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1. The physical inventory of Pangasinan Company on December 31, 2009 showed

merchandise with a cost of P 4,000,000 was on hand at that date. You also discovered the

following items were all excluded from the count:a. Merchandise costing P160,000 , which was held by Pangasinan on consignment. The

consignor is a subsidiary.

b. A special machine, fabricated to order for a customer costing P 400,000 was finishedand specifically segregated in the back part of the shipping room on December 31, 2009.

The customer was billed on that date and the machine excluded from inventory although

it was shipped on January 4, 2010.

c. Merchandise costing P 80,000 which was shipped by Pangasinan f.o.b destination to acustomer on December 31, 2009. The customer expects to receive the merchandise on

January 3, 2010.

d. Merchandise costing P 120,000 which was shipped by Pangasinan f.o.b shipping pointto a customer on December 29, 2009

e. Merchandise costing P 50,000 shipped by a vendor F.O.B shipping point on December

28, 2009 and receive by Pangasinan on January 10, 2010.

The corrected balance of Pangasinans inventory should be

a. P 4,530,000 c. P 4,480,000

b. P 4,130,000 d. P 4,690,000

2. On January 2004, Entity A issued a 10 percent convertible debenture with a face valueof P 1,000,000 maturing on 31 December 2013. The debenture is convertible into

ordinary shares of Entity A at a conversion price of P25 per share. Interest is payable half

yearly in cash. At the date of issue, Entity A could have issued non convertible debt witha ten year term bearing a coupon interest rate of 11 percent.

On January 1 2009, to induce the holder to convert the convertible debenture promptly,Entity A reduces the conversion price to P20 if the debenture is converted before 1 March

2009 (ie within 60 days). The market price of Entity As ordinary shares on the date the

terms are amended is P 40 per share.

Compute the amount to be recognize in profit or loss as a result of the amendment of the

terms

a. P 400,000 c. P 50,000

b. P 200,000 d. P 0

3. Cookie Company is negotiating a loan with Excel Bank. Cookie needs P 3,600,000. as

part of the loan agreement Excel Bank will require Cookie to maintain a compensating

balance of 15% of the loan amount on deposit in a checking account at the bank. Cookie

currently maintains a balance of 200,000 in the checking account. The interest rateCookie is required to pay on the loan is 12%. Excel bank pays 1% interest on checking

accounts. the amount of the loan is

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a. P 4,000,000 c. P 3,600,000

b. P 3,800,000 d. P 3,400,000

4. On January 1, 2009, the lending company made a P 200,000 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 December 31, 2009, the interest for the current year has not been receivednor recorded because the borrower is experiencing financial difficulties. The lending

company negotiated a restructuring of the loan. The payment of all of the interest based

on the original will be delayed until the end the 5 year loan term. In addition, the amount

of principal repayment will be dropped from P 200,000 to P 100,000. The prevailinginterest rate for similar type of the loan as of December 31, 2009 is 10%.

The loan impairment loss to be recognize in 2009 profit or loss isa. P 67,700 c. P 77,492

b. P 73,506 d. P 0

5. Windom Corp. on January 1, 2007 granted share options for 100,000 share of its P10par value ordinary shares to its key employees. The market price of the ordinary share on

that date was P 23 per share and the option price was P 20. The Black Scholes option

pricing model determines total compensation expense to be P 600,000. The options areexercisable beginning January 1, 2010 provided those key employees are still in

Windoms employ at the time the options are exercised. The options expire on January 1,

2011.

On January 1, 2010 when the market price of the share was P29 per share, all 100,000

options were exercised. The amount of compensation expense Windom should record for2009 is.

a. P 100,000 c. P 150,000b. P 200,000 d. P 700,000

6. An entity prepares quarterly interim financial reports in accordance with PAS 34. The

entity sells electrical goods, and normally 5% of customer claims on their warranty. Theprovision in the first quarter was calculated as 5% of sales to date, which was

P20,000,000. However, in the second quarter, a design fault was found and warranty

claims were expected to be 10% for the whole year. Sales in the second quarter wereP30,000,000 . What would be the provision charged in the second quarters income

statement?

a. P 3,000,000 c. P 2,250,000

b. P 4,000,000 d. P 5,000,000

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7. An entity has granted share option to its employees. The total expense to the vesting

date of December 31, 2010, has been calculated as P 8 million. The entity has decided to

settle the award early, on December 31, 2009. The expense charge in the incomestatement since the grant date of January 1, 2007, had been year to December 31, 2007, 2

million, and year to December 31, 2008, 2.1 million. The expense that would have been

charge in the year to December 31, 2009 was P 2.2 million. What would be the expensecharged in the income statement for the year December 31, 2009?

a. P 2.2 million c. P 3.9 million

b. P 8.0 million d. P 2.0 million

8. An entity has spent P 600,000 in developing a new product. These cost meet the

definition of an intangible asset under PAS 38 and have been recognize in the balancesheet. These costs have been recognized as an expense for tax purposes. At the year end

the intangible asset is deemed to be impaired by P 50,000. The tax base of intangible

asset at year end is

a. P 600,000 c. P 50,000

b. P 550,000 d. P 0

9. House Publishers offered a contest in which the winner would receive P 1 million

payable over 20 years. On December 31, 2009, House announced the winner of the

contest and signed a note payable to the winner for P 1 million, payable in P 50,000installments every January 2. Also on December 31, 2009 House purchased an annuity

for P 418,000 to provide the P 950,000 prize monies remaining after the first P 50,000

installment which was paid on January 2, 2010. In its 2009 income statements, whatshould House report as contest prize expense?

a. P 0 c. P 468, 250b. P 418, 250 d. P 1,000,000

10. Atkins bought five identical plots of development land for P 2 million in 2007. OnJanuary 2009 Atkins sold three of the plots of land to an investment company, Landbank,

for a total of 2.4 million. This price was based on 75% of the fair market value of 3.2

million as determined by an independent surveyor at the date of sale. The terms of thesale contained 2 clauses:

. Atkins can re purchased the plots of land for the full fair value of 3.2 million (thevalue determined the date of sale) any time until 31 December 2011 and;

On 1 January 2012, Landbank has the option to require Atkins to re-purchase theproperties for 3.2 million. You may assume that Landbank seeks a return o its

investment of 10% per annum.

If Atkins recorded the legal form of the transaction instead of its substance, the profit for

2009 will be overstated by

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a. P 1,440,000 c. P 640, 000

b. P 1,200,000 d. P 400, 000

11. Quitino, Inc. and its subsidiaries have provided you, their PFRS specialist, with a list

of the properties they own:

Land held by Quirino, Inc. for undetermined future use, P 5,000,000. A vacant building owned by Quirino, Inc. and to be leased out under an operating

lease, P 20, 000, 000.

Property held by a subsidiary of Quirino, Inc., a real estate firm, in the ordinarycourse of its business, P 30, 000, 000.

Property held by Quirino, Inc. for use in production, P 1, 000, 000.

A hotel owned by Sugo Inc, a subsidiary of Quirino, Inc., and for which Sugo,Inc. provides security services for its guests belongings P 50,000,000.

A building owned by Quirino, Inc being leased out to Status Inc, a subsidiary ofQuirino Inc., P 20,000,000.

How much will be reported as investment properties in Quirino, Inc. and its subsidiariesconsolidated financial statements?

a. P 75,000,000 c. P 95,000,000b. P 25,000,000 d. P 45,000,000

12. Roxy Company had the following information relating to its account receivble:

Accounts receivable at 12/31/2008 P 1,300,000

Credit sales for 2009 5,400,000Collection from customers for

2009, excluding recovery 4,750,000Accounts written off 9/30/2009 125,000Collection of accounts written off in

prior year ( customer credit was

not re established) 25,000

Estimated uncollectible receivablesper aging of receivables at

12/31/2009 165,000

On December 31, 2009 the amortized cost of accounts receivables is

a. P 1,825,000 c. P 1,635,000

b. P 1,800,000 d. P 1,600,000

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Suggested Answers:

1. b2. a

3. a

4. a5. b

6. b

7. c

8. d9 c

10. a

11. a12. d