TEAM PRTC
Excel Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
Auditing (AUD)
FIRST PRE-BOARD EXAMINATION
CPA Review
Since 1977
SOLIMAN/UY/AGUILA/RICAFRENTE
OCAMPO/OCAMPO
March 15, 2025
Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of 70 items and the
exam is good for three (3) hours. Good luck!
1. Which of the following audit risk components may be
assessed in nonquantitative terms?
6. An auditor who accepts an audit engagement and does
Control
Detection
Inherent
not possess the industry expertise of the business
risk
risk
risk
entity should
a.
Yes
Yes
No
a. Engage financial experts familiar with the nature of
the business entity.
b.
Yes
No
Yes
b. Obtain knowledge of matters that relate to the
c.
Yes
Yes
Yes
nature of the entity’s business.
d.
No
Yes
Yes
c. Refer a substantial portion of the audit to another
CPA who will act as the group (principal) auditor.
2. While assessing the risk of material misstatement,
d. First inform management that an unqualified
auditors identify risk, relate risk to what could go
opinion cannot be issued.
wrong, consider the magnitude of risk, and
a.
Assess the risk of misstatements due to illegal
7. Which of the following factors most likely would lead a
acts.
CPA to conclude that a potential audit engagement
b. Consider the complexity of the transactions
should not be accepted?
involved.
a. There are significant related-party transactions
c. Consider the likelihood that the risk could result in
that management claims occurred in the ordinary
material misstatements.
course of business.
d. Determine materiality levels.
b. Internal control activities requiring the segregation
of duties are subject to management override.
3. As the acceptable level of detection risk decreases, the
c. Management continues to employ an inefficient
assurance directly provided from
system of information technology to record
a. Substantive tests should increase.
financial transactions.
b. Substantive tests should decrease.
d. It is unlikely that sufficient appropriate evidence is
c. Tests of controls should increase.
available to support an opinion on the financial
d. Tests of controls should decrease.
statements.
4. As a lower acceptable level of materiality is
established, the auditor should plan more work on 8. Rey, CPA requested permission to communicate with
the predecessor auditor and review certain portions of
individual accounts to
the predecessor auditor’s working papers. The
a. Find smaller misstatements.
prospective client’s refusal to permit this will bear
b. Find larger misstatements.
directly on Rey CPA’s decision concerning the
c. Increase the tolerable misstatement in the
a. Adequacy of the audit plan.
accounts.
b. Ability to establish consistency in application of
d. Decrease the risk of assessing control risk too low.
accounting principles between years.
c. Apparent scope limitation.
5. Which of the following statements is not correct about
d.
Integrity of management.
materiality?
a.
The concept of materiality recognizes that some
matters are important for fair presentation of 9. Which of the following matters is generally included in
an auditor's engagement letter?
financial statements in conformity with GAAP,
a. Identification of the applicable financial reporting
while other matters are not important.
framework for the preparation of the entity's
b. An auditor considers materiality for planning
financial statements.
purposes in terms of the largest aggregate level of
b. The factors to be considered in setting preliminary
misstatements that could be material to any one of
judgments about materiality.
the financial statements.
c. Management's liability for the illegal acts
c. Materiality judgments are made in light of
committed by its employees.
surrounding circumstances and necessarily involve
d. The auditor's responsibility to search for significant
both quantitative and qualitative judgments.
internal control deficiencies.
d. An auditor’s consideration of materiality is
influenced by the auditor’s perception of the needs
of a reasonable person who will rely on the
financial statements.
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10. Before accepting an engagement to audit a new client
c. The audit procedures selected will achieve specific
that has previously been audited by another CPA firm,
audit objectives.
a CPA is required to obtain
d. Each account balance will be tested under either
a. An assessment of fraud risk factors likely to cause
tests of controls or tests of transactions.
material misstatements.
b. An understanding of the prospective client's 16. Before applying substantive procedures to the details
industry and business.
of asset accounts at an interim date, an auditor should
c. The prospective client's signature to a written
assess:
engagement letter.
a. Control risk at below the maximum level.
d. The prospective client's consent to make inquiries
b. Inherent risk at the maximum level.
of the predecessor auditor.
c. The difficulty in controlling the incremental audit
risk.
11. In order to respond to the increased risks that could be
d. Materiality for the accounts tested as insignificant.
present in the initial audit of an entity, an external
auditor should consider the assignment of
17. Which of the following is most likely to be considered
a. Internal audit personnel with appropriate levels of
a "further audit procedure?"
capabilities and competence.
a. Communication with the predecessor auditor.
b. Accounting personnel with appropriate levels of
b. Preparation of an engagement letter.
capabilities and competence.
c. Preparation of a flowchart of the sales function.
c. Senior management with appropriate levels of
d. Performance of tests of controls.
capabilities and competence.
d. External audit personnel with appropriate levels of 18. No deletions of audit documentation are allowed after
capabilities and competence.
the:
a. Client's year-end.
12. Audit plans should be designed so that
b. Documentation completion date.
a. Most of the required procedures can be performed
c. Last date of significant fieldwork.
as interim work.
d. Report release date.
b. Inherent risk is assessed at a sufficiently low level.
c. The auditor can make constructive suggestions to 19. Which of the following factors most likely would affect
management.
an auditor's judgment about the quantity, type, and
d. The audit evidence gathered supports the auditor's
content of the auditor's working papers?
conclusions.
a. The assessed level of control risk.
b. The likelihood of a review by a concurring (second)
13. The element of the audit planning process most likely
partner.
to be agreed upon with the client before
c. The number of personnel assigned to the audit.
implementation of the audit strategy is the
d. The content of the management representation
determination of the
letter.
a. Evidence to be gathered to provide a sufficient
basis for the auditor's opinion.
20. Which of the following is the best example of a
b. Procedures to be undertaken to discover litigation,
substantive procedure?
claims, and assessments.
a. Examining a sample of cash disbursements to test
c. Pending legal matters to be included in the inquiry
whether expenses have been properly approved.
of the client's attorney.
b. Confirmation of balances of accounts receivable.
d. Timing of inventory observation procedures to be
c. Comparison of signatures on checks to a list of
performed.
authorized signers.
d. Flowcharting of the client's cash receipts system.
14. Prior to commencing fieldwork, an auditor usually
discusses the general audit strategy with the client’s 21. Which of the following comparisons would be most
management. Which of the following details do
useful to an auditor in evaluating the results of an
management and the auditor usually agree upon at
entity's operations?
this time?
a. Prior-year accounts payable to current-year
a. The specific matters to be included in the
accounts payable
communication with the audit committee.
b. Prior-year payroll expense to budgeted currentb. The minimum amount of misstatements that may
year payroll expense
be considered to be significant deficiencies.
c. Current-year revenue to budgeted current-year
c. The schedules and analyses that the client’s staff
revenue
should prepare.
d. Current-year warranty expense to current-year
d. The effects that inadequate controls may have
contingent liabilities
over the safeguarding of assets.
22. Which of the following is an analytical procedure that
15. An auditor should design the audit plan so that
an auditor most likely would perform near completion
a. All material transactions will be selected for
of an audit?
substantive testing.
a. Comparing each individual expense account
b. Substantive tests prior to the balance sheet date
balance with the relevant budgeted amounts and
will be minimized.
investigating any significant variations
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TEAM PRTC
TEAM PRTC
b. Testing the effectiveness of internal control
d. Extended auditing procedures are required to
procedures that appear to be suitably designed to
detect unrecorded transactions even if there is no
prevent or detect material misstatements
evidence that material errors and fraud may exist.
c. Reading the financial statements and considering
whether there are any unusual or unexpected 28. The primary purpose of an independent audit of
balances that were not previously identified
financial statements is to:
d. Calculating each individual expense account
a. provide a basis for assessing management’s
balance as a percentage of total entity expenses
performance.
and comparing the results with industry averages
b. comply with laws and regulations.
c. assure management that the financial statements
23. Which of the following statements concerning
are
unbiased
and
free
from
material
analytical procedures is correct?
misstatements.
a. Analytical procedures may be omitted entirely for
d. provide users with an unbiased opinion about the
some financial statement audits.
fairness of information presented in the financial
b. Analytical procedures used during risk assessment
statements.
of the audit should not use nonfinancial
information.
29. The level of assurance provided by an audit of
c. Analytical procedures usually are effective and
detecting a material misstatement is referred to as:
efficient for tests of controls.
a. Absolute assurance.
d. Analytical procedures alone may provide the
b. High assurance.
appropriate level of assurance for some assertions.
c. Negative assurance.
d. Reasonable assurance.
24. Which of the following situations represents a risk
factor that relates to misstatements arising from 30. Professional
skepticism
dictates
that
when
misappropriation of assets?
management makes a statement to the auditors, the
a. A high turnover of senior management.
auditors should:
b. A lack of independent checks.
a. disregard the statement because it ranks low on
c. A strained relationship between management and
the evidence quality scale.
the predecessor auditor.
b. corroborate the evidence with other supporting
d. An inability to generate cash flow from operations.
documentation whenever possible.
c. require that the statement be put in writing.
25. Because of the risk of material misstatement, an audit
d. believe the statement in order to maintain the
of financial statements in accordance with generally
professional client-auditor relationship.
accepted auditing standards should be planned and
performed with an attitude of
31. Which of the following is responsible for an entity's
a. Objective judgment.
financial statements?
b. Independent integrity.
a. The entity's management.
c. Professional skepticism.
b. The entity's audit committee.
d. Impartial conservatism.
c. The entity's internal auditors.
d. The entity's board of directors.
26. Which of the following factors would most likely
heighten an auditor's concern about the risk of 32. The difference between what the public expects to get
fraudulent financial reporting?
from the audited financial statements and what the
a. Large amounts of liquid assets that are easily
public is actually getting is known as:
convertible into cash.
a. Credibility gap
b. Low growth and profitability as compared to other
b. Audit gap
entities in the same industry.
c. Expectation gap
c. Financial management's participation in the initial
d. Level of assurance gap
selection of accounting principles.
d. An overly complex organizational structure 33. An engagement letter is best described as:
involving unusual lines of authority.
a. A letter from company management to the
27. Which of the following statements best describes the
auditors specifying management's expectations for
auditor’s responsibility regarding the detection of
completion of the audit on a timely basis and the
material errors and fraud?
fees.
a. The auditor is responsible for the failure to detect
b. A letter from the auditors to company
material errors and fraud only when such failure
management specifying that management is
results from the nonapplication of generally
responsible for the financial statements and the
accepted accounting principles.
auditors will issue an opinion on the financial
b. Auditing procedures may or may not need to be
statements.
extended if the auditor’s analysis indicates the
c. A letter from the auditors to company
existence of fraud risk factors.
management that specifies the responsibilities of
c. The auditor is responsible for the failure to detect
both the company and the auditors in completing
material errors and fraud only when the auditor
the audit and the timing for its completion.
fails to confirm receivables or observe inventories.
d. A letter from the Board of Directors' audit
committee to the auditor that indicates that the
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auditor has been engaged to perform the audit and
the fees to be paid.
d. entity has complied with requirements of quality
control.
34. Which of the following actions may be appropriate if 39. As used in auditing, which of the following statements
the auditor is unable to agree to a change of the
best describes "assertions"?
engagement and is not permitted to continue the
a. Assertions are the representations of management
original engagement?
as to the reliability of the information system.
I.
Auditor should withdraw from the
b. Assertions are the auditor's findings to be
engagement
communicated in his audit report.
II.
Consider whether there is any obligation to
c. Assertions are the representations of management
report to the board of directors or
as to the fairness of presentation of the financial
shareholders the circumstances necessitating
statements.
withdrawal
d. Assertions are found only in the notes to the
a. I
financial statements.
b. I, II
c. II
40. External auditors often confirm assertions contained in
d. Neither I nor II
the organization's financial statements and accounting
records with third parties. Which of the following best
35. The primary purpose of the auditor’s consideration of
explains why confirmation produces an evidence of
internal control is to provide a basis for:
high quality?
a. determining whether procedures and records that
a. Written assertions from knowledgeable third
are concerned with the safeguarding of assets are
parties provide sufficient evidence to achieve most
reliable.
audit objectives.
b. constructive suggestions to clients concerning
b. Confirmation by knowledgeable third parties is
deficiencies in internal control.
usually the most relevant evidence available.
c. determining the nature, timing, and extent of audit
c. Confirmation by knowledgeable third parties is
tests to be applied.
usually the least costly evidence to obtain.
d. the expression of an opinion.
d. Confirmation by knowledgeable third parties is
highly competent because of its independent
36. Which of the following best describes the interrelated
source.
components of internal control?
a. Organizational structure, management philosophy, PROBLEM NO. 1
and planning.
In connection with your audit of Antares Corp. for the
b. Control environment, risk assessment, control
year ended Dec. 31, 2025, you found the following
activities,
information
and
communication
information relating to certain inventory transactions
systems, and monitoring.
from your observation of the client’s physical count and
c. Risk assessment, backup facilities, responsibility
review of sales and purchases cutoff:
accounting, and natural laws.
d. Legal environment of the firm, management a. Goods costing P180,000 were received from a vendor
philosophy, and organizational structure.
on Jan. 3, 2026. The related invoice was received and
recorded on Dec. 30, 2025. The goods were shipped
37. When considering the effectiveness of internal control,
on Dec. 31, 2025, terms FOB shipping point.
the auditor should recognize that inherent limitations
do exist. Which of the following is an example of b. Goods costing P200,000, sold for P300,000, were
shipped on Dec. 31, 2025, and were received by the
inherent limitations in a client's internal control?
customer on Jan. 2, 2026. The terms of the invoice
a. The effectiveness of procedures depends on the
were FOB shipping point. The sale was recorded in
segregation of employee duties.
2026.
b. Procedures are designed to assure the execution
and recording of transactions in accordance with c.
management's authorization.
c. In the performance of most control procedures,
there are possibilities of errors arising from
mistakes in judgment.
d. Procedures for handling large numbers of d.
transactions are processed by electronic data
processing equipment.
The invoice for goods costing P150,000 was received
and recorded as a purchase on Dec. 31, 2025. The
related goods, shipped FOB destination, were received
on Jan. 2, 2026.
38. The purpose of tests of controls is to provide e.
reasonable assurance that the:
a. accounting treatment of transactions and balances
is valid and proper.
f.
b. control procedures are functioning as intended.
c. entity has complied with disclosure requirements
of PFRS.
Goods costing P250,000 were received and recorded
as a purchase on Dec. 31, 2025. These goods are held
on consignment from a vendor.
A P600,000 shipment of goods to a customer on Dec.
30, 2025, terms FOB destination, was recorded as a
sale upon shipment. The goods, costing P400,000,
were received by the customer on Jan. 6, 2026.
Goods costing P160,000, recorded as a sale upon
shipment for P240,000, were shipped on Dec. 31,
2025. These goods are out on consignment with the
customer and sold to a third party on Jan. 5, 2026.
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TEAM PRTC
QUESTIONS:
TEAM PRTC
PROBLEM NO. 3
Dec. 31, 2024
Based on the given information and the result of your
Notes payable
P388,020
audit, answer the following:
Cash
P388,020
41. The inventory as of Dec. 31, 2025 is understated by
a. P140,000
c. P490,000
Dec. 31, 2025
b. P330,000
d. P580,000
Notes payable
P388,020
42. The profit for the year ended Dec. 31, 2025 is
Cash
P388,020
misstated by
a. P 10,000
c. P350,000
QUESTIONS:
b. P190,000
d. P430,000
Based on the given information and the result of your
43. The working capital as of Dec. 31, 2025 is misstated
audit, you are to provide the answers to the following:
by
46. What is the acquisition cost of the equipment?
a. P 10,000
c. P350,000
a. P2,070,000
c. P3,104,160
b. P190,000
d. P430,000
b. P2,370,000
d. P3,404,160
44. The following statements relate to audit of inventories:
I. Attendance at physical inventory counting involves 47. The amount of interest expense to be recognized in
2025 is
inspecting the inventory to ascertain its existence
a. P188,898
c. P207,000
and evaluate its condition, and performing test
b. P199,122
d. P221,898
counts.
II. If attendance at physical inventory counting is
48. The carrying amount of the note payable at Dec. 31,
impracticable, the auditor shall modify the opinion
2025 is
in the auditor’s report.
a. P1,689,858
c. P1,888,980
III. Attendance at physical inventory counting is
b. P1,700,082
d. P2,052,858
impracticable where inventory is held in a location
that may pose threats to the safety of the auditor. 49. The following statements relate to audit of property,
IV. Inspection of documentation of the subsequent
plant and equipment:
sale of specific inventory items purchased after the
I. When few property and equipment transactions
physical inventory counting may provide sufficient
occur during the year the continuing auditor
appropriate audit evidence about the existence
usually obtains an understanding of internal
and condition of inventory.
control and performs extensive tests of current
a. Only one statement is true.
year property and equipment transactions.
b. Only two statements are true.
II. In testing for unrecorded acquisitions of
c. Only one statement is false.
equipment, an auditor is most likely to select items
d. All the statements are true.
of equipment from the accounting records and
then locate them during the plant tour.
45. Purchase cut-off procedures should be designed to
III. The auditor may conclude that depreciation
a. Test whether all inventory purchased and received
charges are insufficient by noting large numbers of
before year-end was recorded.
fully depreciated assets.
b. To detect whether merchandise included in the
IV. An auditor's program to examine long-term debt
physical count at year-end was not recorded as a
most likely would include steps that require
sale in the subsequent period.
correlating interest expense recorded for the
c. Both a and b.
period with outstanding debt.
d. Neither a nor b.
a. Only one statement is true.
PROBLEM NO. 2
b. Only two statements are true.
c. Only one statement is false.
On Jan. 1, 2024, Betelgeuse Corp. acquired a new
d. All the statements are true.
manufacturing equipment on installment basis. The
deferred payment contract provided for a down 50. An auditor is verifying the existence of newly acquired
payment of P300,000 and an 8-year note for
fixed assets recorded in the accounting records. Which
P3,104,160. The note is to be paid in 8 equal annual
of the following is the best evidence to help achieve
installment payments of P388,020, including 10%
this objective?
interest. The payments are to be made on Dec. 31 of
a. Oral evidence obtained by discussions with
each year, beginning Dec. 31, 2024. The equipment
operating management.
has a cash price equivalent of P2,370,000.
b. Documentary support obtained by vouching
entries to subsidiary records and invoices.
Betelgeuse made the following journal entries:
c. Documentary support obtained by reviewing titles
and tax returns.
Jan. 1, 2024
d. Physical examination of a sample of newly
recorded fixed assets.
Equipment
P3,404,160
Cash
P 300,000
Notes payable
3,104,160
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QUESTIONS:
Rigel Corp.’s Intangible Assets include the following:
Patent
Trademark
Franchise
Computer software
Costs of training
employees resulting
in a team of skilled
staff
Costs of internally
generated customer
list
Cost
P1,100,000
1,200,000
680,000
120,000
Useful Life
10 years
Indefinite
10 years
3 years
200,000
2 years
50,000
2 years
All the items were acquired or incurred during 2025, the
first year of the entity’s operations. It is the entity’s policy
to take full year amortization in the year of acquisition.
Additional information:
Patent
The patent was purchased from the inventor who asked
P1,100,000 for it. The entity paid for the patent as follows:
cash, P400,000; issuance of 10,000 shares of its own
ordinary shares, par P10 (fair value, P20 per share); and a
note payable due at the end of three years, face amount,
P500,000, noninterest-bearing. The current interest rate
for this type of financing is 12 percent.
Trademark
Based on the given information and the result of your
audit, answer the following:
51. Carrying amount of patent as of Dec. 31, 2025
a. P 860,310
c. P 955,900
b. P 908,105
d. P1,045,000
52. Carrying amount of trademark as of Dec. 31, 2025
a. P571,429
c. P 800,000
b. P742,857
d. P1,040,000
53. Carrying amount of franchise as of Dec. 31, 2025
a. P494,680
c. P549,644
b. P538,733
d. P612,000
54. Carrying amount of intangible assets as of Dec. 31,
2025
a. P2,097,847
c. P2,394,990
b. P2,154,990
d. P2,474,990
55. The following statements relate to audit of intangible
assets:
I. An auditor most likely would review or re-compute
amortization
and
determine
whether
the
amortization period is reasonable in support of
management’s financial statement assertion of
valuation.
II. Patent is amortized over the shorter of the
remaining legal life and its economic life.
III. Expenditures incurred after the initial recognition
of an acquired intangible asset or after completion
of an internally generated intangible asset are
rarely recognized in the carrying amount of an
asset.
IV. When testing a client's additions to an asset for
research and development, the auditor must
remember that such costs should be amortized
over a maximum period of 20 years.
The trademark is for a very successful product. A
competitor recently introduced a product that is in direct
competition with the entity’s product, thus suggesting the
need for an impairment test. Data gathered by the entity
suggests that the useful life of the trademark is still
a. Only one statement is true.
indefinite, but the cash flows expected to be generated by
b. Only two statements are true.
the trademark have been reduced either to P40,000 per
c. Only one statement is false.
year (with a probability of 70%) or to P80,000 per year
d. All the statements are true.
(with 30% probability). The appropriate risk-free interest
rate is 5%. The appropriate risk-adjusted interest rate is PROBLEM NO. 4
7%.
The following data were taken from your current working
papers in connection with your audit of the Arcturus Corp.’s
Franchise
financial statements for the year ended Dec. 31, 2025.
On Jan. 1, 2025, the entity signed an agreement to operate
as franchisee of Araw Inc. for an initial franchise of Cash account consists of the following items:
Petty cash fund
P 25,000
P680,000. Of this amount, P200,000 was paid when the
agreement was signed and the balance was payable in four
PNB checking account
(37,500)
annual payments of P120,000 each, beginning Jan. 1,
BDO current account
344,250
2026. The agreement provides that the down payment is
Total per GL
P331,750
not refundable and no future services are required of the
franchisor. The implicit rate for loan of this type is 14%. a. The count of the cashier’s accountability on Jan. 2,
The agreement also provides the 5% of the revenue from
2026, revealed total bills and coins of P9,000.
the franchise must be paid to the franchisor annually. The
Unreplenished vouchers for various expenses totaled
entity’s revenue from the franchise for 2025 was
P16,000, of which P3,000 pertains to Jan. 2026.
P8,000,000.
b. On Dec. 29, 2025, a check for P87,500 was drawn
against PNB checking account resulting in bank
Computer software
overdraft of P37,500. The check was picked up by the
The computer software is for a computer-controlled
supplier on Jan. 3, 2026.
machine tool that cannot operate without the software.
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TEAM PRTC
TEAM PRTC
c.
On Dec. 31, 2024, the issuer of the bonds is in financial
difficulties and the entity estimated that the issuer will not
be able to pay interest for 2024 and 2025 and will be able
On Apr. 1, 2022, Sirius Corp. purchased 5-year
to collect only P10,000,000 on Dec. 31, 2026.
P10,000,000 10% bonds dated Jan. 1, 2022. The bonds
were purchased to yield 12%. Interest is payable annually
QUESTIONS:
every Dec. 31. The entity holds investment in bonds in
Based on the given information and the result of your
order to collect contractual cash flows.
audit, answer the following: (Round off present value
factors to four decimal places)
The entity monitors the change in credit quality of the
investment since initial recognition and taking into account
66. How much was the total amount paid to acquire the
historical information, current conditions and forwardinvestment in bonds on Apr. 1, 2022?
looking information, the entity computes the required
a. P9,278,800
c. P9,528,800
expected credit losses (ECL) as follows:
b. P9,307,164
d. P9,557,164
Required
67. How much is the amortized cost of the investment in
allowance
bonds on Dec. 31, 2022?
Date
Credit risk assessment
for ECL
a. P9,157,450
c. P9,345,256
b. P9,342,256
d. P9,392,256
12/31/22
Credit risk has not
increased significantly
68. How much should be recognized as impairment loss in
since initial recognition
P47,000
2024?
12/31/23
Credit risk has increased
a. Nil
c. P1,642,046
significantly since initial
95,200
b. P1,594,446
d. P1,689,646
recognition
69. How much should be recognized as interest income in
12/31/24
Credit-impaired
?
2025?
12/31/25
Credit risk has increased
a. Nil
c. P1,000,000
significantly since initial
b. P956,640
d. P1,159,398
recognition but the
investment is no longer
70. How much should be recognized as impairment gain in
considered credit98,200
2025?
impaired
a. Nil
c. P 892,404
Bank reconciliation statement prepared by the cashier PROBLEM NO. 5
for the BDO account follows:
Pollux Corp. is a company engaged in buying and selling
Bank balance
P310,500
manufacturing equipment. On Jan. 1, 2024, Pollux Corp.
Add: Deposit in transit
P61,250
sold equipment, with a cash price of P1,500,000. The cost
Bank service
of the equipment is P750,000. The buyer signed a deferred
charges
1,250
62,500
payment contract that provides for a down payment of
Total
373,000
P300,000 and a 5-year note for P1,705,900. The note is to
be paid in 5 equal annual payments of P341,180. The
Less: Outstanding
payments include interest and are made on Dec. 31 of each
checks
year, beginning on Dec. 31, 2024.
Check No.
Amount
214
P 2,500 @
Pollux Corp. made the following entries in relation to the
219
20,750
sale of the equipment and the related note receivable:
225
6,000
228
Book balance
8,500
28,750
P344,250
Jan. 1, 2024
Cash
Check certified by the bank in Dec. 2025.
Notes receivable
All reconciling items were traced to the bank statement. Cost of goods sold
Further investigation indicated that the deposits in
Sales
transit include a customer’s post-dated check
Inventory
amounting to P40,000. The check represents a
collection from account customer for sales made in the Dec. 31, 2024
middle of Oct. 2025.
Cash
Notes receivable
QUESTIONS:
@
P
300,000
1,705,900
750,000
P2,005,900
750,000
P341,180
P341,180
Based on the above and the result of your audit, Dec. 31, 2025
answer the following:
Cash
P341,180
56. How much is the adjusted balance of petty cash fund
Notes receivable
P341,180
as of Dec. 31, 2025?
Pollux Corp. reported the notes receivable in its statement
a. P 9,000
c. P13,000
of financial position at Dec. 31, 2024 and 2025 as part of
b. P12,000
d. P16,000
trade and other receivables.
57. How much is the adjusted BDO current account as of
Dec. 31, 2025?
QUESTIONS:
a. P336,500
c. P305,500
Based on the above and the result of your audit,
b. P296,500
d. P330,250
answer the following:
58. How much is the cash shortage as of Dec. 31, 2025?
a. Nil
c. P 9,000
61. The interest rate on the note is
b. P6,500
d. P46,500
a. 10%
c. 12%
b. 11%
d. 13%
59. How much is the adjusted cash as of Dec. 31, 2025?
a. P355,500
c. P367,500
62. Profit for 2024 is overstated by
b. P358,500
d. P398,500
a. P 49,900
c. P361,900
b. P349,900
d. P505,900
60. Which statement is incorrect regarding audit of cash?
I. The general cash account is considered a 63. Retained earnings as of Dec. 31, 2025 is overstated by
significant account in almost all audits even when
a. Nil
c. P241,562
the ending balance is immaterial.
b. P217,973
d. P349,900
II. Cash will be overstated and expenses understated
64. The working capital as of Dec. 31, 2025 is overstated
if an entity did not replenish the petty cash fund at
by
year-end and did not make the appropriate
a. Nil
c. P776,197
adjusting entry.
b. P682,360
d. P787,084
III. The starting point for the verification of the balance
in the general bank account is to obtain a bank 65. A logical substantive test for accrued interest
reconciliation from the client.
receivable would be to
IV. The primary purpose of sending a standard
a. Verify the cost, carrying value, and market value
confirmation request to financial institutions with
of notes receivable.
which the client has done business during the year
b. Verify the interest income by a calculation based
is to corroborate information regarding deposit and
on the face amount of notes and the nominal
loan balances.
interest rate.
a. Only one statement is true.
c. Recalculate interest earned and compare it to the
b. Only two statements are true.
amounts received.
c. Only one statement is false.
d. Compare the interest income with published
d. All the statements are true.
interest investment records.
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PROBLEM NO. 6
b. P794,204
d.
P1,594,446
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Excel Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
Financial Accounting and Reporting (FAR)
FIRST PRE-BOARD EXAMINATION
CPA Review
d.
e.
f.
Since 1977
OCAMPO/OCAMPO
March 16, 2025
•
4. The following statements relate to PFRSs:
I. PFRSs include PIC Q&As.
II. IFRS IC Interpretations adopted by the FSRSC are
less authoritative than PIC Q&A.
III. PFRSs may set out such requirements for
transactions and events that arise mainly in
specific industries.
IV. PFRSs apply from a date specified in the
document.
I.
The Insurance Commission is represented in
FSRSC.
II. The Bangko Sentral ng Pilipinas is represented in
AASC.
III. The Financial Executives Institute of the
Philippines is represented in PIC.
IV. The Philippine Business Coalition for Women
Empowerment COA is represented in PSRC.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
2. The following statements relate to BOA, SEC, PICPA,
and IASB:
I.
The BOA is composed of a chairman and six (6)
members
appointed
by
the
Professional
Regulation Commission.
II. The SEC has the authority to establish the
accounting framework to be used by companies
under its jurisdiction.
III. PICPA is the accredited integrated professional
organization of CPAs.
IV. The IASB publishes an agenda decision to explain
why a standard-setting project has not been
added to the work plan to address a question
submitted.
a.
b.
c.
d.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
a.
b.
c.
d.
•
The closing inventory of Entity A amounted to
P2,580,000. The following items were not included in
this inventory amount:
a. Purchased goods, in transit, shipped FOB
destination invoice price P30,000 which included
freight charges of P2,000.
b. Goods held on consignment, cost P50,000.
c. Goods sold to a customer, in transit, shipped
FOB destination, cost P20,000. Shipping cost to
customer, P2,000.
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8. How much should be reported as inventory by Entity
B?
a. P104,000
c. P114,000
b. P108,000
d. P124,000
Entity C started operations in 2025. The entity
manufactures bath towels. 60% of the production are
“Class A” which sell for P500 per dozen and 40% are
“Class B” which sell for P250 per dozen. During 2025,
6,000 dozens were produced at an average cost of
P360 per dozen. The inventory at the end of the year
was as follows:
P 79,200
108,000
P187,200
On June 30, 2025, a flash flood damaged the
warehouse and factory of Entity D, completely
destroying the work in process inventory. There was
no damage to either the raw materials or finished
goods inventories. A physical inventory taken after
the flood revealed the following valuations:
Finished Goods
Work-in-process
Raw Materials
P112,000
0
52,000
P120,000
115,000
42,500
P277,500
A review of the books and records disclosed that the
gross profit margin historically approximated 34% of
sales. The sales for the first 6 months of 2025 were
P428,000. Raw materials purchases were P96,000.
Direct labor costs for this period were P130,000, and
manufacturing overhead has historically been applied
at 60% of direct labor.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
Information relevant to five different entities follows.
Modifications costing P5 per unit would need to be
made to product A to achieve the selling price of P17.
The inventory on Jan. 1, 2025, consisted of the
following.
Inventories include advances for materials
ordered.
II. An entity should use specific identification for
items that are not ordinarily interchangeable.
III. Inventories are presented in the statement of
financial position as a separate line item under
either current or noncurrent assets.
IV. An entity should disclose the carrying amount of
inventories carried at fair value less costs to sell.
•
100,000
5,300,000
300,000
400,000
200,000
100,000
7. The adjusted cost of Entity A’s inventory at Dec. 31
should be
a. P2,570,000
c. P2,684,000
b. P2,681,000
d. P2,686,000
Finished Goods
Work-in-process
Raw Materials
I.
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•
Mark down cancellations
Sales
Sales allowances
Sales returns
Employee discounts
Theft and other losses
Product B
5,000
P16
P20
Product A
2,000
P14
P17
220 dozens “Class A” @ P360
300 dozens “Class B” @ P360
6. The following statements refer to inventories:
3. The following statements relate to ISSB, SASB, GRI,
and PSRC:
a.
b.
c.
d.
•
5. For an educational institution to be qualified to be
accredited to offer the special refresher course, it must
have at least ten (10) examinees in the CPA Licensure
Examination for the last five (5) years and must obtain
an average national passing percentage of at least
a. 5%
c. 15%
b. 10%
d. 20%
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
I. The ISSB sets IFRS Accounting Standards.
II. The ISSB assumed responsibility for SASB
Standards.
III. One of the key differences between the GRI and
the SASB frameworks is their scope and purpose.
IV. The PSRC was created to issue implementation
guidance on PFRSs.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
The following figures relate to Entity B’s inventory:
Units held
Cost per unit
Selling price
Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of 70 items and the
exam is good for three (3) hours. Good luck!
1. The following statements relate to FSRSC, AASC, PIC
and PSRC:
Purchased goods in transit, terms FOB seller,
invoice price P38,000, freight cost, P3,000.
Goods out on consignment, cost P43,000.
Goods sold to a customer, in transit, shipped
FOB shipping point, cost P36,000.
The records of Entity E report the following data for
the month of Jan.:
Beginning inventory at cost
Beginning inventory at sales price
Purchases at cost
Initial markup on purchases
Purchase returns at cost
Purchase returns at sales price
Freight on purchases
Additional mark up
Mark up cancellations
Mark down
P 440,000
800,000
4,500,000
2,900,000
240,000
350,000
100,000
250,000
100,000
600,000
9. Using the relative sales value method, which Entity C’s
management considers as a more equitable basis of
cost distribution, how much is the cost of sales for the
year 2025?
a. P1,972,054
c. P1,993,500
b. P1,972,800
d. P2,043,000
10. Compute the value of Entity D’s work in process
inventory lost on June 30, 2025.
a. P 92,220
c. P135,020
b. P119,020
d. P271,980
11. Using the average retail inventory method, Entity E’s
ending inventory at cost is
a. P1,024,000
c. P1,536,000
b. P1,472,000
d. P1,664,000
12. An entity signed a three-year noncancelable purchase
contract, which allows the entity to purchase up to
500,000 units of a computer part annually from a
supplier at P10 per unit and guarantees a minimum
annual purchase of 100,000 units. During the first
year of the contract, the part unexpectedly became
obsolete. The entity had 250,000 units of this
inventory at the end of the first year of the contract.
The entity believes these parts can be sold as scrap
for P2 per unit.
I.
Since the contract is noncancellable, the entity
should recognize accounts payable of P3,000,000
on the date of commitment.
II. Since the contract is onerous at the end of the
reporting period, the entity should recognize
accounts payable of P2,000,000.
III. The entity should recognize purchase commitment
liability of P1,600,000 at the end of the first year
of the contract.
IV. The entity should recognize loss on inventory
write down of P2,000,000 at the end of the first
year of the contract.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
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13. Data from an entity’s records disclosed the following:
Goods available for sale
Sales
Sales returns
Gross profit rate based on cost
P680,000
610,000
10,000
20%
I.
The gross profit rate method is one of the
examples of techniques to estimate cost of
inventories mentioned in PAS 2.
II. If the entity is required to prepare quarterly
financial statements, the estimated cost of ending
inventory is P200,000.
III. If a fire occurred at the entity’s warehouse just
before the year-end count of inventory was to take
place, the estimated cost of inventory destroyed
by fire (assuming goods with selling price of
P24,000 were not destroyed) is P180,800.
IV. If the entity’s physical count revealed ending
inventory with selling price of P192,000, the
estimated cost of missing inventory is P20,000.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
•
•
•
•
Four computers (P25,000 each)
Computer software (P50,000)
Fruit-bearing trees (estimated value, P20 million of
which P3 million is attributed to the fruits attached to
the trees).
Harvested fruits (estimated value, P2 million)
Trees grown for use as lumber (estimated value, P10
million)
Trees that are cultivated both for their fruit and their
lumber (estimated value, P8 million)
Maize and wheat (estimated value, P4 million)
16. How much should be accounted for as biological
assets?
a. P25 million
c. P7 million
b. P17 million
d. P3 million
17. How much should be accounted for as property, plant
and equipment?
a. P17.525 million
c. P26.100 million
b. P18.100 million
d. P30.100 million
18. The following statements relate to property, plant and
equipment (PPE):
14. The following statements relate to biological assets:
I.
Biological assets include trees grown for use as
lumber.
II. Biological assets should be measured on initial
recognition and at subsequent reporting dates at
fair value less costs to sell.
III. Biological assets are presented in the statement
of financial position as a separate line item under
either current or noncurrent assets.
IV. Where the production cycle is more than one year,
an entity is required to disclose physical and price
changes separately.
a.
b.
c.
d.
•
•
•
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
I. PPE include equipment for rental to others.
II. Cost of PPE includes costs incurred relating to
leases of assets that are used to construct an item
of PPE.
III. An entity should present separately items of PPE
measured using cost model from those carried at
revalued amount.
IV. An entity should disclose fully depreciated PPE still
in use.
a.
b.
c.
d.
19. An entity acquired the following items of PPE:
•
15. The following pertains to an entity’s biological assets:
Fair value of the asset based on quoted
price in the principal market
Fair value of the asset based on quoted
price in a different market
Selling price in a binding contract to sell
Estimated commissions to brokers
Estimated transport and other costs
necessary to get asset to the market
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
P18,000
•
19,000
20,000
1,800
1,200
The entity’s biological assets should be valued at
a. P15,000
c. P16,200
b. P16,000
d. P17,200
Use the following information for the next two questions.
An entity is engaged in agricultural activity. Its trial
balance at Dec. 31 presents the following assets related
to its farmland:
•
Two tractors (P500,000 each)
•
•
Item 1 - acquired by issuing five-year, 6% note
for P800,000. The entity’s incremental borrowing
rate is 14%. The annual payment of principal and
interest on the note is P189,930. The present
value of an ordinary annuity of P1 at 8% for five
periods is 3.99. Cash price is P651,460.
Item 2 - acquired by issuing noninterest bearing
note requiring three payments of P1,000,000. The
first payment was made on the date of acquisition.
The next payment is after one year. The prevailing
rate of interest for this type of note at date of
issuance is 12%. The present value of an ordinary
annuity of 1 at 12% is 1.69 for two periods and
2.40 for three periods.
Item 3 - acquired by exchanging asset with a
carrying amount of P450,000. The entity received
an additional P90,000 cash as part of the
exchange. The fair value of the asset received is
P420,000.
Item 4 - acquired by exchanging an asset with a
carrying amount of P120,000 and a fair value of
P150,000. The entity paid P40,000. The exchange
lacks commercial substance.
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I. The cost of item 1 is P800,000.
II. The cost of item 2 is P2,400,000.
III. The entity will recognize a loss on exchange of
P30,000.
IV. The cost of item 4 is P160,000.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
20. An entity has the following items of Machinery at the
beginning of the year:
Machine No.
1
2
3
4
Cost
P100,000
200,000
300,000
400,000
Acc. Dep.
P95,000
160,000
210,000
240,000
Additional information:
• All items – useful is 10 years and the fair value is
higher than the carrying amount at the end of the
year.
• Machine No. 2 – idle during the year.
• Machine No. 3 – retired from active use on June 1,
but not yet derecognized at the end of the year.
• Machine No. 4 – classified as held for sale in
accordance with PFRS 5 on July 1, still unsold at
the end of the year.
Compute the balance of accumulated depreciation at
the end of the year.
a. P180,000
c. P520,000
b. P280,000
d. P540,000
Use the following information for the next five questions.
On Jan. 1, 2024, an entity acquired two assets within the
same class of plant and equipment. Information on these
assets follows:
Machine A
Machine B
Cost
P100,000
60,000
Expected useful life
5 years
3 years
The machines are expected to generate benefits evenly
over their useful lives. The class of plant and equipment is
measured using the revaluation model.
At Dec. 31, 2024, information about the assets follows:
Machine A
Machine B
Fair value
P84,000
38,000
Expected useful life
4 years
2 years
On July 1, 2025, machine B was sold for P32,000 cash. On
the same day, the entity acquired machine C for P80,000
cash. Machine C has expected useful life of four years.
At Dec. 31, 2025, information on the machines follows:
Machine A
Machine C
Fair value
P61,000
68,500
Expected useful life
3 years
1.5 years
21. The amount to be recognized in 2024 profit or loss
related to the revaluation of the assets is
a. Nil
c. P2,000
b. P(2,000)
d. P4,000
22. The amount to be recognized in 2024 comprehensive
income related to the revaluation of the assets is
a. P2,000
c. P 4,000
b. P(2,000)
d. P17,000
23. The gain or loss on sale of Machine B is
a. P 333 gain
c. P 6,000 loss
b. P3,500 gain
d. P13,000 gain
24. The total depreciation for the year 2025 is
a. P31,000
c. P50,500
b. P40,500
d. P64,167
25. The amount to be recognized in 2025 profit or loss
related to the revaluation of the assets is
a. Nil
c. P(1,500)
b. P(500)
d. P(3,500)
26. The following
properties:
statements
relate
to
investment
I.
Investment properties include property occupied
by employees paying at market rate.
II. Investment property is initially measured at cost,
including transaction costs.
III. An entity should present separately investment
properties measured using cost model from those
carried at fair value.
IV. When the cost model is used, an entity is
encouraged to disclose the fair value of
investment property when this is materially
different from the carrying amount.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
27. An entity’s properties include the following items:
• Building held for administrative purposes and
leased out under operating lease (60% is for
administrative purposes), P20,000,000.
• Building, which cannot be sold or leased out
separately, used in the production of goods and
around 2% of the area being leased out to canteen
operators, P10,000,000.
• Building leased out under an operating lease (the
entity supplies security and maintenance services
to the lessees), P15,000,000.
• Hotel owned and managed, P50,000,000.
• Building being leased out to a subsidiary,
P8,000,000.
I.
The portion of the building held for administrative
purposes is classified as property, plant and
equipment.
II. The building which cannot be sold or leased out
separately is property, plant and equipment.
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III. An entity providing ancillary services should
classify the property as investment property
regardless of the significance of the services
provided.
IV. The amount to be reported as investment
properties in the entity’s separate financial
statements is P31,000,000.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
28. An entity owns the following properties at Jan. 1,
2025:
Property A
An office building used by the entity for administrative
purposes with a depreciated historical cost of P2
million. At Jan. 1, 2025 it had a remaining life of 20
years. After a re-organization on July 1, 2025, the
property was leased to a third party and reclassified
as an investment property applying the entity’s policy
of the fair value model. An independent valuer
assessed the property to have a fair value of P2.3
million at July 1, 2025, which had risen to P2.34
million at Dec. 31, 2025.
Property B
Another office building sub-leased to a subsidiary of
the entity. At Jan. 1, 2025, it had a fair value of P1.5
million which had risen to P1.65 million at Dec. 31,
2025. At Jan. 1, 2025 it had a remaining life of 15
years.
In relation to these properties, determine the net
amount to be recognized in profit or loss in the entity’s
separate financial statements for the year ended Dec.
31, 2025.
a. P140,000
c. P490,000
b. P190,000
d. P540,000
29. The following statements relate to intangible assets:
I.
Intangible assets include cost incurred on
internally generated masthead.
II. Cost of intangible assets includes cost to register
a legal right.
III. An entity should present separately intangible
assets measured using cost model from those
carried at revalued amount.
IV. An entity shall disclose a reconciliation of the
carrying amount at the beginning and end of the
period.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
30. On Jan. 2, 2017, an entity acquired a patent for
P480,000. The patent had an estimated useful life of
10 years. At the beginning of 2021, the entity spent
P144,000 in successfully prosecuting an attempted
patent infringement. At the beginning of 2022, the
entity purchased for P280,000 a patent that was
expected to prolong the life of its original patent by 5
years. On July 1, 2025, a competitor obtained rights
to a patent that made the entity’s patents obsolete.
Compute the loss on patent obsolescence to be
recognized in 2025 profit or loss.
a. P338,000
c. P416,000
b. P364,000
d. P448,000
31. An entity has just acquired the net assets of another
entity for P100,000. In acquiring the other entity, the
owners of acquirer felt that the acquiree had
unrecorded goodwill. They decided to capitalize the
estimated annual superior earnings of the acquiree at
20% to determine the amount of goodwill. The
computation resulted in an estimated goodwill of
P10,000. A rate of 10% on net assets before
recognition of goodwill was used to determine normal
annual earnings of the acquiree, because it is the rate
that is earned on net assets in the industry in which
the acquiree operates. All other assets of acquiree
were properly recorded. The estimated annual
earnings of the acquiree is
a. P2,000
c. P10,000
b. P9,000
d. P11,000
32. The following statements relate to exploration and
exploration assets:
I.
PFRS 6 require an entity to recognize exploration
and evaluation expenditures as assets to the
extent required by the entity’s accounting policy
for recognizing exploration and evaluation assets.
II. An entity shall classify exploration and evaluation
assets as tangible or intangible according to the
nature of the assets acquired and apply the
classification consistently.
III. An exploration and evaluation asset shall no
longer be classified as such when the technical
feasibility and commercial viability of extracting a
mineral resource are demonstrable.
IV. Exploration and evaluation assets are measured
subsequent to initial recognition either using the
cost model or the fair value model.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
33. An entity paid P5,400,000 for property containing
natural resource of 2,000,000 tons of ore. The entity
is legally required to restore the site after mining
operations. The estimated cost of restoring the land
after the resource is extracted is P450,000 and the
land will have a value of P650,000 after it is restored
for suitable use. Tunnels, bunk houses and other fixed
installations are constructed at a cost of P8,000,000
and such expenditures are charged to mine
improvements.
Operations began on Jan. 1, 2024 and resources
removed totaled 600,000 tons. During 2025, a
discovery was made indicating that available resource
after 2025 will total 1,875,000 tons. At the beginning
of 2025, additional bunk houses were constructed in
the amount of P770,000. In 2025, only 400,000 tons
were mined because of a strike.
Compute the depletion for 2025.
a. P640,000
b. P776,000
c. P1,040,000
d. P1,560,000
34. The following statements relate to impairment of
assets in accordance with PAS 36:
I. PAS 36 does not apply to bearer plants.
II. At the end of each reporting period, an entity is
required to calculate each asset’s recoverable
amount.
III. An indication that an asset may be impaired may
indicate that the asset's useful life, depreciation
method, or residual value may need to be
reviewed and adjusted.
IV. Any impairment loss must be recognized in profit
or loss, even for assets carried at revalued
amounts.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
36. The following statements relate to non-current assets
held for sale in accordance with PFRS 5:
I. PFRS 5 applies to biological assets.
II. Immediately before the initial classification of the
asset as held for sale, the carrying amount of the
asset will be measured in accordance with
applicable PFRSs.
III. Classification of assets carried at fair value prior
to initial classification as held for sale will result in
an immediate charge to profit or loss.
IV. Impairment must be considered both at the time
of classification as held for sale and subsequently.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
37. An entity accounts for non-current assets using the
revaluation model. On June 30 of the current year, the
entity classified a freehold property as held for sale in
accordance with PFRS 5. At that date the property's
carrying amount was P290,000 and the balance on the
revaluation surplus was P20,000. At that date its fair
value was estimated at P330,000 and the costs to sell
at P20,000. At Dec. 31 of the current year, the
property's fair value was estimated at P325,000 and the
costs to sell at P25,000.
The balance of the revaluation surplus at the end of
the current year is
a. Nil
c. P40,000
b. P30,000
d. P60,000
38. Which of the following items are accounted for as
government grants in accordance with PAS 20?
I.
35. An entity acquired an asset on July 1, 2022 for
P250,000. Management estimates that the useful life
is 5 years. At Jan. 1, 2023, impairment indicators are
present and management decides to write down the
asset to an estimated recoverable amount of P75,000.
Depreciation will be taken over 3 years from that
point. On Jan. 1, 2025, the entity adopts the
revaluation model to measure the asset. The asset
now has a fair value of P300,000. Furthermore, the
estimated remaining useful life is now believed to be
5 years.
How much can be recognized as gain on impairment
recovery in 2025 profit or loss?
a. P100,000
c. P175,000
b. P150,000
d. P275,000
Government
providing
infrastructure
in
development areas.
II. Free technical or marketing advice provided by
government.
III. Government assistance to entities with no
conditions specifically relating to the operating
activities of the entity other than the requirement
to operate in certain regions or industry sector.
IV. Government grant related to biological assets
measured at fair value less costs to sell.
a.
b.
I, II, III and IV
III and IV only
c. III only
d. None of these
39. An entity has a P3,000,000 loan from government that
is already due. Because of financial difficulties, the
entity owed accrued interest of P360,000. Under the
government’s amnesty program, the government
agreed to waive the repayment of the remaining
principal and accrued interest provided that the entity
pays P1,500,000.
If the entity met the terms for forgiveness of the loan,
it should recognize income from government grant of
a. Nil
c. P1,860,000
b. P1,500,000
d. P3,360,000
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40. On Jan. 1 of the current year, an entity obtained a loan
for P2,000,000, at an annual interest rate of 12%,
specifically to finance the construction of a qualifying
asset. Availments from the loan were made quarterly
in equal amounts starting Jan. 1.
The proceeds of the loan were disbursed during the
year as follows:
• Jan. 1 – P200,000
• Mar. 31 – P500,000
• June 30 – P600,000
• Sept. 30 – P500,000
• Dec. 31 – P200,000
Prior to their disbursements, the proceeds of the loan
were temporarily invested and earned interest income
of P30,000.
I.
Capitalization of borrowing costs begins when
expenditures are being incurred, borrowing costs
are being incurred and activities that are
necessary to prepare the asset for its intended use
or sale are in progress.
II. Capitalization of borrowing costs ceases when
substantially all of the activities necessary to
prepare the asset for its intended use or sale are
complete.
III. The borrowing costs eligible for capitalization is
P210,000.
IV. The cost of the qualifying asset is P2,210,000.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
41. An entity had the following borrowings during Year 1
and Year 2:
Bank A loan
Bank B loan
Carrying amount
P1,000,000
1,000,000
P2,000,000
Effective interest
P120,000
100,000
P220,000
The borrowings were made for general purposes but
the proceeds were used in part to finance the
construction of a new building.
The construction began on Jan. 1, Year 1 and was
completed on Dec. 31, Year 2. Expenditures on the
building were made as follows:
• Jan. 1, Year 1 – P300,000
• Mar. 31, Year 1 – P500,000
• June 30, Year 1 – P500,000
• Sept. 30, Year 1 – P300,000
• Dec. 31, Year 1 – P200,000
• June 30, Year 2 – P400,000
• Dec. 31, Year 2 – P200,000
The entity invested some of the loan proceeds and
earned interest income of P25,000 in Year 1 and
P12,000 in Year 2.
I.
The borrowing costs eligible for capitalization in
Year 1 is P85,000.
II. The carrying amount of the building at Dec. 31,
Year 1 is P1,885,000.
III. The borrowing costs eligible for capitalization in
Year 2 is P208,000.
IV. The carrying amount of the building at Dec. 31,
Year 1 is P2,693,000.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are false.
42. The following statements relate to borrowing costs:
I.
Borrowing costs include dividends on redeemable
preference shares.
II. Borrowing costs incurred before commencement
date and after substantially all the activities
necessary to prepare the qualifying asset for its
intended use or sale are complete are recognized
as expense when incurred.
III. Borrowings costs not capitalized are recognized in
profit or loss as part of finance costs.
IV. An entity shall disclose the amount of borrowing
costs capitalized during the period and the
capitalization rate used.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
43. The following statements relate to cash and cash
equivalents:
I. Cash includes US dollar bills.
II. Cash equivalents include investment in preference
shares acquired within a short period of their
maturity and with a specified redemption date.
III. Cash and cash equivalents are normally presented
as the first line item under current assets.
IV. An entity should disclose reconciliation of the
amounts in the statement of cash flows with the
equivalent items reported in the statement of
financial position.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
44. An entity’s accountant is attempting to determine the
amount of cash to be reported on its Dec. 31, 2025
statement of financial position. The following
information is provided:
a. Commercial savings account of P1,200,000 and a
commercial
checking
account
balance
of
P1,800,000 are held at PS Bank.
b. Travel advances of P360,000 for executive travel
for the first quarter of the next year (employee to
reimburse through salary deduction).
c. A separate cash fund in the amount of P3,000,000
is restricted for the retirement of a long-term
debt.
d. Petty cash fund of P10,000.
e. An I.O.U. from a company officer in the amount of
P40,000.
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f.
A bank overdraft of P250,000 has occurred at one
of the banks the company uses to deposit its cash
receipts. At the present time, the company has no
deposits at this bank.
g. The company has two certificates of deposit, each
totaling P1,000,000. These certificates of deposit
have maturity of 120 days.
h. The entity has received a check dated Jan. 2, 2026
in the amount of P150,000.
i. The entity has agreed to maintain a cash balance
of P200,000 at all times at PS Bank to ensure
future credit availability.
j. Bills and coins on hand amounted to P15,000.
k. Cryptocurrencies valued at P100,000.
How much will be reported as cash and cash
equivalents at Dec. 31, 2025?
a. P2,575,000
c. P3,025,000
b. P2,825,000
d. P5,025,000
45. The books of an entity disclosed a cash balance of
P68,757 on June 30. The bank statement as of June
30 showed a balance of P54,780. Additional
information that might be useful in reconciling the two
balances follows:
•
Check number 748 for P3,000 was originally
recorded on the books as P4,500.
•
A customer’s note dated March 25 was
discounted on April 12. The note was dishonored
on June 29 (maturity date). The bank charged
the entity’s account for P14,265, including a
protest fee of P42.
•
The deposit of June 24 was recorded on the
books as P2,895, but it was actually a deposit of
P2,700.
•
Outstanding checks totaled P9,885 as of June
30.
•
There were bank service charges for June of
P210 not yet recorded on the books.
•
The entity’s account had been charged on June
26 for a customer’s NSF check for P1,296.
•
The entity properly deposited P600 on June 3
that was not recorded by the bank.
•
Receipts of June 30 for P13,425 were recorded
by the bank on July 2.
•
A bank memo stated that a customer’s note for
P4,500 and interest of P165 had been collected
on June 27, and the bank charged a P36
collection fee.
What is the correct cash balance at June 30?
a. P57,420
c. P58,320
b. P57,720
d. P58,920
46. Which of the following would cause the book balance
to be lower than the bank balance?
I. Undeposited collections
II. Unrecorded credit memo
III. Bank error – overstatement in recording deposit
IV. Book error – overstatement in recording issued
check
a.
b.
I, II, III and IV
II, III and IV only
c. III and IV only
d. I only
47. The following statements relate to receivables:
I.
Receivables are financial assets because they are
contractual rights to receive cash or another
financial asset from another entity.
II. Receivables normally qualify as financial assets
subsequently measured at amortized cost.
III. Non-trade receivables are included in the line item
‘trade and other receivables’ if they are expected
to be realized within twelve months after the
reporting period.
IV. PFRS 7 requires disclosure of fair value of shortterm trade receivables.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
48. The statement of financial position of an entity
reported accounts receivable at Dec. 31, 2024 as
follows:
Accounts receivable
Less allowance for doubtful accounts
P45,000
900
P44,100
During 2025, transactions relating to the accounts
were as follows:
•
Sales on account, P480,000.
•
Cash received from collections of current
receivables totaled P392,000, after discounts of
P8,000 were allowed for prompt payment.
•
Customer's accounts of P2,000 were ascertained
to be worthless and were written off.
•
Bad accounts previously written off prior to 2025
amounting to P500 were recovered.
•
The company provided P2,300 for doubtful
accounts by a journal entry at the end of the
year.
•
Accounts receivable of P70,000 have been
pledged to a local bank on a loan of P40,000.
Collections of P15,000 were made on these
receivables (not included in the collections
previously given) and applied as partial payment
to the loan.
Compute the carrying amount of accounts receivable
at Dec. 31, 2025.
a. P 81,300
c. P106,300
b. P105,800
d. P106,800
Information relevant to four different entities follows.
•
On Jan. 1, 2021, Entity F sold a machine with a
carrying amount of P300,000 and accepted in
exchange a promissory note with a face value of
P500,000, a due date of Dec. 31, 2030, and a stated
rate of 4%, with interest receivable at the end of each
year. The fair value of the machine is not readily
determinable and the note is not readily marketable.
Under the circumstances, the note is considered to
have an appropriate imputed rate of interest of 8%.
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•
•
•
TEAM PRTC
Entity G has a note receivable of P200,000 carried at
face value and is due on Dec. 31, 2029. Interest on
the note payable at 9% each Dec. 31. The borrower
paid the interest due on Dec. 31, 2025, but informed
Entity G that it would probably miss the next two
years' interest payments because of its financial
difficulties. After that, it expected to resume its
annual interest payments, but it would make the
principal payment one year late, with interest paid for
that additional year at the time of the principal
payments.
On Jan. 1, 2025, Entity H granted a P200,000, 8%
loan. The interest is receivable at the end of each
year, with the principal amount to be received at the
end of 5 years. As of Dec. 31, 2025, the interest for
the current year has not yet been received nor
recorded because the borrower is experiencing
financial difficulties. Entity H negotiated a
restructuring of the loan. The payment of all of the
interest based on the original principal will be delayed
until the end the 5-year loan term. In addition, the
amount of principal repayment will be dropped from
P200,000 to P100,000. The prevailing interest rate
for similar type of loan as of Dec. 31, 2025 is 10%.
Entity I sells a financial asset with a carrying amount
of P500,000 for P600,000 and simultaneously enters
into a total return swap with the buyer under which
the buyer will return any increases in value to Entity
I and Entity I will pay the buyer interest plus
compensation for any decreases in the value of the
investment. Entity I expects the fair value of the
financial asset to decrease by P40,000.
49. The carrying amount of the note receivable of Entity F
as of Dec. 31, 2025 is
a. P365,802
c. P420,154
b. P407,547
d. P500,000
50. How much should be recognized by Entity G as
impairment loss in 2025?
a. P12,752
c. P31,671
b. P19,965
d. P32,812
51. The interest income to be recognized by Entity H in
2026 is
a. P 9,800
c. P11,431
b. P10,584
d. P12,294
52. Entity I’s journal entry to record the sale would include
a credit to
a. Financial asset of P500,000
b. Financial liability of P600,000
c. Gain on sale of P100,000
d. Gain on sale of P60,000
53. The following pertains to an entity’s renegotiated
loans receivable:
Present value of renegotiated contractual
cash flows discounted at:
The original effective interest rate
The prevailing interest rate
Carrying amount of loans receivable
The renegotiation did not result in derecognition of the
loans receivable in accordance with PFRS 9.
The carrying amount of the loans receivable after the
modification is
a. Nil
c. P1,500,000
b. P1,300,000
d. P2,000,000
54. Which of the
derecognition?
following
transfers
qualify
for
I.
A sale and repurchase transaction where the
repurchase price is at fair value.
II. A sale of a financial asset together with a total
return swap that transfers the market risk
exposure back to the entity.
III. A sale of a financial asset together with a deep inthe-money put or call option.
IV. A sale of short-term receivables in which the entity
guarantees to compensate the transferee for
credit losses that are likely to occur.
a.
b.
I, II, III and IV
III only
c. I only
d. None of these
55. On Jan. 1, Year 1, an entity purchased P1,000,000
10% bonds for P1,051,510 (including broker’s
commission of P20,000). Interest is payable annually
every Dec. 31. The bonds mature on Dec. 31, Year 3.
The prevailing market rate for the bonds is 9% at Dec.
31, Year 1.
I.
If the bonds are classified as FA at FVTPL, the net
amount to be recognized in Year 1 profit or loss is
P66,100.
II. If the bonds are classified as FA at AC, the amount
to be reported on the entity’s Dec. 31, Year 1
statement of financial position is P1,035,630.
III. If the bonds are classified as FA at FVTOCI, the
amount to be reported on the entity’s Dec. 31,
Year 1 statement of financial position is
P1,017,610
IV. If the bonds are classified as FA at FVTOCI, a loss
allowance is not recognized.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
56. Which of the following transfers result in gain or loss
recognized in profit or loss?
I. FA at AC to FA at FVTPL
II. FA at AC to FA at FVTOCI
III. FA designated at FVTPL to FA at FVTOCI
IV. Equity investment designated at FVTOCI to FVTPL
a.
b.
I, II, III and IV
I, III and IV only
c. I only
d. None of these
57. On Oct. 1, Year 1, an entity purchased shares in
another entity for P100,000. The shares were
designated as FA at FVTOCI. At Dec. 31, Year 1, the
fair value of these shares was P105,000. On Mar. 31,
P1,500,000
Year 2, the entity sold these shares for P112,000. The
1,300,000
fair value of shares on Mar. 31, Year 2 was P113,000.
2,000,000
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I.
The amount to be recognized in Year 1 other
comprehensive income is P5,000.
II. The amount to be recognized in Year 2 other
comprehensive income is P8,000.
III. The amount to be recognized in Year 2 profit or
loss is P1,000.
IV. The entity will report a ‘reclassification
adjustment’ of P(13,000) in Year 2 OCI.
a.
b.
c.
d.
Only one statement is true.
Only two statements are true.
Only one statement is false.
All the statements are true.
61. An entity insured the life of its president for
P8,000,000, the entity being the beneficiary of an
ordinary life policy. The premium is P200,000. The
cash surrender value on Jan. 1 and Dec. 31 are
P60,000 and P80,000 respectively. The president died
on Oct. 1. The policy indicates that the cash surrender
value is P75,000 at that date and the unexpired
premium is refunded. The policy was collected on Dec.
31. How much is the gain on life insurance settlement?
a. P7,845,000
c. P7,920,000
b. P7,875,000
d. P7,925,000
62. Financial assets include:
58. An entity acquired a 20% interest in another entity for
P5,000,000. The entity paid transaction costs of
P50,000. After acquisition, the investee reported the
following changes in equity:
• Comprehensive income, P600,000
• Profit, P1,000,000
• Dividends paid, P800,000
• Transferred realized revaluation surplus to
retained earnings, P200,000
• Made appropriation of retained earnings,
P500,000
The investment has a fair value of P5,150,000 at the
end of the year.
Compute the carrying amount of the investment at the
end of the year.
a. P5,010,000
c. P5,160,000
b. P5,150,000
d. P5,210,000
59. On Apr. 1, 2025, Mariko Corp. purchased 25,000
ordinary shares of Anjin Corp. at P180 per share which
reflected book value as of that date. At the time of the
purchase, Anjin had 100,000 ordinary shares
outstanding. The entity paid transaction costs of
P67,500. The first quarter statement ending Mar. 31,
2025 of Anjin recorded profit of P480,000. For the
year ended Dec. 31, 2025, Anjin reported profit of
P2,400,000. Anjin paid the entity dividends of P60,000
on June 1, 2025 and again P60,000 on Dec. 31, 2025.
The shares of Anjin are selling at P190 per share on
Dec. 31, 2024.
The carrying amount of the investment in Anjin Corp.
as of Dec. 31, 2025 should be
a. P4,860,000
c. P4,980,000
b. P4,927,500
d. P5,047,500
60. An entity established a savings account for building
construction by making annual deposits of P800,000
at the beginning of each of six years to a savings
account paying 8%. At the end of the sixth year, the
account balance was transferred to a bank paying
10%, and annual deposits of P800,000 were made at
the end of each year from the seventh through the
tenth years. What was the account balance at the end
of the tenth year?
a. P11,589,274
c. P12,305,193
b. P12,228,056
d. P12,992,617
I. Cryptocurrencies
II. Investment in redeemable preference shares
III. Security tokens
IV. Advances to suppliers
a.
b.
I, II, III and IV
I, II and III only
c. II and III only
d. None of these
63. An entity was organized on Jan. 1, 2024. On that date
it issued 500,000, P10 par value, ordinary shares at
P15 per share. During the period Jan. 1, 2024 through
Dec. 31, 2025, The entity reported profit of
P3,000,000 and paid cash dividends of P500,000. On
Jan. 5, 2025, the entity purchased 50,000 ordinary
shares at P20 per share. On Dec. 31, 2025, 45,000
treasury shares were sold at P30 per share and retired
the remaining treasury shares. What is the total
shareholders’ equity on Dec. 31, 2025?
a. P10,250,000
c. P10,500,000
b. P10,350,000
d. P10,850,000
64. An entity declared a 5% share dividend on its
100,000, P2 par, issued and outstanding ordinary
shares, which had a fair value of P5 per share before
the share dividend was declared. This share dividend
was distributed sixty days after the declaration date.
By what amount did the entity’s current liabilities
increase as a result of the share dividend declaration?
a. Nil
c. P10,000
b. P5,000
d. P25,000
Information relevant to three different entities follows.
•
The following is a June 30, 2025, post-closing trial
balance for Entity KK:
Account Title
Cash
Short-term
investments
Accounts receivable
Prepaid expenses
Land
Buildings
Accumulated dep. buildings
Equipment
Accumulated dep. equipment
Accounts payable
Accrued expenses
Debits
P850,000
Credits
630,000
2,800,000
320,000
750,000
3,200,000
2,650,000
P1,600,000
1,200,000
1,730,000
450,000
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Excel Professional Services Inc.
TEAM PRTC
Account Title
Notes payable
Mortgage payable
Ordinary shares
Retained earnings
Total
Debits
__________
P11,200,000
Credits
1,000,000
2,500,000
1,000,000
1,720,000
P11,200,000
Additional Information:
1. The short-term investments account includes
P180,000 in treasury bills purchased in May. The
bills mature in July.
Entity MM has provided the following 2025 account
balances:
Accounts receivable
Allowance for
doubtful accounts
Prepaid insurance
Accounts payable
Jan. 1
P1,500,000
200,000
Dec. 31
P2,800,000
400,000
600,000
900,000
450,000
1,200,000
Entity MM's profit for 2025 was P8,000,000.
2. The accounts receivable account consists of the
following:
a. Amounts owed by customers, P2,250,000
b. Allowance for uncollectible accounts trade
customers, P150,000
c. Nontrade note receivable due in three years,
P650,000
d. Interest receivable on note (due in four
months), P50,000
65. The total current assets of Entity KK as of June 30,
2025 is
a. P3,950,000
c. P3,590,000
b. P3,630,000
d. P3,900,000
3. The notes payable account consists of two notes
of P500,000 each. One note is due on Sept. 30,
2025, and the other is due on Nov. 30, 2026.
67. Entity LL’s profit for the year is
a. P 71,500
b. P101,500
4. The mortgage payable is payable in semiannual
installment of P50,000 each plus interest. The
next payment is due on Oct. 31, 2025. Interest
has been properly accrued and is included in
accrued expenses.
5. Five hundred thousand shares of no-par ordinary
shares are authorized, of which 200,000 shares
have been issued and are outstanding.
6. The land account includes P500,000 representing
the cost of the land on which the entity’s office
building resides. The remaining P250,000 is the
cost of land that the entity is holding for
investment purposes.
•
•
The following accounts and their balance are among
those in the trial balance of Entity LL:
Sales
Inventory, Jan. 1
Purchases
Purchases return and allowances
Salaries
Delivery expense
Retained earnings, Jan. 1
Dividend income
Income on sales of fixed asset
Light and power
Travel and transportation
Interest and bank charges
Miscellaneous operating expenses
Bad debts
Depreciation
Income tax
Dividends declared but not yet paid
Inventory, Dec. 31
P2,000,000
365,000
1,555,000
15,000
120,000
22,000
325,000
18,000
7,000
80,000
18,000
35,000
6,000
4,000
15,000
43,500
85,000
325,000
66. The total current liabilities of Entity KK as of June 30,
2025 is
a. P2,880,000
c. P2,780,000
b. P2,680,000
d. P2,280,000
c. P105,500
d. P341,500
68. Entity MM’s net cash provided by operating activities
is
a. P7,150,000
c. P8,650,000
b. P7,350,000
69. An entity recorded journal entries for the issuance of
ordinary shares for P40,000, the payment of P13,000
on accounts payable, and the payment of salaries
expense of P21,000. What net effect do these entries
have on equity?
a. Increase of P6,000.
b. Increase of P19,000.
c. Increase of P27,000.
d. Increase of P40,000.
70. An entity was incorporated on Jan. 1, 2025 with
proceeds from issuance of shares of P750,000 and
borrowed funds of P 110,000. During the first year of
operations, total income amounted to P82,000 and
expenses totaled P64,000. On Dec. 15, the entity
declared a P3,000 cash dividend, payable to
shareholders on Jan. 15, 2026. No additional activities
affected owners' equity in 2025. The entity's liabilities
increased to P120,000 by Dec. 31, 2025. On the
entity's Dec. 31, 2025 statement of financial position,
total assets should be reported at
a. P875,000
c. P882,000
b. P878,000
d. P885,000
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Management Firm of Professional Review and Training Center (PRTC)
Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
Regulatory Framework for
Business Transactions (RFBT)
FIRST PRE-BOARD EXAMINATION
CPA Review
Since 1977
VILLEGAS/MAGUMUN/CELIZ/VILLAMIN
March 16, 2025
Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of 100 items and
the exam is good for three (3) hours. Good luck!
1. D is indebted to C for P100,000. With the consent of
D, X, a third person, pays C P60,000. Which of the
following statements is not true?
a. There is partial subrogation as to the amount of
P60,000.
b. C remains the creditor with respect to the balance
of P40,000.
c. There are two (2) credits that subsist.
d. In case of insolvency of D, X is preferred over C,
that is, C shall be paid from the assets of D ahead
of C.
2. Which of the following statements is not correct?
a. Statute of Frauds applies only to executory
contracts.
b. A person is not bound by the contract of another
where he has no knowledge or to which he has not
given his consent.
c. A contract entered into in the name of another by
one who has no authority is rescissible against the
former, unless it is ratified by him before it is
revoked by the other contracting party.
d. Unauthorized contracts can be cured only by
ratification.
6. On January 13, S, who is in Manila, sends a letter
(offer) via mail to B, who is in Cebu. The said letteroffer states if B is willing to buy S’s car for P200K. On
January 18, B received and opened the letter. On
January 19, B decided to buy the said car for P200k.
On January 20, B sends his letter-acceptance to S. On
January 25, S receives the letter-acceptance of B. On
January 27, S opened the letter-offer and learned that
B accepted the offer.
When was the contract
perfected based on Expedition Theory?
a. On January 18
b. On January 19
c. On January 20
d. On January 25
e. On January 27
3. 1st Statement: The 90-day period to deposit the check
from issue is an element of violation of B.P. 22.
2nd Statement: There is a presumption that the
drawer has knowledge of insufficiency of funds when
the check is deposited within the first 90-day period
from issue.
a. 1st statement is true; 2nd statement is false.
b. 1st statement is false; 2nd statement is true.
c. Both statements are true.
d. Both statements are false.
7. Which of the following is not included on the protection
of the Data Privacy Act to sensitive personal
information?
a. About an individual’s race, ethnic origin, marital
status, age, color, and religious, philosophical or
political affiliations.
b. About an individual’s health, education, genetic or
sexual life of a person, or to any proceeding for
any offense committed or alleged to have been
committed by such individual, the disposal of such
proceedings, or the sentence of any court in such
proceedings.
c. Issued by government agencies peculiar to an
individual which includes, but is not limited to,
social security numbers, previous or current
health records, licenses or its denials, suspension
or revocation, and tax returns.
d. Specifically established by an executive order or
an act of Congress to be kept unclassified.
4. Which of the following is not a special remedy of an
unpaid seller?
a. Right of Possessory lien
b. Right of Stopping the goods in transit
c. Right of Resale
d. Right to Rescind
e. Right to Repurchase
8. The following are the requisites for warranty against
hidden defects, except:
a. The defect must be important or serious.
b. The defect must be hidden.
c. The defect must exist after the time of the sale.
d. The vendee must give notice of the defect to
vendor within a reasonable time.
5. Compensation is not proper in the following
statements, except:
a. Where one of the debts arises from a
commodatum.
b. When one party in a court case over an obligation
has a claim for damages against the other party.
c. Where one of the debts arises from a depositum.
d. Where one of the debts arises from a claim for
support due by gratuitous title.
e. Where one of the debts consists in civil liability
arising from a crime.
9. A kind of mortgage which, although it lacks the proper
formalities of a mortgage, shows the intention of the
parties to make the property subject of the contract
as a security for the fulfillment of an obligation.
a. Equitable mortgage
b. Chattel mortgage
c. Real estate mortgage
d. Voluntary mortgage
e. Legal Mortgage
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TEAM PRTC CPA REVIEW
TEAM PRTC CPA REVIEW
10. X, Y and Z are co-owners of an undivided property
valued at P50,000. X sells his interest to B for
P20,000. Which of the following statements is not
true?
a. Y or Z may exercise the right of redemption by
reimbursing B the price of the sale.
b. If both Y and Z redeem the interest sold by X, each
of them shall pay P10,000 to B, which is the
proportion of their respective shares in the coownership.
c. If the price of P20,000 is extremely excessive, the
same may be equitably reduced by the court.
d. X, Y and Z have the right of legal redemption
against each other.
11. This refers to any distinctive mark, characteristic
and/or sound in electronic form, representing the
identity of a person and attached to or logically
associated with the electronic data message or
electronic document or any methodology or
procedures employed or adopted by a person and
executed or adopted by such person with the intention
of authenticating or approving an electronic data
message or electronic document.
a. Electronic data
b. Electronic document
c. Electronic key
d. Electronic signature
e. Electronic gadget
12. Which of the following is not correct on the distinction
of dation in payment and payment by cession?
a. In dation, there is usually only one creditor; in
cession, there are several creditors.
b. Dation does not presuppose the debtor’s
insolvency; in cession, debtor is insolvent at the
time of the assignment.
c. Dation involves all properties of the debtor, while
cession does not.
d. In dation, the creditor becomes the owner of the
thing given by the debtor; in cession, the creditors
only acquire the right to sell the thing.
e. Dation is an act of novation, while cession is not.
13. Which of the following statements is not correct?
a. A limited partner can manage the partnership.
b. A limited partner is not prohibited from engaging
in a business like that of the partnership.
c. A limited partner is excluded from any active voice
in the control of the affairs of the firm.
d. Limited partners are not personally liable for
partnership obligations; the said liability does not
extend to their personal properties.
e. Limited partner’s name cannot appear in the
partnership name.
14. The following deliveries of goods to a carrier transfer
ownership to the buyer, except:
a. When the owner does not reserve the right of
possession or ownership of the thing sold upon
delivery to the carrier.
b. When the seller draws a bill of exchange on the
buyer for the price of the goods and transmits
such bill of exchange and the bill of lading to the
buyer to secure acceptance or payment of the bill
of exchange and the buyer dishonors the bill of
exchange.
When by the terms of the bill of lading, the goods
are to be delivered to the seller or his agent.
d. When by the terms of the bill of lading, the goods
are to be delivered to the order of the buyer or his
agent, but the seller retains the bill of lading.
c.
15. Which of the following statements is not correct?
a. A partner who is liable for damages to the
partnership due to his failure to give contribution
cannot offset the same from his profits and
benefits in the partnership.
b. Persons who are prohibited from giving each other
any donation or advantage can form a universal
partnership.
c. Partner is a co-owner on specific partnership
property, but his relationship with his other
partners is not governed by the rules on coownership.
d. The birth of the partnership is not affected by the
fact that the partners have not decided what the
nature of the partnership is.
16. 1st Statement: If two (2) or more persons have made
the invention separately and independently of each
other, the right to the patent shall belong to the
person who filed an application for such invention.
2nd Statement: The owner of a patent has the right
to prevent the use of a patented drug or medicine
after it has been put on the market in the Philippines
by any party authorized to use it.
a. 1st statement is true; 2nd statement is false
b. 1st statement is false; 2nd statement is true
c. Both statements are true
d. Both statements are false
17. D owed C P100,000 as evidenced by a promissory note
signed by D in favor of C. C lost the promissory note
which was later found by X who demanded payment
from D. D paid X. Which of the following statements
is correct?
a. Payment to X is valid because he possesses the
credit itself.
b. Payment to X is valid since there is no indication
of bad faith on his part when he found the
promissory note.
c. Payment to X is not valid because X is not a party
to the contract.
d. Payment to X is not valid because X is merely the
possessor of the document evidencing the credit.
18. The correct sequence on the place of delivery of goods
sold is:
a. Parties’ agreement; if no agreement, usage of
trade; if no agreement and no usage, seller’s place
of business; then seller’s residence.
b. Parties’ agreement; if no agreement, seller’s place
of business; then, seller’s residence; then usage
of trade.
c. Parties’ agreement; if no agreement, seller’s
residence; then, seller’s place of business; then
usage of trade.
d. Parties’ agreement; if no agreement, usage of
trade; if no agreement and no usage; seller’s
residence; then seller’s place of business.
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19. 1st Statement: All deposit accounts of a depositor in
a closed bank maintained in the same right and
capacity shall be added together.
2nd Statement: If a bank has more than one branch,
its main office and branches are regarded as separate
for purposes of computing the amount of deposit.
a. 1st statement is true; 2nd statement is false
b. 1st statement is false; 2nd statement is true
c. Both statements are true
d. Both statements are false
20. Charlie offers to construct Oscar’s house for a price of
P1,000,000 giving Oscar ten (10) days within which to
make up his mind. Which of the following statements
is not correct?
a. Charlie may withdraw the offer even before the
lapse of 10 days unless Oscar has already
accepted the offer.
b. After acceptance, withdrawal is not possible since
there is no more offer to withdraw.
c. Even before acceptance, Charlie may not
withdraw the offer if the option money is given by
Oscar.
d. All statements are correct.
e. All statements are not correct.
21. A, B and C are jointly liable to give D a car valued at
P240,000. On the date of delivery, A and B are willing
to deliver but C is not. Which of the following is
statements is not correct?
a. A, B and C will be liable for P80,000 each as share
on the car’s value.
b. D can compel C to deliver the car.
c. D cannot demand from C the delivery of the car,
and the obligation is converted into the value of
the car.
d. If C is insolvent, D cannot demand C’s share on
the debt from A and/or B.
22. Debby borrowed P100,000 from Candy. As security
for the debt, it was agreed that Debby should
mortgage her parcel of land in favor of Candy. When
the document was made, it was written as
“antichresis” because they erroneously believed that
it has the same effect as a mortgage. What is the
status of the said contract?
a. Rescissible because Debby will be prejudiced by
the parties’ mistaken belief.
b. Unenforceable because there was a mistake in
law.
c. Valid because the contract was already in writing
– it now binds the parties.
d. Voidable because there is no meeting of the
minds.
23. Statement 1. Bong bought 100 cans of corned beef
from Saldy, but 120 of which arrived. Bong may
accept 100 and return the 20. If he accepts all the
120, he must pay for them at fair market value.
Statement 2. Where the seller delivers to the buyer
the goods agreed upon mixed with goods of a different
description, the buyer may accept the goods which are
in accordance with the contract and reject the rest. If
the subject matter is indivisible, the buyer may not
reject the whole of the goods.
a.
b.
c.
d.
No. 1 is true; No. 2 is false.
No. 1 is false; No. 2 is true.
Both are true.
Both are false.
24. The following are among the effects of merger and
consolidation, except:
a. The constituent cooperatives shall become a
single cooperative, which in case of merger shall
be the surviving cooperative, and in case of
consolidation,
shall
be
the
consolidated
cooperative.
b. The separate existence of the constituent
cooperatives shall continue.
c. The surviving or the consolidated cooperative shall
possess all rights, privileges, immunities and
powers and shall be subject to all the duties and
liabilities of a cooperative organized under this
Code.
d. The surviving or the consolidated cooperative shall
possess all the assets, rights, privileges,
immunities and franchises of each of the
constituent cooperatives.
e. The surviving or the consolidated cooperative shall
be responsible for all the liabilities and obligations
of each of the constituent cooperatives.
25. Which of the following statements is not correct on the
classes or series of shares of stocks?
a. Shares shall not be deprived of voting rights
except preferred or redeemable shares.
b. Banks, trust companies, insurance companies and
public utilities are permitted to issue no-par value
shares of stock.
c. Shares without par value may not be issued for a
consideration of less than five pesos per share.
d. The terms and conditions of preferred shares or
series thereof may be fixed by the board of
directors only when authorized by the articles of
incorporation.
26. Which of the following statements is not correct?
a. Specific performance is the proper remedy of
other partners if one partner failed to contribute
what he has promised.
b. A partner appointed as manager after the
partnership can be removed even if there is no
valid ground for his removal.
c. A stipulation which excludes one or more partners
from any share in the profits or losses is valid if
majority of the partners agree.
d. Industrial partner is not liable for the losses of the
partnership.
27. Under this right, consumers should be compensated
for misrepresentation, shoddy goods or unsatisfactory
services; defective goods should be replaced, or the
money be refunded by the seller or dealer.
a. Right to consumer education
b. Right to information
c. Right to redress
d. Right to representation
e. Right to safety
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TEAM PRTC CPA REVIEW
TEAM PRTC CPA REVIEW
28. 1st Statement: Partnership by estoppel is formed
when persons by their, acts, consent or representation
have misled third persons into believing that the
former are partners even if it is not.
2nd Statement: Industrial partner is one whose
liability to 3rd person is limited to his capital
contribution and does not participate in the
management of business.
3rd Statement: Partnership at will is one where there
is no time specified; not formed for a particular
undertaking or venture and may be terminated
anytime by mutual agreement of the partners.
a. Only the 1st statement is true
b. Only the 2nd statement is true
c. Only the 3rd statement is true
d. 1st and 2nd statements are true
e. 1st and 3rd statements are true
29. Which of the following statements is correct?
a. Corporation can be created by agreement of the
parties.
b. Management of a stock corporation is vested in
and among the stockholders.
c. A stockholder can transfer his shares without prior
consent of other corporators.
d. There must be at least five (5) incorporators to
form a corporation.
30. Which of the following statements on the non-use of
corporate charter and continuous inoperation is not
correct?
a. The certificate of incorporation of a corporation
that does not formally organize and commence its
business within five (5) years from the date of its
incorporation shall be deemed revoked.
b. A corporation that commenced its business but
subsequently becomes inoperative for a period of
at least five (5) consecutive years shall be placed
under delinquent status.
c. A delinquent corporation shall have a period of one
(1) year to resume operations and comply with all
requirements, otherwise its certificate of
incorporation shall be revoked.
d. Corporations whose certificate of incorporation
have been suspended or revoked shall be reported
to appropriate government agencies by the
Securities and Exchange Commission.
31. Which of the following statements is not true about
the proceedings in FRIA?
a. An action or proceeding for rehabilitation is in rem.
b. As a rule, the debtor’s assets and liabilities may
not be commingled or aggregated with another
debtor.
c. A petition for rehabilitation must be verified.
d. The appointment by the court of a rehabilitation
receiver is limited to the list of nominees stated by
the petitioner.
32. The following corporate acts require the approval
of the BOD, except:
a. To invest corporate funds in another corporation
or business
b. To dissolve the corporation
c. To amend or repeal by-laws
d. To adopt by-laws
33. Statement 1. In a close corporation, the restriction as
to the transfer of shares must be stated/ annotated in
the Articles of Incorporation, the By-Laws and the
certificate of stock. This serves as a notice for the
person dealing with such shares.
Statement 2. A “corporation sole” is one formed for
the purpose of administering and managing, as
trustee, the affairs, property and temporalities of any
religious denomination, sect or church. It is formed by
the chief archbishop, bishop, priest, minister, rabbi or
other presiding elder of such religious denomination,
sect or church.
a. Only the 1st statement is true
b. Only the 2nd statement is true
c. Both statements are true
d. Both statements are false
34. The following are the rights of the debtor in obligation
to give a generic thing, except
a. To ask for performance of the obligation
b. To ask that the obligation be complied with at the
expense of the debtor
c. To recover damages in case of breach
d. To be entitled to the fruits of the thing from the
time the obligation to deliver arises
35. A, B and C are co-owners of an undivided parcel of
land. A sold his 1/3 share to B. Which is correct?
a. C may exercise his right of redemption within 40
days
b. C cannot exercise the right of redemption since
the sale was made to a co-owner
c. The deed of sale is unenforceable because it is
unauthorized
d. C may exercise his right of redemption by
operation of law
36. What is the principle of rebus sic stantibus?
a. Under this theory, the parties stipulate in the light
of certain prevailing conditions, and once these
conditions cease to exist the contract also ceases
to exist.
b. This theory pertains to the freedom of the parties
to stipulate.
c. It pertains to principle of civil law that a contract
can only bind the parties who had entered it, their
heirs, and assigns.
d. The principle provides for the provision in favor of
a third person not a party to the contract.
37. When is a rescission a proper remedy in case of a
breach of contract?
a. If after the principal remedies are filed in court.
b. In case of delay on the part of the creditor.
c. In cases of substantial breach of the terms and
conditions of the contract.
d. If all the properties of the debtor are exhausted.
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38. A 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, because at the time of its creation all the
elements are present.
b. Yes, because subsequent invalidation of law will
not dissolve the corporation
c. No, because the requisites for its existence are
absent and no continuity of good faith.
d. No, because it is a de jure corporation.
39. Which of the following is false?
a. If the corporation is vested with public interest,
the board shall also elect a compliance officer.
b. The officers shall manage the corporation and
perform such duties as may be provided in the
bylaws and/or as resolved by the board of
directors
c. The directors of a corporation shall not receive any
compensation for being members of the board of
directors, except for reasonable per diems
d. In no case, shall the total yearly compensation for
directors, as such directors, exceed 10% of the
net income after income tax of the corporation
during the preceding year.
40. Mr. Y borrowed P5,000 from Mr. Z payable on October
10, 2024 and another P2,000 on October 15, 2024,
payable on November 10, 2024. Then on November
15, 2024, Mr. Y paid P5,000 to Mr. Z designating that
the payment is for the October 10, 2024 debt. Can
there be application of payment?
a. Yes, because all the elements for application for
payment are present.
b. No, because the debtor specifically designated the
debts to be paid.
c. No, because the payment is sufficient only to pay
the first debt.
d. Yes, because it is the right of the debtor.
41. Which of the following cases indicates novation?
a. X is obligated to Y the delivery of a car. They
agreed to change the object by delivering
marijuana instead of the car.
b. X is obligated to deliver to Y a sack of rice. The
obligation resulted from a fraud committed by Y.
Later, the parties agreed to change the delivery
from one sack to three sacks of rice.
c. X is obligated to deliver to Y P50,000 on April 10,
2025. Later the parties agreed to include interest
in case of delay on payment.
d. X is obligated to Y the delivery of marijuana. They
agreed to change the object by delivering a car
instead of the marijuana
e. Answer not given
42. The following are true as to by-laws of a corporation,
except:
a. By-laws are adopted and filed prior or
after to incorporation.
b. By-laws may be necessary for the government of
the corporation but these are subordinate to the
articles of incorporation.
c. It is generally accepted rule that third persons are
bound by by-laws.
d. In all cases, bylaws shall be effective only upon
the issuance by the SEC of a certification that the
bylaws are in accordance with the RCC.
43. The following are the requisites to avail of
reformation, except
a. There is meeting of the minds between the
parties.
b. The true intention is not expressed in the
instrument.
c. The failure to express the true intentions is due to
mistake, fraud, inequitable conduct or accident.
d. The mistake, fraud inequitable conduct or accident
prevented the meeting of the minds of the parties.
44. Spouses H and W formed a limited partnership to
engage in real estate business and H contributed
P500,000. Is the partnership between the spouses
valid?
a. The partnership is not valid because the spouses
cannot enter into a limited partnership.
b. The partnership is valid because spouses can
enter into a partnership, limited or general,
universal or particular.
c. The partnership is valid because spouses are
prohibited to enter into a universal partnership
only.
d. The partnership is not valid because spouses
cannot enter into any kind of partnership for
business.
45. A, B and C, joint debtors owed X, Y, Z , solidary
creditors, P15,000. How much can Y collect from C?
a. P5,000
b. P15,000
c. P3,000
d. P1,500
46. Which of the following is true?
a. When a right to sue upon a civil obligation has
lapsed by extinctive prescription, the obligor who
voluntarily performs the contract cannot recover
what he has delivered or the value of the service
rendered.
b. When without the knowledge or against the will of
the debtor, a third person pays a debt which the
obligor is not legally bound to pay because the
action thereon prescribed, but the debtor
voluntarily reimbursed the third person, the
obligor can recover what he has paid.
c. When, after an action for civil obligation has failed
the defendant voluntarily performs the obligation,
he can still demand the return of what has been
delivered.
d. When a testate or intestate heir voluntarily pays a
debt of the decedent exceeding the value of the
property he received by will, the payment is
invalid and can be rescinded by the payor.
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47. A, B and C formed a partnership, with each
contributed P250,000. They agreed on equal
distribution of profits. After 5 years of operation,
however, C conveys her interest in the partnership to
D, without the knowledge and consent of A and B. Is
the partnership dissolved?
a. The partnership is not dissolved because the
assignment made by C of his whole interest was
without the knowledge and consent of A and B.
b. The partnership was dissolved because the
assignee, D, automatically becomes the partner.
c. The partnership is dissolved since C has ceased to
be a partner because of the assignment.
d. The partnership is not dissolved because the
conveyance of a partner’s interest in the
partnership does not itself dissolve the
partnership.
48. The following refers to Emptio Rei Speratae, except
a. It pertains to the sale of a thing with potential
existence
b. The sale is subject to the condition that the thing
will exist, if not there is no contract.
c. The uncertainty is with regard to quantity and
quality of the thing
d. It is the sale of mere hope or expectancy
49. A agreed to sell to B a lot for P100,000. B was given
until February 14, 2025 to raise the fund necessary to
buy the land. It was further agreed that if B could not
produce the money on or before said date, no liability
would attach to him. Before February 14, 2025, A
backed out of the agreement. Is A obliged to sell the
property?
a. No, since B was not ready to fulfill his obligation.
b. No, since A can withdraw the promise before the
acceptance of B.
c. Yes, since there is already a meeting of the minds.
d. Yes, since the qualified withdrawal was made
before the coming of the period agreed upon.
50. A, B, C and D organized a general partnership with A
and B as industrial partners and were appointed as
managing partners, while C and D as capitalist
partners. C contributed P80,000 and D contributed
P60,000 to the common fund. K applied as office
assistant and M applied as accountant. The hiring of J
was decided upon by A and B but was opposed by C
and D. Whose decision shall prevail?
a. A and B as managing partners
b. C and D as capitalist partners
c. C and D as they have the controlling interest
d. A and B since it is an act of ownership
51. P took a public bus in going to his office. Although P
paid his fare, the bus conductor did not issue him a
ticket. Along the way, the bus met an accident causing
a slight injury to P and passengers. If P is to recover
damages from the bus owner, the source of the bus
owner's liability is:
a. contract
b. quasi-contract
c. law
d. quasi-delict
e. negotiorum gestio
52. There is no extinguishment of the obligation:
a. In a facultative obligation, where the thing lost
was the principal object prior to substitution
b. In a joint obligation, where one of the joint
creditors condoned the obligation of all the joint
debtors
c. In an indivisible obligation, where the thing has
been lost without the fault of the solidary debtor
d. In an alternative obligation, where all the things
were lost due to fortuitous event and the creditor
had the right to choose
53. Rian and Bryan orally agreed to form a partnership.
Each contributed cash and real properties worth
Php500,000 to a common fund. But they did not
register the partnership with the SEC. In this case, the
partnership contract is:
a. Unenforceable
b. Void
c. Valid
d. Voidable
e. Rescissible
54. S and B entered into a contract whereby S sold his car
to B for P100,000.00. Based on the foregoing, which
of the following statements is incorrect?
a. The contract is unenforceable if S is 17 and B is
insane.
b. The contract is voidable if S is 17 years old, and B
is 25 years old.
c. The contract is void if B, 25 years old, compelled
S, 30 years old, to sign the deed of sale by
threatening to burn the house of S.
d. The contract is rescissible if at the time the sale,
the car was the subject matter of litigation
brought by X against S to recover the car, and the
court or X did not give his authority to the sale.
55. The threshold for small and medium sized entities
under SRC Rule 68:
a. Total assets and liabilities are below Php 3 million
b. Assets are between Php 3 million to 100 million or
total liabilities of between Php 3 million to Php 100
million
c. Assets are between Php 3 million to 350 million or
total liabilities of between Php 3 million to Php 250
million
d. Assets are between Php 100 million to 350 million
or total liabilities of between Php 100 million to
Php 250 million
56. Which statement about prosecution of money
laundering case is incorrect?
a. The element of knowledge may be established by
direct or circumstantial evidence.
b. The person accused of money laundering must be
convicted first of predicate crime of money
laundering before he may be convicted of crime of
money laundering.
c. The prosecution of money laundering and the
unlawful activity shall proceed independently. Any
person may be charged with and convicted of both
money laundering and the unlawful activity.
d. The elements of money laundering are separate
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and distinct from the elements of the unlawful
activity. The elements of the unlawful activity,
including the identity of the perpetrators and the
details of the commission of the unlawful activity,
need not be established by proof beyond
reasonable doubt in the case for money
laundering.
57. Which of the following transactions is exempted from
mandatory tender offer?
a. Merger or consolidation
b. Purchase from the biggest company
c. Any purchase from a publicly listed company
d. Any purchase of securities from the unissued
capital stock even if the acquisition will result to a
fifty percent (50%) or more ownership of
securities by the purchaser or such percentage
that is sufficient to gain control of the board
e. Answer not given
58. What is the minimum composition of audit committee
of a corporation? Choose the best answer.
a. At least three directors who shall preferably have
accounting and finance backgrounds, one of
whom shall be an independent director and
another with audit experience
b. At least four directors who shall preferably have
accounting and finance backgrounds, one of
whom shall be an independent director and
another with audit experience
c. At least five directors who shall preferably have
accounting and finance backgrounds, one of
whom shall be an independent director and
another with audit experience
d. At least seven directors who shall preferably have
accounting and finance backgrounds, one of
whom shall be an independent director and
another with audit experience
59. S sold his lot to B reserving his right to repurchase the
same within five years from the date of the execution
of their agreement. The sale together with the right
to repurchases was registered with the Register of
Deeds. Two years after the execution of the sale, B
sold the same lot to X who was not aware that S
reserved his right to repurchase the lot.
a. The sale by S to B is absolute without any
condition.
b. The sale by S to B is subject to a resolutory
condition.
c. The sale by S to B is subject to a suspensive
condition.
d. The sale by S to B is subject to a condition which
is neither suspensive or resolutory.
60. Which of the following must be in writing to be
enforceable as required by the Statute of Frauds?
a. A contract for the lease of a drilling equipment for
a period of 8 months
b. A subscription for 100 shares of stock of a
corporation at P100.00 per share.
c. A contract whereby one agrees to pay another's
debt if the latter defaults in his payment.
d. A contract for the construction of a building
scheduled to begin 3 months after the execution'
of the contract.
61. There being no express stipulation and if the
undertaking is to deliver a determinate thing, the
payment
shall be made
a. At the domicile of the debtor
b. At the domicile of the creditor
c. Wherever the thing might be at the moment the
obligation is to be fulfilled
d. Wherever the thing might be at the moment the
obligation was constituted
62. Roy and Carlos both undertook a contract to deliver to
Sam in Manila a boat docked in Subic. Before they
could deliver it, however, the boat sank in a storm.
The contract provides that fortuitous event shall not
exempt Roy and Carlos from their obligation. Owing
to the loss of the motor boat, such obligation is
deemed converted into one of indemnity for damages.
Is the liability of Roy and Carlos joint or solidary?
a. Solidary or joint upon the discretion of Sam
b. Joint since the conversion of their liability to one
of indemnity for damages made it joint
c. Solidary since Roy and Carlos failed to perform
their obligation to deliver the motor boat
d. Neither solidary nor joint since they cannot waive
the defense of fortuitous event
e. Answer not given
63. D owes C P30,000 due on June 18. C owes D the
following debts: P15,000 due on June 2; P4,000 due
on June 14; P6,000 due on June 16; and P3,000 due
on June 18. On June 19, how much can C collect from
D?
a. Nothing
b. P4,000
c. P6,000
d. P3,000
e. P2,000
64. In a facultative obligation, to whom shall the right to
substitute belong?
a. Always creditor
b. Always debtor
c. Generally debtor unless granted to the creditor
d. Generally creditor unless granted to the debtor
65. S1 – A contract of antichresis must be in writing for
its validity.
S2 – The pledgee can deposit the thing pledged with
a third person.
S3 – The renunciation of the thing pledged must be in
a public instrument to extinguish the pledge.
a.
b.
c.
d.
e.
S1 and S2 are false, S3 is true
S1 is true, S2 and S3 are false
All are false
All are true
Answer not given
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TEAM PRTC CPA REVIEW
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66. D1, D2 and D3 obliged themselves jointly to pay C
P15,000. To secure the obligation, D1 pledged his TV
and D3 his refrigerator. On the date of maturity, D1
paid C P10,000.00. Which of the following statements
is true?
a. D1 can redeem object 1 because the obligation is
joint
b. D1 can redeem object 1 and 2 because they are
proportionate to the amount paid
c. D1 can redeem any of the thing pledged
d. D1 cannot redeem any of the thing pledged
because of Indivisibility of the contract of pledged.
67. D constituted a chattel mortgage on his car as security
for the loan he obtained from C of P1M. It was further
stipulated the same mortgage shall secure the
payment of another loan which the debtor D may incur
in the future. Is the chattel mortgage valid?
a. The chattel mortgage for both loans is valid
b. The mortgage for the P1M is the only one valid
c. The mortgage as regards the future loan is the one
valid.
d. The mortgage is extinguished because of the void
stipulation on the ground it cannot secure a future
obligation
e. Answer not given
68. A. The requirements that the description of the thing
pledged and the date of the pledged must appear in a
public instrument is for:
i.
validity of the pledge
ii.
creation of the pledge
iii.
bind third persons
iv.
enforceability of the contract of pledge
B. The requirement that the Real Mortgage must be
recorded in Registry of Property is:
v.
validity of the real mortgage
vi.
creation of the real mortgage
vii.
bind third persons
viii.
enforceability of the contract of mortgage
a.
b.
c.
d.
e.
A - i and B - v
A - ii and B - vii
A - iii and B - viii
A - i. and B - viii
A - iii and B - v
69. A thing under a pledge by operation of law may be
sold –
a. after demand of the amount for which the thing
was retained
b. after the lapse of one month retention period
c. after failure to sell it at the public auction
d. after extra-judicial termination of the pledgev
70. Which of the following is not true?
i.
In obligations with a penal clause, the debtor may
exempt himself from the performance of the
obligation by paying the penalty.
ii.
When the fulfillment of the condition is dependent
upon the sole will of the debtor, the conditional
obligation shall be void.
iii.
Consignation, to be valid, generally requires a
prior tender of payment.
iv.
In facultative obligations, the right of choice
belongs to the debtor unless it has been expressly
granted to the creditor.
a. i, ii, iii only
b. i and ii only
c. i and iv only
d. i, ii, and iv only
e. all are false
71. The promissory note between Mario and Luigi states:
“Luigi agrees and understands that upon failure on his
part to pay the amount of One Hundred Thousand
Pesos (₱100,000) on December 31, 2022, he agrees
to pay the sum equivalent to six percent (6%) interest
monthly from the date of default until the entire
obligation is fully paid sans demand.” Luigi failed to
pay on the stipulated date. On March 1, 2023, Mario
filed a collection suit against Luigi. In his defense,
Luigi stated that he was not yet in legal delay, as Mario
had not made a demand against him. Is the contention
of Luigi correct? Explain.
a. Yes, as there should be demand first before one
can incur delay.
b. No, as he failed to pay on the date stated.
c. No, as demand is not necessary since the terms of
the agreement are clear as to maturity of the loan
and application of interest.
d. None of the above statements are correct.
72. The following are the elements of an obligation:
a. Active subject, Passive Subject and Object
b. Active subject, Passive Subject, Object, and
Juridical Tie
c. Active subject, Passive Subject, Consideration,
and Object
d. Active subject, Passive Subject, and Consideration
73. Demand must be made on the due date of the
obligation in order for delay to exist in one of the
following cases. Which is it?
a. When it was stipulated by the parties that demand
need not be made.
b. When the law provides that demand need not be
made.
c. When the obligation does not indicate whether
demand must be made or not on due date.
d. When time is of the essence of the contract.
74. Toni saw the live selling of Mariel in Facebook. Mariel
sells limited edition luxury bag. Through an exchange
of messages, Toni and Mariel agreed that: (i) Mariel
will sell to Toni the limited edition luxury bag for
Php250,000.00; (ii) Toni will deposit the purchase
price in Mariel’s bank account; and (iii) Mariel will
deliver the bag within 5 days from deposit. However,
after Toni’s payment, which Mariel acknowledged
receipt, Mariel received an offer from Krissy to buy the
same bag for Php300,000.00. Mariel candidly tells
Toni that she is selling the bag at a higher price to
another buyer and sends this message: “Mars, may
iba pala akong buyer na mas malaki ang offer, sorry!
Balik ko na lang bayad mo, keri?” Mariel claims that
since the bag has not yet been delivered to Toni, she
can still withdraw the offer. Is Mariel correct?
a. Yes, since delivery is required to pass on
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ownership to Toni.
b. No, since the offer has already been accepted by
Toni and Toni has performed her end of the
contract.
c. Yes, since she communicated the return of the
purchase price paid prior to receipt of the bag by
Toni.
d. Yes, since there is no valid contract in the first
place.
75. X sold Y 100 sacks of rice that Y was to pick up from
X’s rice mill on a particular date. Y did not, however,
appear on the agreed date to take delivery of the rice.
After one week, X rescinded the sale without notarial
notice to Y. Is the rescission valid?
a. Yes, rescission is allowed since, having the
character of movables and consumables, rice can
easily deteriorate and he committed a breach
thereof
b. No, the buyer is entitled to a customary 30-day
extension of his obligation to take delivery of the
goods.
c. No, since there was no express agreement
regarding automatic rescission.
d. No, the seller should first determine that Y was not
justified in failing to appear.
76. Three (3) of the following instances will render an offer
ineffective before acceptance is conveyed. Which one
will not?
a. Civil interdiction of either party
b. Insolvency of either party
c. Insanity of either party
d. Intoxication of either party
77. On May 1, 2023, S offered to sell a specific car to B
for P500,000. B sent his letter of acceptance to S on
May 8, 2023. On May 10, 2023, however, S died in a
vehicular accident and his secretary received the letter
of acceptance on May 12, 2023 unaware that S had
already died.
a. The contract was perfected on May 8, 2023 when
B sent his letter of acceptance.
b. The contract was perfected on May 12, 2023 when
the secretary of S received the letter of
acceptance.
c. The contract was not perfected because the offer
of S became ineffective when he died.
d. The contract was perfected on May 1, 2023
because the acceptance made by H on May 8,
2023 retroacts to the date of the offer.
78. P appointed A as his agent to sell P's only Toyota Vios
car for P400,000.00 cash. On November 7, 2023, A,
pursuant to the authority granted to him by P, offered
to sell the car to B at the price of P400,000.00. B
accepted the offer on November 8, 2023 by sending a
letter of acceptance to A, which letter of acceptance
was received and read by A on November 9, 2023. On
November 10, 2023, A informed P and B had accepted
the offer.
a. The contract was perfected on November 8, 2023
when B sent his letter of acceptance.
b. The contract was perfected on November 9, 2023
when A received the letter of acceptance.
c.
The contract was perfected on November 10, 2023
when A notified P, the true owner of the car that
B had accepted the offer.
d. The contract was perfected on November 7, 2023
since the acceptance by B retroacts to the date of
the offer.
79. On July 1, 2023, Boni offered to sell his only Toyota
Fortuner car for P1,000,000.00 to Benny. Boni stated
that he was giving Benny up to July 31, 2023 to make
up his mind whether to buy the car or not. On July 25,
2023, Boni personally went to Benny to inform him
that he was no longer willing to sell the car unless the
price was increased to P1,400,000.00. Choose the
best answer.
a. Benny may compel Boni to sell to him the car for
P1,000,000.00.
b. Boni may validly withdraw his offer to Benny
because the option was not founded upon a
consideration.
c. Boni may not withdraw his offer until after the
lapse of the option period that he gave to Benny.
d. The increase in the price made by Boni was not
valid because it was made within the option
period.
80. S and B entered into a contract whereby S transferred
to B a specific car for the price of P200,000.00 while
B gave to S P90,000.00 in cash and a diamond ring
worth P110,000.00. The heading of the written
contract signed by the parties reads "Contract of
Sale".
a. The contract is a valid contract of barter since the
value of the property given is more than the
monetary consideration. The intention of the
parties is immaterial.
b. The contract is a valid contract of sale as intended
by the parties regardless of whether the monetary
consideration is more or less than the value of the
property consideration.
c. The contract is void because the intention of the
parties is void since the value of the diamond ring
is more than the monetary consideration given.
d. The contract is partly a contract of barter and
partly a contract of sale.
81. The price in a contract of sale is certain, except:
a. When the parties have fixed or agreed upon a
definite amount.
b. If the fixing of the price is left to the discretion of
one of the contracting parties and the price fixed
is not accepted by the other party.
c. If the price fixed is that which the thing sold would
have on a definite day or in a particular exchange
or market.
d. If the price is certain with reference to another
thing certain.
82. Sheena sells to Criste at P50 per gallon 300 gallons of
gasoline stored in his truck's tank which, unknown to
the parties, contains 500 gallons gasoline. What is the
status of the contract of sale between Sheena and
Criste?
a. The sale is void because the quantity available is
more than the quantity sold.
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TEAM PRTC CPA REVIEW
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b. The sale is valid up to 500 gallons of gasoline.
Criste must pay for the additional 200 gallons of
gasoline.
c. The sale is valid up to 300 gallons of gasoline.
Criste becomes the owner of 3/5 of the whole
stock, while Somera becomes the owner of 2/5
thereof.
d. The sale is rescissible because Sheena will suffer
lesion of more than 1 of the value of the whole
stock.
83. One of the following characteristics of dacion en pago
is also a characteristic of a contract of sale. Which is
it?
a. Obligations are extinguished.
b. Ownership of the object is transferred to the other
party.
c. There is a pre-existing credit.
d. There is less freedom in fixing the price.
84. Nover sells to Rey 500 sacks of rice at P1,000.00 per
sack from the stock then stored in the warehouse of
Nover.
Unknown to the parties, the warehouse
contains only 480 sacks of rice. What is the status of
the contract between Nover and Rey?
a. The sale is valid up to 480 sacks of rice but void
as to the deficiency of 20 sacks of rice.
b. The entire sale is valid up to 500 sacks of rice. Rey
becomes the owner of the whole stock available
and Nover must deliver the deficiency of 20 sacks
of rice.
c. The sale is valid up to 480 sacks of rice but
rescissible as to the deficiency of 20 sacks of rice
by reason of damage suffered by Rey.
d. The sale is void since the quantity available is less
than the quantity sold.
e. Answer not given
85. Which of the following statements are true?
i.
Unenforceable contracts are susceptible of
ratification.
ii.
Ratification
in
voidable
contract
requires
conformity of the contracting parties.
iii.
Contracts must bind both parties, its validity or
termination cannot be left to the will of one of
them.
iv.
Contracts of pure beneficence are contracts
without cause.
a. i only
b. i and ii only
c. i and iii only
d. i, ii, and iii only
e. all statements are true
86. Which of the following statements are true?
i.
Acts and contracts which have for their objects the
creation
transmission,
modification
or
extinguishment of real rights over immovable
property must be in a public instrument for its
validity.
ii.
A contract may be voidable even though there
may have been no damage to the contracting
parties
iii.
Incidental fraud invalidates a contract.
iv.
There is violence when in order to wrest consent,
a.
b.
c.
d.
e.
serious or irresistible force is employed.
i and ii only
i and iii only
ii and iii only
ii and iv only
ii, iii, and iv only
87. Which of the following statements are true?
i.
Acts and contracts which have for their objects the
creation
transmission,
modification
or
extinguishment of real rights over movable
property must be in a public instrument to be valid
and binding.
ii.
Intimidation shall annul the obligation, although it
may have been employed by a third person who
did not take part in the contract.
iii.
Failure to disclose facts constitutes fraud.
iv.
Rescission shall be only to the extent necessary to
cover the damage caused by a contract in fraud of
a creditor.
a. i and ii only
b. i and iii only
c. ii and iii only
d. ii and iv only
e. ii, iii, and iv only
88. Which of the following statements is true?
i.
An offer may become ineffective upon insolvency
of either party before acceptance is conveyed
even if the insolvency is not judicially declared.
ii.
An offer made through the agent is accepted from
the time acceptance is communicated to the
agent.
iii.
Mistake as to the qualifications of one of the
parties vitiates consent.
iv.
All contracts are perfected by mere consent.
a. i and ii only
b. i and iii only
c. ii and iii only
d. ii and iv only
e. ii, iii, and iv only
89. Mistake in three of the following will make a contract
voidable. Which one will not?
a. Mistake as to the substance of the thing which is
the object of the contract
b. Mistake as to the principal conditions which
principally moved one or both parties to enter into
the contract.
c. Mistake as to the identity or qualifications of one
of the parties, where identity or qualifications
have been the principal cause of the contract.
d. Simple mistake of account
e. None of the above.
90. The following are requisites for the amendment of the
Certificate of Limited Partnership, except:
a. Amendment must be in writing
b. All the liabilities are paid
c. Certificate is signed and sworn to by all the
partners
d. Filed in the SEC
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91. The following are in-charge of winding up of the
partnership, except:
a. Surviving partner
b. The partners who have not wrongfully dissolved
the partnership
c. Legal representative of the last surviving partner,
not insolvent
d. Liquidating partner
92. S1 – The liability of the partners by estoppel is joint
and severally.
S2 – The liability of the partner who misappropriate
partnership money is in solidum.
S3 – The liability for contractual obligation is joint and
subsidiary.
S4 – Acts of ownership requires the written consent of
the limited partner.
S5 – A limited partner who extended loan to the
partnership is not allowed to ask collateral for the
same.
a.
b.
c.
d.
e.
False, False, False, True, True
False, True, False, True, True
True, False, False, False, True
False, False, True, True, True
True, True, False, True, True
93. S1- Foreclosure in Pledge is extra-judicial
S2 – Foreclosure in Chattel Mortgage may be judicial
or extra-judicial.
S3 – The public auction in legal pledge will happen one
month after the demand.
S4 – The selling of the thing pledge requires the
written consent of the pledgee.
S5 – To bind third persons, a real estate mortgage
must appear in public instrument.
a.
b.
c.
d.
e.
True, True, True, False, False
False, True, False, True, True
True, False, True, False, True
False, False, True, True, True
True, True, False, False, True
94. S1 – The period to report the creation of the
emergency board is 3 days.
S2 – The period to appoint the chairman and vicechairman in a cooperative is 10 days.
S3 – The period to question the decision of the third
person which is manifestly inequitable is 3 months
S4 – The period to redeem in urban land is 30 days.
S5 – The period to reform the contract is 1 year.
a.
b.
c.
d.
e.
Only 1 statement is incorrect
Only two statements are incorrect.
Only 3 statements are incorrect
Only 4 statements are incorrect.
All are correct
95. S1 – Accion Pauliana requires mutual restitution on
the part of both parties.
S2 – Reformation is the remedy if there is no meeting
of the minds on part of the parties since they were
prevented by fraud, mistake or inequitable conduct.
S3 – Rescission in reciprocal obligations requires
damage on the part of one of the parties.
S4 – The foreclosure in chattel mortgage is only
judicial.
S5 – Equity of redemption is allowed in shares of the
corporation.
a.
b.
c.
d.
e.
Only 1 statement is correct
Only two statements are correct.
Only 3 statements are correct
Only 4 statements are correct.
All are correct
96. S1 – Remedy to question the legal existence of the de
facto corporation.
S2 – Remedy of the partnership if the partner did not
give the contribution.
S3 – Remedy if two or more parties claim the right of
ownership over a certain property.
S4 – Remedy if the contract is voidable.
S5 – Remedy if the name of the status of the limited
partner is erroneously registered in the certificate of
limited partnership.
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
xii.
a.
b.
c.
d.
e.
Mandamus
Quo warranto
Derivative suit
Specific performance
Dissolve the partnership
Promptly renounce interest
Interpleader
Replevin
Escheat
Annulment
Rescission
Amendment
i, iv, viii, x, xii
ii, vi, vii, x, xii
i, iv, vii, x, vi
ii, iv, vii, x, xii
ii, iv, vii, x, vi
97. Property that can be used to redeem the interest of
the limited partner charged by the separate creditor.
a. Partnership property
b. Partnership property with the consent of all
partners
c. Separate property of the partners
d. Both the partnership property and the separate
property
e. Neither the partnership property and the separate
property
98. The following are instances of Acts of ownership
provided by the law for Limited partnership, except:
a. Admit person as a general partner
b. Admit a person as a limited partner
c. Do any other act in contravention of the certificate
d. Renounce a claim of the partnership
e. Continue the business of the partnership on the
death of the general partner
99. The following are the rights of the injured partner
where partnership contract rescinded due to fraud or
misrepresentation, except:
a. Right to continue the business of the partnership
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TEAM PRTC CPA REVIEW
b. Right of Lien / Retention on the surplus of
Partnership properties
c. Right to Subrogation in place of partnership
creditors
d. Right of Indemnification by the guilty partner/s
c. Both statements are correct
d. Both statements are incorrect.
Management Firm of Professional Review and Training Center (PRTC)
Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
Advanced Financial Accounting
and Reporting (AFAR)
FIRST PRE-BOARD EXAMINATION
March 16, 2025
Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of 70 items and the
exam is good for three (3) hours. Good luck!
100.
Where the dissolution is caused by the act, death
or insolvency of a partner, each partner is liable to his
co-partners for his share of any liability created by any
partner acting for the partnership as if the partnership
had not been dissolved unless:
S1 - The dissolution being by act of any partner, the
partner acting for the partnership had knowledge or
notice of the dissolution; or
S2 - The dissolution being by the death or insolvency
of a partner, the partner acting for the partnership had
knowledge of the death or insolvency.
a. Only S1 is correct
b. Only S2 is correct
1. The investment in Branch accounting has a balance
that equals which account of the branch?
a. Home Office Account
b. Liability
c. Asset
d. None of the above
End of Examination
Thank you for participating in Team PRTC Nationwide Open First Pre-Board Examination.
2. Which of the following would explain why the
Investment in Branch account is less than the Home
Office Capital account?
a. A Cash transfer to the branch is in transit.
b. A Cash transfer to the home office is in transit.
c. An inventory shipment to the branch (at cost) is
in transit.
d. None of the above.
3. The Shipments to Branch ledger account in the
accounting records of the home office of a business
enterprise:
a. Is an asset valuation account
b. Indicates thot the home office uses the periodic
inventory system
c. Is adjusted at the end of the accounting period to
equal the unrealized profit in the branch's ending
inventories
d. Is not displayed in the home office's separate
financial statement
4. Companies recognize revenue only when
a. A contract is reasonably likely to exist
b. A performance obligation is designated in a
written contract
c. A written contract is in p lace and payment is
variable
d. Control over goods or services has been
transferred from the seller to the customer
5. Which of the following is not true about revenue
recognition with respect to long-term construction
contracts?
a. Long-term construction contract s often are
viewed as having a single performance obligation,
because goods and services fail the "separately
identifiable " criterion.
b. Long-term construction contracts often satisfy the
criteria for recognizing revenue over time.
c. Long-term
construction
contracts
require
accounting for construction in progress as well as
billings to customers.
d. Long-term construction contracts typically include
multiple performance obligations because of all
the different types of goods and services included
for each project.
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CPA Review DE LEON/DE LEON/ALENTON/BINALUYO
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6. A rationale for recognizing revenue over the life of a
contract rather than at a single point In time is that:
a. Results are more conservative.
b. It provides a better measure of periodic
accomplishment.
c. It is a better match with legal ownership.
d. It results in a lower income tax.
7. Re venue on a long-term contract should not be
recognized according to the proportion of the
performance obligation that has been completed if:
a. Completion rates are certain.
b. Profits are low.
c. Projects are more than five years to completion.
d. The arrangement does not qualify for revenue
recognition over time
8. Cost estimates on a long-term contract may indicate
that a loss will result on completion of the entire
contract. In this case, the entire expected loss should
be
a. recognized in the current period. regardless of
whether the percentage-of completion {over
time) or cost-recovery (point in time/time of
completion) method is employed.
b. recognized in the current period under the
percentage-of-completion (over time) method.
but the cost-recovery (point In time/time of
completion) method defers recognition of the loss
to the time when the contract is completed.
c. recognized in the current period under the costrecovery (point in time/time of completion)
method. but the percentage-of-completion (over
time) method defers the loss until the contract Is
completed.
d. deferred and recognized when the contract is
completed, regardless of whether the percentageof-completion (over time) or cost-recovery (point
in time/time of completion) method is employed.
9. An entity enters into a contract with a customer to
license (for a period of three years) intellectual
property related to the design and production
processes for a good. The contract also specifies that
the customer will obtain any updates to that
intellectual property for new designs or production
processes that may be developed by the entity. The
updates are essential to the customer's ability to use
the license because the customer operates in an
industry in which technologies change rapidly. The
entity does not sell the updates separately and the
customer does not have the option to purchase the
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TEAM PRTC
TEAM PRTC
license without the updates. Which of the following
statements is incorrect?
a. The promises to grant the license and to provide
the updates are two separate performance
obligations.
b. The license and the updates are accounted for
together as a single performance obligation.
c. The general principles are applied to determine
how the performance obligation is satisfied.
d. The single performance obligation is satisfied over
time.
10. Which of the following would most likely not be
considered as a separate performance obligation in
relation to a franchise agreement?
a. grant of license to use the franchisor's trade name
b. transfer of equipment to be used in the
franchisee's business
c. franchisor's promise to undertake activities to
support the franchise
d. all of the these are separate performance
obligations
11. When should a consignor recognize revenue from a
consignment sale?
a. When the consignor transfers the goods to the
consignee
b. When the consignee sells the goods to the end
customer
c. At the point of time indicated in the contractual
arrangement between the consignor and the
consignee
d. Any of these
12. How should the consignor and the consignee,
respectively, recognize revenue from the sale of
consigned goods to end customers?
a. Gross amount of sale price; Commission or Fee
b. Sale price net of commission; Commission or Fee
c. Net amount of sale price; Mark up
d. Free; Commission
When an existing partner retires from the
partnership
d. The bonus method can be applied in all three of
the above circumstances
16. Which of the following interest component calculation
bases is least susceptible to manipulation when
allocating profits and losses to partners?
a. Beginning capital account balance
b. Average of beginning and ending capital account
balancesrrect!
c. Weighted average capital account balance
d. Ending capital account balance
17. If all partners are included in the first installment
payment under installment liquidation, then the next
distribution will be made
a. According the residual profit and loss ratio.
b. On schedule of safe payments
c. According to cash priority program
d. According to capital balances.
18. The estimated recovery of partially secured creditors
is equal to
a. The realizable value of the assets pledged plus the
excess amount multiplied by the estimated
recovery percentage
b. The realizable value of the assets pledged minus
the excess amount multiplied by the estimated
recovery percentage
c. Their claims multiplied by the estimated recovery
percentage
d. Any of these
19. According to PFRS 11, it is a separately identifiable
financial structure, including separate legal entities or
entities recognized by statute, regardless of whether
those entities have a legal personality.
a. Special purpose entity
b. Public utility vehicle
c. Special purpose vehicle
d. Separate vehicle
13. Entity A acquired 80% interest in Entity B on
December 31. 2025. How much of Entity B's profit will
be included in the December 31, 2025 consolidated
statement of profit or loss?
a. 80%
b. None
c. 100%
d. B or C
20. A joint arrangement in which assets and liabilities
relating to the arrangement are held in a separate
vehicle.
a. Joint operation and joint venture
b. Joint arrangement
c. Joint operation
d. Joint venture
14. Goodwill is attributed to both the owners of the parent
and non-controlling interests (NCI) if
a. the NCI is measured at 'proportionate share.
b. the NCI is measured at 'fair value'.
c. in both a and b
d. the goodwill is big
On January 1, 2024, PAPSY Company exchanges
15,000 shares of its common stock for all of the assets
and liabilities of MAMSHIE Company. Each of PAPSY’s
shares has a par value of P 4 and a P 50 fair value.
PAPSY also paid P 25,000 in stock registration and
issuance costs in connection with themerger.
15. When can the bonus method be applied?
a. When a partnership is formed
b. When a new partner is added to the partnership
Several of MAMSHIE’s accounts have fair values that
differ from their book values on this date:
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Receivables
Book
Values
P 65,000
Fair
Values
P 63,000
Trademarks
95,000
225,000
Record music catalog
In-process research and
development
Notes payable
60,000
0
180,000
200,000
50,000
45,000
c.
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The balance sheet of the two companies are as
follows:
PAPSY
MAMSHIE
Cash
P 60,000
P 29,000
Receivables
150,000
65,000
Trademarks
400,000
95,000
Record music catalog
840,000
60,000
Equipment (net)
320,000
105,000
P 1,770,000
P 354,000
Totals
Accounts payable
P 110,000
P 34,000
Notes payable
370,000
50,000
Common stock
400,000
50,000
Additional paid-in capital
30,000
30,000
Retained earnings
860,000
190,000
P 1,770,000
P 354,000
Totals
MAMSHIE will be dissolved and will no longer exist as
a legal entity.
Compute for the following balances right after the
business combination:
21. Total Assets
a. 2,124,000
b. 2,547,000
c.
d.
2,574,000
2,599,000
22. Total Liabilities
a. 84,000
b. 480,000
c.
d.
564,000
559,000
23. Common Stock
a. 50,000
b. 400, 000
c.
450,000
d. 460,000
24. Additional Paid-in capital
a. 30,000
b. 60,000
c. 695,000
d. 720,000
25. Retained Earnings
a. 190,000
b. 835,000
c. 860,000
d. 1,050,000
MARKEE
ACEY
Cash
Accounts receivable
Inventories
Plant assets
P 185,700
80,500
42,500
185,800
P 15,500
35,800
10,200
78,000
Total assets
P 494,500
P 139,500
Liabilities
P 110,400
P 29,000
200,000
50,000
50,000
134,100
0
60,500
P 494,500
P 139,500
Capital stock, P 100 par
value
Additional paid in capital
Retained earnings
Total liabilities and
stockholders’ equity
On May 1, 2025, MARKEE acquired 100% of ACEY’s
outstanding capital stock for P 150,000. MARKEE
incurred additional P 32,700 in acquisition-related
costs. All the assets of ACEY are fairly valued except
plant assets with a fair value of P 90,000 on May 1,
2025.
26. In the consolidated statement of financial position on
May 1, 2025, what amount of total assets will be
reported?
a. 646,000
c. 523,300
b. 490,800
d. 634,000
27. What amount of stockholders’ equity will be reported
in the consolidated statement of financial position on
May 1, 2025?
a. 384,100
c. 351,400
b. 494,800
d. 472,600
KURT Company purchases 8,000 shares of MAXINNE
Company for P96 per share. Before acquisition,
MAXINNE Company has the following balance sheet:
Assets
Cash and cash
equivalents
Inventory
Property and
equipment
Goodwill
Total assets
Liabilities and Equity
P30,000 Current Liabilities
420,000
Ordinary share capital,
P5 par
P
375,000
50,000
600,000 Share Premium
150,000 Retained Earnings
220,000
555,000
Total liabilities and
equity
P 1,200,000
P 1,200,000
On the date of acquisition, KURT believes that the
inventory has a fair value of P600,000 and that the
propertyand equipment is worth P 750,000.
On May 1, 2025, the separate statement of financial
position of MARKEE Corporation and ACEY Company are
as follows:
28. On the date of acquisition, how much is the recorded
investment in subsidiary in the consolidatedstatement
of financial position
a. 768,000
c. 0
b. 960,000
d. 825,000
29. What is the result of the business combination if the
non-controlling interests are measured at fair value?
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TEAM PRTC
a.
b.
45,000
36,000
TEAM PRTC
c. 195,000
d. 186,000
Book Value
Assets:
Pledged with Fully
secured creditor
30. On August 01, 2025, A and B decided to combine their
businesses to form a partnership. Their balance sheets
on this date before adjustments follow:
A
B
PHP18,000
PHP7,500
Accounts Receivable
37,000
27,000
Inventories
60,000
39,000
Furniture & Fixtures
(net)
Office equipment (net)
60,000
18,000
23,000
5,500
Prepaid Expenses
12,750
6,000
Cash
TOTAL
Accounts Payable
Capital
TOTAL
Free Assets
Totals
Liabilities:
Unsecured with
priority
Fully secured
Partially secured
Unsecured without
priority
Sub-total
Stockholders’ Equity
Capital stock
Retained Earnings,
deficit
Totals
PHP210,750 PHP103,000
PHP91,500
PHP36,000
119,250
67,000
P 520,000
Pledged with Partially
secured creditor
Current
Value
P 410,000
292,500
92,500
350,000
P1,162,500
47,500
P 550,000
P
B. Inventories should be recognized only at
80% of their book values.
C. Furniture and fixtures of A is undervalued
by PHP25,000 while the Equipment of B is
undervalued by PHP3,500.
D. Prepaid expenses of PHP6,000 for A and
PHP2,000 for B is to be recognized.
E. Accrued expenses of PHP3,000 for A and
PHP1,000 for B is to be recognized.
2025
Costs incurred to
date
Estimated costs to
complete
402,250
225,000
345,000
P1,037,250
What is the adjusted capital of A and B upon
formation?
a. A – PHP140,100; B – PHP66,050
b. A – PHP213,500; B – PHP98,350
c. A – PHP133,400; B – PHP55,350
d. A – PHP133,400; B – PHP62,350
FEU ENTERPRISES filed a voluntary bankruptcy
petition on July 31, 2025 and its Statement of Affairs
reflects the following amounts:
P1,162,500
Unsecured
W/priority
Fully
Secured
Partially
Secured
a.
P 0
P0
P132,500
Unsecured
w/out
priority
P289,750
b.
P 65,000
P0
P225,000
P345,000
c.
P
P0
P132,500
P345,000
d.
P 0
P110,000
P225,000
P289,750
32. The estimated payment that will be made to partially
secured creditors in the event of liquidation at this
point is:
a. P205,125
b. P 92,500
c. P112,625
d. P225,000
Rhea Untalan Mansibang Associates, sells two licenses
to Yvette Tingin-Atienza Company on September 1,
20x6. First, in exchange for P100,000, Rhea Untalan
Mansibang Associates provides Yvette Tingin-Atienza
with a copy of its proprietary investment management
software, which Rhea does not anticipate updating
and which Yvette Tingin-Atienza can use permanently.
Second, in exchange for P90,000, Rhea Untalan
Mansibang Associates provides Yvette Tingin-Atienza
with a three-year right to market Tingin-Atienza’s
financial advisory services under the name of Rhea
Associates, which Rhea Untalan Mansibang Associates
advertises on an ongoing basis.
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2026
2027
4,500,00 6,000,000
0
1,500,00
0
2,400,000
3,600,000
At contract inception, ABC Co. assesses its
performance obligations in the contract and concludes
that it has a single performance obligation that is
satisfied over time. ABC Co. determines that the
measure of progress that best depicts its performance
on the contract is “cost-to-cost” method.
147,500
( 22,250)
31. The total estimated deficiency is allocable to the
unsecured with priority, fully secured, partially
secured and unsecured without priority creditors
respectively at the respective amounts shown below:
9,750
In 2025, ABC Co. enters into a construction contract
with a customer. The contract price is ₱10,000,000.
Information on the contract follows:
65,000
PHP210,750 PHP103,000
The parties agreed that profits and loss be shared
40:60, and that the following adjustments should be
considered prior to formation.
A. Provide 5% allowance for doubtful accounts
on each Accounts Receivable.
33. How much revenue will Rhea recognize in 20x6 under
this arrangement?
a. P10,000
b. P90,000
c. P100,000
d. P110,000
34. How much is the revenue recognized in 2025?
a. 4,200,000
b. 4,000,000
c. 2,800,000
d. 3,500,000
35. How much is the cost of construction recognized as
expense in 2026?
a. 2,100,000
b. 2,400,000
c. 3,800,000
d. 1,500,000
36. How much is the gross profit recognized in 2027?
a. 1,000,000
b. 1,500,000
c. 2,100,000
d. 2,800,000
The SAN AGUSTIN BUILDERS started work on three
job sites during the current year. Any costs incurred
are expected to be recoverable. Data relating to the
three jobs are given below:
Contract
Price
Actual
Cost
Bohol
P
500,000
600,000
P
375,000
254,167
Davao
250,000
100,000
Site
Cebu
Estimated
Cost to
Complete
P
381,250
100,000
Billings
on
Contract
P
500,000
180,000
150,000
Collection
from
Customers
P 500,000
100,000
100,000
37. Calculate the net amount to be reported on the
balance sheet for the above projects under the
percentage of completion method:
a. Contract Liability
P (11,250)
b. Contract Liability
P (13,750)
c. Contract Asset
P 13,750
d. Contract Asset
P 11,250
38. Calculate the net amount to be reported on the
balance sheet for the above projects under the zero
profit method.
a. Contract Liability
P (11,250)
b. Contract Liability
P (13,750)
c. Contract Asset
P 13,750
d. Contract Asset
P 11,250
On August 1, 2025, Aircon, Inc. consigned 10 2horsepower outmoded air-conditioning units to Argy
Trading, a new consignee, at a cost of P12,000 each.
Aircon also paid P4,000 freight for the shipment of the
consignment to Argy. The selling prices are: for
instant cash , P16,000 each; and for a 3-month
account, P17,400, with a minimum down payment of
P5,800. The account sales are to be made available
only to AAA credit=type customers. Commission to
the consignee is 8% of collection. The consignee paid
delivery expenses on the sold units for P2,400.
On August 31, Argy Trading reported sales of 8 units,
5 units for cash and 3 units on account, each credit
customer paying the P5,800 minimum cash down
payment.
39. How much cash was remitted by Argy Trading to
Aircon, Inc on August 31, 2025?
a. P69,808
c. P122,008
b. P87,208
d. P128,200
40. How much is the net profit recognized by Aircon, Inc.
from the consignment sales of Argy Trading in August,
2025?
a. P19,208
c. P29,080
b. P29,108
d. P 22,808
A and B formed a joint operation. The following were
the transactions during the year:
Total
purchases
Total sales
Expenses paid
Other income
A
B
400
960
800
320
720
40
The joint operation was completed at the end of the
year. Each joint operator is entitled to a 10%
commission on its purchases and a 20% commission
on its sales. Any remaining profit or loss is divided
equally.
41. How much is the profit (loss) of the joint operation?
a. 200,000
b. (200,000)
c. 180,000
d. (180,000)
CEBUPAC COMPANY filed a voluntary bankruptcy
petition on August 15, 2025 and the statement of
affairs reflect the following amounts:
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Pledged with fully
secured creditors
Pledged with partially
secured creditors
Free Assets
Liabilities with priority
Fully secured creditors
Partially secured
creditors
Unsecured creditors
TEAM PRTC
BOOK
CARRYING
VALUE
ESTIMATED
CURRENT
VALUE
P 150,000
P 185,000
90,000
210,000
P 450,000
60,000
160,000
P 405,000
Liabilities
P 35,000
130,000
100,000
270,000
P 535,000
Papaya Corporation issued 100,000 shares of P28.50
par ordinary shares for all the outstanding shares of
Pine Enterprises on August 5, 2025. It also paid cash
of P30,000 at the acquisition date and transferred
used equipment with a carrying value of P50,000 and
a current value of 70% thereof. Papaya’s ordinary
stock was selling at P30 when the business
combination was consummated. Pine Enterprises was
to be liquidated.
Out of pocket costs for the acquisition follows:
Indirect acquisition costs
SEC registration costs and fees
Nicxie
18,000 Cr.
20,200 Cr.
Expenses paid from JO
Cash
1,850.00
2,600.00
Value of inventory
taken
1,000.00
Joint Operation
1,800.00
P
Land
Buildings, net
Total
Accounts payable
800,000
1,500,000
P2,725,000
P 250,000
Long-term debt
Abner, capital
Blanche, capital
Donna, capital
P
50,000
10,000
20,000
5,000
12,000
450,000
810,000
729,000
486,000
P2,725,000
The partners agree to admit Janice for a one-fifth
interest. The fair value of the land is appraised at
P900,000 and the market value of the inventory is
P250,000. The assets are to be revalued prior to the
admission of Janice.
46. How much is the joint operation profit?
a. P41,000
b. P34,650
c. P42,750
d. P32,880
51. By how much will the capital accounts of Abner,
Blanche, and Donna increase due to the revaluation of
the assets?
a. The capital accounts will increase by P50,000
each.
b. P60,000, P54,000, and P36,000 respectively.
c. P75,000, P45,000, and P30,000 respectively.
d. P60,000, P50,000, and P40,000 respectively.
A Consignment Out account on the books of Consignor
Inc. appears below
Consignment Out – Consignee Sales
Jan. 3 Shipped 12
sets
P16,800
3 Freight charges
31 Charges by
consignee
Delivery exp.
Commission(20%)
Advertising
1,440
Jan 31
Sales,
9 sets
P21,60
0
900
4,320
1,000
47. The consignment profit realized by Consignor, Inc. on
the consignment during the month was
a. P 1,700
c. P 3,360
b. P 4,340
d. P 4,800
44. If Papaya Corporation is an SME, the acquisition cost
of the combination will be:
a. P3,080,000
c. P3,065,000
b. P3,145,000
d. P3,162,000
48. The adjusted balance of the Consignment-Out account
after recognition of the net profit will be
a. P 6,450
c. P 4,560
b. P 4,605
d. P 6,540
Ric and Nicxie agreed on a joint operation to purchase
and sell car accessories. They agreed to contribute
P25,000 each to be used in purchasing the
merchandise, share equally in any gain or loss and
record their joint operation transactions in their
individual books. After one year, they decided to
terminate the joint operation and data from their
records were made available:
100,000
125,000
200,000
45. How much is the joint operation sales?
a. P84,670
b. P93,350
c. P92,650
d. P88,450
43. If Papaya Corporation is a non-SME, the acquisition
cost of the combination will be:
a. P3,080,000
c. P3,065,000
b. P3,145,000
d. P3,162,000
49. The amount of cash remitted by Consignee was
a. P 14, 300
c. P 15,380
b. P 19,700
d. P 21,600
50. The inventory of consigned goods is
a. P 2, 800
c. P 4,200
b. P 4,560
d. P 4,810
52. How much cash will Janice have to invest into the
partnership to acquire her one-fifth interest?
a. P534,750
c. P547,350
b. P553,740
d. P543,750
53. Suppose Janice, instead, paid P450,000 directly to
the old partners for 20% each of their respective
capital to acquire her one-fifth interest, (1) how much
will be Donna’s capital after Janice’s admission? and
(2) how much cash will Blanche receive in exchange
for her sold interest?
a. (1) P412,800, (2) P159,300
b. (1) P421,800, (2) P139,500
c. (1) P428,100, (2) P195,300
d. (1) P482,010, (2) P153,900
The after-closing trial balance of the BHR Partnership
at December 31, 2025 is summarized as follows:
Cash
Loan to
Bruno
Other
assets
Total
Summary balance sheet for the ABD Partnership
follows: Abner, Blanche, and Donna share profits in
the ratio of 5:3:2, respectively.
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Cash
Accounts receivable
Inventory
Total
42. How much cash will be available to pay the unsecured
non-priority claims?
a. P240,000
c. P160,000
b. P180,000
d. P125,000
Finder’s fee
Accountants’ fee (advisory)
Legal fees (advisory)
Ric
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P 30,000
40,000
480,000
P 550,000
Accounts
payable
Loan from
Herman
Bruno, capital
(25%)
Herman, capital
(25%)
Romeo, capital
(50%)
Total
P 200,000
50,000
70,000
80,000
150,000
P550,000
The partners agree to liquidate the business and
distribute cash as it becomes available.
54. Cash available after the payment of third party
creditors will go first to
a. Herman in the amount of P55,000
b. Herman in the amount of P45,000
c. Bruno in the amount of P20,000
d. Romeo in the amount of P90,00
Forever Company is in bankruptcy and is being
liquidated. The trustee has converted all assets into
P300,000 and has prepared the following list of
approved claims:
Accounts payable, unsecured
Trustee’s fees and other costs of liquidation
Mortgage payable, secured by property that
as sold for P200,000
Note payable to PRTC Bank, secured by all the
accounts receivable of which P75,000
were collected and P5,000 were written
off
Prepaid revenue (P2,500 each of two
customers that ordered Products that were
never delivered
Property taxes payable
P 75,000
40,000
150,000
100,000
5,000
10,000
55. How much is the total amount of unsecured priority
claims
a. P55,000
c. P50,000
b. P40,000
d. P45,000
56. How much is the total amount of deficiency to
unsecured non-priority claims
a. P 20,000
c. P100,000
b. P 0
d. P 80,000
57. How much will the bank be paid for the note payable?
a. P 80,000
c. P75,000
b. P100,000
d.P76,250
Bobby Tan Trading established a branch in Pasay City
to distribute part of the goods purchased by it from
other suppliers. Bobby Tan ships merchandise to the
branch at 20% above cost. The following account
balances are taken from ledger balances of the home
office and the branch:
Sales
Beginning inventory
Purchase
Shipment to branch
Shipment from Home
Office
Operating expenses
Ending inventory
Home
Office
P384,000
76,800
Branch
Office
P134,400
38,400
320,000
83,200
99,840
46,080
62,720
23,040
30,720
All of the branch inventory is acquired from the Home
Office.
58. Calculate the overstatement of cost of sales in the
branch income statement for the year in term of home
office cost
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a. P 17,920
b. P 19,360
c. P33,760
d. P16,192
65. How much is the profit for 2026?
a. P15,225
b. P17,845
c. P14,115
d. P12,435
59. Calculate the true branch net income.
a. P 21,760
c. P 3,840
b. P 17,920
d. P 19,360
60. Calculate the combined net income.
a. P 90,880
c. P108,800
b. P104,960
d. P106,080
The following data were taken from the records of Star
Corporation of Manila and its Bulacan branch for 2025:
Sales
Inventory,
1/1
Purchases
Shipment to
Branch
Shipment
from HO
Inventory,
12/31
Expenses
P
Manila HO
424,000
46,000
Bulacan Branch
P 126,000
17,800
328,000
-
84,000
105,000
57,000
152,800
23,400
40,600
The home office consistently bills the branch for
merchandise shipments; there are no shipments of
merchandise in transit at December 31, 2025.
61. Calculate the overstatement of the branch cost of
sales arising from the home office billing policy.
a. P19,880
c. P18,980
b. P19,808
d. P18,890
62. Calculate the branch net income insofar as the home
office is concerned.
a. P 5,880
c. P6,480
b. P5,088
d. P6,840
63. Calculate the net income from the home office
operation for 2025.
a. P32,800
c. P30,820
b. P30,280
d. P38,200
64. Calculate the combined net income for 2025.
a. P38,660
c. P39,880
b. P38,860
d. P44,080
MANOY Resto bar sold a fast food restaurant franchise
to LEN INC. The sale agreement penned on January 1,
2025 states that a down payment of P100,000 plus
four P50,000 annual payments beginning December
31 of the current year. The prevailing rate during the
year is 10% which has a PV of 1 of .68 and PV of
annuity of 3.17. Moreover, indirect costs incurred
amounted to P15,000 while direct costs totaled for
P27,000. The franchisee acquires the right to use
scheme in this matter.
Compute for the following:
70. The net income of the partnership in 2025 was
a. P 36,000
c. P120,000
b. P132,000
d. P440,000
66. How much is the balance of the note on December
31,2027?
a. P42,003.50
b. P45,463.50
c. P49,423.50
d. P48,223.50
67. WHAT IF, the scheme in this transaction is that the
franchisee acquires the right to access, how much will
be considered as profit for 2025?
a. P54,725
b. P72,725
c. P58,725
d. P68,725
End of Examination
Thank you for participating in Team PRTC Nationwide Open First Pre-Board Examination.
Rajesh Ramayan Koothrappali, Inc. (RRK) sells a big
screen TV package consisting of a 60-inch plasma TV,
a universal remote, and onsite installation by RRK
staff. The installation includes programming the
remote to have the TV interface with other parts of the
customer’s home entertainment system. RRK
concludes that the TV, remote, and installation service
are separate performance obligations. RRK sells the
60-inch TV separately for P17,000, sells the remote
separately for P1,000, and offers the installation
service separately for P2,000. The entire package sells
for P19,000.
68. How much revenue would be allocated to the TV, the
remote, and the installation service, respectively?
a. P18,050; P950; P0
b. P16,150; P950; P1,900
c. P19,000; P0; P0
d. P17,100; P0; P1,900
Amy and Farrah Company is a full-service technology
company. They provide equipment, installation
services, as well as training. Customers can purchase
any product or service separately or as a bundled
package. Cooper Corporation purchased computer
equipment, installation, and training for a total cost of
P140,000 on March 15, 2024. Estimated standalone
fair values of the equipment, and installation P75,000
and P50,000, respectively.
69. The transaction price allocated to equipment,
installation, and training is:
a. P75,000, P50,000, P15,000, respectively
b. P60,000, P40,000, P20,000, respectively
c. P75,000, P50,000, P25,000, respectively
d. P120,000 for the entire bundle
Dulce Martin, a partner in a partnership that carries
the name of the Sweet Shop, has a 30% participation
in partnership profit. Her capital account had a net
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Page 8 of 9
decrease of P48,000 during 2025. In the same year,
she withdrew P104,000 of capital and contributed
property valued at P20,000 to the partnership.
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Excel Professional Services Inc.
TEAM PRTC
Management Firm of Professional Review and Training Center (PRTC)
Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
Taxation (TAX)
FIRST PRE-BOARD EXAMINATION
CPA Review
Since 1977
GUDANI/NARANJO/SIAPIAN/WONG/CRUZ
March 15, 2025
Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of 70 items and
the exam is good for three (3) hours. Good luck!
GRADUATED TAX TABLE UNDER TRAIN LAW (January 1, 2023 and onwards)
Over
But not over
The tax shall be
Plus
0
250,000
0
0
250,000
400,000
0
15%
400,000
800,000
22,500
20%
800,000
2,000,000
102,500
25%
2,000,000
8,000,000
402,500
30%
8,000,000
2,202,500
35%
Of excess over
250,000
400,000
800,000
2,000,000
8,000,000
Use the tax tables if necessary:
REVISED WITHHOLDING TAX TABLE FOR COMPENSATION
DAILY
Compensation
Range
Prescribed
Withholding Tax
1
₱685 and
below
0.00
2
₱685 -₱1,095
WEEKLY
Compensation
Range
Prescribed
Withholding Tax
1
₱4,808 and
below
0.00
2
₱4,808 ₱7,691
0.00 +15%
over ₱4,808
SEMI-MONTHLY
Compensation
Range
Prescribed
Withholding Tax
1
₱10,417 and
below
0.00
2
₱10,417 ₱16,666
0.00 +15%
over ₱10,417
MONTHLY
Compensation
Range
Prescribed
Withholding Tax
1
₱20,833 and
below
0.00
2
₱20,833 ₱33,332
0.00 +15%
over ₱20,833
0.00 +15%
over ₱685
3
₱1,096 ₱2,191
₱61.65 +20%
over ₱1,096
4
₱2,192 - ₱5,478
3
₱7,692 ₱15,384
₱432.60
+20% over
₱7,692
3
₱16,667 ₱33,332
₱937.50
+20% over
₱16,667
3
₱33,333 ₱66,666
₱1,875.00
+20% over
₱33,333
4
₱15,385 ₱38,461
₱1,971.20
+25% over
₱15,385
4
₱33,333 ₱83,332
₱4,270.70
+25% over
₱33,333
4
₱66,667 ₱166,666
₱8,541.80
+25% over
₱66,667
₱280.85 +25%
over ₱2,192
5
₱5,479 ₱21,917
₱1,102.60
+30% over
₱5,479
5
₱38,462 ₱153,845
₱7,740.45
+30% over
₱38,462
5
₱83,333 ₱333,332
₱16,770.70
+30% over
₱83,333
5
₱166,667 ₱666,666
₱33,541.80
+30% over
₱166,667
6
₱21,918 and
above
₱6,034.30 +35%
over ₱21,918
6
₱153,846 and
above
₱42,355.65
+35% over
₱153,846
6
₱333,333 and
above
₱91,770.70
+35% over
₱333,333
6
₱666,667 and
above
₱183,541.80
+35% over
₱666,667
SCHEDULE OF EXPANDED WITHHOLDING TAX (EWT)
COMMON Income Payments
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 income 3M or
below - 5%
Gross income over
3M or VAT-reg or
without sworn
declaration – 10%
Gross income
720,000 or below 10%
Gross income over
720,000 – 15%
2%
10% or 15%
(720,000 threshold)
5%
COMMON Income Payment
1. Purchases by Top Withholding
Agents (TWAs)
2. Purchases by Large Taxpayers
3. Purchases by government
4. Purchases by Joint
ventures/consortiums
Partners in general professional
partnerships (drawings, advances,
sharings, allowances, etc.)
Income distributed to beneficiaries of
estates/trusts
Commission (if not employee)
1.
½ of Gross remittance of emarkeptlace operator (Php
500,000 threshold*)
2. Purchases to Agricultural
Producers (300,000 threshold)
Note: Above are common income payments. Complete list is in page 2 of BIR Form No. 1601-EQ.
EWT
1% - goods
2% - service
720,000 or
less -10%
Above
720,000 –
15%
15%
10%
1%
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1. The following concession shall be made available to 5. Marco, a Certified Public Accountant, has gross receipts
small and medium taxpayers for purposes of Ease of
amounting to P1,550,000 from the practice of his
Paying Tax Act:
profession. He also is a content creator who focuses on
a. A reduced rate of ten percent for civil penalties as
showcasing “A Day in my life as a Certified Public
provided under Section 248 of the Tax Code, as
Accountant” in which he earned P1,640,000 in
amended.
revenue. If he opts to be taxed at 8% preferential tax
b. A reduction on the interest rate by 50% imposed
rate in lieu of income and business tax, to what amount
under Section 249 of the Tax Code as amended.
should he multiply the 8% to compute for the tax due?
c. Both A and B
a. His total gross sales and gross receipts for the
d. Neither A nor B
taxable year, without any deduction.
b. His total gross sales and gross receipts for the
2. Who among the following taxpayers cannot avail of the
taxable year after the allowed deduction of
8% preferential tax rate option?
P250,000, since he is still considered as purely
a. Rey who is employed as a financial controller and
self-employed and/or professional.
at the same time practicing his profession earning
c. His total gross sales and gross receipts for the
P3,000,000 annually.
taxable year after deducting cost of sales and
b. Bryan, a partner in a partnership engaged in retail
service and operating expenses
and trading earning a profit share for the year
d. Not applicable as he will be taxed using the
amounting to P3,000,000. He also owned a
graduated tax rate.
convenience store with P1,000,000 in annual
sales.
6. S1: In case of the determination of the gross estate,
c. Jun, a minimum wage earner with a fish ball stand
the CIR is authorized to inquire into the bank deposit
generating P3,000,000 in sales annually.
of the decedent.
d. All of them can avail the 8% preferential tax rate.
S2: In case a taxpayer has filed an application for
compromise of his tax liability, the CIR is authorized to
3. Arya Corporation operates an illegal drug operation
inquire into the bank deposit of such taxpayer only
that generated P20.0 million in gross sales and P15.0
when the taxpayer executes a waiver of his rights to
million in expenses. Which of the following statements
bank secrecy.
is incorrect?
a. Both statements are correct
I.
– Illegal income from the drug operation shall be
b. Both statements are incorrect
exempt from income tax because its source is not
c. Only statement 1 is correct
valid.
d. Only statement 2 is correct
II.
– Illegal expenses are not allowed as deduction
from gross income of the taxpayer.
7. Which among the following is not a requisite of a
taxable income?
a. II only
a. There must be a gain
b. I only
b. The gain must be realized or received
c. Both statements are correct
c. The gain must not be excluded by law from
d. Both statements are incorrect
taxation
d. The gain must be that of resident or non-resident
4. S1: A non-resident alien individual who shall come to
citizen
the Philippines and stay therein for an aggregate
period of more than 180 days during the taxable year 8. S1 - Real properties acquired by banks through
shall be deemed a “non-resident alien engaged in trade
foreclosure sales are considered as ordinary assets;
or business” regardless of whether he is actually
Thus, banks are normally considered as habitually
engaged in business in the Philippines or not.
engaged in real estate business.
S2: Tax avoidance, otherwise known as tax dodging,
S2 – Real properties acquired by the government in
is the use by the taxpayer of legally permissible
the exercise of their regulatory function is considered
methods in order to reduce the tax liability.
as ordinary assets.
a. Only S1 is correct
a. Statement I is true
b. Only S2 is correct
b. Statement II is true
c. Both statements are correct
c. Both statements are false
d. Both statements are incorrect
d. Both statements are true
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9. I – PCSO winnings amounting to P8,000
c. Medium Taxpayer
II – Other winnings amounting to P8,000
d. Large Taxpayer
III – Prizes amounting to P15,000
IV – Prizes amounting to P5,000
15. All of the following taxpayers are not required to file a
V – Dividends from a Non-resident foreign corporation
return, except:
a. Danny, a resident alien whose compensation
Assuming the taxpayer is a resident alien, which of the
income in the Philippines amounted to P260,000,
following income is taxable?
inclusive of his 13th month pay of P20,000.
b. Elsa, a resident citizen whose income from short
a. I, II, III, and IV
term deposit in the Philippines amounted to
b. II and IV
P300,000.
c. II, III, and IV
c. Joy, a non-resident citizen whose income from her
d. II and III
work in Canada amounted to P500,000.
d. Ethan, a resident citizen whose gross income from
10. An amendment in the tax code was passed that
business in the Philippines amounted to P100,000.
imposed a fixed license fee on every sale of Bibles and
other religious literature. Religious groups question the 16. All the books of accounts, including the subsidiary
constitutionality of the amendment. How should they
books and other accounting records of corporations,
support their argument?
partnerships, or persons, shall be preserved by them
a. The amendment is in violation of the no
for a period of
appropriation of religious freedom.
a. 5 years from the deadline in a filing of return or
b. The amendment is in violation of exemptions of
from the date of filing whichever is later.
religious, charitable, or educational entities, nonb. 5 years from the deadline in a filing of return or
profit cemeteries, and churches from property
from the date of filing whichever is earlier.
taxes.
c. 3 years from the deadline in a filing of return or
c. The amendment is in violation of non-infringement
from the date of filing whichever is later.
of religious freedom.
d. 3 years from the deadline in a filing of return or
d. The amendment is valid.
from the date of filing whichever is earlier.
a.
b.
c.
d.
President of the Philippines
Congress
Secretary of Finance
Commissioner of Internal Revenue
d. All of the above
11. Jia, a government employee, yearly files his Statement 17. Which of the following is not a deduction from gross
of Assets, Liabilities and Net Worth (SALN). An
income?
increase in net worth is presumed an income under:
a. Input VAT paid by a non-VAT taxpayer for a
a. Claim of Right Doctrine
purchase of service.
b. Doctrine of Proprietary Interest
b. Input VAT paid by a VAT-registered taxpayer for a
c. Realization Test
purchase of goods attributable to a direct export
d. Severance Test
sale.
c. Input VAT paid by a VAT-registered taxpayer for a
12. Which is FALSE?
purchase of service directly attributable to an VAT
a. Domestic corporate taxpayers who are exempt
exempt sales.
from income tax are not required to file income tax
d. Input VAT paid by a non-VAT taxpayer for a
returns
purchase of goods directly attributable to sales to
b. Domestic corporate taxpayers who are subject to
government.
preferential tax is not subject to MCIT
c. Returns of domestic corporate taxpayers are 18. In reconciling net income from books to net taxable
required to be filed on or before the 15th day of
income per return, all of the following are added,
the fourth month following the close of the taxable
except
year
a. Rental payment collected in advance from the
d. The rate of limitation on domestic corporate
lessee.
taxpayers who made a donation is 5% of taxable
b. Unrealized losses on financial assets at FVPL
income before donation
c. Unreceipted facilitation fee paid to an officer of the
government recognized as expense in the books
13. The COMELEC awarded the vote counting machines
d. Interest income from bank deposits
contract to a South Korean company. What is the final
withholding tax rate the COMELEC needs to withhold 19. Which of the following statements is correct?
before rental payment to the South Korean company?
a. Actual damages paid to a taxpayer is not taxable
a. 4 1/2 %
including payments for lost income.
b. 7 ½%
b. Moral and exemplary damages paid to a taxpayer
c. 20%
out of a delict are not taxable.
d. 25%
c. Amount received from an outlived insurance are
not taxable in its entirety.
14. Under RA 10976 or the Ease of paying Tax Act, a
d. None of the above.
taxpayer with gross sales of exactly P20,000,000 is
classified as:
20. Who is the person primary authorized to suspend the
a. Micro Taxpayer
application
of
MCIT
provided
the
allowed
b. Small Taxpayer
circumstances?
28. Installment basis of reporting income tax shall be
applied to a casual sale of a personal property provided
all of the following conditions are present except
21. The proper venue to process the e-CAR for a real
a. The selling price exceeds P1,000
property sold subject to CGT is
b. The property would not be included in the
a. Location where the Deed of Sale is signed
inventory of the taxpayer if on hand at the end of
b. Location of the property
the taxable year
c. Residence of the buyer
c. The downpayment does not exceed 25% of the
d. Anywhere, upon effectivity of EOPT
selling price
d. None is the exception.
22. All of the following are exempt from the payment of
CGT, except:
29. The rule on holding period shall apply to which of the
a. The City government of Manila sold a real property
following transactions?
classified as capital asset at a significant gain
a. Sale of a speed boat by Lani used in her business
b. PTRC Company has donated a real property
for P200,000. She acquired the service vehicle two
classified as capital asset
years ago.
c. Disposition of real property pursuant to the
b. Sale of idle land by Brenda at a loss. It was
Comprehensive Agrarian Reform Program
acquired ten years ago.
d. None is the exception
c. Sale of Personal laptop by Malou purchased a week
ago for P30,000.
23. Which of the following principles of taxation is not met
d. Sale of land property by Raya, a dealer of real
when Congress adopts a regressive system of
properties.
taxation?
a. Fiscal Adequacy
30. Wilma, a realtor, sold a real property used in business
b. Theoretical Justice
for P40 million. The property was acquired 3 years ago
c. Administrative Feasibility
at a cost of P25 million. How will this transaction be
d. Universality of taxation
treated?
a. Subject to CGT at 6% based on the higher amount
24. S1: Any tax law contravening any of the inherent
among selling price, zonal value and assessed
limitations of taxation, in effect, will likewise be
value. Rule on holding period does not apply.
unconstitutional.
b. Subject to EWT at 5% based on the higher amount
S2: A violation of inherent limitation can amount to
among selling price, zonal value and assessed
taking of property without due process of law.
value. Rule on holding period applies.
a. Only S1 is true
c. Subject to EWT at 6% based on the higher amount
b. Only S1 is false
among selling price, zonal value and assessed
c. Both statements are false
value. Rule on holding period applies.
d. Both statements are true
d. Subject to EWT at 5% based on the higher amount
among selling price, zonal value and assessed
25. Under this system, the taxes withheld on certain
value. Rule on holding period does not apply.
income payments are already the full and final amount
of the settlement of taxa liabilities.
31. ABC Corporation sold a real property located in Davao
a. Creditable withholding tax
City for P80M. The zonal value is P90M, and the
b. Final withholding tax
assessed value is at P50M. The buyer of the property
c. Global tax system
is the Davao City Government. How will this
d. Schedular tax system
transaction be treated?
a. Subject to 6% CGT based on the higher amount
26. S1: Acknowledgment number refers to the control
among selling price, zonal value and assessed
number issued by the AAB to the BIR to confirm that
value.
tax payment has been credited to the account of the
b. Subject to normal income tax and expanded
government.
withholding tax.
S2: The filing of the withholding tax returns shall be
c. Either A or B, at the option of the taxpayer.
made on or before the last day of the month following
d. Exempt from income tax since the buyer is the
the close of the taxable quarter.
Government.
a. Only S1 is true
b. Only S1 is false
32. Which of the following fringe benefits given to
c. Both statements are false
managerial employee is subject to fringe benefits tax
d. Both statements are true
a. Business class airplane ticket of the employee for
a holiday vacation
27. What is the nature of the taxation power of local
b. Service vehicle given to an employee for the
government units?
benefit and convenience of the employer.
a. It is inherent
c. Both A and B are subject to FBT
b. It is a power delegated by the Congress
d. Neither A nor b is subject to FBT
c. It is Constitutional
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33. ABC Corp. rented a motor vehicle for use by its General
b. P5,000,000
Manager.
Monthly
rent
is
c. P6,000,000
P20,000. Assuming the employee is a resident citizen,
d. P7,500,000
the total amount that the employer can claim as
deductions from gross income is:
39. Assuming that Arthur was able to utilize P12 million of
a. Equal to the gross up monetary value of the fringe
the proceeds to purchase a new principal residence
benefit
within the prescribed time, how much will be the tax
b. Equal to the monetary value of the fringe benefit
basis of his new principal residence?
c. Equal to the value of the fringe benefit and the
a. P6,500,000
fringe benefits tax
b. P9,000,000
d. Equal to the gross up monetary value of the fringe
c. P9,500,000
benefit and the fringe benefits tax
d. P10,000,000
34. S1: A taxpayer who opted for the 8% preferential tax
rate in its first quarter return shall not be allowed to
amend the said return.
S2: A taxpayer who opted for the Optional Standard
Deduction in its first quarter return shall not be allowed
to amend the said return.
a. Only S1 is true
b. Only S1 is false
c. Both statements are false
d. Both statements are true
Use the following information for the next three questions
Anna is employed in RTC Inc. and is also a part-time
content creator. In addition to the statutory minimum
wage of P240,000, she also received from her employer
holiday pay and hazard pay amounting to P10,000 and
P5,000, respectively. As a content creator, she was able to
generate P400,000 of income. She incurred cost of services
and operating expenses of P100,000 and 50,000,
respectively.
35. S1: Retirement benefit of a 60-year old employee (5 40. How much shall be the tax-exempt amount of income
years in service) from a retirement plan of a company
as a minimum wage earner?
is taxable.
a. P255,000
S2: Retirement benefit of a 90-year old employee (70
b. P240,000
years in service) from a company with no retirement
c. P225,000
plan is exempt from income tax.
d. Nil, because the income exceeds P250,000
a. Only S1 is true
b. Only S1 is false
41. How much shall be her income tax due under the
c. Both statements are false
graduated tax rate?
d. Both statements are true
a. P40,500
b. P43,500
Use the following information for the next three questions
c. P2,250
d. Nil
Arthur sold his principal residence of 10 years for P9
million. The current tax base of this property is at P6 42. How much shall be her income tax due under the 8%
million. The properties zonal value and assessed value are
option?
P10 million and P9.5 million, respectively. Arthur also
a. P12,000
inquired from a private real estate assessor, and it turns
b. P14,250
out that the value of the property in the market is at P15
c. P32,000
million.
d. Nil
36. Assuming that Arthur was able to utilize P7.5 million of
the proceeds to purchase a new principal residence
within the prescribed time, how much will be the
proceeds from the escrow deposits?
a. P400,000
b. P450,000
c. P500,000
d. Nil
Use the following information for the next eight items
GOYO Corporation has total assets amounting to P130
million, including the value of the land and the building
where the business is situated amounting to P25 million
and 10 million, respectively. It was registered in the BIR in
2019. For the taxable year ended December 31, 2025, the
Company disclosed the following information.
Gross sales
37. How much shall be the CGT due?
a. P200,000
b. P150,000
c. P600,000
d. P100,000
P10,000,000
Discounts given (including senior citizen discounts of
P20,000)
Returns and allowances
Salaries and wages directly (30% direct)
38. Assuming that Arthur was able to utilize P7.5 million of
the proceeds to purchase a new principal residence
within the prescribed time, how much will be the tax
basis of his new principal residence?
a. P4,500,000
120,000
50,000
1,200,000
Consultant fees (20% direct)
500,000
Rental of the equipment directly related to productions
1,000,000
Depreciation of building (30% direct)
1,000,000
Depreciation of equipment directly related to production
1,000,000
Depreciation of office furniture and fixtures
1,000,000
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Other operating expenses (including interest expense of
P100,000)
Interest income from bank deposits, net of final tax
300,000
Other income – net of other non-operating expenses of
P10,000
Income taxes paid for the previous quarters
45,000
Unexpired NOLCO
80,000
35,000
2,500,000
EWT Company, a top withholding agent as published in the
BIR website, has the following information:
Cost of goods sold
Increase in inventory balance
Purchase of services
Payment of utilities
Professional fees paid to GPPs
Professional fees paid to Individuals*
Rental payments
43. How much is the amount to be reported in line 34 of
BIR Form 1702-RT (Ordinary deductions)?
a. P3,270,000
Payment to agency (janitorial), net of 10% agency fees
b. P3,230,000
Payment to agency (Security), gross of 10% agency fee
c. P3,250,000
Payment to for services RBEs under ITH
d. P3,254,000
P1,000,000
200,000
300,000
300,000
1,000,000
400,000
600,000
200,000
440,000
250,000
*With sworn statement that gross income does not exceed P3M
44. How much is the amount to be reported in line 33 of
51. Compute the amount of purchase
BIR Form 1702-RT (Total Gross income)?
withholding.
a. P7,090,000
a. P3,060,000
b. P7,145,000
b. P4,060,000
c. P7,055,000
c. P3,310,000
d. P7,135,000
d. P3,460,000
45. How much is the amount to be reported in line 39 of
52. Compute the amount of taxes withheld.
BIR Form 1702-RT (Net taxable income)?
a. P79,200
a. P3,895,000
b. P87,200
b. P3,820,000
c. P187,200
c. P1,320,000
d. P92,200
d. P1,395,000
subject
to
46. How much is the amount to be reported in line 43 of 53. Compute the net amount paid.
a. P2,980,000
BIR Form 1702-RT (Tax due)?
b. P3,872,800
a. P348,750
c. P3,222,800
b. P955,000
d. P3,367,800
c. P141,100
d. Some other answer
Use the following information for the next four items
47. How much is the amount to be reported in line 32 of
JAK SILUS University is a domestic educational institution
BIR Form 1702-RT (MCIT Due)?
established in 1969. It has produced many distinguished
a. P141,100
personalities known to the Philippines including Barbie and
b. P142,900
David. For the taxable year 2025, the university had the
c. P142,700
following results of operations (The assets of the University
d. Some other answer
amounted to P50 million):
48. How much is the amount to be reported in line 56 of
Gross income – educational services
P10,000,000
BIR Form 1702-RT (Tax payable)?
a. P313,750
Gross income – Rentals
3,600,000
b. P920,000
Gross income – Sale of merchandise
1,400,000
c. P106,100
(non-educational related)
d. Some other answer
Operating expenses
4,000,000
49. Assuming the Company opted to use OSD, how much
is the amount to be reported in line 43 of BIR Form 54. Assuming that JAK SILUS University is a non-stock
non-profit educational institution, how much is the
1702-RT (Tax Due)?
income tax due?
a. P1,077,250
a. P1,100,000
b. P1,058,250
b. P2,200,000
c. P1,071,750
c. P2,750,000
d. Some other answer
d. Nil
50. Assuming the Company opted to use OSD, how much
is the amount to be reported in line 56 of BIR Form 55. Assuming that JAK SILUS University is a non-stock
non-profit educational institution, but it used the
1702-RT (Tax payable)?
proceeds and its assets for purposes other than for
a. P1,042,250
b. P1,023,250
education. How much is the income tax due?
c. P1,036,750
a. P1,100,000
d. Some other answer
b. P2,200,000
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c. P2,750,000
d. Nil
Use the following information for the next six items
Mr. Cedrick John is a partner of Tayson, Cruz, Rosales &
56. Assuming that JAK SILUS University is a private Co., a general partnership engaged in trading. He owns
educational institution conducted for profit, how much 35% interest. The partnership generated gross sales
amounted to P12.0 million for the taxable year 2025. The
is the income tax due?
recorded cost of sales and operating expenses of the
a. P1,100,000
partnership were P3.75 million and P1.75 million,
b. P2,200,000
respectively. It had also incurred interest expense of P0.2
c. P2,750,000
million for the construction of their manufacturing plant. At
d. Nil
the same taxable year, it had earned interest income from
bank deposits amounting to P0.1 million, net of final tax.
57. Assuming that JAK SILUS University is owned and
The total assets of the partnership is P90.0 million.
operated by Jak Roberto, a resident citizen, how much
is the income tax due?
62. How much is the taxable income of the partnership?
a. P880,000
a. P6.300 million
b. P1,200,000
b. P6.500 million
c. P3,525,500
c. P6.320 million
d. P3,252,500
d. P6.325 million
Use the following information for the next four items
63. How much is the tax due of the partnership?
a. P1,575,000
During the first quarter of year 2025, PRTC Corporation
b. P1,625,000
provided cash for the payment of the monthly rental of a
c. P1,580,000
residential house used by one of its executives, Protacio
d. P1,581,250
(resident citizen) amounting to P200,000. Also, he was
given the following:
64. How much is the share in the partnership income of
Cedrick returnable in his individual annual income tax
Cash for monthly salary of household personnel of
return?
P20,000 per month.
a. P1,653,750
Cash for monthly groceries P5,000 per month.
b. P1,659,000
Cash for monthly rent of vehicle to be used in meeting
c. P1,660,313
clients, P15,000 per month.
d. Nil
Cash for his and her wife’s vacation in Cebu. (Employee
– P30,000; Wife – P20,000)
65. If Cedrick has no other income aside from his
distributive share in the partnership income, how much
58. How much is the value of the fringe benefits for the
shall be his tax due to be filed in his AITR?
first quarter of 2025?
a. P315,938
a. P275,000
b. P317,250
b. P825,000
c. P317,578
c. P725,000
d. Nil
d. P770,000
66. Assuming the partnership avails of the Optional
59. How much is the fringe benefits tax for the first quarter
Standard Deduction, how much is the tax due of the
of 2025?
partnership?
a. P148,080
a. P1,237,500
b. P228,864
b. P1,207,500
c. P390,385
c. Nil
d. P414,615
d. None of the above
Lease liability, beginning
Interest expense
Lease payments
lease modification
Lease liability, ending
P24,223,012
1,453,381
(2,300,000)
(762,183)
22,614,210
Right of use asset, beginning carrying amount
23,122,992
(2,312,299)
(512,862)
20,298,011
Depreciation expense
Lease modification
c. P249,321
d. Nil
Use the following information for the next two items
Bryan owns a nightclub and videoke bar, with gross
sales/receipts of P2,500,000. His cost of sales and
operating expenses are P1,000.000.00 and P600,000.00,
respectively, and with non-operating income of
P100,000.00.
Right of use asset, ending carrying amount
69. How much shall be his income tax due if he signifies
his intention to be taxed at 8% preferential tax rate?
67. In accordance with RMC No. 11-2024, how much shall
a. P188,000
be allowed as deductions from gross income?
b. P152,500
a. P1,453,381
c. P180,000
b. P3,765,680
d. P200,000
c. P2,300,000
d. P2,312,299
70. How much shall be his business tax due?
a. P75,000
68. In accordance with RMC No. 11-2024, how much
b. P78,000
income should be included in the determination of
c. P468,000
taxable income because of lease modification?
d. Nil, 8% payment is in lieu of income and business
a. P762,183
tax
b. P512,862
Thank you for participating in Team PRTC Nationwide Open First Pre-Board Examination.
60. How much is the total quarterly expense of the Use the following information for the next two items
employer related to the fringe benefits?
a. P423,080
BSA Company entered into a 20-year lease agreement with
b. P953,864
a lessor for a building in Makati 10 years ago. This is being
c. P1,115,385
used as office space of the Company. In the books of the
d. P1,184,615
Company, it qualified under PFRS 16 for right of use asset
and lease liability recognition. In 2025, the Company
61. Assuming the executive is an American living in the modified the agreement to decrease the scope of the
USA, how much is the fringe benefits tax for the first leased property. In its 2025 Audited Financial Statements,
quarter of 2025?
the following information were found:
a. P141,667
b. P275,000
c. P241,667
d. Exempt from FBT
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Excel Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
Management Services (MS)
FIRST PRE-BOARD EXAMINATION
TEAM PRTC CPA REVIEW
Since 1977
9.
TRINIDAD/ALENTON/TAYSON
March 15, 2025
CPA Review
Multiple Choice. Select the letter that corresponds to the best answer. This examination consists of 70 items and the
exam is good for three (3) hours. Good luck!
1.
Hsu Company reported the following on its income
statement:
Income before income taxes
P420,000
Income tax expense
120,000
Net income
P300,000
b. has excess capacity.
c. has capacity constraints in the form of limited
resources.
d. has a high fixed-cost structure.
6.
An analysis of the income statement revealed that
interest expense was P80,000. Hsu Company's
times interest earned was
a. a. 8 times.
c. 5.25 times.
b. b. 6.25 times.
d. 5 times.
2.
3.
4.
The following characterize management services
except
a. Involve decision for the future
b. Broader in scope and varied in nature
c. Utilize more junior staff than senior members of
the firm
d. Relate to specific problems where expert help is
required
Which of the following mathematical expressions is
found in a typical flexible-budget formula for
overhead?
a. Total activity units + budgeted fixed overhead
cost per unit.
b. Budgeted variable overhead cost per unit +
budgeted fixed overhead cost.
c. (Budgeted variable overhead cost per unit
total activity units) + budgeted fixed overhead
costs.
d. (Budgeted fixed overhead cost per unit
total
activity units) + (budgeted variable overhead
cost per unit
total activity units).
Martha Manufacturing produces a single product
that sells for P80. Variable costs per unit equal P32.
The company expects total fixed costs to be P72,000
for the next month at the projected sales level of
2,000 units. In an attempt to improve performance,
management is considering a number of alternative
actions.
Suppose that management believes that a 10%
reduction in the selling price will result in a 10%
increase in sales. If this proposed reduction in
selling price is implemented:
a. operating income will decrease by P8,000
b. operating income will increase by P8,000
c. operating income will decrease by P1,600
d. operating income will increase by P1,600
5.
A firm that decides to emphasize those goods with
the highest contribution margin per unit may have
made an incorrect decision when the company:
a. is highly automated.
Fritz Corporation produces 4,000 units of
component “OXO” annually. This component is used
in the manufacture of a main product. The following
are the costs to produce each unit of component
“OXO”:
Material (exclusive of freight)
P3.00
Labor
5.00
Variable overhead
6.00
Fixed overhead
11.
3.50
The company has an option to buy these
components from an outside Supplier at P15 per
unit. Freight and handling costs for all purchases are
estimated at 10% of the purchase price (applicable
to both the components and the materials). If the
components are purchased, the released facilities
can be rented out for P4,000 a year, but P6,000 of
the applied fixed overhead cannot be eliminated.
What is the net advantage or disadvantage of
buying the components?
a. P2,000 advantage
b. P2,400 disadvantage
c. P3,200 advantage
d. P3,200 disadvantage
Use the following information for the next two questions.
Crops, Ltd. Manufactures a single product with the
following costs are:
Variable production
P50 per unit
costs
Fixed production
P200,000/quarter
costs
Selling & Adm.
P80,000/quarter
Expenses (all fixed)
Normal capacity
20,000
units/quarter
Production in the first quarter was 19,000 units and sales
volume was 16,000 units at a selling price of P125 per
unit. There was no opening inventory for the quarter.
7.
8.
The net profit under the absorption costing method
for the quarter was
a. P920,000
c. P960,000
b. P950,000
d. P970,000
The net profit under the variable costing method
was
a. P890,000
c. P930,000
b. P920,000
d. P940,000
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On a balanced scorecard, which of the following
would be most appropriate to measure customer
service?
a. Rapid time-to-market of new products
b. Corporate financial profits
c. On-time delivery
d. Decrease in reworked products
A company produces and sells two products. The
first product accounts for 75% of sales and the
second product accounts for the remaining 25% of
sales. The first product has a selling price of P10 per
unit, variable costs of P6 per unit and allocated fixed
costs of P100,000. The second product has a selling
price of P25 per unit, variable costs of P13 per unit,
and allocated fixed costs of P212,000. At the
breakeven point, what number of units of the first
product will have been sold?
a. 52,000
c. 25,000
b. 39,000
d. 14.625
Tilton Food Warehouse Club sells food and other
items in bulk to its members. Tilton is very selective
in the products it sells because of limited shelf
space. It has been asked by a canned vegetables
manufacturer to consider adding three of its canned
food items. The following information is available
regarding each of the possible canned food items:
Item
Item
Item
#1
#2
#3
Sales price per unit
P3.50 P4.50 P7.00
Cost to purchase
1.25
2.00
3.00
Units per foot of shelf 3
2
1
space
Assuming that there is unlimited demand for all
items, if Tilton has 15 feet of shelf space available,
which of the following statements is true if they wish
to maximize profits?
a. Tilton should sell only item #1.
b. Tilton should sell only item #2.
c. Tilton should sell only item #3.
d. Tilton should sell an equal amount of each item.
12.
The Magic Company is preparing its cash budget for
the month ending January 31.
The following
information pertains to Magic’s past collection
experience from its credit sales:
Current month’s sales
12%
Prior month’s sales
75%
Sales 2 months prior to
6%
current month
Sales 3 months prior to
4%
current month
Cash discounts (2/30, net/90)
2%
Doubtful accounts
1%
Credit sales:
January – estimated
P2,000,000
December
1,800,000
November
1,600,000
October
1,900,000
How much is the estimated credit to Accounts
Receivable as a result of collections expected during
January?
a. P1,730,200
b. P1,757,200
c. P1,762,000
d. P1,802,000
13.
Firms with a high degree of operating leverage:
a. will have a more significant shift in income as
sales volume changes
b. have lower fixed costs
c. have low contribution margin ratios
d. are less dependent on volume to add profits
14.
Super Drive is a computer hard drive manufacturer.
The company's statement of financial position for
the fiscal year ending November 30 appears below:
Super Drive, Inc.
Statement of Financial Position
For the year ended November 30
Assets:
Cash
Accounts receivable
Inventory
Property, plant, and equipment
Total assets
Liabilities and stockholders'
equity:
Accounts payable
Common stock
Retained earnings
Total liabilities and stockholders'
equity
P
52,000
150,000
315,000
1,000,000
P1,517,000
P
175,000
900,000
442,000
P1,517,000
Additional information regarding Super Drive's
operations appear below:
* Sales are budgeted at P520,000 for December
and P500,000 for January of the subsequent
year.
* Collections are expected to be 60% in the
month of sale and 40% in the month following
sale. There are no bad debts.
* 80% of the disk drive components are
purchased in the month prior to the month of
the sale, and 20% are purchased in the month
of the sale. Purchased components comprise
40% of the cost of goods sold.
* Payment for components purchased is made in
the month following the purchase.
* Assume that the cost of goods sold is 80% of
sales.
The balance in accounts payable on the budgeted
statement of financial position as at December 31
should be:
a. P161,280.
c. P165,120.
b. P326,400.
d. P403,200.
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TEAM PRTC CPA REVIEW
15.
16.
TEAM PRTC CPA REVIEW
Shorter Company had originally expected to earn
operating income of P130,000 in the coming year.
Shorter's degree of operating leverage is 2.4.
Recently, Shorter revised its plans and now expects
to increase sales by 20% next year. What is the
percentage of change in operating income expected
by Shorter in the coming year?
a. 8.33%
c. 20.0%
b. 48.0%
d. 30.0%
The Shoe Department at the Baton Rouge
Department Store is being considered for closure.
The following information relates to shoe activity:
Sales revenue
P350,000
Cost of goods sold
280,000
Sales Commission
30,000
Fixed operations costs
90,000
19.
The overhead cost allocated to Beta by using
traditional costing procedures would be:
a. P240,000
c. P444,000
b. P356,000
d. P560,000
20.
The overhead cost allocated to Zeta by using
activity-based costing procedures would be:
a. P240,000
c. P444,000
b. P356,000
d. P560,000
21.
22.
If 70% of the fixed operating costs are avoidable,
should the Shoe Department be closed?
a. Yes, Baton Rouge would be better off by
P23,000.
b. Yes, Baton Rouge would be better off by
P50,000.
c. No, Baton Rouge would be worse off by
P13,000.
d. No, Baton Rouge would be worse off by
P40,000.
17.
18.
Rowe Corporation reported the following variances
for
the
period
just
ended:
Variable-overhead spending variance: P50,000U
Variable-overhead efficiency variance: P28,000U
Fixed-overhead
budget
variance:
P70,000U
Fixed-overhead
volume
variance:
P30,000U
If Rowe desires to analyze variances that arose
primarily from managers' expenditures in excess of
anticipated amounts, the company should focus on
variances that total:
a. P50,000U.
c. P120,000U.
b. P70,000U.
d. P178,000U.
Which of the following employees at Philippine
Airlines would not be considered as holding a line
position?
a. Pilot
b. Chief financial officer (CFO)
c. Flight attendant
d. Ticket agent
Use the following information for the next two questions.
Tandang Ama currently uses traditional costing
procedures, applying overhead to products Beta and Zeta
on the basis of direct labor hours. The company is
considering a shift to activity-based costing and the
creation of individual cost pools that will use direct labor
hours (DLH), production setups (SU), and number of parts
components (PC) as cost drivers. Data on the cost pools
and respective driver volumes follow.
Product
Beta
Zeta
Pool cost
Pool No. 1
(Driver: DLH)
Pool No. 3
(Driver: PC)
1,200
Pool No. 2
(Driver:
SU)
45
2,800
P160,000
55
P280,000
750
P360,000
23.
24.
Financial Accounting
a. has no mandatory rules
b. is internally focused
c. is concerned with the information about the firm
as a whole
d. has an emphasis on the future
Negros Company makes jungle gyms and tree
houses for children. For jungle gyms, the price is
P120 and variable expenses are P90 per unit. For
tree houses, the price is P200 and variable expenses
are P100. Total fixed expenses are P253,750. Last
year, Negros sold 12,000 gyms and 4,000 tree
houses. Suppose that Negros expects tree house
demand to increase from 4,000 to 8,000 units. What
is the new average contribution margin ratio?
a. 35%
c. 40%
b. 38%
d. 60%
Firm X and Firm Y are competitors within the same
industry. Firm X produces its product using large
amounts of direct labor. Firm Y has replaced direct
labor with investment in machinery. Projected sales
for both firms are 15% less than in the prior year.
Which statement regarding projected profits is true?
a. Firm X will lose more profit than Firm Y
b. Firm Y will lose more profit than Firm X
c. Firm X and Firm Y will lose the same amount of
profit.
d. Neither Firm X nor Firm Y will lose profit.
The following data pertain to the three products
produced by My Beloved Corporation:
A
B
C
Selling price per
P5.00
P7.00
P6.00
unit
Variable costs per
4.00
5.00
3.00
unit
CM per unit
P1.00
P2.00
P3.00
Fixed costs are P90,000 per month.
Sixty percent of all units sold are Product A, 30
percent are Product B, and 10 percent are Product
C. What is the monthly composite breakeven point?
a. 6,000
c. 60,000
b. 3,600
d. 180,000
26.
27.
Calculate the fixed overhead volume variance.
a. P32,000 U
c. P32,000 F
b. P24,000 F
d. P24,000 U
All of the following are true except
a. A favorable labor efficiency variance could result
from using higher quality materials that result in
fewer inspections.
b. A favorable labor rate variance could result from
lower wage workers quitting.
c. A favorable materials price variance could result
from purchasing identical materials from
another supplier at a lower price.
d. An unfavorable materials usage variance could
result from not efficiently utilizing raw materials,
thus causing waste.
31.
Calculate the variable overhead spending variance.
a. P40,000 U
c. P24,000 F
b. P24,000 U
d. P40,000 F
32.
Fixed overhead was budgeted at P84,000 and
10,000 direct labor hours were budgeted. If the
fixed overhead volume variance was P3,200
favorable and the fixed overhead spending variance
was P1,200 favorable, fixed overhead applied must
be
a. P87,200
c. P82,800
b. P80,800
d. P82,000
Which of the following is true regarding the
disposition of materials and labor variances?
a. The variances for materials and labor are closed
directly to cost of goods sold regardless of
materiality.
b. If the materials usage variance is material, it is
prorated among raw materials inventory, cost of
goods sold, work in process, and finished goods.
c. The materials usage variance and the labor
variances, if material, are prorated among work
in process, finished goods, and cost of goods
sold.
d. The materials usage variance and the labor
variances are always prorated among work in
process, finished goods, and cost of goods sold.
33.
Muncal Company charges cost plus 25%. If the price
of an item is P80, what is the item's cost?
a. P80
c. P60
b. P64
d. P100
34.
Foster Industries manufactures 20,000 components
per year. The manufacturing cost of the components
was determined as follows:
Direct materials
P150,000
Direct labor
240,000
Inspecting products
60,000
Providing power
30,000
Providing supervision
40,000
Setting up equipment
60,000
Moving materials
20,000
Total
P600,000
28.
The sales manager believes sales could be increased
by 400 units if advertising expenditures were
increased by P10,000. If advertising expenditures
are increased and sales increase by 400 units, the
effect on operating income will be a(n)
a. decrease of P4,000
b. increase of P22,000
c. increase of P4,000
d. increase of P30,000
Budgeted variable overhead for the year is
P120,000. Expected activity is 20,000 standard
direct labor hours. The actual hours worked were
18,000 and the standard hours allowed for actual
production were 19,500. The variable overhead
efficiency variance using variable costing is:
a. P0.
c. P3,000 F.
b. P12,000 F.
d. P9,000 F.
29.
Fixed overhead was budgeted at P84,000 and
10,000 direct labor hours were budgeted. If the
fixed overhead volume variance was P3,200
unfavorable and the fixed overhead spending
variance was P1,200 favorable, fixed overhead
applied must be
a. P87,200
c. P82,800
b. P80,800
d. P82,000
2,250
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Lewis Company calculates its predetermined rates using
practical volume, which is 288,000 units. The standard
cost system allows 2 direct labor hours per unit produced.
Overhead is applied using direct labor hours. The total
budgeted overhead is P3,168,000, of which P864,000 is
fixed overhead. The actual results for the year are as
follows:
Units produced:
280,000
Direct labor:
570,000 hours @ P9
Variable overhead:
P2,320,000
Fixed overhead:
P872,000
30.
Bigger Company expects the following results for
the next accounting period:
Sales
P240,000
Variable costs
P135,000
Fixed costs
P 40,000
Expected production and
3,000
sales in units
Use the following information for the next two questions.
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25.
If the component is not produced by Foster,
inspection of products and provision of power costs
will only be 10% of the production costs; moving
materials costs and setting up equipment costs will
only be 50% of the production costs; and
supervision costs will amount to only 40% of the
production amount. An outside supplier has offered
to sell the component for P25.50.
What is the effect on income if Foster Industries
purchases the component from the outside supplier?
a. P25,000 increase
c. P90,000 decrease
b. P45,000 increase
d. P90,000 increase
35.
Cost traceability is best described as:
a. emphasizing quantitative rather than qualitative
factors because of their financial ramifications.
b. assigning a cost to a cost object through a
cause-and-effect relationship.
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TEAM PRTC CPA REVIEW
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c.
distinguishing between marginal costs and
marginal revenues.
d. evaluating whether to include opportunity costs
in a decision analysis.
36.
37.
Capital Company has decided to discontinue a
product produced on a machine purchased four
years ago at a cost of P70,000. The machine has a
current book value of P30,000. Due to
technologically improved machinery now available
in the marketplace the existing machine has no
current salvage value. The company is reviewing the
various aspects involved in the production of a new
product. The engineering staff advised that the
existing machine can be used to produce the new
product. Other costs involved in the production of
the new product will be materials of P20,000 and
labor priced at P5,000. Ignoring income taxes, the
costs relevant to the decision to produce or not to
produce the new product would be:
a. P95,000.
c. P30,000.
b. P55,000.
d. P25,000.
Ocampo Company can manufacture one of two
special orders with their existing capacity. Special
order A is for 100,000 units and special order B is
for 200,000 units. Cost and revenue data per unit
are as follows.
PER UNIT
Special order
A
B
Sales price
P0.7000
P0.4500
Direct materials
0.4550
0.2775
Direct labor
Variable
0.1100
0.0993
Fixed
0.0300
0.0089
Manufacturing OH
Variable
0.0430
0.0330
Fixed
0.0370
0.0523
Variable
marketing costs, 0.0900
0.0912
already incurred to
obtain the order
Fixed marketing & 0.0950
0.0878
admin costs
correctly depicts relevant and irrelevant decision
factors, respectively?
a. Relevant decision factor: Purchase price of
P3.40 per pound; Irrelevant decision factor:
Market price of P4.05 per pound.
b. Relevant decision factor: Remaining 300 pounds
of cacao cake; Irrelevant decision factor: Market
price of P4.05 per pound.
c. Relevant decision factor: 4,500 pounds of cacao
cake; Irrelevant decision factor: Remaining 300
pounds of Cacao cake.
d. Relevant decision factor: Market price of P4.05
per pound; Irrelevant decision factor: Purchase
price of P3.40 per pound.
39.
40.
41.
Based on the above information, which one of the
following statements correctly identifies the effect
on pretax profit if the optimal decision is made?
a. P8,040 increase if special order B is taken.
b. P10,200 decrease if special order B is taken.
c. P9,200 increase if special order A is taken.
d. P200 increase if special order A is taken.
38.
Two months ago, Davao Corporation purchased
4,500 pounds of cacao cake at a cost of P15,300.
The market for this product has become very strong,
with the price jumping to P4.05 per pound. Because
of the demand, Davao can buy or sell cacao cake at
this price. Davao recently received a special order
inquiry that would require the use of 4,200 pounds
of cacao cake. In deciding whether to accept the
order, management must evaluate a number of
decision factors. Without regard to income taxes,
which one of the following combination of factors
42.
Which of the following types of responsibility centers
include controllable revenues in their performance
reports?
Cost
Investment
Profit
Center
Center
Center
a.
YES
YES
YES
b.
YES
NO
NO
c.
NO
YES
YES
d.
NO
NO
NO
43.
Which of the following would lead to the most
inflation?
a. Both aggregate demand and aggregate supply
increase.
b. Both aggregate demand and aggregate supply
decrease.
c. Aggregate demand increases and aggregate
supply decreases.
d. Aggregate demand decreases and aggregate
supply increases.
Which of the following statements regarding the
balanced scorecard approach is false?
a. Because of changing technology, global
competition, and an increased awareness of the
need to focus on customer needs, nonfinancial
and qualitative performance measures have
become an integral component of effective
managerial decision making.
b. The balance scorecard approach integrates both
financial
and
nonfinancial
performance
measures.
c. The balanced scorecard approach requires
looking at performance from four different but
related perspectives: financial, customer,
internal business, and learning and growth.
d. The balance scorecard approach is not as useful
for performance measurement as traditional
accounting measures.
Lazar Industries produces two products, Crates and
Boxes. Per unit selling prices, costs, and resource
utilization for these products are:
Crates
Boxes
Selling price
P20
P30
Direct material costs
P 5
P 5
Direct labor cost
8
10
Variable OH costs
3
5
Variable selling costs
1
2
MH per unit
2
4
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Production of Crates and Boxes involves joint
processes and use of the same facilities. The total
fixed factory overhead cost is P2,000,000 and total
fixed selling and administrative costs are P840,000.
Production and sales are scheduled for 500,000
units of Crates and 700,000 units of Boxes. Lazar
maintains no direct materials, work-in-process, or
finished goods inventory.
Lazar can reduce direct material costs for Crates by
50% per unit, with no change in direct labor costs.
However,
it
would
increase
machine-hour
production time by 1-1/2 hours per unit. For Crates,
variable overhead costs are allocated based on
machine hours. What would be the effect on the
total contribution margin if these changes were to
be implemented?
a. P250,000 decrease.
b. P1,250,000 increase.
c. P125,000 increase.
d. P300,000 increase.
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44.
45.
46.
Which of the following statements is CORRECT?
a. The sustainable growth rate is the maximum
achievable growth rate without the firm having
to raise external funds.
b. If a firm’s assets are growing at a positive rate,
but its retained earnings are not increasing,
then it would be impossible for the firm’s AFN to
be negative.
c. If a firm increases its dividend payout ratio in
anticipation of higher earnings, but sales and
earnings actually decrease, then the firm’s
actual AFN must, mathematically, exceed the
previously calculated AFN.
d. Higher sales usually require higher asset levels,
and this leads to what we call AFN. However,
the AFN will be zero if the firm chooses to retain
all of its profits, i.e., to have a zero dividend
payout ratio.
Increasing information systems capabilities would
be a critical success factor found in which
perspective of the balanced scorecard?
a. Internal process
c. Financial
b. Customer
d. Learning and growth
Which of the following items used to measure
customer response time would not be used to
measure manufacturing cycle time?
a. Time it takes to process raw materials into a
completed product.
b. Time spent waiting for a machine's availability.
c. Time spent inspecting the materials for quality
control.
d. Time spent delivering the product to the
customer.
Rogers, Inc., had an unfavorable labor efficiency
variance and an unfavorable materials quantity
variance. Which department might be held
accountable for these variances?
a. Purchasing, because bad materials can harm
labor efficiency.
b. Production, because inefficient workers may use
more materials than allowed.
c. Purchasing and/or production.
d. Marketing.
47.
Spring Co. had two divisions, A and B. Division A
created Product X, which could be sold on the
outside market for P25 and has a variable costs of
P15. Division B could take Product X and apply
additional variable costs of P40 to create Product Y,
which could be sold for P100. Division B received a
special order for a large amount of Product Y. What
is the maximum transfer price that Division B would
be willing to pay for the Product X needed to fill the
special order?
a. P25
c. P60
b. P55
d. P65
48.
Anna Corporation has two divisions, Annabelle
Division and Annaliza Division. In the current year,
changes in Investment Turnover and Return on
Sales for the two divisions are: Annabelle:
Investment turnover increased by 30% and ROS
decreased by 20%; Annaliza: Investment turnover
decreased by 10% and ROS decreased by 30%. The
effect of changes in Investment Turnovers and ROS
for Annabelle and Annaliza’s ROIs are:
Annabelle
Annaliza
a. increase by 30%
increase by 30%
b. increase by 6%
decrease by 10%
c. increase by 4%
decrease by 37%
d. decrease 16.67%
decrease by 63%
49.
Thompson Company is in the process of preparing
its budget for the next fiscal year. The company has
had problems controlling costs in prior years and has
decided to adopt a flexible budgeting system this
year. Many of its costs contain both fixed and
variable cost components. A method that can be
used to separate costs into fixed and variable
components is:
a. Learning curve.
c. Linear programming.
b. Expected value
d. Regression analysis.
50.
The cost-plus pricing approach is generally in what
formula?
a. Unit cost / selling price = markup percentage.
b. Unit cost × (1 + markup % on unit cost) =
selling price.
c. Variable cost + fixed cost + contribution margin
− selling price.
d. Cost base + gross margin = selling price.
Use the following information for the next two questions.
MTR Company produces its only one product using the
following standard quantity of materials per unit of output.
Material M – 2 pounds each; P5 per pound
Material O – 3 pounds each; P8 per pound
During the month of October, the company produced
31,000 units using 60,000 pounds of Material M and
100,000 pounds of Material O.
51.
How much is the materials mix variance?
a. P20,000 Fav.
c. P34,000 Fav.
b. b. P32,000 Unf.
d. P12,000 Unf.
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TEAM PRTC CPA REVIEW
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52.
Compute the materials yield variance?
a. P20,000 Fav.
c. P34,000 Unfav.
b. P32,000 Unf.
d. P12,000 Unf.
53.
If economic activity slows down, total costs could
easily decline in which of the following categories?
a. variable costs and committed fixed costs
b. variable costs and discretionary fixed costs
c. variable costs only
d. committed fixed costs only
54.
55.
56.
57.
d. P4,300 unfavorable
58.
Management should implement a different and/or
more costly accounting system only when
a. The management thinks it is appropriate.
b. The cost of system exceeds the benefits.
c. The board of directors dictates a change.
d. The benefits of the system exceed the cost.
59.
Huntington Corporation pays bonuses to its
managers based on operating income, as calculated
under variable costing. It is now 2 months before
year end, and earnings have been depressed for
some time. Which one of the following actions
should Wanda Richards, production manager,
definitely implement if she desires to maximize her
bonus for this year?
a. Step up production so that more manufacturing
costs are deferred into inventory.
b. Cut P2.3 million of advertising and marketing
costs.
c. Postpone
P1.8
million
of
discretionary
equipment maintenance until next year.
d. Implement, with the aid of the controller, an
activity-based costing and activity-based
management system.
Division Y earns a contribution margin of P500,000
and has a divisional margin of P110,000. If Division
Y is closed, all of the direct divisional expenses and
P70,000 of common expenses can be eliminated.
These facts indicate that closing the division will
cause the firm's operating income to
a. increase by P320,000.
b. decrease by P320,000.
c. increase by P40,000.
d. decrease by P40,000.
The Swan Company produces their product at a total
cost of P43 per unit. Of this amount P8 per unit is
selling and administrative costs. The total variable
cost is P30 per unit The desired profit is P20 per unit.
The markup percentage on variable cost is:
a. 100%
c. 110%
b. 80%
d. 46.5%
60.
Why do many companies have switched from
absorption costing to variable costing for internal
reporting:
a. to comply with external reporting requirements
b. to increase bonuses for managers
c. to reduce the undesirable incentive to build up
inventories
d. in order to have the denominator level more
accurate
Actual machine-hours used
Actual
variable
overhead costs
manufacturing
22,000
units
7,200
hours
P242,000
What is the flexible-budget variance for variable
manufacturing overhead?
a. P5,500 favorable
b. P5,500 unfavorable
c. P4,300 favorable
Balance Sheet
Liabilities & Stockholders’
Equity
P60,000,000 Accounts
P30,000,000
payable &
accruals
Notes
36,000,000
payable –
long-term
48,000,000 Common
18,000,000
Stock
Retained
24,000,000
Earnings
108,000,000 Total
108,000,000
Current
assets
Fixed
assets
Assume that Adrenal Company has sufficient
capacity to produce 100,000 ADS each year. A
customer in a foreign market wants to purchase
20,000 ADS. Import duties on the ADS would be
P1.70 per unit, and costs for permits and licenses
would be P9,000. The only selling costs that would
be associated with the order would be P3.20 per unit
shipping cost. What is the break-even price on this
order?
a. P23.35
c. P28.65
b. P22.15
d. P21.70
63.
The company has 1,000 ADS on hand that have
some irregularities and are therefore considered to
be “seconds.” Due to the irregularities, it will be
impossible to sell these units at the normal price
through regular distribution channels. What unit
cost figure is relevant for setting a minimum selling
price?
a. P16.80
c. P18.00
b. P 4.70
d. P 1.20
64.
Due to a strike in its supplier’s plant, Adrenal
Company is unable to purchase more material for
the production of ADS. The strike is expected to last
for two months. Adrenal Company has enough
material on hand to continue to operate at 30% of
normal levels for the two months. If the plant was
closed, fixed overhead costs would continue at 60%
of their normal level during the two-month period;
the fixed selling costs would be reduced by 20%
while the plant was closed. How much is the
advantage or disadvantage of closing the plant for
the two-month period?
a. Disadvantage, P144,000
b. Disadvantage, P15,000
c. Advantage, P144,000
d. Advantage, P 15,000
Total
Adisyonal Phinansing Co. has an after- tax profit
margin of 5%, and a dividend payout ratio of 30%.
If sales grow by 10% next year, the required new
financing to finance the expansion is
a. P5,820,000
C. P3,180,000
b. P3,600,000
D. P6,000,000
61.
Sales of speakers have grown steadily during the
past five years. A dealer predicted that the demand
for February would be 185 speakers. Actual demand
in February was 238 speakers. If the smoothing
constant is α=0.3, the demand forecast for March,
using the exponential smoothing model, will be
a. 170 speakers.
c. 238 speakers.
b. 201 speakers.
d. 253 speakers.
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62.
Assets
Simon Corporation manufactures industrial-sized
water coolers and uses budgeted machine-hours to
allocate variable manufacturing overhead. The
following information pertains to the company's
manufacturing overhead data:
Budgeted output units
15,000
units
Budgeted machine-hours
5,000
hours
Budgeted variable manufacturing P161,250
overhead costs
Actual output units produced
Adisyonal Phinansing Co. Company has plants in 3
major cities. Sales for last year were P120 million,
and the balance sheet at year-end is similar in
percentage of sales to that of previous years (and
this will continue in the future). All assets (including
fixed assets) and current liabilities will vary directly
with sales. Adisyonal Phinansing Co. is already
using assets at full capacity.
Use the following information for the next four questions.
Adrenal Company has a single product called ADS. The
company normally produces and sells 60,000 ADS each
year at a selling price of P32 per unit. The company’s unit
costs at this level of activity are given below:
Direct materials
P10.00
Direct labor
4.50
Variable manufacturing
2.30
overhead
Fixed manufacturing
5.00
P300,000
overhead
total
Variable selling
expenses
1.20
Fixed selling expenses
3.50
P210,000
total
Total cost per unit
P26.50
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65.
An outside manufacturer has offered to produce
ADS for Adrenal Company and to ship them directly
to Adrenal’s customers.
If Adrenal Company
accepts this offer, the facilities that it uses to
produce ADS would be idle; however, fixed
overhead costs would be reduced by 75% of their
present level. Since the outside manufacturer would
pay for all the costs of shipping, the variable selling
costs would be reduced by two-thirds of their
present amount. What is the unit cost figure that is
relevant for comparison to whatever quoted price is
received from the outside manufacturer?
a. P20.95
c. P21.35
b. P18.85
d. P18.45
Use the following information for the next five questions.
On December 30, a fire destroyed most of the accounting
records of the Twist Division, a small one-product
manufacturing division that uses standard costs and
flexible budgets. All variances are written off as additions
to (or deductions from) income; none are pro-rated to
inventories. You have the task of reconstructing the
records for the year. The general manager informs you
that the accountant has been experimenting with both
absorption costing and variable costing.
The following information is available for the current year:
• Cash on hand, December 31
P12
• Sales
P153,600
• Actual fixed indirect manufacturing
costs
25,200
• Accounts receivable, December 31
24,000
• Standard unit variable
manufacturing costs
1.2
• Variances from standard of all
variable manufacturing costs
P6,000U
• Operating income, absorptioncosting basis
P17,280
• Accounts payable, December 31
21,600
• Gross profit, absorption costing at
standard (before deducting
26,880
variances)
• Total liabilities
120,000
• Unfavorable budget variance, fixed
manufacturing costs
1,200U
• Notes receivable from chief
4,800
accountant
• Contribution margin, at standard
(before deducting variances)
57,600
• Direct-material purchases, at
standard prices
60,000
• Actual selling and administrative
costs (all fixed)
7,200
66.
How much is the selling price?
a. P1.92
b. P1.60
c. P1.45
d. P1.21
67.
How much is the standard fixed overhead per unit?
a. P0.32
b. P0.38
c. P1.32
d. P1.58
68.
How many units were used as the denominator level
in computing the standard fixed overhead rate?
a. 75,000
b. 62,500
c. 18,180
d. 15,190
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TEAM PRTC CPA REVIEW
How much is the net income under direct costing?
a. P25,200
b. P31,200
c. P19,200
d. P16,000
70.
How much was the fixed overhead denominator
level variance under absorption costing?
a. P4,800 favorable
b. P4,800 unfavorable
c. P4,000 favorable
d. P4,000 unfavorable
Suggested Answers and Solution
FIRST PRE-BOARD EXAMINATION
Team PRTC
March 15 & 16, 2025
CPA Review
Suggested Answers
TE
1. D
2. C
3. B
4. E
5. B
6. C
7. D
8. C
9. A
10. D
11. D
12. C
13. A
14. A
15. B
16. A
17. D
18. A
19. A
20. D
21. B
22. D
23. D
24. B
25. B
26. C
27. C
28. E
29. C
30. C
31. D
32. D
33. C
34. D
35. B
36. A
37. C
38. C
39. D
40. A
41. B
42. C
43. D
44. C
45. A
46. A
47. D
48. D
49. B
50. A
RFBT
51. A
52. B
53. B
54. C
55. C
56. B
57. A
58. A
59. B
60. C
61. D
62. B
63. E
64. B
65. B
66. D
67. B
68. C
69. A
70. C
71. C
72. B
73. C
74. B
75. A
76. D
77. C
78. B
79. B
80. B
81. B
82. C
83. B
84. B
85. A
86. D
87. D
88. A
89. D
90. B
91. A
92. D
93. A
94. A
95. A
96. E
97. C
98. D
99. A
100.
1. D
2. B
3. B
4. C
5. B
6. B
7. C
8. A
9. C
10. C
11. B
12. B
13. A
14. C
15. C
16. A
17. B
18. B
19. A
20. C
21. B
22. A
23. B
24. B
25. C
26. A
27. C
28. A
29. B
30. A
31. D
32. C
33. A
34. A
35. A
FAR
36. C
37. D
38. C
39. C
40. B
41. D
42. D
43. D
44. C
45. D
46. B
47. C
48. C
49. C
50. C
51. B
52. B
53. C
54. C
55. C
56. C
57. C
58. A
59. B
60. D
61. D
62. C
63. B
64. A
65. A
66. C
67. B
68. B
69. B
70. D
AFAR
1. A
36. A
2. B
37. C
3. B
38. A
4. D
39. B
5. D
40. D
6. B
41. A
7. D
42. B
8. A
43. C
9. A
44. B
10. C
45. C
11. B
46. A
12. A
47. A
13. B
48. C
14. B
49. C
15. D
50. B
16. C
51. C
17. A
52. D
18. A
53. A
19. D
54. A
20. A
55. A
21. C
56. D
22. D
57. A
23. D
58. A
24. C
59. A
25. C
60. C
26. B
61. A
27. C
62. A
28. C
63. D
29. B
64. D
30. D
65. D
31. C
66. B
32. B
67. C
33. D
68. B
34. B
69. A
35. A
70. C
EV
TAX
36. C
37. D
38. B
39. B
40. A
41. D
42. C
43. C
44. B
45. D
46. A
47. B
48. A
49. C
50. C
51. A
52. A
53. A
54. D
55. A
56. A
57. D
58. C
59. B
60. B
61. A
62. D
63. D
64. D
65. D
66. A
67. C
68. D
69. B
70. C
R
1. D
2. D
3. B
4. A
5. D
6. A
7. D
8. C
9. C
10. C
11. B
12. A
13. B
14. C
15. D
16. A
17. B
18. D
19. B
20. C
21. B
22. D
23. B
24. D
25. B
26. D
27. C
28. C
29. C
30. D
31. A
32. A
33. C
34. C
35. D
PA
AUD
36. B
37. C
38. B
39. C
40. D
41. C
42. C
43. C
44. B
45. A
46. B
47. A
48. A
49. B
50. D
51. B
52. D
53. A
54. D
55. D
56. B
57. B
58. B
59. B
60. D
61. D
62. B
63. B
64. D
65. C
66. D
67. C
68. B
69. B
70. B
C
1. C
2. C
3. A
4. A
5. B
6. B
7. D
8. D
9. A
10. D
11. D
12. D
13. D
14. C
15. C
16. C
17. D
18. B
19. A
20. B
21. C
22. C
23. D
24. B
25. C
26. D
27. B
28. D
29. D
30. B
31. A
32. C
33. C
34. B
35. C
TC
MS
36. D
37. C
38. D
39. C
40. C
41. D
42. C
43. A
44. D
45. D
46. C
47. C
48. C
49. D
50. B
51. D
52. C
53. B
54. D
55. C
56. C
57. B
58. D
59. C
60. C
61. B
62. B
63. D
64. B
65. C
66. A
67. B
68. B
69. C
70. A
AM
Thank you for participating in Team PRTC Nationwide Open First Pre-Board Examination.
1. B
2. C
3. C
4. A
5. C
6. C
7. B
8. B
9. C
10. B
11. A
12. C
13. A
14. A
15. B
16. A
17. C
18. B
19. A
20. B
21. C
22. B
23. B
24. C
25. A
26. B
27. C
28. D
29. B
30. D
31. A
32. B
33. B
34. A
35. B
PR
End of Examination
Since 1977
IE
W
69.
Management Firm of Professional Review and Training Center (PRTC)
Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
D
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1stPB5.25a
Excel Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
CPA Review
420,000
80,000
500,000
80,000
6.25
PA
Budgeted production
Less: Actual production
Difference in production
*Standard fixed overhead per unit [200,000/20,000]
Production volume variance
66,000
3,200
20,000
19,000
1,000
10
10,000
www.teamprtc.com.ph
IE
W
EV
240,000
1,350,000
96,000
76,000
1,762,000
AM
128,000
33,280
161,280
20%
2.4
48%
MC No. 16 – A
Avoidable fixed costs [90,000*0.70]
Less: Lost contribution margin
Sales
Less: Variable costs
Variable costs of goods sold
Variable commission
Advantage (Disadvantage) of closing
unfavorable
6
Item No. 3
7.00
3.00
4.00
1
4.00
Third
MC No. 15 – B
Percentage of change in sales
*Degree of operating leverage
Percentage of change in operating income
970,000
1,030,000
80,000
950,000
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Item No. 2
4.50
2.00
2.50
2
5.00
Second
MC No. 14 – A
Purchases in December based on 40% of the CGS in:
January [(500,000*0.80*0.40)*0.80]
December [(520,000*0.80*0.40)*0.20]
Total purchases in December, AP Dec. 31
2,000,000
800,000
160,000
10,000
Item No. 1
3.50
1.25
2.25
3
6.75
First
MC No. 12 – C
Collections in January from credit sales in
January [2,000,000*0.12]
December [1,800,000*0.75]
November [1,600,000*0.06]
October [1,900,000*0.04]
Total credit to accounts receivable
MC No. 13 – A
60,000
6,000
312,000
6
52,000
0.75
39,000
TE
PR
TE
AM
MC No. 7 – B
Sales [16,000*125]
Less: Costs of goods sold
Variable production costs [16,000*50]
Fixed overhead costs [16,000*(200,000/20,000)]
Production volume variance – unfavorable
Gross profit
Less: Operating expenses
Absorption profit
Total fixed costs [100,000+212,000]
Divide by: WAUCM
Total breakeven point in units
*Sales mix in units of the first product
Breakeven point in units of the first product
MC No. 11 – A
12,000
1,200
20,000
24,000
8,000
4,000
69,200
TC
MC No. 6 - C
Direct materials [4,000*3]
Freight and handling costs [12,000*0.10]
Direct labor [4,000*5]
Variable overhead [4,000*6]
Avoidable fixed overhead [(4,000*3.5)-6,000]
Forgone rental income
Total relevant costs of making
Total relevant costs of buying
Acquisition costs [4,000*15]
Freight and handling costs [60,000*0.10]
Advantage (Disadvantage) of buying
Second product
25
13
12
Weighted average unit contribution margin (WAUCM) [(4*0.75)+(12*0.25)]
Selling price per unit
Less: Variable costs per unit
Contribution margin per unit
*No. of units per foot
Contribution margin per foot
Order of priority
C
MC No. 5 - C
First product
10
6
4
R
88,000
96,000
(8,000)
Selling price
Less: Variable costs per unit
Contribution margin per unit
PA
New contribution margin
Less: Old contribution margin
Increase (Decrease) in profit
MC No. 10 – B
C
IE
W
160,000
64,000
96,000
R
Sales [2,000*80]
Less: Variable costs [2,000*32]
Old contribution margin
EV
MC No. 3 - C
158,400
70,400
88,000
2,000,000
800,000
1,200,000
280,000
920,000
MC No. 9 – C
MC No. 2 - C
MC No. 4 - A
Sales [(2,000*1.1)*(80*0.9)]
Less: Variable costs [(2,000*1.1)*32]
New contribution margin
MC No. 8 - B
Sales [16,000*125]
Less: Variable costs [16,000*50]
Contribution margin
Less: Fixed costs [200,000+80,000]
Variable costing profit
TC
MC No. 1 - B
Earnings before taxes
Interest expense
Earnings before interest and taxes
Divide by: Interest expense
Times interest earned ratio
Since 1977
TRINIDAD/ALENTON/TAYSON
Suggested Answers and Solutions
PR
Management Services (MS)
FIRST PRE-BOARD EXAMINATION
TEAM PRTC
63,000
350,000
280,000
30,000
310,000
40,000
23,000
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TEAM PRTC
TEAM PRTC
MC No. 26 – B
U
U
U
MC No. 27 – C
Pool No. 3
360,000
3,000
120
Jungle gym
120
90
30
Tree houses
Jungle gyms
Tree houses
Total
Unit sales
12,000
8,000
20,000
Sales mix in units
60%
40%
100%
MC No. 32 – B
Budgeted fixed overhead
Less: Applied fixed overhead
Fixed overhead volume variance
MC No. 24 – C
Sales
Less: Variable costs
Contribution margin
Divide by: Expected sales
Contribution margin per unit
*Increase in unit sales
Increase in contribution margin
Less: Increase in fixed costs [advertising]
Increase (Decrease) in operating income
58
152
38%
MC No. 33 – B
Cost [80/1.25]
AM
TE
2,320,000
2,280,000
40,000
84,000
87,200
(3,200)
W
U
U
squeezed
F
64
150,000
240,000
54,000
27,000
24,000
30,000
10,000
535,000
510,000
25,000
MC No. 35 – B
MC No. 36 – D
Materials
Labor
Total relevant costs
15
Total fixed costs
Divide by: Composite unit contribution margin
Composite breakeven
90,000
15
6,000
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288,000
280,000
8,000
3
24,000
MC No. 34 – A
Direct materials
Direct labor
Inspecting products [60,000*0.90]
Providing power [30,000*0.90]
Providing supervision [40,000*0.60]
Setting- up equipment [60,000*0.50]
Moving materials [20,000*0.50]
Total relevant costs of making
Total relevant costs of buying [20,000*25.5]
Increase (Decrease) in profit if purchased from outside supplier
240,000
135,000
105,000
3,000
35
400
14,000
10,000
4,000
MC No. 25 – A
Composite unit contribution margin [(1*6)+(2*3)+(3*1)]
Per hour [576,000 hours]
4.00
1.50
5.50
AM
MC No. 23 – B
PR
Weighted average unit contribution margin [(30*0.6)+(100*0.4)]
Weighted average unit selling price [(120*0.6)+(200*0.4)]
Weighted average contribution margin ratio
squeezed
U
Per unit [288,000 units]
8
3
11
MC No. 31 – A
Actual variable overhead
Less: Actual hours at standard rate [570,000*4]
Variable overhead spending variance
200
100
100
TC
C
Selling price
Variable costs per unit
Contribution margin per unit
TE
MC No. 22 – B
Total
2,304,000
864,000
3,168,000
Budgeted variable overhead
Budgeted fixed overhead
Budgeted total overhead
Budgeted production
Less: Actual production
Difference in production volume
*Standard fixed overhead per unit
Fixed overhead volume variance
PA
MC No. 21 – C
112,000
154,000
90,000
356,000
R
Overhead costs assigned to Zeta from Pool No. 1 [2,800*40]
Overhead costs assigned to Zeta from Pool No. 2 [55*2,800]
Overhead costs assigned to Zeta from Pool No. 3 [750*120]
Overhead assigned to Zeta – activity-based costing
MC No. 30 – D
84,000
80,800
3,200
IE
Pool No. 2
280,000
100
2,800
MC No. 29 – B
Budgeted fixed overhead
Less: Applied fixed overhead
Fixed overhead volume variance
F
EV
Pool No. 1
160,000
4,000
40
IE
W
Overhead assigned to cost pools
Divide by: Activity driver
Activity rate
EV
MC No. 20 – B
800,000
4,000
200
1,200
240,000
18,000
19,500
(1,500)
6
(9,000)
R
MC No. 19 – A
Total overhead costs [160,000+280,000+360,000]
Divide by: Direct labor hours [1,200+2,800]
Overhead costs per direct labor hour
*Direct labor hours of Beta
Overhead assigned to Beta – traditional costing
MC No. 28 – D
Actual hours
Less: Standard hours
Difference in hours
*Standard variable overhead per direct labor hour [120,000/20,000]
Variable overhead efficiency variance
C
PA
MC No. 18 – B
TC
50,000
70,000
120,000
PR
MC No. 17 – C
Variable overhead spending variance
Fixed overhead budget variance
Total
www.teamprtc.com.ph
20,000
5,000
25,000
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TEAM PRTC
TEAM PRTC
MC No. 53 – B
MC No. 54 – D
Avoidable direct fixed costs [500,000-110,000]
Avoidable common fixed costs
Total avoidable fixed costs
Less: Lost contribution margin
Increase (Decrease) in profit
MC No. 40 – C
EV
MC No. 42 – C
Variable overhead costs per unit – Crates
Divide by: Machine hours per unit – Crates
Variable overhead per machine hour – Crates
*Incremental machine hours per unit – Crates
Incremental variable overhead per unit – Crates
Less: Savings in direct materials per unit – Crates [5*0.50]
Increase in contribution margin per unit – Crates
*No. of units – Crates
Increase in total contribution margin – Crates
R
3
2
1.5
1.5
2.25
2.50
0.25
500,000
125,000
MC No. 45 – D
TC
MC No. 46 – C
PR
MC No. 47 – C
Selling price of product Y
Less: Variable costs to produce product Y
Maximum transfer price that Division B can pay for product X
MC No. 59 – C
MC No. 60 – C
Beginning of year
Profit
Less: Dividend
Additional financing needed
End of year
100
40
25,000
MC No. 48 – C
Effect on ROI – Annabelle [(1.3*0.8)-1]
Increase by 4%
Effect on ROI – Annaliza [(0.9*0.7)-1]
Decrease by 37%
AM
MC No. 58 – D
PR
MC No. 44 – D
Profit [(120M*1.1)*5%]
Dividend
[6.6M*30%]
MC No. 50 – B
TE
Materials M
Materials O
Total
Actual quantity
60,000
100,000
160,000
Standard mix
40% [2/5]
60% [3/5]
100%
Standard quantity
64,000
96,000
160,000
MC No. 52 – C
Actual yield
Less: Standard yield [160,000/5]
Difference in yield – unfavorable
*Standard direct materials costs per unit [(2*5)+(3*8)]
Yield variance
Standard price
5
8
31,000
32,000
1,000
34
34,000
Mix variance
(20,000) F
32,000 U
12,000 U
www.teamprtc.com.ph
MC No. 62 – B
Direct materials
Direct labor
Variable manufacturing overhead
Variable selling expenses
Import duties
Permits and licenses per unit [9,000/20,000]
Breakeven price on the special order
MC No. 63 – D
Variable selling expenses
242,000
236,500
5,500
Total
assets
108M
AP and
Accruals
30M
36M
118.8M
33M
36M
[108M*1.1]
[30M*1.1]
NP
W
U
LTD, CS
and RE
42M
6.6M
1.98M
3.18M
49.8M
6.6M
1.98M
10.00
4.50
2.30
3.20
1.70
0.45
22.15
1.20
U
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161,250
15,000
10.75
22,000
236,500
MC No. 61 – B
Fnp = Ftp + a(Atp - Ftp)
= 185 + 0.3(238-185)
= 201 speakers
MC No. 49 – D
MC No. 51 – D
MC No. 57 – B
Budgeted variable overhead costs
Divide by: Budgeted production
Budgeted variable overhead per unit
*Actual production
Flexible budget for variable overhead
Actual variable overhead
Less: Flexible budget for variable overhead
Flexible budget variance for variable overhead
C
PA
MC No. 43 – A
210%
100%
110%
MC No. 56 – C
AM
MC No. 41 – D
63
30
33
EV
IE
MC No. 39 – C
MC No. 55 – C
Selling price [20+43]
Less: Variable costs
Mark-up
R
MC No. 38 – D
390,000
70,000
460,000
500,000
(40,000)
C
PA
W
0.6080
0.0920
100,000
9,200
TC
0.4550
0.1100
0.0430
IE
0.7000
TE
MC No. 37 – C
Selling price – A
Less: Variable costs per unit – A
Direct materials
Direct labor
Variable overhead
Contribution margin per unit – A
*No. of units
Increase in profit if special order A is accepted
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TEAM PRTC
C
PA
153,600
80,000
1.92
25,200
24,000
1,200
Budgeted fixed overhead
Divide by: Standard fixed overhead per unit
Budgeted production
24,000
0.384
62,500
MC No. 69 – C
Standard contribution margin
Less: Unfavorable variable manufacturing costs variances
Actual contribution margin
Less: Fixed costs [25,200+7,200]
Net income – direct costing
57,600
6,000
51,600
32,400
19,200
U
AM
MC No. 68 – B
Actual fixed overhead
Less: Budgeted fixed overhead
Fixed overhead spending variance
Squeezed
TE
1.200
0.384
1.584
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PR
126,720
80,000
1.584
Standard unit costs – variable
Standard fixed overhead per unit
Standard unit costs – absorption
PR
TC
153,600
126,720
26,880
TC
MC No. 67 – B
Sales
Less: Standard costs of goods sold
Standard gross profit
AM
R
R
96,000
1.2
80,000
C
PA
Sales
Divide by: Unit sales
Selling price
U
U
F [squeezed]
U
😊 – end - 😊
153,600
96,000
57,600
Standard variable costs
Divide by: Standard unit variable costs
Unit sales
Page 7 of 8
6,000
1,200
(4,800)
2,400
EV
MC No. 66 – A
Sales
Less: Standard variable costs
Standard contribution margin
TE
IE
10.00
4.50
2.30
3.75
0.80
21.35
Variable manufacturing costs variances
Fixed overhead spending variance
Fixed overhead volume variance
Manufacturing costs variances
squeezed
W
42,000
(15,000)
26,880
2,400
24,480
7,200
17,280
EV
3,000
14
MC No. 65 – C
Direct materials
Direct labor
Variable manufacturing overhead
Avoidable fixed overhead [5*0.75]
Avoidable variable selling costs [1.2*2/3]
Breakeven price on the special order
Standard costs of goods sold
Divide by: Unit sales
Unit costs – absorption
MC No. 70 – A
Standard gross profit
Less: Unfavorable manufacturing costs variances
Actual gross profit
Less: Operating expenses
Net income – absorption costing
20,000
7,000
27,000
W
MC No. 64 – B
Avoidable fixed overhead [(300,000*2/12)*0.4]
Avoidable fixed selling costs [(210,000*2/12)*0.2]
Total avoidable fixed costs
Less: Lost contribution margin
Reduced production in 2 months [(60,000*2/12)*0.3]
*Contribution margin per unit [32-10-4.5-2.3-1.2]
Advantage (Disadvantage) of closing
IE
TEAM PRTC
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TEAM PRTC MAY 2025 FIRST PRE-BOARD EXAMINATION
R
EV
3. A. When detecMon risk is set at a lower level, auditors need to obtain greater assurance from substanMve
procedures. This can be achieved by performing more extensive substanMve tesMng, using more effecMve
procedures, or changing the Mming of substanMve tests to year-end rather than interim dates.
PA
4. A. When the auditor sets a lower acceptable level of materiality, they must perform more extensive tesMng to
detect smaller misstatements. This may involve selecMng more effecMve audit procedures, conducMng procedures
closer to the balance sheet date, or increasing the extent of tesMng. The goal is to idenMfy smaller misstatements
that, when aggregated, could become material.
C
5. B. The incorrect statement is that materiality is determined based on the largest aggregate misstatement. In reality,
auditors set materiality based on the smallest misstatement that could be material to any one of the financial
statements. Materiality judgments consider both quanMtaMve and qualitaMve factors and are made in the context
of financial statement users' needs.
IE
W
2. C. The professional standards suggest that aXer idenMfying risks and their potenMal impacts, auditors should assess
the likelihood that the idenMfied risk could result in material misstatements. This helps in determining the
necessary audit procedures to address such risks.
12. D. The primary purpose of the audit plan is to ensure that sufficient appropriate audit evidence is gathered to
support the auditor’s conclusions and opinion. While interim work, risk assessments, and management suggesMons
may be part of the audit, they are not the fundamental purpose of an audit plan.
13. D. The Mming of inventory observaMon must be coordinated with the client because the auditor needs to be present
during physical inventory counts. Other items, such as the evidence to be gathered, audit procedures, and legal
inquiries, are determined by the auditor independently and are not typically negoMated with the client.
R
EV
IE
W
1. C. All three components of audit risk—control risk, detecMon risk, and inherent risk—can be assessed in either
quanMtaMve terms (such as percentages) or nonquanMtaMve terms (such as high, medium, or low). This flexibility
allows auditors to use professional judgment in evaluaMng risk levels.
11. D. When performing an iniMal audit, the external auditor should assign audit personnel with the necessary skills,
experience, and competence to address the increased risks. Internal audit personnel, accounMng personnel, and
senior management are not under the direct authority of the external auditor and cannot be assigned to the audit
engagement.
14. C. During the planning phase, the auditor and client discuss the schedules and analyses that the client’s staff should
prepare to facilitate the audit. This ensures efficiency and prevents unnecessary delays. The other opMons involve
auditor judgment and are not typically part of discussions with management.
15. C. The audit plan is designed to ensure that audit procedures effecMvely achieve specific audit objecMves (e.g.,
tesMng for completeness, accuracy, or existence). The other opMons are incorrect because not all material
transacMons require tesMng, substanMve procedures may be performed before or aXer the balance sheet date, and
account balances may be tested using various approaches, including analyMcal procedures
PA
AUDITING
16. C. The auditor should assess the difficulty in controlling the incremental audit risk and consider the cost of
substanMve tests necessary for the remaining period.
C
TEAM PRTC MAY 2025 FIRST PRE-BOARD EXAMINATION
7. D. The fundamental purpose of an audit is to obtain sufficient appropriate audit evidence to express an opinion. If
such evidence is unlikely to be available, the auditor should not accept the engagement. While related-party
transacMons, internal control limitaMons, or inefficient IT systems may pose challenges, they do not necessarily
preclude an auditor from forming an opinion.
19. A. The assessed level of control risk affects the quanMty, type, and content of working papers.
10. D. Professional standards require the successor auditor to a_empt to communicate with the predecessor auditor
before accepMng a new audit engagement. However, this communicaMon can only occur aXer obtaining the
prospecMve client’s consent. This ensures transparency and allows the successor to gain insights into any previous
audit challenges, disputes, or potenMal issues.
Page 1 of 4
PR
20. B. Confirming accounts receivable balances is a direct test of financial balances, making it a substanMve procedure.
21. C. A comparison of current-year revenue to budgeted revenue is useful in evaluaMng results of operaMons as it
helps the auditor assess performance against expectaMons and predict the effects on other income statement
accounts.
AM
TE
9. A. An engagement le_er establishes the understanding between the auditor and the client. It typically includes the
financial reporMng framework (e.g., IFRS or GAAP), the scope of the audit, responsibiliMes of management and the
auditor, and inherent limitaMons of an audit. Factors such as materiality consideraMons, specific responsibiliMes for
detecMng fraud, and internal control deficiencies are important but are not typically detailed in the engagement
le_er.
18. B. Professional standards state that audit documentaMon may not be deleted aXer the documentaMon compleMon
date.
22. C. Near compleMon of the audit, auditors read the financial statements and consider unusual or unexpected
balances to assess conclusions and evaluate financial statement presentaMon.
TE
PR
AM
8. D. A client’s refusal to allow communicaMon with the predecessor auditor raises serious concerns about
management’s integrity. One of the key purposes of reviewing the predecessor’s work is to gain insights into past
audit issues, fraud risks, and disagreements. If management is unwilling to permit such discussions, it may indicate
an a_empt to conceal past problems.
TC
17. D. Tests of controls and substanMve procedures are considered further audit procedures.
TC
6. B. An auditor is required to obtain knowledge of ma_ers that relate to the nature of the enMty’s business before
accepMng the engagement. This includes understanding the industry, key transacMons, and operaMonal risks. The
auditor is not required to hire financial experts or delegate the engagement to another CPA but must take steps to
become sufficiently knowledgeable.
23. D. In some cases, analyMcal procedures alone can provide sufficient assurance for specific asserMons, making them
an effecMve substanMve test.
24. B. A lack of independent checks. A lack of independent checks creates an opportunity for misappropriaMon of
assets, making it a significant fraud risk factor.
25. C. Professional skepMcism requires auditors to maintain a quesMoning mind and criMcally assess audit evidence.
Page 2 of 4
TEAM PRTC MAY 2025 FIRST PRE-BOARD EXAMINATION
26. D. An overly complex organizaMonal structure involving unusual lines of authority. A complex structure can obscure
financial transacMons and facilitate fraudulent financial reporMng.
27. B. AudiMng procedures may or may not need to be extended if the auditor’s analysis indicates the existence of
fraud risk factors. When fraud risk factors exist, auditors should evaluate whether the designed procedures
adequately address fraud risks and extend them if necessary.
TEAM PRTC MAY 2025 FIRST PRE-BOARD EXAMINATION
39. C. In audiMng, asserMons refer to the representaMons made by management regarding the fairness of the financial
statements. These asserMons serve as the basis for the auditor's procedures in verifying that the financial
statements are prepared in conformity with the applicable financial reporMng framework.
40. D. ConfirmaMon evidence is considered highly reliable because it is obtained directly from independent third
parMes. This independence enhances the quality and persuasiveness of the evidence, providing strong support for
the auditor's conclusions regarding the financial statement asserMons.
IE
W
IE
W
28. D. The purpose of an independent audit is to provide an unbiased opinion on whether the financial statements are
fairly presented in accordance with an applicable financial reporMng framework. This enhances the credibility of
the financial informaMon for external users such as investors, creditors, and regulators
R
EV
R
EV
29. D. Audits provide reasonable assurance that the financial statements are free from material misstatements.
Absolute assurance is not possible due to inherent limitaMons in audiMng, such as the use of sampling and reliance
on management representaMons.
30. B. Professional skepMcism requires auditors to criMcally assess evidence and not accept management’s statements
at face value. They should corroborate management’s asserMons with independent supporMng evidence whenever
possible to reduce audit risk.
PA
PA
31. A. Management is responsible for preparing and presenMng the financial statements in accordance with applicable
accounMng standards. The auditor’s role is to provide an independent opinion on their fairness but not to prepare
them.
C
C
32. C. The expectaMon gap refers to the difference between what users of financial statements expect from auditors
(e.g., detecMon of all fraud) and the actual responsibiliMes of auditors (e.g., providing reasonable assurance on the
fairness of financial statements). This gap oXen leads to misunderstandings about the audit funcMon.
TC
TC
33. C. An engagement le_er is a formal agreement between the auditor and the client that outlines the scope of the
audit, the responsibiliMes of both parMes, and the Mming of the engagement. It helps avoid misunderstandings and
serves as a wri_en record of the audit engagement.
TE
36. B. The five components of internal control are: (1) Control Environment, (2) Risk Assessment, (3) Control AcMviMes,
(4) InformaMon and CommunicaMon Systems, and (5) Monitoring. These components work together to ensure an
effecMve internal control system that supports reliable financial reporMng and operaMonal efficiency.
37. C. Internal control systems have inherent limitaMons, such as human error, collusion, and management override.
Mistakes in judgment or oversight can lead to control failures even when the system is properly designed and
implemented.
PR
TE
AM
35. C. The auditor evaluates internal control primarily to assess the risk of material misstatement and to plan the
nature, Mming, and extent of audit procedures. A strong internal control system allows the auditor to rely more on
controls and perform fewer substanMve tests, whereas weak controls require more substanMve procedures.
AM
PR
34. B. If the auditor is unable to conMnue an engagement due to restricMons imposed by management or governance
bodies, they should withdraw. AddiMonally, the auditor may need to report the withdrawal to the appropriate
parMes, such as the board of directors or shareholders, if required by ethical and professional standards.
38. B. Tests of controls are performed to determine whether internal control policies and procedures are operaMng
effecMvely. If controls are found to be effecMve, the auditor may reduce the extent of substanMve procedures. If
not, addiMonal substanMve tesMng is required.
Page 3 of 4
Page 4 of 4
Excel_Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao
First Preboard Examination on Auditing Practice
March 15, 2025
Suggested answers/solutions by OCAMPO/OCAMPO
Question no. 54 - D
Patent (See No. 51)
Trademark (See No. 52)
Franchise (See No. 53)
Carrying amount of Intangible Assets, 12/31/25
860,310
1,040,000
494,680
2,394,990
Notes:
1. The computer software is PPE.
2. The costs of training are recognized as expenses when incurred.
3. The costs of internally generated customer list are recognized as expenses when incurred.
PROBLEM NO. 1 - Antares Corp.
Question No. 41 - C
Question No. 42 - C
Question No. 43 - C
Question no. 50 - D
890,000
(350,000)
(350,000)
42 - C
43 - C
41 - C
R
Question No. 44 - B
Question No. 45 - A
Question No. 46 - B
Cost of equipment (Cash price)
Principal
388,020
388,020
207,000
188,898
181,020
199,122
C.A.
2,070,000
1,888,980
1,689,858
296,500
Question No. 60 - D
(1,250)
303,000
(6,500) (58)
296,500 (57)
12,000
50,000
296,500
358,500
Question No. 61 - D
PVF used to calculate the annual payment (P1.2M/P341,180)
Ordinary annuity factor at 13% for 5 periods
400,000
200,000
355,900
955,900
(95,590)
860,310
Sales - over
Reported
Should be
Interest income - under
Reported
Should be (refer to amortization schedule)
Net misstatement
560,000
480,000
1,040,000
Note: Since the trademark is impaired, the carrying amount is equal to recoverable amount.
www.teamprtc.com.ph
2,005,900
1,500,000
0
156,000
Question No. 63 - B
160,000
Question no. 53 - A
Down payment
PV of installment payments (P120,000 x 2.9137)
Cost of franchise
Amorization - 2025 (P549,644/10)
Carrying amount of franchise, 12/31/25
2024 Profit
over (under)
AM
Question No. 62 - B
1,200,000
Impairment loss
3.5172
3.5172
TE
AM
TE
(35,250)
296,500
PROBLEM NO. 5 - Pollux Corp.
Question no. 51 - B
Cash paid
Fair value of shares issued (10,000 x P20)
PV of note payable (P500,000 x 0.7118)
Cost of patent
Amortization - 2025 (P955,900/10)
Carrying amount of patent, 12/31/25
Page 1 of 4
344,250
(40,000)
Question No. 59 - B
Petty cash fund (see no. 56)
PNB checking account (-P37,500 + P87,500)
BDO current account (see no. 57)
Adjusted cash, 12/31/25
PROBLEM NO. 3 - Rigel Corp.
Question no. 52 - D
Carrying amount
Recoverable amount:
Outcome 1 (P40,000/.05 x .7)
Outcome 2 (P80,000/.05 x .3)
Books
310,500
21,250
C
Int. (10%)
Bank
PR
C
Payment
PR
Question No. 49 - B
Question No. 50 - D
2,370,000
TC
Question No. 47 - A
Question No. 48 - A
Date
1/1/24
12/31/24
12/31/25
Unadjusted balances
Add (deduct) adjustments:
Post dated check
Undeposited collections (P61,250 - P40,000)
Bank service charge
Outstanding checks (P20,750 + P6,000 + P8,500)
Corrected balances
Unlocated difference - cash shortage
Adjusted balances, 12/31/25
PA
PA
PROBLEM NO. 2 - Betelgeuse Corp.
Question No. 57 - B
Question No. 58 - B
EV
(490,000)
25,000
(13,000)
12,000
R
400,000
Question No. 56 - B
Unadjusted petty cash fund, 12/31/25
Unreplenished vouchers, 12/31/25 (P16,000 - P3,000)
Adjusted petty cash fund, 12/31/25
TC
540,000
IE
W
250,000
240,000
Inventory
COS
Effect on Profit Effect on WC
over (under) over (under) over (under) over (under)
(180,000)
180,000
(180,000)
(180,000)
(300,000)
(300,000)
150,000
(150,000)
(150,000)
(400,000)
400,000
200,000
200,000
250,000
(160,000)
160,000
80,000
80,000
EV
a
b
c
d
e
f
Purchases
over (under)
150,000
IE
W
PROBLEM NO. 4 - Arcturus Corp.
Sales
over (under)
(300,000)
600,000
200,000
349,644
549,644
(54,964)
494,680
2024 profit overstated (see no. 62)
2025 profit understated (interest income under)
Reported
Should be (refer to amortization schedule)
Net misstatement
Question No. 64 - D
Amount reported under current assets
[P1,705,900 - (P341,180 x 2)]
Should be (refer to amortization schedule)
Net misstatement of WC, 12/31/25 - over (under)
AP.1stPB5.25
Page 2 of 4
www.teamprtc.com.ph
505,900
(156,000)
349,900
RE, 12/31/25
over (under)
349,900
0
131,927
(131,927)
217,973
1,023,540
236,456
787,084
AP.1stPB5.25
Principal
Question No. 70 - B
Required loss allowance, 12/31/25
Less recorded loss allowance, 12/31/25 (P1,689,646 - P797,242)
Increase (decrease) in loss allowance
CA
1,200,000
1,014,820
805,567
569,111
301,915
-
185,180
209,253
236,456
267,196
301,915
*** This is the difference between the PV of contractual cash flows and PV of expected cash flows
before reversal of impairment.
Gross carrying amount, 12/31/25 (see amortization schedule)
Amortized cost, 12/31/25 (see revised amortization schedule)
PROBLEM NO. 6 - Sirius Corp.
Question No. 66 - D
113,456
127,071
142,319
159,398
178,956
PR
Question No. 69 - B
Interest income - 2025 (P7,972,000 x 12%)
AM
956,640
C
TE
2025
Journal entry - collection of interest
Cash
Interest income
TC
9,661,646
(7,972,000)
1,689,646
(95,200)
1,594,446
PR
Question No. 68 - B
Gross carrying amount, 12/31/24 (see amortization schedule)
PV of ECF (P10,000,000 x 0.7972)
Required loss allowance, 12/31/24
Recorded loss allowance
Increase (decrease) in loss allowance
TE
794,204
AM
9,392,256
(47,000)
9,345,256
TC
Gross carrying amount, 12/31/22 (see amortization schedule)
Loss allowance, 12/31/22
Amortized cost, 12/31/22
Journal entry
Debt investment - AC
Allowance for ECL
Interest income
794,204
9,278,800
28,364
9,307,164
250,000
9,557,164
C
Question No. 67 - C
956,640
1,071,360
Journal entry
Allowance for ECL
Impairment gain
PA
PV, 1/1/22
Discount amortization, 1/1 to 4/1 (P113,456 x 3/12)
PV, 4/1/22 (Purchase price)
Accrued interest (P10,000,000 x 10% x 3/12)
Total amount paid
-
Amort. Cost
7,972,000
8,928,640
10,000,000
R
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
Gross CA
9,278,800
9,392,256
9,519,327
9,661,646
9,821,044
10,000,000
Disc. Amort.
PA
Disc. Amort.
IE
W
NI (10%)
NI (10%)
EV
Original amortization schedule:
EI (12%)
1/1/22
12/31/22
1,113,456
12/31/23
1,127,071
12/31/24
1,142,319
12/31/25
1,159,398
12/31/26
1,178,956
PV, 1/1/22
5,674,000
3,604,800
9,278,800
R
10,000,000
1,000,000
PVF at 12%
0.5674
3.6048
Revised amortization schedule:
EI (12%)
12/31/24
12/31/25
956,640
12/31/26
1,071,360
9,821,044
(8,928,640)
892,404
EV
Question No. 65 - C
Principal
Interest
98,200
892,404 ***
(794,204)
IE
W
Amortization schedule:
Date
Payment
Interest (13%)
1/1/24
12/31/24
341,180
156,000
12/31/25
341,180
131,927
12/31/26
341,180
104,724
12/31/27
341,180
73,984
12/31/28
341,180
39,265
1,705,900
159,398 *
797,242 **
956,640
* Refer to the original amortization schedule; this represents the increase in present value
of original contractual cash flows.
** Decrease in loss allowance due to passage of time, which is recognized as interest income.
Page 3 of 4
www.teamprtc.com.ph
AP.1stPB5.25
Page 4 of 4
www.teamprtc.com.ph
AP.1stPB5.25
Team PRTC CPA Review
Nationwide Open First Pre-board Examination
TAXATION
R
EV
PA
C
AM
TE
AM
TE
IE
W
D
C
C
B
D
A
B
A
C
C
A
A
A
D
A
A
D
C
B
B
A
D
D
D
D
A
C
D
B
C
TC
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
PR
TC
C
PA
R
EV
IE
W
First Pre-Boards Examination - Anser Key
Taxation
1 D
Both of the concessions are for small and MICRO taxpayers.
2 D
3 B
Illegal income are still taxable
4 A
The length of stay alone, being more than 180 days in
aggregate, qualifies the taxpayer as NRAETB
5 D
His gross sales or receipts breached the P3 million threshold
6 A
7 D
8 C
Correctly considered as ordinary assets, but banks are not
considered as habitually engaged in real estate business.
9 C
IV - although not subject to final tax, is a taxable income for a
resident alien.
10 C
11 B
12 A
13 B
It falls under other equipment rented by an NRFC subject to 7
1/12 % FWT
14 C
Medium taxpayer is at least 20M
15 D
Individual engage in business is required to file taxes
16 A
Section 235
17 B
It is only allowed either as credit or for refund
18 D
This is deducted as this is not a returnable income
19 B
Payment for lost income are taxable / amount received from
insurance over the premiums paid are taxable
20 C
21 B
You can file and pay anywhere. But processing of eCAR still
remains to be on the location of the property
22 D
All of them are exempt
23 B
Ability to pay theory
24 D
Pepsi Cola vs. Municipality of Tanuan 69 SCRA 460
25 B
26 D
27 C
It is found in our Constitution
28 C
Initial payment, not downpayment.
29 C
It applies to capital assets not subject to CGT
30 D
No holding period because its ordinary asset. 5% EWT since the
tax[ayer is a realtor.
31 A
No option to be taxed under RCIT since taxpayer is non individual
32 A
Regardless of the ticket, since its vacation travel
33 C
No transfer of ownership, thus, it cannot equal to the GUMV
34 C
They are allowed to amend return. They just cannot change the
options made (8% and OSD)
35 D
36 C
37 D
38 B
39 B
40 A
PR
Team PRTC CPA Review
Nationwide Open First Pre-board Examination
TAXATION
Team PRTC CPA Review
Nationwide Open First Pre-board Examination
TAXATION
R
EV
240,000.00
5,000.00
10,000.00
255,000.00 [A]
400,000.00
100,000.00
300,000.00
50,000.00
250,000.00
[D]
GS
400,000.00
8%
32,000.00 [C]
10,000,000.00
150,000.00
9,850,000.00
2,760,000.00
7,090,000.00
55,000.00
7,145,000.00 [B]
PEI
Operating expenses
Taxable income
Special rate
Tax due
Same as above
1,100,000.00
Individual
Taxable income
Excess of 8M
58 - 61
Total value of FB
Rental - house
Cash - household personnel
Cash - groceries
Rental - vehicle
Vacation
[A]
600,000.00
60,000.00
15,000.00
50,000.00
725,000.00
[C]
PR
7,145,000.00
2,858,000.00
4,287,000.00
1,071,750.00
142,900.00
1,071,750.00 [C]
35,000.00
1,036,750.00 [C]
[B]
[A]
AM
Tax due and payable if OSD
Total gross income
OSD
Taxable income
RCIT
MCIT
Tax due
Tax credits
Tax payable
[D]
NRA
Monetary value
GUMV
FBT
62 - 66
GS
COS
GI
OPEX
Interest expense
Taxable income
RCIT rate
RCIT
[A]
[A]
11,000,000.00
3,000,000.00
35%
1,050,000.00
2,202,500.00
3,252,500.00 [D]
Fixed amount
Tax due
FBT
[C]
[D]
10,000,000.00
5,000,000.00
15,000,000.00
4,000,000.00
11,000,000.00
10%
1,100,000.00 [A]
GUMV
3,250,000.00
3,895,000.00
2,500,000.00
1,395,000.00
348,750.00
142,900.00
348,750.00
35,000.00
313,750.00
TE
none
NSNP But proceeds are diverted to other purpose
Gross income - education (67%)
Gross income - others (33%)
Monetary value
AM
PR
TC
C
43 - 50
Gross sales
Sales RDA [120,000 - 20,000 + 50,000]
Net sales
Direct cost
Salaries [1,200,000 x 30%]
360,000.00
Consultant fees [500,000 x 20%]
100,000.00
Rental
1,000,000.00
Depreciation - bldg [1,000,000 x 30%]
300,000.00
Depreciation - eqpt
1,000,000.00
Gross income
Other income
Total gross income
Operating and other expenses
Salaries [1,200,000 x 70%]
840,000.00
Consultant fees [500,000 x 80%]
400,000.00
Depreciation - bldg [1,000,000 x 70%]
700,000.00
Depreciation - FF
1,000,000.00
Other operating expenses, exc interest expense
200,000.00
Other non operating expenses
10,000.00
SC Discount
20,000.00
Interest expense, net of arbitrage
[100,000 - (80,000/.80*.20)
80,000.00
Taxable income before NOLCO
NOLCO
Net taxable income
RCIT
MCIT [7,145,000 X 2%]
Tax due
Tax credits
Tax payable
PA
Gross sales
COS
GI
AD
TI
Tax due
54 - 57
NSNP
Tax due
TE
40 - 42
SMW
Hazard pay
holiday pay
[A]
[A]
IE
W
Old tax base
6,000,000.00
Excess of new principal residence over proceeds (12M - 9M) 3,000,000.00
New tax base
9,000,000.00 [B]
12,000.00
6,000.00
6,000.00
20,000.00
30,000.00
4,400.00
800.00
79,200.00
R
EV
6,000,000.00
1,000,000.00
5,000,000.00 [B]
1%
2%
2%
0%
5%
5%
2%
2%
0%
PA
Old tax base
Unutilized portion (1.5M/9M*6M)
New tax base
51 - 53
Purchase of goods [1,000,000 + 200,000] 1,200,000.00
purchase of services
300,000.00
purchase of utilities
300,000.00
PF - GPP
PF - Individuals
400,000.00
Rents
600,000.00
Agency fee - janitorial [200,000 x 1.1]
220,000.00
Agency fee - security [440,000/1.1 x 10%]
40,000.00
Payment to RBE
3,060,000.00
2,980,800.00
C
600,000.00
83%
500,000.00 [C]
100,000.00 [D]
TC
36 - 39
CGT deposited in escrow (10M x 6%)
Utilized percentage (7.5M / 9M)
CGT returned
CGT Due
IE
W
Team PRTC CPA Review
Nationwide Open First Pre-board Examination
TAXATION
300,000.00
60,000.00
15,000.00
50,000.00
425,000.00
65%
653,846.15
35%
228,846.15 [B]
953,846.15 [B]
425,000.00
75%
566,666.67
25%
141,666.67 [A]
12,000,000.00
3,750,000.00
8,250,000.00
1,750,000.00
175,000.00
6,325,000.00 [D]
25%
1,581,250.00 [D]
If GP, the partner has no returnable income income since share in net income of GP is treated as dividends subject to FT
GI
OSD
Taxable income
RCIT
Tax due
8,250,000.00
3,300,000.00
4,950,000.00
25%
1,237,500.00 [A]
1.
Nil
AM
PR
xxx xxx xxx
offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the
offerer except from the time it came to his knowledge.
The contract, in such a case, is presumed to have been
entered into in the place where the offer was made.
(1262a)
EXPEDITION THEORY: The contract is perfected from the
moment the offeree TRANSMITS THE NOTIFICATION of
acceptance to the offeror.
7.
D. To be kept “classified”
(l) Sensitive personal information refers to
personal information:
(1) About an individual’s race, ethnic origin, marital
status, age, color, and religious, philosophical or political
affiliations;
(2) About an individual’s health, education, genetic or
sexual life of a person, or to any proceeding for any
offense committed or alleged to have been committed
by such person, the disposal of such proceedings, or the
sentence of any court in such proceedings;
(3) Issued by government agencies peculiar to an
individual which includes, but not limited to, social
security numbers, previous or current health records,
licenses or its denials, suspension or revocation, and tax
returns; and
(4) Specifically established by an executive order or an
act of Congress to be kept classified. (RA 10173
PA
3.
B. 1st statement – In Wong v. CA (February 2,
2001), the Court ruled that the 90-day period provided
in the law is not an element of the offense. Neither does
it discharge petitioner from his duty to maintain
sufficient funds in the account within a reasonable time
from the date indicated in the check.
8.
C. “at the time of” the sale
Requisites
a. Defect is important or Serious
i. The thing sold is unfit for the use which
it is intended
ii. Diminishes its fitness for such use or to such an extent
that the buyer would not have acquired it had he been
aware thereof
b. Defect is Hidden
c. Defect Exists at the time of the sale
d. Buyer gives Notice of the defect to the seller
within reasonable time
e. Action for rescission or reduction of the price
is brought within the proper period
i. 6 months – from delivery of the thing
sold
ii. Within 40 days – from the delivery in
case of animals
f. There must be No waiver of warranty on the part of
the buyer.
C
2nd statement - In Arceo v. People (July 17, 2006), the
presumption of knowledge of insufficiency of funds did
not arise because the check was presented beyond the
90-day period.
4.
E. Article 1526. Subject to the provisions of this
Title, notwithstanding that the ownership in the goods
may have passed to the buyer, the unpaid seller of
goods, as such, has: (1) A lien on the goods or right to
retain them for the price while he is in possession of
them; (2) In case of the insolvency of the buyer, a right
of stopping the goods in transitu after he has parted with
the possession of them; (3) A right of resale as limited
by this Title; (4) A right to rescind the sale as likewise
limited by this Title.
TC
TC
C
PA
Not qualified for 8% since it is subject to Amusement tax
Article 1403. The following contracts are unenforceable,
unless they are ratified: (1) Those entered into in the
name of another person by one who has been given no
authority or legal representation, or who has acted
beyond his powers;
PR
2,600,000.00
18%
468,000.00 [C]
C. Unenforceable.
Article 1317. No one may contract in the name of
another without being authorized by the latter, or unless
he has by law a right to represent him.
Where the ownership in the goods has not passed to the
buyer, the unpaid seller has, in addition to his other
remedies a right of withholding delivery similar to and
coextensive with his rights of lien and stoppage in
transitu where the ownership has passed to the buyer.
(n) Article 1527.
AM
GS
Amusement tax rate
Business tax due
2.
R
EV
Fixed amount
Tax due
2,500,000.00
1,000,000.00
1,500,000.00
600,000.00
900,000.00
100,000.00
1,000,000.00
200,000.00
25%
50,000.00
102,500.00
152,500.00 [B]
IE
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69 - 70
GS
COS
GI
OPEX
Operating income
Other income
Total taxable income
Excess of 800,000
TE
A creditor, to whom partial payment has been made,
may exercise his right for the remainder, and he shall be
preferred to the person who has been subrogated in his
place in virtue of the partial payment of the same credit.
(1213)
2,300,000.00
Item of gross income
5.
B. Article 1287. Compensation shall not be
proper when one of the debts arises from a depositum
or from the obligations of a depositary or of a bailee in
commodatum. Neither can compensation be set up
against a creditor who has a claim for support due by
gratuitous title, without prejudice to the provisions of
paragraph 2 of article 301. (1200a)
TE
67 - 68
Deductions from gross income
Lease payments (rent expense)
D. Old creditor is preferred. Article 1304.
IE
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Regulatory Framework for Business Transactions
R
EV
Team PRTC CPA Review
Nationwide Open First Pre-board Examination
TAXATION
Article 1288. Neither shall there be compensation if one
of the debts consists in civil liability arising from a penal
offense. (n)
6.
C. Article 1319. Consent is manifested by the
meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The
9.
A. ARTICLE 1602. The contract shall be
presumed to be an equitable mortgage, in any of the
following cases: (1) When the price of a sale with right
to repurchase is unusually inadequate; (2) When the
vendor remains in possession as lessee or otherwise; (3)
When upon or after the expiration of the right to
repurchase another instrument extending the period of
redemption or granting a new period is executed; (4)
When the purchaser retains for himself a part of the
purchase price; (5) When the vendor binds himself to
pay the taxes on the thing sold; (6) In any other case
where it may be fairly inferred that the real intention of
the parties is that the transaction shall secure the
payment of a debt or the performance of any other
obligation.
Page 1 of 10
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PR
TC
17.
D. Article 1242. Payment made in good faith to
any person in possession of the credit shall release the
debtor. (1164)
18.
A. Article 1521. Whether it is for the buyer to
take possession of the goods or of the seller to send
them to the buyer is a question depending in each case
on the contract, express or implied, between the parties.
Apart from any such contract, express or implied, or
usage of trade to the contrary, the place of delivery is
the seller's place of business if he has one, and if not his
residence; but in case of a contract of sale of specific
goods, which to the knowledge of the parties when the
contract or the sale was made were in some other place,
then that place is the place of delivery.
19.
A. "(k) The term insured deposit means the
amount due to any bonafide depositor for legitimate
deposits in an insured bank as of the date of closure but
not to exceed Five hundred thousand pesos
(P500,000.00). Such amount shall be determined
according to such regulations as the Board of Directors
may prescribe. In determining such amount due to any
depositor, there shall be added together all deposits in
the bank maintained in the same right and capacity for
his or her benefit either in his or her own name or in the
name of others. A joint account regardless of whether
the conjunction 'and', 'or', 'and/or' is used, shall be
insured separately from any individually-owned deposit
account: Provided, That (1) if the account is held jointly
by two or more natural persons, or by two or more
Page 2 of 10
Where the seller delivers to the buyer a quantity of goods
larger than he contracted to sell, the buyer may accept
the goods included in the contract and reject the rest. If
the buyer accepts the whole of the goods so delivered
he must pay for them at the contract rate.
IE
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Where the seller delivers to the buyer the goods he
contracted to sell mixed with goods of a different
description not included in the contract, the buyer may
accept the goods which are in accordance with the
contract and reject the rest. In the preceding two
paragraphs, if the subject matter is indivisible, the buyer
may reject the whole of the goods. The provisions of this
article are subject to any usage of trade, special
agreement, or course of dealing between the parties
PA
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24.
B. ART. 22. Effects of Merger and Consolidation.
The merger or consolidation of cooperatives shall have
the following effects:
“(1) The constituent cooperatives shall become a single
cooperative which, in case of merger, shall be the
surviving cooperative, and, in case of consolidation, shall
be the consolidated cooperative;
“(2) The separate existence of the constituent
cooperatives shall cease, except that of the surviving or
the consolidated cooperative;
“(3) The surviving or the consolidated cooperative shall
possess al the assets, rights, privileges, immunities and
franchises of each of the constituent cooperatives;
“(4) The surviving or the consolidated cooperative shall
possess all the assets, rights, privileges, immunities and
franchises of each of the constituent cooperatives; and
“(5) The surviving or the consolidated cooperative shall
be responsible for all the liabilities and obligation of each
of the constituent cooperatives in the same manner as if
such surviving or consolidated cooperative had itself
incurred such liabilities or obligations. Any claim, action
or proceeding pending by or against any such
constituent cooperatives may be prosecuted by or
against the surviving or consolidated cooperative, as the
case may be. Neither the rights of creditors nor any lien
upon the property of any such constituent cooperatives
shall be impaired by such merger or consolidation.
21.
B. Article 1209. If the division is impossible, the
right of the creditors may be prejudiced only by their
collective acts, and the debt can be enforced only by
proceeding against all the debtors. If one of the latter
should be insolvent, the others shall not be liable for his
share.
C
C
14.
A. Article 1503. When there is a contract of sale
of specific goods, the seller may, by the terms of the
contract, reserve the right of possession or ownership in
the goods until certain conditions have been fulfilled. The
right of possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer
or to a carrier or other bailee for the purpose of
transmission to the buyer. Where goods are shipped,
and by the bill of lading the goods are deliverable to the
seller or his agent, or to the order of the seller or of his
agent, the seller thereby reserves the ownership in the
goods. But, if except for the form of the bill of lading, the
ownership would have passed to the buyer on shipment
of the goods, the seller's property in the goods shall be
deemed to be only for the purpose of securing
performance by the buyer of his obligations under the
contract. Where goods are shipped, and by the bill of
lading the goods are deliverable to order of the buyer or
of his agent, but possession of the bill of lading is
retained by the seller or his agent, the seller thereby
reserves a right to the possession of the goods as against
the buyer. Where the seller of goods draws on the buyer
for the price and transmits the bill of exchange and bill
of lading together to the buyer to secure acceptance or
payment of the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor the bill of
exchange, and if he wrongfully retains the bill of lading
he acquires no added right thereby. If, however, the bill
of lading provides that the goods are deliverable to the
buyer or to the order of the buyer, or is indorsed in
blank, or to the buyer by the consignee named therein,
one who purchases in good faith, for value, the bill of
lading, or goods from the buyer will obtain the ownership
in the goods, although the bill of exchange has not been
honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the consignee
named therein, or of the goods, without notice of the
facts making the transfer wrongful. (n)
Article 1224. A joint indivisible obligation gives rise to
indemnity for damages from the time anyone of the
debtors does not comply with his undertaking. The
debtors who may have been ready to fulfill their
promises shall not contribute to the indemnity beyond
the corresponding portion of the price of the thing or of
the value of the service in which the obligation consists
TC
PA
13.
A. Article 1848. A limited partner shall not
become liable as a general partner unless, in addition to
the exercise of his rights and powers as a limited
partner, he takes part in the control of the business.
20.
D. Article 1324. When the offerer has allowed
the offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by
communicating such withdrawal, except when the option
is founded upon a consideration, as something paid or
promised.
PR
They are: (1) There must be two or more creditors;
(2) The debtor must be (partially) insolvent;
(3) The assignment must involve all the properties of the
debtor; and
(4) The cession must be accepted by the creditors.
22.
D. Article 1334. Mutual error as to the legal
effect of an agreement when the real purpose of the
parties is frustrated, may vitiate consent. (n)
Article 1390. The following contracts are voidable or
annullable, even though there may have been no
damage to the contracting parties: (1) Those where one
of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud. These
contracts are binding, unless they are annulled by a
proper action in court. They are susceptible of
ratification. (n)
AM
C. Requisites of payment by cession.
The owner of a patent has no right to prevent third
parties from using the invention under the following
circumstances:
1.
Using the patented product which has been put
on the market in the Philippines by the owner of the
product, or with his express consent, insofar as such use
is performed after that product has been so put on the
said market
2.
Where the act is done privately and on a noncommercial purpose provided, that it does not
significantly prejudice the economic interests of the
owner of the patent
3.
Where the act consists of making or using
exclusively for the purpose of experiments that relate to
the subject matter of the patented invention
4.
Where the act consists of the preparation for
individual cases, in a pharmacy or by a medical
professional, of a medicine in accordance with a medical
prescription or acts concerning the medicine so prepared
5.
Where the invention is used on any ship, vessel,
aircraft, or land vehicles of any other country entering
the territory of the Philippines temporarily or accidentally
provided, that such invention is used exclusively for the
needs of the ship, vessel, aircraft or land vehicle and not
used for the manufacturing of anything to be sold within
the Philippines (Sec. 72, IP Code).
juridical persons or entities, the maximum insured
deposit shall be divided into as many equal shares as
there are individuals, juridical persons or entities, unless
a different sharing is stipulated in the document of
deposit, and (2) if the account is held by a juridical
person or entity jointly with one or more natural persons,
the maximum insured deposit shall be presumed to
belong entirely to such juridical person or entity:
Provided, further, That the aggregate of the interest of
each co-owner over several joint accounts, whether
owned by the same or different combinations of
individuals, juridical persons or entities, shall likewise be
subject to the maximum insured deposit: Provided,
furthermore, That the provisions of any law to the
contrary notwithstanding, no owner/holder of any
passbook, certificate of deposit or other evidence of
deposit shall be recognized as a depositor entitled to the
rights provided in this Act unless the passbook,
certificate of deposit or other evidence of deposit is
determined by the Corporation to be an authentic
document or record of the issuing bank. (RA 11840)
TE
12.
16.
A. If two (2) or more persons have made the
invention separately and independently of each other,
the right to the patent shall belong to the person who
filed an application for such invention, to the applicant
who has the earliest filing date or, the earliest priority
date (Sec. 29, IP Code).
IE
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11.
D. "Electronic signature" refers to any distinctive
mark, characteristic and/or sound in electronic form,
representing the identity of a person and attached to or
logically associated with the electronic data message or
electronic document or any methodology or procedures
employed or adopted by a person and executed or
adopted by such person with the intention of
authenticating or approving an electronic data message
or electronic document. (RA 8792)
15.
B. Article 1782. Persons who are prohibited from
giving each other any donation or advantage cannot
enter into universal partnership. (1677)
R
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10.
D. No right of redemption if sold to a co-owner.
The purchaser must be a third party, not another coowner. If the sale is to another co-owner, there is no
need for redemption because the ideal share remains
within the co-ownership.
23.
D. Article 1522. Where the seller delivers to the
buyer a quantity of goods less than he contracted to sell,
the buyer may reject them, but if the buyer accepts or
retains the goods so delivered, knowing that the seller is
not going to perform the contract in full, he must pay for
them at the contract rate. If, however, the buyer has
used or disposed of the goods delivered before he knows
that the seller is not going to perform his contract in full,
the buyer shall not be liable for more than the fair value
to him of the goods so received.
25.
B. SEC. 6. Classification of Shares. – The
classification of shares, their corresponding rights,
privileges, or restrictions, and their stated par value, if
any, must be indicated in the articles of incorporation.
Each share shall be equal in all respects to every other
share, except as otherwise provided in the articles of
incorporation and in the certificate of stock.
xxx xxx xxx
The shares or series of shares may or may not have a
par value: Provided, That banks, trust, insurance, and
preneed companies, public utilities, building and loan
associations, and other corporations authorized to obtain
or access funds from the public, whether publicly listed
or not, shall not be permitted to issue no-par value
shares of stock.
26.
C. Article 1799. A stipulation which excludes one
or more partners from any share in the profits or losses
is void. (1691)
27.
Page 3 of 10
C. The right to redress.
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30.
C. SEC. 21. Effects of Non-Use of Corporate
Charter and Continuous Inoperation. – If a corporation
does not formally organize and commence its business
within five (5) years from the date of its incorporation,
its certificate of incorporation shall be deemed revoked
as of the day following the end of the five (5)-year
period.
However, if a corporation has commenced its business
but subsequently becomes inoperative for a period of at
least five (5) consecutive years, the Commission may,
33.
Page 4 of 10
C. Self-explanatory
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41.
B. Both the old and the new obligations must be
valid in order for novation to exist.
Article 1297. If the new obligation is void, the original
one shall subsist, unless the parties intended that the
former relation should be extinguished in any event. (n)
Article 1298. The novation is void if the original
obligation was void, except when annulment may be
claimed only by the debtor or when ratification validates
acts which are voidable. (1208a)
42.
C. Only the stockholders.
43.
D. Article 1359. When, there having been a
meeting of the minds of the parties to a contract, their
true intention is not expressed in the instrument
purporting to embody the agreement, by reason of
mistake, fraud, inequitable conduct or accident, one of
the parties may ask for the reformation of the instrument
to the end that such true intention may be expressed. If
mistake, fraud, inequitable conduct, or accident has
prevented a meeting of the minds of the parties, the
proper remedy is not reformation of the instrument but
annulment of the contract.
PA
37.
C. When one party fails to perform a contractual
obligation without lawful justification, the aggrieved
party may seek multiple remedies. In the Philippine
setting, the Civil Code stands as the primary source of
law governing obligations and contracts. Additionally,
special laws, rules of court procedure, and
jurisprudential interpretations by the Supreme Court
shape the landscape of contractual rights and duties.
40.
A. Article 1252. He who has various debts of the
same kind in favor of one and the same creditor, may
declare at the time of making the payment, to which of
them the same must be applied. Unless the parties so
stipulate, or when the application of payment is made by
the party for whose benefit the term has been
constituted, application shall not be made as to debts
which are not yet due. If the debtor accepts from the
creditor a receipt in which an application of the payment
is made, the former cannot complain of the same, unless
there is a cause for invalidating the contract. (1172a)
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36.
A. The principle of rebus sic stantibus is rooted
in the idea that contractual obligations are valid only as
long as the essential circumstances surrounding the
contract remain the same as when it was created. In the
Philippines, this principle applies as an exception under
the doctrine of the pacta sunt servanda—which holds
that agreements must be honored. However, when
unforeseen and extraordinary changes alter the
fundamental circumstances that formed the basis of an
obligation, rebus sic stantibus may allow for the revision
or extinguishment of that obligation.
C
In Vermen Realty Development Corporation, July 6,
1993, the Supreme Court ruled – The rescission of the
contract will not be permitted for slight breach, but only
for substantial and fundamental breach as would defeat
the very object of the parties in executing the
agreement.
TC
a.
If after the principal remedies are filed in court
and remained futile and unresolved.
b.
In case of delay on the part of the creditor after
the requisite demand.
c.
In cases of substantial breach of the terms and
conditions of the contract. [Best answer]
d.
If all the properties of the debtor are exhausted
(Guaranty principle)
PR
29.
C. i. Corporation is created by law (Sec. 2, RA
11232)
ii. In stock corporation, BOD is the governing body (Sec
22 RA 11232).
iii. Transferrable
iv. 2-15 incorporators allowed per SEC MC No. 16, Series
of 2019, Guidelines on the Number and Qualifications of
Incorporators [effective August 1, 2019].
35.
B. No right to redeem if made to a co-owner, it
must be to a stranger.
38.
C. A valid law is required to invoke a de facto
corporation.
39.
D. SEC. 29. Compensation of Directors or
Trustees. – In the absence of any provision in the bylaws
fixing their compensation, the directors or trustees shall
not receive any compensation in their capacity as such,
except for reasonable per diems: Provided however,
That the stockholders representing at least a majority of
the outstanding capital stock or majority of the members
may grant directors or trustees with compensation and
approve the amount thereof at a regular or special
meeting. In no case shall the total yearly compensation
of directors exceed ten (10%) percent of the net income
before income tax of the corporation during the
preceding year. Directors or trustees shall not participate
in the determination of their own per diems or
compensation. Corporations vested with public interest
shall submit to their shareholders and the Commission,
an annual report of the total compensation of each of
their directors or trustees.
AM
C
TC
PR
Article 1843. A limited partnership is one formed by two
or more persons under the provisions of the following
article, having as members one or more general partners
and one or more limited partners. The limited partners
as such shall not be bound by the obligations of the
partnership.
32.
D. SEC. 45. Adoption of Bylaws. – For the
adoption of bylaws by the corporation, the affirmative
vote of the stockholders representing at least a majority
of the outstanding capital stock, or of at least a majority
of the members in case of nonstock corporations, shall
be necessary. The bylaws shall be signed by the
stockholders or members voting for them and shall be
kept in the principal office of the corporation, subject to
the inspection of the stockholders or members during
office hours. A copy thereof, duly certified by a majority
of the directors or trustees and countersigned by the
secretary of the corporation, shall be filed with the
Commission and attached to the original articles of
incorporation. Notwithstanding the provisions of the
preceding paragraph, bylaws may be adopted and filed
prior to incorporation; in such case, such bylaws shall be
approved and signed by all the incorporators and
submitted to the Commission, together with the articles
of incorporation. In all cases, bylaws shall be effective
only upon the issuance by the Commission of a
certification that the bylaws are in accordance with this
Code. The Commission shall not accept for filing the
bylaws or any amendment thereto of any bank, banking
institution, building and loan association, trust company,
insurance
company,
public
utility,
educational
institution, or other special corporations governed by
special laws, unless accompanied by a certificate of the
appropriate government agency to the effect that such
bylaws or amendments are in accordance with law.
34.
D. Right to the fruits applies to obligation to give
a specific thing. (1166 NCC)
Article 1166. The obligation to give a determinate thing
includes that of delivering all its accessions and
accessories, even though they may not have been
mentioned. (1097a)
TE
31.
D. SEC. 30. Initial Appointment of the
Rehabilitation Receiver. — The court shall initially
appoint the rehabilitation receiver, who may or may not
be from among the nominees of the petitioner. However,
at the initial hearing of the petition, the creditors and the
debtor who are not petitioners may nominate other
persons to the position. The court may retain the
rehabilitation receiver initially appointed or appoint
another who may or may not be from among those
nominated.
In case the debtor is a securities market participant, the
court shall give priority to the nominee of the appropriate
securities or investor protection fund.
If a qualified natural person or entity is nominated by
more than fifty percent (50%) of the secured creditors
and the general unsecured creditors, and satisfactory
evidence is submitted, the court shall appoint the
creditors’ nominee as rehabilitation receiver. (RA 10142)
PA
28.
E. Article 1825. When a person, by words spoken
or written or by conduct, represents himself, or consents
to another representing him to anyone, as a partner in
an existing partnership or with one or more persons not
actual partners, he is liable to any such persons to whom
such representation has been made, who has, on the
faith of such representation, given credit to the actual or
apparent partnership, and if he has made such
representation or consented to its being made in a public
manner he is liable to such person, whether the
representation has or has not been made or
communicated to such person so giving credit by or with
the knowledge of the apparent partner making the
representation or consenting to its being made: (1)
When a partnership liability results, he is liable as though
he were an actual member of the partnership; (2) When
no partnership liability results, he is liable pro rata with
the other persons, if any, so consenting to the contract
or representation as to incur liability, otherwise
separately. When a person has been thus represented to
be a partner in an existing partnership, or with one or
more persons not actual partners, he is an agent of the
persons consenting to such representation to bind them
to the same extent and in the same manner as though
he were a partner in fact, with respect to persons who
rely upon the representation. When all the members of
the existing partnership consent to the representation, a
partnership act or obligation results; but in all other
cases it is the joint act or obligation of the person acting
and the persons consenting to the representation. (n)
A delinquent corporation shall have a period of two (2)
years to resume operations and comply with all
requirements that the Commission shall prescribe. Upon
compliance by the corporation, the Commission shall
issue an order lifting the delinquent status. Failure to
comply with the requirements and resume operations
within the period given by the Commission shall cause
the revocation of the corporation’s certificate of
incorporation. The Commission shall give reasonable
notice to, and coordinate with the appropriate regulatory
agency prior to the suspension or revocation of the
certificate of incorporation of companies under their
special regulatory jurisdiction. (RA 11232).
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The right to redress. This is your right to be compensated
for misrepresentation, shoddy goods, or unsatisfactory
services
after due notice and hearing, place the corporation under
delinquent status.
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This is your right to be compensated for
misrepresentation, shoddy goods, or unsatisfactory
services. In case you have bought a defective product,
you can return to the store, look for Consumer Welfare
Desk, and request a replacement, refund, or repair of
the product.
44.
C. Article 1782. Persons who are prohibited from
giving each other any donation or advantage cannot
enter into universal partnership. (1677)
The subsequent marriage of the partners does not
operate to dissolve it, such marriage not being one of
the causes provided for that purpose either by the
Spanish Civil Code or the Code of Commerce. (CIR
versus Suter)
45.
A. Article 1208. If from the law, or the nature or
the wording of the obligations to which the preceding
article refers the contrary does not appear, the credit or
debt shall be presumed to be divided into as many
shares as there are creditors or debtors, the credits or
debts being considered distinct from one another,
subject to the Rules of Court governing the multiplicity
of suits.
Article 1211. Solidarity may exist although the creditors
and the debtors may not be bound in the same manner
and by the same periods and conditions.
46.
A. Article 1424. When a right to sue upon a civil
obligation has lapsed by extinctive prescription, the
obligor who voluntarily performs the contract cannot
recover what he has delivered or the value of the service
he has rendered.
Article 1425. When without the knowledge or against the
will of the debtor, a third person pays a debt which the
obligor is not legally bound to pay because the action
thereon has prescribed, but the debtor later voluntarily
reimburses the third person, the obligor cannot recover
what he has paid.
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PR
TC
58.
A. The Audit Committee shall consist of a
minimum of 3 directors with independent directors
forming a majority.
59.
B. Pacto de retro sale is subject to a resolutory
condition. If the seller a retro reacquires the property
during the period agreed upon, the ownership of the
buyer a retro is extinguished.
60.
C. Article 1403. The following contracts are
unenforceable, unless they are ratified:
53.
B. Real properties were contributed.
Article 1771. A partnership may be constituted in any
form, except where immovable property or real rights
are contributed thereto, in which case a public
instrument shall be necessary.
Article 1773. A contract of partnership is void, whenever
immovable property is contributed thereto, if an
inventory of said property is not made, signed by the
parties, and attached to the public instrument.
(2) Those that do not comply with the Statute of Frauds
as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by
action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a
secondary evidence of its contents
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52.
B. Only the proportionate part of the debt can be
extinguished.
54.
C. Voidable only due to vitiated consent.
55.
C. Total assets of between P3M to P350 Million
or total liabilities of between P3M to P250 Million. If the
entity is a parent company, the said amounts shall be
based on the consolidated figures. (SRC, Rule 68)
56.
B. It is not required. As amended by RA 10365,
Sec. 6 (a) provides that any person may be charged with
b) A special promise to answer for the debt, default, or
miscarriage of another;
61.
D. Article 1251. Payment shall be made in the
place designated in the obligation. There being no
express stipulation and if the undertaking is to deliver a
determinate thing, the payment shall be made wherever
the thing might be at the moment the obligation was
constituted. In any other case the place of payment shall
be the domicile of the debtor. If the debtor changes his
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In Marquez vs. Elisan Credit, the Supreme Court ruled
that the chattel mortgage cannot validly cover the
second loan of the debtor.
68.
C.
69.
A. Since there is no period, a demand is required
and the sale will ensue after one month form the
demand.
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Article 2122. A thing under a pledge by operation of law
may be sold only after demand of the amount for which
the thing is retained. The public auction shall take place
within one month after such demand. If, without just
grounds, the creditor does not cause the public sale to
be held within such period, the debtor may require the
return of the thing. (n)
PA
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70.
C. i. Article 1227. The debtor cannot exempt
himself from the performance of the obligation by paying
the penalty, save in the case where this right has been
expressly reserved for him. Neither can the creditor
demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time, unless this
right has been clearly granted him. However, if after the
creditor has decided to require the fulfillment of the
obligation, the performance thereof should become
impossible without his fault, the penalty may be
enforced. (1153a)
iv. Only the debtor has the right to substitute
65.
B. S1 – True
S2 – False, cannot deposit
S3 – False, writing only
71.
C. The agreement provides that demand is not
required.
72.
C
51.
A. Article 1356. Contracts shall be obligatory, in
whatever form they may have been entered into,
provided all the essential requisites for their validity are
present. However, when the law requires that a contract
be in some form in order that it may be valid or
enforceable, or that a contract be proved in a certain
way, that requirement is absolute and indispensable. In
such cases, the right of the parties stated in the following
article cannot be exercise.
64.
B. Debtor only has the right to substitute.
Article 1206. When only one prestation has been agreed
upon, but the obligor may render another in substitution,
the obligation is called facultative. The loss or
deterioration of the thing intended as a substitute,
through the negligence of the obligor, does not render
him liable. But once the substitution has been made, the
obligor is liable for the loss of the substitute on account
of his delay, negligence or fraud.
B. Self-explanatory
73.
C. General rule, demand is required. No demand,
no delay.
TC
C
50.
A. Managing partners decide in the acts of
administration.
63.
E. Article 1279. In order that compensation may
be proper, it is necessary: (1) That each one of the
obligors be bound principally, and that he be at the same
time a principal creditor of the other; (2) That both debts
consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the
same quality if the latter has been stated; (3) That the
two debts be due; (4) That they be liquidated and
demandable; (5) That over neither of them there be any
retention or controversy, commenced by third persons
and communicated in due time to the debtor.
66.
D. Indivisibility of the collateral.
Article 2089. A pledge or mortgage is indivisible, even
though the debt may be divided among the successors
in interest of the debtor or of the creditor. Therefore, the
debtor's heir who has paid a part of the debt cannot ask
for the proportionate extinguishment of the pledge or
mortgage as long as the debt is not completely satisfied.
Neither can the creditor's heir who received his share of
the debt return the pledge or cancel the mortgage, to
the prejudice of the other heirs who have not been paid.
From these provisions is excepted the case in which,
there being several things given in mortgage or pledge,
each one of them guarantees only a determinate portion
of the credit. The debtor, in this case, shall have a right
to the extinguishment of the pledge or mortgage as the
portion of the debt for which each thing is specially
answerable is satisfied
PR
PA
49.
B. Article 1324. When the offerer has allowed the
offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by
communicating such withdrawal, except when the option
is founded upon a consideration, as something paid or
promised
62.
B. Article 1224. A joint indivisible obligation
gives rise to indemnity for damages from the time
anyone of the debtors does not comply with his
undertaking. The debtors who may have been ready to
fulfill their promises shall not contribute to the indemnity
beyond the corresponding portion of the price of the
thing or of the value of the service in which the obligation
consists.
AM
D. Emptio spei is the sale of hope or expectancy.
domicile in bad faith or after he has incurred in delay,
the additional expenses shall be borne by him. These
provisions are without prejudice to venue under the
Rules of Court.
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48.
57.
A. 19.2. Mandatory tender offers
19.3. Exemptions from the Mandatory Tender Offer
Requirement
19.3.1. Unless the acquisition of equity securities is
intended to
circumvent or defeat the objectives of the tender
offer rules, the mandatory
tender offer requirement shall not apply to the following:
19.3.1.1. Any purchase of securities from the
unissued capital stock;
Provided, the acquisition will not result to a fifty
percent (50%) or more
ownership of securities by the purchaser or such
percentage that is sufficient to
gain control of the board;
19.3.1.2. Any purchase of securities from an
increase in authorized
capital stock;
19.3.1.3. Purchase in connection with foreclosure
proceedings
involving a duly constituted pledge or security
arrangement where the
acquisition is made by the debtor or creditor;
19.3.1.4. Purchases in connection with a privatization
undertaken by
the government of the Philippines;
19.3.1.5. Purchases in connection with corporate
rehabilitation under
court supervision;
19.3.1.6. Purchases in the open market at the prevailing
market price;
and
19.3.1.7. Merger or consolidation (Rule 19, Tender
Offers, SRC)
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47.
D. Article 1813. A conveyance by a partner of his
whole interest in the partnership does not of itself
dissolve the partnership, or, as against the other
partners in the absence of agreement, entitle the
assignee, during the continuance of the partnership, to
interfere in the management or administration of the
partnership business or affairs, or to require any
information or account of partnership transactions, or to
inspect the partnership books; but it merely entitles the
assignee to receive in accordance with his contract the
profits to which the assigning partner would otherwise
be entitled. However, in case of fraud in the
management of the partnership, the assignee may avail
himself of the usual remedies. In case of a dissolution of
the partnership, the assignee is entitled to receive his
asignor's interest and may require an account from the
date only of the last account agreed to by all the
partners.
and convicted of both the offense of money laundering
and unlawful activity.
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Article 1428. When, after an action to enforce a civil
obligation has failed the defendant voluntarily performs
the obligation, he cannot demand the return of what he
has delivered or the payment of the value of the service
he has rendered.
67.
B. Chattel mortgage cannot secure future
obligations.
The Court stated that a chattel mortgage cannot cover
obligations beyond those explicitly stated at its
constitution without a corresponding modification or new
execution that complies with the Chattel Mortgage Law.
Despite contractual provisions suggesting otherwise, the
full settlement of the initial loan secured by the chattel
mortgage nullified its binding effect on subsequent
loans. (Nunelon R. Marquez vs. Elisan Credit
Corporation)
74.
B. Contract was perfected electronically and
consummated upon the payment of the price.
75.
A. Notarial rescission is only required in
immovables under Article 1592 of NCC.
Article 1597. Where the goods have not been delivered
to the buyer, and the buyer has repudiated the contract
of sale, or has manifested his inability to perform his
obligations thereunder, or has committed a breach
thereof, the seller may totally rescind the contract of sale
by giving notice of his election so to do to the buyer.
76.
D. Article 1323. An offer becomes ineffective
upon the death, civil interdiction, insanity, or insolvency
of either party before acceptance is conveyed.
77.
C. Both parties must be living and capacitated at
the time of the knowledge of acceptance (2nd, par,
1319, NCC)
Article 1323. An offer becomes ineffective upon the
death, civil interdiction, insanity, or insolvency of either
party before acceptance is conveyed.
78.
B. Article 1322. An offer made through an agent
is accepted from the time acceptance is communicated
to him.
79.
B. Article 1324. When the offerer has allowed the
offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by
Page 7 of 10
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83.
B. Self-explanatory
84.
B. Article 1464. In the case of fungible goods,
there may be a sale of an undivided share of a specific
mass, though the seller purports to sell and the buyer to
buy a definite number, weight or measure of the goods
in the mass, and though the number, weight or measure
of the goods in the mass, and though the number,
weight or measure of the goods in the mass is
undetermined. By such a sale the buyer becomes owner
Article 1358. The following must appear in a public
document: (1) Acts and contracts which have for their
object the creation, transmission, modification or
extinguishment of real rights over immovable property;
sales of real property or of an interest therein are
governed by articles 1403, No. 2, and 1405; (2) The
cession, repudiation or renunciation of hereditary rights
or of those of the conjugal partnership of gains; (3) The
power to administer property, or any other power which
has for its object an act appearing or which should
appear in a public document, or should prejudice a third
person; (4) The cession of actions or rights proceeding
from an act appearing in a public document. All other
contracts where the amount involved exceeds five
hundred pesos must appear in writing, even a private
one. But sales of goods, chattels or things in action are
governed by articles, 1403, No. 2 and 1405. (1280a)
iii. Only when there is a duty to reveal them.
Article 1339. Failure to disclose facts, when there is a
duty to reveal them, as when the parties are bound by
confidential relations, constitutes fraud
88.
A. iii. Article 1331. In order that mistake may
invalidate consent, it should refer to the substance of the
thing which is the object of the contract, or to those
conditions which have principally moved one or both
parties to enter into the contract. Mistake as to the
identity or qualifications of one of the parties will vitiate
Page 8 of 10
94.
A. S1 –
S2 –
S3 –
S4 –
S5 – no period is explicitly provided by law
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95.
A. S1 –
S2 – Annulment
S3 – Violation /Breach of the obligation
S4 – Judicial or extra-judicial
S5 – Pre-emptive right. Equity of redemption applies in
chattel and real estate mortgage
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96.
E. S1 – Quo warranto
S2 – Specific performance / compel the delivery
S3 – Interpleader
S4 – Annulment
S5 – Promptly renounce his interest
PA
97.
C. Article 1862. On due application to a court of
competent jurisdiction by any creditor of a limited
partner, the court may charge the interest of the
indebted limited partner with payment of the unsatisfied
amount of such claim, and may appoint a receiver, and
make all other orders, directions and inquiries which the
circumstances of the case may require.
The interest may be redeemed with the separate
property of any general partner, but may not be
redeemed with partnership property. The remedies
conferred by the first paragraph shall not be deemed
exclusive of others which may exist. Nothing in this
Chapter shall be held to deprive a limited partner of his
statutory exemption.
C
87.
D. i. To bind third persons and the law covers
immovable property.
TC
iii. It is still valid.
PR
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Article 1522. Where the seller delivers to the buyer a
quantity of goods less than he contracted to sell, the
buyer may reject them, but if the buyer accepts or
retains the goods so delivered, knowing that the seller is
not going to perform the contract in full, he must pay for
them at the contract rate. If, however, the buyer has
used or disposed of the goods delivered before he knows
that the seller is not going to perform his contract in full,
the buyer shall not be liable for more than the fair value
to him of the goods so received. Where the seller delivers
to the buyer a quantity of goods larger than he
contracted to sell, the buyer may accept the goods
included in the contract and reject the rest. If the buyer
accepts the whole of the goods so delivered he must pay
for them at the contract rate. Where the seller delivers
to the buyer the goods he contracted to sell mixed with
goods of a different description not included in the
contract, the buyer may accept the goods which are in
accordance with the contract and reject the rest. In the
preceding two paragraphs, if the subject matter is
indivisible, the buyer may reject the whole of the goods.
The provisions of this article are subject to any usage of
trade, special agreement, or course of dealing between
the parties
90.
B. Article 1865. The writing to amend a
certificate shall: (1) Conform to the requirements of
article 1844 as far as necessary to set forth clearly the
change in the certificate which it is desired to make; and
(2) Be signed and sworn to by all members, and an
amendment substituting a limited partner or adding a
limited or general partner shall be signed also by the
member to be substituted or added, and when a limited
partner is to be substituted, the amendment shall also
be signed by the assigning limited partner. The writing
to cancel a certificate shall be signed by all members. A
person desiring the cancellation or amendment of a
certificate, if any person designated in the first and
second paragraphs as a person who must execute the
writing refuses to do so, may petition the court to order
a cancellation or amendment thereof. If the court finds
that the petitioner has a right to have the writing
executed by a person who refuses to do so, it shall order
the Office of the Securities and Exchange Commission
where the certificate is recorded, to record the
cancellation or amendment of the certificate; and when
the certificate is to be amended, the court shall also
cause to be filed for record in said office a certified copy
of its decree setting forth the amendment. A certificate
is amended or cancelled when there is filed for record in
the Office of the Securities and Exchange Commission,
where the certificate is recorded: (1) A writing in
accordance with the provisions of the first or second
paragraph, or (2) A certified copy of the order of the
court in accordance with the provisions of the fourth
paragraph; (3) After the certificate is duly amended in
accordance with this article, the amended certified shall
thereafter be for all purposes the certificate provided for
in this Chapter.
91.
A. Article 1836. Unless otherwise agreed, the
partners who have not wrongfully dissolved the
partnership or the legal representative of the last
surviving partner, not insolvent, has the right to wind up
the partnership affairs, provided, however, that any
partner, his legal representative or his assignee, upon
cause shown, may obtain winding up by the court. (n)
AM
Article 1358. The following must appear in a public
document: (1) Acts and contracts which have for their
object the creation, transmission, modification or
extinguishment of real rights over immovable property;
sales of real property or of an interest therein are
governed by articles 1403, No. 2, and 1405; (2) The
cession, repudiation or renunciation of hereditary rights
or of those of the conjugal partnership of gains; (3) The
power to administer property, or any other power which
has for its object an act appearing or which should
appear in a public document, or should prejudice a third
person; (4) The cession of actions or rights proceeding
from an act appearing in a public document. All other
contracts where the amount involved exceeds five
hundred pesos must appear in writing, even a private
one. But sales of goods, chattels or things in action are
governed by articles, 1403, No. 2 and 1405. (1280a)
PA
82.
C. Article 1464. In the case of fungible goods,
there may be a sale of an undivided share of a specific
mass, though the seller purports to sell and the buyer to
buy a definite number, weight or measure of the goods
in the mass, and though the number, weight or measure
of the goods in the mass, and though the number,
weight or measure of the goods in the mass is
undetermined. By such a sale the buyer becomes owner
in common of such a share of the mass as the number,
weight or measure bought bears to the number, weight
or measure of the mass. If the mass contains less than
the number, weight or measure bought, the buyer
becomes the owner of the whole mass and the seller is
bound to make good the deficiency from goods of the
same kind and quality, unless a contrary intent appears.
86.
D. i. to bind third persons or for the convenience
of the parties, NOT validity
consent only when such identity or qualifications have
been the principal cause of the contract.
iv. Not all, Article 1316. Real contracts, such as deposit,
pledge and commodatum, are not perfected until the
delivery of the object of the obligation.
89.
D. Article 1331. In order that mistake may
invalidate consent, it should refer to the substance of the
thing which is the object of the contract, or to those
conditions which have principally moved one or both
parties to enter into the contract. Mistake as to the
identity or qualifications of one of the parties will vitiate
consent only when such identity or qualifications have
been the principal cause of the contract. A simple
mistake of account shall give rise to its correction.
TE
81.
B. Price is not certain since there is no mutuality
of contract. Price cannot be left to the discretion of one
of the contracting parties.
Article 1473. The fixing of the price can never be left to
the discretion of one of the contracting parties. However,
if the price fixed by one of the parties is accepted by the
other, the sale is perfected
85.
A. ii. It does not require the consent of the guilty
party
iii. its validity or “compliance” cannot be left to the will
of one of them
iv. the cause is the liberality of the benefactor
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80.
B. Intention of the parties prevails.
Article 1466. In construing a contract containing
provisions characteristic of both the contract of sale and
of the contract of agency to sell, the essential clauses of
the whole instrument shall be considered.
in common of such a share of the mass as the number,
weight or measure bought bears to the number, weight
or measure of the mass. If the mass contains less than
the number, weight or measure bought, the buyer
becomes the owner of the whole mass and the seller is
bound to make good the deficiency from goods of the
same kind and quality, unless a contrary intent appears.
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communicating such withdrawal, except when the option
is founded upon a consideration, as something paid or
promised.
92.
D. S1 – Not solidary (See Article 1825)
S2 – Not solidary (See Article 1788)
S3 – Pro rata (Joint) and subsidiary (See Article 1816)
S4 – (See Article 1850)
S5 – (See Article 1854)
93.
A.S1 –
S2 –
S3 –
S4 – consent only (no form is required)
S5 – must be registered
98.
D. Article 1850. A general partner shall have all
the rights and powers and be subject to all the
restrictions and liabilities of a partner in a partnership
without limited partners. However, without the written
consent or ratification of the specific act by all the limited
partners, a general partner or all of the general partners
have no authority to: (1) Do any act in contravention of
the certificate; (2) Do any act which would make it
impossible to carry on the ordinary business of the
partnership; (3) Confess a judgment against the
partnership; (4) Possess partnership property, or assign
their rights in specific partnership property, for other
than a partnership purpose; (5) Admit a person as a
general partner; (6) Admit a person as a limited partner,
unless the right so to do is given in the certificate; (7)
Continue the business with partnership property on the
death, retirement, insanity, civil interdiction or
insolvency of a general partner, unless the right so to do
is given in the certificate.
Article 1818. Every partner is an agent of the partnership
for the purpose of its business, and the act of every
partner, including the execution in the partnership name
of any instrument, for apparently carrying on in the usual
way the business of the partnership of which he is a
member binds the partnership, unless the partner so
acting has in fact no authority to act for the partnership
in the particular matter, and the person with whom he is
dealing has knowledge of the fact that he has no such
authority. An act of a partner which is not apparently for
the carrying on of business of the partnership in the
usual way does not bind the partnership unless
authorized by the other partners. Except when
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Excel_Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao
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Question No. 4 - C
II. - IFRS IC Interpretations and PIC Q&As have the same authority.
Question No. 7 - C
Unadjusted inventory
Item a
Item b
Item c
Item d
Item e
Item f
Adjusted inventory
C
PA
2,580,000
20,000
41,000
43,000
2,684,000
Question No. 8 - A
Product A
Product B
R
Question No. 5 - B
Question No. 6 - B
I. - Advances for materials ordered are not inventories (other receivables or other current assets).
III. - Inventories are presented as line item under current assets.
Cost
14
16
NRV
12
20
TC
PR
TC
C
99.
Article 1837. When dissolution is caused in any
way, except in contravention of the partnership
agreement, each partner, as against his co-partners and
all persons claiming through them in respect of their
interests in the partnership, unless otherwise agreed,
may have the partnership property applied to discharge
its liabilities, and the surplus applied to pay in cash the
net amount owing to the respective partners. But if
dissolution is caused by expulsion of a partner, bona fide
under the partnership agreement and if the expelled
partner is discharged from all partnership liabilities,
either by payment or agreement under the second
paragraph of article 1835, he shall receive in cash only
the net amount due him from the partnership. When
dissolution is caused in contravention of the partnership
agreement the rights of the partners shall be as follows:
(1) Each partner who has not caused dissolution
wrongfully shall have: (a) All the rights specified in the
first paragraph of this article, and (b) The right, as
against each partner who has caused the dissolution
wrongfully, to damages breach of the agreement. (2)
The partners who have not caused the dissolution
wrongfully, if they all desire to continue the business in
the same name either by themselves or jointly with
others, may do so, during the agreed term for the
partnership and for that purpose may possess the
partnership property, provided they secure the payment
by bond approved by the court, or pay any partner who
has caused the dissolution wrongfully, the value of his
interest in the partnership at the dissolution, less any
damages recoverable under the second paragraph, No.
1 (b) of this article, and in like manner indemnify him
against all present or future partnership liabilities. (3) A
partner who has caused the dissolution wrongfully shall
have: (a) If the business is not continued under the
provisions of the second paragraph, No. 2, all the rights
of a partner under the first paragraph, subject to liability
Question No. 3 - B
I. - Should be IFRS Sustainability Disclosure Standards not IFRS Accounting Standards.
IV. - This is the function of PIC not PSRC.
LCN
12
16
Units
2,000
5,000
Total
24,000
80,000
104,000
NRV of Product A (P17 - P5)
PR
(2) The dissolution being by the death or insolvency of a
partner, the partner acting for the partnership had
knowledge or notice of the death or insolvency.
Question No. 1 - D
Question No. 2 - B
I. - Should be the President of the Phils. not PRC.
IV. - Should be IFRS IC not IASB.
Question No. 9 - C
Total cost of production (6,000 dozens x P360)
Less inventory, 12/31/25
Class A (P2,160,000 x 18/24 x 220/3,600)
Class B (P2,160,000 x 6/24 x 300/2,400)
Cost of sales
2,160,000
99,000
67,500
AM
(1) The dissolution being by act of any partner, the
partner acting for the partnership had knowledge of the
dissolution; or
OPEN First Preboard Examination on Financial Accounting and Reporting
March 16, 2025
Suggested answers/solutions by OCAMPO/OCAMPO
Class A (6,000 x 60% = 3,600 x P500)
Class B (6,000 x 40% = 2,400 x P250)
Total sales price
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100.
D. Article 1833. Where the dissolution is caused
by the act, death or insolvency of a partner, each partner
is liable to his co-partners for his share of any liability
created by any partner acting for the partnership as if
the partnership had not been dissolved unless:
PA
A. Article 1838. Where a partnership contract is
rescinded
on
the
ground
of
the
fraud
or
misrepresentation of one of the parties thereto, the party
entitled to rescind is, without prejudice to any other
right, entitled: (1) To a lien on, or right of retention of,
the surplus of the partnership property after satisfying
the partnership liabilities to third persons for any sum of
money paid by him for the purchase of an interest in the
partnership and for any capital or advances contributed
by him; (2) To stand, after all liabilities to third persons
have been satisfied, in the place of the creditors of the
partnership for any payments made by him in respect of
the partnership liabilities; and (3) To be indemnified by
the person guilty of the fraud or making the
representation against all debts and liabilities of the
partnership.
for damages in the second paragraph, No. 1 (b), of this
article. (b) If the business is continued under the second
paragraph, No. 2, of this article, the right as against his
co partners and all claiming through them in respect of
their interests in the partnership, to have the value of
his interest in the partnership, less any damage caused
to his co-partners by the dissolution, ascertained and
paid to him in cash, or the payment secured by a bond
approved by the court, and to be released from all
existing liabilities of the partnership; but in ascertaining
the value of the partner's interest the value of the goodwill of the business shall not be considered. (n
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EV
authorized by the other partners or unless they have
abandoned the business, one or more but less than all
the partners have no authority to: (1) Assign the
partnership property in trust for creditors or on the
assignee's promise to pay the debts of the partnership;
(2) Dispose of the good-will of the business; (3) Do any
other act which would make it impossible to carry on the
ordinary business of a partnership; (4) Confess a
judgment; (5) Enter into a compromise concerning a
partnership claim or liability; (6) Submit a partnership
claim or liability to arbitration; (7) Renounce a claim of
the partnership. No act of a partner in contravention of
a restriction on authority shall bind the partnership to
persons having knowledge of the restriction. (n)
Question No. 10 - C
Raw materials, 1/1
Purchases
Raw materials available for use
Less raw materials, 6/30
Raw materials used
Direct labor
Factory overhead (P130,000 x .6)
Total manufacturing cost
Work-in-process, 1/1
Total cost placed in process
Less work-in-process, 6/30 (squeeze)
Cost of goods manufactured
Finished goods, 1/1
Page 1 of 9
166,500
1,993,500
1,800,000
600,000
2,400,000
42,500
96,000
138,500
52,000
86,500
130,000
78,000
294,500
115,000
409,500
135,020
274,480
120,000
www.teamprtc.com.ph
FAR.1stPB5.25
Total goods available for sale
Less finished goods, 6/30
Cost of goods sold (P428,000 x .66)
394,480
112,000
282,480
Question No. 17 - B
Two tractors (P500,000 x 2)
Four computers (P25,000 x 4)
Fruit-bearing trees (P20M - P3M)
Total PPE
Question No. 11 - B
Retail
800,000
7,400,000
(350,000)
Question No. 18 - B
III. - This is not required.
IV. - Disclosure of fully depreciated PPE still in use is encouraged only.
250,000
(100,000)
(600,000)
100,000
7,500,000
Question No. 19 - A
I. - This is false. The correct amount is the cash price of P651,460.
II. - This is false. The correct amount is computed as follows:
Initial payment
1,000,000
PV of remaining payments (P1,000,000 x 1.69)
1,690,000
Cost of item 2
2,690,000
Cost ratio (P4,800,000/P7,500,000)
0.64
510,000
(450,000)
60,000
5,200,000
2,300,000
0.64
1,472,000
IV. This is true. This is computed as follows:
Carrying amount of asset given up
Cash paid
Cost of item 4
120,000
40,000
160,000
TC
Question No. 13 - A
I. - This is false. Gross profit rate method is not mentioned in PAS 2.
II. This is false. The correct amount is computed as follows:
Goods available for sale
680,000
Cost of sales [(P610,000 - P10,000)/1.2]
(500,000)
Estimated cost of ending inventory
180,000
180,000
(160,000)
20,000
AM
Increase (Decrease)
To be recognized in
Question No. 22 - A
Profit or loss
Other comprehensive income (OCI)
Comprehensive income
TE
Question No. 14 - C
IV. - Disclosure of physical and price changes separately is encouraged only.
Question No. 15 - C
FV of the asset based on quoted price in the principal market
Estimated commissions to brokers
Fair value less costs to sell
Question No. 16 - A
Fruits attached to the trees
Trees grown for use as lumber
Trees that are cultivated both for their fruit and their lumber
Maize and wheat
Total biological assets
PA
Fair value
Carrying amount, 12/31/24:
Cost
Accumulated depreciation
PR
IV. This is true. This is computed as follows:
Estimated cost of ending inventory (see S.II)
Cost of actual inventory (P192,000/1.2)
Estimated cost of missing inventory
Question No. 21 - B
AM
180,000
(20,000)
160,000
PR
III. This is false. The correct amount is computed as follows:
Estimated cost of ending inventory (see S.II)
Cost of goods not destroyed (P24,000/1.2)
Estimated fire loss
Question No. 20 - C
Accumulated depreciation, 1/1
Add depreciation - current year
Machine No. 1 (P100,000 - P95,000)
Machine No. 2 (P200,000/10)
Machine No. 3 (P300,000/10)
Machine No. 4 [(P400,000)/10 x 6/12]
Total
Less classified as held for sale (P240,000 + P20,000)
Accumulated depreciation, 12/31
C
C
PA
Question No. 12 - B
I. - Purchase commitment is an executory contract. This is recorded by memo entry only.
II and III. - The entity should recognize loss and purchase commitment liability of P1,600,000
[100,000 units x (P10 -P2) x 2 years].
IV. - The loss on inventory write down is computed as follows [250,000 x (P10 - P2)].
R
III. - This is false. The correct amount is computed as follows:
Fair value of asset given up (P420,000 + P90,000)
Carrying amount of asset given up
Gain (loss) on exchange
TC
5,300,000
(400,000)
200,000
100,000
7,500,000
R
Goods available for sale (GAS) at retail
Less net decrease in GAS at retail:
Sales
Sales returns
Employee discounts
Theft and other losses
Ending inventory at retail
x Cost ratio
Ending inventory at cost
18,000
(1,800)
16,200
TE
4,800,000
EV
IE
W
Cost
440,000
4,500,000
(240,000)
100,000
EV
IE
W
Beginning inventory
Purchases
Purchase returns
Freight on purchases
Additional mark up
Mark up cancellations
Mark down
Mark down cancellations
Goods available for sale
1,000,000
100,000
17,000,000
18,100,000
5,000
20,000
30,000
20,000
Machine A
Machine B
84,000
38,000
100,000
(20,000)
80,000
4,000
OCI
60,000
(20,000)
40,000
(2,000)
Profit or loss
705,000
75,000
780,000
260,000
520,000
(2,000)
4,000
2,000
Question No. 23 - B
Sales proceeds
Less carrying amount, 7/1/25:
Carrying amount, 12/31/24
Depreciation up to 7/1 (P38,000/2 x 6/12)
Gain on sale of Machine B
32,000
38,000
(9,500)
28,500
3,500
3,000,000
10,000,000
8,000,000
4,000,000
25,000,000
Question No. 24 - B
Page 2 of 9
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FAR.1stPB5.25
Page 3 of 9
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FAR.1stPB5.25
21,000
9,500
10,000
40,500
Estimated restoration cost
Total
Residual value
Amount subject to depletion
Depletion - 2024 (600,000 x P2.6*)
Remaining amount subject to depletion, 1/1/25
Divide by remaining estimated reserves, 1/1/25 (1,875,000+400,000)
Depletion rate for 2025
Question No. 25 - C
Increase (Decrease)
84,000
(21,000)
63,000
(2,000)
80,000
(10,000)
70,000
(1,500)
To be recognized in
OCI
Profit or loss
* (P5,200,000/2,000,000)
Depletion - 2025 (400,000 tons x P1.60)
Question No. 26 - A
I. - Property occupied by employees is PPE. It doesn't matter whether the employees pay rent or not.
III. - This is not required.
IV. - Disclosure of fair value is required.
125,000
25,000
100,000
PA
TC
Question No. 38 - C
Question No. 39 - C
CA of liabilities (P3,000,000 + P360,000)
Less amount paid
Income from government grant
PR
Question No. 40 - B
III. - This is false. The correct amount is computed as follows:
Interest incurred:
Jan. 1 (P500,000 x .12 x 12/12)
Apr. 1 (P500,000 x .12 x 9/12)
July 1 (P500,000 x .12 x 6/12)
Oct. 1 (P500,000 x .12 x 3/12)
AM
480,000
240,000
240,000
280,000
520,000
Income from investment
Capitalized interest
182,000
338,000
IV. - This is false. The correct amount is computed as follows:
Capitalized interest
Actual construction costs
Cost of qualifying asset
TE
PR
AM
TE
CA, 1/1/25 - without impairment (P250,000 x 2.5/5)
Less CA, 1/1/25 - before reversal of impairment (P75,000 x 1/3)
Reversal of impairment loss in P/L
20,000
40,000
60,000
Note: Impairment loss in accordance with PFRS 5 is recognized in profit or loss.
Question No. 29 - B
I. - Cost incurred on internally generated masthead is not recognized as intangible asset.
III. - This is not required.
Question No. 31 - D
Excess annual earnings (P10,000 x .2)
Normal return on net assets [(P100,000 - P10,000) x .1]
Annual earnings
225,000
75,000
150,000
Question No. 37 - D
Revaluation surplus before classification as HFS
Increase in revaluation surplus (P330,000 - P290,000)
Revaluation surplus, end of current year
(50,000)
40,000
150,000
140,000
Note: The difference between the fair value (P2,300,000) and carrying amount (P1,950,000) on the
date of transfer is recognized as revaluation increase (i.e., increase in RS in OCI).
Question No. 30 - A
Cost of original patent
Less amortization - 2017 to 2021 (P480,000 x 5/10)
CA of original patent, 1/1/22
Cost of related patent
CA of patents, 1/1/22
Less amortization - 1/1/22 to 7/1/25:
Original patent (P240,000 x 3.5/10)
84,000
Related patent (P280,000 x 3.5/10)
98,000
Loss on patent obsolescence
Question No. 35 - A
CA, 1/1/23 (P250,000 x 4.5/5)
RA
Impairment loss - 2023
Question No. 36 - C
I. - Biological assets measured at FV - CTS are excluded from the scope of PFRS 5.
PA
C
Question No. 28 - A
Depreciation – Property A (P2M/20 x 6/12)
FV adjustment – Property A (P2.34M – P2.3M)
FV adjustment – Property B (P1.65M – P1.5M)
Net amount in profit or loss
Question No. 34 - A
I. - PAS 36 applies to bearer plants.
II. - In general, an entity will compute recoverable amount if there are indications that the asset is impaired.
IV. - For assets carried at revalued amounts, impairment loss is accounted for as revaluation decrease.
R
R
Question No. 27 - C
III. - Classification depends on the significance of the services provided.
IV. This is true. This is computed as follows:
Building with partial own use - rented portion
8,000,000
Building with incidental ancillary services
15,000,000
Building leased out to a subsidiary
8,000,000
Investment properties in separate FS
31,000,000
640,000
EV
IE
W
68,500
450,000
5,850,000
(650,000)
5,200,000
(1,560,000)
3,640,000
2,275,000
1.60
C
Machine C
61,000
EV
IE
W
Machine A
Fair value
Carrying amount, 12/31/25:
Previous carrying amount
Depreciation - 2025
TC
Machine A (P84,000/4)
Machine B (P38,000/2 x 6/12)
Machine C (P80,000/4 x 6/12)
Total depreciation - 2025
2,000
9,000
11,000
3,360,000
1,500,000
1,860,000
60,000
45,000
30,000
15,000
150,000
(30,000)
120,000
120,000
2,000,000
2,120,000
Question No. 32 - C
IV. - Either cost or revaluation model (not fair value model).
Question No. 33 - A
Acquisition cost
Page 4 of 9
5,400,000
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FAR.1stPB5.25
Question No. 41 - D
I. - This is false. The correct amount is computed as follows:
Weighted average expenditures:
Page 5 of 9
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FAR.1stPB5.25
300,000
375,000
250,000
75,000
1,000,000
0.11
110,000
Actual borrowing costs
1,910,000
200,000
2,110,000
0.11
232,100
220,000
220,000
PA
Capitalizable borrowing costs - Year 2 (lower)
AM
TE
Question No. 50 - C
Date
Cash flows
12/31/25
12/31/26
12/31/27
18,000
12/31/28
18,000
12/31/29
218,000
Periods
1
2
3
4
5
PVF at 9% PV, 12/31/25
0.9174
0.8417
0.7722
13,900
0.7084
12,751
0.6499
141,678
168,329
200,000
(168,329)
31,671
Question No. 52 - B
Journal entry:
Cash
Financial liability
FAR.1stPB5.25
100,000
80,000
180,000
0.7350
132,300
0.08
10,584
600,000
600,000
This is a transfer that does not qualify for derecognition since the entity retained substantially all
risks and rewards of the transferred asset.
Question No. 53 - C
See PFRS 9 par. 5.4.3.
Question No. 54 - C
Question No. 55 - C
I. - This is true. This is computed as follows:
Interest income (P1,000,000 x 10%)
Transaction costs
Fair value adjustment (see below)
Net amount in Year 1 profit or loss
54,780
(9,885)
600
13,425
58,920
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Principal
Interest
PVF at 8%,
5 periods
CA, 12/31/25
0.6806
340,300
3.9927
79,854
420,154
TC
PR
1,200,000
1,800,000
10,000
15,000
3,025,000
Question No. 46 - B
Question No. 47 - C
IV. - Disclosure of fair value is not required when the carrying amount is a reasonable approximation
of fair value (e.g., short-term trade receivables).
Page 6 of 9
Cash flows
500,000
20,000
Question No. 51 - B
Reduced principal
Interest (P200,000 x .08 x 5)
Expected cash flows
x PVF at 8%, 4 periods
Carrying amount, 12/31/25
x interest rate
Interest income - 2026
Other items not included in cash and cash equivalents should be presented as follows:
b. Travel advances – Trade and other receivables
c. Cash fund for retirement of long-term debt – Noncurrent investments
e. I.O.U. from a company officer – Trade and other receivables
f. Bank overdraft – Current liabilities (Short term borrowings)
g. Certificates of deposit – Other financial assets (Short term investments)
h. Check dated Jan. 2, 2026 (PDC) – Trade and other receivables
k. Cryptocurrencies – Can be treated as inventories, investments or intangible assets
in accordance with PIC Q&A No. 2019-02.
Question No. 45 - D
Balance per bank, unadjusted
Outstanding checks
Unrecorded deposit by bank
Deposits in transit
Balance per bank, as adjusted
Question No. 49 - C
PV of contractual cash flows (gross CA)
PV of expected cash flows
Impairment loss
1,910,000
220,000
600,000
2,730,000
TC
Question No. 42 - D
Question No. 43 - D
Question No. 44 - C
a. Savings account at PS Bank
a. Checking account at PS Bank
d. Petty cash fund
j. Bills and coins on hand
Total
C
IV. - This is false. The correct amount is computed as follows:
CA, 12/31/Y1 (see S.II)
Capitalized interest (see S.III)
Actual construction costs - Year 2
CA, 12/31/Y2
EV
IE
W
x Capitalization rate (P220,000/P2,000,000)
Interest on weighted avarage expenditures
EV
IE
W
III. - This is false. The correct amount is computed as follows:
Weighted average expenditures:
Jan. 1 (P1,910,000 x 12/12)
June 30 (P400,000 x 6/12)
Dec. 31 (P200,000 x 0/12)
110,000
1,800,000
1,910,000
R
II. - This is false. The correct amount is computed as follows:
Capitalized interest (see S.I)
Actual construction costs - Year 1
CA, 12/31/Y1
R
110,000
PA
Capitalizable borrowing costs - Year 1 (lower)
C
220,000
PR
Actual borrowing costs
45,000
480,000
(400,000)
(2,000)
(15,000)
108,000
1,700
106,300
AM
x Capitalization rate (P220,000/P2,000,000)
Interest on weighted avarage expenditures
Question No. 48 - C
Accounts receivable, 12/31/24
Sales on account
Collections on AR (P392,000+P8,000)
AR writeoff
Recovery of accounts previously written off
Collections on AR pledged
Accounts receivable, 12/31/25
Less allowance for DA, 12/31/25 (P900 - P2,000 + P500 + P2,300)
CA of AR, 12/31/25
TE
Jan. 1 (P300,000 x 12/12)
Mar. 31 (P500,000 x 9/12)
June 30 (P500,000 x 6/12)
Sept. 30 (P300,000 x 3/12)
Dec. 31 (P200,000 x 0/12)
Principal
Interest
Fair value
Page 7 of 9
Cash flows
1,000,000
100,000
100,000
(20,000)
(13,900)
66,100
PVF at 9%,
2 periods
0.8417
1.7591
FV, 12/31/Y1
841,700
175,910
1,017,610
www.teamprtc.com.ph
FAR.1stPB5.25
Less carrying amount (P1,051,510 - P20,000)
Fair value adjustment gain (loss)
1,031,510
(13,900)
Total equity, 12/31/25
Question No. 64 - A
Share dividend distributable (or payable) is not a liability.
CA, 12/31/Y1
857,300
178,330
1,035,630
Note: 8% is the rate that discounts the cash flows as of 1/1/Y1 equal to P1,051,510.
EV
IE
W
III. - This is true. See computation of fair value as of 12/31/Y1 in Statement I.
IV. - This is false. Loss allowance shall be recognized in other comprehensive income and
shall not reduce the carrying amount of the financial asset in the statement of financial position.
Question No. 56 - C
III and IV are prohibited transfers. The designation at FVTPL and FVTOCI is irrevocable.
PR
Question No. 60 - D
Future value of annuity due of P1 for 6 periods at 8%:
Future value of 1 for 4 periods at 10%:
Future value of ordinary annuity of 1 for 4 periods at 10%:
9,279,817
3,712,800
12,992,617
Question No. 68 - B
Profit
Increase in accounts receivable
Increase in allowance for doubtful accounts
Decrease in prepaid insurance
Increase in accounts payable
Net cash provided by operating activities
Question No. 62 - C
www.teamprtc.com.ph
8,000,000
(1,300,000)
200,000
150,000
300,000
7,350,000
Question No. 69 - B
Issuance of ordinary shares
Payment on accounts payable
Payment of salaries expense
Net effect on equity
40,000
(21,000)
19,000
Question No. 70 - D
Proceeds from issuance of shares
Net income (P82,000 - P64,000)
Cash dividends declared
Total equity, 12/31
Total liabilities, 12/31
Total assets, 12/31
750,000
18,000
(3,000)
765,000
120,000
885,000
TE
TE
8,000,000
(75,000)
7,925,000
Question No. 63 - B
Proceeds from issuance of shares, 1/1/24 (500,000 x P15)
Profit 2024 to 2025
Dividends paid 2024 to 2025
Purchase of treasury shares, 1/5/25 (50,000 x P20)
Reissuance of treasury shares, 12/31/25 (45,000 x P30)
Retirement of treasury shares, 12/31/25
2,000,000
(1,580,000)
(120,000)
(22,000)
18,000
7,000
(80,000)
(18,000)
(35,000)
(6,000)
(4,000)
(15,000)
(43,500)
101,500
R
Question No. 67 - B
Sales
Cost of goods sold (P365,000 + P1,555,000 - P15,000 - P325,000)
Salaries
Delivery expense
Dividend income
Income on sales of fixed asset
Light and power
Travel and transportation
Interest and bank charges
Miscellaneous operating expenses
Bad debts
Depreciation
Income tax
Profit
AM
Years 7 to 10 (P6,338,240 x 1.4641)
Years 7 to 10 (P800,000 x 4.6410)
AM
6,338,240
Page 8 of 9
1,730,000
450,000
500,000
100,000
2,780,000
C
7.9228
1.4641
4.6410
Years 1 to 6 (P800,000 x 7.9228)
Question No. 61 - D
Policy amount
Cash surrender value, 10/1
Gain on settlement
Question No. 66 - C
Accounts payable
Accrued expenses
Notes payable, due on 9/30/25
Mortgage payable - current portion (P50,000 x 2)
Total current liabilities
PA
R
4,500,000
67,500
4,567,500
480,000
(120,000)
4,927,500
TC
C
Question No. 59 - B
Purchase price (25,000 x P180)
Transaction costs
Total cost
Share of profit [(P2,400,000 - P480,000) x .25]
Dividends received (P60,000 + P60,000)
CA, 12/31/25
5,050,000
200,000
(80,000)
(160,000)
5,010,000
PA
Question No. 58 - A
Cost (P5,000,000 + P50,000)
Share of profit (P1,000,000 x .2)
Share of OCI - expense [(P1,000,000 - P600,000) x .2]
Dividends received (P800,000 x .2)
CA, end of year
1,030,000
450,000
2,100,000
50,000
320,000
3,950,000
TC
Question No. 57 - C
IV. - This is not applicable to equity investment designated at FVTOCI.
Question No. 65 - A
Cash and cash equivalents (P850,000 + P180,000)
Short-term investments (P630,000 - P180,000)
Accounts receivable (P2,800,000 - P650,000 - P50,000)
Interest receivable
Prepaid expenses
Total current assets
PR
Principal
Interest
PVF at 8%,
2 periods
0.8573
1.7833
EV
IE
W
II. - This is true. This is computed as follows:
Cash flows
1,000,000
100,000
10,350,000
7,500,000
3,000,000
(500,000)
(1,000,000)
1,350,000
-
FAR.1stPB5.25
Page 9 of 9
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FAR.1stPB5.25
AFAR PREBOARD SOLUTION
23. D
33. D
License # 1
License #2 90,000/3 x 4/12.
100,000
10,000
110,000
40. D
PA
C
TC
36. A
Total GP= 10M – 6M = 4M x 25%= 1,000,000
37. C
41. A
PR
2026: 4.5/6.0= 75%
2027: 100%- 75%= 25%
AM
768,000
804,000
36,000
IFA must only accrue to the acquirer even under
FV Method of NCI.
30. D
Only the secured portion will be paid
TE
C
TC
PR
AM
TE
22. D
32. B
35. A
Since it is a GP under cost to cost, actual cost
is equal to the recognized cost
28. C
Eliminated in the Consolidated FS
29. B
Cost 8,000x P96
FV of NA @ 80%
IFA
39. B
34. B
%of Comp: 2.4/6.0= 40%
Revenue: 10M x 40%= 4,000,000
27. C
21. C
38. A
R
R
26. B
EV
IE
W
25. C
31. C
EV
IE
W
24. C
PA
AFAR PREBOARD SOLUTION
1. A
2. B
3. B
4. D
5. D
6. B
7. D
8. A
9. A
10. C
11. B
12. A
13. B
14. B
15. D
16. C
17. A
18. A
19. D
20. A
42. B
AFAR PREBOARD SOLUTION
AM
13,680
7,920
6,220
1,700
48. C
Inv, end: (16,800 + 1,440) x 3/12 4,560
TE
49. C
Sales
Less: Expenses
Remittance
21,600
6,220
15,380
50. B
Inv, end: (16,800 + 1,440) x 3/12 4,560
Capital of B Purchased by J
Share in the Gain (15,000* 30%)
Cash Received by Blanche
154,800
4,500
159,300
Loss= 450,000 -(2,175,000* 20%) =
15,000
54. A
Loss Absorption Capabilities:
B: 30,000/ 25%
H: 130,000/ 25%
R: 150,000/ 50%
(520,000- 300,000) * 25%
=
120,000
520,000
300,000
55,000
55. A
Available Cash
300,000
Less: Prioritized Claims: FS
PS
US w/P (40,000 +5,000 +10,000)
Cash Available for Unprioritized Claims
Less: Unprioritized Claims
US Portion of PS Claim
US w/out Priority
Deficiency to Unprioritized Claims
80,000
Recovery Rate (20,000/100,000) 20%
56. D
150,000
75,000
55,000 280,000
20,000
25,000
75,000 100,000
60. C
HO: Sales
Less: COS
Beg
Purchases
Shipments
End
GP
Less:OPEX
HONI
Br True Net Income
CNI
61. A
105,000/84,000
250,880
133,120
46,080
87,040
21,760
108,800
12,435
Franchise Rev and Cost have been recognized
in 2025
125%
COS (17,800+ 105,000 -23,400)
Overstatement 99,400/1.25*.25
62. A
Sales
Less: COS(99,400/1.25)
Gross Profit
46,480
OPEX
TBNI
63. D
Sales
Less: COS
Inv,beg
Purchases
Shipments
65. D
Interest Revenue
384,000
76,800
320,000
(83,200)
(62,720)
EV
IE
W
516,000
103,200
412,800
134,400
89,600
44,800
23,040
21,760
38,200
5,880
44,080
R
Adj. Capital of Donna
Less: Purchased Capital
Balance of Donna after Purchas
103,200
59. A
Br: Sales
Less: COS at Cost
GP
Less:OPEX
Net Income
64. D
HONI
TBNI
CNI
191,000
152,800
38,200
66. B
PV of Note: 50,000 x 3.17= 158,500
PA
Purchased Cap
177,000
* 20%
R
Adj Bal
A: P 810,000 + 75,000 = 885,000
B: P 729,000 + 45,000 = 774,000
154,800
D: P 486,000 + 30,000 = 516,000
38,400
99,840
(30,720)
107,520
1.2
89,600
0.2
17,920
(57,000)
C
4/5
2,718,750
1/5
543,750
58. A
COS: Beg
Shipments
End
COS at BP
Divide by
COS at Cost
Multiply by
AFOVBI (COS)
TC
21,600
PR
47. A
Sales
Less: COS
(16,800 + 1,440) x 9/12
GP
Less: Expenses
Profit
47,200
45,450
4,450
41,000
P 2,025,000
150,000
PA
50,000
2,800
C
92,650
53. A
TC
46. A
Sales
Less: COS
Purchases
Less” MI, end
GP
Less: Expenses
Profit
38,200
4,450
50,000
92,650
52. D
Unadjusted Total Capital
Revaluation of Assets
Adjusted Capital before Admission
2,175,000
Divide by
Total Capital after Admission
Multiply by
Janice’s Investment for 1/5 Interest
Inv,end
233,000
Gross Profit
OPEX
HONI
75,000
5,000
80,000
PR
45. C
Credit Balances
Expenses
Purchases
Sales
150,000
57. A
PS 100,000: SP 75,000 x 100%
25,000 x 20%
Cash Paid
AM
44. B
Shares ( 100,000 * 30)
3,000,000
Cash
30,000
Equipment (50,000 * 70%).
35,000
Direct cost (50,000 + 10,000 + 20,000) 80,000
TOTAL
3,145,000
50,000
TE
3,000,000
30,000
35,000
3,065,000
51. C
. ( 250,000- 200,000)
Land (900,000- 800,000)
100,000
Total revaluation
A: P 150,000 x 50% = P 75,000
B: P 150,000 x 30% = P 45,000
D: P 150,000 x 20% = P 30,000
EV
IE
W
AFAR PREBOARD SOLUTION
43. C
Shares ( 100,000 * 30)
Cash
Equipment (50,000 * 70%)
TOTAL
99,400
19,880
126,000
79,520
Rev : 258,500/4
Cost: 27,000/ 4
GP
Int Rev
Exp
Profit
68. B
40,600
5,880
424,000
46,000
328,000
(84,000)
67. C
Transaction price: 100,000 + 158,500
= 258,500
69. A
64,625
(6,750)
57,875
15,850
(15,000)
58,725
EV
IE
W
AFAR PREBOARD SOLUTION
70. C
(48,000)= AI – Widrawal + Share NI
(48,000) = 20,000 – 104,000 + Share in NI
Share in NI = 36,000
TE
AM
PR
TC
C
PA
R
TOTAL NI= 36,000/30% = 120,000