1.

Stephanie Electronics makes all of its sales on credit and accounts to them using the
installment sales method. For simplicity, assume that all sales occur on the first day
of the year and that all cash collections are made on the last day of the year.
Stephanie Electronics charges 18% interest on the unpaid installment balance Data
for 2015 and 2016 are as follows:
Sales
Cost of goods sold
Cash collections (principal and interest)
2015 sales
2016 sales

2015
100,000
60,000

2016
120,000
80,000

40,000

50,000
90,000

The interest income recognized in 2016 amounted to:

A. 14,000
B. 49,700
C. 35,640
D. 21,600
2. Property taxes on a manufacturing plant are generally considered as
A. Semi-variable cost
B. Period Cost
C. Conversion Cost
D. Non-manufacturing Cost
3. Which of the following assets or liabilities are nonmonetary?
A. Deferred Tax Liabilities
B. Accrued expenses and other payables
C. Taxes payable
D. Trade receivables
4. Separately identified intangible assets are accounted for by amortizing:
A. Amortzing over a period not to exceed a maximum of 40 years.
B. over the useful economic life less residual value using only the straight-line
method.

C. exclusively by using impairment testing.

D. based upon a pattern that reflects the benefits conveyed by the asset.

5. According to PAS 32, it is a financial instrument that gives the holder the right to put
the instrument that gives the holder the right to put the instrument back to the issuer
on the occurrence of an uncertain future event of the death or retirement of the
instrument holder.
A. Callable Instruments
B. Redeemable Instruments
C. Financial Instruments
D. Puttable Instruments
6. The mining company produces 25,000 pounds of copper each month in its mining
operations. To eliminate the price risk associated with copper sales, on December 1,
2016, the mining company entered into futures contract to sell 25,000 pounds of
copper on January 1, 2017. The futures price is P.77 per pounds. The futures
contract is managed through an exchanged, so the mining company does not know
the party on the other side of the contract. As with most derivative contracts, this
futures contract will be settled by an exchange of cash on January 1, 2017 based on
the price of copper on that date. What net amount will the mining company pay or
receive on January 1, 2017 under the futures contract if the price of copper per
pound on that date is P0.77?
A. P19,250 net receipt
B. P19,250 net payment
C. No net payment or receipt
D. 22,000 net payment
7. The following items are not deemed to be items that would meet the definition of an
intangible asset under PFRS 3:
A. Experienced marketing team
B. Order backlogs
C. Trademarks

D. Newspaper mastheads

8. S and L owes the Kurt Corporation P6,000 on account, which is secured by accounts
receivable with a book value of P5,000. Its statement of affairs lists the accounts
receivable securing the Kurt account with an estimated realizable value of P4,500.
Assume that S and L account is unsecured. How much can Kurt expect to receive?
A. 4,000
B. Cannot be determined without data
C. 6,000
D. 4,800
9. Which of these considerations would not be relevant in determining the entity's
functional currency?
A. The currency in which finance is generated
B. The currency in which receipts from operating activities are retained
C. The currency that is the most internationally acceptable for trading
D. The currency that influences the costs of the entity
10. What is the best cost accumulation procedure to use when many batches, each
differing as to product specification, are produced?
A. Process
B. Standard
C. Job order
D. Actual
11. It is the respective share of a province, city or municipality in the proceeds of the
additional one percent real property tax levied and appropriated for educational
purposes under the Real Property Tax Code.
A. Special Education Fund
B. Trust Fund
C. Infrastructure fund
D. General Fund

12. JMC Company prepare, package, and distributes six frozen vegetables in two
different sized containers. The different vegetables and different sizes are prepared
in large batches. The company employs a normal job order costing system.
Manufacturing overhead is assigned to batches by a predetermined rate on the basis
of the direct labor hours. The manufacturing overhead costs incurred by the
company during two recent years (adjusted for changes using current prices and
wage rates) are presented below:
Direct labor hours worked
Manufacturing overhead costs incurred
Indirect labor
Employee benefits
Supplies
Power
Head and light
Supervision
Depreciation
Property taxes and insurance
Total overhead costs

2012
2,760,000

2013
2,160,000

11,040,000
4,140,000
2,760,000
2,208,000
552,000
2,865,000
7,930,000
3,005,000
34,500,000

8,640,000
3,240,000
2,160,000
1,728,000
552,000
2,625,000
7,930,000
3,005,000
29,880,000

What is the total variable overhead cost for the year 2012?
A. 15,552,000
B. 13,608,000
C. 21,252,000
D. 16,632,000
13. Which is the best cost accumulation procedure to use when there is a continuous
mass production of like units?
A. Process
B. Job order
C. Standard
D. Actual
14. Philips entered into a franchise agreement with Rusty. As per agreement on July 1,
2016, Rusty is to pay Philip an up-front franchise fee of 1,000,000 and subsequent

annual franchise fees of 50,000 over the next four years. Cost of initial franchise
services rendered by Philips during the year is 250,000 which is substantial, and it
estimates the cost of subsequent annual services to be 10,000. Rusty paid the
annual franchises fee for 2017, and Philips rendered the services for the year. In its
December 31, 2017 income statement, the amount of realized franchise fee revenue
to be reported by Philips is:
A. 300,000
B. 250,000
C. 50,000
D. 25,000
15. In a job order cost system, the application of factory overhead would usually be
reflected in the general ledger as an increase in
A. Factory overhead control
B. Cost of goods sold
C. Work in process control
D. Finished goods control
16. When should an anticipated loss on a long term contract be recognized under the
cost recovery method of construction accounting (or zero-profit approach)?
A. prorated when contract is completed
B. contract complete
C. immediately
D. over life of project
17. Which of the following is not an example of political risk?
A. language barriers
B. production control by a foreign government
C. nationalization of businesses
D. unitary tax

18. In the separate financial statements of a parent entity, investments in subsidiaries

that are not classified as held for sale should be accounted for
A. Used in equity method
B. In accordance with PAS 39
C. At cost
D. At cost or in accordance with PAS 39

19. Kate Company manufactures three products, R, S, and T in a joint process. For
every 10 kilos of raw material input, the output is 5 kilos of R, 3 kilos of S and 2 kilos
of T. During August, 50,000 kilos of raw materials costing P120,000 were processed
and completed, with joint conversion costs of P200,000. Conversion costs shall be
allocated to the production on the basis of market values. To make the product
salable, however, further processing which does not require additional material was
done at the following costs: R, P30,000; S, P20,000; and T, P30,000. Unit selling
prices are R, P10; S, P12; and T, P15.
The unit cost of product R is:
A. 8.00
B. 7.12
C. 10.00
D. 25.32
20. By applying the definition provided in The Effects of Changes in Foreign Exchange
Rates, which of the following items will be regarded as a monetary item?
A. Motor vehicles
B. Machinery
C. Inventory
D. Cash
21. A loss from a construction contract shall be fully and immediately recognize under
A. The cost recovery method
B. Both the cost recovery and percentage-of-completion method
C. The percentage-of-completion method

D. Neither the cost recovery nor percentage-of-completion method

22. A derivative may be
A. An equity account
B. A liability account
C. An asset account
D. Either an asset or an liability account

23. Joint costs are used for

A. Setting and selling price of a product
B. Determining whether to continue producing an item
C. Determining inventory costs for accounting purposes
D. Controlling costs

24. Process cost accounting is the method to be used in assigning costs to products
A. Which are manufactured on the basis of each order received
B. Which are only partially completed during the accounting period
C. As an average cost per unit for all units in process during the accounting
period
D. When standard cost accounting is not used in continuous process

25. All the following items are monetary items except:

A. borrowings 30,000
B. shares held in B listed on the Philippine Stock Exchange
C. trade receivable of $12,000
D. trade payable of $50,000.
26. If the amount of spoilage in a manufacturing process is abnormal, it should be
classified as a
A. Joint costs
B. Product cost

C. Deferred charge
D. Period cost

27. In a job order cost system, the application of factory overhead would usually be
reflected in the general ledger as an increase in
A. Finished goods control
B. Work in process control
C. Factory overhead control
D. Cost of goods sold
28. In job order costing, the application of FOH would be reflected in the general ledger
as an increase in
A. Cost of goods sold
B. Finished goods
C. Factory overhead control
D. Work in process
29. If the foreign operation reports in the currency of a hyperinflationary economy,
assets, liabilities income and expenses shall be translated at
A. Forward rate
B. Exchange rate on the date of transaction
C. Average rate
D. Closing rate

30. It is the rate available by terms of an agreement for the exchange of two currencies
at a future date.
A. Spot rate
B. Forward rate
C. Exchange rate
D. Closing rate

31. Which of the following is not a financial asset?

A. A contractual right exchange financial assets or financial liability with another
entity under conditions that are potentially favourable or unfavourable to the
entity.
B. Cash
C. A contractual right to receive cash
D. An equity instrument of another entity

32. Factory supplies for a manufacturing plant are generally

A. Excluded from product costs
B. Prime costs
C. Variable costs
D. Period costs
33. For the purposes of consolidated financial reporting, a group is:
A. an entity that has no subsidiaries
B. a parent entity and all its subsidiaries
C. an entity that has one or more subsidiaries
D. a subsidiary entity of another entity.

34. Which of the following items is classified as a financial asset?

A. Trade receivables
B. Buildings
C. Loans payable
D. Ordinary shares held in a subsidiary.
35. An accounting system that collects financial and operating data on the basis of the
underlying nature and extent of cost drivers is
A. Target costing
B. Activity-based costing

C. Cycle-time costing
D. Variable costing
36. A company has a 40% share in a joint venture and loans the venture P2,000,000,
what figure will be shown for the loan in the balance sheet of the venturer?
A. 1,200,000
B. 800,000
C. 0
D. 2,000,000

37. The price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at measurement date is defined in
Business Combinations as the:
A. present value
B. market value
C. current replacement cost
D. fair value
38. Kate Company manufactures three products, R, S, and T in a joint process. For
every 10 kilos of raw material input, the output is 5 kilos of R, 3 kilos of S and 2 kilos
of T. During August, 50,000 kilos of raw materials costing P120,000 were processed
and completed, with joint conversion costs of P200,000. Conversion costs shall be
allocated to the production on the basis of market values. To make the product
salable, however, further processing which does not require additional material was
done at the following costs: R, P30,000; S, P20,000; and T, P30,000. Unit selling
prices are R, P10; S, P12; and T, P15. Assuming all units are sold, the gross margin
on sales for Product S is:
A. 180,000
B. 60,000
C. 48,000
D. 72,000

39. Income and expense items of a foreign operation shall be translated at

A. Spot exchange rate
B. Forward rate
C. Closing rate
D. Exchange rate on the date of transaction
40. It is the currency in which financial statements are presented.
A. Presentation currency
B. Foreign currency
C. Reporting currency
D. Functional currency
41. Drew Co. produces expensive equipment for sale on installment contracts. When
there is doubt about eventual collectibility, the income recognition method least likely
to overstate income is
A. At the time the equipment is completed
B. The cost recovery method
C. The installment method
D. At the time of delivery.
42. In a job order cost system, the use of direct materials previously purchased usually is
recorded as an increase in
A. Factory overhead applied
B. Work in process control
C. Factory overhead control
D. Stores control
43. A hedge of the exposure to changes in the fair value of a recognized asset or asset
or liability or an unrecognized firm commitment, is classified as a
A. Fair value hedge
B. Cash flow hedge

C. Underlying
D. Foreign currency hedge

44. In an ABC system, what should be used to assign a department's manufacturing

overhead costs to products produced in varying lot sizes?
A. A single cause-and-effect relationship
B. Multiple cause-and-effect relationships
C. A product's ability to bear cost allocations
D. Relative net sales values of the products
45. If the construction in progress account has a balance of 1,000,000 while the
Progress Billings on Contracts accounts balance is P800,000, how should these
accounts be reflected on the balance sheet?
A. Construction in Progress will be shown as a current asset
B. The difference between the two accounts will be reflected as a current asset
C. Progress Billings on Contracts will be shown as a current liability
D. The difference between the two accounts will be reflected as a current liability.

46. It is a hedge of the exposure to variability in cash flows that is attributable to a

particular risk associated with a recognized asset or liability or a highly probable
forecast transaction and could affect profit or loss
A. Hedge of a net investment of foreign operations
B. Cash flow hedge
C. Fair value hedge
D. None of the choices

47. Dollar-denominated short-term financial assets are translated for financial reporting
purposes, based on
A. Closing rate
B. Forward rate

C. Average spot rate

D. Historical rate
48. In a business combination, the acquirer is the party that:
A. receives the acquisition consideration
B. sells the acquired entity
C. obtains control of the other entities
D. concedes control over the acquired entities

49. If the foreign operation reports in the currency of a hyperinflationary economy,

assets, liabilities income and expenses shall be translated at
A. Closing rate
B. Forward rate
C. Exchange rate on the date of transaction
D. Average rate

50. Which is the best cost accumulation procedure to use when there is a continuous
mass production of like units?
A. Process
B. Actual
C. Standard
D. Job order
51. Foreign exchange risk may relate to:
A. recognised assets and liabilities
B. unrecognised firm commitments
C. planned foreign currency transactions
D. all of the answers relate to foreign exhange risk.

52. Excess direct labor wages resulting from overtime premium will be disclosed in
which variance?
A. Labor efficiency
B. Labor rate
C. Yield
D. Quantity

53. Which of the following is not true regarding the use of activity-based costing (ABC)?
A. Costs associated with non-value adding activity must be minimized
B. Consumption ratios are computed based on the usage of identified activity
C. The number of labor hours is used as cost driver for total production cost
D. Several cost drivers must be identified
54. On July 1, 2016, Magnolia Company purchases 1,000 pounds of Swiss chocolate for
50,000 Swiss francs, payable in 60 days. On July 1, a Swiss franc is worth P27.29;
by August 30, the day of payment, the Swiss franc is worth 27.00. The 60-day
forward rate on July 1 is 1 Swiss franc = 28.00. Magnolia Company should record
the cost of the chocolate as:
A. 1,400,000
B. 1,832,000
C. 1,364,500
D. 1,350,000
55. Century Buildings Company, a parent company of a group of companies, acquired
machinery for US $50,000 on October 31, 2016 when the peso/dollar rate was
P26.00, the liability is to be paid six-months after. By the end of the year, the
peso/dollar rate drastically increased to 32.00 and this is considered as a
devaluation or severe fluctuation. On its year-end balance sheet, Century should
report the machinery at:
A. 1,300,000
B. 1,600,000

C. 1,280,000
D. 1,040,000
56. By applying the definition provided in PAS 21, which item will be regarded as a
monetary item?
A. Property, plant and equipment
B. Land and buildings
C. Inventory
D. Accounts receivable

57. By applying the definition provided in PAS 21, which item will be regarded as a
monetary item?
A. Property, plant and equipment
B. Land and buildings
C. Inventory
D. Accounts receivable

58. Utilities expense incurred in production facilities (e.g., water, heat and light) is
classified as
A. Factory overhead
B. Period cost
C. Administrative cost
D. Prime cost

59. Which of the following accounting methods must be applied to all business
combination?
A. Pooling method
B. Equity method
C. Proportionate consolidation
D. Acquisition method

60. Direct labor and factory overhead can be combined into a classification called
A. Prime cost
B. Manufacturing cost
C. Cost of goods manufactured
D. Conversion cost

61. Which is the best cost accumulation procedure to use when there is a continuous
mass production of like units?
A. Actual
B. Job order
C. Standard
D. Process