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EASY

MAS

1. A companys return on assets is determined to be 15% while debt ratio remains relative constant at
40%. What is the companys return on equity?
a. 9% b. 6% c. 25% d. 37.5% e. Correct answer not given

Answer: C. 25%

AT

2. SheenaBrey is working at her desk when her phone rings. She picks it up and says, Hello? The
caller asks to speak to Sheena Brey. If Sheena wants to be grammatically correct, which of the
following responses should she choose?
I. This is she.
II. This is her.
III. Speaking
a. I only b. I or III c. II or III d. Any of the above is grammatically correct

Answer: B. I or III

P2

3. Sy and Gor formed a general professional partnership (public practice - accounting) in the
Philippines on January 1, 2014. Their capital contributions were credited to their respective capital
accounts as follows: Sy, Capital P600,000; Gor, Capital P1,000,000. During the year, the
partnership earned profit before tax of P4,000,000. The income tax rate was 30%. How much is the
share of Gor in the partnership profit?

a. P2,500,000 b. P2,000,000 c. P1,750,000 d. P1,500,000

Answer: A. P2,500,000

TOA

4. Which of the following statements is/are true about the recognition of NCI under IFRS 3?

I. The acquirer recognizes NCI, if any, and measures all NCI it at either fair value or at the NCIs
proportionate share of the acquirees identifiable net assets acquired.
II. The acquirer can make the choice between the 2 optional measurement of NCI for each
acquisition, and is considered an accounting policy choice.

a. I only b. II only c. I and II d. Neither I nor II

Answer: D. Neither I nor II


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5. What is the 2014 depreciation expense using sum-of-the-years digit method on an asset purchased
on July 1, 2012, costing P140,000 with a residual value of P20,000 and a 5-year useful life?

Answer: P28,000

P2

6. On January 1, 2015, CL Co. acquired all of the identifiable assets and assumed all liabilities of GD,
Inc. by paying P8,000,000. On this date, identifiable assets and liabilities assumed have fair value of
P12,800,000 and P7,200,000, respectively.

Additional information:

CL intends to sell immediately a factory included in the above assets. Based on the
documents and information available, this asset qualifies to be a held for sale under IFRS 5.
As of January 1, 2015, the fair value less cost to sell and book value of this factory amounted
to P1,600,000 and P2,000,000, respectively. The cost to sell deducted to the fair value
amounted to P50,000.

The acquiree has an in-process research and development unrecognized on its separate
books. The acquirer does not intend to use it but it has a fair value of P400,000.

. How much is the goodwill (gain on bargain purchase) on the business combination?

a. P800,000 b. P2,050,000 c. P2,400,000 d. P2,450,000


e. P2,750,000

Answer: B. P2,050,000

AP

7. An asset is sold in three different active markets at different prices. An entity enters into
transactions in all markets and can access the price in those markets for the asset at the
measurement date. Information for these markets are shown below:
Assuming none of these markets is the principal market, which of the three is the most
advantageous market?

Answer: B

BLT

8. Which of the following statements is/are false?

I. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding
quarter or quarters.
II. Unapplied input taxes may be treated outright as deductible expense for income tax purposes
once the 2 year prescriptive period expires.
III. Input tax attributable to non-VAT sales maybe claimed as deductible expense for income tax
purposes.

Answer: II only

AVERAGE

AT

9. The following have received the results of their CPA Board Exams:

Results of July 2014


Candidate Exams Remarks

Martin Failed This is Martins removal examination. He last


took the examination in October 2013, where he
received conditional credits.

Manuel Failed This is Manuels first quest for the CPA license.

Mark Failed Mark failed in the May 2012 examinations. He


took three reviews but still fell short of the grade.
Marvin Failed Marvin failed in the May 2013 examinations.
He took another examination in October 2013
and got conditional credits.

Who among these candidates must take a refresher course (of at least 24 units of subject given in
the licensure examination) before embarking on another attempt for a CPA License (assume that
2014 is the current year)?

Answer: Mark and Marvin

TOA

10. Which of the following entities is/are not subsidiaries of EBC?

I. EBC Ltd. has an interest of 52% in ABD Ltd. and signed an agreement with the shareholder B,
whereby B is responsible for the production and commercial operations of ABD Ltd., while EBC is
responsible for the marketing decisions and human resources department.
II. EBC Ltd. has direct interest in 27% of Douro Wines. At the beginning of this year, EBC Ltd. entered
into an agreement whereby it established an option to increase its holding with more than 24% of
the equity interests of Douro Wines. The exercise price of the call option is in the money and it can
be exercised at any moment.
III. EBC Ltd. has 42% of GHT Ltd. and has the right to veto in the board of directors with regard to the
annual operating budget.

Answer: I only

MAS

11. BACK Company has made the following information available:

2013 2014 2015


Accounts Receivable, net PhP40,000 PhP42,500 PhP45,000
Inventory 40,000 50,000 45,000
Current assets 120,000 140,000 130,000
Total assets, net 700,000 750,000 725,000
Current liabilities 70,000 80,000 50,000
Cash sales 400,000 420,000 450,000
Credit sales 120,000 125,000 131,250
Costs of sales 310,000 324,000 345,000

What is the turnover of (net) working capital for 2015?

Answer: 8.3

BLT
12. Which of the following statements is/are true?

I. If the authority is to lease a building to third persons for at least one year, a special
power of attorney is necessary.
II. The authority to sell a property in behalf of the principal necessarily includes the
authority to mortgage.

Answer: None

P2

13. OPM Co. Is in bankruptcy and is being liquidated by a court-appointed trustee. The financial report
that follows was prepared by the trustee just before the final cash distribution:

Cash P1,000,000

Claims:

Mortgage payable secured by property that was sold for P300,000 P800,000
Unsecured accounts payable 500,000
Administrative expenses payable 80,000
Salaries payable 20,000
Interest payable related to mortgage payable 100,000

What was the percentage of recovery for unsecured creditors? (round-off into 2 decimal %)

Answer: 54.55%

P1

14. The books of DARLENE Co. shows the following:

Cash on hand P0.40M; Cash in Bank current account P1.40M; Cash in Bank peso savings
account P8M; Cash in Bank unrestricted dollar deposit $0.40M; Cash in Bank restricted dollar
deposit $0.08; Cash in money market account P1M; Treasury bill, maturing February 28, 2015,
acquired December 1, 2014 P3.20M; Treasury bond, maturing February 28, 2015, acquired March
1, 2014 P2M; Unused Credit Line P8M; Redeemable preference shares, purchased 12/31/2014,
mandatory redemption date is 3/1/2015 P1.48M; Treasury shares, purchased 12/1/2014, to be
reissued on 3/5/2015 P0.20M; Sinking fund P0.80M

Additional information:
Cash on hand includes a P80,000 check payable to DARLENE Co. dated January 10, 2015.
During December 2014, checks amounting to P240,000 and P160,000 were drawn against the
current account in payment of accounts payable. The P240,000 check is dated January 15, 2015.
The P160,000 check is dated December 31, 2014 but was delivered to the payee only on January
15, 2015.
The Cash in Bank peso savings deposit includes a deposit in escrow in the amount of P1.36M and
a compensating balance amounting to P1M which is legally restricted.
The Cash in Bank dollar deposit (unrestricted) account includes interest of $8,000, net of tax,
directly credited to DARLENE Co.s account. The exchange rate as of year-end is $1 is to P40.

How much is the cash and cash equivalents to be reported in the 2014 financial statements?

a. P21,440,000 b. P29,440,000 c. P37,440,000 d. P28,440,000

Answer: B. P29,440,000

AP

15. In which of the following will an entity not record impairment loss?(choose one or more)

Answer: Scenarios 1, 2 and 4 only

TOA

16. Which of the following items are both exempted to the recognition and measurement principles of
IFRS 3?

I. Asset held for sale


II. Employee benefits
III. Income taxes
IV. Indemnification assets
V. Share-based payment
Answer: II, III and IV only

DIFFICULT

TOA

17. Acquisition accounting requires an acquirer and an acquiree to be identified for every business
combination. Where entity (H) is created to acquire two pre-existing entities, S (larger entity than A)
and A, which of these entities will be designated as the acquirer?
a. H b. S c. A or S d. May depend on the consideration transferred by H

Answer: D

AP

18. The stockholders equity of P Co. showed the following data on December 31, 2012:

12% preferred stock, P30 par, 135,000 shares issued and outstanding P4,050,000
Common stock, P50 par, 180,000 shares issued and outstanding 9,000,000
Premium on preferred stock 1,080,000
Premium on common stock 3,240,000
Retained earnings 1,395,000

The 2013 transactions of the company affecting its stockholders equity are summarized
chronologically as follows:

1. Issued 27,000 shares of preferred stock at P40.


2. Issued 94,500 shares of common stock at P70.
3. Retired 5,400 shares of preferred stock at P45.
4. Purchased 13,500 shares of its common stock at P80.
5. Split common stock two for one (par value reduce to P25).
6. Reissued 13,500 shares of treasury stock common at P50.
7. Stockholders donated to the company 9,000 shares of common stock when shares had a
market price of P52. One half of these shares were subsequently issued for P54.
8. Dividends were paid at the end of the calendar year on the common stock at P2 per
share and on the preferred stock at the preferred rate.
9. Net income for the year was P2,520,000.

Determine the amount of APIC as of December 31, 2013 (60 secs)

Answer: P6,814,800

TOA

19. What earnings figure should be used for determining basic EPS?
a. Consolidated net profit after tax attributable to parent
b. Consolidated profit after tax
c. A and B
d. None of the choices

Answer: A. Consolidated net profit after tax attributable to parent

P1

20. Canary Co. determined that one of its cash-generating units is impaired. Information on the assets
of the CGU is shown below:

Assets Carrying Amount


Inventory P 800,000
Investment property (at cost model) 1,600,000
Building 2,400,000
Goodwill 1,200,000

It was estimated that the value in use of the CGU is P3,600,000 and its fair value less costs to sell is
P2,400,000. How much is the carrying amount of the inventory after the impairment testing?
a. P320,000 c. P600,000 e. Correct answer not given
b. P480,000 d. P800,000

Answer: D. P800,000

AP

21. You have obtained the latest actuarial report prepared for SHOULD-BE Corps pension plan.
Information about the actuarial reports are presented below: From the December 31, 2015
actuarial report

12/31/2014 12/31/2015
Present value of defined benefit 3,600,000 3,500,000
obligation
Fair value of plan assets at end of year 3,900,000 3,800,000
Current service cost for year 345,000 320,000
Benefits paid in year 240,000 230,000
Contributions paid in year 430,000 410,000
Discount rate at end of year 4.5% 5.0%
Assume contributions and benefit payments occurred evenly throughout the year.

Based on the above information and assumptions determine the OCI component to of the PBO to
arrive at the ending balance on December 31, 2015: (Round of any components in the computation
to the nearest thousands)
Indicate if debit or credit

Answer:P347,000 credit

P2

22. On May 1, 2014, the Geri Inc. acquired 80% of the voting shares of JonJon Limited. The fair value of
the identifiable assets and liabilities of the acquiree as at the date of acquisition were P13,786,000
and P4,300,000, respectively. The fair value of NCI at the date of acquisition is P1,547,000. The fair
value of the NCI has been estimated by applyinga discounted earnings approach. Geri issued
2,500,000 ordinary shares as consideration for the 80% interest in the acquiree. The fair value of the
shares is the published price of the shares of Geri at the acquisition date, which was P2.88 each
(rounded off from P2.8812). The fair value of the consideration given is therefore P7,203,000.

Transaction costs of P600,000 have been expensed and are included in administrative expenses. The
attributable costs of the issuance of the equity instruments of P32,000 have been charged directly
to equity as negative share premium. Said costs were already paid.

As part of the purchase agreement with the previous owner of JonJon Limited, a contingent
consideration has been agreed. There will be additional cash payments to the previous owner of
JonJon Limited of:

P675,000, if the entity generates P1,000,000 of profit before tax in a 12-month period after the
acquisition date, or
P1,125,000, if the entity generates P1,500,000 of profit before tax in a 12-month period after
the acquisition date.

As at the acquisition date, the fair value of the contingent consideration was estimated at P714,000.
As at December 31, 2014, the key performance indicators of JonJon Limited show clearly that target
(a) will be achieved and the achievement of target (b) is probable due to a significant expansion of
the business and synergies implemented. Accordingly, the fair value of the contingent consideration
was determined to be P1,071,500. The entity was able to generate more than P1,500,000 of profit
before tax on the settlement date, thus, was required to pay P1,125,000.

In the consolidated financial statements, what is the net effect in equity of the above acquisition for
the year ended December 31, 2014? (disregarding any income earned from operations by both the
acquirer and acquiree)
Answer: P8,110,700

TOA
23. Which of the following disclosures is/are not mandatory for associates and joint ventures in
accordance with IFRS 12?

I. Liberty Ltd. shall disclose the summarized financial information, the profit and loss of the non-
controlling interests and the dividends paid to non-controlling interests.
II. Liberty Ltd. shall disclose a schedule that shows the effects on the equity attributable to its
owners of the decrease of 15% in its ownership interest.
III. Liberty Ltd. shall disclose the portion of the gain or loss attributable to measuring the 85% relative
to the retained investment at its fair value and the line in profit or loss in which the gain or loss is
recognized.

Answer: III only

AT

24. Given the following information, what number results from [(E) + (C)] {(B) x [(A) (D)]}?

Item (A): The number of years that comprises a single term of a duly appointed SEC commissioner.

Item (B): The required minimum number of CPE credit units that an accounting teacher shall earn in
each year prior to renewal of accreditation.

Item (C): The age required for a registered professional to be exempted from CPE requirements
permanently.

Item (D): The number of subjects covered in the CPA Licensure Examination.

Item (E): The number of years the independent CPA, who audited the records and certified the
financial statements of the Company, shall maintain and preserve electronic copies of the audited and
certified financial statements, including the audit working papers.

Answer: 75

BLT

25. In taxable year 2013, payment for various penalties amounting to P 19,119,139 was considered as
non-deductible expense for purposes of computing the Companys taxable net income for 30%
Regular Corporate Income Tax (RCIT) purposes. Said penalties pertain to CY 2008 tax assessments.
The details of the said penalties are as follows:
Tax Type Basic Interest Penalty Total
Documentary Stamp Tax (DST) P 2,939,261 P 4,400,033 P 25,000 P 7,364,294
Income tax (IT) 707,998 1,021,069 20,000 1,749,067
Expanded Withholding Tax (EWT) 2,615,926 3,901,671 25,000 6,542,597
Premium Tax (PT) 1,383,002 2,055,179 25,000 3,463,181
Total P 7,646,187 P 11,377,952 P 95,000 P 19,119,139

Invoking Section 34 (C) of the tax Code, as amended and Section 80 of Revenue Regulations (RR) No. 2,
how much from the said amount may be considered as non-deductible expense for RCIT purposes?
(Average)

a. P95,000 b. P3,418,924 c. P3,548,924 d. P8,291,664

Answer: B. P3,418,924

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