1.

Independence is required of a CPA performing

A. Audits, but not any other professional services
B. All attestations services, but not other professional services
C. All attestation and tax services, but not other professional services
D. All professional services

2. AAA Company's financial statements adequately disclose uncertainties that concern future events,
the outcome of which are not susceptible of reasonable estimation. The auditor's report should
include a(an):
a. Unqualified opinion.
b. "Subject to" qualified opinion.
c. "Except for" qualified opinion.
d. Adverse opinion.

3. When there is a significant change in accounting principle, an auditor's report should refer to the
lack of consistency in:
a. The scope paragraph.
b. An explanatory paragraph between the second paragraph and the opinion paragraph.
c. The opinion paragraph.
d. An explanatory paragraph following the opinion paragraph.

4. AAA Life Insurance Co. prepares its financial statements on an accounting basis insurance
companies use pursuant to the rules of a state insurance commission. If Wall, CPA, AAA's auditor,
discovers that the statements are not suitably titled, Wall should:
a. Disclose any reservations in an explanatory paragraph and qualify the opinion.
b. Apply to the state insurance commission for an advisory opinion.
c. Issue a special statutory basis report that clearly disclaims any opinion.
d. Explain in the notes to the financial statements the terminology used.

5. AAA Co., a nonprofit entity, prepared its financial statements on an accounting basis prescribed by
a regulatory agency solely for filing with that agency. Green audited the financial statements in
accordance with PSA and concluded that the financial statements were fairly presented on the
prescribed basis. Green should issue a:
a. Qualified opinion.
b. Standard three paragraph report with reference to footnote disclosure.
c. Disclaimer of opinion.
d. Special report.

6. An auditor's report would be designated a special report when it is issued in connection with:
a. Interim financial information of a publicly held company that is subject to a limited review.
b. Compliance with aspects of regulatory requirements related to audited financial statements.
c. Application of accounting principles to specified transactions.
d. Limited use prospective financial statements such as a financial projection.

7. When a CPA reports on audited financial statements prepared on the cash receipts and
disbursements basis of accounting, the report should:
a. Explain why this basis of accounting is more useful for the readers of this entity's financial
statements than PFRS.
b. Refer to the note in the financial statements that describes management's responsibility for
the financial statements.
c. State that the basis of presentation is a comprehensive basis of accounting (OCBOA) other
than PFRS.
d. Include a separate explanatory paragraph that discusses the justification for, and the CPA's
concurrence with, the departure from PFRS.

8. Which of the following statements is correct concerning an auditor's use of the work of a
specialist?
a. The auditor need not obtain an understanding of the methods and assumptions used by the
specialist.
 b. The auditor may not use the work of a specialist in matters material to the fair presentation of
the financial statements.
c. The reasonableness of the specialist's assumptions and their applications are strictly the
auditor's responsibility.
d. The work of a specialist who has a contractual relationship with the client may be acceptable
under certain circumstances.

9. Which of the following statements is correct concerning an auditor's use of the work of a
specialist?
a. The work of a specialist who is related to the client may be acceptable under certain
circumstances.
b. If an auditor believes that the determinations made by a specialist are unreasonable, only a
qualified opinion may be issued.
c. If there is a material difference between a specialist's findings and the assertions in the
financial statements, only an adverse opinion may be issued.
d. An auditor may not use a specialist in the determination of physical characteristics relating to
inventories.

10. In using the work of a specialist, an auditor referred to the specialist's findings in the auditor's
report. This would be an appropriate reporting practice if the:
a. Client is not familiar with the professional certification, personal reputation, or particular
competence of the specialist.
b. Auditor, as a result of the specialist's findings, adds an explanatory paragraph emphasizing a
matter regarding the financial statements.
c. Auditor understands the form and content of the specialist's findings in relation to the
representations in the financial statements.
d. Auditor, as a result of the specialist's findings, decides to indicate a division of responsibility
with the specialist.

11. Prior to commencing field work, an auditor usually discusses the general audit strategy with the
client's management. Which of the following details do management and the auditor usually agree
upon at this time?
a. The specific matters to be included in the communication with those charged with governance.
b. The minimum amount of misstatements that may be considered to be significant deficiencies
in internal control.
c. The schedules and analyses that the client's staff should prepare.
d. The effects that inadequate controls may have over the safeguarding of assets.

12. An auditor plans to apply substantive tests to the details of asset and liability accounts as of an
interim date rather than as of the statement of financial position date. The auditor should be aware
that this practice:
a. Eliminates the use of certain statistical sampling methods that would otherwise be available.
b. Presumes that the auditor will reperform the tests as of the statement of financial position
date.
c. Should be especially considered when there are rapidly changing economic conditions.
d. Potentially increases the risk that errors that exist at the statement of financial position date
will not be detected.

13. A successor auditor is required to attempt communication with the predecessor auditor prior to:
a. Performing test of controls.
b. Testing beginning balances for the current year.
c. Making a proposal for the audit engagement.
d. Accepting the engagement.

14. An auditor uses the assessed level of control risk to:

a. Evaluate the effectiveness of the entity's internal control.
b. Identify transactions and account balances where inherent risk is at the maximum.
c. Indicate whether materiality thresholds for planning and evaluation purposes are sufficiently
high.
d. Determine the acceptable level of detection risk for financial statement assertions.
15. The existence of audit risk is recognized by the statement in the auditor's standard report that the
auditor:
a. Obtains reasonable assurance about whether the financial statements are free of material
misstatement.
b. Assesses the accounting principles used and also evaluates the overall financial statement
presentation.
c. Realizes some matters, either individually or in the aggregate, are important while other
matters are not important.
d. Is responsible for expressing an opinion on the financial statements, which are the
responsibility of management.

16. On the basis of audit evidence gathered and evaluated, an auditor decides to increase the
assessed level of control risk, and therefore the risk of material misstatement, from that originally
planned. To achieve an overall audit risk level that is substantially the same as the planned audit
risk level, the auditor would:
a. Increase inherent risk.
b. Increase materiality levels.
c. Decrease substantive testing.
d. Decrease detection risk.
17. Which of the following would an auditor most likely use in determining the auditor's preliminary
judgment about materiality?
a. The results of the initial assessment of control risk.
b. The anticipated sample size for planned substantive tests.
c. The entity's financial statements of the prior year.
d. The assertions that are embodied in the financial statements.

18. Holding other planning considerations equal, a decrease in the amount of misstatements in a class
of transactions that an auditor could tolerate most likely would cause the auditor to:
a. Apply the planned substantive tests prior to the statement of financial position date.
b. Perform the planned auditing procedures closer to the statement of financial position date.
c. Increase the assessed level of control risk for relevant financial statement assertions.
d. Decrease the extent of auditing procedures to be applied to the class of transactions.

19. When issuing an unqualified opinion, the auditor who evaluates the audit findings should be
satisfied that the:
a. Amount of known misstatement is documented in the management representation letter.
b. Estimate of the total misstatement is less than a material amount.
c. Amount of known misstatement is acknowledged and recorded by the client.
d. Estimate of the total likely misstatement includes the adjusting entries already recorded by the
client.

20. Which of the following is a management control method that most likely could improve
management's ability to supervise company activities effectively?
a. Monitoring compliance with internal control requirements imposed by regulatory bodies.
b. Limiting direct access to assets by physical segregation and protective devices.
c. Establishing budgets and forecasts to identify variances from expectations.
d. Supporting employees with the resources necessary to discharge their responsibilities.

21. In obtaining an understanding of a manufacturing entity's internal control concerning inventory

balances, an auditor most likely would:
a. Analyze the liquidity and turnover ratios of the inventory.
b. Perform analytical procedures designed to identify cost variances.
c. Review the entity's descriptions of controls over inventory.
d. Perform test counts of inventory during the entity's physical count.

22. When obtaining an understanding of an entity's internal controls, an auditor should concentrate on
the substance of the controls rather than their form because:
a. The procedures may be operating effectively but may not be documented.
b. Management may establish appropriate procedures but not enforce compliance with them.
c. The procedures may be so inappropriate that no reliance is contemplated by the auditor.
d. Management may implement procedures whose costs exceed their benefits.

23. When an auditor is to conduct an audit of a service organization, what considerations should the
auditor make in the planning stages regarding internal controls of the organization?
a. The auditor should assess the control risk before obtaining an understanding of internal
controls.
b. The auditor should obtain an understanding of the entity's internal controls after performing
substantive procedures.
c. The auditor should obtain an understanding of the effect of the user organization upon the
service organization.
d. The auditor should be engaged to perform agreed-upon procedures.

24. Proper segregation of duties reduces the opportunities to allow any employee to be in a position to
both:
a. Journalize cash receipts and disbursements and prepare the financial statements.
b. Monitor internal controls and evaluate whether the controls are operating as intended.
c. Adopt new accounting pronouncements and authorize the recording of transactions.
d. Record and conceal fraudulent transactions in the normal course of assigned tasks.
25. An auditor who wishes to capture an entity's data as transactions are processed and continuously
test the entity's computerized information system most likely would use which of the following
techniques?
a. Snapshot application.
b. Embedded audit module.
c. Integrated data check.
d. Test data generator.

26. Which of the following is an engagement attribute for an audit of an entity that processes most of
its financial data in electronic form without any paper documentation?
a. Discrete phases of planning, interim, and year-end fieldwork.
b. Increased effort to search for evidence of management fraud.
c. Performance of audit tests on a continuous basis.
d. Increased emphasis on the completeness assertion.

27. Which of the following strategies would a CPA most likely consider in auditing an entity that
processes most of its financial data only in electronic form, such as a paperless system?
a. Continuous monitoring and analysis of transaction processing with an embedded audit module.
b. Increased reliance on internal control activities that emphasize the segregation of duties.
c. Verification of encrypted digital certificates used to monitor the authorization of transactions.
d. Extensive testing of firewall boundaries that restrict the recording of outside network traffic.

28. When an auditor tests a computerized accounting system, which of the following is true of the test
data approach?
a. Several transactions of each type must be tested.
b. Test data are processed by the client's computer programs under the auditor's control.
c. Test data must consist of all possible valid and invalid conditions.
d. The program tested is different from the program used throughout the year by the client.

29. Which of the following statements most likely represents a disadvantage for an entity that keeps
microcomputer-prepared data files rather than manually prepared files?
a. Attention is focused on the accuracy of the programming process rather than errors in
individual transactions.
b. It is usually easier for unauthorized persons to access and alter the files.
c. Random error associated with processing similar transactions in different ways is usually
greater.
d. It is usually more difficult to compare recorded accountability with physical count of assets

30. An auditor has been asked to report on the balance sheet of AAA Co. but not on the other basic
financial statements. The auditor will have access to all information underlying the basic financial
statements. Under these circumstances, the auditor:
a. May accept the engagement because such engagements merely involve limited reporting
objectives.
b. May accept the engagement but should disclaim an opinion because of an inability to apply the
procedures considered necessary.
c. Should refuse the engagement because there is a client-imposed scope limitation.
d. Should refuse the engagement because of a departure from generally accepted auditing
standards.

PROBLEM NO. 1
Data regarding the statement of financial position of Sybelle Co. follow:
2016 2015
ASSETS:
Cash ₱ ₱
6,653,062 6,200,000
Accounts receivable 700,000 600,000
Allowance for doubtful accounts (50,000) (40,000)
Inventories 1,700,000 1,500,000
 Investment in bonds 951,938 -
Investment in associate 4,185,000 3,780,000
Property plant and equipment 9,069,180 9,000,000
Accumulated depreciation (3,000,000) (3,200,000)
Franchise- net 500,000 600,000
Total assets ₱20,709,18 ₱18,440,00
0 0
LIABILITIES AND EQUITY:
Accounts payable ₱ ₱
4,000,000 3,500,000
Income tax payable 150,000 200,000
Deferred tax liability 700,000 500,000
Finance lease liability 269,180 -
Ordinary shares, ₱100 par value 12,510,000 10,000,000
Share Premium 1,120,000 1,000,000
Treasury shares at cost (4,500 (500,000) (500,000)
shares)
Retained earnings 2,460,000 3,740,000
Total liabilities and equity ₱20,709,18 ₱18,440,00
0 0
Additional information:
1) On January 1, 2015, Sybelle Co. acquired 25,000 ordinary shares out of the 100,000 outstanding ordinary
shares of Samuel Inc. for ₱3,500,000. Samuel’s assets and liabilities approximate their fair values except
for inventories with carrying amount of ₱400,000 and fair value of ₱600,000 and machinery with
carrying amount of ₱3,000,000 and fair value of ₱1,800,000. The remaining useful life of the machinery
is 10 years. On that date, Samuel’s net assets have a book value of ₱10,000,000. On December 31, 2015,
Samuel reported net income of ₱2,000,000 and declared and paid dividends of ₱800,000. On December
31, 2016, Samuel reported net income of ₱2,400,000 and declared and paid dividends of ₱900,000.
2) On January 1, 2016, Sybelle Co. acquired for ₱939,230, 4-year bonds with a face value of ₱1,000,000 and
stated interest of 10% per year payable annually on December 31. The bonds were acquired to yield
12%. The bonds are to be appropriate classified as financial asset at amortized cost.
3) On January 2, 2016, Sybelle Co. sold equipment costing ₱900,000 with accumulated depreciation of
₱400,000 for ₱350,000. On July 1, 2016, Sybelle Co. acquired equipment costing ₱600,000 cash.
4) On June 5, 2016, Sybelle Co. issued 6,000, ₱100 par ordinary shares for ₱120 per share.
5) On July 1, 2016, Sybelle Co. declared and issued 20% share dividends. The par value of the shares is ₱100
while the fair value on that date is ₱110.
6) On December 31, 2016, Sybelle Company signed a 4-year noncancelable lease for a new machine
requiring ₱100,000 annual payments beginning December 31, 2016. The machine has a useful life of 10
years, with no salvage value. The rate implicit on the lease is 10%. Sybelle has a bargain purchase option
amounting to ₱30,000 it is certain that the company will exercise this option. The fair value of the
machine at the inception of the lease amounted to ₱392,745.
7) During 2016, Sybelle Co. recorded Sales for the year amounted to ₱5,000,000, cost of goods sold of
₱2,000,000 and income tax expense of ₱420,000 and net income of ₱980,000.
Questions:
Based on the above data, answer the following:
1. How much is the total cash paid to suppliers in 2016?
a. ₱2,200,000 c. ₱2,000,000
b. ₱5,700,000 d. ₱1,700,000
2. How much is the total cash paid for income tax in 2016?
a. ₱470,000 c. ₱220,000
b. ₱270,000 d. ₱420,000
3. How much is the net cash provided by (or used in) operating activities?
a. ₱1,372,292 c. ₱1,777,292
b. ₱1,827,292 d. ₱517,292
4. How much is the net cash provided by (or used in) investing activities?
a. (₱600,000) c. ₱350,000
b. (₱1,189,230) d. ₱544,230
5. How much is the net cash provided by (or used in) financing activities?
a. ₱370,000 c. ₱720,000
b. (₱350,000) d. ₱270,000

PROBLEM NO. 2
Account balances and supplemental information for the Seek to Win Corporation as of December 31, 2001,
are given below:
Accounts Payable.................................................................................................................................. P 75,900
Accounts Receivable................................................................................................................................ 141,600
Accumulated Depreciation--Equipment......................................................................................... 84,000
Bonds Payable............................................................................................................................................ 300,000
Cash................................................................................................................................................................. 243,900
Ordinary shares......................................................................................................................................... 1,560,000
Deferred Income Tax Liability............................................................................................................. 6,900
Dividends Payable.................................................................................................................................... 45,000
Equipment.................................................................................................................................................... 840,000
Income Taxes Payable............................................................................................................................. 91,500
Inventory...................................................................................................................................................... 395,100
Investment in Land.................................................................................................................................. 510,000
Investment in Subsidiary....................................................................................................................... 492,000
Note Payable............................................................................................................................................... 120,000
Notes Receivable....................................................................................................................................... 150,000
Prepaid Insurance..................................................................................................................................... 7,200
Retained Earnings..................................................................................................................................... 453,600
Salaries and Wages Payable................................................................................................................. 42,900
(a) ₱300,000 of 12% bonds were sold on November 1, 2001, at par.
(b) 40,000 shares of ₱30 par value ordinary shares were sold for ₱1,560,000.
(c) All the equipment was purchased on January 2, 2000. The depreciation rate is 10 percent per
year.
(d) 5 percent of accounts receivable are expected to be uncollectible.
(e) A two-year insurance policy was purchased on May 1, 2001, for ₱7,200.
(f) Accrued interest on ₱150,000 of short-term notes receivable from customers was ₱5,100 at
December 31, 2001.
(g) ₱120,000 was borrowed from the bank on a 5-year, 10% note payable dated December 31,
2001. The loan is to be repaid in 10 semiannual payments of ₱12,000 plus interest, with the
first payment due June 30, 2002.

Based on the above data, compute for the following:

6. Current Assets
 a. 933,420 c. 928,320
b. 928,620 d. 940,500
7. Total noncurrent assets
a. 1,002,000 c. 1,674,000
b. 1,842,000 d. 1,182,000
8. Current Liabilities
a. 299,200 c. 261,300
b. 255,300 d. 285,300
9. Noncurrent liabilities
a. 402,900 c. 420,000
b. 396,000 d. 426,900
10. Total shareholders’ equity
a. 2,602,320 c. 2,607,420
b. 2,602,620 d. 2,614,500

PROBLEM NO. 3 Net benefit Asset-With Asset Ceiling

On January 1, 2021, Campos Co. has the following data relating to its defined benefit plan:
6,000,00
Fair value of plan assets 0
5,000,00
Defined benefit obligation 0
1,000,00
Surplus 0
During the year 2021, Campos Co. recognized the following:
Past service cost 400,000
Current service cost 500,000
Benefits paid during the period 300,000
Actual Return on plan assets 680,000
1,200,00
Contributions to the fund 0
Actuarial gain due to decrease in
DBO -
Actuarial loss due to increase in
DBO 160,000
Discount rate 10%
The present values of economic benefits available in the form of refunds from the plan are
₱800,000 and ₱900,000 on January 1, 2021 and December 31, 2021, respectively.
Questions:
Based on the above data, answer the following:
11. How much is the fair value of plan assets as of December 31, 2021?
a. ₱7,500,000 c. ₱7,580,000
b. ₱7,880,000 d. ₱6,900,000
12. How much is the defined benefit obligation as of December 31, 2021?
c. ₱5,540,000 c. ₱6,260,000
d. ₱5,960,000 d. ₱6,560,000
13. How much is the net Interest expense (or income)-P&L during 2021?
a. ₱ (20,000) c. ₱500,000
b. ₱(80,000) d. ₱600,000
14. How much is the defined benefit cost to be recognized in the profit or loss in 2021?
e. ₱820,000 c. ₱1,100,000
f. ₱920,000 d. ₱1,420,000
15. How much is the defined benefit cost to be recognized in the other comprehensive
income in 2021?
g. Nil c. ₱280,000
h. ₱80,000 d. ₱1,100,000

PROBLEM NO. 4
In 2020, Lemuel Company started to manufacture machines that are sold on installment basis.
Lemuel Company recognizes revenue when equipment is sold for financial reporting purposes, and when
installment payments are received for tax purposes.
In 2020, the entity recognized gross profit of ₱6,000,000 for financial reporting purposes and ₱1,500,000 for
tax purposes.
The amounts of gross profit expected to be recognized for tax purposes in 2021 and 2022 are ₱2,500,000 and
₱2,000,000, respectively.
The entity guaranteed the machines for two years.
Warranty costs are recognized on the accrual basis for financial reporting purposes and when paid for tax
purposes.
Warranty costs accrued in 2020 is ₱2,500,000 but only ₱500,000 of warranty cost is paid in 2020.
It is expected that in 2021 and 2022, ₱1,000,000 and ₱1,000,000 respectively, of warranty cost will be paid.
In addition, during 2020, ₱5000,000 interest, net of 20% final income tax, was received and earned.
Insurance premium of ₱100,000 on life insurance policy that covered the life of the entity’s president was
paid. The entity is the beneficiary for this policy.
Pretax accounting income in 2020 was ₱2,000,000. Any 2020 operating loss will be carried forward to 2021.
The income tax rate is 30%.
Questions:
Based on the above date, answer the following:
16. What is the accounting income subject to tax?
a. ₱1,500,000 c. ₱2,000,000
b. ₱1,600,000 d. ₱2,100,000

17. What is the deferred tax asset on December 31, 2020?

a. ₱270,000 c. ₱600,000
b. ₱480,000 d. ₱870,000

18. What is the deferred tax liability on December 31, 2020?

a. ₱1,320,000 c. ₱1,500,000
b. ₱1,350,000 d. ₱1800,000

19. What is the current tax expense for 2020?

a. Nil c. ₱600,000
b. ₱180,000 d. ₱750,000

20. The 2020income statement shall report total income tax expense at
a. Nil c. ₱600,000
b. ₱480,000 d. ₱630,000

PROBLEM NO. 5 Direct Financing Lease - Lessor

On December 31, 2018, Take it Easy Co. leased an equipment with a cost of ₱1,000,000 to Desperado Co. for 4
years which is also the useful life of the asset. The lease agreement specifies equal annual payment of
₱261,694 beginning on December 31, 2018.

At the end of the lease term, the equipment will revert to Take it Easy Co. A third party related to the lessee
guarantees residual value of the equipment amounting to ₱150,000. The rate implicit on the lease is 11%.

Questions:
Based on the above data, answer the following:
21. How much is the total interest income to be earned over the lease term?
a. ₱46,775 c. ₱196,775
b. ₱103,225 d. ₱1,172,927

22. How much is the interest income in 2019?

a. ₱24,597 c. ₱81,214
b. ₱61,361 d. ₱110,000

PROBLEM NO. 6 Sales-Type Lease

On January 1, 2018, Money Co., a dealer of machines, leased a machine to For Nothing Co. Data relating to the
lease is as follows:

Cost of the machinery ₱900,000

Useful life of equipment 5
Lease term 4
Annual rent payable at the end of the year 300,000
Interest rate implicit in the lease 8%
Residual value 50,000
Initial direct cost 10,000

The leased asset reverts to Money Co. at the end of the lease term. The lease is appropriately recorded as
sales type lease.

Questions:
Based on the above data, answer the following:
23. How much is the total interest income to be earned over the lease term?
a. ₱219,620 c. ₱993,630
b. ₱1,250,000 d. ₱36,750

24. How much is the total interest income in 2018?

a. ₱65,025 c. ₱46,227
b. ₱82,430 d. ₱100,000

25. How much is the profit on sale on December 31, 2018?

a. Nil c. ₱167,130
b. ₱120,380 d. ₱83,630

PROBLEM NO. 7
You were able to obtain the following from the accountant of Tuguegarao Company related
to the company’s liabilities as of December 31, 2018:
Current liabilities:
₱1,350,0
Accounts payable 00
14% note payable issued October 1, 2017, maturing
1,250,00
September 30, 2019 0
16% note payable issued April 1, 2016, due on April 3,000,00
2019 0
Interest payable ?
Noncurrent liability:
10% 2-year, note payable issued on July 1, 2018 2,000,00
 0
The following additional information pertains to these liabilities:
a) The accounts payable balance of ₱1,350,000 was before any necessary year-end
adjustments relating to the following:
 Goods were in transit to Tuguegarao from a vendor on December 31, 2018. The
invoice cost was ₱75,000. The goods were shipped FOB shipping point on December
29, 2018 and were received on January 2, 2019.
 Goods shipped FOB destination on December 21, 2018, from a vendor to
Tuguegarao, were received on January 6, 2019. The invoice cost was ₱37,500.
 On December 27, 2018, Tuguegarao wrote and recorded checks totaling ₱60,000
which were mailed on January 10, 2019.
b) The interest of the 14% note payable is payable every September 30.
c) On December 31, 2018, the company expects to refinance the ₱3,000,000 note by the
issuance of a long-term note payable in lump sum. The refinancing of the ₱3,000,000 is
at the discretion of the enterprise. Tuguegarao’s December 31, 2018 financial
statements were issued on March 31, 2019. On January 15, 2019, the entire ₱3,000,000
balance of the 16% note was refinanced by issuance of a long-term obligation payable.
The interest is payable every April 1.
d) The note payable of ₱2,000,000 is payable to Baggao Corporation. The interest is
payable quarterly. The existing loan agreement does not carry a provision to refinance.
During September, Tuguegarao was experiencing financial difficulty and was unable to
pay the periodic interest. Baggao Company agreed at the reporting date to provide a
grace period ending at least twelve months to rectify the breach.
Questions:
Based on the above, answer the following:
26. In Tuguegarao’s December 31, 2018 statement of financial position, how much should be
the accounts payable?
a. ₱1,410,000 c. ₱1,462,500
b. ₱1,425,000 d. ₱1,485,000
27. Total interest expense for the year 2018
a. ₱175,000 c. ₱655,000
b. ₱480,000 d. ₱755,000
28. Total interest payable as of December 31, 2018 is
a. ₱143,750 c. ₱503,750
b. ₱2,423,750 d. ₱2,380,750
29. Total current liabilities as of December 31, 2018 is
a. ₱5,158,750 c. ₱3,238,750
b. ₱2,878,750 d. ₱5,115,000
30. Total noncurrent liabilities as of December 31, 2018 is
a. ₱3,000,000 c. ₱5,000,000
b. ₱2,000,000 d. Nil

PROBLEM NO. 8
The property, plant and equipment section of Brenner Corporation’s balance sheet at December 31, 2015
included the following items:

Land ₱ 700,000
Land Improvements 10,000
Building 900,000
Machinery 980,000
During 2016 the following data were available to you upon your analysis of the fixed assets account:

₱2,500,00
Cash paid on the purchase of land 0
Mortgage assumed on the land bought, including interest at 16% 4,000,000
Realtor's commission 300,000
Legal fees, realty taxes and documentation expenses 50,000
Amount paid to relocate persons squatting on the property 100,000
Cost of tearing down an old building on land 120,000
Amount recovered from the salvage of the building demolished 150,000
Cost of fencing the property 110,000
Amount paid to a contractor for the building erected 2,000,000
Building permit fees 20,000
Excavation expenses 50,000
Architect's fees 50,000
Interest that would have been earned had the money used
during the period of construction been invested in the money
market 150,000
Invoice cost of machinery acquired 2,000,000
Freight, unloading, and delivery charges 60,000
Customs duties and other charges 140,000
Allowances, hotel accommodations, etc., paid to foreign
technicians during installation and test runs of machines 400,000
Royalty payments on machines purchased (based on units
produced and sold) 120,000

Questions:
Based on the above and the result of your audit, determine the following:
31. The total cost of the Land.
a. ₱7,770,000 c. ₱7,620,000
b. ₱7,650,000 d. ₱7,880,000

32. The total cost of the Land improvement.

a. ₱120,000 c. ₱110,000
b. ₱10,000 d. ₱170,000

33. The total cost of the building

a. ₱2,990,000 c. ₱2,920,000
b. ₱3,020,000 d. ₱3,080,000

34. The total cost of the machinery

a. ₱3,500,000 c. ₱3,620,000
b. ₱3,580,000 d. ₱3,220,000

35. The total cost of the depreciable property, plant and equipment
a. ₱6,690,000 c. ₱6,720,000
b. ₱6,010,000 d. ₱6,470,000

PROBLEM NO. 9 Comprehensive

You are engaged in the audit of the financial statements of JULIE ANN Corporation for the
year ended December 31, 2018. The following information was prepared by the bookkeeper.
 Cash receipts:
Collection on accounts receivable ₱1,513,0
00
Less: Cash discounts taken 13,00 ₱1,500,0
0 00
Cash sales of merchandise 160,000
Sale of warehouse equipment 12,000
Insurance proceeds from boiler explosion 42,000
Sale of land on November 3 20,00
0
Cash disbursements:
Payments to trade creditors ₱1,206,0
00
General and administrative expenses 204,000
Cash purchases of merchandise 120,000
Repairs made on warranty contracts 6,400
Purchase of land on May 1 16,000
Purchase on November 10 of 100 shares of Tommy Co. 24,000
stock
Supplementary information:
1) The following account balances were taken from the general ledger:
December December
31, 2017 31, 2018
Accounts receivable P 124,000 P 146,000
Inventory 186,000 190,000
Prepaid gen. and admin. Expenses 9,600 8,400
Accrued gen. and admin. 7,000 9,000
Expenses
Accounts payable 382,000 410,000
2) Depreciation for 2018 was ₱84,000.
3) The warehouse equipment sold during 2018 was acquired in 2009 at a cost of ₱25,000.
The double-declining method of depreciation was used and accumulated charges were
₱16,000 at date of sale. If the straight-line method had been used, the accumulated
depreciation at date of sale would have been ₱10,000.
4) An explosion occurred on January 15, 2018 in which a boiler, not the structural
component of a building, was completely destroyed. It was purchased in January 2008 at
a cost of ₱48,000, depreciation was recorded by the straight-line method and ₱20,000
had accumulated at the date of the explosion.
5) Land was purchased on May 1, 2018 and was used as a storage facility. It was found to
be unsuitable for this purpose and was sold on November 3, 2018.
Questions:
Based on the above information, compute the adjusted balances of the following accounts
as of December 31, 2018:
36. Net Sales
a. P 1,522,000 c. P 1,682,000
b. P 1,509,000 d. P 1,349,000
37. Total purchases
a. 1,234,000 c. 1,298,000
b. 1,178,000 d. 1,354,000
38. Cost of Sales
a. P 1,350,000 c. P 1,174,000
 b. P 1,230,000 d. P 1,358,000
39. Total operating expenses
a. P 297,600 c. P 294,400
b. P 291,200 d. P 295,200
40. Net income
a. P 55,400 c. P 35,400
b. P 61,800 d. P 47,400