
b. P662,650 d. P300,271

Sonny Company purchased an equipment on January 1, 2020 for P13,000,000. This equipment had 10 years useful
life. In 2021, due to obsolescence, Sonny recognized an impairment loss of P2,600,000. On December 31, 2022,
Sonny determined that the fair value of the equipment had increased to P9,750,000.
9. What amount of gain on reversal of impairment shall Sonny recognize in 2022?
a. 2,925,000 c. 650,000
b. 2,275,000 d. 325,000

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR Preweek
BATCH 44 – October 2022 CPA Licensure Examination

Sentri Corporation purchased a patent for P135,000 on September 1, 2020. It had a useful life of 10 years. On
January 1, 2022, the company spent P33,000 to successfully defend the patent in a lawsuit. Sentri Corporation
estimated that as of that date, the remaining useful life is 5 years.
10. What amount should be reported for patent amortization expense for 2022?
a. 30,900 c. 30,000
b. 28,200 d. 23,400

On January 31, 2022, Jegane signed an agreement to operate as franchisee of Clear Copy Service, Inc. for an initial
franchise of P780,000. Of this amount, P300,000 was paid when the agreement was signed and the balance was
payable in four annual payments of P120,000 each, beginning January 31, 2023. The agreement provides that the
down payment is not refundable and no future services are required of the franchisor. The implicit rate for loan of
this type is 12%. The agreement also provides the 1.5% of the revenue from the franchise must be paid to the
franchisor annually. Jegane’s revenue from the franchise in 2022 was P9,500,000. Jegane estimates the useful life
of the franchise to be ten years. At the end of 2022, the franchise recoverable amount was P610,000.

11. What is the carrying value of the franchise as of December 31, 2022?
a. P603,571 c. P604,381
b. P598,034 d. P599,384

In 2022, Steel Company held the following investments in ordinary shares:

➢ 25,000 shares of Ang Company’s 100,000 outstanding shares. Steel’s level of ownership gives it the
ability to exercise significant influence over the financial and operating policies of Ang.
➢ 60,000 shares Teng Company’s 350,000 outstanding shares designated as at fair value through profit
or loss.

During 2022, Steel received the following distributions from its ordinary share investments.
➢ November 6 – P30,000 cash dividend from Ang Company.
➢ November 11 – P15,000 cash dividend from Teng Company.
➢ December 26 – 3% ordinary share bonus issue from Ang Company.

Market values per share at December 31, 2022 are: Ang - P15; Teng – P8.

12. What amount of dividend revenue should Steel Company report for 2022?
a. 56,250 c. 30,000
b. 45,000 d. 15,000

On December 31, 2019, Bruce Company appropriately reported a P100,000 unrealized loss. There was no change
during 2020 in the composition of the portfolio of non-trading equity securities held at fair value through other
comprehensive income.

Security Cost MV – December 31, 2020

A 1,200,000 1,300,000
B 900,000 500,000
C 1,600,000 1,500,000
TOTAL 3,700,000 3,300,000

13. What cumulative amount of unrealized gain/loss on these securities should be reported in the
statement of financial position on December 31, 2020?
a. 100,000 c. 400,000
b. 200,000 d. 0

On July 1, 2022, Larmaine Company acquired a 25% interest in the outstanding shares of Dove Company at a total
cost of P1,750,000. The underlying equity of the shares acquired by Larmaine was P1,500,000. The difference
was due to the following:
I. Land with current fair value of P750,000 more than its carrying amount.
II. Depreciable plant assets with current fair value of P150,000 more than the carrying amount.
III. Inventories which are undervalued by P20,000.

All other identifiable assets of Dove Company have fair values equivalent to their book values. The depreciable
plant assets have remaining useful lives of 10 years from the date of acquisition of the investment. All of the
inventories have been sold as of December 31, 2022.

Larmaine received P100,000 dividends from Dove in 2022. Dove reported P1,350,000 profit during the year ended
December 31, 2022. Interim reports from Dove revealed that it earned P650,000 during the first two quarters of
2022. There are no differences in accounting policies between the two companies, nor do differences in reporting
dates exist. Assume that there is no indication of impairment in the shares as of December 31, 2022.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR Preweek
BATCH 44 – October 2022 CPA Licensure Examination

14. How much was the income from associate reported in Larmaine’s profit and loss for the year ended
December 31, 2022?
a. 161,875 c. 168,125
b. 166,250 d. 175,000

On January 1, 2022, Teddy Corporation purchased 3-year, 10%, 5,000 of P1,000 face value bonds for P4,600,000.
In relation to this acquisition, Teddy incurred P160,000 broker’s commission. As a result, the effective rate on the
bond was 12%.

Meanwhile, Teddy determined the following fair values at each yearend:

December 31, 2022 102
December 31, 2023 105
15. How much is the unrealized gain or loss to be reported in its 2022 Profit or Loss Statement
assuming the investment is FVPL?
a. 0 c. 268,800
b. 500,000 d. 340,000

On January 1, 2019, Neri Company acquired a 5-year, 10%, P1,000,000 face value bonds at 92. The company paid
broker’s fees amounting to P118,896. As a result, yield rate on the bond was 9%. Interests are collectible annually
every January 1. The bonds were selling at 120, 102, 98 as of December 31, 2019, December 31, 2020 and
December 31, 2021, respectively. Neri company classified the investment as Fair Value through Other
Comprehensive Income.
16. How much is the unrealized gain or loss that should be reported as of December 31, 2020?
a. 5,312 UL c. 172,915 UL
b. 5,312 UG d. 162,291 UL

Dick Company acquired an investment property costing P500,000 on January 1, 2021. The property is being leased
out under operating lease and the lessee pays P50,000 on a semi-annual basis. Dick Company depreciates its
properties using the straight-line method over a 10-year useful life. The fair value of the building at the end of
2021 and 2022 were P600,000 and P 500,000, respectively.
17. How much is the total increase in profit or loss for the year 2021 assuming the company is using
the fair value model?
a. 100,000 c. 200,000
b. 150,000 d. 250,000
18. How much is the carrying value of the investment properties on December 31, 2022 assuming the
company is using the cost model?
a. 450,000 c. 400,000
b. 600,000 d. 500,000

The following information pertains to the living plant and agricultural produce of Iron Company. On January 1,
2020, the cost of the living plant was P20,000,000 with an estimated useful life of 10 years. The company is using
the straight-line method of depreciation. As of December 31, 2020, Iron Company determines the following:

Fair value of the fruits before the harvest on December 31, 2020 P5,000,000
Estimated cost to sell of the fruit 100,000
Estimated cost to sell of the living plant 500,000

With the assistance of valuation experts, Iron Company determines that the fair value of the living plant including
the fruit as of December 31, 2020 is P26,000,000.

19. How much is the carrying value of the living plant on December 31, 2020 under PAS 16?
a. 18,000,000 c. 20,500,000
b. 20,000,000 d. 25,400,000

On January 1, 2022, Mercury Company has a building with a cost of P4,000,000 and accumulated depreciation of
P3,100,000. The company commits to a plan to sell the building by January 1, 2023. On January 1, 2022, the building
has an estimated selling price of P800,000 and it is estimated that the selling costs associated with the disposal of
the building will be P120,000. On December 31, 2022, the estimated selling price of the building has increased to
P1,200,000 and the estimated selling costs remain at P120,000.

20. How much is the total net effect in profit or loss for the year 2022 in relation to the noncurrent
asset held for sale?
a. 0 c. 220,000 decrease
b. 220,000 increase d. 400,000 increase

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR Preweek
BATCH 44 – October 2022 CPA Licensure Examination

The following information was provided to you by Manila Corporation with regard to its currently maturing obligations
as of December 31, 2022:

• On December 31, 2022, Manila had P1,000,000 short-term notes payable due February 14, 2023. On January
15, 2023, the company issued bonds with a face value of P900,000. The proceeds from the issuance of bond
plus additional cash held by the company on December 31, 2022 were used to liquidate the P1,000,000 of short-
term notes.

• Another P500,000 notes payable is due on March 15, 2023. On December 31, 2022, Manila signed an agreement
to borrow up to P 500,000 to refinance the notes payable on a long-tem basis. The financing agreement called
for borrowings not to exceed 80 percent of the value of collateral Manila was providing. At the date of issue of
the December 31, 2022 financial statements, the value of collateral was P450,000 and was not expected to fall
below this amount during 2023.

• The financial statements of Manila were authorized to be issued on March 31, 2023.

21. How much liabilities are long term as of December 31, 2022?
a. 360,000 b. 500,000 c. 1,140,000 d. 1,360,000

On December 25, 2022, an employee filed a P3,000,000 lawsuit against Oslo Company for damages suffered when
one of Oslo’s equipment malfunctioned in August of 2022. The legal counsel of the company believes that it is probable
that Oslo will pay the damages ranging between P500,000 to 1,000,000 but P820,000 is considered to be the best
estimate of the obligation. On March 31, 2023, the employee has offered to settle the lawsuit out of court for P925,000
and the company accepted the offer and settled the amount. The financial statements were authorized to be issued
on March 1, 2023.

22. How much is the provision that should be recognized as of December 31, 2022?
a. 820,000 b. 925,000 c. 750,000 d. 1,000,000

On October 1, 2022, France Inc. purchased an equipment which has no known market value. France Inc. paid a down
payment of P200,000 and signed a 2-year non-interest-bearing note for 500,000. The prevailing interest rate for
similar note is 10%.

23. The entry to record the issuance of the note on October 1, 2022 is
a. Debit Equipment for P700,000, Credit Note payable for P500,000 and Credit Cash for P200,000.
b. Debit Equipment for P613,200, Credit Note payable for P413,200 and Credit Cash for P200,000.
c. Debit Equipment for P613,200, Debit Discount on Note payable for 86,800, Credit Note payable
for P500,000 and Credit Cash for P200,000.
d. Debit Equipment for P700,000, Credit Discount on Note payable for 86,800, Credit Note payable
for P413,200 and Credit Cash for P200,000.

On April 1, 2022, Avatar Corp. issued a 3-year noninterest bearing note with face value of 3,000,000 in exchange for
an equipment. The note provides that Avatar Corp. shall pay equal annual installment of P1,000,000 every March 31
beginning March 31, 2023. The prevailing rate of notes of this type of note is 12%.

24. What amount of interest expense shall be reported in the statement of profit or loss for the year
ended December 31, 2022?
a. 288,216 c. 192,144
b. 216,162 d. 0

On January 1, 2021, Pluto Co. issued for P4,695,000 a P5,000,000 bonds payable which will mature after ten years.
The bonds pay 9% annual interest every December 31 and were sold to yield 10%.

25. How much is the balance of unamortized discount on bonds payable as of December 31, 2022?
a. P311,195 c. P264,050
b. P285,500 d. P256,950

On January 1, 2019, Farm Inc. issued 2,000 of its 5-year, 11%, P1,000 face value bonds dated January 1 with an
effective annual interest rate of 9%. Interest is payable annually every December 31. Farm Inc. uses the effective
interest method of amortization. On December 31, 2020, the bonds were retired by Farm Inc. for P1,980,000.

The PV Factors are:

PV of 1 at 9% for 5 period – 0.6499;
PV of ordinary annuity of 1 at 9% for 5 periods – 3.8897.

26. What is the gain or loss on early retirement of bonds on December 31, 2020?
a. 121,190 gain taken to profit or loss c. 121,190 gain taken to OCI
b. 121,190 loss taken to profit or loss d. 121,190 loss taken to OCI

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR Preweek
BATCH 44 – October 2022 CPA Licensure Examination

On January 1, 2022, Dallas Corporation leased a new machine from Mavericks Company. The following data relate
to the lease transaction:
Annual rental payable every Jan. 1, starting Jan. 1, 2022 P100,000
Lease term 8 years
Useful life of machine 10 years
Implicit interest rate, known by Dallas 10%
Incremental borrowing rate 12%
Present value of an annuity of 1 in advance for 8 periods at 10% 5.868
Present value of an ordinary annuity for 8 periods at 10% 5.335
Present value of an ordinary annuity for 8 periods at 12% 4.968
Present value of an annuity of 1 in advance for 8 periods at 12% 5.564
The possession of the machine reverts to Mavericks when the lease terminates.
27. How much is the initial cost of the right-of-use machine?
a. 533,500 c. 496,800
b. 586,800 d. 556,400

28. How much is the interest expense for the year 2022?
a. 58,680 c. 43,350
b. 53,350 d. 48,680

Miami Company leased equipment from Heat Inc. on July 1, 2022, for an 8-year period. Equal payments under the
lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2022. The interest
rate contemplated by Miami and Heat is 10%. The carrying value of the equipment on Heat’s accounting records is
P2,800,000. Residual value of P100,000 at the end of lease term is guaranteed by Miami. The lease is appropriately
recorded as a sales-type lease.
Present value of an annuity of 1 in advance for 8 periods at 10% 5.87
Present value of an ordinary annuity of 1 for 8 periods at 10% 5.33
Present value of 1 for 8 periods at 10% 0.47

29. How much is the sales that should be recognized by Heat Inc.?
a. 3,522,000 c. 3,245,000
b. 3,569,000 d. 3,198,000

30. How much is the cost of goods sold that should be recognized by Heat Inc. assuming the residual
value is unguaranteed?
a. 2,800,000 c. 3,569,000
b. 2,753,000 d. 3,522,000

Macmac Co. reported pretax financial income for the current year 2021 at P3,000,000. Included in the determination
of the said net income were:
Permanent differences:
Non-deductible expenses P100,000
Non-taxable revenues 500,000
Temporary differences:
Unrealized gain trading securities 400,000
Impairment loss on machinery 500,000
Provision for bad debts 900,000
Excess tax depreciation over accounting depreciation 420,000

The income tax rate is 30% and is not expected to change in the future.
31. How much is the current income tax expense?
a. 954,000 c. 246,000
b. 780,000 d. 420,000

32. How much is the deferred tax liability on December 31, 2021?
a. 954,000 c. 246,000
b. 780,000 d. 420,000
On January 1, 2021, Olympinks Company reported the fair value of plan assets at P6,700,000 and defined benefit
obligation at P6,100,000. Transactions affecting the balances for the current year are as follows:
Current service cost P1,125,000
Past service cost 325,000
Contribution to the plan 990,000
Benefits paid to retirees at scheduled date 800,000
Benefits paid to retirees at early (CV is P340,000) 300,000
Actual return on plan assets 469,000
Decrease in defined benefit obligation due to changes in actuarial assumption 135,000
Discount rate 10%
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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR Preweek
BATCH 44 – October 2022 CPA Licensure Examination

33. How much is the amount of defined benefit cost reported in its statement of comprehensive income
as a component of profit or loss?
a. 1,350,000 c. 66,000
b. 1,385,000 d. 336,000
34. How much is the amount of defined benefit cost reported in its statement of comprehensive income
as a component of OCI?
a. 1,350,000 c. 66,000
b. 1,385,000 d. 336,000

Hawkeye Corp. reported the following amounts in the shareholders’ equity section of its December 31, 2021, balance
sheet:
10% Preference shares, P10 par (100,000 shares authorized, 40,000 shares issued) P400,000
Ordinary shares, P5 par (50,000 shares authorized, 20,000 shares issued) 100,000
Share premium 190,000
Retained Earnings 1,200,000

The following transactions occurred during 2022:

Feb. 1-Purchased 4,000 shares of its own outstanding ordinary shares for P80,000.
March 1-Ordinary shares were split 2 for 1.
April 30-Reissued 2,000 treasury ordinary shares for cash at P15 per share.
June 30-Issued 10,000 shares of preference shares at P15 per share.
August 1-Purchased 3,000 preference shares from June 30 issuance at P 12 per share.
Sept. 1-Declared a 10% stock dividend on the outstanding ordinary shares when the stock is selling for P6 per
share. Issued the share dividend on September 30.
Dec. 1-Declared the annual dividend on preference shares and the P2.00 per share dividend on ordinary shares.
These dividends are payable in 2023.
Dec. 31-Registered a net income for 2022 at P800,000.

Determine the adjusted balances of the following accounts on December 31, 2022:

a b c d

35.Ordinary shares 108,500 217,000 187,000 93,500

36.Total SHE 2,728,200 2,602,200 2,632,200 2,623,200

The Contis Company granted 100 share options to each of its 500 employees on January 1, 2020. The option plan
allows the employees to purchase a share of the entity’s P100 par value ordinary share at P120 per share. On January
1, 2020, the fair value of each option is P30. The option plan requires the employees receiving the options to be in the
service of the company for the next three years. Options are exercisable starting January 1, 2023 and options expire
at the end of 2024. At January 1, 2020, it was estimated that 20% of the employees will leave during the next three
years.

Actual and revised estimate of employees leaving the company during 2020, 2021 and 2022 are as follows:
2020: 20 employees left; revised estimate is 15% of remaining options
2021: 10 employees left; revised estimate is 10% of remaining options
2022: 18 employees left

37. How much is the compensation expense for the year 2022?
a. 846,000 b. 438,000 c. 510,000 d. 1,356,000

Cebu Company reported the following on December 31, 2022:

Bonds payable- 10% 1,000,000
Ordinary share capital, P 100 par, 50,000 shares 5,000,000
Net income 1,735,000
The bonds are convertible into ordinary shares in the ratio of 10 ordinary shares for each P1,000 bond. The income
tax rate is 30%.
38. What is the amount of basic earnings per share?
a. 30.08 c. 34.70
b. 30.58 d. 27.75

39. What is the amount of diluted earnings per share?

a. 30.08 c. 34.70
b. 30.58 d. 27.75

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY FAR Preweek
BATCH 44 – October 2022 CPA Licensure Examination

Pasay Corporation’s December 31, 2022 balance sheet reports the following shareholders’ equity:

10% Cumulative Preference share capital, P100 par value per share, 30,000 shares
issued and outstanding, liquidation value of P105 P3,000,000
Ordinary share capital, P100 par value, 60,000 shares issued 6,000,000
Share premium 500,000
Treasury Stock, (ordinary) 5,000 shares at cost 600,000
Retained Earnings 4,000,000
Subscribed ordinary share, net of P400,000 subscription receivable 1,000,000
Revaluation surplus 700,000

Preference dividends have not been paid since last year up to the end of 2022.
40. What is the book value per share on ordinary share?
a. 173.08 b. 163.04 c. 166.92 d. 157.25

Batangas Corp.’s transactions for the year ended December 31, 2022 included the following:
• Purchased real estate for P 550,000 cash
• Sold building for P 500,000
• Paid dividends of P 600,000
• Issued 500 shares of ordinary shares for P 250,000
• Purchased machinery and equipment for P 125,000 cash
• Paid P 450,000 bank loan
• Increased accounts receivable by P 100,000
• Increased accounts payable by P 200,000
41. How much is the net cash provided or (used) in investing activities for 2022?
a. 175,000 c. 675,000
b. (175,000) d. (50,000)

42. How much is the net cash provided or (used) in financing activities for 2022?
a. (200,000) c. (800,000)
b. (1,050,000) d. 800,000

On December 31, 2022, the bookkeeper of Laguna Company provided the following information:

Accounts payable, net of P500,000 debit balance in creditor’s account P 2,500,000

Deferred tax liabilities 300,000
Long-term advances to officers 500,000
Other trade payables (payable normally in 15 months) 250,000
Bonds Payable 2,000,000
Stock dividends payable 800,000
Credit balance in customers’ accounts 400,000
Provision for litigation 50,000
Serial bonds, payable in semiannual installments of P1,000,000 5,000,000
Accrued interest on bonds payable 300,000
Salaries payable 600,000
Contingent liabilities 100,000
Premium on bonds payable 700,000
43. In the December 31, 2022 statement of financial position, how much current liabilities should be reported?
a. 6,350,000 c. 6,200,000
b. 6,600,000 d. 6,700,000

44. In the December 31, 2022 statement of financial position, how much non-current liabilities should be reported?
a. 6,500,000 c. 6,250,000
b. 6,000,000 d. 6,000,000

Naga has the following information for its five business segments for the year 2022:

Segment Intersegment revenue Segment Assets Revenue to external customers

A P 20,000,000 P 2,000,000 P 25,000,000

B 5,000,000 500,000 5,000,000
C 2,800,000 1,000,000 3,500,000
D 1,200,000 200,000 1,500,000
E 1,000,000 250,000 1,000,000

45. How much is the minimum amount that should be reported by the reportable segments?
a. 22,500,000 c. 49,500,000
b. 27,000,000 d. 6,600,000

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BATCH 44 – October 2022 CPA Licensure Examination

46. The following statements are based on PAS 38 (Intangible Assets):

Statement I: Internally generated goodwill shall not be recognized as an asset.
Statement II: No intangible asset arising from research or research phase of an internal project shall be
recognized.
Statement III: Internally generated brands, mastheads, publishing titles, customer lists and items similar in
substance shall be recognized as intangible assets.
a. All of the statements are true
b. Only statement I is true
c. Only statement II is false
d. Only statement III is false

47. Which of the following is false about erroneous bank charge?

a. Cash balance per bank is understated
b. Disbursements per bank is overstated
c. It should be recorded as a debit to cash in bank account
d. It should be added to balance per bank in preparing bank reconciliation
48. The statement of financial position may include unrealized gains and losses from which type of investment
securities?
a. FVPL only
b. FVOCI only
c. FVPL & FVOCI
d. FVPLOCI
49. Which of the following transactions shall be included in the statement of cash flows?
a. Acquisition of a property by means of issuing preference shares
b. Purchase of treasury shares for cash at more than par value
c. Conversion of bonds to ordinary shares
d. Acquisition of assets by means of a finance lease
50. If an entity failed to amortize the discount on its investment in bond classified at amortized cost, this may result
to
a. Understatement of net income
b. Overstatement of net income
c. No effect on net income
d. Overstatement on investment account
51. The following statements are based on PFRS 5 (Non-current Assets Held for Sale and Discontinued Operations)
Statement I: An entity shall classify a non-current asset or disposal group as held for sale if its carrying amount
will be recovered principally through a sale transaction rather than through continuing use.
Statement II: An extension of the period required to complete a sale does not preclude an asset or disposal
group from being classified as held for sale if the delay is caused by events or circumstances
beyond the entity’s control and there is sufficient evidence that the entity remains committed to
its plan to sell the asset (or disposal group).
Statement III: An entity shall measure a non-current asset or disposal group classified as held for sale at the
lower of its carrying value and fair value less cost to sell.
a. Only statement I is false
b. Only statement II is false
c. Only statement III is true
d. All of the statements are true

52. Which of the following is/are not subject for depreciation?

I. Land held to be used as a future plant site
II. Non-current asset classified as “held for sale”
III. Building classified as investment property under fair value model
a. I only
b. I and III
c. II and III
d. I, II and III
53. Which of the following is false about the preparation of statement of comprehensive income?
a. Income from operation does not include items which are considered incidental/peripheral.
b. Income from continuing operations plus income from discontinued operation equals total profit or
loss
c. Profit or loss plus other comprehensive income equals total comprehensive income
d. Other comprehensive income shall be disclosed on the face of income statement after tax
54. When an owner-occupied property is transferred to investment property at fair value, a decrease in the carrying
amount of the property to its fair value at the date of transfer
a. Is recognized in profit and loss, or, for a revalued property, charged against the revaluation
surplus to the extent of its credit balance
b. Is recognized in profit and loss at all times
c. Is absorbed by retained earnings
d. Is carried directly to equity
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BATCH 44 – October 2022 CPA Licensure Examination

55. Susan Corporation declares and distributes a cash dividend that is a result of current earnings. How will the
receipt of those dividends affect the investment account of the investor under each of the following accounting
methods?
Fair Value Method Equity Method
a. No Effect Decrease
b. Increase Decrease
c. No Effect No Effect
d. Decrease No Effect

56. Statement 1: Trade receivables are classified as current assets if they are not to be collected within one year or
within the normal operating cycle, whichever is shorter.
Statement 2: Non-trade receivables are classified as current assts if they are to be collected within one year or
within the normal operating cycle, whichever is longer.
a. Both statements are true
b. Statement 1 is true while statement 2 is false
c. Both statements are false
d. Statement 1 is false while statement 2 is true

57. The minimum lease payments include all the following, except
a. Contingent rent
b. Rental payments over the lease term
c. Any amount guaranteed by the lessee.
d. Payment required to exercise an option on the part of the lessee to purchase the asset at a price which
is certain to exercise by the lessee determined at inception of the lease.

58. Which of the following is not true in relation to bearer plant?

a. It is a living plant that has a remote likelihood of being sold as agricultural produce, except for
incidental scrap sales
b. The bearer plant and the related agricultural produce are accounted as two separate assets
c. Plants which have a dual use or exclusive to be harvested as agricultural produce is not a bearer
plant
d. Bearer plant should be measured initially at fair value less estimated cost of disposal

59. Share premium could NOT arise from

a. Issuance of non-convertible bonds
b. Receipt of donated asset from a shareholder
c. Issuance of bonds with detachable share warrants
d. Distribution of “small” bonus issue

60. Lastnato Company has issued a range of share appreciation rights to employees. In accordance with IFRS 2 Share-
based payment, what type of share-based payment transaction does this represent?
a. Asset-settled share-based payment transaction
b. Equity-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Liability-settled share-based payment transaction

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