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MIDTERM EXAMINATION
Name: ______________________________ Course/Year/Section:__________ Date: _________
Choose the letter of the correct answer.
1. According to P.D. No. 1445, government personnel entrusted with the custody of government
resources (choose the incorrect statement)
a. are responsible for the safekeeping therefor in accordance with the law.
b. are directly responsible to the head of the agency for the efficient and effective utilization
therefor.
c. are directly responsible to the public for the efficient and effective utilization therefor.
d. must be properly bonded.
2. It refers to the authority issued by an agency’s Central Office to its regional and operating units
to cover the latter’s cash requirements.
a. Notice of Cash Allocation
b. Notice of Transfer of Allocation
c. Non-Cash Availment Authority
d. Cash Disbursement Ceiling
3. Under responsibility accounting, non-controllable costs are
a. costs incurred indirectly and allocated to a responsibility level.
b. ignored when general purpose financial statements are prepared.
c. costs that are uncertain of timing and amount.
d. all of these
4. Which of the following is not one the necessary closing entries of a government entity?
a. Closing of income and expense accounts to the “Revenue and Expense Summary”
account.
b. Closing of the net balance of “Revenue and Expense Summary” account to the “Subsidy
from National Government” account.
c. Closing of “Subsidy from National Government” account to the “Revenue and Expense
Summary” account.
d. Closing of “Cash-Treasury/Agency Deposit, Regular” account to the “Accumulated
Surplus/(Deficit)” account.
5. Which of the following best describes “Not yet due and demandable” obligations
a. Obligations that are not yet incurred but are expected to be incurred in the future
b. Obligations already incurred and recorded in the registries but not yet in the accounting
books because the accounting recognition criteria for liabilities are not yet met.
c. Obligations that are long-term and, hence, do not require payment within 12 months from
the reporting date.
d. Obligations where the obligee provided the entity with a grace period not to demand
immediate payment within 1 year or longer.
6. Recording in the Obligation Request and Status (ORS) is made when
a. obligations are incurred
b. liabilities for the obligations are recognized in the books of accounts
c. the recognized liabilities are settled
d. all of these
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7. Which of the following is an indication of impairment of investment property from internal
sources?
a. Significant changes with an adverse effect on the entity have taken place during the period,
or are expected to take place in the near future, in the extent to which, or the manner in
which, an asset is used or is expected to be used.
b. During the period, an asset’s market value has declined significantly more than would be
expected as a result of the passage of time or normal use.
c. Market interest rates or other market rates of return on investments have increased during
the period, and those increases are likely to affect the discount rate used in calculating an
asset’s value in use and decrease the asset’s recoverable amount materially.
d. Significant changes with an adverse effect on the entity have taken place during the period,
or will take place in the near future, in the technological, market, economic, or legal
environment in which the entity operates, or in the market to which an asset is dedicated.
8. Entity A, a government entity, acquires investment in bonds for ₱100,000, equal to face
amount, and incurs transaction costs of ₱10,000. At year-end, the fair value of the investment
is ₱120,000. If the investment is classified under the held to maturity category, which of the
following carrying amounts at the end of Year 1 would most likely not be questioned by the
COA auditor?
a. 120,000
b. 108,382
c. 100,000
d. Answer cannot be determined due to insufficient data, like nominal interest rate, effective
interest rate, maturity, contractual terms, present value factor, amortization table, name
of auditor, etc.
100,000 acquisition cost + 10,000 = 110,000 initial carrying amount.
Since the investment is classified as held to maturity investment, it will be subsequently
measured at amortized cost. At the investment’s maturity date, the carrying amount of the
bonds would be equal to 100,000, the face amount.
Thus, choice (a) is incorrect because 120,000 is the fair value; choice (c) is also incorrect because
100,000 is the face amount. The correct carrying amount at the end of Year 1 would be less than
110,000, the initial carrying amount, but more than 100,000, the face amount. Choice (b) is
the best answer.
9. If the unadjusted balance of cash per bank statement is less than the adjusted balance and
there no other reconciling items or errors, the difference is most likely caused by
a. Credit memo
b. Debit memo
c. Deposits in transit
d. Outstanding checks
10. The issuer of a financial instrument shall classify the instrument, or its component parts, on initial
recognition as a
a. financial asset
b. financial liability
c. equity instrument
d. any of these
11. According to the PPSAS, a financial asset is recognized when
a. an entity becomes a party to the contractual provisions of the instrument.
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b. there is reasonable certainty that the asset will result to inflow of resources embodying
economic benefits to the entity.
c. its cost can be measured with sufficient reliability.
d. c and d
12. Which of the following items are classified by a government entity as Inventory Held for
Consumption?
a. Minor tools and equipment costing less than ₱15,000.
b. Raw materials that are consumed in the production process.
c. Office supplies and similar materials.
d. Rice and other welfare goods held for distribution
13. Under this inventory system, purchases, sales, and other transactions affecting inventory are
recorded in the “inventory” and “cost of sales” accounts, as appropriate. Moreover, stock
cards and stock ledgers are maintained.
a. Specific identification
b. Periodic inventory system
c. Perpetual inventory system
d. Weighted average
14. This consolidates all issued Requisition and Issue Slips (RIS) for inventories and is used in updating
both the Stock Card and the Stock Ledger Card
a. Report of Supplies and Materials Issued (RSMI)
b. Report on Inventory Subsidiary Ledgers (RISL)
c. Report of Accountability for Accountable Forms
d. Report on the Physical Count of Inventories
15. The following are the account balances from Entity A’s statement of financial performance:
Inventory, January 1, 20x1 ...................................
Purchases .............................................................
Purchase Returns and Allowances .......................
Purchase Discounts ..............................................
Freight-In ..............................................................
Inventory, December 31, 20x1 .............................
Freight-Out ...........................................................
₱30,000
40,000
5,000
4,000
5,000
15,000
6,000
Given this information, the cost of sales during 20x1 is:
a. 51,000
b. 46,000
c. 56,000
d. 66,000
16. Relief and other welfare goods held for distribution are most likely to be classified by a
government entity as
a. Semi-Expendable Property
b. Inventory Held for Consumption
c. Inventory Held for Distribution
d. None of these
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17. Entity A, a government entity, records purchases of items of inventory under the “Purchases”
account and freight-in under the “Freight-in” account. Which of the following statements is
correct?
a. Entity A is not compliant with the requirements of GAM for NGAs.
b. Entity A is not compliant with the requirements of GAM for NGAs. This can be rectified by
note disclosure.
c. Entity A is compliant with the requirements of GAM for NGAs, but needs to make a note
disclosure of the accounting policy choice.
d. Entity A uses the periodic inventory system and this is okay. There are no other requirements
from Entity A.
18. A government entity’s biological asset has fair values less costs to sell of ₱100,000 and ₱120,000
at the beginning and end of the period, respectively. The year-end adjusting entry will most
likely include
a. a debit to unrealized gain of ₱20,000 to be recognized in profit or loss
b. a credit to unrealized gain of ₱20,000 to be recognized in profit or loss
c. a credit to unrealized gain of ₱20,000 to be recognized directly in equity
d. a credit to unrealized gain of ₱20,000 to be recognized in surplus or deficit
19. Entity A acquires a biological asset for ₱100, equal to fair value, and incurs transaction cost of
₱10 on the purchase. The costs to sell at the acquisition date are ₱20. Which of the following
statements is correct?
a. Entity A recognizes the purchased asset at ₱100.
b. Entity A recognizes the purchased asset at ₱90.
c. Entity A recognizes a loss of ₱30 on the initial recognition of the purchased asset.
d. Entity A recognizes a gain of ₱20 on the initial recognition of the purchased asset.
20. Which of the following statements is correct regarding investment properties?
a. A building being rented out to the entity’s employees who are paying rentals at market
rates is not an investment property.
b. All assets classified as investment property shall be depreciated.
c. A commencement of owner-occupation is a change in use that triggers a transfer from
PPE to investment property classification.
d. A decision to sell an investment property is considered a change in use under the GAM for
NGAs.
21. Which of the following may qualify as investment property?
a. Machineries that are held for lease
b. Building leased from another entity under an operating lease and is leased out to various
tenants under sub-operating leases.
c. An agricultural land purchased for appreciation purposes
d. Equipment purchased with an indeterminate purpose
22. Which of the following may be capitalized as cost of property, plant and equipment?
a. Professional fees
b. Costs of opening a new facility
c. Costs of introducing a new product or service
d. Costs of conducting business in a new location or with a new class of customers
e. Administration and other general overhead costs
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23. The initial testing costs incurred on an item of property, plant and equipment are
a. capitalized.
b. not capitalized.
c. capitalized after deducting the disposal proceeds of samples generated during testing.
d. Any of these as an accounting policy choice.
24. Entity A exchanges an item of PPE with Entity B. Assuming the exchange lacks commercial
substance, how should Entity A measure the equipment received from the exchange?
a. at the carrying amount of the asset given up
b. at the fair value of the asset given up
c. at the fair value of the asset received
d. at the carrying amount of the asset given up, plus cash paid or minus cash received
25. Entity A receives a donation of scientific equipment from an international body. If no condition
is attached to the donation, how should entity A account for the donation?
a. Recognize it immediately as income measured at the equipment’s fair value at the
acquisition date.
b. Initially recognized it as a liability measured at the equipment’s fair value at the acquisition
date.
c. Recognize it as income when the expenses intended to be compensated by the donation
are incurred.
d. b and c.
26. Which of the following reflects a Non-Cash Availment Authority (NCAA) mode of
disbursement?
a.
Accounts Payable
xxx
Cash-Constructive Income
Remittance
xxx
b.
Accounts Payable
xxx
Cash – Modified Disbursement
System (MDS), Regular
xxx
c.
Accounts Payable
xxx
Subsidy from National Government
xxx
d.
None of these.
27. Transactions and events are recognized in the accounting records and recognized in the
financial statements of the periods to which they relate.
a. Time value of money
b. Recognition
c. Accrual basis of accounting
d. Going concern
28. Entity A, a government entity, maintains a petty cash fund with an established amount of
₱40,000. During the period, Entity A disburses ₱10,000 for office supplies from the petty cash
fund. The entry to record the disbursement is
a.
Office Supplies Expense
10,000
Petty Cash
10,000
b.
Office Supplies
10,000
Petty Cash
10,000
c.
Office Supplies
10,000
Cash-Treasury/Agency Deposit, Regular
10,000
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d.
None of these.
10,000
10,000
29. Which of the following statements is correct?
a. The purchases account is used in a periodic inventory system but not in a perpetual
inventory system.
b. Government entities sometimes record the acquisition of inventories under the purchases
account.
c. The classification of inventories as held for distribution at no charge or at a minimal charge
is not uncommon to business entities.
d. Raw materials and work-in-process inventories are applicable only for business entities.
30. Select the correct statement.
a. All investment properties held for capital appreciation will be classified as held for sale in
the long run.
b. Investment properties being redeveloped as investment properties on behalf of third
parties are investment properties.
c. Investment properties that are to be disposed of without further development are treated
as investment property until they are derecognized.
d. Entity A’s primary line of business is leasing. Entity A shall treat all assets used in providing
lease services as investment property.
31. Select the incorrect statement regarding impairments of investment properties.
a. Impairments of investment properties of government entities are recognized in surplus or
deficit.
b. Investment properties are subject to impairment.
c. Impairment losses on investment properties measured under the cost model are never
reversed.
d. Compensation from third parties for investment property that was impaired or lost shall be
recognized in surplus or deficit when the compensation becomes receivable and not
offset with the amount of loss.
32. Which of the following statements is incorrect regarding investment property?
a. An investment property generates, or has the ability to generate, separately identifiable
cash flows from the other assets of the entity.
b. Transfers to or from investment property shall be made when, and only when, there is a
change in use.
c. During the period, Entity A, a government entity, reclassifies a building that was previously
use
d as office space to investment property. On the date of transfer, the building has
a carrying amount of ₱1M and a fair value of ₱1.2M. Entity A will recognize a gain on
transfer of ₱.2M.
d. When a government entity applies the cost model to account for its investment property
subsequent to initial recognition, changes in fair values may affect the entity’s assessment
of the property’s impairment.
33. Which of the following is included in the initial cost of an item of PPE?
a. Cash discounts taken
b. Cash discounts not taken
c. Nonrefundable purchase taxes
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d. Refundable purchase taxes
Use the following information for the next two questions:
Entity A exchanged equipment with Entity B. Pertinent data are shown below:
Entity A
Entity B
Carrying amount
85,000
130,000
Fair value
95,000
Indeterminable
Cash paid by Entity B to Entity A
15,000
34. If the exchange has commercial substance, how much is the initial measurement of the
equipment received by Entity B?
a. 95,000
b. 115,000
c. 100,000
d. 110,000
95,000 FV of asset received
35. If the exchange has commercial substance, how much is the gain (loss) recognized by Entity
B in the exchange?
a. (50,000)
b. (35,000)
c. (15,000)
d. 0
Equipment – new
Loss (squeeze)
Cash
Equipment – old
95,000
50,000
15,000
130,000
36. Which of the following statements is incorrect? (BONUS)
a. For subsequent measurement, government entities classify intangible assets into those with
finite and indefinite useful lives, similar to business entities.
b. Subsequent expenditures on recognized intangible assets are generally expensed unless it
is clear that the expenditures meet the recognition criteria for intangible assets.
c. A government entity acquires an intangible asset with indefinite useful life for ₱100.
Assuming the entity uses the maximum amortization period for intangible assets under the
GAM for NGAs, the appropriate annual amortization expense on the intangible asset is ₱0.
d. The amortization of an intangible asset is credited directly to the intangible asset account,
according to the GAM for NGAs.
37. Entity A acquires equipment from a supplier, on account. A lender settles the account of Entity
A by directly paying the supplier the proceeds of a loan payable that is recorded in the BTr’s
books. This mode of disbursement is called
a. Cash Disbursement Ceiling (CDC)
b. Advice to Debit Account (ADA)
c. Non-Cash Availment Authority (NCAA)
d. Notice of Transfer of Allocation (NTA)
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38. Under this type of disbursement authority, disbursements are made out of the entity’s own
bank account rather than through the Treasury Single Account.
a. Disbursement through Advice to Debit Account (ADA)
b. Disbursement through Cash Disbursement Ceiling (CDC)
c. Disbursement through electronic Modified Disbursement System (eMDS)
d. Disbursement through Non-Cash Availment Authority (NCAA)
39. No journal entry is made for a disbursement under this mode of disbursement.
a. LDDAP-ADA
b. CPC
c. eMDS
d. None of these
40. Which of the following shall certify the availability of allotment before obligations can be
incurred and disbursements are made?
a. Budget Officer
b. Head of Agency
c. Chief Accountant
d. COA Auditor
41. Which of the following shall certify the availability of funds and completeness of supporting
documents before the Head of Agency or his/her authorized representative can enter into
contracts that obligate the government for the eventual payment of government funds?
a. BTr
b. Budget Officer
c. Chief Accountant
d. COA Auditor, jointly with DBM
42. All Disbursement Vouchers (DVs) or Payroll shall be approved by the
a. Budget Officer
b. Head of Agency
c. Chief Accountant
d. COA Auditor
43. Which of the following is not one of the modes of disbursements by a government entity?
a. check
b. credit card
c. online payment
d. payment through Short Messaging System (SMS)
44. Payments of checks that are chargeable against the Treasury Account are credited to the
a. Modified Disbursement System Checks
b. Commercial Checks
c. Advice to Debit Account
d. Cash-Modified Disbursement System (MDS) account
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45. According to the GAM for NGAs, cash disbursements are made through
a. cash advances to authorized personnel
b. direct cash payments by the Head of Agency to the payees
c. direct cash payment by Collecting Officers to payees
d. any of these
46. Which of the following statements regarding the disbursement of government funds is
incorrect?
a. No additional cash advance shall be given to any official or employee unless the previous
cash advance given to him is first liquidated.
b. Transfer of cash advance from one officer to another is prohibited.
c. A cash advance shall not be used to encash checks or to liquidate a previous cash
advance.
d. Officials and employees authorized to travel shall be granted cash advance to cover
traveling expenses. The amount granted shall be accounted for as “Due to Officers and
Employees.”
47. It is an authority issued by an agency’s Central Office to its regional and operating units to
cover the latter’s cash requirements.
a. Notice of Cash Allocation (NCA)
b. Tax Remittance Advice (TRA)
c. Cash Disbursement Ceiling (CDC)
d. Notice of Transfer of Allocation (NTA)
48. The receipt of a disbursement authority in the form of Non-Cash Availment Authority (NCAA)
is debited to which of the following accounts?
a. Subsidy from National Government
b. Cash-Modified Disbursement System (MDS), Regular
c. Accounts Payable
d. Cash-Constructive Income Remittance
49. Which of the following transactions is not recorded through a credit to the “Cash-Modified
Disbursement System (MDS), Regular” account?
a. Reversion of unused NCA at the end of the period.
b. Constructive remittance of taxes withheld to the BIR.
c. Payment of accounts payable wherein the tax portion is withheld.
d. Granting of cash advance for payroll.
50. This account is credited when government entities remit collections to the National Treasury.
a. Cash-Modified Disbursement System (MDS), Regular
b. Cash-Treasury/Agency Deposit, Regular
c. Cash-Collecting Officers
d. Cash-Tax Remittance Advice
51. All of the above involves the physical transfer of cash except
a. Remittance of collections of revenue to the National Treasury
b. Remittance of employee contributions to GSIS, Pag-IBIG and PhilHealth
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c. Remittance of taxes through the Tax Remittance Advice
d. Remittance of excess cash advance by an officer
52. Which of the following is not one of the objects of expenditures under the GAM for NGAs?
a. PS
b. MOOE
c. CF
d. All of these are objects of expenditures under the GAM for NGAs.
53. Government expenditures classified as MOOE are those that
a. pertain to finance costs
b. pertain to all types of employee benefits
c. pertain to various operating expenses other than employee benefits and financial
expenses
d. pertain to capitalizable expenditures
Use the following information for the next three questions:
On January 1, 20x1, Entity A acquires 5-year, 5%, ₱1,000,000 face amount bonds for ₱957,876 and
classifies them as available for sale financial assets. The issuer pays annual interest every
December 31. The effective interest rate is 6%. On December 31, 20x1, the bonds have a fair value
of ₱980,000.
54. How much is the carrying amount of the bonds on Entity A’s December 31, 20x1 statement of
financial position?
a. 980,000
b. 957,867
c. 965,349
d. 973,270
Amortization Table:
Date
Interest received
1/1/x1
12/31/x1
50,000
12/31/x2
50,000
12/31/x3
50,000
12/31/x4
50,000
12/31/x5
50,000
Interest income
Amortization
57,473
57,921
58,396
58,900
59,434
7,473
7,921
8,396
8,900
9,434
55. How much is the interest income in 20x1?
a. 50,000
b. 57,473
c. 57,921
d. 58,800
56. How much is the gain or loss recognized in net assets/equity?
a. (20,000)
b. 22,124
c. (22,124)
d. 14,651
Present value
957,876
965,349
973,270
981,666
990,566
1,000,000
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980,000 fair value - 965,349 = 14,651
57. Entity A had the following balances at December 31, 1999:
• Cash in checking account
• Cash in money market account
• Treasury bill, purchased 11/1/1999, maturing 1/31/2000
• Treasury bill, purchased 12/1/1999, maturing 3/31/2000
35,000
75,000
350,000
400,000
Entity A’s policy is to treat as cash equivalents all highly liquid investments with a maturity of three
months or less when purchased. What amount should Entity A report as cash and cash equivalents
in its December 31, 1999 statement of financial position?
a. 110,000
b. 385,000
c. 460,000
d. 860,000
(35,000 + 75,000 + 350,000) = 460,000
58. Entity A purchased a machine costing ₱125,000 for its manufacturing operations and paid
shipping costs of ₱20,000. Entity A spent an additional ₱10,000 testing and preparing the
machine for use. What amount should Entity A record as the cost of the machine?
a. 155,000
b. 145,000
c. 135,000
d. 125,000
(125,000 + 20,000 + 10,000) = 155,000
59. On December 31, 20X6, a building owned by Entity A was totally destroyed by fire. The building
had fire insurance coverage up to ₱500,000. Other pertinent information as of December 31,
20X6, follows:
Building, carrying amount
Building, fair market value
Removal and clean-up costs
₱520,000
550,000
10,000
During January 20X7, before the 20X6 financial statements were issued, Entity A received
insurance proceeds of ₱500,000. On what amount should Entity A base the determination of its
loss on involuntary conversion?
a. 520,000
b. 530,000
c. 550,000
d. 560,000
(520,000 + 10,000) = 530,000. The insurance is accounted for as a separate event.
60. Entity A uses straight-line depreciation for its property, plant, and equipment, which, stated at
cost, consisted of the following:
12/31/X6
12/31/X5
Land
₱ 25,000
₱ 25,000
Buildings
195,000
195,000
Machinery & Equipment
695,000
650,000
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Accumulated depreciation
400,000
370,000
Entity A depreciation expense for 20X6 and 20X5 was ₱55,000 and ₱50,000, respectively. What
amount was debited to accumulated depreciation during 20X6 because of property, plant, and
equipment retirements?
a. 40,000
b. 25,000
c. 20,000
d. 10,000
Accumulated Depreciation
disposals (squeeze)
end.
25,000
400,000
370,000
beg.
55,000
depreciation
61. Entity A started construction of a new office building on January 1, 20X4, and moved into the
finished building on July 1, 20X5. Of the building's ₱2,500,000 total cost, ₱2,000,000 was incurred
in 20X4 evenly throughout the year. Entity A 's incremental borrowing rate was 12% throughout
20X4, and the total amount of interest incurred by Entity A during 20X4 was ₱102,000. What
amount should Entity A report as capitalized interest at December 31, 20X4?
a. 102,000
b. 120,000
c. 150,000
d. 240,000
BC based on weighted average expenditures = [(2M ÷ 2) x 12%] = 120,000
Actual BC = 102,000
Capitalizable BC = 102,000 lower
62. If the unadjusted balance of cash per bank statement is greater than the adjusted balance
and there no other reconciling items or errors, the difference would most certainly be caused
by a
a. Credit memo
c. Deposits in transit
b. Debit memo
d. Outstanding checks
63. Which of the following does not qualify as cash equivalent for a government entity?
a. Money market placement with an original term of 1 year but matures within 3 months after
the reporting date.
b. Money market placement with an original term of 3 months.
c. Temporary investments in stocks that are expected to be sold within 1 month after the
reporting date.
d. All of these qualify as cash equivalents.
64. Entity A estimates a risk of loss on a recognized asset at 20%. However, Entity A can only accept
a risk of 5%. Entity A then enters into a forward contract to offset the excess risk of 15%. This
process is best described as
a. Risk management
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b. Forward hedging
c. Hedge accounting
d. Process risk hedge
65. Which of the following may not be included as part of cash in the note disclosures?
a. Post-dated checks drawn
b. Unreplenished petty cash fund consisting of only the coins and currencies held as at the
reporting date
c. Issued checks that were cancelled because they became stale
d. Treasury bills acquired 3 months before maturity date
66. Which of the following statements is correct?
a. Entity A acquires equipment from a supplier, on account. A lender settles the account of
Entity A by directly paying the supplier the proceeds of a loan payable that is recorded in
the BTr’s books. This transaction is called Cash Disbursement Ceiling (CDC).
b. All disbursements shall be made through Disbursement Vouchers (DVs) or Payroll which are
approved by the Head of the Requisitioning Unit.
c. Government entities are not allowed by law to make purchases using credit card.
d. No additional cash advance shall be given to any official or employee unless the previous
cash advance given to him is first liquidated.
67. Which of the following statement is incorrect?
a. A check disbursement is normally recorded as a credit to the “Cash-Modified
Disbursement System (MDS), Regular” account.
b. Both the ORS and RAOD are updated each time an obligation is incurred, a payable is
recorded for the obligation incurred, and disbursements are made to settle the recorded
payables.
c. At the end of each year, an adjustment is made to revert any unused NCA of a
government entity.
d. The GAM for NGAs requires the Collecting Officer to issue an official receipt to
acknowledge the receipt of the Notice of Cash Allocation.
68. On December 31, 1998, Entity A had the following cash balances:
Cash in banks
₱1,800,000
Petty cash funds (all funds were reimbursed on 12/31/98)
50,000
Cash in banks includes ₱600,000 of compensating balances against short-term borrowing
arrangements at December 31, 1998. The compensating balances are not legally restricted as to
withdrawal by Entity A. In the current assets section of Entity A's December 31, 1998 statement of
financial position, what total amount should be reported as cash?
a. 1,200,000
b. 1,250,000
c. 1,800,000
d. 1,850,000
(1,800,000 + 50,000) = 1,850,000
69. Which of the following statement is incorrect?
a. Technically, only the Journals and Ledgers are considered accounting records; the
Registries are budget records.
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b. Separate accounting records and budget registries are maintained for each fund cluster.
c. Government entities and business entities use the term “obligation” or the phrase
“incurrence of obligation” similarly.
d. The various registries maintained by government entities primarily serve as internal control
for controlling and monitoring the conformance of actual results with the approved
budget.
70. Entity A had the following bank reconciliation at March 31, 1997:
Balance per bank statement, 3/31/97
₱46,500
Add deposit in transit
10,300
56,800
Less outstanding checks
12,600
Balance per books, 3/31/97
₱44,200
Data per bank for the month of April 1997 follow:
Deposits
₱58,400
Disbursements
49,700
All reconciling items at March 31, 1997, cleared the bank in April. Outstanding checks at April 30,
1997, totaled ₱7,000. There were no deposits in transit at April 30, 1997. What is the cash balance
per books at April 30, 1997?
a. 48,200
b. 52,900
c. 55,200
d. 58,500
Per bank
46,500
Disbursements
49,700
4/30/97
Per books (squeeze)
3/31/97
Deposits
58,400
55,200
48,200
Per bank
55,200
CM
DIT
DM
OC
(7,000)
Adjusted
48,200
Adjusted
48,200
71. Which of the following statements is correct?
a. All revenues shall be remitted to the BTr and included in the Special Fund, unless another
law specifically requires otherwise.
b. Payments to government entities in the form of checks are not allowed.
c. Revenues of a government entity arise from exchange transactions only.
d. When cash flows are deferred, the fair value of the consideration receivable is its present
value.
72. In preparing its bank reconciliation at December 31, 1994, Entity A has available the following
data:
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Balance per bank statement, 12/31/94
Deposit in transit, 12/31/94
Outstanding checks, 12/31/94
Amount erroneously credited by bank to Entity A's
account, 12/28/94
Bank service charges for December
₱38,075
5,200
6,750
400
75
Entity A's adjusted cash in bank balance at December 31, 1994, is
a. 36,525
b. 36,450
c. 36,125
d. 36,050
38,075 + 5,200 – 6,750 – 400 = 36,125
73. For government entities, the capitalization threshold for PPE is
a. ₱15,000 or more
b. not less than ₱25,000
c. more than ₱15,000
d. at least ₱5,000
74. Which of the following statements is incorrect?
a. The constructive remittance of taxes withheld through the TRA gives rise to the recognition
of revenue.
b. According to the GAM for NGAs, the receipt of concessionary loans by government
entities may give rise to revenue recognition.
c. Taxes are compulsory payments, imposed on persons, properties or activities, intended to
provide revenue to the government. Taxes include fees, fines and penalties.
d. The main source of revenue for the government is taxes.
75. Which of the following statements is correct?
a. All disbursements require prior certifications to establish their validity and legality. A
certification for fictitious obligation is void and results to civil liability by the certifying
officials, but not criminal liability.
b. According to the GAM for NGAs, the Advice to Debit Account (ADA) mode of
disbursement can be used only if the payee maintains an account in the same bank where
the government entity maintains its account.
c. Disbursements through the Cash Disbursement Ceiling (CDC) results to the recognition of
a loan payable in the books of accounts of the BTr.
d. Under the Advice to Debit Account (ADA) mode of disbursement, payments from a
government entity are directly credited to the bank accounts of the payees through bank
transfers.
e. The only valid modes of disbursement for a government entity are through cash or check.
76. The entry to record the receipt of Notice of Cash Allocation (NCA) by a government entity is:
a. (Debit) Cash-Modified Disbursement System (MDS), Regular; (Credit) Accumulated Surplus
(Deficit)
b. (Debit) Cash-Modified Disbursement System (MDS), Regular; (Credit) Subsidy from National
Government
c. (Debit) Cash-Collecting Officer; (Credit) Subsidy from National Government
d. No journal entry. The event is recorded only in the Registries.
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77. Which of the following statements is correct? (BONUS)
a. If it is not clear whether an expenditure is a research or a development cost, it is treated
as development cost.
b. The development costs of an internally generate intangible asset may be capitalized if
certain conditions are met.
c. A government entity does not amortize intangible assets.
d. Government entities amortize all of their intangible assets over a period of 2 to 10 years,
unless a more appropriate estimate of useful life is available.
e. Government entities normally assign their intangible assets a residual value of 5% of cost.
78. Entity A, a government entity, is a wholesaler of Product A, a non-unique good. The activity for
Product A during July is shown below:
Date
Balance/Transaction
Units
Cost
July 1
Inventory
2,000
₱36.00
7
Purchase
3,000
37.00
12
Sales
3,600
21
Purchase
5,000
22
Sales
3,800
29
Purchase
1,600
37.88
38.11
How much is the ending inventory on July 31?
a.
b.
c.
d.
153,400
156,912
158,736
Answer cannot be determined due to insufficient information
C
Solution:
Date Transaction
1-Jul Inventory
7
Purchase
Total
12
Sales
21
Purchase
Total
22
Sales
29
Purchase
Ending inventory
Units
2,000
3,000
5,000
(3,600)
5,000
6,400
(3,800)
1,600
4,200
Cost
36.00
37.00
36.60
36.60
37.88
37.60
37.60
38.11
Total cost
72,000
111,000
183,000
(131,760)
189,400
240,640
(142,880)
60,976
158,736
79. Which of the following is most likely an acceptable measurement for agricultural produce
Initial measurement
Subsequent measurement
P a g e | 17
a.
b.
c.
d.
fair value less costs to sell
cost
fair value less costs to sell
lower of cost and NRV
fair value
lower of cost and FV less costs to sell
fair value less costs to sell
fair value less costs to sell
80. Biological assets and agricultural produce are recognized when all of the following are present
except
a. control
b. probable future economic benefits
c. probable future event
d. fair value or cost can be measured reliably
81. Which of the following statements is incorrect regarding the accounting for biological assets?
a. Agricultural land used in growing agricultural produce can never qualify for recognition as
biological asset.
b. Biological asset is living animal or plant.
c. Agricultural produce is harvested product from a biological asset before any processing.
d. PAS 41 and the GAM for NGAs have the same accounting treatment for consumable and
bearer plants.
Use the following information for the next two questions:
On January 1, 20x1, the biological assets of Entity A consist of three 1-year old animals with fair
value less costs to sell of ₱1,200 each.
The following transactions occurred during the period:
On July 1, 20x1, four 1-year old animals are acquired for ₱1,000 each, equal to the FVLCS on this
date.
On October 1, 20x1, six animals are born. The FVLCS of a newborn on this date is ₱600.
The FVLCS on December 31, 20x1 are as follows:
Age
FVLCS
new born
₱ 750
3 mos. old
₱ 900
1 yr. old
₱1,300
1.5 yr. old
₱1,700
2 yrs. old
₱2,200
82. How much is change in FVLCS due to price change?
a. 400
b. 1,200
c. 800
d. 1,600 (BONUS)
Solution:
Formula:
(FVLCS, end. Age beg.) - (FVLCS, beg. Age beg.) x Qty.
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Asset Group
From beg. (1 yr.; 1 yr.)
Purchased on July 1 (1 yr.; 1 yr.)
Born on Oct. 1 (0; 0)
Change in FVLCS due to Price Change
Change in FVLCS
(₱1,300 - ₱1,200) x 3
(₱1,300 - ₱1,000) x 4
(₱750 - ₱600) x 6
300
1,200
900
2.400
83. How much is change in FVLCS due to physical change?
a. 9,700 (BONUS)
b. 2,900
c. 8,000
d. 3,600
Solution:
Formula:
(FVLCS, end. Age end.) - (FVLCS, end. Age beg.) x Qty.
+ FVLCS of newborn at date of birth
Asset Group
Change in FVLCS
From beg. (2yrs.; 1yr.)
(₱2,200 - ₱1,300) x 3
Purchased on July 1 (1.5yrs.; 1yr.)
(₱1,700 - ₱1,300) x 4
Born on Dec. 31 (3 mos.; 0 yr.)
(₱900 - ₱750) x 6
FVLCS of new born on Dec. 31
(₱600 x 6)
Change in FVLCS due to Physical Change
2,700
1,600
900
3,600
8,800
84. Which of the following properties falls under the definition of investment property?
I.
Land held for long-term capital appreciation
II.
Property occupied by an employee paying market rent
III.
Property being constructed on behalf of third parties
IV.
A building owned by an entity and leased out under an operating lease
a.
b.
c.
d.
I, II
II, IV
I, IV
II, III, IV
85. BONUS
“I press on toward the goal to win the prize for which God has called me heavenward in Christ
Jesus.” (Philippians 3:14)
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