SUGGESTED ANSWERS & SOLUTION
FINAL PRE-BOARD EXAMINATION
TEAM PRTC
April 24 – 26, 2022
MANAGEMENT ADVISORY SERVICES
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
B
B
D
D
D
B
C
C
A
D
A
D
A
B
D
B
C
D
B
B
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
D
D
D
A
D
C
B
C
D
A
C
B
A
C
C
C
D
C
B
C
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
Page 1 of 6
A
D
C
B
C
B
B
C
D
D
D
D
C
B
B
C
D
A
A
D
61
62
63
64
65
66
67
68
69
70
D
D
B
B
A
C
C
D
C
D
AUDITING
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
D
C
D
B
A
B
A
C
D
A
D
B
C
B
A
B
B
B
A
C
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
D
B
C
A
A
B
A
C
A
B
C
C
D
C
C
D
B
D
C
D
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
Page 2 of 6
B
C
C
D
C
C
C
C
A
D
B
C
D
C
C
B
B
B
A
D
61
62
63
64
65
66
67
68
69
70
B
B
C
D
B
C
C
B
C
C
TAXATION
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
D
C
E
D
B
A
D
B
A
C
B
B
B
C
B
D
B
C
C
D
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
D
D
A
B
B
B
D
B
B
C
C
D
D
D
C
C
C
C
B
B
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
Page 3 of 6
A
A
C
B
B
C
B
C
A
A
D
D
D
D
D
D
D
D
A
A
61
62
63
64
65
66
67
68
69
70
A
A
A
A
A
A
A
A
A
A
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
D
A
A
C
A
B
C
E
C
A
B
C
D
C
E
E
D
E
C
A
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
C
D
D
B
C
B
D
A
D
E
E
D
D
A
C
D
A
C
A
C
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
D
A
A
D
B
C
A
D
A
A
C
D
A
D
C
C
A
A
D
A
Page 4 of 6
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
A
C
A
B
D
A
B
D
A
A
D
D
D
A
E
B
C
C
B
B
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
A
B
A
B
A
E
C
A
A
A
A
A
A
B
D
C
B
C
D
D
FINANCIAL ACCOUNTING AND REPORTING
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
B
D
A
C
B
C
D
B
D
C
A
D
B
C
C
C
C
A
C
D
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
C
A
C
B
B
D
C
C
D
A
C
A
B
B
C
D
D
D
D
A
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
Page 5 of 6
C
A
B
D
D
D
C
C
A
B
D
D
D
D
C
C
D
A
B
B
61
62
63
64
65
66
67
68
69
70
B
B
B
D
B
D
A
B
A
A
ADVANCED FINANCIAL ACCOUNTING AND REPORTING
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
A
D
A
D
B
B
D
C
A
C
A
C
A
D
B
B
C
D
D
D
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
C
B
D
B
B
C
A
D
A
B
A
D
A
A
D
D
C
C
A
A
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
D
A
A
D
A
B
C
B
B
A
A
D
B
C
A
A
C
D
D
D
61
62
63
64
65
66
67
68
69
70
D
A
B
C
A
B
D
A
A
D
Thank you for participating in
Team PRTC Nationwide Online Open Final Pre-Board Examination for May 2022 LECPA!
Page 6 of 6
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Management Advisory Services
Final Open Preboard Examinations - May 2022 Batch
Suggested Solutions
MC No. 6
25,000 + 40X = 60,000 + 5X
40X - 5X = 60,000 - 25,000
35X = 35,000
35
X = 1,000
If monthly usage is greater than 1,000 miles = GOLIATH Inc. (more leveraged)
If monthly usage is equal to 1,000 miles = INDIFFERENT
If monthly usage is lesser than 1,000 miles = DAVID Enterprises (less leveraged)
MC No. 7
VOH at normal capacity [150,000*0.80]
FOH at normal capacity
Total OH
Divide by: Normal capacity
[60,000*0.80]
OH rate at normal capacity
120,000
240,000
360,000
48,000
7.50
MC No. 8
Variable costs [15,000*0.60]
Fixed costs [7,200/12]
Monthly flexible budget
9,000
600
9,600
MC No. 11
At 4,000
Cost of sales
Selling, general and administrative costs
Total
Using high low method:
615,500 - 508,000
VC/bed =
5,000 - 4,000
383,600
124,400
508,000
At 5,000
479,500
136,000
615,500
= 107.5
Using costs at highest level of activity
Total variable costs [5,000*107.5]
Total fixed costs
Total costs
537,500
78,000
615,500
Total contribution margin
112,230
[4,300*(133.6-107.5)]
MC No. 12
Selling price of silver polish
Less: VC
Sprit 357 [20*1/4]
Other ingredients, labor and VOH
Variable selling costs
CM/unit
40
5
25
3
33
7
BEP (Units) = FC / CM per unit
BEP (Units) = 56,000 / 7
BEP (Units) = 8,000 jars
MC No. 13
DSO = 360 / AR Turnover
AR Turnover = 360 / DSO
AR Turnover = 360 / 15
AR Turnover = 24
AR Turnover = Sales / Average AR
Sales = AR Turnover * Average AR
www.teamprtc.com.ph
Sales = 24 * 129,000
Sales = 3,096,000
Contribution margin
Less: Fixed costs
Profit
[3,096,000*49%]
1,517,040
1,032,000
485,040
Fixed costs
Divide by: Contribution margin ratio
Break-even revenue
[squeezed]
1,032,000
49%
2,106,122
MC No. 16
Standard costs of materials
Divide by: Standard quantity [12,000*2]
Standard price of materials
60,000
24,000
2.5
MC No. 18
MQV = (AQ - SQ) SP
2,500 = (X - 24,000) 2.5
2,500 = 2.5X - 60,000
60,000 + 2,500 = 2.5X
62,500 = 2.5X
2.5
X = 25,000
MC No. 17
Actual purchase price per unit [105,000/35,000]
MPV = (AP - SP) AQ used
MPV = (3 - 2.5) * 25,000
MPV = 12,500 unfavorable
3
MC No. 19
SVV = (AQ - SQ) * Budgeted unit CM
= (20,000 - 21,000) * (30 - 18)
= 12,000 favorable
MC No. 22
Sales [26,000*40]
Less: Variable costs
Standard variable MC [26,000*22]
572,000
Variance
(21,000)
Selling and administrative exp. 95,000
Contribution margin
Less: Fixed costs
Operating income
Actual VMC
Less: Applied VMC
Variance
1,040,000
646,000
394,000
235,000
159,000
595,000
616,000
(21,000) favorable
[28,000*22]
MC No. 24
Selling price
Less: Direct materials
Throughput contribution per unit
* Additional unit sales
Increase in throughput contribution
18
5
13
8,000
104,000
MC No. 25
Last year
NI
Div
AFN
This year
Total assets
580,000,000
AP & Accruals
70,000,000
NP
50,000,000
754,000,000
91,000,000
50,000,000
www.teamprtc.com.ph
NCL, CS and RE
460,000,000
22,750,000 [350M*1.3*0.05]
13,650,000 [22.75M*0.6]
143,900,000 squeezed
613,000,000
[580M*1.3]
MC No. 26
Full capacity sales level
[2,000,000/0.80]
[90M*1.3]
2,500,000
MC No. 27
Fnp = Ftp + a(Atp - Ftp)
= 58 + 0.3(61-58)
= 58.9
MC Nos. 28 to 31
Sales
Less: Costs of goods sold
DM used
DM, beginning
Net purchases
Total DM available for use
Less: DM, ending
Direct labor [1,470,000*40%]
Factory overhead [588,000*75%]
Total manufacturing costs
WIP, beginning
Total costs put into process
Less: WIP, end
Costs of goods manufactured
FG, beginning
Total FG available for sale
Less: FG, ending
Gross profit
Less: Operating expenses
Selling expenses [2M*15%]
Administrative expenses [2M*9%]
Operating profit
Less: Finance costs [2M*1%]
Net income [2M*10%]
2,000,000
250,000
491,000
741,000
300,000
441,000
588,000
441,000
1,470,000
200,000
1,670,000
320,000
1,350,000
350,000
1,700,000
400,000
300,000
180,000
MC No. 33
Variable costs per post
1,300,000
700,000
480,000
220,000
20,000
200,000
9
The transfer price will be equal to the variable costs per unit because the outside customers are not
affected by reason of excess capacity.
MC No. 34
Lost CM from outside customers [15,000*(1.75-0.90)]
Divide by: No of units
Additional charge
Variable costs per unit
Transfer price
12,750
25,000
0.51
0.90
1.41
MC No. 35
Effect on profit if purchased from outsider [25,000*(1.45-1.41)]
1,000
MC No. 38
Savings if purchased internally [20,000*(50-32)]
Opportunity costs [20,000*30]
Advantage (disadvantage)
360,000
600,000
(240,000)
MC No. 39
Under existing equipment
Fixed costs
Divide by: CM per unit [30-15]
Break-even point in unit
775,000
15
51,667
Under automated equipment
Fixed costs
892,500
www.teamprtc.com.ph
decrease
Divide by: CM per unit [30-13]
Break-even point in unit
17
52,500
Percentage of increase in BEP [(52,500-51,667)/51,667]
1.61%
The company should not make a shift because by doing so, the breakevent point will even rise by
roughly 1.61%.
MC No. 40
Effect on profit of Product F
Lost contribution loss [400*0.1]
Effect on profit of Product E
New CM of Product E [1,100*(3.40-3.00)]
Less: Existing CM of Product E [700*0.75]
Effect on monthly profit
40
440
525
(85)
(45)
decrease
MC Nos. 41 and 42
Sales
Less: Costs of sales
Gross profit
2021
2,750,000
1,584,000
1,166,000
2020
2,500,000
1,600,000
900,000
2,750,000
1,760,000
Costs at 2020 price [1,584,000/0.90]
Percentage of change in quantity [(1,760,000/1,600,000)-1]
Sales at 2020 price [2,500,000*1.1]
1,760,000
10%
2,750,000
Effect on CGS due to changes in volume [1,760,000 - 1,600,000]
Effect on sales due to changes in selling price [2,750,000 - 2,750,000]
160,000
-
MC No. 45
Current ratio = Current assets / Current liabilities
Current assets = Current ratio * Current liabilities
Current assets = 3 * 280,000
Current assets = 840,000
Acid test ratio = Quick assets / Current liabilities
Quick assets = Acid test ratio * Current liabilities
Quick assets = 2 * 280,000
Quick assets = 560,000
Quick asssets
Inventory
Current assets
560,000
280,000
840,000
MC No. 46
Average inventory [(260,000+280,000)/2]
270,000
Inventory TO = COGS / Average inventory
COGS = Inventory TO * Average inventory
COGS = 8 * 270,000
COGS = 2,160,000
MC No. 47
Sales
Less: COGS
Gross profit
[60%]
3,600,000
2,160,000
1,440,000
DSO = 360 / AR Turnover
AR Turnover = 360 / DSO
AR Turnover = 360 / 40
AR Turnover = 9
AR Turnover = Sales / Average AR
Average AR = Sales / AR Turnover
Average AR = 3,600,000 / 9
www.teamprtc.com.ph
squeezed
Average AR = 400,000
Average AR = (Beginning AR + Ending AR) / 2
Average AR * 2 = Beginning AR + Ending AR
Ending AR = (Average AR * 2) - Beginning AR
Ending AR = (400,000 * 2) - 380,000
Ending AR = 420,000
MC No. 50
Interest expense [1,000,000*0.10]
Interest income [(200,000 - 75,000)*0.03]
Net interest expense
100,000
3,750
96,250
EIR = Net interest expense / Net proceeds
EIR = 96,250 / [1,000,000 - (200,000 - 75,000)]
EIR = 11%
MC No. 51
DSO = 360 / AR Turnover
AR Turnover = 360 / DSO
AR Turnover = 360 / 30
AR Turnover = 12
Interest expense {[(120,000*0.75)*(10%+2%)*30/360]*12}
Administrative fee [(120,000*12)*0.01]
Total financing costs
Divide by: Amount of the loan [120,000*0.75]
Effective interest rate
10,800
14,400
25,200
90,000
0.28
MC No. 52
Semi-monthly interest rate
[12%/24]
EIR = [(1+i)^n]-1
EIR = [1.005^24]-1
EIR = 12.72%
0.005
Total interest payable at the end of the year [1,000,000*0.12715977609]
127,160
MC No. 55
Amount of investment that can be financed by RE [15M/0.4]
37,500,000
Financed by RE
Financed by New CS
Total Project
37,500,000
22,500,000
60,000,000
WACC = (KdAT *Wd) + (Kp*Wp) + (Kn*We)
WACC = (5%*0.45) + (9%*0.15) + (12%*0.25) + (13.5%*0.15)
WACC = 8.63%
MC No. 56
After tax costs of debt [9%*0.6]
5.40%
Ke = (d1 / P0) + g
Ke = (1.20 / 40) + 10%
Ke = 13%
Long-term debt [7M*80%]
Preferred stock
Common stock [200,000*40]
Total
Market value
5,600,000
1,000,000
8,000,000
14,600,000
Capital structure
0.383561644
0.068493151
0.547945205
WACC = (KdAT *Wd) + (Kp*Wp) + (Kn*We)
WACC = (5.4%*0.383561644) + (6%*0.68493151) + (13%*0.547945205)
WACC = 9.6%
www.teamprtc.com.ph
%
25%
15%
40%
MC No. 57
K = Rrf + b(market risk premium)
K = 6% + 1.2(5%)
K = 12%
Ke = (d1 / P0) + g
g = Ke - (d1 / P0)
g = 12% - (2 / 40)
g = 7%
P3 [40*1.07*1.07*1.07]
49
MC No. 59
Project No. 1
Project No. 2
PV of FCF
Less: Net investment
Net present value
725,000
700,000
25,000
325,000
300,000
25,000
PV of FCF
Divide by: Net investment
Profitability index
725,000
700,000
1.04
325,000
300,000
1.08
MC No. 60
Manager No. 1
PV of FCF [20,000*4.3553]
Less: Net investment
Net present value
87,106
100,000
(12,894)
Manager No. 2
PV of CF in years 2 to 6
78,961
[23,000*3.4331]
PV of FCF [(5,000+78,961)*0.8772]
Less: Net investment
Net present value
73,651
100,000
(26,349)
Manager No. 3
PV of FCF [135,000*0.4323]
Less: Net investment
Net present value
58,361
100,000
(41,640)
MC No. 61
PV of FCF
Less: Net investment
Net present value
18,954
17,166
1,788
PV of FCF
Divide by: PV Factor
Annual costs savings
18,954
3.7908
5,000
MC No. 62
Using 14%
PV of FCF [5,000*3.4331]
Less: Net investment
Net present value
17,166
17,166
-
MC No. 65
Overhead applied using traditional costing [50*20]
Overhead applied using activity-based costing
Materials handling [2*100]
Inspection [3*75]
Supervision [2*30]
Purchasing [5*60]
Difference
1,000
200
225
60
300
785
215
www.teamprtc.com.ph
MC No. 66
Total units of 11 workers
Total units of 10 workers
Marginal units if 1 worker is added to a team of 10 workers
25
20
5
MC No. 67
Total revenue of 12 workers [28*47.5]
Total revenue of 11 workers [25*49]
Increase in revenue
Divide by: Increase in units [28-25]
Marginal revenue per unit if 1 worker is added to a team of 11 workers
MC No. 68
Increase in consumption [44,000 - 38,000]
Divide by: Increase in disposable income [48,000 - 40,000]
Marginal propensity to consume
1,330
1,225
105
3
35
6,000
8,000
0.75
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Final Preboard Examination on Auditing Problems
April 24, 2022
Suggested answers/solutions by OCAMPO/OCAMPO
PROBLEM NO. 1 - Tae-mu Company
Inventory
7/1/21
Unadjusted balances
500,000
Purchases
3,600,000
Inventory
6/30/22
700,000
Add (deduct) adjustments:
a
b
c
d
e
f
Net adjustments
Adjusted balances
130,000
130,000
630,000
(54,000)
186,000
108,000
240,000
3,840,000
186,000
74,000
260,000
960,000
(36-D)
(37-B)
(38-D)
Nov. 30
December
Receipts
Disb
Dec. 31
January 1-12
Receipts
Disb
Jan. 12
Unadjusted bank balances
344,420
Deposits in transit:
Beginning of period
35,000
End of period
Outstanding checks:
Beginning of period
(88,240)
End of period
Bank error in check payment
NSF check redeposited (Customer A)
Adjusted bank balances
291,180
941,010
1,010,410
275,020
321,490
230,180
366,330
40,490
(40,490)
19,230
Unadjusted book balances
271,260
Note collected by bank in Nov.
19,920
NSF check not redeposited (Customer B)
Unrecorded payroll in Jan.
Adjusted book balances
291,180
Question No. 39 - C
Question No. 40 - D
PROBLEM NO. 2 - Ha-ri Corp.
(35,000)
40,490
(88,240)
97,230
(1,000)
(3,270)
(3,270)
943,230 1,015,130
-
(97,230)
50,120
(50,120)
299,230
183,070
335,440
226,010
292,500
177,570
340,940
(6,730)
6,730
219,280
299,230
5,500
183,070
(5,500)
335,440
-
-
-
-
(97,230)
1,000
(1,000)
219,280
963,230 1,008,480
(20,000)
(80)
6,730
943,230
-
1,015,130
-
19,230
Question No. 41 - B
Deposits in transit, Nov. 30
Add collections in December:
December book receipts
Customers' note collected by bank in Nov.
Total
Less deposits credited by the bank in December:
December bank receipts
NSF check redeposited (Customer A)
Deposits in transit, Dec. 31
35,000
963,230
(20,000)
943,230
978,230
941,010
(3,270)
937,740
40,490
Question No. 42 - C
Outstanding checks, Nov. 30
Add checks issued in December:
December book disbursements
Collection fee for note collected in Nov.
Total
Less checks paid by the bank in December:
Page 1 of 8
88,240
1,008,480
(80)
1,008,400
1,096,640
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AP.FinPB5.22
December bank disbursements
Bank error in check payment (P1,340 - P340)
NSF check - Customer A
NSF check - Customer B
Outstanding checks, Dec. 31
1,010,410
(1,000)
(3,270)
(6,730)
999,410
97,230
Question No. 43 - C (See adjusted bank balance 12/31/22)
Page 2 of 8
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Question No. 44 - D
Deposits in transit, Dec. 31 (see no. 41)
Add collections, Jan. 1-12:
Jan. 1-12 book receipts
NSF check - Customer B
Total
Less deposits credited by the bank, Jan. 1-12:
Jan. 1-12 bank receipts
Correction of error in check payment in Dec.
Deposits in transit, Jan. 12
40,490
292,500
6,730
299,230
339,720
321,490
(1,000)
320,490
19,230
Question No. 45 - C
Outstanding checks, Dec. 31 (see no. 42)
Add checks issued, Jan. 1-12:
Jan. 1-12 book disbursements
Unrecorded payroll checks
Total
Less checks paid by the bank, Jan. 1-12:
Outstanding checks, Jan. 12
97,230
177,570
5,500
183,070
280,300
230,180
50,120
PROBLEM NO. 3 - Chairman Company
Question No. 46 - C
As reported (60,000 x P8)
Should be - equity method CA, 12/31/21:
Cost
SOPA (P180,000 x .3)
Dividends received (P100,000 x .3)
Over (under)
Question No. 47 - C
Profit or loss from investment
As reported
Dividend income
FV adjustment (P480,000 - P570,000)
Should be - SOPA
Over (under)
570,000
54,000
(30,000)
30,000
(90,000)
Question No. 48 - C
As reported (60,000 x P9)
Should be - equity method CA, 12/31/22:
CA, 12/31/21 (see no. 46)
SOPA (P310,000 x .3)
Dividends received (P140,000 x .3)
Over (under)
Question No. 49 - A
Profit or loss from investment
As reported
Dividend income
FV adjustment (P540,000 - P480,000)
Should be - SOPA
Over (under)
480,000
594,000
(114,000)
(60,000)
54,000
(114,000)
540,000
594,000
93,000
(42,000)
42,000
60,000
645,000
(105,000)
102,000
93,000
9,000
Question No. 50 - D
PROBLEM NO. 4 - Young-seo, Inc.
Question No. 51 - B
Total proceeds
Less liability component:
PV of the principal (P4,000,000 x 0.6830)
PV of the interest [(P4,000,000 x .08 x 3.1699)
Equity component
Page 3 of 8
4,000,000
2,732,000
1,014,368
3,746,368
253,632
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Question no. 52 - C
Carrying amount, 1/2/21 (see no. 51)
Add discount amortization for 2021:
Effective interest (P3,746,368 x .1)
Nominal interest (P4,000,000 x .08)
Carrying amount, 12/31/21
3,746,368
374,637
(320,000)
54,637
3,801,005
Question no. 53 - D
Effective interest - 2022 (P3,801,005 x .1)
Page 4 of 8
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380,101
AP.FinPB5.22
Question no. 54 - C
Carrying amount, 12/31/21 (see no. 52)
Add discount amortization for 2022:
Effective interest (P3,801,005 x .1)
Nominal interest (P4,000,000 x .08)
Carrying amount, 12/31/18
3,801,005
380,101
(320,000)
CA of bonds converted (P3,861,106* x 1/2)
Less par value of shares issued (P2,000,000/P1,000 x 6 x P100)
Net increase in share premium
Question no. 55 - C
CA of bonds reacquired (P3,861,106* x 1/4)
Less reacquisiton price (P1,000,000 x 1.1)
Gain (loss) on bond reacquisition
60,101
3,861,106
*
1,930,553
1,200,000
730,553
965,276
1,100,000
(134,724)
PROBLEM NO. 5 - Seong-hun Corp.
1
2
3
4
5
6
7
SC-OS
SP
CC
Equity
2,100,000
22,650,000
(1,410,000)
54,900,000
(1,560,000)
54,900,000
(1,560,000)
(4,200,000)
27,000,000
100,000
100,000
4,300,000
3,000,000
830,000
5,100,000
48,340,000
53,440,000
54,270,000
(56-B)
(57-B)
(58-B)
(59-A)
Journal entries for 2021-2022 affecting shareholders' equity accounts:
1 Subscriptions receivable - PS (300,000 x P105)
Subscriptions receivable - OS (900,000 x P26)
Subscribed SC - PS (300,000 x P100)
Subscribed SC - OS (900,000 x P2.5)
Share premium
31,500,000
23,400,000
30,000,000
2,250,000
22,650,000
Cash
16,470,000
Subscriptions receivable - PS (300,000 x P105 x .3)
Subscriptions receivable - OS (900,000 x P26 x .3)
9,450,000
7,020,000
2 Cash
37,338,000
Subscriptions receivable - PS (300,000 x P105 x .7)
Subscriptions receivable - CS [(900,000-60,000) x P26 x .7]
22,050,000
15,288,000
Subscribed SC - PS (300,000 x P100)
Subscribed SC - OS [(900,000-60,000) x P2.5]
Share capital - PS
Share capital - OS
30,000,000
2,100,000
Subscribed SC - OS (60,000 x P2.5)
Share premium [60,000 x (P26-P2.5)]
Subscriptions receivable - OS (60,000 x P26 x .7)
Cash (60,000 x P26 x .3)
150,000
1,410,000
30,000,000
2,100,000
1,092,000
468,000
3 Treasury shares
Cash (150,000 shares x P28)
4,200,000
4 Share capital - PS
Share premium [300,000 x (P105-P100)]
Share capital - OS (300,000 x 4 x P2.5)
Share premium [300,000 x (P105-P100)]
30,000,000
1,500,000
5 Machinery
4,300,000
Page 5 of 8
4,200,000
3,000,000
28,500,000
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AP.FinPB5.22
Treasury shares
Share premium
4,200,000
100,000
6 Memo entry.
7 P/L summary
Retained earnings
830,000
830,000
Question no. 60 - D
PROBLEM NO. 6 - Min-woo Corporation
Question No. 61 - B
Unadjusted profit
Add (deduct):
Loss on inventory writedown (see computation below)
Dividends to ordinary shareholders [(P36,000M/.25) x P.04]
Depreciation (see computation below)
Loss on investment property (P24.3M - P28.8M)
Adjusted profit
88,200,000
(540,000)
5,760,000
(10,080,000)
(4,500,000)
78,840,000
Loss on inventory writedown:
Cost of damaged goods
Less NRV of damaged goods (P1.71M - P.81M)
Loss on inventory writedown
1,440,000
900,000
540,000
Depreciation:
Building (P86.4M/15)
Plant [(P64.8M - P30.24M) x .125]
Total
5,760,000
4,320,000
10,080,000
Question No. 62 - B
Profit (see no. 61)
Increase in revaluation surplus (P113.4M - P75.6M)
Total comprehensive income
78,840,000
37,800,000
116,640,000
Question No. 63 - C
Trade receivables
Inventories (P18.9M - P.54M)
Land and building (see computation below)
Plant and equipment (see computation below)
Investment property (at fair value)
Total assets
38,700,000
18,360,000
107,640,000
30,240,000
24,300,000
219,240,000
Land and building:
Land (at fair value)
Building (at fair value)
Total
Accumulated depreciation - building (P86.4M/15)
Carrying amount, 3/31/22
27,000,000
86,400,000
113,400,000
(5,760,000)
107,640,000
Plant and equipment
Cost of plant and equipment
Accumulated depreciaiton, 4/1/21
Carrying amount, 4/1/21
Depreciation for 2021-2022 (P34.56M x .125)
Carrying amount, 3/31/22
64,800,000
(30,240,000)
34,560,000
(4,320,000)
30,240,000
Question No. 64 - D
Trade payables
Page 6 of 8
21,240,000
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Bank overdraft
Redeemable preference shares
Total liabilities, 3/31/22
1,620,000
18,000,000
40,860,000
Question No. 65 - B
Retained earnings, 4/1/21
Dividends to ordinary shareholders [(P36,000M/.25) x P.04]
Adjusted profit (see no. 61)
Retained earnings, 3/31/22
31,500,000
(5,760,000)
78,840,000
104,580,000
Note: The entity does not make a transfer to retained earnings in respect of excess depreciation.
PROBLEM NO. 7 - Yu-ra Corporation
Question No. 66 - C
Unadjusted income before taxes
Add (deduct) adjustments:
a) Unrealized loss on short term marketable securities (P55,000 - P60,000)
b) Decrease in allowance for doubtful accounts (P59,000 - P36,000)
c) Understatement of ending inventories
d) Prepaid insurance charged to expense
e) Production machine charged to expense
e) Depreciation of production machine (P24,000/5 x 6/12)
f) Write off of R & D expense (P150,000 - P30,000)
g) Provision for loss from lawsuit
Adjusted income before taxes
Less income tax expense (40%)
Net income
Page 7 of 8
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560,000
(5,000)
23,000
12,000
3,000
24,000
(2,400)
(120,000)
(72,500)
422,100
168,840
253,260
AP.FinPB5.22
Question No. 67 - C
Cash
Marketable securities, at fair value
Accounts receivable
Allowance for doubtful accounts
Inventories (P430,000 + P12,000)
Prepaid insurance (P15,000 + P3,000)
Total current assets
150,000
55,000
450,000
(36,000)
442,000
18,000
1,079,000
Question No. 68 - B
Property, plant and equipment (P426,000 + P24,000)
450,000
Accumulated depreciation (P40,000 + P2,400)
(42,400)
Property, plant and equipment, net
407,600
Current assets (see no. 67)
1,079,000
Total assets
1,486,600
Question No. 69 - C
Accounts payable and accrued expenses
Income taxes payable (see no. 66)
Provision for loss from lawsuit
Total liabilities
592,000
168,840
72,500
833,340
Question No. 70 - C
Share capital
Retained earnings (see no. 66)
Total equity
400,000
253,260
653,260
Page 8 of 8
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Excel Professional Services, Inc.
Management Firm of Professional Review and Training Center (PRTC)
(LUZON) Manila 87339344 * Calamba City, Laguna * Dasmariñas City, Cavite * Lipa City,
Batangas (0917) 8852769 * (VISAYAS) Bacolod City (034) 4346214 * Cebu City (032)
2537900 loc. 218 (MINDANAO) Cagayan De Oro (0917) 7081465 * Davao City (082) 2250049
TAXATION
C. NARANJO/ A. SIAPIAN/ V. GUDANI
MAY 2022
2nd Pre-Board Examinations
Choose the best answer.
Use the tax tables, if necessary:
GRADUATED TAX TABLE UNDER TRAIN LAW (January 1, 2018 to December 31, 2022)
Over
But not over
The tax shall be
Plus
Of excess over
250,000
0
0
P 250,000
400,000
0
20%
P 250,000
400,000
800,000
30,000
25%
400,000
800,000
2,000,000
130,000
30%
800,000
2,000,000
8,000,000
490,000
32%
2,000,000
8,000,000
2,410,000
35%
8,000,000
SCHEDULE OF EXPANDED WITHHOLDING TAX (EWT)
Income Payment
Professional/Management/Consultancy
fees (Individual)
Professional/Management/Consultancy
fees (Non-Individual)
Contractors/subcontractors (security,
janitorial, etc.)
Director’s fees (if not employee)
Rental
EWT
Gross receipts 3M or
below - 5%
Gross receipts over
3M or VAT-reg – 10%
Gross receipts
720,000 or below 10%
Gross receipts over
720,000 – 15%
2%
Income Payment
Purchase of goods or
properties by Top Withholding
Agents (TWA) -
EWT
1% - goods
2% - service
Partners in general
professional partnerships
(drawings, advances,
sharings, allowances, etc.)
720,000 or
less -10%
Above 720,000
– 15%
Commission (if not employee)
10%
10% or 15%
(720,000 threshold)
5%
Income distributed to
beneficiaries of estates/trusts
15%
REVISED WITHHOLDING TAX TABLE (COMPENSATION)
Effective January 1, 2018 to December 31, 2022
DAILY
Compensation
Range
Prescribed
Withholding Tax
WEEKLY
Compensation
Range
Prescribed
Withholding Tax
SEMI-MONTHLY
Compensation
Range
Prescribed
Withholding Tax
MONTHLY
Compensation
Range
Prescribed
Withholding Tax
1
685 and below
2
685-1,095
3
1,096-2,191
4
2,192-5,478
5
5,479-21,917
6
21,918 and above
0
0
+ 20% over 685
2
4,808-7691
82.19
+ 25% over 1,096
3
7,692-15,384
356.16
+ 30% over 2,192
4
15,385-38,461
1,342.47
+ 32% over 5,479
5
38-462-153,845
6,602.74
+ 35% over 21,918
6
153,846 and above
0
+ 20% over 4,808
2
10,417-16,666
576.92
+ 25% over 7,692
3
16,667-33,332
2,500
+30% over 15,385
4
33,333-83,332
9,423.08
+ 32% over 38,462
5
83,333-333,332
46,346.15
+ 35% over 153,846
6
333,333 and above
0
+ 20% over 10,417
2
20,833-33,332
1,250
+ 25% over 16,667
3
33,333-66,666
5,416.67
+ 30% over 33,333
4
66,667-166,666
20,416.67
+ 32% over 83,333
5
166,667-666,666
100,416.67
+ 35% over 333,333
6
666,667 and above
0
+ 20% over 20,833
2,500
+ 25% over 33,333
10,833.33
+ 30% over 66,667
40,833.33
+ 32% over
166,667
200,833.33
+ 35% over 666,667
1
4,808 and below
0
1
10,417 and below
0
1
20,833 and below
0
DOCUMENTARY STAMP TAX TABLE
Theories
1. S1: Taxes may be imposed to raise revenues or to provide tax incentives to certain activities within the
state.
S2: The state can have the power of taxation even if the Constitution does not expressly give it the
power to tax.
S3: For the exercise of the power of taxation, the state can tax anything within the commerce of man at
any time.
S4: The provisions of taxation in the Philippine Constitution are grants of power and not limitations on
taxing power.
Which is FALSE?
a. Only S1 is false
b. Only S2 is false
c. Only S3 is false
d. Only S4 is false
e. All is false
Reason: The provisions of taxation in the Philippine Constitution are limitations on taxing power of the
government.
2. S1: Real property tax is a national tax.
S2: Value-added tax is a progressive tax.
S3: Estate tax is a direct tax.
a. Only S1 is true
b. Only S2 is true
c. Only S3 is true
d. All is false
Reason: S1: RPT is a local tax. S2: VAT is proportional tax.
3. S1: Non-payment of tax does not necessarily render the business illegal.
S2: License fee is imposed as a regulatory measure.
S3: Tax has generally no limit on the amount that may be imposed.
S4: License fee is generally limited to cover the cost of regulation.
a. Only S1 is false
b. Only S2 is false
c. Only S3 is false
d. Only S4 is false
e. All is true
4. Facts: In 2020, the government did not meet its target revenue collection because of the Covid-19
pandemic. In order to sustain its operations, it borrowed money from China.
S1: The borrowing of money from China is consistent with the principle of Administrative Feasibility.
S2: The borrowing of money from China is in violation of the Constitution as it violates the principle of
Fiscal Adequacy that the government should yield enough revenue to finance its operation.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: The borrowing of money is consistent with the principle of Fiscal Adequacy. Violation of the
principle of fiscal adequacy does not, in general, in itself violates the Constitution.
5. S1: Direct double taxation is prohibited by the Philippine Constitution.
S2: Indirect double taxation is not prohibited by the Philippine Constitution.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: There is no provision that prohibits double taxation
6. S1: The power of taxation involves raising money for the government.
S2: The power of eminent domain raises money for the government.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: In eminent domain, property of a private person is taken, for which he is paid just
compensation.
7. Nicanor, a non-resident citizen residing in United State of America, deposited $5,000 in ABC Bank, a
local bank authorized by the Banko Sentral ng Pilipinas (BSP) to engage in foreign-currency denominated
transactions.
S1: If the deposited money earns $20 interest income, the interest income is subject to 15% final tax.
S2: If the deposited money earns P1,000 interest income, the interest income is subject to 20% final tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: Under RA 9294/RR-10-98, no tax is imposed on interest income arising from foreign currency
bank deposits of non-residents.
8. Park, a Filipino-Korean actor, inherited parcel of land located in Clark Pampanga from his mother Inday,
a Filipino residing in Clark Pampanga. Park sold the parcel of land to Nicanor, a Filipino residing in Manila
as evidenced by a deed of sale.
S1: The sale of land by Park is subject to 6% capital gains tax.
S2: The sale of land by Park is subject to regular income tax.
S3. The sale is subject to documentary stamp tax.
a. Only S1 is false
b. Only S2 is false
c. Only S3 is true
d. All is true
Reason: sale, barter, or exchange of real property classified as capital asset located in the Philippines is
subject to 6% capital gains tax and documentary stamp tax (Section 24D & 196, NIRC as amended by
Train Law)
9. Nicanor, resident citizen, sold his shares of stock from ABC Corporation, a foreign corporation based in
United Kingdom, to Inday, a Filipino who migrated in Canada, for P 200,000 with a cost of P 100,000.
S1: For income tax purposes, the sale of shares of stock by Nicanor is subject to normal income tax.
S2: The sale of the shares of stock is subject to 15% capital gains tax based on net capital gain of P
100,000.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1: Resident citizen is taxable on income derived from sources within and without the
Philippines. S2: The sale of shares of stock from a foreign corporation is subject to regular income tax
not to capital gains tax.
10. Facts: Nicanor, a Filipino residing in Manila, borrowed P 50,000 from Inday, an OFW (OCW) living in
Saudi Arabia. As a result, Inday earned P 2,000 interest income.
S1: Interest income earned by Inday is an income derived from sources within the Philippines.
S2: The Interest income earned by Inday is subject to regular or normal tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1: The situs of taxation with respect to interest income is the place of residence of the debtor.
Here, Nicanor is a resident citizen. Hence, the income is derived from sources within the Philippines. S2:
Non-resident citizen is taxable from his income derived from sources within the Philippines only. Since
the interest income is derived from sources within, the income is taxable.
11. Vladmir, a Russian citizen residing in the Philippines, borrowed P 100,000 from Xi Jeng, a Chinese
residing in Beijing China. As a result, Xi Jeng earned P 10,000 interest income.
S1: Interest income earned by Xi Jeng is an income derived from sources without the Philippines.
S2: The Interest income earned by Xi Jeng is taxable.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1: The situs of taxation with respect to interest income is the place of residence of the debtor.
Here, Vladimir is a resident alien who is residing in the Philippines. Hence, the income is derived from
sources within the Philippines. S2: Non-resident alien is taxable from his income derived from sources
within the Philippines only. Since the interest income is derived from sources within, the income is
taxable.
12. Nicanor, a Filipino residing in the United States, earned P 20,000 dividend income from his investment in
ABC Corporation, a corporation established under the laws of the Philippines. The Corporation earned
gross income (for the last three years) in the United States amounting to Php 500M and another Php
200M within the Philippines.
S1: Dividend income earned by Nicanor is an income derived from sources without the Philippines.
S2: The Dividend income earned by Nicanor is subject to final tax of 10%.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1: Amount received as dividend income from a domestic corporation is an income derived
from sources within the Philippines. S2: Resident citizen is taxable from his income derived from sources
within and without the Philippines. Hence, the dividend income earned by Nicanor is subject to 10%
final tax.
13. Facts: Earnest and Old (EO), is partnership established under the laws of the Philippines. Nicanor, a
Filipino residing in Manila, is working as a Junior auditor of EO. He was assigned by EO to work in
Australia for 3 months to audit one of its clients. EO paid Nicanor the amount of P 30,000 per month as
his salary.
S1: The salary earned by Nicanor is an income derived from sources within the Philippines.
S2: The salary earned by Nicanor is taxable.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1: The services performed abroad is considered as an income derived from sources without
the Philippines. S2: Resident citizen is taxable from his income derived from sources within and without
the Philippines. Hence, the salary earned by Nicanor is taxable.
14. Facts: Lisa, a Korean citizen who lives in Seoul Korea, works as an actress in JYP Inc, a corporation
established under the laws of South Korea. One day, Lisa was invited to work with ABC ZBN, a domestic
corporation in the Philippines, for their upcoming movie entitled “My Korean GF” which will be held in
the Philippines. Lisa signed her contract with ABC ZBN which states that she will work with the latter for
3 months and that ABC ZBN will pay JYP Inc P 10,000,000 for the professional fee. JYP Inc pays Lisa the
amount of P 4,000,000 as her professional fee.
S1: The professional fee earned by Lisa is an income derived from sources within the Philippines.
S2: The professional earned by Lisa is taxable.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1: The services performed in the Philippines is considered as an income derived from sources
within the Philippines. S2: Non-resident alien is taxable from his income derived from sources within the
Philippines only. Hence, the professional fee earned by Lisa is taxable.
15. Facts: Rose, a Filipino Citizen residing in Malabon, earns P 200,000 income from renting her house and
lot in Italy.
S1: The rent income earned by Rose is an income derived from sources within the Philippines.
S2: The rent income earned by Rose is taxable.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1: The rent income from renting real properties located in abroad is considered as an income
derived from sources without the Philippines. S2: Resident Citizen is taxable from his income derived
from sources within and without the Philippines. Hence, the rent income earned by Rose is taxable.
16. Facts: John, an American Citizen residing in the United States of America (USA), applied for a franchise of
Jollibee, a local fastfood chain, in the USA. The Jollibee corporation, a domestic corporation, which is the
owner of the franchise was paid the amount of $ 50,000 in the Philippines representing income from
royalty.
S1: The royalty income earned by Jollibee is an income derived from sources within the Philippines.
S2: The royalty income earned by Jollibee is subject to final tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1: The royalty income from franchise which was exercised abroad is considered as an income
derived from sources without the Philippines. S2: Income is an ordinary income subject to regular tax
17. S1: In order for passive income to be subject to final tax under section 24 (B) of the NIRC, the income
must be derived from sources within or without the Philippines.
S2: An income that is exempted from income tax under the law, is not subject to withholding tax.
S3: Dividend income earned by a resident citizen is always subject to 10% final tax.
Which is True?
a. Only S1 is True
b. Only S2 is True
c. Only S3 is True
d. All is false
Reason: S1: Passive income under section 24 B of the NIRC, must be derived from sources within the
Philippines to be subject to final tax. S2: True. S3: Dividend income derived from sources without the
Philippines is subject to ordinary income tax.
18. Nicanor, a Resident Citizen, bought shares of stocks from ABC Corporation, a corporation established
under the laws of the Philippines. Later, he sold the same for a gain of P 50,000 in the United States of
America to Inday, an American Citizen residing therein. The P 50,000 gain on sale is:
S1: An income derived from sources within the Philippines.
S2: An income of Nicanor subject to capital gains tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1: Gain on sale of shares of stock of a domestic corporation is considered to be an income
derived from sources without the Philippines. S2: Resident Citizen is taxable from his income derived
from sources within and without the Philippines. Hence, the gain on sale of shares of stock earned by
Nicanor is taxable.
19. Piyu Corporation, a domestic corporation, owns twenty (20%) of the outstanding share of NTZ
Corporation, a non-resident foreign corporation (NRFC) since August 15, 2015. On June 30, 2021, it
received dividends amounting to P 1,000,000 from the said NRFC. The said dividend has not been used
until January 13, 2023, to which in the said year, the income is reinvested in the business operation of
Piyu Corporation.
S1: The dividend income shall be declared as income for the taxable year 2021.
S2: The dividend income shall be subject to surcharges, interest, and penalty since it was not utilized
within the next table year, which is 2022.
S3: The dividend income is exempted from income tax, as all the conditions for a foreign sourced
dividends received by a domestic corporation to be exempted from income tax under Section 5 of
Revenue Regulations no. 5-2021 are present in this case.
a. Only S1 is false
b. Only S2 is false
c. Only S3 is false
d. All is true
Basis: Section 5, RR-5-2021. Illustration letter (a). S3 is false as the dividend income was not utilized
within the next table year, which is 2022.
20. S1: Nicanor, a senior manager of ABC Corp., received P 30,000 fringe benefits from the company.
Nicanor has the obligation to report in his annual income tax return the fringe benefit he received.
S2: Inday, an accounting clerk of ABC Corp., received P 5,000 fringe benefits from the company. The
fringe benefits received by Inday is subject to fringe benefits tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1: FBT is a final tax. S2: fringe benefits received by a rank-and-file employee is treated as an
additional compensation subject to withholding tax on compensation.
21. ABC Corp. grants its employees 20 days vacation leave for the whole year. Such vacation leave may be
converted into cash before the end of the year. Inday, an accounting clerk of the company, who is
earning a rate of P 600 per day, monetized her unused vacation leave of P 6,600 at the end of the year.
The whole amount of P 6,600 monetized unused vacation is:
S1: Part of Inday’s taxable compensation.
S2: Partly treated taxable compensation and partly exempt from income tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: P 6,000 is exempt (600 x 10 days monetized unused vacation leave (MUVL) is de minimis
benefits) the P 600 excess de minimis benefits (in excess of 10 days MUVL will be subjected to the 90k
ceiling of 13th month pay and other benefits.
22. Department of Finance grants its employees 20 days’ sick leave for the whole year. Such sick leave may
be converted into cash before the end of the year. Nicanor, one of its rank-and-file employees, who is
earning a rate of P 600 per day, monetized his unused sick leave of P 6,600 at the end of the year. The
whole amount of P 6,600 monetized unused vacation is:
S1: Part of Nicanor’s taxable compensation.
S2: Partly treated taxable compensation and partly exempt from income tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: Monetized unused vacation and sick leave of a government employee is exempted from income
tax as they are de minimis benefits.
23. Which of the following is not a function of Bureau of Customs?
a. Assessment and Collection of all national internal revenue taxes, fees, and charges
b. Simplification and harmonization of customs procedures to facilitate movement of goods in
international trade
c. Border control to prevent entry of smuggled goods
d. Prevention and suppression of smuggling and other customs fraud
e. Facilitation and security of international trade and commerce through an informed compliance
program
Reason: Function of BIR not BOC.
24. S1 – Capital gains are subject to capital gains tax.
S2 – Ordinary gains are subject to ordinary income tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: Only capital gains on sale of unlisted shares of stocks and real property classified as capital asset
are subject to capital gains tax. All other capital gains are considered ordinary income
25. S1 – Capital gains from disposition of capital assets are subject to holding period.
S2 – Ordinary gains from disposition of ordinary assets are NOT subject to holding period.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: Only for individual taxpayers
26. S1 – Capital assets can be converted to ordinary assets.
S2 – Ordinary assets can be converted to capital assets.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: Both are true
27. S1 – All dispositions of real properties classified as capital assets are subject to capital gains tax.
S2 – All dispositions of shares of stocks are subject to capital gains tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1 – sale of principal residence is exempt. S2 – listed shares are not subject to CGT
28. S1 – Sales to senior citizens are deductions from gross income.
S2 – Sales to persons with disabilities are exempt from VAT.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: S1 – Discounts to senior citizens are deductions not sales.
29. Nicanor, a Filipino citizen, died in exile in 2019 in the United States of America. He is survived by his
wife, Inday, his son Dayunyor who is the executor named in the will, his daughters Aymi and Ayrin. While
Nicanor’s will is being probated in Court, the BIR collated all his known properties including those which
appeared to be acquired by illegal means. The computed estate tax including amounted to Php 3 Billion.
To date, the estate tax remains unpaid. Who is the person primarily liable to pay the estate tax?
a. Estate of Nicanor
b. Dayunyor only
c. Inday because she is the wife
d. All the heirs
Reason: Executor or administrator is the one primarily liable to pay the tax (see Section 9 No. 9 of RR 122018)
30. Nicanor, a Filipino citizen, died in exile in 1989 in the United States of America. He is survived by his
wife, Inday, his son Dayunyor who is the executor named in the will, his daughters Aymi and Ayrin. While
Nicanor’s will is being probated in Court, the BIR collated all his known properties including those which
appeared to be acquired by illegal means. The computed estate tax including amounted to Php 3 Billion.
To date, the estate tax remains unpaid. Which is TRUE?
S1 – The Commissioner has the power to file the estate tax return of a decedent.
S2 – The estate includes all properties illegally acquired.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: All properties where the decedent has interest are to be included in the estate.
31. Nicanor ran and won the mayoralty position in 2019 midterm elections. During the campaign period, he
received contributions amounting to Php 70M. He was only able to utilize Php 20M. Which is TRUE?
S1 – Nicanor is liable to pay income tax on the unutilized election contributions if he opts not to return
the excess.
S2 – Contributions for election campaign in cash or in kind to any candidate, political party or coalition
of parties are governed by the Election Code.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: Express provisions of RR 12-2018.
32. Nicanor is a CPA. He was engaged by Josh, a resident alien and President of Farmally Corp., a domestic
corporation, to sign and certify its financial statements without audit. Inday, a Revenue Officer, knowing
that Farmally Corp. committed tax evasion, extorted money. Which is TRUE?
S1 – Nicanor’s certificate as a CPA shall be automatically revoked or cancelled upon conviction.
S2 – Josh shall be immediately deported after serving sentence without further proceedings for
deportation.
S3 – Inday committed grave misconduct and shall be subjected to administrative case and subject to
Civil Service Law, shall be dismissed from the revenue service after due notice and hearing.
a. Only S1 is true
b. Only S2 is true
c. Only S3 is true
d. All is true
d. All is false
Reason: Express provisions of Tax Code as amended by TRAIN Law.
33. Nicanor is a CPA. He was engaged by Josh, a resident alien and President of Farmally Corp., a domestic
corporation, to sign and certify its financial statements without audit. Inday, a Revenue Officer, knowing
that Farmally Corp. committed tax evasion, extorted money. Which is TRUE? Penalty is:
a. Fine of not less than Php 500,000 and not exceeding Php 10M or imprisonment of not less than 6 years
but not more than 10 years
b. Fine of not less than Php 5M and not exceeding Php 10M and imprisonment of not less than 6 years but
not more than 10 years
c. Fine of not less than Php 500,000 and not exceeding Php 10M and imprisonment of not less than 10 years
but not more than 20 years
d. Fine of not less than Php 500,000 and not exceeding Php 10M and imprisonment of not less than 6 years
but not more than 10 years
Reason: Express provisions of Tax Code as amended by TRAIN Law.
34. In registration of taxpayers, which is TRUE?
S1 – An employee is required to be registered within 10 days from date of employment.
S2 – A sole proprietor is required to be registered on or before start of business or practice of profession
but may register within 30 days from the issuance of registration from DTI or the issuance of Mayor’s
Permit without incurring penalties for late registration.
S3 – A corporation is generally required to be registered before payment of tax or within 30 days from
the issuance of registration from SEC or of Mayor’s Permit without incurring penalties for late
registration.
a. Only S1 is true
b. Only S2 is true
c. Only S3 is true
d. All is true
e. All is false
Reason: Express provisions of Revenue Regulations on registration
35. Which is FALSE in registration?
a. Venue of initial registration of employees is the employer’s place of business
b. For self-employed, registration is with BIR which has jurisdiction over the place of business
c. Registration of One-Time Transactions is with RDO where the transaction took place
d. If taxpayer is not an employee nor self-employed, venue is RDO which has jurisdiction over the place
of residence
Reason: In sale of real property, venue is location of property; in unlisted shares, where seller is
registered, in estate and donation, domicile/residence of the decedent/donor
36. Which is FALSE in payment of Registration Fee with the BIR?
a. Fee is Php 500 whether registration is VAT or non-VAT
b. Php 500 is required to be paid every year after year of registration
c. All taxpayers initially registering with the BIR are required to pay the registration fee
d. Deadline of payment is January 31 of each year following registration
Reason: Express provisions of RR
37. Which is FALSE in bookkeeping requirements?
a. All corporations, companies, partnerships or persons required by law to pay internal revenue taxes
are required to keep books of accounts
b. Retention of books of accounts is 10 years
c. Those whose quarterly sales, earnings, receipts, or output do not exceed Php 50,000 shall keep and
use simplified set of bookkeeping records
d. Books of accounts of taxpayers whose gross annual sales exceed Php 3M are required to be examined
by an independent CPA
Reason: Statement is false because it is an old rule and was already amended under TRAIN law
38. Which is FALSE in deadlines of filing of returns of following transactions?
Transaction
Deadline
a.
Sale of real property classified as capital asset
30 days from date of notarization of deed
b.
Donation of personal property
30 days from date of notarization of deed
c.
Estate of decedent
30 days from date of death of decedent
d.
Sale of unlisted shares of stocks
30 days from date of notarization of deed
Reason: Express provisions of Tax Code
39. Which is FALSE?
S1 – A Notice of Discrepancy needs to be settled within 30 days from receipt of Notice
S2 – A taxpayer is required to reply to the Preliminary Assessment Notice (PAN) within 15 days from
receipt of the PAN
S3 – A taxpayer is required to protest to the Formal Letter of Demand / Final Assessment Notice
(FLD/FAN) within 30 days from receipt of the FLD/FAN otherwise the assessment shall become final,
executory and demandable
S4 – A taxpayer is required to file an administrative or judicial appeal within 30 days from receipt of the
Final Decision on Disputed Assessment (FDDA) otherwise the assessment shall become final, executory
and demandable.
a. S1
b. S2
c. S3
d. S4
Reason: Reply is not mandatory in PAN
40. Which is TRUE? In the issuance of Formal Letter of Demand (FLD)
S1 – A taxpayer is always required to submit documents in support of its protest.
S2 – The assessment shall become final, executory and demandable if the taxpayer fails to file a protest.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Reason: In reconsideration, submission of documents is not required because the basis is existing
documents.
41. Payment of professional tax is with:
a.
b.
c.
d.
Provincial Treasurer or Treasurer of Highly Urbanized Cities
Municipal Treasurer
Office of the Governor or Mayor through City Administrator
Sanggunian Panlalawigan or Panlunsod
Reason: Payment is made with the Provincial Treasurer or Treasurer of HUC by express provision of the
Local Government Code.
42. The required document issued by the Bureau of Internal Revenue when processing one-time
transactions like the capital gains tax, estate and donor’s tax and is considered as proof that proper
taxes were paid:
a. Certificate Authorizing Registration
b. Certificate of Authority
c. Certificate of Registration
d. Letter of Authority
43. Which is FALSE?
S1 – Remittance Returns of Creditable Income Taxes Withheld (Expanded) are filed every quarter.
S2 – Remittance Returns of Final Income Taxes Withheld are filed every quarter.
S3 – Remittance Returns of Income Taxes Withheld on Compensation are filed every quarter.
a. S1
b. S2
c. S3
d. None is false
Reason: Monthly only for withholding tax on compensation
44. Which is FALSE?
S1 – VAT Declarations/Returns are filed monthly and quarterly.
S2 – Percentage Tax Returns of taxpayers whose registration is non-VAT and whose gross receipts are
subject to 1% rate are filed monthly and quarterly.
a. S1
b. S2
c. Both are true
d. Both are false
Reason: Quarterly only for transactions under Section 116 (Percentage Tax of 1%)
45. Which is subject to 12% VAT? Assume all sales are direct costs to the buyers. ABC Corp., a domestic
corporation, sold goods to
S1 – DEF Corp., a PEZA-registered export-oriented enterprise paying Php 1 Million.
S2 – GHI Corp., a corporation registered under the laws of Japan and doing business therein paying Php
1 Million.
S3 – JKL Corp., a local export-oriented enterprise paying $1 Million.
S4 – MNO Corp., a registered business enterprise under CREATE Law, paying $1 Million
a. S1
b. S2
c. S3
d. S4
Reason: In direct export, payment should be in foreign currency.
46. S1 – Nicanor opted 8% taxation. If his gross sales/receipts is Php 5M, he is subject to percentage tax
based on the Php 3M.
S2 – Nicanor opted 8% taxation. If his gross sales/receipts is Php 5M, he is subject to 12 VAT based on
the excess of Php 2M.
a. S1
b. S2
c. Both are true
d. Both are false
Reason: By express provision of TRAIn law.
47. The pertinent facts of the case to the BIR audit for taxable year 2019 are shown below:
Date of receipt of electronic Letter of Authority
March 1, 2021
Date of service and receipt by the taxpayer
April 1, 2021
Date of Notice of Discrepancy
June 1, 2022
Date of receipt of the PAN
July 10, 2022
Date of reply
July 31, 2022
Date of receipt of FLD/FAN
August 1, 2022
Date of protest
September 1, 2022
Based on the above, which is TRUE?
a. The reply is void
b. The assessment is void
c. The assessment is final, executory and demandable
d. The assessment is valid
Reason:
A is wrong – reply is not mandatory hence even if its late, it has no bearing
B is correct – the LOA is void having been served after the lapse of the 30-day period
C and D are wrong because the assessment is void
48. The pertinent facts of the case to the BIR audit for taxable year 2019 are shown below:
Date of receipt of electronic Letter of Authority
March 1, 2021
Date of service and receipt by the taxpayer
March 10, 2021
Date of Notice of Discrepancy
June 1, 2022
Date of receipt of the PAN
July 20, 2022
Date of reply
July 31, 2022
Date of FLD/FAN and date of receipt
August 1, 2022
Date of protest
September 1, 2022
Based on the above, which is TRUE?
a. The assessment is void due to prescription
b. The FLD/FAN is void having been issued within the 15-day period
c. The assessment is final, executory and demandable
d. The assessment is questionable
Reason: C is correct because the protest was late having been made after the 30-day period
49. Judicial office which has power to suspend collection of tax:
a.
b.
c.
d.
Court of Tax Appeals
Supreme Court
Court of Appeals
Regional Trial Courts
Reason: Express provision of Tax Code
50. In filing a return, which is FALSE?
a. If a taxpayer failed to file returns in previous years, he is not required to file the same if he is in a foreign
country
b. A representative can file the return if authorized
c. The Commissioner can file a return for and on behalf of a taxpayer
d. It is wrong not to file a return if required by law
Reason: Express provision of Tax Code
Problems
Below are the data provided to you by Nicanor, a top withholding agent for the month of May 2021:
Purchases of goods from XYZ Corporation, a
regular supplier.
Purchases of services from GHI Corporation, a
regular supplier.
Purchase of services from Jabiiee corporation
(meals for employees of the company;
transacted 4 times)
Purchases of goods from NBS corporation
(purchase of office supplies; transacted 8
times)
Rent expense
Professional fees (Individual w/sworn
declaration)
Professional fees (Individual w/o sworn
declaration)
Security fees (20% of which is the agency fee)
Janitorial services fees
800,000
200,000
25,000
8,000
50,000
30,000
40,000
100,000
10,000
51. Based on the foregoing data, how much is the total expanded withholding tax required to be withheld?
a. Php 22,280
b. Php 21,780
c. Php 21,180
d. Php 20,680
SOLUTION:
Income payment
Purchases of goods from XYZ
Corporation, a regular supplier.
Purchases of services from GHI
Corporation, a regular supplier.
Purchase of services from Jabiiee
corporation (meals for employees of
the company; transacted 4 times)
Purchases of goods from NBS
corporation (purchase of office
supplies; transacted 8 times)
Rent expense
Professional fees (w/sworn
declaration)
Professional fees (w/o sworn
declaration)
Security fees (20% of which is the
agency fee)
Janitorial services fees
Total
Amount
800,000
Rate
EWT
1%
8,000
200,000
2%
4,000
25,000
Exempt
0
8,000
1%
80
50,000
30,000
5%
5%
2,500
1,500
40,000
10%
4,000
20,000
2%
400
10,000
2%
200
20,680
The following are the data given to you by an employer. You were contracted to handle the payroll:
Employees Name
Rey
Status
Contractor
(Pakyawan/Arawan)
Probationary
Regular
Regular
Regular
Compensation
537
Frequency of payroll
Daily
Ram
900
Daily
Nicanor
20,000
Weekly
Rian
45,000
Semi-monthly
Bryan
150,000
Monthly
Additional information:
• The company operates 26 working days in the month of September
• Assume there are four (4) weeks in September
• The statutory minimum wage rate is P 537 per day as per regional tripartite wage and productivity board
52. How much is the total withholding tax on compensation will the employer need to withhold for the
month of September?
a. Php 74,207.27
b. Php 61,406.00
c. Php 48,677.50
d. Php 70,322.77
SOLUTION:
Employees Name
Compensation
Frequency of payroll
Rick
537
Daily
Moragan
900
Daily
Nicanor
15,000
Weekly
Jack
30,000
Semi-monthly
Wilson
150,000
Monthly
TOTAL
WTC
0
43 x 26
3,884.50 x 4
8,916.77 x 2
35,833.23
Nicanor, a Filipino Citizen residing in Manila, had the following data for the taxable year 2021:
Gross income from rent of commercial spaces,
net of P 60,000 withholding tax
Dividend income:
P 1,140,000
WTC
0
1,118
15,538
17,833.54
35,833.23
70,322.77
From domestic corporation
From resident foreign corporation
From non-resident foreign corporation
50,000
60,000
20,000
Interest income:
On notes receivable
On Philippine bank deposit, net of FWT
On Phil bank deposit under FCDU
On bank deposit abroad
On long-term bank deposit
6,000
4,800
4,000
5,000
20,000
Royalty income:
From literary works
Other than literary works
10,000
12,000
Information on disposition of capital assets:
Capital gain on sale of unlisted shares of stock of ABC Corp
On sale of vacation house in Gapan City
• Acquisition Cost - 5,500,000
• Selling price - 6,000,000
• Zonal Value - 4,000,000
• FMV per tax declaration 5,000,000
200,000
Business expenses
691,000
Questions:
53. How much is the taxable income?
a. Php 1,300,000.00
b. Php 650,000.00
c. Php 540,000.00
d. Php 600,000.00
Solution:
Gross income from business
Other Gross income:
Dividend income from RFC
Dividend income from NRFC
Interest income on notes receivable
Interest on bank deposit abroad
Total Gross income
Less: Business expenses
Taxable income
P 1,200,000 (1.140M + 60k wtx)
60,000
20,000
6,000
5,000
1,291,000
691,000
600,000
54. How much is the total capital gains tax due?
a. Php 30,000.00
b. Php 330,000.00
c. Php 360,000
d. Php 390,000.00
ANS: P 390,000
Solution:
Shares of stock (P 200k * 15%)
Real property classified as capital asset
SP
ZV
FMV per tax dec
P 30,000
P 6,000,000
4,000,000
5,000,000
Higher
P 6,000,000 x 6%
Total capital gains tax due
360,000
390,000
55. How much is the total passive income subject to final tax (excluding those subjects to capital gains tax)?
a. Php 185,800.00
b. Php 187,000.00
c. Php 80,800.00
d. Php 82,000.00
Solution:
Dividend income
From domestic corporation
Interest income:
On Philippine bank deposit, net of FWT (4,800/80%)
On Phil bank deposit under FCDU
Royalty income:
From literary works
Other than literary works
Total passive income subject to final tax
50,000
6,000
4,000
10,000
12,000
82,000
56. How much is the total final tax due? (Excluding capital gains tax)
a. Php 11,700.00
b. Php 10,500.00
c. Php 9,960.00
d. Php 10,200.00
Solution:
Dividend income
From domestic corporation (P50k x 10%)
Interest income:
On Philippine bank deposit, net of FWT (P6k x 20%)
On Phil bank deposit under FCDU
(4,000 x 15%)
Royalty income:
From literary works
(P10k x 10%)
Other than literary works
(12k x 20%)
Total final tax due (Excluding capital gains tax)
5,000
1,200
600
1,000
2,400
10,200
57. ABC Corporation, a Resident Foreign Corporation, has gross income for the three-year period of P
500,000,000 from sources within the Philippines. It also derived gross income from outside of the
Philippines, amounting to P 300,000,000. In 2022, it declared dividend amounting to Ten Million pesos (P
10,000,000.00). Five Million pesos (P 5,000,000.00) of which was paid to Corporation XYZ, a domestic
corporation.
Based on the foregoing facts, how much is the income tax due of XYZ Corporation?
a. P 1,250,000
b. P 1,000,000
c. P 1,500,000
d. P
0
Reason: The dividend income is an income derived from sourced within the Philippine since the gross
income of ABC Corporation from within is more than 50% of its total gross income. Hence, it is exempted
from income tax. (RMC-62-2021, Q9:A9)
58. ABC Corp. has the following transactions during the year:
• Loans - Php 1,000,000, the DST due is Php 75,000
• Increase of capital stock - Php 5,000,000
• Purchase of real property:
•
i. Selling price – Php 5,000,000
ii. Zonal value – Php 6,000,000
iii. FMV by assessor – Php 3,000,000
Lease agreement – Php 5,000,000
The total DST which should have been paid by the Company is:
a. Php 102,504.00
b. Php 152,504.00
c. Php 107,502.00
d. Php 157,502.00
Solution:
Transaction
Loan
Increase of capital stock
Purchase of real property
Lease
Amount
Rate
1,000,000
5,000,000
6,000,000
5,000,000
DST
1.50/200
2.00/200
15/1,000
Php 6 - 2,000
Php 2 in excess of 1,000
7,500
50,000
90,000
10,002
Total
157,502
COMPREHENSIVE PROBLEMS
59. ABC Corp. is engaged in trading. The following information were disclosed in the VAT returns:
SALES
1st Quarter
3,000,000
2,000,000
1,000,000
2nd Quarter
4,000,000
1,000,000
1,000,000
3rd Quarter
3,000,000
1,000,000
1,000,000
4th Quarter
5,000,000
2,000,000
PURCHASES (all to VAT-registered suppliers)
1st Quarter
Capital goods
500,000
Purchase of goods
5,000,000
Purchase of service
1,000,000
Imported goods
1,000,000
2nd Quarter
500,000
1,000,000
1,000,000
1,000,000
3rd Quarter
500,000
1,000,000
1,000,000
1,000,000
4th Quarter
1,000,000
1,000,000
1,000,000
1,000,000
Domestic sales
VAT-exempt sales
Zero-rated sales
How much is the VAT Payable (Overpayment) in 1st Quarter?
a.
b.
c.
d.
(Php 240,000)
(Php 540,000)
(Php 900,000)
Php 360,000
Solution:
Domestic sales
VAT-exempt sales
Zero-rated sales
OUTPUT TAX
Capital goods
Purchase of goods
Purchase of service
Imported goods
INPUT TAX
Nondeductible Inpu
Overpayment
1st Quarter
3,000,000
2,000,000
1,000,000
360,000
0
0
360,000
500,000
5,000,000
1,000,000
1,000,000
2/6 x 900,000
60,000
600,000
120,000
120,000
900,000
(300,000)
600,000
(240,000)
60. How much is the VAT Payable (Overpayment) in 2nd Quarter?
a. (Php 110,000)
b. (Php 240,000)
c. Php 60,000
d. Php 130,000
Solution:
Domestic sales
VAT-exempt sales
Zero-rated sales
OUTPUT
Capital goods
Purchase of goods
Purchase of service
Imported goods
INPUT
Nondeductible Inpu
Add: Carry-over 1st
Overpayment
2nd Quarter
4,000,000
1,000,000
1,000,000
480,000
0
0
480,000
500,000
1,000,000
1,000,000
1,000,000
1/6 x 420,000
60,000
120,000
120,000
120,000
420,000
(70,000)
350,000
240,000
(110,000)
61. How much is the VAT Payable (Overpayment) in 3rd Quarter?
a. (Php 86,000)
b. Php 24,000
c. Php 60,000
d. Php 130,000
Solution:
Domestic sales
VAT-exempt sales
Zero-rated sales
OUTPUT
Capital goods
Purchase of goods
Purchase of service
Imported goods
INPUT
Nondeductible Inpu
Add: Carry-over 2nd
Overpayment
3rd Quarter
3,000,000
1,000,000
1,000,000
500,000
1,000,000
1,000,000
1,000,000
1/5 x 420,000
360,000
0
0
60,000
120,000
120,000
120,000
420,000
84,000
62. How much is the VAT Payable (Overpayment) in 4th Quarter?
a. Php 34,000
b. Php 120,000
c. Php 600,000
d. Php 230,000
Domestic sales
VAT-exempt sales
Zero-rated sales
4th Quarter
5,000,000
0
2,000,000
600,000
0
0
360,000
336,000
110,000
86,000
OUTPUT
Capital goods
Purchase of goods
Purchase of service
Imported goods
INPUT
Carry-over from 3rd
PAYABLE
600,000
1,000,000
1,000,000
1,000,000
1,000,000
120,000
120,000
120,000
120,000
480,000
86,000
34,000
COMPREHENSIVE PROBLEMS
63. A non-VAT taxpayer’s 2021 records showed the following:
Gross sales
Quarters
Head Office - Makati
Branch 1 – Gapan City Branch 2 – Quezon City
1st Quarter
200,000
100,000
100,000
nd
2 Quarter
300,000
100,000
100,000
rd
3 Quarter
500,000
100,000
100,000
th
4 Quarter
500,000
200,000
200,000
Total
1,500,000
500,000
500,000
Assuming the taxpayer is Nicanor who opted for 8% preferential tax, how much is the percentage tax liability for
the 1st quarter?
a. Php 0
b. Php 4,000
c. Php 32,000
d. Php 12,000
Solution: Taxpayers who opted 8% are not liable to pay percentage tax
64. Assuming the taxpayer is Nicanor who opted for Optional Standard Deduction for 1st Quarter, how much
is the Net Taxable Income for the taxable year 2021?
a. Php 1,500,000
b. Php 0
c. Php 900,000
d. Php 2,500,000
Solution:
Gross sales
Quarters
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total
Less: OSD 40%
Taxable income
Head Office
200,000
300,000
500,000
500,000
1,500,000
Branch 1
100,000
100,000
100,000
200,000
500,000
Branch 2
100,000
100,000
100,000
200,000
500,000
TOTAL
400,000
500,000
700,000
900.000
2,500,000
1,000,000
1,500,000
65. Assuming Nicanor opted for itemized deduction in the 1st quarter income tax return, how much is the
total percentage tax liability the taxable year 2021?
a. Php 25,000
b. Php 0
c. Php 250,000
d. Php 2,500
Solution:
Gross sales
Quarters
Head Office
Branch 1
Branch 2
TOTAL
st
1 Quarter
200,000
100,000
100,000
400,000
nd
2 Quarter
300,000
100,000
100,000
500,000
rd
3 Quarter
500,000
100,000
100,000
700,000
th
4 Quarter
500,000
200,000
200,000
900.000
Total
Rate
PT
1,500,000
500,000
500,000
2,500,000
1%
25,000
66. Assuming the taxpayer is ABC Corp, a domestic corporation which opted for Optional Standard
Deduction for 1st Quarter, how much is the income tax due for the taxable year 2021 assuming total
assets excluding the land amounted to Php 1,000,000 and the cost of sales amounted to Php 1,500,000?
a. Php 120,000
b. Php 375,000
c. Php 150,000
d. Php 300,000
Solution:
Quarters
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total
Less; COS
Gross income
Less: OSD 40%
Taxable income
Tax due (20%)
Head Office
200,000
300,000
500,000
500,000
1,500,000
Gross sales
Branch 1
Branch 2
100,000
100,000
100,000
100,000
100,000
100,000
200,000
200,000
500,000
500,000
TOTAL
400,000
500,000
700,000
900.000
2,500,000
1,500,000
1,000,000
400,000
600,000
120,000
67. Inday, the wife and the children of Nicanor provided the following data to you so you can help them file
the return and pay the corresponding estate tax, if any:
PROPERTIES
• Family home – Php 20,000,000
• Inherited 2,500 Shares in XYZ Corp. an unlisted company – 10,000,000
• Bank deposits – Php 5,000,000
Other information:
• Expenses and judicial expenses – Php 1,000,000
How much is the estate tax due?
a. Php 450,000
b. Php 750,000
c. Php 150,000
d. Php 390,000
Solution:
Exclusive
Family Home
Shares of stocks
Bank deposits
Gross estate
Less: Share of spouse
Estate after share
Less: special deductions
Standard deduction
Family Home
Net estate
Rate
Estate tax
Conjugal
20,000,000
10,000,000
5,000,000
12,500,000
5,000,000
10,000,000
Total
20,000,000
10,000,000
5,000,000
35,000,000
12,500,000
22,500,000
15,000,000
7,500,000
6%
450,000
68. The information provided by ABC Manufacturing Corp. disclosed the following:
INCOME STATEMENT
Gross Sales – Php 50M
Cost of goods/sales:
Direct materials – Php 10M
Direct labor – Php 10M
Manufacturing overhead – Php 5M
Operating expenses:
Salaries and wages – Php 1M
Professional fees – Php 1M
Supplies – Php 1M
Depreciation – Php 1M
Training expenses* – Php 1M
BALANCE SHEET
Assets – Php 20M
Liability – Php 5M
SHE – Php 15M
*Requirements for additional deduction on training expenses are complied with.
Compute the income tax?
a. Php 4,875,000
b. Php 3,900,000
c. Php 5,000,000
d. Php 4,000,000
Solution:
Gross sales
Cost of sales
Gross income
Less: Opex
Additional deduction training
Taxable income
Rate
Income tax due
50,000,000
25,000,000
25,000,000
5,000,000
500,000
5,500,000
19,500,000
25%
4,875,000
69. In 2021, ABC Corp. borrowed money from the bank in the amount of Php 1 Million with an interest rate
of 10%. ABC Corp. has interest income from bank deposits in the amount of Php 50,000.00 from which
final tax was withheld. Assume ABC Corp.’s tax rate is 25%. How much is the allowable interest expense?
a. Php 90,000
b. Php 100,000
c. Php 83,500
d. Php 0
Solution:
Interest expense
100,000
Less: Interest income (FT)
50,000
Rate
20%
10,000
Allowable interest expense
90,000
70. Which is FALSE?
a. BIR has 1 Commissioner and 6 Deputy Commissioners
b. BOC has 1 Commissioner and 6 Deputy Commissioners
c. PEZA Board has a total of 13 members including the chairman
d. BOI is comprised of 7 governors
e. BCDA is composed of 8 members of the board
Reason: BIR has 1 Commissioner and FOUR Deputy Commissioners
PRTC Final Pre-Board, May 2022
1. The following modes of extinguishment of obligations require two or more creditors, except:
a. Application of Payment
b. Legal Application of Payment
c. Payment by Cession
d. Dation in Payment
See Art. 1245
2. Below are instances when legal compensation is not allowed, except:
a. One of the debts arises from mutuum
b. One of the debts arises from commodatum
c. One of the debts arises from support by gratuitous title
d. One of the debts arises from civil liability arising from a criminal offense
See Art. 1287-1288
3. S1 - Consent of parties is required in legal compensation.
S2 - Consent of creditor is required in Substitution.
S3 - In Dation in payment, the creditor becomes the owner of the property given.
S4 - In Cession, creditors are only assignees.
a. Only 1 statement is false
b. Only two statements are false
c. Only three statements are false
d. All statements are false
S1 – See Art 1290
4. S1 – In Culpa Aquiliana, negligence is only incidental.
S2 – In Culpa Contractual, ordinary diligence is available as a defense
S3 – The Master and Servant Rule applies in Civil Negligence
S4 – Proof beyond reasonable doubt is the evidence required in Culpa Criminal
a. Only 1 statement is false
b. Only two statements are false
c. Only three statements are false
d. All statements are false
S1 – Direct and substantive
S2 – Extraordinary diligence is required
S3 – Only in Culpa Contractual
5. Instances when benefit to the creditor need not be proved if it redounded or not to him, except:
a. If after payment, the debtor acquired the right to collect from the guarantor
b. If after the payment, the third person acquires the creditor’s rights
c. If the creditor ratifies the payment to the third person
d. If the creditor’s conduct, the debtor has ben led to believe that third person had authority
to receive payment
See 1241
6. The number of trustees in a non-stock corporation
a. Minimum of 1, maximum of 15
b. Minimum of 1, may be more than 15
c. Minimum of 2, maximum of 15
d. Minimum of 5, may be more than 15
e. Minimum of 5, maximum of 15
See Sec 91
7. The number of board of directors in a stock corporation
a. Minimum of 1, maximum of 15
b. Minimum of 1, may be more than 15
c. Minimum of 2, maximum of 15
d. Minimum of 5, may be more than 15
e. Minimum of 5, maximum of 15
See Sec. 22
8. Offenses against the confidentiality, integrity, and availability of computer data and system,
except:
a. Illegal Access
b. Data Interference
c. System Interference
d. Misuse of Devices
e. Infringement
9. The provision aims at criminalizing the intentional hindering of the lawful use of computer
systems including telecommunications facilities by using or influencing computer data.
a. Illegal Access
b. Data Interference
c. System Interference
d. Misuse of Devices
e. Cyber squatting
10. A _______ grants property rights on an invention, allowing the holder to exclude others from
making, selling, or using the invention.
a. patent
b. trademark
c. utility model
d. copyright
e. industrial design
11. Alternative dispute resolutions (ADR) are recognized both in the Revised Corporation Code and
the Cooperative Law. This ADR is a process wherein the parties meet with a mutually selected
impartial and neutral person who assists them in the negotiation of their differences.
a. Negotiation
b. Mediation
c. Conciliation
d. Voluntary Arbitration
e. Mandatory Arbitration
See: (JAMS | Judicial Arbitration and Mediation Services)
12. S1 – The period to extend the life of the corporation if fixed is 5 years before its expiration.
S2 – The period to extend the life of a cooperative is 5 years prior to its expiration.
S3 – The period to extend the patent is 6 months prior to its expiration.
a. S1 and S2 are false, S3 is true
b. S1 and S2 are true, S3 is false
c. S1 and S3 are false, S2 is true
d. S1 and S3 are true, S3 is false
e. All are false
See Sec 11 RCC, Sec 10 Cooperative, IPL
S1 – 3 years
S3 – patent cannot be extended
13. The following entities are not allowed to be a One Person Corporation (OPC), except:
a. Banks
b. Pre-need
c. Insurance
d. Estate
e. Public and publicly listed companies
See Sec 116 RCC
14. S1 – The bond of the single stockholder if he is likewise the treasurer is renewed every 3 years.
S2 – The vote to divide the Cooperative is ¾ of the members.
S3 – The limited partner may rightfully demand the return of his contribution after he has given a
one (1) month notice in writing to all members if no time is specified in the certificate.
a. S1 and S2 are false, S3 is true
b. S1 and S2 are true, S3 is false
c. S1 and S3 are false, S2 is true
d. S1 and S3 are true, S3 is false
e. All are false
15. The One Person Corporation is required to submit the following documents, except:
a. General Information Sheet
b. Audited Financial Statements
c. Disclosure of Self-Dealings and Related Party Transactions
d. Appointment Form
e. Compensation of director
16. Under the Revised Corporation Code, an Emergency Board may be created by a vote of
_____________ to (purpose) _________ and it will be temporarily filled from the ___________
of the corporation.
a. Majority vote of the OCS / prevent grave, substantial, and irreparable loss or damage to the
corporation / stockholders
b. Majority vote of the BOD / vote on matter of paramount importance / officers
c. Unanimous vote of all the directors / prevent grave, substantial, and irreparable loss or
damage to the corporation / stockholders
d. Unanimous vote of the remaining directors / approve a self-dealing director / newly elected
BOD
e. Unanimous vote of the remaining directors / prevent grave, substantial, and irreparable loss
or damage to the corporation / officers
See Sec 28 RCC
17. S1 – The period to notify the creation of the emergency board is within 5 days from the creation
of the board.
S2 – The period to report the election of the officers of the One Person Corporation is within 5
days from their appointment.
S3 – The period to submit the certificate of stock for notation on the exercise of appraisal right is
within 10 days after the demanding for payment.
a. S1 and S2 are false, S3 is true
b. S1 and S2 are true, S3 is false
c. S2 and S3 are false, S1 is true
d. S2 and S3 are true, S1 is false
e. All are false
See Sec 28
S1 - 3 days
18. S1 – The period for non-use of corporate charter is 5 years from the date of filing the articles of
incorporation.
S2 – The period for non-use of a cooperative is 2 years from the issuance of the certificate of
incorporation.
S3 – No damages can be recovered for acts of infringement of a patent committed more than
three (3) years before the institution of the action for infringement.
a. S1 and S2 are false, S3 is true
b. S1 and S2 are true, S3 is false
c. S2 and S3 are false, S1 is true
d. S2 and S3 are true, S1 is false
e. All are false
S1 – Issuance of COI; S2 – issuance of COR; S3 – 4 years
19. A bound himself to deliver to B a 65-inch 2022 model of TV set, and the 18 cubic feet of White
Westinghouse refrigerator with motor no. WERT 385, which B saw in A’s store, and to repair B’s
piano. A did not do any of these.
S1 – A can be compelled to deliver the TV set.
S2 – A can be compelled to deliver the refrigerator.
S3 – A can be compelled to repair the piano.
a. S1 and S2 are false, S3 is true
b. S1 and S2 are true, S3 is false
c. S1 and S3 are false, S2 is true
d. S1 and S3 are true, S2 is false
e. All are false
20. A obligated himself to B for supplying textbook. It was agreed that the textbooks will be delivered
by A on November 20, 2021. Upon the arrival of the designated period for payment, is demand
necessary in order that A shall incur delay?
a. Yes, following the general rule since there is no delay if there is no demand
b. Yes, since that is incumbent upon the rule on reciprocal obligation
c. No, demand is not necessary since there is a period designated delivered.
d. No, demand is not necessary since it is for the benefit of A
See Art. 1169 NCC
21. The debtor executed a promissory note promising to pay his obligation to the creditor as soon as
he has received funds derived from the sale of his property in certain place. What type of
condition is present?
a. potestative
b. casual
c. mixed
d. negative
See Hermosa v. Longara (93 Phil. 971), the fulfillment depends not only on the will of the debtor
but also upon the concurrence of other factors
22. A sold a parcel of land to B for P200,000. In the deed of sale, there is a stipulation that the
purchase price shall be paid on a certain date and that in case of failure to pay on a certain date,
then the contract shall be automatically rescinded. The period arrived and B failed to pay as
stipulated in the contract.
a. The contract is automatically rescinded as stipulated by the parties
b. The contract to be rescinded must need substantial breach to be rescinded.
c. The contract is not rescinded till after the arrival of the period designated and expiration of
the grace period as mandated by law.
d. The contract is not rescinded until there is notarial rescission.
23. S1 - An Asset Preservation Order is enforceable anywhere in the Philippines.
S2 - On the reporting of covered transactions, the law mandates that covered institutions shall
report to the AMLC all covered transactions within five (5) working days from occurrence thereof.
S3 - On record keeping under AMLA, the law states that all records of all transactions of covered
institutions shall be maintained and safely stored for five (5) years from the date of transactions.
a. Only 1 statement is false
b. Only 2 statements are false
c. All statements are false
d. All statements are true
24. S1 – The freeze order in AMLA shall be effective immediately within a period of 20 days.
S2 - On motion of the petitioner filed before the expiration of twenty days from issuance of a
freeze order in AMLA proceedings, the court may for good cause extend its effectivity for a period
not exceeding six months.
S3 – The officers of the homeowners association shall be given fifteen (15) working days to refer
the application to the members of the association.
a. S1 and S2 are false, S3 is true
b. S1 and S2 are true, S3 is false
c. S1 and S3 are false, S2 is true
d. S1 and S3 are true, S2 is false
e. All are false
25. High Earning Corporation filed a complaint against five of its officers for violation of Section 31 of
the Revised Corporation Code. The corporation claimed that the said officers were guilty of
advancing their personal interests to the prejudice of the corporation, and that they were grossly
negligent in handling its affairs. Aside from documents and contracts, the corporation also
submitted in evidence records of the officers‘ U.S. Dollar deposits in several banks overseas Boston Bank, Bank of Switzerland, and Bank of New York. For their part, the officers filed a criminal
complaint against the directors of High Earning Corporation for violation of Republic Act No. 6426,
otherwise known as the Foreign Currency Deposit Act of the Philippines. The officers alleged that
their bank deposits were illegally disclosed for want of a court order, and that such deposits were
not even the subject of the case against them. Under the Bank Secrecy Law, can these foreign
currency deposits be opened since they are subject matter of the litigation?
a.
b.
c.
d.
Yes, since the law is explicit on this matter that it is the subject matter of litigation.
Yes, if there is consent of the depositors
No, since the Bank Secrecy excludes FCDU accounts
No, a freeze order must be filed in the RTC to seize the FCDU accounts
26. A private corporation was created by a special law. Later, the law creating it was declared invalid.
May such corporation claim to be a de facto corporation?
a. Yes, since from the inception the corporation was given juridical existence
b. No, where a private corporation is created under a special law, there is no attempt to
incorporate a valid corporation
c. No, since it is a public corporation and must be incorporated
d. Yes, it was a de jure corporation which gives it prima facie existence
27. Under the Articles of Incorporation of Manila Industrial Corp, its principal place of business shall
be in Pasig, MM. The principal corporate office is at the Ortigas Center, Pasig, MM while its factory
processing leather products is in Manila. The corporation holds its annual stockholders‘ meeting
at the Manila Hotel in Manila and its BOD meeting at a hotel in Makati MM. The by-laws are silent
as to the place of meetings of the stockholders and directors. Where should the meeting of the
stockholders be held?
a. Pasig, MM only, being the principal place of business
b. Manila only, being the place of operation
c. Makati only, since it rests on the power of the BOD
d. Within Metro Manila, Metro Manila is considered a city or municipality
28. Stikki Cement Company was organized primarily for cement manufacturing. Anticipating
substantial profits, its President proposed that Stikki invest in a) a power plant project, b) a
concrete road project, and c) quarry operations for limestone in the manufacture of cement. What
corporate approval or vote is needed for quarry operations for limestones in the manufacture of
the cement?
a. Majority of the BOD
b. Majority of the quorum of the BOD
c. Majority of the BOD and majority of the OCS
d. Majority of the BOD
29. The stockholders of People Power Inc (PPI) approved two resolutions in a special stockholders‘
meeting: a) Resolution increasing the authorized capital stock of PPI; and b) Resolution authorizing
the BOD to issue, for cash payment, the new shares from the proposed capital stock increase in
favor of outside investors who are non-stockholders. The foregoing resolutions were approved by
stockholders representing 99% of the total outstanding capital stock. The sole dissenter was Jimmy
Morato who owned 1% of the stock. Are the resolutions binding on the corporation and its
stockholders including Jimmy Morato, the dissenting stockholder?
a. Yes, since only 1% OCS dissented to the approved act
b. No, since there was a lone dissenter and it must unanimously approved by the OCS
c. Yes, it is within the prerogative of the OCS to approve the intra vires act of the corporation.
d. No, While these resolutions were approved by the stockholders, the directors‘ approval, which
is required by law in such case, does not exist.
30. Which of the following corporate acts are valid, void, or voidable?
i) XL Foods Corporation, which is engaged in the fast-food business, entered into a contract with
its President Jose Cruz, whereby the latter would supply the corporation with its meat and
poultry requirements.
ii) The Board of Directors of XL Foods Corporation declared and paid cash dividends without
approval of the stockholders.
iii) XL Foods Corporation guaranteed the loan of its sister company XL Meat Products, Inc.
a. Valid, Void, Voidable
b. Void, Valid, Voidable
c. Voidable, Valid, Void
d. Valid, Void, Void
e. Voidable, Valid, Voidable
1)Voidable – A contract of the corporation with one or more of its directors or trustees or
officers is voidable, at the option of such corporation (Sec 32, Corporation Code).
2) Valid
3)Voidable – This is an ultra vires act on part of XL Foods Corporation and is not one of the
powers provided for in Sec. 36 of the Corporation Code.
31. The BOD of a corporation declared due and payable all unpaid subscription to the capital stock.
The lone dissenting director failed to pay on due date, i.e., 19 Sept 2021, his unpaid subscription.
Other than the shares wherein he was unable to complete payment, he did not own any share in
the corporation. On 23 Sept 2021, he was informed by the BOD that, unless due payment is
meanwhile received, he:
a) could no longer serve as a director of the corporation forthwith:
b) would not be entitled to the cash and stock dividends which were declared and payable on 24
Sep 2021; and
c) could not vote in the stockholders meeting scheduled to take place on 26 Sept 2021.
Was the action of the BOD on each of the foregoing matters valid?
a. Yes, yes, yes
b. Yes, no, yes
c. No, yes, no
d. No, no, yes
e. No, no, no
a) No. The period of 30 days within which the stockholder can pay the unpaid subscription had
not yet expired.
b) No. The delinquency did not deprive the stockholder of his right to receive dividends declared.
However, the cash dividend declared may be applied by the corporation to the unpaid
subscription.
c) No. The period of 30 days within which the stockholder can pay the unpaid subscription had
not yet expired.
32. M and N were very good friends. N borrowed P10,000 from M. Because of their close relationship,
the promissory note executed by N provided that he would pay the loan “whenever his means
permit.” Subsequently, M and N quarreled. M now seeks to collect the loan because he is in dire
need of money.
a. Yes, be can collect the money since there is no period agreed upon
b. Yes, since the conditional obligation is void being dependent on the debtor
c. No, he can only ask for rescission of the contract
d. No, he must first ask the court to fix the period
See Art. 1180 NCC
33. M and N were very good friends. N borrowed P10,000 from M. Because of their close relationship,
the promissory note executed by N provided that he would pay the loan “whenever his means
permit.” Subsequently, M and N quarreled. M now seeks to collect the loan because he is in dire
need of money. What kind of obligation is present?
a. Potestative
b. Causal
c. Mixed
d. Period
e. Alternative
See Art. 1180 NCC
34. A and B sold 1,000 sacks of rice to X and Y. On X’s request, A and B delivered the 1,000 sacks of
rice to him. X resold the rice without turning over any part of it or its price to Y. What kind of
obligation is present?
a. Joint divisible obligation
b. Joint indivisible obligation
c. Solidary divisible obligation
d. Solidary indivisible obligation
See Art 1210 NCC
35. A and B sold 1,000 sacks of rice to X and Y. On X’s request, A and B delivered the 1,000 sacks of
rice to him. X resold the rice without turning over any part of it or its price to Y. From whom will Y
ask for delivery of his share?
a. From A
b. From B
c. From A and B
d. From X
e. From A, B and X
See Art. 1209 NCC
36. A and B sold 1,000 sacks of rice to X and Y. On X’s request, A and B delivered the 1,000 sacks of
rice to him. X resold the rice without turning over any part of it or its price to Y. How much if any,
can Y demand from the person/s liable?
a. 0
b. 125
c. 250
d. 500
e. 1,000
37. The following contracts can be ratified, except:
a. Rescissible
b. Voidable
c. Unenforceable
d. Unauthorized
38. In the following instances, the third person becomes part of the contract, except:
a. Contracts creating real rights
b. Interference in contractual relations
c. Delivery of the subject matter of the contract
d. Contracts to defraud creditors
39. I do that you may give
a. Facio ut des
b. Facio ut facias
c. Do ut des
d. Do ut facias
See Art. 1307 NCC
40. The contract shall be presumed to be an equitable mortgage in the following instances, except:
a. When the price of a sale with right to repurchase is unusually inadequate
b. When the vendor remains in possession as lessee or otherwise
c. When the vendor retains for himself a part of the purchase price
d. When the vendor binds himself to pay taxes on the thing sold.
See Art. 1602 NCC
41. The corporate term of a stock corporation is that which is stated in its Articles of Incorporation. It
may be extended or shortened by an amendment of the Articles when approved by majority of
its Board of Directors and:
a. approved and ratified by at least 2/3 of all stockholders.
b. approved by at least 2/3 of the stockholders representing the outstanding capital stock.
c. ratified by at least 2/3 of all stockholders.
d. ratified by at least 2/3 of the stockholders representing the outstanding capital stock.
42. P authorized A to sign a negotiable instrument in his (P’s) name. It reads: "Pay to B or order the
sum of Php1 million. Signed, A (for and in behalf of P)." The instrument shows that it was drawn
on P. B then indorsed to C, C to D, and D to E. E then treated it as a bill of exchange. Is presentment
for payment necessary in this case?
a. No, since the drawer and drawee are the same person.
b. No, since the bill is non-negotiable, the drawer and drawee being the same person.
c. Yes, since the bill is payable to order, presentment is required for acceptance.
d. Yes, in order to hold all persons liable on the bill.
See Sec 79 NIL
43. P sold to M a pair of gecko (tuko) for Php50,000.00. M then issued a promissory note to P
promising to pay the money within 90 days. Unknown to P and M, a law was passed a month
before the sale that prohibits and declares void any agreement to sell gecko in the country. If X
acquired the note in good faith and for value, may he enforce payment on it?
a.
No, since the law declared void the contract on which the promissory note was founded.
b.
No, since it was not X who bought the gecko.
c.
Yes, since he is a holder in due course of a note which is distinct from the sale of gecko.
d. Yes, since he is a holder in due course and P and M were not aware of the law that
prohibited the sale of gecko.
See Sec 58 NIL
44. The Board of Directors of XYZ Corp. unanimously passed a Board Resolution approving the taking
of steps that in reality amounted to willful tax evasion. On discovering this, the government filed
tax evasion charges against all the company’s members of the board of directors. The directors
invoked the defense that they have no personal liability, being mere directors of a fictional being.
Are they correct?
a. No, since as a rule only natural persons like the members of the board of directors can
commit corporate crimes.
b. Yes, since it is the corporation that did not pay the tax and it has a personality distinct from
its directors.
c. Yes, since the directors officially and collectively performed acts that are imputable only to
the corporation.
d. No, since the law makes directors of the corporation solidarily liable for gross negligence and
bad faith in the discharge of their duties.
See Sec 30 RCC
45. Under the Intellectual Property Code, lectures, sermons, addresses or dissertations prepared for
oral delivery, whether or not reduced in writing or other material forms, are regarded as –
a. non-original works
b.
original works
c.
derivative works
d.
not subject to protection
See Sec 172 IPL
46. Which of the following indorsers expressly warrants in negotiating an instrument that 1) it is
genuine and true; 2) he has a good title to it; 3) all prior parties have capacity to negotiate; and 4)
it is valid and subsisting at the time of his indorsement?
a. The irregular indorser
b. The regular indorser
c.
The general indorser
d.
The qualified indorser
See Sec 66 NIL
47. In case of disagreement between the corporation and a withdrawing stockholder who exercises
his appraisal right regarding the fair value of his shares, a three-member group shall by majority
vote resolve the issue with finality. May the wife of the withdrawing stockholder be named to the
three member group?
a. No, the wife of the withdrawing shareholder is not a disinterested person.
b. Yes, since she could best protect her husband's shareholdings.
c. Yes, since the rules do not discriminate against wives.
d. No, since the stockholder himself should sit in the three-member group.
See Sec 81 RCC
48. The Corporation Code sanctions a contract between two or more corporations which have
interlocking directors, provided there is no fraud that attends to it, and it is fair and reasonable
under the circumstances. The interest of an interlocking director in one corporation may be either
substantial or nominal. It is nominal if his interest:
a. does not exceed 25% of the outstanding capital stock
b.
exceeds 25% of the outstanding capital stock
c.
exceeds 20% of the outstanding capital stock
d.
does not exceed 20% of the outstanding capital stock
See Sec 32 RCC
49. Notice of dishonor is not required to be made in cases specified by law. One instance where such
notice is not necessary is when the indorser is the one to whom the instrument is supposed to be
presented for payment. The rationale here is that the indorser a. already knows of the dishonor and it makes no sense to notify him of it.
b. is bound to make the acceptance in all cases.
c. has no reason to expect the dishonor of the instrument.
d.
must be made to account for all his actions.
Sec 115 NIL
50. X Corp., whose business purpose is to manufacture and sell vehicles, invested its funds in Y Corp.,
an investment firm, through a resolution of its Board of Directors. The investment grew
tremendously on account of Y Corp.'s excellent business judgment. But a minority stockholder in
X Corp. assails the investment as ultra vires. Is he right and, if so, what is the status of the
investment?
a. Yes, it is an ultra vires act of the corporation itself but voidable only, subject to stockholders’
ratification.
b.
Yes, it is an ultra vires act of its Board of Directors and thus void.
c.
Yes, it is an illegal act of its Board of Directors but voidable only, subject to stockholders’
ratification.
d. Yes, it is an ultra vires act of the corporation itself and, consequently, void.
See Sec 44 RCC
51. In the election for the Board of Trustees of non-stock corporations, the right of the members of
any class or classes to vote may be limited, broadened, or denied and each member shall be
entitled to one vote. This is true a. unless set aside by the members in plenary session.
b.
in every case even if the Board of Trustees resolves otherwise.
c.
unless otherwise provided in the Articles of Incorporation or in the By-laws.
d. in every case even if the majority of the members decide otherwise during the elections.
See Sec 88 RCC
52. Under the Anti-Money Laundering Law, a covered institution is required to maintain a system of
verifying the true identity of their clients as well as persons purporting to act on behalf of
a. those doing business with such clients
b. unknown principals
c. the covered institution
d. such clients
RA 9160 SEC. 9. Prevention of Money Laundering; Customer Identification Requirements and Record
Keeping. — (a) Customer Identification. — Covered institutions shall establish and record the true identity
of its clients based on official documents. They shall maintain a system of verifying the true identity of
their clients and, in case of corporate clients, require a system of verifying their legal existence and
organizational structure, as well as the authority and identification of all persons purporting to act on their
behalf.
53. ABC Corp. increased its capital stocks from Php10 Million to Php15 Million and, in the process,
issued 1,000 new shares divided into Common Shares "B" and Common Shares "C." T, a
stockholder owning 500 shares, insists on buying the newly issued shares through a right of preemption. The company claims, however, that its By-laws deny T any right of pre-emption. Is the
corporation correct?
a. No, since the By-Laws cannot deny a shareholder his right of pre-emption.
b. Yes, but the denial of his pre-emptive right extends only to 500 shares.
c. Yes, since the denial of the right under the By-laws is binding on T.
d. No, since pre-emptive rights are governed by the articles of incorporation.
See Sec 38 RCC, AOI denies it
54. For purposes of determining violation of the provisions of Anti-Money Laundering Law, a
transaction is considered as a "Suspicious Transaction" with "Covered Institutions" regardless of
the amount involved, where which the following circumstances exist/s?
a. the amount involved is not commensurate with the client's business or financial capacity;
b. there is no underlying legal or trade obligation, purpose or economic justification;
c.
client is not properly identified;
d. All of the above.
See AMLA IRR 2018
55. Which of the following is an exception to the secrecy of bank deposits and other laws which are
in Philippine Pesos, but not an exception to the secrecy of foreign currency deposits?
a. When the AMLC seeks to examine suspicious deposits or upon order of the court
b. Under the provisions of the Human Security Act
c. Upon inquiry in cases of impeachment
d. Written consent of depositor
See RA 6426
56. Which phrase best completes the statement - When a debt is secured by a real estate mortgage,
upon default of the debtor?
a. the only remedy of the creditor is to foreclose the real estate mortgage;
b. another remedy is filing an action for collection and then foreclose if collection is not
enough;
c. the creditor can foreclose the mortgage and demand collection for any deficiency;
d. None of the above.
57. X mortgaged her residential house and lot in favor of ABC Bank. X defaulted in her loan and so the
bank foreclosed the real estate mortgage on the residential house. Y then bought the residential
house and lot before the expiration of the redemption period. Can Y now take possession of the
property?
a. No, because it is still covered by the redemption period and the purchaser is not yet entitled
as a matter of right to take possession of the property.
b. Yes, the purchaser is now entitled to the possession of the house.
c.
No, because there is a need to talk to X to leave the house.
d. No, because Y was not the one who foreclosed the mortgage on the property.
58. Which phrase best completes the statement - The affidavit of good faith in a Deed of Chattel
Mortgage is?
a. an oath where the parties swear that the mortgage is made for the purpose of securing the
obligations specified and that the obligation is just and valid;
b. an affidavit, the absence of which will vitiate the mortgage between the parties;
c.
necessary only if the chattel being mortgaged are growing crops;
d. a certification from the mortgagor that he is the mortgagor of the chattel.
59. Which phrase best completes the statement - To bind third parties, a chattel mortgage of shares
of stock must be registered?
a. with the Register of Deeds where the debtor resides;
b. with the Register of Deeds where the principal office of the corporation is;
c.
in the Stock and Transfer Book of the corporation with the Corporate Secretary;
d. with the Register of Deeds where the debtor resides and the principal office of the
corporation.
60. X is a depositor of AAA Bank. She has three (3) deposit accounts all under her name. One, in
checking account, one in saving account and another one in time deposit account. Each account
has a balance of Php250,000. AAA Bank became insolvent. Philippine Deposit Insurance
Corporation was assigned as receiver of the Bank. X therefore is unable to withdraw from all of
the accounts.
She then filed her claims with the Philippine Deposit Insurance Corporation. Which statement is
most accurate?
a. X can claim a total of Php500,000 for all the three (3) accounts.
b. X can only claim from one (1) account of Php250,000.
c.
X can claim a total of Php750,000 from all the three (3) accounts.
d. X cannot claim anything from any of the deposit accounts.
61. X is being charged for violation of Anti-Graft and Corrupt Practices because he is suspected of
having accumulated unexplained wealth. X maintains deposit accounts with ABC Bank. The
Ombudsman filed criminal cases against X before the Sandiganbayan. Can the Court issue
subpoenas against ABC Bank to produce all documents pertaining to all the deposit accounts of
X?
a. Yes, because there is already a pending case and provided the subpoena must be specific as
to which account.
b. Yes, it is enough that the specific bank is identified.
c.
No, because the issuance of the subpoena has no real legal basis.
d. Even without a subpoena, information about the deposit accounts of X can be submitted to
the Sandiganbayan because it will be used in a pending case.
62. XXX Bank Corporation and ZZZ Corporation were merged into XX ZZ Bank Corporation. So as not
to create any unnecessary conflict, all the former directors of both banks wanted to be appointed
/elected as members of the Board of Directors of the merged bank. Each bank used to have eleven
(11) members of the board. The maximum number of directors of the merged bank is a. 15
b. 22
c. 21
d. 11
Sec 17, GBL, Sec 22, RCC
63. X maintains a savings deposit in the amount of Php·1 Million with ABC Bank Corporation. X also
has obtained a loan from ABC Bank Corporation in the amount of Php1 Million. In case of
default,
a. ABC Bank can set-off the loan from the savings account being maintained by X with ABC
Bank
b. Set-off is not possible because legal compensation is not allowed in banking transaction
c. Deposit accounts are usually earmarked for specific purpose hence offsetting is not legally
possible
d. Off -setting is not possible because the obligation of X is a "simple loan"
See: Gullas v. PNB
64. The government agency granted with the power of supervision and examination over banks and
non-bank financial institutions performing quasi-banking functions, to ensure that the conduct
of its business is on a sound financial basis that will provide continued solvency and liquidity is a. The Philippine Deposit Insurance Corporation
b. The Bangko Sentral ng Pilipinas
c.
The Anti-Money Laundering Council
d. The Securities and Exchange Commission
65. X, who is the Executive Vice President of ABC Corporation, a listed company, can be held liable or
guilty of insider trading if, he a. bought shares of ABC Corporation when it was planning to acquire another company to
improve its asset base, the news of which increased the price of the shares in the Stock Exchange
b. bought shares of XYC Corporation, a sister company of ABC Corporation when he learned that
XYC Corporation was about to also list its share in the Philippine Stock Exchange
c. bought shares of ZZZ Corporation when he learned that ABC Corporation would acquire ZZZ
Corporation
d. All of the above
66. AAA Corporation is a foreign corporation that wants to operate a representative office here in the
Philippines. As required by the Corporation Code, there is a need to appoint a Resident Agent as
a condition precedent to the issuance of a license to transact business in the Philippines. After
two (2) years, AAA Corporation removed its Resident Agent and did not appoint anyone anymore.
Which statement is the most accurate?
a. This can be a ground for revocation or suspension of its license to do business
b. There is no more effect in the license because anyway at the time of registration, a resident
agent was appointed
c.
This can be a ground for suspension only
d. This will result in automatic revocation of its license to do business in the Philippines
Sec 151 RCC
67. X is a minority stockholder of CCC Corporation. Y is a member of the Board of Directors of CCC
Corporation and at the same time he is the President. X believes that Y is mismanaging CCC
Corporation hence, as a stockholder and in behalf of the other stockholders, he wanted to sue Y.
Which statement is most accurate?
a. X can institute a derivative suit in behalf of himself as a stockholder.
b. A derivative suit must be instituted in behalf of the corporation.
c.
Derivative suit is an exclusive remedy that X can institute.
d. Derivative suit is not the remedy in this situation.
68. If ABC Corporation will increase its authorized capital stock, the Corporation Code requires the
approval of the SEC and a. the approval of the majority of the Board of Directors only.
b. the approval of the majority of the stockholders and the Board of Directors.
c. the approval of 2/3 of the shareholders of the outstanding capital stock as well as the
approval of the Securities and Exchange Commission.
d. the approval of the majority of the Board of Directors and approval of the shareholders
holding 2/3 share of the outstanding capital stock.
69. X subscribed 10,000 shares in the capital stocks of AAA Corporation. He paid 50% of the 10,000
shares. X asked the Corporate Secretary to issue him the corresponding stock certificate
representing the 50% of what he already paid. The Corporate Secretary of the corporation refused.
Was the Corporate Secretary correct?
a. The Corporate Secretary is correct because the Revised Corporation Code provides that no
certificate of stock shall be issued to a subscriber until the shares as subscribed have been fully
paid.
b. The Corporate Secretary cannot refuse because a Stock Certificate can be issued
corresponding to the percentage of shares which were paid.
c. The Corporate Secretary cannot refuse because a Certificate of Stock can be issued provided
it is indicated in the Certificate the actual percentage of what has been paid.
d. The Corporate Secretary cannot refuse because it is his legal duty to issue a stock certificate
corresponding to the number of shares actually subscribed regardless of the actual payment.
See Sec 63 RCC
70. Which of the following is the least defective contract?
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
71. In double sale of real property, priority is given to a. The one who first possessed the thing in good faith
b. The one to whom it was first sold in good faith
c. The one to whom who had the sale notarized in good faith
d. The one to whom who had it registered in good faith
72. The penalty for violation of BP 22 is –
a. Imprisonment of not less than thirty (30) days but not more than one (1) year
b. Fine of not less than but not more than double the amount of the check, which shall in no
case, exceed Two Hundred Thousand (P200,000.00)
c. Both imprisonment and fine
d. Any of the above-mentioned
73. For applications or requests for license, clearance, permit, certification or authorization requiring
the approval of the local Sangguniang Bayan, Sangguniang Panlungsod, Sangguniang
Panlalawigan, the processing time is –
a. 3 working days
b. 7 working days
c. 20 working days
d. 45 working days
74. Applications or requests submitted by applicants or requesting parties of a government office or
agency which only require ministerial actions on the part of the public officer or employee, or that
which present only inconsequential issues for the resolution by an officer or employee of said
government.
a. Simple Transactions
b. Compound Transactions
c. Complex Transactions
d. Highly Technical Transactions
75. The period to appeal the denial of the application for registration of a Cooperative from CDA to
the Office of the President is
a. 20 days
b. 30 days
c. 45 days
d. 60 days
e. 90 days
76. A partnership which compromises all the partners may acquire by their work or industry during the
existence of the partnership is
a. Universal partnership of present property
b. Universal partnership of profits
c.
d.
Particular partnership
General partnership
77. The common property of a universal partnership shall be
a. All the properties which shall belong to each of the partners after the constitution of the
partnership.
b. All the properties which belong to each of the partners at the time of the constitution of the
partnership.
c. All the properties which belong to each of the partners at the time of the constitution of the
partnership as well as the profits which they may acquire therewith.
d. All the properties which belong to each of the partners at the time of the constitution of the
partnership as well as properties which each may acquire thereafter.
78. Mr. AB offered in writing to sell his house and lot for P750,000.00 to Mr. CD on July 1, 2019. Mr. CD
requested Mr. AB to give him 60 days within which to raise the P750,000.00. On August 15, 2019, Mr.
AB informed Mr. CD that the price is raised and now at P1,000,000.00. Can Mr. CD compel Mr. AB to
sell his house and lot at P750,000.00 which was offered in writing by Mr. AB?
A. Yes, because Mr. AB is already estoppel by his written offer
B. Yes, because the 60 days offer has not yet expired
C. No, because Mr. CD has not accepted the offer of Mr. AB.
D. Yes, because there was already meeting of the minds
79. In distinguishing Earnest Money from Option Money, Earnest Money is
A. Given when there is no contract of sale
B. Given only when there is a perfected contract of sale
C. Given to bind the offeror in a unilateral promise to sell or buy
D. Given as a separate consideration from the purchase price
80. Which of the following obligations of the vendor cannot be waived?
a. To allow the buyer to examine the goods sold.
b. To transfer ownership to the buyer.
c. To pay the expenses of the deed of sale.
d. To warrant the thing sold.
81. Three of the following contracts are inexistent and void from the beginning. Which is the exception?
a. That where one of the parties is incapable of giving his consent to a contract.
b. That whose purpose is contrary to law or public policy.
c. That which contemplates an impossible service.
d. That which is absolutely simulated or fictitious.
82. The following instances are subject to suspensive condition, except:
a. Contract to sell
b. Conventional redemption
c. Sale on trial
d. Sale on approval or satisfaction
83. Ralph and Vi orally agreed to form a partnership. Each contributed cash and personal properties
worth P10,000 to a common fund. But they did not register the partnership with the Securities and
Exchange Commission (SEC)
a. The partnership is still valid.
c. The partnership is voidable.
b. The partnership is void.
d. The partnership is unenforceable.
84. The following are judicial grounds for the dissolution of partnership, except:
a. insanity of a partner
b. Insolvency of any partner
c. Incapacity of a partner
d. Misconduct of a partner
e. Persistent breach of partnership agreement
85. The following are instances of acts of ownership in general partnership, except:
a. continue the partnership on the death, insanity or civil interdiction of a general partner
b. enter into a compromise concerning a partnership claim
c. submit a partnership or liability to arbitration
d. renounce a claim of the partnership
e. dispose of the goodwill of the business
See 1818 v. 1850, NCC
86. The following are instances when the certificate in a limited partnership may be amended, except:
a. change in the name of the partnership
b. person is substituted as a limited partner
c. change in the character of the business of the partnership
d. false or erroneous statement in the certificate
e. all the limited partners cease to be such
See 1864 NCC
87. The following are prohibited transactions in a limited partnership, except:
a. Receiving or holding as collateral security any partnership property
b. receiving any payment, conveyance or release from liability if it will prejudice the right of third
person
c. granting loans to the partnership
d. Answer not given
See Art. 1854 NCC
88. A single-purpose cooperative may transform into a multi-purpose cooperative and may create
subsidiaries only after at least:
a. 2 years of operation
b. 2 years from registration
c. 2 years from cooperation
d. 5 years from registration
89. No additional compensation other than per diems shall be paid to a director of a cooperative during
of existence of any cooperative.
a. First year
c. First 3 years
b. First 2 years
d. First 5 years
90. Upon the winding up of the cooperative affairs, any asset distributable to any creditor, shareholder or
member who is unknown or cannot be found shall be given to the:
a. Federation or union to which the cooperative is affiliated with
b. Government
c. Trustee
d. Any federation or union
91. Where no creditors are affected the cooperative may be voluntarily dissolved by vote of the board of
directors and by a resolution duly adopted by the affirmative vote of the members with voting rights,
present and constituting a quorum at a meeting to be held upon call of the directors.
a. Majority; 3/4
c. Majority, majority
b. 2/3, Majority
d. Majority; 2/3
92. No member shall transfer his shares or interest in the cooperative or any part thereof unless he had
held such share capital contribution or interest for not less than:
a. One year
c. 3 years
b. 2 years
d. 5 years
93. Upon dissolution of a cooperative, what happens to the capital donated to said cooperative?
a. It is subject to escheat
b. It shall be divided among the members of the cooperative
c. It shall be returned to the donor
d. It shall be donated to another cooperative with a similar purpose
94. An elected officer of a cooperative may be removed by
a. BOD
b. General Assembly
c. BOD and General Assembly
d. Chairman of the Cooperative
95. The following are required to file their claims under the PDIC, except:
a. With valid deposit accounts with balances of more than P100,000.00;
b. With outstanding obligations with the closed bank either as borrower, co-maker, or as spouse of
borrower;
c. With incomplete mailing address found in the bank records, or failed to update them through the
MAUF issued by the PDIC;
d. have not maintained the account under the name of business entities
96. Large scale in the Data Privacy Act is committed and the maximum penalty in the scale of penalties
respectively provided in the offenses shall be imposed when the personal information
___________________________ is harmed, affected or involved as the result of the above mentioned
actions.
a. of at least 250 persons
b. of at least fifty (50) persons
c. of at least one hundred (100) persons
d. of at least one thousand (1,000) persons
97. The full report of the personal data breach must be submitted ________________
a. within three (3) days
b. within five (5) days
c. within ten (10) days
d. within twenty (20) days
e. within seventy-two (72) hours
98. NO. 1: A contract entered into by a minor is void.
NO. 2: As a general rule, contracts where the amount involved P500 or more must be in writing to
be enforceable.
a. True, True
b. False, False
c. False, True
d. True, False
99. A limited partnership is formed if there is a substantial compliance in good faith with the requirements
of the law, except if this is violated:
a. character of the business
b. location of the principal place of business
c. the term which the partnership is to exist
d. the name of the partnership, adding thereto the word “Limited”
100. Where a partner has become insolvent or his estate is insolvent, the claims against his separate
property shall rank in the following order –
a. partnership creditors, separate creditors, partners by way of contribution
b. partners by way of contribution, separate creditors, partnership creditors
c. separate creditors, partners by way of contribution, partnership creditors
d. separate creditors, partnership creditors, partners by way of contribution
Excel_Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao
OPEN Final Preboard Examination on Financial Accounting and Reporting
April 26, 2022
Suggested answers/solutions by OCAMPO/OCAMPO
Question No. 1 - B
Question No. 2 - D
Question No. 3 - A
No adjustments. All items were properly excluded.
Question No. 4 - C
Unadjusted inventory
Add (deduct) adjustments:
Cryptocurrencies for investment purposes
Lubricants
Materials in transit shipped FOB shipping point
Finished goods in transit shipped FOB shipping point
Advertising catalogs and shipping boxes
Items of PPE held for sale in the ordinary course of business
Adjusted inventory
Question No. 5 - 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
Estimated cost of misssing inventory
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)
(860,000)
(150,000)
(30,000)
7,760,000
1,280,000
5,600,000
(5,280,000)
1,600,000
(1,440,000)
160,000
1,200,000
7,200,000
(1,000,000)
7,400,000
1,400,000
8,800,000
0.60
5,280,000
Question No. 6 - C
Carrying value, Jan. 1, 2022
Increase in fair value due to growth and price changes
Decrease in fair value due to harvest
Carrying value, Dec. 31, 2022
1,176,000
365,000
(42,000)
1,499,000
Question No. 7 - D
Increase in fair value due to growth and price changes
Decrease in fair value due to harvest
Net unrealized gain on Biological Assets
365,000
(42,000)
323,000
Question No. 8 - 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
80,000
3,000
5,000
4,000
6,000
8,000
Page 1 of 9
8,800,000
www.teamprtc.com.ph
FAR.FinPB5.22
Costs of adjustments to machine
Total cost
7,500
113,500
Notes:
1. Insurance cost is expense
2. Cost of training is expense
Question No. 9 - D
Depreciable amount (P2,000,000 + P70,000 - P100,000)
Divide by useful life
Depreciation for 2022
1,970,000
10
197,000
Question No. 10 - C
Fair value of asset given up (P205,000 - P60,000)
Carrying amount
Gain (loss) on exchange
145,000
168,000
(23,000)
Question No. 11 - A
The depreciation method is double declining balance method.
Depreciation rate (1/8 x 2)
0.25
Cost
CA, 12/31/21 (P9,900,000 x .75 x .75)
Acc. Dep., 12/31/21
9,900,000
(5,568,750)
4,331,250
Depreciation - 2022 (P5,568,750 x .25)
1,392,188
Question No. 12 - D
Revaluation surplus, 1/1 (Head Office)
Increase in value of head office
Revaluation surplus, 12/31
1,257,000
82,000
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. 13 - B
Property 1 (P350,000 - P320,000)
Property 2 (P285,000 - P305,000)
Property 3 (P360,000 - P385,000)
Net FV adjustment gain (loss)
30,000
(20,000)
(25,000)
(15,000)
Question No. 14 - C
Research and development expense (P5,025,000 - P3,000,000)
Question No. 15 - C
FV of shares issued (2,500 x P9)
Cash paid
Cost of patent
22,500
75,000
97,500
Question No. 16 - C
Acquisition cost
Development cost - 2021
Total
Residual value
Amount subject to depletion
Depletion - 2021 (100,000 x P4.05*)
Remaining amount subject to depletion, 1/1/22
Development cost - 2022
Page 2 of 9
2,025,000
4,500,000
150,000
4,650,000
(600,000)
4,050,000
(405,000)
3,645,000
75,000
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FAR.FinPB5.22
Revised amount subject to depletion
Divide by revised remaining estimated reserves, 1/1/22
(925,000 - 100,000)
Depletion rate for 2020
3,720,000
825,000
4.51
* (P4,050,000/1,000,000)
Depletion - 2022 (150,000 tons x P4.51)
676,500
Question No. 17 - C
Carrying amount, 12/31/22 – without impairment (P6,250,000 x 7/10)
Carrying amount, 12/31/22 – before reversal of IL (P4,000,000 x 4/5)
Reversal of impairment loss in profit or loss
Question No. 18 - B
Fair value
Carrying amount before revaluation
Revaluation increase (decrease)
4,375,000
(3,200,000)
1,175,000
330,000
290,000
40,000
The revaluation increase is recognized as income in OCI (increase in RS).
Carrying amount after revaluation
Fair value less costs to sell (P330,000 - P20,000)
Impairment loss in P/L (initial writedown to FV-CTS)
330,000
310,000
20,000
Fair value less costs to sell, 6/30/21
Fair value less costs to sell, 12/31/21 (P325,000 - P25,000)
Impairment loss in P/L (subsequent writedown to FV-CTS)
310,000
300,000
10,000
Net disposal proceeds
CA (Fair value less costs to sell), 12/31/21
Gain (loss) on disposal
285,000
300,000
(15,000)
Question No. 19 - C
Question No. 20 - D
Question No. 21 - C
Specific borrowing (P150,000 x .06)
General borrowing [(P250,000 - P150,000) x .09]
Total capitalizable borrowing costs
Question No. 22 - A
Question No. 23 - C
1. Savings account at PS Bank
1. Checking account at PS Bank
4. Petty cash fund
10. Bills and coins on hand
Total
9,000
9,000
18,000
1,200,000
1,800,000
10,000
15,000
3,025,000
Other items not included in cash and cash equivalents should be presented as follows:
2. Travel advances – Trade and other receivables
3. Cash fund for retirement of long-term debt – Noncurrent investments
5. I.O.U. from a company officer – Trade and other receivables
6. Bank overdraft – Current liabilities (Short term borrowings)
7. Certificates of deposit – Other financial assets (Short term investments)
8. Check dated Jan. 2, 2023 (PDC) – Trade and other receivables
11. Cryptocurrencies – Can be treated as inventories, investments or intangible assets
in accordance with PIC Q&A No. 2019-02.
Question No. 24 - B
Balance per bank, 10/31
Page 3 of 9
6,580
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FAR.FinPB5.22
Deposit in transit, 10/31 (see below)
Outstanding checks, 10/31 (see below)
Adjusted balance per bank
7,800
(1,600)
12,780
Deposits in transit, 10/31
Deposits in transit, 9/30
Deposits per books - October
Deposits per bank - October
4,400
24,600
(21,200)
7,800
Outstanding checks, 10/31
Outstanding checks, 9/30
Checks per books - October
Checks per bank - October
2,800
27,800
(29,000)
1,600
Question No. 25 - B
Allowance for D/A, 12/31 (P240,000 x .05)
Accounts written off
Allowance for D/A, 1/1
Recovery of accounts written off
Doubtful accounts expense
12,000
7,200
(10,000)
(2,100)
7,100
Question No. 26 - D
Jan. 1 to May 31 (P3M x .12 x 5/12)
June 1 to Dec. 31 (P2M x .12 x 7/12)
Interest income - 2022
150,000
140,000
290,000
Question No. 27 - C
Present value of note receivable (P300,000 x 0.7118)
Less carrying amount of machine (P500,000 - P380,000)
Gain on sale of machine
Interest income - 2022 (P213,540 x 12% x 6/12)
Total income to be recognized in 2022 profit or loss
Question No. 28 - C
Question No. 29 - D
Question No. 30 - A
Net sales proceeds (P220,000 - P3,300)
Less CA (FV on last remeasurement, 12/31/21)
Gain on sale of investment
Question No. 31 - C
Fair value, 12/31/22
Fair value, 12/28/22
Fair value adjustment gain (loss)
213,540
120,000
93,540
12,812
106,352
216,700
208,000
8,700
505,000
(500,000)
5,000
Question No. 32 - A
Acquisition cost
Share of profit (P150,000 x 30%)
Dividends received (P90,000 x 30%)
Carrying amount, 12/31/22
360,000
45,000
(27,000)
378,000
Held for sale (40%):
Page 4 of 9
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FAR.FinPB5.22
Carrying amount (P378,000 x 40%)
151,200
Fair value less costs to sell [(P390,000 x .95) x 40%]
148,200
Amount to be reported (whichever is lower)
148,200
Question No. 33 - B
Annual premium
Increase in CSV (P189,350 - P138,030)
Dividends received
Life insurance expense
121,040
(51,320)
(4,210)
65,510
Question No. 34 - B
Question No. 35 - C
Question No. 36 - D
Question No. 37 - D
Projected benefit obligation, Dec. 31 (see below)
Less fair value of plan assets, Dec. 31 (see below)
Accrued (prepaid) benefit expense, Dec. 31
10,280,000
8,870,000
1,410,000
Projected benefit obligation, Jan. 1
9,000,000
Service cost
1,000,000
Interest on projected benefit obligation (P9,000,000 x .1)
900,000
Actuarial loss on projected benefit obligation
160,000
Benefits paid to retirees
(780,000)
Projected benefit obligation, Dec. 31
10,280,000
Fair value of plan assets, Jan. 1
Interest on plan assets (P8,000,000 x .1)
Actuarial gain on plan assets (P850,000 - P800,000)
Employer contributions
Benefits paid to retirees
Fair value of plan assets, Dec. 31
8,000,000
800,000
50,000
800,000
(780,000)
8,870,000
Question No. 38 - D
Cumulative expense, year 3 {167 x 100 x [(P21 x 3/3) + (P3 x 2/2)]}
Cumulative expense, year 2 {165 x 100 x [(P21 x 2/3) +(P3 x 1/2)]}
Expense - year 3
400,800
(255,750)
145,050
Question No. 39 - D
Based on the given information, it is probable that the entity will successfully defend the court case.
Therefore, the entity has only a possible obligation and consequently a contingent liability.
Question No. 40 - A
Accounting profit
Reversal expenses (income) for accounting purposes:
Depreciation - motor vehicle
Depreciation - equipment
Rent revenue
Royalty revenue (exempt from taxation)
Doubtful debts expense
Entertainment expense (non-deductible)
Gain on sale of equip. (P19,000 - P18,000)
Annual leave expense
Income (expenses) for tax purposes:
Depreciation - motor vehicle
Depreciation - equipment
Rent revenue collected (P16,000 + P2,400 - P2,800)
Royalty revenue (exempt from taxation)
Page 5 of 9
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18,500
4,500
20,000
(16,000)
(5,000)
2,300
1,500
(1,000)
5,000
(15,000)
15,600
-
FAR.FinPB5.22
Bad debts written off (P2,500 + P2,300 - P3,000)
Entertainment expense (non-deductible)
Loss on sale of equip. - tax [P19,000 - (P30,000 x .7)]
Annual leave paid (P5,000 + P6,000 - P4,500)
Taxable profit
Tax rate
Current tax expense
(1,800)
(2,000)
(6,500)
20,100
30%
6,030
Question No. 41 - C
Comparison of carrying amount of asssets/liabilities and tax base
Receivables
Rent receivable
Motor vehicle
Equipment
Provision for annual leave
Carrying
amount
12,000
2,800
2,250
40,000
4,500
Tax base
15,000
55,000
-
Difference
3,000
2,800
2,250
15,000
4,500
Remarks
Deductible
Taxable
Taxable
Deductible
Deductible
Inc(Dec)
(1,230)
1,200
Effect on tax
expense
Credit
Credit
Tax base of Receivables - (P12,000 + P3,000)
Tax base of equipment - [P100,000 - (P100,000*0.15*3)]
Deferred tax liability
Deferred tax asset
Journal entry:
Deferred tax liability
Deferred tax asset
Income tax expense
Ending
1,515
6,750
Beginning
2,745
5,550
1,230
1,200
2,430
Question No. 42 - A
Fair value, 12/31/21 (P115M + P11.6M)
Less carrying amount, 12/31/21 (P120M x 37/40)
Revaluation surplus, 12/31/21
Question No. 43 - B
Revaluation surplus, 12/31/21 (see no. 42)
Decrease in decommissioning liability
Revaluation decrease:
Fair value, 12/31/22 (P107M + P7.2M)
Less carrying amount, 12/31/22 (P126.6M x 36/37)
Revaluation surplus, 12/31/22
Question No. 44 - D
June 1 (50,000 shares x P10)
June 5
June 15 [(100,000 x P15)+(5,000 x P35)]
June 25
Total shareholders' equity, 6/30/22
Question No. 45 - D
Share premium, 12/31/21 (P160,000 + P600,000)
April 30 - retirement of PS [1,000 x (P25 - P20)]
July 31 - re-issuance of TS [800 x (P50 - P42.5*)]
Page 6 of 9
(in millions)
126.6
111.0
15.6
(in millions)
15.600
5.000
114.200
123.178
(8.978)
11.622
500,000
600,000
1,675,000
2,775,000
760,000
(5,000)
6,000
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FAR.FinPB5.22
761,000
* Cost per share of treasury shares after share split (P85/2)
Question No. 46 - D
Retained earnings, 1/1/22
Prior period error
Cash and share dividends
Net income (P58,500 - P6,000 - P2,500)
Retained earnings, 12/31/22
Question No. 47 - C
Total equity
Less preference shareholders equity:
Liquidation value (20,000 + P110)
PS dividend (P2M x 12% x 3)
Ordinary shareholders equity
/ Number of ordinary shares outstanding
Book value per share - ordinary
112,500
(10,500)
(60,000)
50,000
92,000
8,250,000
2,200,000
720,000
2,920,000
5,330,000
200,000
26.65
Question No. 48 - C
Profit to ordinary for 2021 (1,000,000 x P4.8)
Add preference share dividends in 2021 (P2,000,000 x 10%)
Profit for 2021
Increase in profit for 2022 (P5,000,000 x 10%)
Profit for 2022
Less preference share dividends 2022 (P2,000,000 x 1/2 x 10%)
Profit to ordinary for 2022
Divide by weighted aveg ordinary shares outs. (1 million x 3)
Earnings per share for 2022
Question No. 49 - A
Question No. 50 - B
Retained earnings (P7,000 x .7)
Income tax payable
Cost of sales (Inventory, beg.)
4,800,000
200,000
5,000,000
500,000
5,500,000
100,000
5,400,000
3,000,000
1.80
4,900
2,100
7,000
Question No. 51 - D
Question No. 52 - D
Question No. 53 - D
Bank overdraft
Accounts receivable with credit balances
Accounts payable (P3,000,000 + P150,000 + P200,000)
Notes payable - current portion
Accrued expenses
Total current liabilities
Question No. 54 - D
Question No. 55 - C
Question No. 56 - C
Question No. 57 - D
Net sales
Cost of goods sold
Gross profit
Selling expenses
G & A expenses
Operating income
Dividend income
Page 7 of 9
50,000
100,000
3,350,000
500,000
300,000
4,300,000
390,000
(227,400)
162,600
(41,600)
(48,600)
72,400
3,600
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FAR.FinPB5.22
Loss on sale of land
Interest expense
Profit before tax
Income tax expense
Profit
(8,000)
(8,200)
59,800
(23,920)
35,880
Question No. 58 - A
Profit before income tax
Adjustments for:
Depreciation on property, plant and equipment
Provision for impairment losses
Unrealized foreign exchange gains
Fair value adjustment gain on FA at FVTPL
Fair value adjustment loss on investment property
Share of profit of associate
Gain on sale of FA at AC
Loss on sale of equipment
Gain on debt extinguishment
Gain on distribution of non-cash assets to owners
Interest expense
Interest income
Operating income before changes in working capital accounts
Changes in operating assets and liabilities:
Increase in accounts receivable
Decrease in inventory
Increase in accounts payable
Net cash generated from operations
Interest paid
Interest received
Income taxes paid
Net cash provided by operating activities
880,000
250,000
150,000
(60,000)
(130,000)
190,000
(220,000)
(85,000)
70,000
(125,000)
(40,000)
150,000
(80,000)
950,000
(350,000)
100,000
300,000
1,000,000
(200,000)
90,000
(160,000)
730,000
Supporting computations:
Interest expense
Interest payable, beginning of the year
Interest payable, end of the year
Interest paid
150,000
100,000
(50,000)
200,000
Interest income
Interest receivable, beginning of the year
Interest receivable, end of the year
Interest received
80,000
30,000
(20,000)
90,000
Question No. 59 - B
Minimum profit or loss to be considered as reportable (P33.2M x 10%)
Question No. 60 - B
Question No. 61 - B
Cash and cash equivalents
Trade and other receivables
Inventories (P500,000 x 450/400)
Prepayments (P50,000 x 450/180)
Debt investments at amortized cost
Property, plant and equipment (P1,000,000 x 450/150)
Accumulated depreciation (P300,000 x 450/150)
Investment property at fair value
Total Assets
Trade and other payables
Page 8 of 9
3,320,000
200,000
350,000
562,500
125,000
200,000
3,000,000
(900,000)
600,000
4,137,500
(250,000)
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FAR.FinPB5.22
Short-term borrowings
Note payable to bank
Equity
Share capital (P400,000 x 450/100)
Retained earnings (Balance)
(180,000)
(800,000)
2,907,500
(1,800,000)
1,107,500
Question No. 62 - B
Question No. 63 - B
Question No. 64 - D
The investment is measured at fair value. See PFRS for SMEs Section 11 par. 11.14(c)(i).
Question No. 65 - B
The investment is measured at cost. See PFRS for SMEs Section 11 par. 11.14(c)(ii).
Question No. 66 - D
Question No. 67 - A
2020
RA (P204,000 - P8,000)
Cost (P200,000 + P2,000)
Impairment loss
196,000
202,000
(6,000)
2021
RA (P220,000 - P8,000)
212,000
Reversal Impairment loss recognied in 2020
Dividend income (P40,000 x .3)
6,000
12,000
18,000
2022
RA (P180,000 - P8,000)
Cost (P200,000 + P2,000)
Impairment loss
172,000
202,000
(30,000)
Question No. 68 - B
Question No. 69 - A
Debit
Cash (P5,912 + P450 - P190)
Accounts receivable (P5,240 - P450)
Supplies on hand
Furniture and equipment (P6,100 + P3,200)
Accounts payable
Share capital
Retained earnings
Service revenue (P5,200 + P2,025 + P80)
Office expense (P4,320 - P3,200)
Total
Question No. 70 - A
Service revenue (P5,200 + P2,025 + P80)
Office expense (P4,320 - P3,200)
Net income
Page 9 of 9
Credit
6,172
4,790
2,967
9,300
7,044
8,000
2,000
7,305
1,120
24,349
24,349
-
7,305
(1,120)
6,185
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FAR.FinPB5.22
1.
2.
3.
4.
A
D
A
D
13. A
W/o priority 18,000* 39.22
14. D
348,000 + 232,000 = 580 ÷ 80% x 20% = 145,000
5. B
A
B
TOTAL
Interest 348,000
LOR
(75,000)
Payment273,000
LOR: 625k-500k= 125k
`202,000
(50,000)
152,000
550,000
(125,000)
425,000
6. B
Munoz
Nieva
Perez TOTAL
Interest 312,500 187,500
75,000 575,000
LOR
(250,000) (150,000) (100,000) (500,000)
Balance 62,500 37,500 (25,000) 75,000
7. D
Total Loss: 7,000 + 21,800 +34,400= 63,200
R
E
TOTAL
Interest 25,600
47,000
72,600
LOR
(25,280) (37,920)
(63,200)
Balance
320
9,080
9,400
8. C
9. A
10. C
11. A
Est Cash (71,000+ 12,500+ 11,000)
Less: Prioritized Claims
FS
69,000
PS- SP
12,500
w/ Priority
3,000
Cash Available to Unsecured Claims
Less: Unsecured Claims
PS-UP
7,500
w/o Priority
18,000
Est Deficiency
ERR
7,059
94,500
84,500
10,000
25,500
15,500
10,000/25,500
12. C
PS- SP 12,500 * 100%
PS-UP 7,500 * 39.22%
Total Pymt
39.22%
12,500
2,941
15,441
Cash, beg= Liab to be liquid + SHE – Assets to be
realized
Cash= 285,000 + 131,600 – 107,500 = 309,100
15. B
16. B
Inv, beg
Purchases
Shipments 253,750* 1.3
TGAS
• With silent shipment in transit
17. C
Required Shipment @BP
Recorded by the branch
SIT
101,500
350,000
329,875
781,375
329,875
263,900
65,975
BRANCH Inv, end: 73,500 + 65,975= 139,475
HO: 139,475- 48,475 = 91,000
91,000/ 1.3=
70,000
OV:
48,475
Inv, end @ cost
118,475
HOME OFFICE Inv, end
210,000
Combined In, end
328,475
18. D
HONI: 2.1M – (35k + 1,575M -253750
– 210k) – 507,500 =
446,250
RBNI: 1.26 – (101,500 + 329,875
+ 350,000 – 139,475) – 192,500 = 425,600
RDP: 91,875 – (91,000/1.3 * .3 )
CNI
70,875
942,725
19. D
PNI from its own operation
(367,500 – 210,000 – 78,750)
SNI (70,000- 61,250 -17,500)
78,750
(8,750)
Cost of investment
Less book value of net assets
Overstatement of building
Annual amortization
385,000
437,500
(52,500)
5,250
CNI = P78,750 – P8,750 + P5,250
75,250
20. D
Parent’s Retained Earnings, beg
Plus CNI (subsidiary is fully-owned)
Less Parent’s Cash dividends
Consolidated Retained Earnings, end
P 446,250
75,250
8,750
P 512,750
21. C
22. B
23. D
CNI = [(P122,500 – P42,000) + P78,750] + P1,531 –
P 1,313 + P4,725 – P3,150
= P 161,043
24. B
PNI O/O (P122,500 – P42,000)
Plus parent’s investment income:
Adjusted SNI
(P78,750 + P1,531 – P1,313) P78,968
X CI%
80%
Inv inc before dwnstrm adj P63,174
Add net dwnstrm adjstmnt
(P4,725 – P3,150)
1,575
Share of parent’s shareholders from CNI
25. B
Adjusted SNI
X by NCI%
NCI in CNI (P161,043 – P145,249)
P 80,500
64,749
P 145,249
P 78,968
20%
P 15,794
26. C
Goodwill is not being recorded by the parent nor
the subsidiary. It is only being included in the
consolidated FS thru WPEE.
27. A
Total FV 196,000/ .80
FV of the NA
GW
245,000
230,000
15,000
TOTAL ASSETS:
Parent (615k- 196k)
Subsidiary
GW
Total
419,000
301,000
15,000
735,000
28. D
196,000/ .80 * .20 = 49,000
29. A
Total assets (P12,500 + P17,500 + P23,000 +
78,000 + P5,500 + P12,500)
P 149,000
30. B
Consolidated net income (P820,000 – P525,000 –
212,500 – P2,100)
P 80,400
31. A
32. D
33. A
Dec in spot rate (P0.4295 – P0.4245)
Multiply by
Foreign exchange gain
P 0.005
FC 100,000
P
500
34. A
Amount Due (FC 100,000 x P0.4300)
P 43,000
35. D
Inc in spot rate (P0.4345 – P0.424)
Multiply by
Foreign exchange loss
P
0.01
FC 100,000
P ( 1,000)
36. D
Dec in Forward rate (P0.4300 – P0.4325)
Multiply by
Foreign exchange loss
P0.0025
FC 100,000
P ( 250)
37. C
Loss on FCT (P0.4345 – P0.4295) x FC100,000 P ( 500)
Gain on FEC (P0.4345 – P0.4325) x FC100,000
200
Net overall loss, also
(P0.4325 – P0.4295) x FC100,000
P ( 300)
38. C
Percentage (%) of Completion Method
CIP
Bohol (P254,167 - P35,417)
Davao (P100,000 + P 25,000)
Bohol + Davao
(P180,000 + P150,000)
Contract Asset
P218,750
125,000
P343,750
PB
39. A
Zero Profit Method
CIP
Bohol
Davao
PB
Contract Liability
P218,750
100,000
330,000
P 13,750
P318,750
330,000
P(11,250)
40. A
Cash Collection
PB
P1,500,000
AR, end
( 500,000 )
Collection P1,000,000
Actual cost to date
CIP
P1,600,000
GP in 2021
200,000
Cost incurred P1,400,000
41. D
42. A
43. A
44. D
45. A
46. B
47. C
48. B
58. C
59. D
Total cost
(P532,000 + P8,218) - (P15,960 x 80%)
Divide by units produced (400 – 15)
Unit cost
P 527,450
385
P 1,370
60. D
Total cost [P532,000 - (15 x P1,330)]
Divide by units produced (400 – 15)
Unit cost
P 512,050
385
P 1,330
61. D
62. A
Purchases – A
Joint operation - A
400
960
Purchases – B
49. B
FOC (240 x P3.56) + (240 x P8.40)
50. A
Cost from PD
(11,000 x P3.56) + (5,500 x P8.40)
P
2,870
P 85,360
Expenses – A
320
720
800
40
200
Sales – A
Sales – B
Other income – B
Profit - credit balance
63. B
51. A
52. D
53. B (Refer to above solution)
54. C
55. A (Refer to above solution)
56. A (Refer to above solution)
57. C
FO Applied
Set-up
Inspection
Materials handling
Engineering
Job #901
P 800
440
300
1,250
2,790
64. C
65. A
66. B
Collection
Cash (16,000*5)
Credit (5,800*3)
Total
Less:
Delivery Exp
Commission
Remittance
80,000
17,400
97,400
2,400
7,792
10,192
87,208
67. D
Sales
Cash (16,000*5) 80,000
Credit (17,400*3) 52,200
132,200
Less COS (12,000*10)+4,000* 8/10 99,200
Gross Profit
33,000
Less:
Delivery Exp
2,400
Commission
7,792
10,192
Net Profit
22,808
68. A
Inv, end (12,000*10)+4,000* 2/10
24,800
69. A
The entire Initial Franchise fee is recognized in full
at the time the franchise license was granted
70. D
400,000/5 * 1/12= 6,667