Started on Sunday, 15 March 2020, 2:30 PM
Finished
State
Completed on Sunday, 15 March 2020, 4:49 PM
Time taken 2 hours 19 mins
74.00 out of 75.00 (99%)
Grade
Question 1
In relation to measuring the pension expense under a defined benefit plan, which discount rate is
used?
Select one:
A. Market yields at the balance sheet date on high-quality bonds
B. Investment or actuarial risk
C. Risk that future experiences may differ from actuarial assumptions.
D. Specific risk associated with the entity’s business
Question 2
Reynaldo Company leased a machine from Chester Company on January 1, 2018. The first
annual payment was made on January 1, 2019. The machine has an economic life of six years.
The lease agreement requires four annual payments of ₱33,000, including ₱3,000 annual
payment for repairs and maintenance. The machine will be returned to Chester Company at the
end of the lease term and Reynaldo Company guarantees a residual value of ₱5,000. Interest
implicit in the lease is 10%, which is known to Reynaldo.
In its noted to the financial statements at December 31, 2020, Reynaldo Company would disclose
minimum lease payments of:
Answer:
65000
Question 3
Adriel Company has a loan due for repayment in six-month time, but it has discretion to
refinance for repayment fifteen months later. Adriel exercised its discretion by entering into a
refinancing agreement that was signed after the balance sheet date but before financial
statements were authorized for issue. Based on the foregoing facts, in which section of the
statement of financial position should this be presented?
Select one:
A. Noncurrent assets
B. Current assets
C. Noncurrent liabilities
D. Current liabilities
Question 4
Which of the following obligations do not arise from past services provided by an employee?
Select one:
A. termination benefits
B. short-term compensated absences
C. post-employment benefits
D. other long-term employee benefits
Question 5
At the beginning of the current year, Babe Company had the following balances related to a
defined benefit plan:
Projected benefit obligation
Fair value of plan assets
₱6,500,000
5,750,000
The actuary provided the following data for the current year: Current service cost- ₱600,000;
Settlement discount rate- 10%; Expected return on plan assets- 8%; Actual return on plan assets₱700,000; Contribution to the plan- ₱900,000; Benefits paid to retirees- ₱100,000.
What is the defined benefit cost?
Answer:
550000
Question 6
If bonds are initially sold at a discount and the straight line method of amortization is used,
interest expense in the earlier years:
Select one:
A. Will be less than what it would have been had the effective method of amortization been
used
B. Will be the same as what it would have been had the effective method of amortization
been used
C. Will exceed what it would have been had the effective method of amortization been used
D. Will be less than the coupon rate of interest.
Question 7
According to PAS 19, Employee benefits, which of the following terms best describes ‘other
long-term employee benefits’?
Select one:
A. Benefits payable as a result of an entity’s decision to end an employment before the
normal retirement care.
B. Benefits which fall due within twelve months of the end of the reporting period in which
the service is rendered.
C. Benefits not falling due wholly within twelve months of the end of the reporting period in
which the service is rendered.
D. Benefits which are payable after completion of employment.
Question 8
On January 1, 2019, Canon Company, a calendar-year company, issued ₱400,000 of notes
payable, of which ₱100,000 is due on January 1 for each of the next four years. The proper
balance sheet presentation on December 31, 2019, is
Select one:
A. Current Liabilities, ₱200,000; Long-term Debt, ₱200,000
Current Liabilities, ₱200,000; Long-term Debt, ₱200,000
Current Liabilities, ₱200,000; Long-term Debt, ₱200,000
B. Current Liabilities, ₱100,000; Long-term Debt, ₱300,000
C. Current Liabilities, ₱400,000
D. Long-term Debt, ₱400,000
Question 9
During 2019, Smith Company filed suit against West Company seeking damages for patent
infringement. On December 31, 2019, Smith’s legal counsel believed that it was probable that
smith would be successful against West for an estimated amount of₱1,500,000. On March 1,
2020, Smith Company was awarded ₱1,000,000 and received full payment thereof. The 2019
financial statements were issued on February 1, 2020.
How should the award be reported?
Select one:
A. Some other answer
B. As a disclosure of a contingent asset of ₱1,000,000
C. As a receivable and revenue of ₱1,000,000
D. As a receivable and deferred revenue of ₱1,000,000
E. As a disclosure of a contingent asset of ₱1,500,000
As a disclosure of a contingent asset of ₱1,500,000
As a disclosure of a contingent asset of ₱1,500,000
Question 10
Liabilities are:
Select one:
A. any accounts having credit balances after closing entries are made.
B. present obligations arising from past events and results in an outflow of resources.
C. deferred credits that are recognized and measured in conformity with generally accepted
accounting principles.
D. obligations to transfer ownership shares to other entities in the future.
Question 11
If the market rate of interest is lower than the face interest rate on the date of issuance, the bonds
will:
Select one:
A. Not sell until the face interest is adjusted
B. Sell at a discount
C. Sell at a premium
D. Sell at face value
Question 12
At year end, Ron Company had outstanding 10%, P1,000,000 face amount convertible bonds
payable maturing in three years. Interest is payable on June 30 and December 31. Each P1,000
bond is convertible into 50 shares of P10 par value. The unamortized premium on bonds payable
was P60,000 at year-end. At the year end, 400 bonds were converted when Cey’s share had a
market price of P24. The entity incurred P4,000 in connection with the conversion. What amount
should be recorded as share premium from the issuance of shares as a result of the bond
conversion at year-end?
Answer:
220000
Question 13
On January 1, 2019, Joshua Company issued convertible bonds with a face amount of
P5,000,000 for P6,000,000. The bonds are convertible into 50,000 shares with P100 par value.
The bonds have a five-year life with 10% stated interest rate payable annually every December
31. The fair value of the convertible bonds without conversion option is computed at P5,399,300
on January 1, 2019. On December 31, 2021, the convertible bonds were not converted but fully
paid for P5,550,000. On such date, the fair value of the bonds without conversion privilege is
P5,400,000 and the carrying amount is P5,178,300. What amount should be recorded as a loss on
the extinguishment of the convertible bonds payable on December 31, 2021?
Answer:
221700
Question 14
A retail store received cash and issued a gift certificate that is redeemable in merchandise. When
the gift certificate was issued,
Select one:
A. Deferred revenue account should be decreased
B. Revenue account should be decreased
C. Deferred revenue account should be increased
D. Revenue account should be increased
Question 15
Answer:
45000
Question 16
On January 1, 2017, Tagbilaran Co. issued its 10%, 5-year, P3,000,000 convertible bonds for the
face amount of P3,000,000. The bonds are convertible into P400 par ordinary shares at a
conversion price of P500 per share. The prevailing rate of interest of the bonds without the
conversion option is 12%. Interest is payable every December 31.
On December 31, 2018, after payment of interest, one half of the bonds were retired at
P1,600,000 when the fair value of the securities is P500. The prevailing rate of interest of the
bonds is 9%.
On January 1, 2019, to induce the holder to convert the convertible debenture promptly,
Tagbilaran reduces the conversion price to P400 if the debenture is converted before March 1,
2019. All the bond holders accepted the offer on January 1, 2019. On the date of conversion, the
fair value of the Tagbilaran Co.’s ordinary share is P420 per share.
How much is the amount allocated to equity on January 1, 2017?
Answer:
216287
Question 17
Reynaldo Company leased a machine from Chester Company on January 1, 2018. The first
annual payment was made on January 1, 2019. The machine has an economic life of six years.
The lease agreement requires four annual payments of ₱33,000, including ₱3,000 annual
payment for repairs and maintenance. The machine will be returned to Chester Company at the
end of the lease term and Reynaldo Company guarantees a residual value of ₱5,000. Interest
implicit in the lease is 10%, which is known to Reynaldo. If Chester Company recorded the net
investment in lease higher than the liability initially recorded by Reynaldo Company, the
difference could be due to:
Select one:
A. an unguaranteed residual value
B. Both A and C
C. Initial direct costs
Question 18
Nemie Company leases computer equipment to customers under direct financing lease. The
equipment has no residual value at the end of the lease and the leases do not contain bargain
purchase option. Nemie wishes to earn 8% interest on a five-year lease of equipment with a fair
value of ₱323,400. (Use PV factors up to 3 decimal places). What is the total amount of the
interest revenue that Nemie will earn over the life of the lease?
Answer:
51600
Question 19
Tobruk Company has an agreement to pay its sales manager a bonus of 5% of the income after
bonus and after tax. The income for the current year before bonus and tax is ₱5,250,000. The
income tax rate is 30% of income after bonus. What amount should be reported as bonus for the
sales manager for the current year?
Answer:
177536
Question 20
Gains or losses from the early extinguishment of debt, if material, should be:
Select one:
A. Recognized in income before taxes in the period of extinguishment
B. Recognized as an extraordinary item in the period of adjustment
C. Amortized over the remaining life of the extinguished issue
D. Amortized over the life of the new issue
Question 21
On January 1, 2019, Gab Industries leased equipment to Clarebelle Company for a four-year
period ending December 31, 2022. The equipment cost Gab ₱300,000 and has an expected useful
life of five years. Annual payments are ₱118,951, which includes ₱10,000 executory costs. The
equipment’s fair value is ₱400,000. The lessee guarantees the residual value of ₱80,000. Lease
payment is due every December 31 and Clarebelle made the first payment on December 31,
2019. Clarebelle’s implicit rate is 10%. Gab incurred ₱15,000 costs to consummate the lease
contract. (Use PV factors up to 5 decimal places). How much profit, inclusive of interest
revenue, should Gab report from this lease for the year ended December 31, 2019?
Answer:
125000
Question 22
On January 1, 2019, Gab Industries leased equipment to Clarebelle Company for a four-year
period ending December 31, 2022. The equipment cost Gab ₱300,000 and has an expected useful
life of five years. Annual payments are ₱118,951, which includes ₱10,000 executory costs. The
equipment’s fair value is ₱400,000. The lessee guarantees the residual value of ₱80,000. Lease
payment is due every December 31 and Clarebelle made the first payment on December 31,
2019. Clarebelle’s implicit rate is 10%. Gab incurred ₱15,000 costs to consummate the lease
contract. (Use PV factors up to 5 decimal places). How much should Gab report as net
investment in the lease on December 31, 2019 statement of financial position?
Answer:
331049
Question 23
Montano Inc. offers a cash rebate of ₱50 on each ₱200 package of biscuits sold during the last
three months of 2019. Historically, 30% of the company’s customers mail in the rebate form.
During the last three months of 2019, 7,700,000 packages of biscuits are sold, and 1,470,000 ₱50
rebates are mailed to customers. What is the rebate expense shown on the company’s 2019
income statement?
Answer:
115500000
Question 24
The estimated premium liability at December 31, 2020 is:
Answer:
42500
Question 25
An entity is required to recognize a liability for short-term compensated absences that are:
Select one:
A. non-accumulating and vesting
B. accumulating and non-vesting
C. accumulating and vesting
D. non-accumulating and non-vesting
Question 26
A contingent liability:
Select one:
A. is not recognized in the financial statements.
B. definitely exists as a liability but its amount and due date are indeterminable.
C. is the result of a loss contingency.
D. is accrued even though not reasonably estimated.
Question 27
How should a lessor account for a non-refundable lease bonus paid by a lessee on signing an
operating lease
Select one:
A. Recognized as rent income during the year of commencement.
B. Recognized as rent income over the life of the lease.
C. Recognized as rent income when received.
D. Referred when received and recognized as income in the final year of the lease term.
Question 28
On January 1, 2019, Luyang Company issued 3-year bonds with face amount of P5,000,000 at
98. Additionally, the entity paid bond issue cost of P140,000. The nominal rate is 10% and the
effective rate is 12% after considering the bond issue cost. The interest is payable annually on
December 31. The entity used the effective interest method in amortizing bond discount and
issue cost. What is the carrying amount of the bonds payable on December 31, 2019?
Answer:
4831200
Under the effective interest method, as a discount is amortized each period, the:
Select one:
A. Amount amortized decreases
B. interest paid on bondholders increases
C. Interest expense recorded increases
D. bond’s carrying value decreases
Question 30
Which of the following is not a condition necessary to exclude a short-term obligation from
current liabilities?
Select one:
A. Subsequently refinance the obligation on a long-term basis
B. Unconditional right to defer settlement of the liability for at least 12 months.
C. Intend to refinance the obligation on a long-term basis.
D. Obligation must be due within one year.
Question 31
Which of the following characterizes an operating lease?
Select one:
A. The lessor records depreciation expense and interest revenue.
B. The lessor records depreciation expense and rent revenue.
C. The lessee records depreciation expense and interest expense.
D. The lessee records an asset and a liability.
Question 32
Provisions are contingent liabilities which are accrued because the likelihood of an unfavorable
outcome is
Select one:
A. at least 75%
B. possible.
C. virtually certain
D. greater than 50%
Question 33
On September 1, 2019, Pine Company issued a note payable to National Bank in the amount of
P1,800,000, bearing interest at 12%, and payable in three equal annual principal payments of
P600,000. The first interest and principal payment was made on September 1, 2020. What
amount should be reported as interest expense for 2020?
Answer:
192000
Question 34
Which of the following components of the annual pension costs shall be recognized in the other
comprehensive income?
Select one:
A. Answer not given
B. Remeasurements of the net defined benefit liability.
C. Net interest on the net defined benefit liability
D. Service cost
Question 35
Lanie Company reported plan assets at fair value of ₱2,000,000 and projected benefit obligation
of ₱4,000,000 on December 31, 2019. On January 1, 2019, the prepaid/accrued benefit cost
account had a credit balance of ₱1,500,000. During the year, the entity recognized contributions
of ₱1,200,000 and remeasurement loss of ₱600,000. There were no remeasurement gain or loss
on January 1, 2019.
What amount of employee benefit expense was recognized for 2019?
Answer:
1100000
Question 36
Which of the following is a characteristic of a current liability but not a non-current liability?
Select one:
A. Present obligation that entails settlement by probable future transfer or use of cash, goods,
or services.
B. Settlement is expected within the normal operating cycle, or within 12 months after the
reporting date.
C. Unavoidable obligation.
D. Transaction or other event creating the liability has already occurred.
Question 37
Ariel Corporation has the following liabilities at December 31, 2019:
8.9% note payable issued November 1, 2019, maturing
October 31, 2020
₱1,150,000
7.25% note payable issued August 1, 2019, payable in twelve equal
annual installments of ₱90,000 beginning August 1,
2019
1,080,000
Ariel’s December 31, 2019 financial statements were issued on March 19, 2020. On January 23,
2020, the entire ₱1,150,000 balance of the 8.9% note was refinanced by issuance of a long-term
obligation payable in a lump sum. In addition, on December 29, 2019, Ariel consummated a noncancelable agreement with the lender to refinance the 7.25%, ₱1,080,000 note on a long-term
basis, on readily determinable terms that have not yet been implemented. On the December 31,
2019 statement of financial position, the amount of these notes payable that Ariel should classify
as short-term obligations is: Answer:
1150000
Question 38
At the beginning of the current year, Colt Company issued ten-year bonds with a face amount of
P5,000,000 and a stated interest rate of 8% payable annually at every year-end. The bonds were
priced to yield 10%. What is the issue price of the bond?
Answer:
4385500
Question 39
Which of the following is not a relevant consideration when evaluating whether to derecognize a
financial liability?
Select one:
A. Whether the obligation has been cancelled
B. Whether the obligation has expired
C. Whether substantially all the risks and rewards of the obligation have been transferred
D. Whether the obligation has been discharged
Question 40
Which of the following are not factors that are considered when evaluating whether or not to
record a liability for pending litigation?
Select one:
A. The ability to make a reasonable estimate of the amount of the loss.
B. Time period in which the underlying cause of action occurred.
C. The probability of an unfavorable outcome.
D. The type of litigation involved.
Question 41
On January 1, 2019, Zeus Company sold equipment with carrying amount of ₱100,000 and a
remaining useful life of 10 years to Ezra Company for ₱150,000. Zeus immediately leased the
equipment back under a 10-year finance lease with a present value of ₱150,000 and will
depreciate the equipment using the straight-line method. Zeus made the first annual lease
payment of ₱24,412 in December 2019.
What is the gain on equipment sale in Zeus’s 2019 Statement of Comprehensive Income?
Answer:
45000
Question 42
Reynaldo Company leased a machine from Chester Company on January 1, 2018. The first
annual payment was made on January 1, 2019. The machine has an economic life of six years.
The lease agreement requires four annual payments of ₱33,000, including ₱3,000 annual
payment for repairs and maintenance. The machine will be returned to Chester Company at the
end of the lease term and Reynaldo Company guarantees a residual value of ₱5,000. Interest
implicit in the lease is 10%, which is known to Reynaldo.
How much annual depreciation expense should Reynaldo Company record?
Answer:
23378
Question 43
Granada Company had an overdue 8% note payable to First Bank at P8,000,000 and accrued
interest of P640,000. As a result of restructuring agreement on January 1, 2019, First Bank
agreed to the following provisions:




The principal obligation is reduced to P7,000,000.
The accrued interest of P640,000 is forgiven.
The date of maturity is extended to December 31, 2022.
Annual interest of 10% is to be paid for 4 years every December 31.
The present value of 1 at 8% for 4 periods is 0.735 and the present value of an ordinary annuity
of 1 at 8% for 4 periods is 3.31. What amount should be reported as gain on extinguishment of
debt for 2019?
Answer:
1178000
Question 44
On January 1, 2017, Tagbilaran Co. issued its 10%, 5-year, P3,000,000 convertible bonds for the
face amount of P3,000,000. The bonds are convertible into P400 par ordinary shares at a
conversion price of P500 per share. The prevailing rate of interest of the bonds without the
conversion option is 12%. Interest is payable every December 31.
On December 31, 2018, after payment of interest, one half of the bonds were retired at
P1,600,000 when the fair value of the securities is P500. The prevailing rate of interest of the
bonds is 9%.
On January 1, 2019, to induce the holder to convert the convertible debenture promptly,
Tagbilaran reduces the conversion price to P400 if the debenture is converted before March 1,
2019. All the bond holders accepted the offer on January 1, 2019. On the date of conversion, the
fair value of the Tagbilaran Co.’s ordinary share is P420 per share.
The loss on the retirement of bonds on December 31, 2018 is:
Answer:
110024
Question 45
An increase in the present value of a defined benefit obligation resulting from employee service
in the current period is referred to as:
Select one:
A. the past service cost
B. an actuarial gain or loss
C. the interest cost
D. the current service cost
Question 46
Montano Inc. offers a cash rebate of ₱50 on each ₱200 package of biscuits sold during the last
three months of 2019. Historically, 30% of the company’s customers mail in the rebate form.
During the last three months of 2019, 7,700,000 packages of biscuits are sold, and 1,470,000 ₱50
rebates are mailed to customers. What is the rebate liability shown on the company’s 2019
statement of financial position?
Answer:
42000000
Question 47
At the commencement of the lease, the lessee shall recognize a finance lease as asset and liability
at an amount equal to the:
Select one
:
A. Fair value of the leased asset or present value of the minimum lease payments,
whichever is lower
B. Present value of the minimum lease payments
C. Fair value at the leased asset
D. Fair value of the leased asset or present value of the minimum lease payments, whichever
is higher
Question 48
At the beginning of the current year, Babe Company had the following balances related to a
defined benefit plan:
₱6,500,000
Projected benefit obligation
Fair value of plan
assets
5,750,000
The actuary provided the following data for the current year: Current service cost- ₱600,000;
Settlement discount rate- 10%; Expected return on plan assets- 8%; Actual return on plan assets₱700,000; Contribution to the plan- ₱900,000; Benefits paid to retirees- ₱100,000.
What amount should be reported as employee benefit expense?
Answer:
675000
Question 49
Sharon leased equipment to Hay Corporation on July 1, 2019 for an eight-year period expiring
June 30, 2027. Equal payments under the lease are ₱600,000 and are due on July 1 of each year.
The first payment was made on July 1, 2019. The rate of interest contemplated by Sharon and
Hay is 10%. The cash selling price of the equipment on Sharon’s accounting records is
₱2,800,000. The lease is appropriately recorded as a dealer’s lease.
What is the amount of profit on the sale that Sharon should record for the year ended December
31, 2019?
Answer:
720000
Question 50
At the beginning of the current year, Babe Company had the following balances related to a
defined benefit plan:
Projected benefit obligation
Fair value of plan assets
₱6,500,000
5,750,000
The actuary provided the following data for the current year: Current service cost- ₱600,000;
Settlement discount rate- 10%; Expected return on plan assets- 8%; Actual return on plan assets₱700,000; Contribution to the plan- ₱900,000; Benefits paid to retirees- ₱100,000.
What amount should be reported as accrued benefit cost at year-end?
Answer:
400000
Question 51
The premium expense for 2019 is
Answer:
50000
Question 52
In a lease that is recorded as a manufacturer’s lease or dealer’s lease by the lessor, interest
revenue:
Select one:
A. Should be recognized over the period of the lease using the interest method.
B. Does not arise
C. Should be recognized over the period of the lease using the straight-line method.
D. Should be recognized in full as revenue at the lease’s inception.
Question 53
An entity receives an advance payment for special order goods that are to be manufactured and
delivered within 6 months. The advance payment shall be reported in the entity’s balance sheet
as:
Select one:
A. Current liability
B. Noncurrent liability
C. Deferred charge
D. Contra asset account
Question 54
Which of the following methods is used in PFRS to account for defined benefit pension plans?
Select one:
A. Plan contributions
B. Accumulated benefits method
C. Projected unit credit method
D. Remeasurements
Question 55
An electronics store is running a promotion where for every video game purchased, the customer
receives a coupon upon checkout to purchase a second game at a 50% discount. The coupons
expire in one year. The store normally recognized a gross profit margin of 40% of the selling
price on video games. How would the store account for a purchase using the discount coupon?
Select one:
A. The difference between the cost of the video game and the selling price prior to the
coupon is recognized as premium expense.
B. The reduction in sales price attributed to the coupon is recognized as premium expense.
C. Premium expense is not recognized
D.
The difference between the cost of the video game and the cash received is recognized as
premium expense.
Question 56
Warranty4U manufactures high-end whole home electronic systems. The company provides a
one-year warranty for all products sold. The company estimates that the warranty cost is ₱200
per unit sold and reported a liability for estimated warranty costs ₱6.5 million at the beginning of
this year. If during the current year, the company sold 50,000 units for a total of ₱243 million
and paid warranty claims of ₱7,500,000 on current and prior year sales, what amount of liability
would the company report on its statement of financial position at the end of the current
year?Answer:
9000000
Question 57
On the first day of each month, Bell Company received from Carr Company an escrow deposit
of ₱250,000 for real estate taxes. Bell Company recorded the ₱250,000 in an escrow account.
The real estate tax for 2019 is ₱2,800,000 payable in equal annual installments on the first day of
each calendar quarter. On January 1, 2019, the balance in the escrow account was ₱300,000. On
September 30, 2019, what amount should be reported as escrow liability?
Answer:
450000
Question 58
On January 1, 2014, Beanstalk Corporation issued 3,000 of its 9%, P1,000 bonds when the
prevailing rate of interest was 8%. Interest is payable annually every January 1. The bonds
mature on January 1, 2019. Beanstalk paid transaction costs of P24,640 in relation to the issue of
the debt instruments and in effect the yield rate is 8.20%. Beanstalk uses the effective method of
amortization. What is the balance of the unamortized transaction cost or bond issue cost as of
December 31, 2015?
Answer:
15676
Question 59
Santos Corporation, a manufacturer of household paints, is preparing annual financial statements
at December 31, 2019. Because of a recently proven health hazard in one of its paints, the
government has clearly indicated its intention of having Santos recall all cans of this paint sold in
the last six months. The management of Santos estimates that this recall would cost ₱900,000.
What accounting recognition, if any, should be accorded this situation?
Select one:
A. Operating expense of ₱900,000 and liability of ₱900,000
B. No recognition
C. Note disclosure only
D. Appropriation of retained earnings of ₱900,000
Question 60
GodIsInControl Company has established a defined benefit pension plan for a lone employee.
Annual payments under the pension plan are equal to the employee’s highest lifetime salary
multiplied by 2% multiplied by the number of years with the entity. On December 31, 2019, the
employee had worked for GodIsInControl Company for 10 years. The salary in 2019
was ₱500,000. The employee is expected to retire in 25 years and the salary increases are
expected to average 3% per year during that period. The employee is expected to live for 15
years after retiring and will receive the first annual pension payment one year after retirement.
The discount rate is 8%.
What is the annual pension payment that should be used in computing the projected benefit
obligation on December 31, 2019?
Answer:
209400
Question 61
Reynaldo Company leased a machine from Chester Company on January 1, 2018. The first
annual payment was made on January 1, 2019. The machine has an economic life of six years.
The lease agreement requires four annual payments of ₱33,000, including ₱3,000 annual
payment for repairs and maintenance. The machine will be returned to Chester Company at the
end of the lease term and Reynaldo Company guarantees a residual value of ₱5,000. Interest
implicit in the lease is 10%, which is known to Reynaldo. For the year ended December 31,
2019, what would Reynaldo Company record in relation to the lease?
Select one:
A. Some other answer
B. ₱9,851 interest payable
C. ₱7,836 interest payable
D. ₱0, interest expense
E. ₱9,851, interest expense
Question 62
If the interest rate used by the entity is 10%, how much is the actuarial gain in 2020 taken to
other comprehensive income?
Answer:
20000
Question 63
Which of the following is the proper way to report a probable contingent asset?
Select one:
A. As a disclosure only.
B. As an accrued amount.
C. As an account receivable with additional disclosure explaining the nature of the
contingency.
D. As deferred revenue.
What is the actual return on plan assets for the year 2013?
Answer:
370000
Question 65
On January 1, 2014, Justin Company issued its 10%, 6-year convertible debt instrument with a
face amount of P3,000,000 for P3,500,000. Interest is payable every December 31 of each year.
The debt instrument is convertible into 30,000 ordinary shares with a par value of P100. The debt
instrument is convertible into equity from the time of issue until maturity. Without the
conversion feature, the debt instrument would have sold at 106. On December 31, 2015, Justin
Company converted 1,000,000 debt instruments by issuing 10,000 ordinary shares. As of
December 31, 2015, the unamortized premium on the debt instrument is P135,000. What amount
should be credited to Share Premium account as a result of the conversion?
Answer:
151667
Question 66
Minimum lease payments may include a
Select one:
A. penalty for failure to renew
B. any of these
C. guaranteed residual value
D. bargain purchase option
Question 67
The estimated premium liability at December 31, 2019 is
Answer:
20000
Question 68
Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating
cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing policy of guaranteeing
new products against defects for three years that has resulted in material but rather stable
warranty repair and replacement costs. Any liability for the warranty
Select one:
A. should be reported as non-current.
B. need not be disclosed.
C. should be reported as current.
D. should be reported as part current and part non-current.
Question 69
Correct
Question text
On October 1, 2014, Winston Corporation issued, at 99 excluding accrued interest, 2,000 of its
8% P1,000 bonds. The bonds are dated January 1, 2014, mature on January 1, 2024, and pay
interest on July 1 and January 1. Winston paid transaction costs of P70,000. From the bond
issuance, Winston received net cash of:
Answer:
1950000
Question 70
On November 5, 2019, a Dunn Company truck was in an accident with an auto driven by Bell.
Dunn received notice on January 15, 2020 of lawsuit for ₱700,000 damages for personal injuries
suffered by Bell. The entity’s counsel believed it is probable that Bell will be awarded an
estimated amount in the range between ₱200,000 and ₱450,000, and no amount is a better
estimate of potential liability than any other amount because each point in the range is as likely
as any other. The 2019 financial statements were issued on March 1, 2020. What amount of loss
should be accrued on December 31, 2019?
Answer:
325000
Question 71
At the beginning of the current year, Babe Company had the following balances related to a
defined benefit plan:
₱6,500,000
Projected benefit obligation
Fair value of plan
assets
5,750,000
The actuary provided the following data for the current year: Current service cost- ₱600,000;
Settlement discount rate- 10%; Expected return on plan assets- 8%; Actual return on plan assets₱700,000; Contribution to the plan- ₱900,000; Benefits paid to retirees- ₱100,000.
What amount should be reported as remeasurement gain on plan assets?
Answer:
125000
Question 72
Ayosto Company provided the following information related to pension plan:




Actuarial estimate of projected benefit obligation at 1/1/2020
72,000
Service cost for
2020
Pension benefits paid during
2020
15,000
Assumed discount
rate
₱
18,000
10%
No change in actuarial estimates occurred during 2020. What amount should be reported as
projected benefit obligation on December 31, 2020?
Answer:
82200
Question 73
On January 1, 2019, Solemn Company sold land to Glory Company. There was no established
market price for the land. Glory gave Solemn a P2,400,000 noninterest bearing note payable in
three equal annual installments of P800,000 with the first payment due December 31, 2019. The
note has no ready market. The prevailing rate of interest for a note of this type is 10%. The
present value of a P2,400,000 note payable in three equal annual installments of P800,000 at a
10% rate of interest is P1,989,600. What is the carrying amount of the note payable on December
31, 2019?
Answer:
1388560
Question 74
On May 1, 2014, Jimfred Company issued P2,000,000, 10 years, 9% bonds at 105 including
accrued interest. These bonds are dated January 1, 2014. Interest is payable semi-annually on
January 1 and July 1. Transaction costs of P10,000 were paid by Red Hood. What is the net cash
receipt from the bond issuance?
Answer:
2090000
Question 75
Sharon leased equipment to Hay Corporation on July 1, 2019 for an eight-year period expiring
June 30, 2027. Equal payments under the lease are ₱600,000 and are due on July 1 of each year.
The first payment was made on July 1, 2019. The rate of interest contemplated by Sharon and
Hay is 10%. The cash selling price of the equipment on Sharon’s accounting records is
₱2,800,000. The lease is appropriately recorded as a dealer’s lease.
What is the interest revenue reported in Sharon’s statement of comprehensive income for the
year ended December 31, 2019?
146000
Answer:
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