1.

Aroma Company provided the following account balances and related information on December 31, 2022:
Cash 3,700,000
Accounts receivable 1,500,000
Allowance for doubtful accounts (200,000)
Inventory 2,000,000
Cash surrender value 300,000
Total current assets 7,300,000

Analysis of Cash
Cash in bank 1,300,000
Bank overdraft in another bank (300,000)
Cash set aside for plant addition 2,000,000
Petty cash fund 50,000
Cash withheld from wages 150,000
General cash 500,000
Total cash 3,700,000

The accounts receivable included past due account in the amount of P100,000. The account is deemed
uncollectible and should be written off. The inventory included goods held on consignment amounting to
P150,000 and goods of P200,000 purchased and received on December 31, 2022. Neither of these items have
been recorded as a purchase. What total amount should be reported as current assets on December 31, 2022?
a. 5,150,000
b. 5,450,000
c. 5,250,000
d. 5,300,000

2
.

3
.
4
.

5. how much is the bad debt expense

a. 4,250 b. 4,300 c. 4,550 d. 4,400
6. how much is the recoverable historical cost of accounts receivable
a. 194,750 b. 200,450 c. 196,250 d. 196,700

7.

.
 8.

9.

10.

11.

12.

13.

.
 14.

. 15. how much is the estimated liability for warranty at December 31, 2020?
a. 344,362 c. 1,428,702

b. 744,842 d. 1,230,602

16. what is the carrying value of investment on December 31,2022

a. 7,356,000 b. 8,256,000

c. 5,456,000 d. 6,756,000

17. what is the total cost of the new machinery

a. 2,990,000 c. 3,140,000

b. 2,970,000 d. 3,120,000

18. the loss on trade-in of the old truck is?

 a. 0 c. 17,000
b. 7,000 d. 20,000

19.

.
a. 70,000 c. 550,000
b. 150,000 d. 300,000

20. what is the cost of land?

a. 1,145,000

b. 1,215,000

c. 1,130,000

d. 1,080,000
21. What is the cost of the building?
a. 6,625,000 c. 6,585,000

b. 6,575,000 d. 6,560,000
MISSKONASIYA Company acquired on January 1, 2022 a 5 year, 8%, P5,000,000 face
value bonds, for P4,445,615 dated January 1, 2022. The bonds which pay interest
every December 31 had 11% prevailing interest rate on the date of acquisition.
Lance’s business model is to collect contractual cash flows and the cash flows
are solely payment of principal and interest and to sell the bonds when
circumstances warrants. The prevailing interest rate on December 31, 2022 is
10%.

1. What amount should MISSKONASIYA Company report its debt investment in the
Statement of
Financial Position as of December 31, 2022?
a. P5,450,000 c. P4,683,013
b. P4,696,128 d. P4,534,633

2. What amount should Candy Crush Company report as unearned premium income in
its December 31, 2021 and December 31, 2022 Statement of Financial Position,
respectively?
a. P460,623 and P748,678 c. P570,652 and P776,193
b. P520,772 and P727,281 d. P582,352 and P730,660

A customer is suing KUNGMAHALMOAKOBATOAKOPINAPAPILI Company for P550,000 in

damages because her child was injured in November 2022 while riding an escalator
that stopped suddenly in one of its state-of-the-art stores in Makati when he
tripped and fell while walking down an escalator that was going up. Legal
counsel that it is probable that the lawsuit will be settled for between P200,000
and P550,000, with the following likely outcome: 20% to be settled at P200,000;
30% to be settled at P370,000 and 50% to be settled at P550,000.

3. What amount should KUNGMAHALMOAKOBATOAKOPINAPAPILI Company shall reflect the

situation in its December
31, 2022 Financial Statements?
a. P426,000 recognized as provision and P124,000 disclosed as contingent
liability.
b. P373,333 recognized as provision and P176,667 disclosed as contingent
liability.
c. P550,000 recognized as provision and no disclosure for contingent
liability.
d. P550,000 recognized as provision and P200,000 disclosed as contingent
liability.
JUNIEBOY Company started its business in selling printers with three-year
warranty. It estimates its warranty cost as a percentage of peso sales. Based
on past experience, it is estimated that 3% will be repaired during the first
year of warranty, 5% will be repaired during the second year of warranty and 7%
will be repaired in the third year. The product warranty provides assurance
based on agreed upon specification. In 2021 and 2022, the company was able to
sell 12,000 units and 14,500 units, respectively at a total price of P7,000 per
unit. The company also incurred actual repair costs of P6,500,000 and
P12,500,000 in 2021 and 2022, respectively. The selling price of the warranty
is P2,000 per unit. The printer is selling at P5,000 if without the warranty.

4. What amount should JUNIEBOY Company shall report the balance of warranty
liability as of December 31, 2022?
a. P7,625,000 c. P9,125,000
b. P8,825,000 d. P9,375,000

Graceful Corp. has a three-year, 10%, long-term bond for P3,500,000 with a
maturity date of November 1, 2025. On October 1, 2022, it breaches a covenant
related to this debt and the loan becomes due on demand. Graceful reaches an
agreement with the lender on January 2, 2023, to provide a waiver of the breach
not to demand payment until December 31, 2023. The financial statements are
authorized for issue on March 5, 2023.

5. How should Graceful Corp. shall report the situation in its Financial
Position as of December 31, 2022?
a. Graceful shall report the bond payable as non-current because a grace
period was obtained related to the debt.
b. Graceful shall report the bond payable as non-current because a grace
period was not obtained related to the debt.
c. Graceful shall report the bond payable as current because a grace
period was obtained related to the debt regardless of the date of when
the grace period was obtained.
d. Graceful shall report the bond payable as current because a grace
period was obtained related to the debt after the end of the reporting
period.

On January 1, 2021 MATTDINAPILAY Company bought an equipment by paying cash of

P2,000,000 and issued a 10% 4-year note payable in equal annual installment of
P1,000,000 at the end of each year. Interest is payable at each year-end based
on outstanding balance of the note. At issuance date, MATTDINAPILAY recorded
the transaction by recognizing a discount on note payable of P160,442.

On December 31, 2022, MATTDINAPILAY recorded a credit to discount on notes

payable of P48,037 when required payment of principal and interest due on this
date was made. At the end of 2023, the balance of unamortized discount is
P17,857.

ROMALULU Corporation issued P1,500,000 of 8% bonds on October 1, 2020 due on

October 1, 2023 at 105. The interest is to be paid twice a year on April 1 and
October 1. When the bonds were issued, the prevailing market rate was 10%
without the conversion privilege. The corporation closes its books annually on
December 31. Each P1,000 bond is convertible into 10 shares of P100 par value
ordinary share. The bonds were retired on April 1, 2023 at 102 and on this date,
the prevailing market rate was 9% without
the conversion privilege.
IBAONMODAPATMAGLOLOCK Company has an overdue note payable to ReSA Bank of
P10,000,000 and recorded accrued interest of P1,000,000. On December 31, 2022,
ReSA Bank agreed to the following restructuring agreement:
 Reduce the principal obligation by P3,000,000
 Waive the P1,000,000 accrued interest
 Extend the maturity date to December 31, 2025.
 Annual interest of 8% of the new principal is to be paid on December
31, 2023, December 31, 2024 and December 31, 2025.
 The prevailing market interest rate for similar debt instrument on
the date of restructuring is 12%

6. What is the carrying value of the bonds payable reported in MATTDINAPILAY

Company’s statement of financial position as of December 31, 2022?
a. P2,003,281 c. P1,936,816
b. P1,948,342 d. P1,922,162
7. How much gain (loss) should ROMALULU record upon retirement of these bonds?
a. P7,109 loss c. P37,177 loss
b. P7,109 gain d. P37,177 gain
8. How much is the gain on debt restructuring should IBAONMODAPATMAGLOLOCK
recognized in profit or loss?
a. P4,348,169 c. P4,592,669
b. P4,469,372 d. P4,672,512

9. Assuming Coca-Cola accounts for treasury under the cost method, what amount
should it report as total equity on its December 31, 2022, statement of
financial position?
a. P1,965,000 c. P1,985,000
b. P1,975,000 d. P1,995,000

ISARKAGAYAKU has 50,000 shares of P10 par ordinary shares authorized. The
following transactions took place during 2022, the first year of the
corporation’s existence:
Sold 5,000 ordinary shares for P18 per share.
Issued 5,000 ordinary shares in exchange for a patent with fair value of
P100,000.

DELUSIONAL Corporation has an investment in 5,000 shares of Wallace Company

ordinary shares Exam with a cost of P218,000. These shares are used in a property
dividend to shareholders of Malaki. The property dividend is declared on May 25
and scheduled to be distributed on July 31 to shareholders of record on June
15. The market value per Wallace share is P63 on May 25, P66 on June 15, and
P68 on July 31.
10. At the end of the ISARKAGAYAKU Corporation’s first year of operations,
total contributed capital amounted to?
a. P180,000 c. P200,000
b. P190,000 d. P210,000
11. The net effect of property dividend declaration on retained earnings of
DELUSIONAL Corporation for year ended December 31, 2022 is a reduction of?
a. P218,000 c. P330,000
b. P315,000 d. P340,000

12. One Direction should record for 2022:

a. lease expense of P150,000.
b. interest expense of P85,681 and depreciation expense of P131,210.
c. interest expense of P80,521 and depreciation expense of P85,101.
d. interest expense of P84,968 and depreciation expense of P88,806.

13. How much should Harry Styles Company report the right-of-use asset as of
December 31, 2023 and the amount of depreciation expense for year 2023,
respectively?
a. P8,257,132 and P1,075,483 c. P8,105,475 and P1,541,095
b. P8,927,417 and P1,705,483 d. P8,107,045 and P1,541,409

14. How much should Zayn Corporation report the balance of lease receivable
– net as of December 31, 2022 and the gross profit recognized at inception
of the lease?
a. P2,917,291and P632,161 c. P2,686,921 and P799,681
b. P2,955,789 and P632,161 d. P2,739,722 and P799,681
15. How much should Liam Company report the deferred tax asset and deferred
tax liability as of December 31, 2022, respectively?
a. P42,000 and P185,000 c. P42,000 and P180,000
b. P85,000 and P100,000 d. P80,900 and P93,600
16. What amount should Niall Incorporated’s report as net income after in its
Income Statement for the year 2022?
a. P2,890,000 c. P3,290,000
b. P3,450,000 d. P3,210,000

Peter Corporation’s board of directors declared a 10 percent bonus issue on

April 1, Exam 2022, when the market value of the share was P24 per share.
Accordingly, new shares were issued. Another P2.50 per cash dividends were
declared on September 1, 2022 and the equipment with carrying value of P650,000
currently having fair value of P720,000 was declared as dividends on December
1, 2022. Peter Corporation sustained a net loss of P810,000 for the year ended
December 31, 2022.

17. What amount should Peter Corporation report as retained earnings as of

December 31, 2022?
a. P4,657,500 c. P4,511,250
b. P4,567,500 d. P5,321,250

18. How much is the total shareholder’s equity should Peter Corporation in
its December 31, 2022 Statement of Financial Position?
a. P11,511,250 c. P13,151,250
b. P12,051,250 d. P13,671,250

19. Megan Company issues P2,000,000 6% convertible bonds on June 1, 2022.

Interest is Exam payable annually. The conversion option can be exercised in
 a number of years’ time. The liability component is initially measured at
P1,841,160 based on an 8% market rate of interest for a similar
nonconvertible bond. What amounts are recognized in the statement of
financial position at May 31, 2023?
a. a liability of P1,813,867 and equity of P186,133
b. a liability of P1,868,453 and equity of P158,840
c. a liability of P1,961,160 and equity of P38,840
d. a liability of P1,988,453 and equity of P11,547

20. 13. Laurence Company issued a P100,000, 10% bond at 99. The bond was:
a. sold for P100,000 less P1,000 of accrued interest.
b. sold at a premium because the stated rate was higher than the yield
rate.
c. sold at a discount because the stated rate was lower than the market
interest rate.
d. sold at a premium because the P1,000 accrued interest is added to the
P100,000 face amount.
21. Which of the following treasury share transactions do not affect the total
 [1.] Acquisition of treasury shares.
 [2.] Reissuance of treasury shares.
 [3.] Declaration of treasury shares as dividends.
 [4.] Retirement of treasury shares.
a. Number 1 only
b. Numbers 2 and 3 only
c. Numbers 3 and 4 only
d. Numbers 2, 3 and 4 only.
22. Danielle Company made the following journal entry on January 1, 2022
related to a Lease contract:
Lease receivable xx
Cost of sales xx
Sales xx
Inventory xx
Unearned interest income xx
Danielle Company must have a (an)?
a. sales-type lease
b. direct finance lease
c. operating lease
d. sale-leaseback transaction
23. Which of the following is included in the cost of the right-of-use asset
of the lessee?
a. free rent on the first year of lease contract granted by the lessor.
b. initial direct costs to effect the lease paid by the lessor.
c. reimbursements by the lessor of the lessee’s initial direct costs.
d. initial payment made by the lessee to the lessor at inception of the
lease.
24. The current income tax expense (CITE) is:
a. financial income multiplied by current year tax rate.
b. financial income multiplied by future enacted tax rate.
c. taxable income multiplied by future enacted tax rate.
d. taxable income multiplied by current year tax rate.
NAKNANG Company leased equipment from POOCH Inc. on January 1, 2022, for an 8-
year period. Equal payments under the lease are P1,000,000 and are due on July
1 of each year. The first payment was made on January 1, 2022. The interest
rate contemplated by NAKNANG and POOCH is 10%. The cost of the equipment on
POOCH’s accounting records is P2,500,000. Residual value of P100,000 at the end
of lease term is unguaranteed by NAKNANG. The lease is appropriately recorded
as a dealer’s lease.

25. How much is the interest income for the year ended December 31, 2022?
a. P491,700 b. P591,700 c. P587,000 d. P487,000
26. How much is the sales that POOCH should recognize for the year 2022?

a. P5,917,000 b. P5,870,000 c. P2,500,000 d. P2,453,000

32. On January 1, 2023, JOSKONAMAN Company issued P2,000,000 face value, 5-
year bonds at 102. Each P1,000 bond has one detachable share warrant that
allows the holder to purchase ten shares of P50 par value stock at P70 per
share. The bonds would have been sold at 99 without the warrants. The stated
rate on the bonds is 11% payable annually every December 31, starting
December 31, 2023. 33. Assuming that all the warrants were exercised at a
time when the market value of the stock is P100 on December 31, 2025, how
much is the total net effect on equity upon exercise of the warrants?

a. P1,400,000 b. P1,460,000 c. P460,000 d. P0