ReSA
The Review School of Accountancy
Tel. No. 735-9807 & 734-3989
FINANCIAL ACCOUNTING & REPORTING
First Pre-Board Examination
July 23, 2021(Friday)
6:00 PM to 9:00 PM
MULTIPLE CHOICE
INSTRUCTIONS: Select the correct answer for each of the following questions. Mark
only one answer for each item by shading the box corresponding to the letter of
your choice on the sheet provided. STRICTLY NO ERASURES ARE ALLOWED . Use pencil
no. 2 only.
D
1. Which statement is incorrect concerning investment property?
a. If the property comprises a portion that is held to earn rentals
and another portion that is held for use in production of goods
and these portions could not be sold separately, the property
is an investment property only if an insignificant portion is
held for use in production of goods.
b. When the owner of an office building provides security and
maintenance services to the lessees, the office building is an
investment property because the ancillary services are
insignificant.
c. An owner-managed hotel is an owner-occupied property rather
than investment property because the services provided to the
guests are significant.
d. If a property is leased by a subsidiary to another subsidiary,
the property is owner-occupied property in the individual
financial statements of the subsidiary that owns it but
investment property in the consolidated financial statements
of the group.
2. How would an increase in the fair value of the ordinary shares affect
the investment account under each of the following appropriate
classification?
Trading equity securities
Investment in Associate
B
a.
Increase
Increase
b.
Increase
No effect
c.
No effect
No effect
d.
No effect
Increase
3. Gains or losses on sale of Investment at FVOCI are recognized
B
a. In profit or loss whether debt or equity securities
b. In profit or loss when debt securities only
c. In other comprehensive income whether debt or equity securities
d. In profit or loss when equity securities only
4. Assume an investor purchases bonds at a premium the bonds are to be
held as a long-term investment which of the following statement is true
regarding the amount of bond interest revenue to be reported over life
of the bonds?
D
a. The periodic amount of bond interest revenue will always be
above the periodic amount of cash received for interest
b. The pattern of the periodic amt. of bond interest rev. is an
increasing amount
c. The periodic amount of bond interest revenue will always be
equal to the periodic amount of cash received
d. The periodic amount of bond interest revenue will always be
less than the periodic
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5. Which of the following is not included in the computation of cost ratio
under the average retail inventory method?
A
a. Employee discounts
b. Purchase discounts
c. Mark-up cancellation
d. Departmental transfer-in
6. When a company uses the perpetual inventory system in accounting for
its merchandise inventory, which of the following is false?
A
a. Total cost of goods sold is computed by deducting ending
inventory from total goods available for sale
b. The inventory account is updated after each sale
c. One of the entries to record return of goods is debit inventory
and credit cost of goods sold
d. None of the above
7. If the owner-occupied property is transferred to investment property
that is to be carried at fair value, the excess of carrying amount of
the property over its fair value shall be
A
a. Included in profit or loss.
b. Included in other comprehensive income.
c. Treated as an adjustment to the opening balance of retained
earnings.
d. Included in equity.
8. Which of the following terms would not result to recognition of freightin on the books of the buyer?
B
a. FOB Seller
b. FOB Buyer
c. FOB Shipping point, freight prepaid
d. FOB Shipping point, freight collect
C
9. Which of the following items should be treated as dividend income?
a. Reverse stock split
b. Cash received in lieu of shares
c. Shares received in lieu of cash
d. Cash dividend under equity method
10. Which of the following is true with regards to the accrued interest on
bonds payable that are sold between interest dates?
D
a. The accrued interest is computed using the effective rate
b. The accrued interest will be paid to the seller when the bonds
mature
c. The accrued interest is extra income to the buyer and treated
as bond issue cost of the buyer
d. The accrued interest is added to the issue price of the bond
to determine the total cash proceeds from bond issuance
C
11. Which cash item should be reported as current asset?
a. Cash segregated for payment of long-term bonds payable
b. Cash set aside for the acquisition of furniture and fixtures
c. Restricted compensating balance for which the related loan is
short-term
d. Restricted compensating balance for which the related loan is
long-term
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12. Which of the following can be classified as Cash and cash equivalents
under PAS 7 Statement of Cash Flows?
a.
b.
c.
d.
B
a. Redeemable preference shares
Yes
No
Yes
No
due in 180 days
b. Loan
notes
held
due
for
Yes
No
No
No
repayment in 100 days
c. Equity investments for trading
No
No
Yes
Yes
purposes
d. Bank
drafts
and
demand
No
Yes
No
Yes
deposits
D
13. The petty cash fund account under the imprest fund system is debited
a. Only when the fund is created.
b. When the fund is created and every time it is replenished.
c. When the fund is created and when the fund is decreased.
d. When the fund is created and when the size of the fund is
increased.
14. Book credit error of current month corrected in the same month shall
be:
D
a. Deducted from disbursements and deducted from ending cash
balance.
b. Added to receipts and added to ending cash balance.
c. Deducted in receipts and deducted from ending cash balance.
d. Deducted from disbursements and deducted from receipts.
15. Bank service charges of the previous and current month in the proof of
cash shall be:
i.
Deducted in books previous month cash balance – NSF check
previous month
ii. Deducted in books current month cash balance – NSF check
previous month
iii. Deducted in disbursements – NSF check previous month
iv. Added in books disbursement – NSF check current month
v.
Deducted in books ending cash balance – NSF check current month
C
a. i,ii,iv and v only
b. i,iii, iv only
c. i,iii,iv and v only
d. i,ii,iii,iv and v
16. Which of the following concepts relates to using the allowance method
in accounting for accounts receivable?
A
a. Bad debt expense is an estimate that is based on historical
and prospective information.
b. Bad debt expense is based on the actual amounts determined to
be uncollectible.
c. Bad debt expense is an estimate that is based only on an
analysis of the receivables aging.
d. Bad debt expense is management’s determination of which
accounts will be sent to the attorney for collection.
17. Which of the following is true when accounts receivable are factored
without recourse?
C
a. The transaction may be accounted for either as a secured
borrowing or as a sale, depending upon the substance of the
transaction.
b. The receivables are used as collateral for a promissory note
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issued to the factor 0by the owner
of the receivables.
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c. The factor assumes the risk of collectibility and absorbs any
credit losses in collecting the receivables.
d. The financing cost (interest expense) should be recognized
ratably over the collection period of the receivables.
18. On October 1 of the current year, an entity received a one-year note
receivable bearing interest at the market rate. The face amount of the
note receivable and the entire amount of the interest are due on
September 30 of next year. The interest receivable on December 31 of
the current year would consist of an amount representing
A
a. Three months of accrued interest income
b. Nine months of accrued interest income
c. Twelve months of accrued interest income
d. The excess on October 1 of the present value of the note
receivable over its fact amount
19. How would the interest-bearing note collectible in installment shall
be reported in the statement of financial position?
B
a. the entire carrying value is always reported as non-current
asset.
b. the carrying value maybe reported as partly current and partly
non-current.
c. the entire carrying value is always reported as current asset.
d. the carrying value is not reported in the statement of financial
position.
20. A component of an entity is classified as “Held for Sale” when the
component is available for immediate sale and the sale is highly
probable. Which of the following statements is incorrect when
considering a sale to be highly probable?
C
a. Management is committed to a plan to sell the component.
b. Active program to locate a buyer is initiated.
c. The component is actively marketed for sale at a price that is
higher than its acquisition cost.
d. The sale is expected to qualify as a completed sale within one
year from the date of classification as “held for sale”.
21. At a minimum, the results of a discontinued operation, net of tax shall
be presented
B
a. As a single amount on the face of the income statement or
statement of comprehensive income with no details disclosed in
the notes.
b. As a single amount on the face of the income statement or
statement of comprehensive income with appropriate disclosure
of the details in the note.
c. Side by side with continuing operations with details for
revenues and expenses attributable to the discontinued
operation shown on the face of the income statement or the
statement of comprehensive income.
d. In the notes to the financial statements only
22. If the fair value less cost to sell is higher than the carrying amount
of a non-current asset classified as held for sale, the difference is
A
a. Not accounted for.
b. Accounted for as an impairment loss.
c. Deferred gain as a component of equity.
d. Gain to be recorded in profit or loss.
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23. An entity classified a noncurrent asset accounted for under the cost
model as held for sale on December 31, 2020. Because no offers were
received at an acceptable price, the entity decided on July 1, 2021
not to sell the asset, but to continue to use it. In accordance with
IFRS 5, the asset should be measured on July 1, 2021 at
C
a. The lower of its carrying amount and its recoverable amount.
b. The higher of its carrying amount and its recoverable amount.
c. The lower of its carrying amount on the basis that it had
never been classified as held for sale and its recoverable
amount.
d. The higher of its carrying amount on the basis that it had
never been classified as held for sale and its recoverable
amount.
D
24. Which of the following is not true in relation to bearer plant?
a. It is a living plant that has a remote likelihood of being sold
as agricultural produce, except for incidental scrap sales
b. The bearer plant and the related agricultural produce are
accounted as two separate assets
c. Plants which have a dual use or exclusive to be harvested as
agricultural produce is not a bearer plant
d. Bearer plant should be measured initially at fair value less
estimated cost of disposal
25. The following provides examples of biological assets, agricultural
produce and products that are the result of processing after harvest.
Which is a correct combination?
Biological asset
Agricultural produce
Product after harvest
C
a.
Dairy cattle
Cheese
Milk
b.
Sheep
Yarn
Wool
c.
Pigs
Carcass
Sausages
d.
Grapes
Vines
Wine
Use the following information for the next two questions
The cash balance of Trese Company had the following information:
November
December
Cash balances per book
P1,200,000 P1,450,000
Cash balances per bank
1,400,000
1,838,500
Bank service charges
12,000
11,500
NSF checks
100,000
150,000
Notes collected by the bank
350,000
410,000
Deposit in transit
320,000
?
Outstanding checks
?
185,000
Book debit error
25,000
–
Book credit error
50,000
70,000
Bank credit error
–
65,000
Bank debit error
75,000
90,000
Bank receipts
2,550,000
Book disbursements
1,920,000
Note: errors were corrected in the following period. No other errors
affecting the cash balances.
C
26. How much is the amount of deposit in transit for the month of December?
a. P110,000
b. P100,000
c. P90,000
d. P80,000
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27. How much is the amount of outstanding checks for the month of November?
a. P112,000
b. P192,000
c. P272,000
d. P332,000
Solution:
Book
Unadjusted balances
BSC - Nov
BSC - Dec
NSF checks - Nov
NSF checks - Dec
Notes collected - Nov
Notes collected - Dec
Book debit error
Book credit error
Book credit error
Adjusted balances
Nov
1,200,000
(12,000)
Bank
Unadjusted balances
DIT - Nov
DIT - Dec
OC- Nov
OC- Dec
Bank credit error
Bank debit error
Bank debit error
Adjusted balances
Receipts
2,170,000
(100,000)
350,000
Disb
1,920,000
(12,000)
11,500
(100,000)
150,000
(350,000)
410,000
(25,000)
50,000
(50,000)
1,463,000
2,180,000
Nov
1,400,000
320,000
Receipts
2,550,000
(320,000)
90,000
Dec
1,450,000
(11,500)
(150,000)
410,000
(25,000)
(332,000)
(70,000)
1,874,500
70,000
1,768,500
Disb
2,111,500
Dec
1,838,500
90,000
(332,000)
185,000
75,000
(65,000)
(75,000)
1,463,000
2,180,000
(90,000)
1,874,500
(185,000)
(65,000)
90,000
1,768,500
In preparing its August 31, 2021 bank reconciliation, Kirk Corp. has
available following information:
Balance per bank statement, 8/31/21
P18, 050
Deposit in transit, 8/31/21
3, 250
Return of customer’s check for insufficient funds, 8/29/21
600
Outstanding checks, 8/31/21
2, 750
Bank service charges for August
100
Check disbursement recorded in August (correct amount is
P5,000)
500
Kirk deposited P15,000 in August but credited by bank at
1,500
A
28. What is the unadjusted balance per book on August 31, 2021?
a. P37, 250
b. P35, 050
c. P32, 050
d. P28, 250
Solution:
Unadjusted balances
DIT
OC's
NSF check returned
BSC for August
Book error in August
Bank error in August
Adjusted cash balance
Bank
18,050
3,250
(2,750)
Book
37,250
(600)
(100)
(4,500)
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32,050
32,050
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Casio Company had a unadjusted cash balance in its cash in BDO Bank as of
December 31, 2021 of P2,100,000, the following transactions were recorded
in this account as of 12/31/2021:
• Check payable to Casio dated January 3, 2022 was recorded as receipts
as of December 31, P145,000.
• Check payable to Casio amounting to P210,000 dated December 27, 2021
recorded as receipts on 12/27 and returned by bank on 12/29 marked as
“NSF” and was immediately redeposited on 12/30. The return of the check
was not recorded on 12/29 but the redeposit was recorded as receipts
on 12/30.
• Check payable to Grab (a supplier), dated January 2, 2022 was delivered
on December 30, 2021 amounting to P120,000.
29. What is the correct balance of cash in BDO bank as of December 31,
2021?
B
a. P2,075,000
b. P1,865,000
c. P1,745,000
d. P1,625,000
Solution:
Unadjusted cash in BDO
Customer postdated check
Error in recording NSF check
Company's postdated check
2,100,000
(145,000)
(210,000)
120,000
Adjusted cash in BDO
1,865,000
Health Company established as petty cash fund of P12,000. Details of the PCF
are as follows:
Unreplenished expense vouchers:
Date
12/21/2021
12/26/2021
12/28/2021
12/30/2021
01/02/2022
01/03/2022
Payee
Coffee Bean
Anytime Pitnes
Frap, Employee
Honest Bee
Bonds and Papers
Mr. Taxi U
Description
Coffee and pastries
Zumba for employees
Advances for business trip
Meals
Office Supplies
Transportation
Amount
P1,400
1,200
1,500
1,300
2,800
1,550
The count of remaining bills and coins in the petty cash box were as follows:
Bills
P100
50
20
Counted
2 pieces
3 pieces
4 pieces
Coins
P1.00
0.50
0.25
Counted
20 pieces
500 pieces
200 pieces
A replenishment check amounting to P1,500 was also found inside the petty
cash box.
30. How much is the balance of petty cash fund reported in its December
31, 2021 statement of financial position?
C
a. P2,250
b. P5,100
c. P6,600
d. P7,100
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Solution:
Bills and coins
Replenishment check
Vouchers dated January (2,800 + 1,550)
Petty cash fund as of 12/31/2021
750
1,500
4,350
6,600
One Company had the following items in its “Cash equivalents” account as
of December 31, 2021:
Money market fund due in 3 months acquired 1 month ago
Investment in equity designated in OCI – expected to
disposed in 3 months
Time deposit – 2 months maturity, acquired on 12/1/2021
Treasury bills – due in 3 months from date of acquisition
(12/30/2021)
Redeemable preference shares – purchased on 11/30/2021 due
on 3/31/2022
P250,000
500,000
600,000
250,000
300,000
31. How much should be the correct amount of cash and cash equivalents as
of December 31, 2021?
D
a. P1,900,000
b. P1,400,000
c. P1,100,000
d. P850,000
Solution:
Time deposit
Treasury bills
Total cash equivalents
600,000
250,000
850,000
The Kirkland Corporation reported cash in Matt Bank of P2,450,000. The
following checks were disbursed and are part of outstanding checks as of
December 31, 2021:
Check payable to a supplier dated 3/31/2021, released 3/1/2021
Check payable to a supplier dated 12/30/21, released 1/2/2022
Check payable to a supplier dated 12/30/2021, released 11/28/2021
Check payable to a supplier dated 1/4/2022, released 12/28/2021
Check payable to a supplier dated 12/1/2021, released 12/29/2021
P120,000
70,000
90,000
100,000
60,000
32. How much is the correct cash balance in Matt Bank as of December 31,
2021?
B
a. P2,890,000
b. P2,740,000
c. P2,620,000
d. P2,450,000
Solution:
Unadjusted balance in Matt Bank
Stale check
Unreleased check
Company's postdated check
Adjusted balance in Matt Bank
2,450,000
120,000
70,000
100,000
2,740,000
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May Co. prepared an aging of its accounts receivable at December 31, 2021
and determined that the net realizable value of the receivables was
P300,000. Additional information is available as follows:
Allowance for uncollectible accounts at 1/1/21—credit balance P 34,000
Accounts written off as uncollectible during 2021
23,000
Accounts receivable at 12/31/21
325,000
Uncollectible accounts recovered during 2021
5,000
33. For the year ended December 31, 2021, May's uncollectible accounts
expense would be
D
a. P25,000
b. P23,000
c. P16,000
d. P9,000
Solution:
Allowance, beginning
Write off
Recovery
Uncollectible account expense
Allowance, end (325,000 - 300,000)
34,000
(23,000)
5,000
9,000
25,000
On December 1, 2021, Yuclid Corp. engaged the following transactions:
B
•
The company pledge P600,000 of its accounts receivable as a security
for a P500,000 loan with Yureka Bank.
•
Factored P1,300,000 of accounts receivable without recourse on a
notification basis with Yuterpe Finance Company. Yuterpe Finance
charged a factoring fee of 10% of the amount of receivable factored
and withheld 15% of the receivable factored.
•
A customer’s P700,000, 7-month, 5% note receivable dated August 1, 2021
was discounted with Yummy Bank at 8% discount rate on a with recourse
basis.
34. How much is the total cash received from the financing of receivables?
a. P1,681,008
b. P2,181,008
c. P2,291,508
d. P2,200,508
Solution:
Face value of note
Total interest (700,000 x 5% x 7/12)
Maturity value
Discount (720,417 x 8% x 3/12)
Proceeds from discounting
Proceeds from pledging
Proceeds from factoring
Total proceeds
700,000
20,417
720,417
(14,408)
706,008
500,000
975,000
2,181,008
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The following is the summary of transactions of Pillar Company in 2020 and
2021:
Credit sales
Collections of outstanding receivables
Accounts written off
Recovery of accounts previously written off
Days past invoice date at December 31
0 – 30
31 – 90
91 – 180
Over 180
2021
P6,000,000
5,830,000
60,000
15,000
2020
P5,620,000
4,800,000
20,000
none
600,000
150,000
110,000
?
500,000
180,000
?
30,000
The company’s policy to provide allowance on its account receivable at year
end as follows: 0-30 days – 2%; 31-90 days – 5%; 91-180 days – 10%; and over
180 days – 15%.
35. How much is the uncollectible accounts expense in its 2021 profit or
loss?
D
a. P42,500
b. P40,280
c. P39,550
d. P38,000
Solution:
Beginning balance of AR (5,620 - 4,800 - 20)
Credit sales in 2021
Collection of outs receivables
Write off - 2021
Recovery - 2021
Ending balance of AR
Days outs
0-30
Amounts
600,000
% uncollectible
2%
Allowance
12,000
Net realizable value 12/31/2021
800,000
6,000,000
(5,830,000)
(60,000)
910,000
31-90
150,000
5%
7,500
91-180
110,000
10%
11,000
Allowance, beginning
Write off
Recovery
Uncollectible account expense
Allowance, end
>180
50,000
15%
7,500
Total
910,000
38,000
872,000
32,500
(60,000)
15,000
50,500
38,000
On January 1, 2021, Decade Company sold an equipment costing P10,000,000 and
accumulated depreciation of P2,500,000. Decade received a P1,000,000 cash
and a 10%, 7-year, P7,000,000 note receivable every December 31 in equal
annual installment of P1,000,000 plus interest starting December 31, 2021.
Interest effective on this note when received is at 8%.
36. How much is the amount of gain (loss) on sale should Decade recognized
on January 1, 2021?
C
a. (P51,593)
b. (P48,178)
c. P948,407
d. P782,882
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37. How much is the interest income in Decade’s statement of comprehensive
income for the period ending December 31, 2021?
A
a. P595,873
b. P507,542
c. P420,146
d. P333,757
Solution:
1,000,000
700,000
1,000,000
600,000
1,000,000
500,000
1,000,000
400,000
1,000,000
300,000
1,000,000
200,000
1,000,000
100,000
Total PV of note on 1/1/2021
1,700,000
1,600,000
1,500,000
1,400,000
1,300,000
1,200,000
1,100,000
0.925926
0.857339
0.793832
0.735030
0.680583
0.630170
0.583490
1,574,074
1,371,742
1,190,748
1,029,042
884,758
756,204
641,839
7,448,407
Date
1/1/2021
12/31/21
12/31/22
12/31/23
12/31/24
12/31/25
12/31/26
Principal
NI (10%)
EI (8%)
Amort
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
700,000
600,000
500,000
400,000
300,000
200,000
595,873
507,542
420,146
333,757
248,458
164,335
104,127
92,458
79,854
66,243
51,542
35,665
12/31/27
1,000,000
100,000
81,481
18,519
Selling price (7,448,407 + 1M)
CV of equipment (10M - 2.5M)
Gain on sale
CV
7,448,407
6,344,280
5,251,822
4,171,968
3,105,726
2,054,184
1,018,519
(0)
8,448,407
(7,500,000)
948,407
On May 1, 2021, Network received a 3-year, P1,200,000 note receivable due on
April 30, 2024. The note was received upon sale of an old machinery of
Network which is no longer use in its operation. The interest effective of
similar note is at 7%.
B
38. How much is the carrying value of the note as of December 31, 2022?
a. P1,075,193
b. P1,097,039
c. P1,121,495
d. P1,143,925
Solution:
Principal
PV factor (1.07^-3)
Initial CV of note
Date
5/1/21
12/31/21
5/1/22
12/31/22
5/1/23
1,200,000
0.816298
979,557
EI (7%)
45,713
22,856
48,913
24,456
CV
979,557
1,025,270
1,048,126
1,097,039
1,121,495
0
FAR FIRST PRE-BOARD EXAMINATION (BATCH 42)
0
0
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ReSA - The Review School of Accountancy
Page 12 of 25
On January 1, 2021, Alias Company received a 5%, P6,000,000, note collectible
in installment plus interest every December 31 of each year until December
31, 2023. The note is collectible in principal as follows:
December 31, 2021
December 31, 2022
December 31, 2023
P1,000,000
2,000,000
3,000,000
The interest effective on January 1, 2021 is at 3%, on December 31, 2021 is
at 4%.
C
39. How much is the carrying value of the note on December 31, 2021?
a. P5,330,882
b. P5,512,041
c. P5,153,643
d. P5,391,939
40. How much is the interest income in its statement of comprehensive income
for the period ending December 31, 2021?
A
a. P187,970
b. P154,609
c. P188,620
d. P155,709
Solution:
1,000,000
2,000,000
3,000,000
Total PV of note
Date
1/1/2021
12/31/21
12/31/22
12/31/23
300,000
250,000
150,000
1,300,000
2,250,000
3,150,000
0.970874
0.942596
0.915142
1,262,136
2,120,841
2,882,696
6,265,673
Principal
NI (5%)
EI (3%)
Amort
1,000,000
2,000,000
3,000,000
300,000
250,000
150,000
187,970
154,609
91,748
112,030
95,391
58,252
CV
6,265,673
5,153,643
3,058,252
-
Hydrogen Company acquired a building on April 1, 2021 for P 18,000,000. The
building is being leased out under operating lease wherein the lessee pays
rent on a quarterly basis amounting to P 30,000. At that date, the building
had an estimated useful life of 30 years and depreciated using the straightline method. On December 31, 2021, the fair value of the building was P
19,200,000.
41. How much is the total net increase/decrease in profit for the year 2021
assuming the company is using fair value model?
A
a. 1,290,000
b. 1,200,000
c. 1,320,000
d. 840,000
Solution:
FAIR VALUE model
0
1,200,000
90,000
1,290,000
Depreciation expense
Unrealized gain
Rent income
0
FAR FIRST PRE-BOARD EXAMINATION (BATCH 42)
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ReSA - The Review School of Accountancy
Page 13 of 25
Beryllium Company purchased 10,000 shares of Be Corp.’s ordinary shares at
P50 share on January 3, 2021 and classified the investment as fair value
investment. On August 31, 2021, Beryllium received 5,000 shares of Be
ordinary shares in lieu of cash dividend of P25 per share. On this date, the
Be Corp.’s ordinary share has a quoted market price of P30 per share. The
fair value of Be Corp.’s ordinary share on Dec. 31, 2021 is P 45 per share.
42. How much is the total income that should be reported in the statement
of comprehensive income for the year 2021?
D
a.
0
b. 150,000
c. 250,000
d. 175,000
Solution:
FAIR VALUE model
675,000
-650,000
25,000
150,000
175,000
Fair Value ( 10,000+5,000 x 45)
Carrying Value( 500,000+150,000)
Unrealized gain
Dividend income
Total income reported in SCI
Information pertaining to the inventory of Boron Company for the year ended
December 31, 2021 follows:
Beginning inventory
Total Purchases
Freight-in
P 200,000*
830,000
10,000
Ending Inventory
P 300,000**
Purchase returns
35,000
Purchase discounts
5,000
*Includes items A and B costing P20,000 and P30,000, respectively. The
net realizable value of item A is P15,000 and item B is P27,000.
** Includes cost of items A and B still unsold at the end of the year.
The net realizable value of item A is P23,000 and item B is P29,000.
43. How much is the ending inventory that should be reported in the
statement of financial position on December 31, 2021 using the allowance
method?
C
a. 300,000
b. 293,000
c. 299,000
d. none of the choices
Solution:
FAIR VALUE model
300,000
-1,000
299,000
Ending inventory at COST
Allowance for inventory write-down, 12/31/2021
Ending inventory at NRV
Allowance for inventory write-down-Item A
Beg. Balance
5,000
5,000
Ending balance
0
Allowance for inventory write-down-Item B
Beg. Balance
3,000
2,000
Ending balance
1,000
0
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