SUGGESTED ANSWERS & SOLUTION
FIRST PRE-BOARD EXAMINATION
TEAM PRTC
August 5, 6 and 7, 2022
MANAGEMENT ADVISORY SERVICES
1.
B
21.
C
41.
C
61.
D
2.
A
22.
C
42.
C
62.
B
3.
D
23.
C
43.
B
63.
A
4.
D
24.
C
44.
D
64.
B
5.
C
25.
D
45.
B
65.
A
6.
A
26.
D
46.
B
66.
D
7.
A
27.
D
47.
A
67.
D
8.
A
28.
C
48.
C
68.
A
9.
A
29.
C
49.
C
69.
C
10.
C
30.
C
50.
B
70.
C
11.
C
31.
B
51.
C
12.
A
32.
A
52.
D
13.
A
33.
A
53.
D
14.
A
34.
A
54.
A
15.
B
35.
A
55.
A
16.
D
36.
D
56.
D
17.
C
37.
A
57.
D
18.
D
38.
C
58.
B
19.
D
39.
D
59.
B
20.
C
40.
D
60.
A
Page 1 of 46
AUDITING
1.
A
21.
D
41.
C
61.
C
2.
A
22.
D
42.
C
62.
D
3.
B
23.
A
43.
A
63.
B
4.
B
24.
A
44.
D
64.
C
5.
D
25.
C
45.
C
65.
C
6.
D
26.
C
46.
C
66.
B
7.
D
27.
C
47.
A
67.
D
8.
D
28.
B
48.
B
68.
B
9.
B
29.
B
49.
C
69.
B
10.
C
30.
A
50.
B
70.
C
11.
B
31.
D
51.
A
12.
D
32.
D
52.
B
13.
C
33.
A
53.
B
14.
A
34.
C
54.
C
15.
A
35.
D
55.
A
16.
A
36.
C
56.
D
17.
C
37.
D
57.
D
18.
A
38.
A
58.
C
19.
C
39.
C
59.
D
20.
C
40.
A
60.
D
Page 2 of 46
TAXATION
1.
D
21.
A
41.
B
61.
A
2.
B
22.
D
42.
B
62.
A
3.
D
23.
D
43.
D
63.
A
4.
A
24.
A
44.
D
64.
B
5.
D
25.
A
45.
D
65.
A
6.
C
26.
C
46.
D
66.
A
7.
D
27.
C
47.
D
67.
A
8.
D
28.
B
48.
D
68.
A
9.
D
29.
A
49.
C
69.
A
10.
C
30.
B
50.
C
70.
A
11.
D
31.
D
51.
D
12.
D
32.
D
52.
B
13.
C
33.
A
53.
A
14.
B
34.
A
54.
B
15.
C
35.
D
55.
C
16.
C
36.
D
56.
C
17.
B
37.
D
57.
C
18.
A
38.
A
58.
A
19.
C
39.
D
59.
B
20.
D
40.
B
60.
C
Page 3 of 46
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
1.
A
21.
D
41.
B
61.
C
81.
D
2.
B
22.
D
42.
D
62.
A
82.
A
3.
A
23.
C
43.
C
63.
C
83.
D
4.
A
24.
B
44.
B
64.
C
84.
B
5.
A
25.
D
45.
B
65.
C
85.
D
6.
C
26.
C
46.
D
66.
B
86.
D
7.
C
27.
B
47.
C
67.
D
87.
D
8.
D
28.
D
48.
B
68.
B
88.
B
9.
D
29.
C
49.
A
69.
B
89.
B
10.
A
30.
D
50.
A
70.
A
90.
E
11.
D
31.
D
51.
D
71.
D
91.
D
12.
B
32.
C
52.
B
72.
C
92.
D
13.
D
33.
A
53.
A
73.
B
93.
C
14.
E
34.
C
54.
D
74.
A
94.
B
15.
A
35.
B
55.
D
75.
B
95.
A
16.
A
36.
C
56.
B
76.
B
96.
C
17.
D
37.
A
57.
C
77.
A
97.
B
18.
A
38.
A
58.
C
78.
D
98.
C
19.
A
39.
C
59.
B
79.
A
99.
B
20.
B
40.
C
60.
E
80.
D
100.
C
Page 4 of 46
FINANCIAL ACCOUNTING AND REPORTING
1.
A
21.
B
41.
A
61.
D
2.
D
22.
D
42.
C
62.
C
3.
C
23.
D
43.
D
63.
C
4.
B
24.
D
44.
C
64.
A
5.
B
25.
C
45.
D
65.
B
6.
A
26.
D
46.
D
66.
D
7.
B
27.
B
47.
D
67.
A
8.
C
28.
B
48.
B
68.
D
9.
D
29.
A
49.
D
69.
D
10.
D
30.
B
50.
A
70.
D
11.
A
31.
B
51.
C
12.
C
32.
B
52.
A
13.
B
33.
D
53.
C
14.
D
34.
D
54.
A
15.
B
35.
D
55.
D
16.
D
36.
B
56.
C
17.
B
37.
B
57.
C
18.
D
38.
B
58.
A
19.
C
39.
C
59.
B
20.
D
40.
B
60.
C
Page 5 of 46
ADVANCED FINANCIAL ACCOUNTING AND REPORTING
1.
D
21.
B
41.
C
61.
D
2.
A
22.
C
42.
A
62.
D
3.
D
23.
D
43.
A
63.
B
4.
A
24.
D
44.
A
64.
A
5.
C
25.
D
45.
A
65.
B
6.
B
26.
D
46.
D
66.
D
7.
C
27.
C
47.
D
67.
C
8.
C
28.
B
48.
B
68.
A
9.
A
29.
B
49.
D
69.
D
10.
A
30.
A
50.
A
70.
D
11.
A
31.
A
51.
C
12.
B
32.
D
52.
C
13.
D
33.
B
53.
A
14.
B
34.
D
54.
A
15.
B
35.
A
55.
A
16.
D
36.
B
56.
C
17.
D
37.
A
57.
B
18.
A
38.
A
58.
C
19.
C
39.
C
59.
B
20.
D
40.
B
60.
D
Page 6 of 46
Suggested Solution – MS
Page 7 of 46
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Page 10 of 46
Page 11 of 46
Suggested Solution – AUD
1. A. The responsible party is the one responsible for issuing the subject matter information and not the practitioner.
“Assurance engagement” means an engagement in which a practitioner expresses a conclusion designed to enhance
the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation
or measurement of a subject matter against criteria.
2. A. The objective of the auditor is to obtain reasonable assurance whether the financial statements are free from
material misstatements, whether due to fraud or error, and to report on the financial statements.
3. B. Information risk is the risk that the user makes an incorrect decision based on inaccurate information. Client
acceptance risk is the risk that the auditor will associate itself with a company whose management lacks integrity.
Business risk is the risk that the organization will not achieve its objectives. Control risk is the risk that the controls
will not be able to prevent, detect or correct the material misstatements on a timely manner.
4. B. ESG is an emerging concept in reporting, particularly on sustainability practices of organizations. It stands for
Environmental, Social and Governance practices of organizations.
5. D. Reasonable assurance is high but not absolute level of assurance. Answer (a) is incorrect, absolute assurance is
unattainable in practice since there are limitations in audit. Answer (b) is incorrect since reasonable assurance is
the correct term. Answer (c) is incorrect, negative assurance is less than reasonable assurance.
6. D. The requirement is to identify the statement that should be included in an auditor's letter on significant
deficiencies. Answer (d) is correct because PSA 265 indicates that such a letter to the audit committee should (1)
indicate that the audit's purpose was to report on the financial statements and not to express an opinion on internal
control, (2) include the definition of a significant deficiency, and (3) restrict distribution of the report.
7. D. Analytical procedures aid in the identification of unusual transactions and events. The recording of debits and
credits to an unusual combination of revenue and expense accounts would cause these accounts to behave
differently than expected. The performance of analytical procedures designed to disclose differences from
expectations would have helped to detect this irregularity. Answer (a) is incorrect, tracing a sample of journal entries
to the general ledger would provide evidence that the journal entries were properly posted to the general ledger.
As a result, evidence for the completeness assertion would be provided. It would not necessarily enable the auditor
to detect unusual transactions. Answer (b) is incorrect, the evaluation of effectiveness of internal controls is
performed by means of tests of controls. Such tests would not identify unusual transactions. Answer (c) is incorrect,
investigating the reconciliations between controlling accounts and subsidiary records would not necessarily detect
unusual transactions.
8. D. Answer (d) is correct because proper lines of reporting are necessary to prepare financial statements that follow
GAAP. Answer (a) is incorrect because management’s attitude on information processing and accounting
departments is indicative of the tone at the top. Answer (b) is incorrect because recruiting and hiring practices relate
to the competence of client personnel. Answer (c) is incorrect since there is no necessary relationship between such
physical proximity of accounting to upper management.
9. B. Inverse is correct because as control risk increases (decreases) detection risk must decrease (increase).
10. C. Answer (c) is correct because an auditor will review significant changes in balances. Answer (a) is incorrect
because it is unlikely that confirmations will be sent again, particularly given the positive results obtained. Also, one
ordinarily confirms accounts receivable at an interim date so as to avoid confirming accounts at year-end. Answer
(b) is incorrect because it is unlikely that confirmations will be sent again, particularly given the positive results
obtained. Also, one ordinarily confirms accounts receivable at an interim date so as to avoid confirming accounts at
year-end. Answer (d) is incorrect because it is less complete than the proper reply.
11. B. When management is dominated by one individual, that individual may be able to follow overly aggressive
accounting principles.
12. D. PSA 250 states that management failure to take the appropriate remedial action is particularly problematical
since it may affect the auditor's ability to rely on management representation and may therefore lead to withdrawal.
Answer (a) is incorrect, the auditor will consider these circumstances, but they are not ordinarily considered as
serious as failure to take the appropriate remedial action. Answer (b) is incorrect, while the auditor will consider this
circumstance it is not ordinarily considered as serious as failure to take the appropriate remedial action. Answer (c)
is incorrect, this represents a circumstance which the auditor will consider, but is not ordinarily considered as serious
as failure to take the appropriate remedial action.
13. C. The professional standards suggest that auditors should then consider the likelihood that risk involved could
result in material misstatements. Answer (a) is incorrect, the assessment is not limited to illegal acts. Answer (b) is
Page 12 of 46
incorrect, The complexity of transactions is not next to be considered. Answer (d) is incorrect, determining
materiality levels occurs prior to this stage of the audit.
14. A. Answer (a) is correct because the auditor obtains evidence on the completeness of the inventory listing by
comparing tags to those listed. Answer (b) is incorrect, this answer is incorrect because a procedure of tracing from
inventory tags to inventory items may not directly address proper counting when one tag includes a quantity of
items; related, to address whether items on the listing were properly counted, one would trace sample items on
that listing to the items themselves. Answer (c) is incorrect, this answer is incorrect because tracing quantities does
not directly address lower of cost or market considerations. Answer (d) is incorrect because tracing quantities does
not directly address valuation.
15. A. Both factors are included in a sampling plan.
16. A. This answer is correct because the representation letter should be dated as of the date of the auditor’s report.
17. C. An audit program sets forth in detail the audit procedures that are necessary to accomplish the objectives of the
audit. Answer (a) is incorrect, audit programs address topics beyond selecting material transactions and this is not
their primary focus. Answer (b) is incorrect, a program may include numerous substantive tests to be performed
prior to the balance sheet date. Answer (d) is incorrect, immaterial accounts often are not tested and because tests
of transactions, tests of balances, and analytical procedures are used to test account balances; account balances
are not directly tested through tests of controls.
18. A. The requirement is to identify a primary purpose of an auditor's working papers. PSA 230 states that working
papers serve mainly to provide the principal support for the auditor's report and to aid the auditor in the conduct
and supervision of the audit.
19. C. This answer is correct because disputes between management and the auditor on accounting matters represents
a risky situation. Answer (a) is incorrect, this answer is incorrect because a lack of interest by management in
maintaining an earnings trend does not appear particularly risky, as contrasted to a circumstance in which
management is extremely concerned with maintaining such a trend. Answer (b) is incorrect, this answer is incorrect
because the sale of assets at a loss may indicate errors in judgment relating to estimating the assets’ life or salvage
value and this is less likely to represent fraudulent financial reporting. Answer (d) is incorrect, this answer is incorrect
because companies often have large checks outstanding.
20. C. Entering invalid identification numbers or passwords will provide the auditor with evidence on whether controls
are operating as designed. Answer (a) is incorrect, directly testing access controls is more direct than testing data
through checkpoints at intervals. Answer (b) is incorrect, a transaction log will not in general, by itself, identify
whether transactions were lost or entered twice. Answer (d) is incorrect, vouching proper authorization is only one
measure of whether controls are properly functioning.
21. D. To address the overall risk of material misstatement, an auditor should assign personnel to the engagement who
have the skills and competence appropriate to the circumstances. Answer (a) is incorrect, the external auditor has
no authority over an entity’s internal audit function and cannot assign specific internal audit personnel to assist with
the engagement. Answer (b) is incorrect, the external auditor has no authority over an entity’s accounting personnel
and cannot assign specific accounting personnel to assist with the engagement. Answer (c) is incorrect, the external
auditor has no authority over an entity’s senior management and cannot assign management personnel to assist
with the engagement.
22. D. An auditor uses the assessed levels of control and inherent risk to establish the level of detection risk that the
auditor may accept. Answer (a) is incorrect, the auditor must obtain an understanding of the control environment
before determining the assessed level of control risk. That understanding is then used to assess control risk. Answer
(b) is incorrect, an assessment of control risk does not provide assurance that the auditor's materiality levels are
appropriate. Assessed control risk and assessed inherent risk enable the auditor to set detection risk and to
determine the nature, timing, and extent of the auditing procedures to be performed. Answer (c) is incorrect, control
risk and inherent risk are independently assessed risks. Inherent risk pertains to the risk that a material
misstatement will occur in an account or a transaction without considering related internal controls. Control risk
relates to the risk that the internal controls will not prevent or detect a material misstatement in an account or a
transaction. It does not make sense, therefore, for the control risk assessment to indicate where inherent risk may
be the greatest.
23. A. This answer is correct because these two errors generally result in an auditor performing unnecessary additional
procedures. Answer (b) is incorrect because the risk of incorrect acceptance and the risk of assessing control risk
too low relate to the effectiveness of an audit. Answer (c) is incorrect, this answer is incorrect because sampling
risk components do not directly affect the actual selection of sample items. Answer (d) is incorrect, this answer is
incorrect because the quality controls to be adhered to during the audit engagement are not directly affected by the
components of sampling risk.
Page 13 of 46
24. A. This answer is correct because whether the data were processed in a computerized system or in a manual
accounting system will not in and of itself influence reliability--either type of system may provide reliable (or
unreliable) information. Answer (b) is incorrect, this answer is incorrect because whether sources within the entity
were independent of those who are responsible for the amount being audited does influence the auditor’s
consideration of the reliability of data for purposes of achieving audit objectives. Answer (c) is incorrect, this answer
is incorrect because whether the data were subjected to such audit testing is a factor which influences the auditor’s
consideration of the reliability of data for purposes of achieving audit objectives. Answer (d) is incorrect, This answer
is incorrect because whether the data were obtained from independent sources is a factor which influences the
auditor’s consideration of the reliability of data for purposes of achieving audit objectives.
25. C. Answer (c) is correct, this answer is correct because when the auditor becomes aware of information that existed
at the report date that might have affected the audit report had it been known, it should be investigated. Answer
(a) is incorrect, this answer is incorrect because if the transaction occurred after the audit report was issued the
auditor need not consider it. Answer (b) is incorrect, this answer is incorrect because such final resolution need not
be disclosed. Answer (d) is incorrect, this answer is incorrect because the event relating to going concern status
occurred after issuance of the audit report.
26. C. Answer (c) is correct. The consideration of tolerable misstatement is related to preliminary judgments in a manner
such that when the auditor's preliminary judgments about tolerable misstatement levels for accounts or transaction
types are combined for the entire audit plan, the preliminary judgments about materiality levels for the financial
statements are not exceeded. Answer (a) is incorrect, the auditor's judgment of business risk related to a client is
not directly related to tolerable misstatement. Answer (b) is incorrect, tolerable misstatement may be adjusted for
qualitative factors. Answer (d) is incorrect, tolerable misstatement may be changed during the audit process,
especially as misstatements are identified and the auditor considers the nature of the misstatements.
27. C. Answer (c) is correct, in such a circumstance the failure to take remedial action may cause an auditor to decrease
reliance on management representations. Answer (a) is incorrect, The reply by the attorney is likely to disclose any
claims, litigation or assessments that the client has improperly omitted from the letter of audit inquiry. Answer (b)
is incorrect, the prior years' audit programs are not being relied upon for this year's audit. Answer (d) is incorrect,
the preliminary judgment about materiality levels would not be expected to change.
28. B. Inverse is correct because as internal control is relied upon to a lesser extent, substantive tests are relied upon
to a greater extent.
29. B. Answer (b) is correct. This answer is correct because examining transactions occurring during the last month will
reveal whether they have been recorded in the proper period. Answer (a) is incorrect. This answer is incorrect
because, since most sales occur during the final month, interim period testing will not address the last month sales
very well. The interim period has different characteristics (at a minimum, lower sales) than sales in the last month.
Answer (c) is incorrect. This answer is incorrect because, since most sales occur during the final month, interim
period testing will not address the last month sales very well. The interim period has different characteristics (at a
minimum, lower sales) than sales in the last month. Answer (d) is incorrect. This answer is incorrect as examining
period-end compensation will not as directly address final month sales.
30. A. Per PRC BOA Resolution No. 22 Series of 2020, the BOA unanimously agreed that the membership in the AASC
be increased from fifteen (15) to eighteen (18) to include two (2) representatives from the small and medium sized
practitioners, a representative from the Insurance Commission, and remove the representative from government.
The PRC BOA Resolution was dated July 1, 2020 and was published in official gazette on July 9, 2020.
31. D. Sec. 19 of our RA 9298 or Philippine Accountancy Act of 2004 provides that all successful candidates in the
examination shall be required to take an oath of profession before any member of the Board or before any
government official authorized by the Commission or any person authorized by law to administer oaths upon
presentation of proof of his/her qualification, prior to entering upon the practice of the profession. It does not include
the professional’s rating in the licensure examination.
32. D. Answer (d) is correct. This is the answer that is not true, for clients have the right to object to outsourcing of
substantive services and if they do object then the accounting firms should either do the work themselves or decline
the engagement altogether. Answer (a) is incorrect. Outsourcing mere administrative support services does not
unduly threaten objectivity or integrity. Answer (b) is incorrect. Clients should be notified, preferably in writing,
before any of their confidential information is provided to a TSP. Answer (c) is incorrect. Clients have the right to
object to outsourcing of substantive services and if they do object, firms should either do the work themselves or
decline the engagement altogether. They should not outsource over their clients’ objections.
33. A. Answer (a) is correct since materiality is explicitly addressed in audit and other assurance reports. Answer (b) is
incorrect because materiality may also be expressed in terms of percentage. Answer (b) is incorrect, materiality is
based on the auditor’s professional judgment. Answer (d) is incorrect, materiality is used in assurance engagements.
34. C. The five (5) inherent risk factors discussed in PSA 315 (Revised 2019) include (1) complexity, (2) subjectivity,
(3) uncertainty, (4) change, (5) susceptibility to misstatement due to management bias or fraud. Answer (c) is not
included.
Page 14 of 46
35. D. Generally, control environment, risk assessment process and monitoring of controls are considered indirect
controls while control activities and information system and communication are considered as direct controls. (PSA
315, Revised 2019).
PROBLEM NO. 1 - Young-Woo Corp.
Unadjusted balances
Add (deduct)
adjustments:
a
b
c
d
e
f
g
h
Adjusted balances
Inventory
AP
Net Sales
1,520,000
1,200,000
8,150,000
71,000
30,000
32,000
21,000
27,000
3,000
71,000
56,000
6,000
(40,000)
(47,000)
-
1,704,000
1,333,000
8,063,000
(36. C)
(37. D)
(38. A)
Question No. 39 - C
Question No. 40 - A
PROBLEM NO. 2 - Jun-Ho Corp.
Cost of land, which included an unusable building
Mortgage assumed, including related interest
Delinquent property taxes assumed by the Jun-Ho
Cost of demolishing the old building
Proceeds from sale of salvaged materials
Architects fee for new building
Building permit for new construction
Fee for title search
Survey before construction of new
building
Excavation before construction of new building
Payment to building contractor
Assessment by city for drainage project
Cost of grading and
leveling
Temporary quarters for construction
crew
Temporary building to house tools and materials
Cost of changes during construction
Interest cost on specific borrowing
Payment of medical bills
Cost of paving driveway and parking lot
Cost of installing lights in parking lot
Premium for insurance on building during construction
Cost of open house party
Cost of windows broken by vandals
Question No. 44 - D
Question No. 45 - C
Page 15 of 46
Land
3,000,000
80,000
30,000
Building
Land imp.
40,000
(10,000)
60,000
40,000
25,000
20,000
100,000
10,000,000
15,000
50,000
80,000
50,000
90,000
360,000
60,000
12,000
30,000
3,220,000
10,840,000
72,000
(41. C)
(42. C)
(43. A)
PROBLEM NO. 3 - Su-Yeon Corp.
Question no. 46 - C
Down payment
Add PV of installment payments (P120,000 x 2.9137)
Cost of franchise
Divide by useful life
Amortization of franchise
Periodic franchise fee (P8,000,000 x .05)
Interest expense (P349,644 x .14)
Total expenses related to franchise in 2022
200,000
349,644
549,644
10
54,964
400,000
48,950
503,914
Question no. 47 - A
Cost of franchise (see no. 46)
Amortization - 2022 (see no. 46)
549,644
(54,964)
Carrying amount of franchise, 12/31/22
494,680
Question no. 48 - B
Cash paid
Fair value of shares issued (10,000 x P20)
PV of note payable (P500,000 x 0.7118)
Cost of patent
Amortization - 2022 (P955,900/10 x 6/12)
400,000
200,000
355,900
955,900
(47,795)
Carrying amount of patent, 12/31/22
Question no. 49 - C
Franchise related expenses (see no. 46)
Patent related expenses:
Amortization (see no. 48)
Interest expense (P355,900 x .12 x 6/12)
Trademark related expense (Impairment loss)
Carrying amount
Recoverable amount:
Outcome 1 (P40,000/.05 x .7)
Outcome 2 (P80,000/.05 x .3)
908,105
503,914
47,795
21,354
69,149
1,200,000
560,000
480,000
1,040,000
Total expenses - 2022
160,000
733,063
Question no. 50 - B
Page 16 of 46
PROBLEM NO. 4 - Min-Woo
Corp.
December
Unadjusted bank balances
Undeposited receipts:
November
December
Outstanding checks:
November
December
Erroneous bank debit
Payment to creditor in cash
NSF checks:
Returned, recorded in December
Returned, recorded in January
Unrecorded bank collections:
November
December
Bank service charges:
November
December
Book error in December
Unadjusted book balances
Nov. 30
107,800
Receipts
1,102,250
45,300
(45,300)
50,600
(13,375)
6,050
(5,200)
(60,750)
Disb
1,094,850
50,600
(13,375)
7,150
(4,750)
6,050
(5,200)
(4,300)
60,750
(58,200)
3,750
Dec. 31
115,200
(7,150)
4,750
4,300
(58,200)
3,750
(2,100)
(1,800)
2,100
1,800
82,725
1,110,950
1,080,275
113,400
(51. A)
(52. B)
(53. B)
(54. C)
Question No. 55 - A
PROBLEM NO. 5 - Geurami Corp.
Question No. 56 - D
Expected cash discounts
Divide by percentage of cash discount
Portion of AR that will be granted cash discounts
Divide by % of total AR estimated to take advantage of the discount
Accounts receivable, 12/31/22
300
2%
15,000
10%
150,000
Question No. 57 - D
Allowance for doubtful accounts, 12/31/22
[P150,000 x (P2,000/P50,000) x 150%]
9,000
Question No. 58 - C
Accounts receivable, 12/31/22
Less: Allowance for doubtful accounts
Allowance for sales discounts
150,000
9,000
300
Net realizable value, 12/31/22
9,300
140,700
Question No. 59 - D
Allowance for doubtful accounts, 12/31/22
Add accounts written off
Total
Less: Allowance for doubtful accounts, 12/31/21
Bad debt recoveries
Doubtful accounts expense for 2022
9,000
2,200
11,200
2,000
150
2,150
9,050
Question No. 60 - D
Page 17 of 46
PROBLEM NO. 6 - Min-Sik Corp.
Question No. 61 - C
PV of Principal (P1,000,000 x 0.6806)
PV of Interest (P1,000,000 x 10% x 3.9927)
PV, 1/1/19
680,600
399,270
1,079,870
Less premium amortization, 1/1 - 4/1
NI (P1M x .1 x 3/12)
25,000
EI (P1,079,870 x .08 x 3/12)
(21,597)
Purchase price (PV, 4/1/19)
3,403
1,076,467
Accrued interest
25,000
Total amount paid
1,101,467
Question No. 62 - D
Interest income - 2019 (P86,390 x 9/12)
64,793
Amortization schedule
NI (10%)
EI (8%)
1/1/19
Prem.
Amort.
Gross CA
1,079,870
12/31/19
100,000
86,390
13,610
1,066,260
12/31/20
100,000
85,301
14,699
1,051,561
12/31/21
100,000
84,125
15,875
1,035,686
12/31/22
100,000
82,855
17,145
1,018,541
12/31/23
100,000
81,459
18,541
1,000,000
Question No. 63 - B
PV of contractual CF (Gross CA), 12/31/21
Less PV of expected CF (P800,000 x 0.8573)
1,035,686
685,840
Loss allowance, 12/31/21
349,846
Question No. 64 - C
Interest income - 2022 (P685,840 x .08)
54,867
Question No. 65 - C
PROBLEM NO. 7 - Myeong-Seok Corp.
Question No. 66 - B
Cash (P571,000-P400,000)
Accounts receivable, net
Notes receivable
Inventories
Prepaid expenses
171,000
480,000
162,300
645,100
47,400
Total current assets
1,505,800
Page 18 of 46
Question No. 67 - D
Accounts payable
Income tax payable
Wages payable
Interest payable (P750,000 x 8% x 8/12)
Dividends payable
Unearned revenue
510,000
145,000
275,000
40,000
200,000
489,500
Total current liabilities
1,659,500
Question No. 68 - B
Notes payable (due 2024)
Bonds payable
Discount on bonds payable [(P49,500 - (P49,500/5 *8/12)]
Total non-current liabilities
Question No. 69 - B
Share capital
Share premium reserve
Retained earnings, as adjusted
Unadjusted
Accrued wages
Interest payable (P750,000 x 8% x 8/12)
Amortization of discount (P49,500/5 *8/12)
157,400
750,000
(42,900)
864,500
1,840,000
150,000
2,810,600
(275,000)
(40,000)
(6,600)
Total equity
2,489,000
4,479,000
Question No. 70 - C
Page 19 of 46
Suggested Solution – TAX
1. D. S1 - F. taxes cannot be subject to set-off or compensation. S2 – F – retroactive application is allowed if the law
so provides
2. B. S1 – F. Income is subject to final tax
3. D. S1 – F. Taxable. S2 – F. Taxable.
4. A.
5. D. S1 – F. The power to tax by the local government units or political subdivisions is merely a grant of power by
the Philippine Constitution under Sec 5, Article X. The provisions of the Philippine Constitution on Taxation are
limitation on the inherent power of taxation. S2 – F. Only legislative department has the power to impose tax.
6. C. (Modified BAR Q11 and A11). S3 - Subject to final tax.
7. D. S1: Nicanor is required to file BIR Form 1700 as he has two employers within the taxable year. S2: Employees
with multiple employers during the year are not qualified for substituted filing.
8. D. S1 - F. Not required to be uninterrupted. S2 – F. Requirement applies only in cases where employer has a
retirement plan. If without plan, such is not required.
9. D. Section 3, Revenue Regulations No. 3-2022.
10. C. S1: the retirement pay received by Nicanor is not taxable because all the requisites under the law for its
exemption are present that is: 1. BNA and Co., has a reasonable pension plan that is registered with the BIR, the
retirement pay; 2. Nicanor has been in the services of the same employer for at least 10 years [4 years (19841980) + 3 years (2008-2005) +3 years(2017-2014) = 10 years]; 3. Nicanor is 60 at the time of retirement (at
least 50 years of age); and 4. This is the first time that Nicanor avails the retirement benefit. S2: the retirement
pay received by Nicanor is not taxable, although BNA and Co., has no reasonable pension plan that is registered
with the BIR, since all the requisites of RA 7641 are present that is: 1. Nicanor is 60 years old at the time of
retirement (60-65 years old); and 2. He has served BNA and Company at least 5 yrs.
11. D. S1 - FALSE. No deduction if gross income is compensation. Specific in Sec 34. S2 - FALSE as there are additional
deductions like 25% and 15% from SC/PWD laws or if taxpayer opted OSD as method of deduction.
12. D. S1 – False. Expense is subject to limitation. S2 – False. Option applies only in foreign income tax payment.
13. C.
14. B
15. C. Only P 800,000 out of P 1,000,000 is exempted from income tax as the P 200,000 was not utilized in the taxable
year 2022 (first requisite of Section 5, RR-5-2021 is not complied).
16. C. Income derived from sources without are items of gross income of RC and DC. RR7-2003.
17. B. Income derived from sources without by an NRC are exempt from income tax.
18. A. S2 – Gain is subject to regular tax. S3- Exempt since taxpayer is an RFC and source is without. S4 – Exempt
since taxpayer is an NRC and source is without.
19. C.
20. D.
21. A. S2 – False, exemption from withholding is due to GPP being exempt from income tax. S3 – False, subject to
capital gains tax.
22. D. S1 - Compensation is subject to withholding tax on compensation WTC. S2 – fringe benefits received by Rankand-File employees are compensation subject to WTC. S3 – 50% valuation is provided in some fringe benefits.
23. D. S1 – De minimis benefits are expenses of an employer deductible against its gross income. S2 – exemption from
FBT does not follow exemption from other taxes.
Page 20 of 46
24. A.
25. A. S2 – all proceeds received from life insurance are exclusions from gross income on the part of Inday. S3 proceeds from life insurance are EXCLUSIONS from gross income.
26. C. S3 – to be exempt, sickness should be serious.
27. C. In case of capital outlay, proprietary educational institutions have the option under the law, to either capitalize
the cost or expensed it outright at the option of the school.
28. B. Bribes, kickbacks or similar payments are non-deductible expenses.
29. A. Legacies, bequest and devises are exclusions from gross income.
30. B. S1 – False. Prior ruling is no longer a requirement Section 8, RR- 5-2021.
31. D.
32. D.
33. A.
34. A.
35. D.
Gross receipts
Cost of service
Expenses:
Salaries and Wages
Rental
Depreciation
Representation
Transportation and travel
Office Supplies
Miscellaneous
Taxable Income
Tax due per tax table
Php 2,800,000
(1,280,000)
(1% of P2,800,000 =
28k ceiling vs. 50K
actual w/c ever is lower
4th tier (800k-2Million)
130,000 + 66,600
[(1,022,000 –
800k)*30%]
Less: Tax credits (EWT)
Income Tax Payable
(280,000)
(65,000)
(55,000)
(28,000)
(40,000)
(20,000)
(10,000)
1,022,000
196,600
140,000
56,600
36. D.
Gross receipts
Less: exempt income
Php 2,800,000
(250,000)
Taxable income
2,550,000
Income tax rate
8%
Income tax due
204,000
Less: Tax credits (EWT)
(140,000)
Income Tax Payable
64,000
Page 21 of 46
37. D
Gross receipts
P 2,800,000
Less: OSD (40% x 2.8Million)
(1,120,000)
Taxable Income
1,680,000
Income tax due per tax table
4th tier (800k-2Million)
130,000 + 264,000
394,000
[(1.680M-800K) * 30%
Less: Tax Credits (EWT)
Income Tax Payable
(140,000)
254,000
38. A
For Letter A
Income tax due under graduated income tax
(Itemized deduction)
Income tax due under 8% income tax
(in lieu of opt and GIT)
Income Tax Savings
P 196,600
(see solution for question no. 35)
204,000
7,400
(see solution for question no. 36)
39. D
Gross receipts
Cost of service
Expenses:
Salaries and Wages
Rental
Depreciation
Representation
Php 2,800,000
(1,280,000)
(1% of P2,800,000 = 28k ceiling
vs. 50K actual w/c ever is lower
Transportation and travel
Office Supplies
Miscellaneous
Taxable Income
RCIT
Tax due
Less: Tax credits (EWT)
Income Tax Payable
(40,000)
(20,000)
(10,000)
1,022,000
20%
204,400
140,000
64,400
40. B
P 140 Million x 5% = P 7Million*
Selling Price
P 100Million
Assessed value
Lot
House
Total
60Million
60Million
Zonal Value
Lot
House
Total
80Million
60Million
(280,000)
(65,000)
(55,000)
(28,000)
120Million
140Million (w/c ever is higher)*
Page 22 of 46
Explanation: Section 2 (F) of Revenue Regulations no. 11-2018
Tax Base
Rate
Seller is engaged in buying/selling of real property
GSP or FMV of BIR and Assessor whichever is higher
0% - if registered with HLURB or HUDCC
1.5% - selling price is not over P500,000
3% - selling price is over P500,000 but not over P2M
5% - of selling price is over Php 2M
41. B
P 140Million x 15/1,000 = P 2,100,000
42. B. Sale of Real Property Classified as Ordinary Asset (CWT) and Documentary stamp tax
43. D. The returns shall be filed in the BIR having jurisdiction over the location of the property or where the property
is located.
44. D.
Regular Corporate Income Tax (RCIT)
2021
Gross sales
P6,000,000
Cost of sales
(2,000,000)
Deductible Expenses
(3,850,000)
Taxable income
150,000
Corporate Income Tax Rate
20%*
Income Tax Due
30,000
Minimum Corporate Income Tax (MCIT)
2021
Gross sales
P6,000,000
Cost of sales
(2,000,000)
Gross income
4,000,000
MCIT Rate
1%
Income Tax Due
40,000**
* The CITR is 20%. Because the net income and the total assets excluding the land on which the particular business
entity's office, plant and equipment are situated did not exceed the did not exceed the P 5,000,000 and P 100,000,000
threshold, respectively.
**MCIT is higher than RCIT
45. D
Regular Corporate Income Tax (RCIT)
2022
Gross sales
Cost of sales
Deductible Expenses
Taxable income
Corporate Income Tax Rate
Income Tax Due
Less: Carry forward of excess MCIT
(2021: P40,000 – P30,000)
Income Tax Payable
P20,000,000
(10,000,000)
(5,000,000)
5,000,000
20%*
1,000,000**
(10,000)
P990,000
Page 23 of 46
Minimum Corporate Income Tax (MCIT)
2022
Gross sales
P20,000,000
Cost of sales
(10,000,000)
Gross income
10,000,000
MCIT Rate
1%
Income Tax Due
100,000
* The CIRT is 20%. Because the net income and the total assets excluding the land on which the particular business
entity's office, plant and equipment are situated, both did not exceed the P 5,000,000 and P 100,000,000 threshold,
respectively.
**RCIT is higher than MCIT
46. D
Regular Corporate Income Tax (RCIT)
2023
Gross sales
Cost of sales
P35,000,000
(20,000,000)
Deductible Expenses
Taxable income
(5,000,000)
P10,000,000
Corporate Income Tax Rate
Income Tax Due
25%*
P2,500,000**
Minimum Corporate Income Tax (MCIT)
2023
Gross sales
Cost of sales
P35,000,000
(20,000,000)
Gross income
15,000,000
MCIT Rate
1.5%***
Income Tax Due
225,000
* The CIRT is 25%. Because the net income and the total assets excluding the land on which the particular business
entity's office, plant and equipment are situated, both exceeded the P 5,000,000 and P 100,000,000 threshold,
respectively.
** RCIT is higher than the MCIT
*** Starting July 1, 2023, onwards, the MCIT rate shall be 2%. Hence, the applicable MCIT rate for the taxable year
2023 is 1.5% which is the average of 2% MCITR and 1% MCIT Rate.
47. D. None or NIL (zero). Loss of P 500,000.
48. D.
Itemized Deduction
2023
Gross sales
Cost of sales
Deductible Expenses
Taxable
Corporate Income Tax Rate
Income Tax Due
P35,000,000
(20,000,000)
(5,000,000)
P10,000,000
25%*
P2,500,000
Page 24 of 46
Optional Standard Deduction (OSD)
2023
Gross sales
Cost of sales
P35,000,000
(20,000,000)
Gross Income
15,000,000
OSD (40%)
(6,000,000)
Taxable Income
P9,000,000
Corporate Income Tax Rate
Income Tax Due
25%*
P2,250,000
49. C.
1st Qtr
P500,000
(250,000)
P250,000
8%
P20,000
(500)
P19,500
Gross Sales
Less: Exemption
Taxable Income
Tax rate
Income tax due
Less: Tax Credits (EWT)
Income Tax Payable
50. C.
Gross Sales
Add: 1st Qtr GS
Total
Less: Exemption
Taxable Income
Tax rate
Income tax due
Less: Previous tax payments
Less: Tax Credits (EWT) for this quarter
Tax Credits (EWT) for previous quarters
Income Tax Payable
P800,000
500,000
P1,300,000
(250,000)
1,050,000
8%
P84,000
(19,500)
(800)
(500)
P63,200
51. D
Gross Sales
Add: 1st Qtr GS
2nd QTR GS
Total
Less: Exemption
Taxable Income
Tax rate
Income tax due
Less: Previous tax payments (19.5K + 63.2K)
Less: Tax Credits (EWT) for this quarter
Tax Credits (EWT) for previous quarters (800 + 500)
Income Tax Payable
Page 25 of 46
P800,000
500,000
1,500,000
P2,800,000
(250,000)
2,550,000
8%
P204,000
(82,700)
(1,500)
(1,300)
P118,500
52. B
Gross Sales
Cost of Goods Sold
Gross Income
Business Expenses
Taxable income
Income Tax Due per tax table [130,000 + 294,000 (1,780M – 800K
= 980K * 30%)
Less: Previous tax payments (19,500 + 63,200 + 118,500)
Less: Tax Credits (EWT) for this quarter
Tax Credits (EWT) for previous quarters (800 + 500 + 1,500)
Income Tax Payable
* Business expenses
Less:
Rent expense (disallowed expenses – without
withholding tax)
Excess of allowable interest expense deduction
Interest expense
Less: Interest income subject to Final Tax
[(8k/.80% = 10,000 x 20%)]
Allowable Interest Expense
Less: Deducted Interest Expense
Total
Allowable Business Expenses
Annual
P3,600,000
(1,440,000)
2,160,000
(380,000*)
1,780,000
P424,000
(201,200)
(3,600)
(2,800)
P216,400
P 432,000
(50,000)
30,000
(2,000)
28,000
30,000
(2,000)
380,000
53. A. Since the P3M VAT Threshold is breached, he is not qualified for 8% income tax rate. Thus, he will be taxed at
graduated income tax rate and is required to file BIR Form 1701 and not 1701-A.
54. B.
Interest income (net of final tax)
[8,000/80%]
Dividends Income (net of final tax)
[10,800/90%]
Non-Taxable Income and is subjected to final tax
P10,000
12,000
P22,000
55. C
Rent expense (disallowed expenses – without withholding
tax)
Excess of allowable interest expense deduction:
Interest expense
Less: Interest income subject to Final Tax
[(8k/.80% = 10,000 x 20%)]
Allowable Interest Expense
Less: Deducted Interest Expense
Total
P 50,000
30,000
(2,000)
Page 26 of 46
28,000
30,000
2,000
P52,000
56. C
Income payees
Nicanor - a non-VAT registered professional
Inday - a non-VAT registered professional
Jose - a VAT-registered professional
XYZ and Co., CPAs – a general professional partnership
DEF Consultancy Corp. - a consultancy firm
GHI Management Corp. - a management firm
JKL Professionals Corp. – a consultancy firm
Total
Amount
100,000
100,000
100,000
100,000
100,000
100,000
100,000
Rate
Amount
100,000
100,000
100,000
20,000
100,000
5,000
5,000
5,000
5,000
Rate
5%
10%
10%
0%
10%
15%
15%
EWT
5,000
10,000
10,000
0
10,000
15,000
15,000
65,000
57. C
Income payments
Rent – car for use of the president
Rent – commercial building
Janitorial fee (20% is agency fee; 80% is salary of janitors)
Security fee (20% is agency fee; 80% is salary of guards)
Payment to building contractor
Purchase of goods – regular suppliers
Purchase of goods – non-regular suppliers
Purchase of service – regular suppliers
Purchase of service – non-regular suppliers
Total
5%
5%
2%
2%
2%
1%
0%
2%
0%
EWT
5,000
5,000
2,000
400
2,000
50
0
100
0
14,550
58. A. The taxable income of Nicanor is PHP 250,000, hence exempt from income taxation, therefore the tax withheld
on his compensation during the year should be refunded not later than January 25 of the following year.
59. B. The tax due on taxable income of Inday is PHP 10,000. Since total tax withheld during the year amounted to
only PHP 5,000, hence, the balance of PHP 5,000 should be withheld on his December salary and remitted on
January 15 or the following year.
60. C. Since Kennedy is a minimum wage earner, his compensation income is exempt from income tax. Any tax withheld
therefore should be refunded to him in full on or before January 25 of the following year.
61. A. Jett’s income tax due on his taxable compensation for the year is Php 490,000. Since the same amount was
already withheld from January to November, ABC Corp. need not make any further withholding on his December
salary.
62. A. In annualization, total taxable compensation from present and previous employment are to be consolidated for
purposes of computing employee’s income tax for the year. The total taxable compensation of PHP 500,000 (PHP
450,000 from previous and PHP 50,000 from present) would yield the income tax due of PHP 55,000. Since the
previous employer remitted only PHP 20,000, the present employer needs to withhold the remaining PHP 35,000
on his December salary.
63. A. Thirteenth month pay is equivalent to the mandatory one (1) month basic salary of official and employees and
is based on the total basic salary earned during the year divided by 12 months. Emong has worked at least one
month, hence he is entitled to the 13th month pay. The basic salary of Emong from ABC Corp. is Php 50,000 divided
by 12 months would arrive at a 13th month pay of Php 4,166.67.
64. B. As indicated in the problem, adjustments were made on the salary of Nicanor (refund of Php 10,000), Inday
(withholding of additional Php 5,000), Kennedy (refund of erroneous withholding) and Jett (properly withheld), and
that all have no previous employment during the year, all of them are qualified for substituted filing. Emong on the
other hand is disqualified due to him having multiple employers during the year even if ABC Corp. made the proper
withholding.
Employee
Nicanor
Inday
Kennedy (MWE)
Jett
Correct tax due
based on
annualization
0
10,000
0
490,000
Tax Withheld from
January to
November
10,000
5,000
20,000
490,000
Page 27 of 46
Adjustment:
(Refund) or
Additional Tax
(10,000)
5,000
(20,000)
0
Tax Effect After
Adjustment
0
0
0
0
65. A
•
•
•
•
•
Total –
Monetized vacation leave credits (10 days at Php 1,000 per day) – Php 10,000
Uniform allowance – Php 6,000
Christmas cash gift – Php 5,000
Employee achievement award (Laptop) – Php 10,000
Annual medical assistance – Php 10,000
Php 41,000
66. A
•
Monetized vacation leave credits (10 days at Php 1,000 per day) – Php 10,000
•
Uniform allowance – Php 4,000
•
Christmas cash gift – Php 5,000
•
Employee achievement award (loyalty award) – Laptop worth Php 40,000
Total excess de minimis benefits – Php 59,000
67. A
13th month benefit threshold
90,000
Less: Total 13th month and other benefits:
13th month benefit already given
70,000
Add: Excess de minimis benefits:
o
Monetized vacation leave credits
o
Uniform allowance
o
Christmas cash gift
o
Employee award (Laptop)
Excess 13th month pay and other benefits
10,000
4,000
5,000
40,000
129,000
39,000
Add: Other taxable compensation:
o
Monetized sick leave credits (20 days)
o
Daily transportation allowance
20,000
2,000
Total taxable compensation
22,000
61,000
68. A
•
•
•
•
•
•
Total –
Monetized vacation leave credits (20 days at Php 1,000 per day) – Php 20,000
Monetized sick leave credits (20 days at Php 1,000 per day) – Php 20,000
Uniform allowance – Php 6,000
Christmas cash gift – Php 5,000
Employee achievement award (loyalty award) – Laptop worth Php 10,000
Annual medical assistance – Php 10,000
Php 71,000
69. A
•
Uniform allowance – Php 4,000
•
Christmas cash gift – Php 5,000
•
Employee achievement award (loyalty award) – Laptop worth Php 40,000
Total excess de minimis benefits – Php 49,000
70. A
13th month benefit threshold
90,000
Less: Total 13th month and other benefits:
13th month benefit already given
70,000
Add: Excess de minimis benefits:
49,000
119,000
Add: Other taxable compensation:
o
Monetized sick leave credits (20 days)
o
Daily transportation allowance
20,000
2,000
Total taxable compensation
22,000
51,000
Page 28 of 46
SUGGESTED SOLUTION – RFBT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
A
B. See Art. 1241, 2nd par. (When benefit to creditor need not be proved)
A. See Sec. 1, Rule 142 Rules of Court.
A. Distinguish Art. 1198 (Period) v. Art. 1256 (Tender of Payment and Consignation)
A. Distinguish Art. 1191 (Reciprocal obligation) v. Art. 1383/1384 (Rescissible obligations).
C. See Art. 1874 (Authority of agent to sell land must be in writing for validity) v. Art. 1403 (2) (Instances of Statute
of Frauds).
C. See 1163, Delimited Generic or Limited Generic thing.
D. Art. 1537, 2nd par – All the fruits shall pertain to the vendee from the day on which the contract was perfected.
D. Art. 1478 – The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has
fully paid the price.
A. Art. 1390 – These contracts are binding, unless they are annulled by a proper action in court.
D. Art. 1359/1364 – Remedy is to correct the instrument.
B. Statute of Frauds applies only to executory contracts. Contract is executed since there is already a down payment
given.
D. Amount of donation in personal property is below P5,000, hence no form is required.
E. Art. 1403 (2) – Sale of personal property amounting to P500 or more must be in writing to be enforceable.
A. Donation of real property, regardless of the value, must be in public instrument or validity.
A. Exception under AMLA.
D. The mortgage is indivisible even if the principal obligation is divisible.
A. Art. 1196 – Period is for the benefit of the debtor “on or before.”
A. Ratification is not available for Rescissible contracts.
B. Art 1874 – Authority of agent must be in writing to be valid.
D. See Sec 42 RCC (But stock dividends require it).
D. See Sec 31 RCC (Only instance).
C. See Sec 25 RCC.
B. Distinguish Sec. 42 v. Secs 66/67 RCC.
D. See Art. 1772 NCC, requirements of public instrument and registration are not mandatory.
C. See Sec. 135 RCC, SEC hearing and approval are required.
B. Distinguish BP 22 and Bank Secrecy Law, prohibition applies to the amount of deposit.
D. See RA 7080 Section 2. Definition of the Crime of Plunder; Penalties. — Any public officer who, by himself or in
connivance with members of his family, relatives by affinity or consanguinity, business associates, subordinates or
other persons, amasses, accumulates or acquires ill-gotten wealth through a combination or series of overt or
criminal acts as described in Section 1(d) hereof in the aggregate amount or total value of at least Fifty million
pesos (P50,000,000.00) shall be guilty of the crime of plunder and shall be punished by reclusion perpetua to death.
C. See Art. 1204 NCC, right of choice is given to debtor.
D. See Art. 2096 NCC, date and description must appear in public instrument.
D. See Art. 1304 NCC.
C. Distinguish Art. 1187 NCC (retroactive effect of SC) v. Art. 1188 (Rights pending the fulfillment of SC). A and B’s
transaction is subject to Suspensive condition while A and C’s transaction is subject to Resolutory condition.
A. Deficiency judgment is available in chattel and real mortgage.
C. Majority of the OCS only, Sec 29 RCC.
B. See RA 4726, Condominium Law.
C. See Art. 1608/1609 NCC, subject to Resolutory condition.
A. See Art 1423 NCC and Art. 1145 NCC, ARTICLE 1145. The following actions must be commenced within six years:
(1) Upon an oral contract; (2) Upon a quasi-contract. (n)
A. See Art. 1256 NCC.
C. Donation of real property must be in public instrument for validity.
C. See Art. 1307 NCC.
B. See Art. 1778/1779 NCC 2nd par.
D. See Art. 1813 NCC.
C. See Art. 1818, 1st par. NCC.
B. See Sec. 42 RCC.
B. See Sec 2 RCC.
D. See Art. 1217 NCC.
C. See Art. 1170, Incidental fraud’s remedy is to ask for damages.
B. See Art 1211 NCC.
A. See Art. 1211 NCC.
A. See Art. 1502 NCC, ownership passes to buyer upon delivery but subject to resolutory condition if buyer returns
the goods.
D. See Art 1616 NCC.
B. See Arts 2121-2123 NCC.
A. See Art. 1816 NCC, pro-rata (equally/jointly) and subsidiarily against all partners.
D. See Art. 2130 NCC, Pactum de non alienando.
Page 29 of 46
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
D. See Sec 22 RCC, Board of Directors (BOD) is the governing body.
B. See Art. 1301 NCC.
C. See Act No. 1508, in pledge excess goes to creditor.
C. See Art 1211 NCC.
B. See Art. 1628 NCC, no warranty on the solvency of the debtor.
E. S2- no requirement. S3 – P15,000.
C. See Art. 2089 NCC, Mortgage is indivisible.
A. See RA 10142, FRIA, Rescission is for Civil Code.
C. S3 – 6 months.
C. S3 – See Art 1800 NCC, GR Appointment is irrevocable unless there is a just or lawful cause and vote of the
controlling interest.
65. C. S1- no need to file by-laws. See Sec 119 RCC; S2 – there is no period provided.
66. B. See Alternative methods of procurement, See RA 9184, GPRA.
67. D. See RA 10667, PCA.
68. B. Q1 –Deficiency judgment is allowed (except in pledge, Recto Law and TP Mortgagor); Q2 – Debtor gets the
excess (except in pledge, creditor is entitled to get excess).
69. B. See Art. 1619 NCC, must be to a stranger.
70. A. See Art 1592 NCC, notarial rescission is required.
71. D. See Arts. 1539 and 1540 NCC.
72. C. See Art. 1480 NCC and 1163 NCC.
73. B. See Art 1623, last par.
74. A. See Art. 1566, Caveat Venditor.
75. B. No, due to the stipulation in the Affidavit of Good Faith.
76. B. See 1874 NCC, oral authority is not allowed.
77. A.
78. D. Related rights are the rights related to copyright, that have their special subject matter of protection, which is
mainly related to copyright works. These rights are called the rights related to copyright or simply related rights, or
the rights neighboring to copyright or simply neighboring rights.
79. A. The two essential requisites for a valid marriage are: (1) contracting parties must be male and female and have
the legal capacity to enter into marriage, and (2) consent of the contracting parties must be freely given before a
solemnizing officer.
80. D. See Art. 1781 NCC, Universal Partnership of Profits.
81. D. See Sec 15 RCC – Amendment of AOI (Ordinary Corp.)
82. A. See Sec. 61 RCC, Promissory note and future services are not allowed.
83. D. S1 – Only the stockholders can fill-out in case of increase in number of BOD.
84. B. See Sec 6, RCC.
85. D. No form for validity required. Law mandates form to bind third parties i.e. registration.
86. D. Public instrument in donation is a requirement for validity.
87. D. Associate is not a partner, delectus personarum.
88. B. S1 – Service is not allowed. S2 – Husband and wife not allowed to enter in Universal Partnership.
89. B. S1 – It will not dissolve, third party becomes an assignee; S2 – Not assignable.
90. E. S1 – must be “imminent loss”; S2 – Liability for contractual obligation is pro rata and subsidiary.
91. D. See Art. 1978, decision of TP is valid, unless manifestly inequitable.
92. D. See Sec. 80 RCC.
93. C. See Art 1317 and 1403 (3), choose the most defective.
94. B. S1 – deemed approved; S2 – 90 days; S3 – Integration rule applies in Service Charge.
95. A.
96. C. S3 – SEC cannot impose the penalty of imprisonment.
97. B. Sec. 10. Freezing of Monetary Instrument or Property.— Upon a verified ex parte petition by the AMLC and after
determination that probable cause exists that any monetary instrument or property is in any way related to an
unlawful activity as defined in Section 3(i) hereof, the Court of Appeals may issue a freeze order which shall be
effective immediately, for a period of twenty (20) days.
98. C. See Art 1811 (3) NCC.
99. B. See Art. 1810 NCC.
100.
C. See Art. 1780 NCC
Legend:
GR – General Rule
RCC – Revised Corporation Code
NCC – New Civil Code
AMLA – Anti Money Laundering Act
AMLC – Anti Money Laundering Council
GPRA – Government Procurement and Reform Act
PCA – Philippine Competition Act
FRIA – Financial Rehabilitation and Insolvency Act
Page 30 of 46
SUGGESTED SOLUTION – FAR
Question No. 1 - A
Insurance Commission is now represented in FRSC and AASC in accordance with
BOA Resolution No. 29 series of 2022 and BOA Resolution No. 22 series of 2020,
respectively.
Question No. 2 - D
Question No. 3 – C
Question No. 4 - B
Unadjusted Inventory
(b) Goods sold in transit - FOB destination
(e) Goods purchased - FOB shipping point
441,000
38,000
51,000
Adjusted Inventory
530,000
Items a, c, and d were properly excluded.
Question No. 5 - B
Inventory, 7/4
Add (deduct), 7/1 to 7/4 transactions:
Purchases
Sales
Sales returns
Purchase returns
483,700
(38,400)
14,800
(400)
1,800
Inventory, 6/30
461,500
Question No. 6 - A
Unadjusted inventory
Less loss on inventory write-down:
Cost of 1,000 items (1,000 x 18)
NRV of 1,000 items [(1,000 x P15)- P800]
386,400
18,000
14,200
Adjusted inventory
3,800
382,600
Question No. 7 - B
Inventory, 12/31/21
Purchases (P5,640,000 + P40,000 - P80,000)
Cost of sales (see computation below)
Estimated Inventory, 12/31/22
Inventory based on physical count
1,280,000
5,600,000
(5,280,000)
1,600,000
(1,440,000)
Estimated cost of misssing inventory
160,000
Computation of cost of sales:
Accounts receivable, 12/31/22
Collections
Accounts receivable, 1/1/22
Sales on account
Cash sales
Total sales
x COS ratio (1 - .4)
1,200,000
7,200,000
(1,000,000)
7,400,000
1,400,000
8,800,000
0.60
5,280,000
Page 31 of 46
Question No. 8 - C
Cost
1,987,200
4,688,640
94,560
Inventory, beginning
Purchases
Freight in
Net mark up (P720,000 - P120,000)
Net mark down (P240,000 - P40,000)
Retail
2,760,000
6,512,000
600,000
(200,000)
Goods available for sale
6,770,400
Cost ratio (P6,770,400/P9,672,000)
9,672,000
70.00%
Goods available for sale at retail
Less sales
9,672,000
7,812,000
Ending inventory, at retail
1,860,000
Ending inventory, at cost (P1,860,000 x 70%)
1,302,000
Question No. 9 - D
Question No. 10 - D
The items are classified as follows:
Tractors - PPE
Computers - PPE
Software - Intangible assets
Cacao-bearing trees - PPE
Harvested cacao - Inventory
Question No. 11 - A
Fruits attached to fruit-bearing trees
Trees grown for use as lumber
Trees that are cultivated both for their fruit and their lumber
Maize and wheat
Total biological assets
3,000,000
10,000,000
8,000,000
4,000,000
25,000,00
0
Question No. 12 - C
PPE
a
Land held for capital appreciation
b
Land and building for rental to others under operating leases
c
d
e
f
g
h
i
j
k
l
Land and building for rental to others under finance leases
Land and building held for resale in the ordinary course of business
Factory building
Research and development building
Head office building
Machinery used in production
Store building
Delivery vehicle
Office furniture and fixtures
Equipment for rental to others under operating leases
m
n
o
p
Equipment for rental to others under finance leases
Equipment held for sale in the ordinary course of business
Equipment held for sale in accordance with PFRS 5
Dogs used in rendering security services
Page 32 of 46
4,000,000
2,000,000
3,800,000
1,700,000
1,300,000
900,000
760,000
540,000
150,000
Notes on
not PPE
Investment
property
Investment
property
Not
recognized
Inventories
Not
recognized
Inventories
NCA HFS
q
r
Plants displayed administrative office
Bearer plants related to agricultural activity (excluding produce growing on
bearer plants valued at P240,000)
r
Produce growing on bearer plants
s
Bearer animals related to agricultural activity
t
Annual crops related to agricultural activity
70,000
740,000
Biological
assets
Biological
assets
Biological
assets
15,960,00
0
Question No. 13 - B
Fair value of asset given up
Less carrying amount, 4/1/22
Cost
Acc. Dep. [P240,000 + (P96,000 x 3/12)]
192,000
480,000
(264,000)
Gain (loss) on exchange
(24,000)
Question No. 14 - D
The entity used double declining balance method.
Depreciation rate (1/8 x 2)
0.25
Cost
CA, 12/31/21 (P5,400,000 x .75 x .75)
5,400,000
(3,037,500)
Acc. Dep., 12/31/21
2,362,500
Depreciation - 2022 (P3,037,500 x .25)
759,375
Question No. 15 - B
Carrying amount, 6/30/22 (P34,000 x .8 x .8 x .9)
Loss on disposal
19,584
(2,100)
Sales proceeds
17,484
Question No. 16 - D
Fair value
Carrying amount, 12/31/22
Increase (Decrease)
Computation of carrying amount, 12/31/22
Machine A:
Carrying amount, 6/30/22
Depreciation (P3M/10 x 6/12)
Machine A
1,800,000
1,650,000
Machine B
1,550,000
1,600,000
150,000
(50,000)
OCI (RS)
P/L (RL)
1,800,000
(150,000)
1,650,000
Machine B:
Carrying amount, 6/30/22
Depreciation (P2M/10 x 6/12)
216,000
1,700,000
(100,000)
1,600,000
Page 33 of 46
Question No. 17 - B
Purchase price (P89,600 - P9,600)
Costs of transporting machine
Labor costs of installation
Labor costs of testing
Costs of safety rails and platforms surrounding machine
Costs of water devices to keep machine cool
Costs of adjustments to machine
80,000
3,000
5,000
4,000
6,000
8,000
7,500
Total cost
113,500
Notes:
1. Insurance cost is
expense
2. Cost of training is expense
Question No. 18 - D
Depreciable amount (P2,000,000 + P70,000 - P100,000)
Divide by useful life
1,970,000
10
Depreciation for 2022
197,000
Question No. 19 - C
Fair value of asset given up (P205,000 - P60,000)
Carrying amount
145,000
168,000
Gain (loss) on exchange
(23,000)
Question No. 20 - D
Revaluation surplus, 1/1 (Head Office)
Increase in value of head office
1,257,000
82,000
Revaluation surplus, 12/31
1,339,000
The impairment on factory is recognized profit or loss.
There is no credit balance in the revaluation surplus for this asset.
Question No. 21 - B
Land held as potential plant site
Vacant building to be leased out under an operating
lease
Building being leased out to a subsidiary
Investment property under construction
Investment properties in the separate FS
5,000,000
20,000,000
8,000,000
7,000,000
40,000,000
Question No. 22 - D
Excess annual earnings (P10,000 x .2)
Normal return on net assets [(P100,000 - P10,000) x .1]
Annual earnings
Page 34 of 46
2,000
9,000
11,000
Question No. 23 - D
Cost of natural resources, net of residual value (P10M - P2M)
Mine improvements
Cost subject to depletion
Divide by total estimated reserves in 2021
Depletion rate in 2021
Number of tons mined in 2021
8,000,000
750,000
8,750,000
2,000,000
4.38
50,000
Depletion for 2021
219,000
Original cost subject to depletion
Less depletion in 2021
Remaining cost to deplete, 1/1/22
Remaining tons of ore, 1/1/22 (3,000,000 + 150,000)
Depletion rate in 2022
Number of tons mined in 2022
8,750,000
219,000
8,531,000
3,150,000
2.71
150,000
Depletion for 2022
406,500
Question No. 24 - D
Question No. 25 - C
Machine 1 (CA)
Machine 2 (RA)
270,000
198,000
CA after impairment
468,000
CA before impairment (see below)
RA (Lower of FV less COD and VIU)
Machine 1
270,000
285,000
Machine 2
200,000
198,000
-
2,000
Impairment loss
Computation of CA before impairment:
Machine 1 (P450,000 x 6/10)
Machine 2 (P250,000 12/15)
270,000
200,000
Question No. 26 - D
Asset 1
Asset 2
Asset 3
CA before IL
150,000
200,000
50,000
Initial IL
alloc.
(18,750)
(25,000)
(6,250)
CA after
initial alloc.
of IL
131,250
175,000
43,750
IL re-alloc.
(11,250)
15,000
(3,750)
CA after IL
120,000
190,000
40,000
400,000
(50,000)
350,000
-
350,000
Question No. 27 - B
Cost
Acc. depreciation, 12/31/22 [(P650,000 - P50,000) x 5/12]
Carrying amount, 12/31/22
Recoverable amount - VIU [(P1M - P825,000)/5 x 3.7908]
Impairment loss
650,000
(250,000)
400,000
132,678
267,322
Page 35 of 46
Question No. 28 - B
Fair value, 12/31/22
CA, 12/31/22 without impairment [P2,000,000 - (P80,000 x 12)]
1,650,000
1,040,000
Revaluation surplus
610,000
Alternative computation:
Fair value, 12/31/22
Less CA, 12/31/22 with impairment
Revaluation increase
Less reversal of impairment
1,650,000
836,875
813,125
203,125
Revaluation surplus
610,000
Useful life (P2,000,000/P80,000)
25
CA, 12/31/19 [P2,000,000 - (P80,000 x 9)]
Impairment loss
1,280,000
250,000
RA
1,030,000
CA, 12/31/19 after impairment
Less depreciation - 2020 to 2022 [(P1,030,000/16) x 3]
1,030,000
193,125
CA, 12/31/22
836,875
CA, 12/31/22 without impairment [P2,000,000 - (P80,000 x 12)]
Less CA, 12/31/22 with impairment
1,040,000
836,875
Reversal of impairment loss in P/L
203,125
Question No. 29 - A
Balance of revaluation reserve before revaluation
Revaluation increase on 6/30/22 (P330,000 - P290,000)
20,000
40,000
Balance of revaluation reserve after revaluation
60,000
Question No. 30 - B
Depreciation - 2022 [(P135,000 - P13,500)/5]
24,300
Question No. 31 - B
Interest Allied Bank loan (P800,000 x .06)
Interest BDO Bank loan (P1,000,000 x .066)
Interest Metro Bank loan (P3,000,000 x .07)
48,000
66,000
210,000
Total
Total general borrowings
324,000
4,800,000
Capitalization rate
6.75%
Capitalized interest (P1,800,000 x .0675 x 8/12)
81,000
Question No. 32 - B
Refer to PFRS 5 par. 27.
Question No. 33 - D
Income from GG - 2022 (P1,800,000 x 5/15)
Refer to PAS 20 par. 17.
Question No. 34 - D
Question No. 35 - D
Page 36 of 46
600,000
Question No. 36 - B
Question No. 37 - B
Question No. 38 - B
Checking account balance
Overdraft in special checking account at same bank
Certified check from customer
Currency and coins in a petty cash fund
Correct amount of 'Cash'
925,000
(17,000)
9,800
800
918,600
The items excluded are treated as
follows:
Certificate of deposit - Cash equivalent (not cash)
Cash held in a bond sinking fund - Non-current investment
Postdated check from customer - Accounts
receivable
NSF check received from customer - Accounts receivable
Cash advance to subsidiary - Non-current investment
Postage stamps on hand - Supplies
Utility deposit paid to electric company - Other non-current asset
Unreplenished petty cash - Expenses
Question No. 39 - C
Deposits in transit, Sept. 30
October deposits per books
October deposits per bank
4,400
24,600
(21,200)
Deposits in transit, Oct. 31
7,800
Question No. 40 - B
Outstanding checks, Sept. 30
October checks per books
October checks per bank
2,800
27,800
(26,500)
Outstanding checks, Oct. 31
4,100
Question No. 41 - A
Question No. 42 - C
Question No. 43 - D
CA, 12/31/22 (P50,000 x 5.3282)
266,410
Question No. 44 - C
Question No. 45 - D
Factors holdback (P400,000 x .04)
Sales discounts - August
Sales returns and allowances - August
Sales returns and allowances September
16,000
(9,000)
(2,400)
(880)
Final settlement
3,720
Page 37 of 46
Question No. 46 - D
Fair value (P10,000,000 x 1.011)
Less CA before FV adjustment (purchase price)
PV of Principal (P10M x 0.8548)
8,548,000
PV of Interest (P10M x .05 x
3.6299)
1,814,950
FV adjustment gain (loss)
10,110,000
10,362,950
(252,950)
Question No. 47 - D
Interest income - 2022 (P10,362,950 x .04)
414,518
Question No. 48 - B
PV of Principal (P10M x 0.8890)
PV of Interest (P10M x .05 x 2.7751)
8,890,000
1,387,550
Carrying amount, 12/31/22
10,277,550
Question No. 49 - D
Dividend income (P12,500 x .2)
Fair value adjustment gain [10,000 x (P6.50 - P6.00)]
2,500
5,000
Effect on profit or loss (investment is held-for-trading)
7,500
Question No. 50 - A
Acquisition cost (10,000 x P6)
Share of profit (P3,000 x 6 x .2)
Dividend received (P12,500 x .2)
60,000
3,600
(2,500)
CA, 12/31/22 (investment is associate)
61,100
Question No. 51 - C
Premium paid
Less increase in CSV including dividends (P108,000 - P87,000)
Life insurance expense
40,000
21,000
19,000
Question No. 52 - A
See PFRS 9 par 4.3.6.
Question No. 53 - C
Question No. 54 - A
Question No. 55 - D
Unadjusted accounts payable
Add (deduct) adjustments:
Goods purchased FOB destination, received 12/24/22
Goods purchased FOB shipping point, shipped 12/28/22
Adjusted accounts payable
5,000,000
400,000
650,000
6,050,000
Question no. 57 - C
Interest expense - 2022 (P64,000 x 3.6048 x .12 x 6/12)
Page 38 of 46
13,842
Question no. 58 - A
Carrying amount, 12/31/21
Premium amortization, 1/1 - 9/1/22 (P12,000 x 8)
Carrying amount, 9/1/22
Retirement price
10,300,000
(96,000)
10,204,000
10,000,000
Gain on bond retirement
204,000
Computation of monthly amortization:
Carrying amount, 12/1/19 (P10.8M - P.2M)
Carrying amount, 12/31/21
Amortization of premium
Divide by the number of months (12/1/19 to 12/31/21)
10,600,000
(10,300,000)
300,000
25
12,000
Question no. 59 - B
Liability, 12/31/22 (P1,000,000 x .25 x .7938)
198,450
Question no. 60 - C
Question no. 61 - D
Question no. 62 - C
Cost
Residual value (P35,000 - P30,000)
Depreciable amount
Divide by lease term
98,512
(5,000)
93,512
4
Annual depreciation
23,378
Note: The machine will be returned to lessor at the end of lease term.
Question no. 63 - C
Depreciation - 2022 (P1,250,000/10)
125,000
Note: Depreciation begins on Jan. 1, 2022 since the asset is already available for use on that
date.
Question no. 64 - D
See PAS 19 par 84.
Question no. 65 - B
Unadjusted income before taxes
a. Purchases understated
b. Ending inventory understated
c. Business taxes understated
d. Rent income overstated (P30,000 x 4/6)
e. Insurance expense overstated (P120,000 x 6/12)
Adjusted income before taxes
250,000
(100,000)
150,000
(50,000)
(20,000)
60,000
290,000
Page 39 of 46
Question no. 66 - D
Question no. 67 - A
CA
Accounts payable
Accounts receivable
CL
66,000
40,000
Accumulated depreciation
Advances to sales persons
10,000
Advertising Expense
Allowance for Bad Debts
(10,000)
Bonds payable
Cash
22,000
Certificates of deposit
16,000
Share capital, (par)
Deferred income tax liability
Equipment
Inventory
55,000
Investment in X Co. shares
Investment in Y Co. shares
21,000
Share premium
Premium on Bonds Payable
Prepaid Insurance
6,000
Rent revenue
Rent revenue received in advance (4 months)
Retained earnings
Taxes payable
Tools
160,000
Working capital (P160,000 - P88,000)
Others
44,000
NCA
deduction
72,000
Expense
80,000
NCL
100,000
46,000
215,500
Equity
NCL
NCA
76,500
NCA
42,500
6,000
Equity
NCL addition
37,000
Income
97,500
Equity
52,000
NCA
12,000
10,000
88,000
72,000
Question no. 68 - D
Receipts from customers
Payments to suppliers
Interest received
Income taxes paid
832,000
(593,000)
17,600
(45,500)
Cash provided by operating activities
211,100
Question no. 69 - D
Question no. 70 - D
Proceeds from issuance of shares
Net income (P82,000 - P64,000)
Cash dividends declared
Total equity, 12/31/22
Total liabilities, 12/31/22
750,000
18,000
(3,000)
765,000
120,000
Total assets, 12/31/22
885,000
Page 40 of 46
SUGGESTED SOLUTION – AFAR
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
D
A
D
A
C
B
C
C
A
A
A
B
D
B
B
D
D
A
C
D
B
210,000- 60,000=P150,000
22. C
Tot Assets 320,000+ 175,00+ 210,000
Less: Liab
Total CNA
Multiply by
Bobby, Capital
P705,000
(60,000)
P645,000
20%
P129,000
23. D
E
B
R
Total
Interest
P24,187.50
P9,675
P14,512.50
P48,375
Salaries
90,000
90,000
180,000
Bonus
Balance
Total
7,002
7,002
23,341
23,341
23,341
70,023
P144,531
P33,016
P127,853
P305,400
24. D
Capital, beg 645,000 x 30%
Share in net income
Capital, end
P193,500
127,853
P321,353
25. D
35,000+ 25,000+ 15,000+ 12,500- 15,000= P72,500
26. D
10,000 + 7,500+ 10,000 – 15,000 = P10,000
Page 41 of 46
27. C
X
Y
Z
Total
Beg
P20,000
P25,000
P27,500
P72,500
Loss
(13,500)
(13,500)
(40,500)
(67,500)
Bal
6,500
11,500
(13,000)
5,000
APL
(6,500)
(6,500)
13,000
-
P-
P5,000
P-
P5,000
Payment
Loss: 7,500 + 25,000 + 30,000 + 5,000 = P67,500
28. B
Refer to the above solution
29. B
Estimated Cash Available
Less: Prioritized Claims
24,000+ 41,600+ 5,600
Available to Unsecured Claims
Unsecured Claims 89,600+ 6,400
Estimated Deficiency
Estimated Rate 62,400/96,000
P133,600
(71,200)
62,400
(96,000)
(36,600)
65%
Total book value
48,000
Secured:
41,600 x 100%
Unsecured 6,400 x 65%
Total
41,600
4,160
P45,760
30. A
Will be paid at 100%
31. A
89,600 x 65%
P58,240
32. D
Estimated Cash
Liabilities 24,000+ 48,000+ 5,600+ 49,600
Excess of Cash after paying Liabilities/ Payment to SH
P133,600
127,200
P6,400
33. B
Interest
Loss
Bal
APL
Payment
A
P3,000
(3,200)
(200)
200
-
B
P9,000
(6,400)
2,600
(100)
P2,500
C
P10,000
(6,400)
3,600
(100)
P3,500
Loss: 6,000 + 10,000 = 16,000
Page 42 of 46
TOTAL
P22,000
(16,000)
6,000
P6,000
34. D
A
B
C
TOTAL
Interest
P3,000
P9,000
P10,000
P22,000
Loss
(3,280)
(6,560)
(6,4560)
(16,400)
Bal
(280)
2,440
3,440
5,600
APL
280
(140)
(140)
-
-
P2,300
P3,300
P5,600
Payment
35. A
Estimated total cash to become available
Less: Prioritized claims
Fully secured
Partially secured (SP)
With priority
Net amount to unsecured amounts
Partially-secured (UP)
Without priority
Estimated deficiency
Estimated recovery rate (P252,000 divide by P360,000)
PSC (TBV)
P80,000
Less Secured portion
50,000
x
100%
P 50,000
Balance (U. P.)
P30,000
x
70%
21,000
P402,000
P60,000
50,000
40,000
150,000
P252,000
P 30,000
330,000
360,000
P(108,000)
70%
P71,000
36. B
Gross loss
(P1,695,000 + P225,000)
Gross gain
(P 945,000 + P750,000)
Estimated net loss
Book value of stockholder’s equity (P1,500,000 - P600,000)
Estimated amount recovered by stockholders
P1,920,000
(1,695,000)
P 225,000
900,000
P 675,000
37. A
The answer in item 36 means there was no deficiency to creditors, otherwise, the stockholders would recover
nothing from liquidation.
38. A
Total estimated cash (P28,000 + P72,000 + P61,600 + P26,400)
Less priority claims: Income taxes
Note payable (secured portion)
Salaries payable
Administrative/liquidation expenses
Estimated net amount available for non-priority claims
39. C
Net free assets (please see Item 38)
Less non-priority claims
Notes payable (unsecured portion)
Accounts payable
Bonds payable
Estimated deficiency
Estimated recovery rate (ERR): P88,800 / P148,000
Notes payable : Total Book Value
Secured portion
Unsecured portion
P 188,000
P
6,400
72,000
4,800
16,000
P
99,200
88,800
P 88,800
P 24,000
68,000
56,000
148,000
P(59,200)
60%
P96,000
72,000
P 24,000
Page 43 of 46
x
x
100%
60%
P 72,000
14,400
P 86,400
40. B
TBNI
RBNI
Realized Allowance
156,000
60,000
96,000
COGS @ BP
70,000 + 350,000 – 84,000
COGS @ Cost 336,000 -96,000
336,000
240,000
336,000/ 240,000= 140% of cost
41. C
84,000 /1.4 x .40
P24,000
42. A
600,000- (100,000+ 350,000- 200,000- 30,000)- 120,000 P260,000
43. A
300,000- (40,000+ 250,000 – 60,000) – 50,000
P20,000
44. A
(40,000+ 250,000 – 60,000) / 125% x 25%
P46,000
45. A
HO
100,000+ 350,000- 200,000- 30,000
BR
40,000+ 250,000 – 60,000)/ 125%
Combined COS
P220,000
184,000
P404,000
46. D
260,000 + 20,000 + 46,000
P326,000
47. D
Unadjusted balance
HO
Branch
P46,900
P44,000
AR Collection
(800)
SIT
3,200
RIT
Adjusted balance
(500)
P46,400
P46,400
48. B (See no. 47)
49. D
Total BV
Less: Inv from the HO
6,000/ 20% x 120%
Inventories from Outside Vendors
P50,000
(36,000)
P14,000
50. A
720,000 + 608,000 + 7,000 – 1,000
P1,334,000
Page 44 of 46
51. C
PNI O/O
Inv Inc (608,000 + 7,000 -1,000) x 80%
CNI: Parent
P720,000
491,200
P1,211,200
52. C
(608,000 + 7,000 -1,000) x 20%
P122,800
53. A
2,500,000 + 180,000 – 1,211,200
P1,468,000
54. A
Cost 755,000 + 55,000
Less: FV of NA
( 74,000 + 184,000 + 271,500
+ 187,500 – 220,000)
Goodwill
P810,000
(497,000)
P313,000
55. A
$100,000 x .93
(
P93,000)
56. C
$100,000 x 51.10
P5,110,000
57. B
DOT 450,000/ 1.50
BSD 450,000/ 1.45
Forex Loss
P300,000
310,345
(P10,345)
58. C
450,000/ 1.50
P300,000
59. B
DOT 130,000/ 2.3
Nov 30 130,000/ 2.1
Forex Loss
P56,522
61,905
(P5,383)
60. D
DOT 100,000/2.3
BSD 100,000/1.8
Forex Loss
P43,478
55,556
(P12,078)
61. D
FC250,000 x .04
P10,000 Gain
62. D
Rambutan’s NA at BV
Coconut’s NA at FV
Less Out of Pocket Cost
TOTAL ASSETS
P28,000,000
9,000,000
(145,000)
P36,855,000
Page 45 of 46
63. B
IFA= (400,000 x P20) – 9,000,000= 1,000,000
RE: 5M+ 1M – 120,000- 15,000= P5,865,000
64. A
Cost 400,000 x 22.81
FV of NA
Goodwill
P9,124,000
9,000,000
P124,000
Cost 325,000 x 7.50
FV of NA (2M +162,500)
Goodwill
P2,437,500
2,162,500
P275,000
65. B
66. D
Existing SHE
Issued shares @FV
TOTAL SHE
P575,000
2,437,500
P3,012,500
67. C
Cost (196,000/80%)
P245,000
FV of NA
119,000+ 13,000+ 29,000+ 140,000- 71,000
Goodwill
230,000
P15,000
68. A
615,000- 196,000+ 301,000+ 15,000=
P735,000
69. D
196,000/ 80% x 20%
P49,000
70. D
400,000+ 112,000 + 49,000
P561,000
Page 46 of 46