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Question #1

Stephanie Electronics makes all of its sales on credit and accounts to them using the
installment sales method. For simplicity, assume that all sales occur on the first day of
the year and that all cash collections are made on the last day of the year. Stephanie
Electronics charges 18% interest on the unpaid installment balance Data for 2015 and
2016 are as follows:
Sales
Cost of goods sold
Cash collections (principal and interest)
2015 sales
2016 sales

2015
100,000
60,000

2016
120,000
80,000

40,000

50,000
90,000

The interest income recognized in 2016 amounted to:


14,000
49,700
35,640
21,600

Question #2
Property taxes on a manufacturing plant are generally considered as
Semi-variable cost
Period cost
Conversion cost
Non-manufacturing cost

Question #3
Which of the following assets or liabilities are nonmonetary?
Deferred tax liabilities
Accrued expenses and other payables

Taxes payable
Trade receivables

Question #4
Separately identified intangible assets are accounted for by amortizing:
amortizing over a period not to exceed a maximum of 40 years.
over the useful economic life less residual value using only the straight-line method.
exclusively by using impairment testing.
based upon a pattern that reflects the benefits conveyed by the asset.

Question #5
According to PAS 32, it is a financial instrument that gives the holder the right to put the
instrument that gives the holder the right to put the instrument back to the issuer on the
occurrence of an uncertain future event of the death or retirement of the instrument
holder.
Callable Instruments

Redeemable Instruments

Financial Instruments

Puttable Instruments

Question #6
The mining company produces 25,000 pounds of copper each month in its mining
operations. To eliminate the price risk associated with copper sales, on December 1,
2016, the mining company entered into futures contract to sell 25,000 pounds of copper
on January 1, 2017. The futures price is P.77 per pounds. The futures contract is
managed through an exchanged, so the mining company does not know the party on
the other side of the contract. As with most derivative contracts, this futures contract will
be settled by an exchange of cash on January 1, 2017 based on the price of copper on
that date.

What net amount will the mining company pay or receive on January 1, 2017 under the
futures contract if the price of copper per pound on that date is P0.77?
P19,250 net receipt
P19,250 net payment
No net payment or receipt
22,000 net payment

Question #7
The following items are not deemed to be items that would meet the definition of an
intangible asset under PFRS 3:
experienced marketing team

order backlogs.

trademarks

newspaper

mastheads

Question #8
S and L owes the Kurt Corporation P6,000 on account, which is secured by accounts
receivable with a book value of P5,000. Its statement of affairs lists the accounts
receivable securing the Kurt account with an estimated realizable value of P4,500.
Assume that S and L account is unsecured. How much can Kurt expect to receive?
4,000
Cannot be determined without additional data
6,000
4,800

Question #9
Which of these considerations would not be relevant in determining the entity's
functional currency?
The currency in which finance is generated
The currency in which receipts from operating activities are retained

The currency that is the most internationally acceptable for trading


The currency that influences the costs of the entity

Question #10
What is the best cost accumulation procedure to use when many batches, each differing
as to product specification, are produced?
Process
Standard
Job order
Actual

Question #11
It is the respective share of a province, city or municipality in the proceeds of the
additional one percent real property tax levied and appropriated for educational
purposes under the Real Property Tax Code.
Special Education Fund
Trust Fund
Infrastructure fund
General Fund

Question #12
JMC Company prepare, package, and distributes six frozen vegetables in two different
sized containers. The different vegetables and different sizes are prepared in large
batches. The company employs a normal job order costing system. Manufacturing
overhead is assigned to batches by a predetermined rate on the basis of the direct labor

hours. The manufacturing overhead costs incurred by the company during two recent
years (adjusted for changes using current prices and wage rates) are presented below:
2012
2013
Direct labor hours worked
2,760,000
2,160,000
Manufacturing overhead costs incurred
Indirect labor
11,040,000
8,640,000
Employee benefits
4,140,000
3,240,000
Supplies
2,760,000
2,160,000
Power
2,208,000
1,728,000
Head and light
552,000
552,000
Supervision
2,865,000
2,625,000
Depreciation
7,930,000
7,930,000
Property taxes and insurance
3,005,000
3,005,000
Total overhead costs
34,500,000
29,880,000
What is the total variable overhead cost for the year 2012?
15,552,000
13,608,000
21,252,000
16,632,000

Which is the best cost accumulation procedure to use when there is a continuous mass
production of like units?
Process
Job order
Standard
Actual

Question #14
Philips entered into a franchise agreement with Rusty. As per agreement on July 1,
2016, Rusty is to pay Philip an up-front franchise fee of 1,000,000 and subsequent
annual franchise fees of 50,000 over the next four years. Cost of initial franchise
services rendered by Philips during the year is 250,000 which is substantial, and it
estimates the cost of subsequent annual services to be 10,000. Rusty paid the annual
franchises fee for 2017, and Philips rendered the services for the year. In its December

31, 2017 income statement, the amount of realized franchise fee revenue to be reported
by Philips is:
300,000

250,000

50,000

25,000

Question #15
In a job order cost system, the application of factory overhead would usually be reflected
in the general ledger as an increase in
Factory overhead control
Cost of goods sold
Work in process control
Finished goods control

Question #16
When should an anticipated loss on a long term contract be recognized under the cost
recovery method of construction accounting (or zero-profit approach)?
prorated when contract is completed
contract complete
immediately
life of project

Question #17
Which of the following is not an example of political risk?
language barriers
production control by a foreign government

over

nationalization of businesses
unitary tax

Question #18
In the separate financial statements of a parent entity, investments in subsidiaries that
are not classified as held for sale should be accounted for
Used in equity method
In accordance with PAS 39
At cost
At cost or in accordance with PAS 39

Question #19
Kate Company manufactures three products, R, S, and T in a joint process. For every
10 kilos of raw material input, the output is 5 kilos of R, 3 kilos of S and 2 kilos of T.
During August, 50,000 kilos of raw materials costing P120,000 were processed and
completed, with joint conversion costs of P200,000. Conversion costs shall be allocated
to the production on the basis of market values.
To make the product salable, however, further processing which does not require
additional material was done at the following costs: R, P30,000; S, P20,000; and T,
P30,000. Unit selling prices are R, P10; S, P12; and T, P15.
The unit cost of product R is:
8.00
7.12
10.00
25.32

Question #20
By applying the definition provided in The Effects of Changes in Foreign Exchange
Rates, which of the following items will be regarded as a monetary item?
Motor vehicles
Machinery
Inventory
Cash

Question #21
A loss from a construction contract shall be fully and immediately recognize under
The cost recovery method
Both the cost recovery and percentage-of-completion
method

The percentage-of-completion method

Neither the cost recovery nor

percentage-of-completion method

Question #22
A derivative may be
An equity account
A liability account
An asset account
Either an asset or an liability account

Question #23
Joint costs are used for
Setting and selling price of a product
Determining whether to continue producing an item
Determining inventory costs for accounting purposes
Controlling costs

Question #24
Process cost accounting is the method to be used in assigning costs to products
Which are manufactured on the basis of each order received
Which are only partially completed during the accounting period
As an average cost per unit for all units in process during the accounting period
When standard cost accounting is not used in continuous process

Question #25
All the following items are monetary items except:
borrowings 30,000.
shares held in B listed on the Philippine Stock Exchange.
trade receivable of $12,000.

trade payable of $50,000.

Question #26
If the amount of spoilage in a manufacturing process is abnormal, it should be classified
as a
Joint costs
Product cost
Deferred charge
Period cost

Question #27
In a job order cost system, the application of factory overhead would usually be reflected
in the general ledger as an increase in

Finished goods control

Work in process control

Factory overhead control

Cost of goods sold

Question #28
In job order costing, the application of FOH would be reflected in the general ledger as
an increase in
Cost of goods sold
Finished goods
Factory overhead control
Work in process

Question #29
If the foreign operation reports in the currency of a hyperinflationary economy, assets,
liabilities income and expenses shall be translated at
Forward rate
Exchange rate on the date of transaction
Average rate
Closing rate

Question #30

It is the rate available by terms of an agreement for the exchange of two currencies at a
future date.
Spot rate
Forward rate
Exchange rate
Closing rate

Question #31
Which of the following is not a financial asset?
A contractual right exchange financial assets or financial liability with another entity
under conditions that are potentially favourable or unfavourable to the entity.
Cash
A contractual right to receive cash
An equity instrument of another entity

Question #32
Factory supplies for a manufacturing plant are generally
Excluded from product costs
Prime costs
Variable costs
Period costs

Question #33
For the purposes of consolidated financial reporting, a group is:

an entity that has no subsidiaries;

a parent entity and all its subsidiaries;

entity that has one or more subsidiaries;

an

a subsidiary entity of another entity.

Question #34
Which of the following items is classified as a financial asset?
Trade receivables.
Buildings.
Loans payable.
Ordinary shares held in a
subsidiary.

Question #35
An accounting system that collects financial and operating data on the basis of the
underlying nature and extent of cost drivers is
Target costing
Activity-based costing
Cycle-time costing
Variable costing

Question #36
A company has a 40% share in a joint venture and loans the venture P2,000,000, what
figure will be shown for the loan in the balance sheet of the venturer?
1,200,000
800,000
0
2,000,000

Question #37
The price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at measurement date is defined in
Business Combinations as the:
present value.
market value.

current replacement cost.

fair value.

Question #38
Kate Company manufactures three products, R, S, and T in a joint process. For every
10 kilos of raw material input, the output is 5 kilos of R, 3 kilos of S and 2 kilos of T.
During August, 50,000 kilos of raw materials costing P120,000 were processed and
completed, with joint conversion costs of P200,000. Conversion costs shall be allocated
to the production on the basis of market values.
To make the product salable, however, further processing which does not require
additional material was done at the following costs: R, P30,000; S, P20,000; and T,
P30,000. Unit selling prices are R, P10; S, P12; and T, P15.
Assuming all units are sold, the gross margin on sales for Product S is:
180,000
60,000
48,000
72,000

Question #39
Income and expense items of a foreign operation shall be translated at
Spot exchange rate
Forward rate
Closing rate
Exchange rate on the date of transaction

Question #40
It is the currency in which financial statements are presented.

Presentation currency
Foreign currency
Reporting currency
Functional currency

Question #41
Drew Co. produces expensive equipment for sale on installment contracts. When there
is doubt about eventual collectibility, the income recognition method least likely to
overstate income is;
At the time the equipment is completed.
installment method.

The cost recovery method.

The

At the time of delivery.

Question #42
In a job order cost system, the use of direct materials previously purchased usually is
recorded as an increase in
Factory overhead applied
Work in process control
Factory overhead control
Stores control

Question #43
A hedge of the exposure to changes in the fair value of a recognized asset or asset or
liability or an unrecognized firm commitment, is classified as a

Fair value hedge


Cash flow hedge
Underlying
Foreign currency hedge

Question #44
In an ABC system, what should be used to assign a department's manufacturing
overhead costs to products produced in varying lot sizes?
A single cause-and-effect relationship
Multiple cause-and-effect relationships
A product's ability to bear cost allocations
Relative net sales values of the products

Question #45
If the construction in progress account has a balance of 1,000,000 while the Progress
Billings on Contracts accounts balance is P800,000, how should these accounts be
reflected on the balance sheet?
Construction in Progress will be shown as a current asset.

The difference

between the two accounts will be reflected as a current asset.

Progress Billings on

Contracts will be shown as a current liability.

The difference between the two

accounts will be reflected as a current liability.

Question #46
It is a hedge of the exposure to variability in cash flows that is attributable to a particular
risk associated with a recognized asset or liability or a highly probable forecast
transaction and could affect profit or loss

Hedge of a net investment of foreign operations


Cash flow hedge
Fair value hedge
None of the choices

Question #47
Dollar-denominated short-term financial assets are translated for financial reporting
purposes, based on
Closing rate
Forward rate

Average spot rate

Historical rate

Question #48
In a business combination, the acquirer is the party that:
receives the acquisition consideration.
sells the acquired entity
of the other entities

obtains control

concedes control over the acquired entities

Question #49
If the foreign operation reports in the currency of a hyperinflationary economy, assets,
liabilities income and expenses shall be translated at
Closing rate
Forward rate
Exchange rate on the date of transaction
Average rate

Question #50
Which is the best cost accumulation procedure to use when there is a continuous mass
production of like units?
Process
Actual

Standard
Job order

Question #51
Foreign exchange risk may relate to:
recognised assets and liabilities.
foreign currency transactions.

unrecognised firm commitments.

planned

all of the answers relate to foreign exhange risk.

Question #52
Excess direct labor wages resulting from overtime premium will be disclosed in which
variance?
Labor efficiency
Labor rate
Yield
Quantity

Question #53
Which of the following is not true regarding the use of activity-based costing (ABC)?
Costs associated with non-value adding activity must be minimized
Consumption ratios are computed based on the usage of identified activity
The number of labor hours is used as cost driver for total production cost
Several cost drivers must be identified

Question #54

On July 1, 2016, Magnolia Company purchases 1,000 pounds of Swiss chocolate for
50,000 Swiss francs, payable in 60 days. On July 1, a Swiss franc is worth P27.29; by
August 30, the day of payment, the Swiss franc is worth 27.00. The 60-day forward rate
on July 1 is 1 Swiss franc = 28.00. Magnolia Company should record the cost of the
chocolate as:
1,400,000

1,832,000

1,364,500

1,350,000

Question #55
Century Buildings Company, a parent company of a group of companies, acquired
machinery for US $50,000 on October 31, 2016 when the peso/dollar rate was P26.00,
the liability is to be paid six-months after. By the end of the year, the peso/dollar rate
drastically increased to 32.00 and this is considered as a devaluation or severe
fluctuation. On its year-end balance sheet, Century should report the machinery at:
1,300,000
1,600,000
1,280,000
1,040,000

Question #56
By applying the definition provided in PAS 21, which item will be regarded as a
monetary item?
Property, plant and equipment
Land and buildings
Inventory
Accounts receivable

Question #56
By applying the definition provided in PAS 21, which item will be regarded as a
monetary item?

Property, plant and equipment


Land and buildings
Inventory
Accounts receivable

Question #57
Utilities expense incurred in production facilities (e.g., water, heat and light) is classified
as
Factory overhead
Period cost
Administrative cost
Prime cost

Question #58
Which of the following accounting methods must be applied to all business
combination?
Pooling method
Equity method
Proportionate consolidation
Acquisition method

Question #59
Direct labor and factory overhead can be combined into a classification called

Prime cost
Manufacturing cost
Cost of goods manufactured
Conversion cost

Question #60
Which is the best cost accumulation procedure to use when there is a continuous mass
production of like units?
Actual
Job order
Standard
Process