DAY 2 of 150

AFAR – PARTNERSHIP FORMATION

(50-51) Office
Charlie and Delta formed a partnership. Charlie equipment 36,000 36,000
invested cash worth P85,000 and a machine. On Accumulated
the other hand. Delta contributed cash worth depreciation
P55,000 and an equipment which has a mortgage — office
of P35,000 which Delta will pay personally. The equipment 19,200 9,600
total capital after formation was P360,000. They Accounts
also further agreed to reflect 55:45 ratio as to their payable 96,000 96,000
capital balances respectively. No other
investment or withdrawal occurred other than 52. What is the amount of additional cash to be
mentioned to reflect their capital ratio agreement. invested by E in accordance with their agreement?
a. 96,000
50. How much is the fair value of the machine? b. 98,400
c. 100,000
a. 113,000 d. 0
b. 105,000
c. 107,000
d. 115,000 53. What is the current market value of the
merchandise to be contributed by F?

51. How much is the fair value of the equipment? a. 240,000

b. 410,000
a. 115,000 c. 210,000
b. 107,000 d. 180,000
c. 150,000
d. 142,000
54. G and H decided to form a partnership during
2020. The following are their statement of
(53-53) financial position on the date of formation:
E and F form partnership. E is to invest certain G H
business assets and his liabilities will be assumed Cash 131,250 328,125
by the partnership, He will also contribute Accounts
sufficient cash to bring his total capital to an receivable 2,975,000 1,793,750
agreed P360,000, which is 60% of the total agreed Inventories 1,750,000 1,771,875
capital of the partnership. F on the other hand will Equipment 1,312,500 2,537,500
invest cash in the amount of P60,000 and a certain Total 6,168,750 6,431,250
merchandise valued at the current market price.
The following are the assets and liabilities of E to Accounts payable 918,750 2,318,750
be contributed to the partnership: G, capital 5,250,000
Book Value Agreed Value H, capital 4,112,500
Accounts Total 6,168,750 6,431,250
receivable 108,000 108,000
Allowance
for doubtful The following are based on their agreement:
accounts 7,200 12,000
Inventories 193,200 210,000 • Equipment of G is under-depreciated by
Store P175,000 and the equipment of H is over-
equipment 54,000 54,000 depreciated by P262,500
Accumulated • Allowance for doubtful accounts is to be
depreciation setup amounting to P595,000 for G and
— store P393,750 for H
equipment 36,000 26,400

1 of 8
 DAY 2 of 150

• Inventories in the amount of P43,750 and c. 4,781,875 withdraw

P30,625 are worthless in the books of G d. 3,556,875 withdraw
and H respectively
• The partnership agreement also provides a
profit and loss ratio and capital interest 55. Which of the following transactions shall not
ratio of 70% and 30% for G and H affect the capital balance of a partner?
respectively a. Share of a partner in the partnership’s net
• G will invest or withdraw sufficient amount loss.
of cash. to be in accordance to their capital b. Receipt of bonus by a partner from another
interest ratio partner based on the agreement
What is the amount of cash to be invested or c. Advances made by the partnership to a
withdrawn by G in accordance with their partner.
agreement? d. Additional investment by a partner to the
partnership
a. 4,781,875 invest
b. 3,556,875 invest

AP – AUDIT OF SHAREHOLDERS’ EQUITY

(56-60)
You were engaged by PETMALU CORPORATION, a publicly held company whose shares are traded on the
Philippine Stock Exchange, to conduct an audit of its 2020 financial statements. You were told by the
company’s controller that there were numerous equity transactions that took place in 2020. The
shareholders’ equity accounts at December 31, 2019, had the following balances:
Preference share capital, P100 par value, 6% cumulative;
27,000 shares authorized; 16,200 shares issued and outstanding P1,620,000
Ordinary share capital, P1 par value, 1,620,000 shares authorized;
1,080,000 shares issued and outstanding 1,080,000
Share premium 2,160,000
Retained earnings 882,000
Total shareholders’ equity P5,742,000
You summarized the following transactions during 2020 and other information relating to the shareholders’
equity in your working papers as follows:
• January 6, 2020 - Issued 40,500 ordinary shares in exchange for land. On the date issued, the shares
had a market price of P16.50 per share. The land had a carrying value of P378,000, and an assessed
value for property taxes of P441,000.
• January 31, 2020 - Sold 2,160, P1,000, 12% bonds due January 31, 2030, at 98 with one detachable
share warrant attached to each bond. Interest is payable annually on January 31. The fair value of
the bonds without the share warrants is 95. The detachable warrants have a fair value of P50 each
and expire on January 31, 2021. Each warrant entitles the holder to purchase 10 ordinary shares at
P10 per share.
• February 22, 2020 - Purchased 13,500 of its own ordinary shares to be held as treasury shares for
P24 per share.
• February 28, 2020 - Subscriptions for 37,800 ordinary shares were received at P26 per share, payable
50% down and the balance by March 15.
• March 15, 2020 - The balance due on 32,400 ordinary shares was received and those shares were
issued. The subscriber who defaulted on the 5,400 remaining shares forfeited the down payment in
accordance with the subscription agreement.
• August 30, 2020 - Reissued 5,400 treasury shares for P20 per share.
• September 14, 2020 - There were 1,701 warrants detached from the bonds and exercised.
• November 30, 2020 - Declared a cash dividend of P0.50 per share to all ordinary shareholders of
record December 15, 2020. The dividend was paid on December 30, 2020.

2 of 8
 DAY 2 of 150

• December 15, 2020 - Declared the required annual cash dividends on preference shares for 2020.
The dividend was paid on January 15, 2021.
• January 8, 2021 - Before closing the accounting records for 2019, PETMALU became aware that no
depreciation had been recorded for 2019 for a machine purchased on July 1, 2019. The machine was
properly capitalized at P864,000 and had an estimated useful life of eight years when purchased.
The correcting entry was recorded on the same date.
• Adjusted net income for 2020 was P756,000.
Based on the preceding information, determine the correct December 31, 2020, balances of the following:
(Ignore income tax implications.)

56. Ordinary share capital

a. P1,152,900 b. P1,161,810 c. P1,169,910 d. P1,175,310

57. Total share premium

a. P3,658,590 b. P3,815,640 c. P3,885,840 d. P3,926,880

58. Unappropriated retained earnings

a. P560,295 b. P689,895 c. P711,495 d. P884.295

59. Legal capital

a. P2,789,910 b. P6,675,750 c. P7,365,645 d. P2,795,310

60. Total shareholders’ equity

a. P7,171,245 b. P7,351,875 c. P7,365,645 d. P7,371,045

AT
61. Assurance services differ from consulting 62. An assurance engagement should have which
services in that assurance services of the following elements?
I. Focus on providing advice I. Subject matter
II. Involve monitoring of one party by another II. Sufficient appropriate evidence
a. Yes Yes a. Yes Yes
b. Yes No b. Yes No
c. No Yes c. No Yes
d. No No d. No No

FAR – ACCOUNTING PROCESS

63. Which of the following is not correct about an a. It proves that debits and credits of equal
unadjusted trial balance? amounts are in the ledger.
b. It is the basis for any adjustments to the
account balances.

3 of 8
 DAY 2 of 150

c. It supplies a listing of open accounts and 67. The adjusting entry for depreciation has the
their balances. same effect as the adjusting entry for
d. It proves that debits and credits were a. An unearned revenue
properly entered in the ledger accounts. b. A prepaid expense
64. Adjusting entries affect c. An accrued revenue
a. One nominal account and one real account d. An accrued expense
b. Two nominal accounts
c. Two real accounts 68. Which statement is not true about accrual and
d. No particular combination of nominal and deferral?
real accounts
a. An accrued expense is an amount not paid
and currently matched with earnings.
65. Adjusting entries b. A prepaid expense is an amount paid and
a. Are often prepared after the statement of not currently matched with earnings.
financial position date, but dated as of the c. An accrued income is an amount not
statement of financial position date. collected and currently matched with
b. Are necessary to enable the financial expenses.
statements to conform with IFRS. d. A deferred income is an amount collected
c. Include both accruals and deferrals. and currently matched with expenses.
d. All of the choices are correct regarding
adjusting entries. 69. Closing entries
a. Are optional in the accounting cycle
66. An adjusting entry should never include b. Affect only real accounts
a. A debit to revenue and a credit to liability c. Determine the amount of net income or net
b. A debit to expense and a credit to liability loss for the period
c. A debit to liability and a credit to asset d. Reduce the balances of temporary
d. A debit to asset and a credit to revenue accounts to zero

MAS - ECONOMICS
70. A decrease in the price of a complementary d. people spend a large share of their income
good will on the product
a. shift the demand curve of the joint
commodity to the left 72. Which of the following has the highest price
b. increase the price paid for a substitute elasticity coefficient?
good
c. shift the supply curve of the joint a. Milk
commodity to the right b. Macaroni and cheese
d. shift the demand curve of the joint c. Bread
commodity to the right d. Ski boats

71. Demand for a product tends to be price 73. The local video store’s business increased by
inelastic if 12% after the movie theater raised its prices from
P65 to P70. Thus, relative to movie theater
a. the product is considered a luxury item admissions, videos are
b. few good complements for the product are
available a. substitute goods
c. the population in the market area is large b. superior goods

4 of 8
 DAY 2 of 150

c. complementary goods d. increase price

d. public goods

76. Given the following data, what is the marginal

74. An individual receives an income of P3,000 per propensity to consume?
month, and spends P2,500. An increase in income Level of
of P500 per month occurs, and the individual
spends P2,800. The individual’s marginal Disposable income Consumption
propensity to save is P40,000 P38,000
a. 0.2 48,000 44,000
b. 0.4
a. 1.33
c. 0.6
b. 1.16
d. 0.8
c. 0.95
d. 0.75
75. In any competitive market, an equal increase
in both demand and supply can be expected to
77. Which of the following will cause a shift in the
always
supply curve of a product?
a. increase both price and market-clearing
a. Changes in the price of the product.
quantity
b. Changes in production taxes.
b. decrease both price and market-clearing
c. Changes in consumer taxes.
quantity
d. Changes in the number of buyers in the
c. increase market-clearing quantity
market.

RFBT – OBLIGATION
78. Which of the following statements concerning c. A stranger gives support to a child of
the kinds of quasi-contract is correct? another person without the knowledge of
I. Negotiorum Gestio refers to the voluntary the person obliged to give support.
management of the property or affairs of another d. A person saves the property of another
without the knowledge or consent of the latter. person during fire, flood, storm or other
calamity without the knowledge of the
II. Solutio Indebiti refers to the juridical relation owner.
which is created when something is received e. A person caused injury to another person
when there is no right to demand it and it was through fault of negligence.
unduly delivered through mistake.
a. I only
b. II only 80. What is the nature of the responsibility or
c. Both I and II liability of two or more officious managers in a
d. Neither I nor II negotiorum gestio?
a. Generally, it shall be solidary unless the
management was assumed to save the
79. The following are examples of quasi- thing or business from imminent danger
contracts, except which will make their liability to be joint
a. A person receives something when there is only.
no right to demand it or it was unduly b. Generally, it shall be joint unless the
delivered through mistake. management was assumed to save the
b. A person takes charge of the agency or thing or business from imminent danger
management of business or property of which will make their liability to be
another without authority or without solidary.
consent of the latter. c. It is always solidary.

5 of 8
 DAY 2 of 150

d. It is always joint. a. He is liable only in so far as he has thereby

been benefited.
b. When he is not guilty of negligence.
81. The officious manager in a negotiorum gestio c. He is liable in any instances.
shall be liable for any fortuitous event in any of the d. When the reason of loss is fortuitous
following instances, except event.
a. If he undertakes risky operations which the
owner was not accustomed to embark
upon. 86. It is a source of an obligation that refers any
b. If he has preferred his own interest to that act or omission punishable by law.
of the owner. a. Crime or Delict
c. If he fails to return the property or business b. Quasi-contract
after demand by the owner. c. Contract
d. If he assumed the management in good d. Quasi-delict
faith.

87. Is a person criminally liable also liable to pay

82. In which of the following instances will civil damages to private offended party?
negotiorum gestio arise? a. Yes, as a general rule, unless the crime
a. When the property or business is not committed does not cause civil damages.
neglected or abandoned. b. Yes, in all cases.
b. If in fact the manager has been tacitly c. No, unless the People of the Philippines
authorized by the owner. ask for damages.
c. Neither A nor B. d. No because criminal liability means
d. Either A or B. imprisonment only.

83. What is the nature of responsibility or liability 88. What is the nature of civil liability of two or
of two or more payees in solutio indebiti when more persons (criminas) who are convicted of
there has been payment of what is not due? crime?
a. Solidary a. Solidary
b. Joint b. Joint
c. Pro-rata c. Pro-rata
d. Subsidiary d. Subsidiary

84. When will a person who accepts an undue 89. Article 100 of the Revised Penal Code provides
payment of a sum of money be liable for interest? that every person criminally liable for a felony is
a. When he receives the undue payment in also civilly liable for damages. Under Article 12 of
bad faith. the Revised Penal Code, the following persons will
b. When he receives the undue payment in not be imprisoned (exempted from criminal
good faith. liability) but will still be liable for civil damages
c. When he receives the undue payment, (civil liability) for their acts, except
regardless of being bad or good faith. a. An imbecile or insane person.
d. Under all instances. b. A minor or any person under 18 years of
age.
c. Any person who acts under the
85. When will a person who in good faith accepts compulsion of an irresistible force.
an undue payment of a thing certain or d. Any person who acts under the impulse of
determinate be responsible for the impairment or an uncontrollable fear of an equal or
loss of the same or its accessories and greater injury.
accessions? e. Any person who acts under self-defense or
any person who acts in the performance of

6 of 8
 DAY 2 of 150

his official duty or any wife suffering from 93. What degree of evidence must be proved by
battered woman syndrome who killed or the plaintiff in order to recover civil damages
injured his batterer. arising contract or quasi-delict?
a. Proof beyond reasonable doubt
90. The civil liabilities arising from crimes are as b. Clear and convincing evidence
follows, except c. Preponderance of evidence
d. Substantial evidence
a. Restitution which refers to restoration of
the thing itself even though it be found in
the possession of a third person who has 94. In the prosecution for the crime of criminal
acquired it by lawful means. negligence, the accused is acquitted on the
b. Reparation of the damage caused which ground of failure of the prosecution to prove his
shall be determined by the Court taking guilt beyond reasonable doubt. May the private
into consideration of the price of the thing offended party file another civil case based on
and its sentimental value. quasi-delict?
c. Indemnification for consequential a. Yes, because a single act may result to
damages which shall include not only different sources of obligation and crime
those caused the injured party but also and quasi-delict are separate and distinct
those suffered by his family or by a third sources of civil liability but the private
person by reason of the crime. offended party (plaintiff) cannot recover
d. Compromise of the criminal liability. twice civil damages for a single act since
civil damages are awarded to compensate
91. What degree of evidence must be proved by the victim for the injury caused to him but
the prosecution for the conviction of an accused not to unjustly enrich him.
of a crime? b. No, because the accused shall not be
subject to double jeopardy.
a. Proof beyond reasonable doubt c. Yes, only if there is a contract between the
b. Clear and convincing evidence contending parties.
c. Preponderance of evidence d. No, because the private offended party is
a. Substantial evidence barred by the principle of res judicata.

92. What degree of evidence must be proved by 95. It refers to a Source of an obligation wherein a
the private offended party to be entitled to civil person by act or omission causes damage to
damages arising from crime or delict? another, there being fault or negligence.
a. Proof beyond reasonable doubt a. Contract
b. Clear and convincing evidence b. Quasi-contract
c. Preponderance of evidence c. Quasi-delict or culpa aquiliana or torts
d. Substantial evidence d. Delict

TAX – GENERAL PRINCIPLES OF TAXATION

96. Which of the following statements is correct? d. Taxation is subject to inherent and
a. Income tax is an indirect tax. constitutional limitations.
b. Our National Internal Revenue Laws are
criminal in nature. 97. This is an inherent limitation on the power of
c. The theory of taxation states that the taxation
power of taxation is supreme, plenary,
unlimited, and comprehensive. a. Rule on uniformity and equity in taxation

7 of 8
 DAY 2 of 150

b. Due process of law and equal protection of c. No appropriation of public money for
the laws religious purposes
c. Non-impairment of the jurisdiction of the d. Power to tax cannot be delegated to
Supreme Court in tax cases private persons or entities
d. Tax must be for public purpose

99. The power to acquire private property upon

98. This is a constitutional limitation on the power payment of just compensation for public purpose
of taxation a. Power of taxation
a. Tax laws must be applied within the b. Police power
territorial jurisdiction of the state c. Power of eminent domain
b. Exemption of government agencies and d. Power of love
instrumentalities from taxation

ANSWERS
AFAR AP AT FAR MAS RFBT TAX
50. A 56. C 61. C 63. D 70. D 78. C 96. D
51. B 57. C 62. A 64. A 71. D 79. E 97. D
52. A 58. B 65. D 72. D 80. A 98. C
53. D 59. A 66. C 73. A 81. D 99. C
54. A 60. C 67. B 74. B 82. C
55. C 68. C 75. C 83. A
69. D 76. D 84. A
77. B 85. A
86. A
87. A
88. A
89. E
90. D
91. A
92. C
93. C
94. A
95. C

8 of 8