I. Multiple Choice

An entity reported the following data for the current year:

Legal and audit fees 1,700,000

Rent for office space 2,400,000

Advertising 500,000

Interest on inventory loan 2,100,000

Loss on abandoned data processing equipment 350,000

Freight in 1,750,000

Freight out 1,600,000

Officers' salaries 1,500,000

Insurance 850,000

Sales representative salaries 2,150,000

Research and development expense 1,000,000

The office space is used equally by the sales and accounting departments.

1. What amount should be classified as general and administrative expenses?

a. 5,250,000

b. 6,450,000

c. 5,600,000

d. 6,250,000

2. What amount should be reported as selling expense?

a. 5,450,000

b. 4,250,000

c. 6,300,000

d. 6,450,000

3. An entity provided the following information for the current year:

Increase in raw materials inventory 150,000

Decrease in goods in process inventory 200,000

Decrease in finished goods inventory 350,000

Raw materials purchased 4,300,000

Direct labor payroll 2,000,000

Factory overhead 3,000,000

Freight out 450,000

Freight in 250,000

What is the cost of goods sold for the current year?

a. 9,950,000

b. 9,550,000

c. 9,250,000

d. 9,150,000An entity reported operating expenses other than interest expense for the year at 40% of cost of goods

sold but only 20% of sales. Interest expense is 5% of sales. The amount of purchases is 120% of cost

of goods sold. Ending inventory is twice as much as the beginning inventory. The net income for the

year is P2,100,000. The income tax rate is 30%.

4. What is the amount of Sales for the year?

a. 8,300,000

b. 8,800,000

c. 7,000,000

d. 6,800,000

5. What is the amount of Purchases for the year?

a. 3,700,000

b. 5,500,000

c. 4,700,000

d. 4,500,000

An entity reported the following information for the current year

Income from continuing operations 4,000,000

Income from discontinued operation 500,000

Unrealized gain on financial asset - FVPL 800,000

Unrealized loss on equity investment - FVOCI 1,000,000

Unrealized gain on debt investment - FVOCI 1,200,000

Unrealized gain on futures contract designated as a cash flow hedge 400,000

Translation loss on foreign operation 200,000

Net "remeasurement" gain on defined benefit plan during the year 600,000

Loss on credit risk of a financial liability designated at FVPL 300,000

Revaluation surplus during the year 2,500,000

6. What net amount should be reported as other comprehensive income for the current year?

a. 4,000,000

b. 3,500,000

c. 3,200,000

d. 7,000,000

7. What amount should be reported as comprehensive income for the current year?

a. 5,200,000

b. 7,700,000

c. 8,500,000

d. 7,200,000

8. An entity reported net income of P7,400,000 for the current year. The auditor raised questions about

the following amounts that had been included in net income:

Equity in earnings of an associate - 25% interest 1,500,000

Dividend received from the associate 400,000

Unrealized loss on equity investment at FVOCI (550,000)

Gain on early retirement of bonds payable 2,200,000

Adjustment of profit of prior year for error in depreciation, net of tax effect (750,000)

Loss from fire (1,400,000)

Gain from change in fair value of financial liability designated at FVPL 500,000What amount should be reported as adjusted net income?

a. 8,300,000

b. 7,800,000

c. 9,500,000

d. 8,800,000

An investment entity provided the following data for the current year:

Dividend income from investments 10,000,000

Distribution income from trusts 500,000

Interest income on deposits 700,000

Income from bank treasury bills 100,000

Income from dealing in securities held for trading 600,000

Writedown on securities held for trading 150,000

Other income 250,000

Finance cost 300,000

Administrative staff costs 3,800,000

Sundry administrative costs 1,400,000

Income tax expense 2,000,000

9. What is the total income before tax?

a. 12,000,000

b. 12,150,000

c. 11,750,000

d. 11,550,000

10. What is the net income for the year?

a. 6,500,000

b. 4,500,000

c. 4,650,000

d. 4,250,000

11. An entity had the following events and transactions during 2020:

Depreciation for 2019 was understated by P500,000

A litigation settlement resulted in a loss of P2,000,000

The inventory on December 31, 2018 was overstated by P800,000

The entity disposed of a recreational division at a loss P1,500,000

The income tax rate is 30%

What total amount of loss should be included in income from continuing operations for 2020?

a. 2,000,000

b. 1,400,000

c. 3,500,000

d. 2,450,00012. During 2020, an entity decided to change from the FIFO method of inventory valuation to the weighted

average method. Inventory balances under each method were:

The income tax rate is 30%. What amount should be reported as the effect of this accounting change in

the statement of Retained Earnings for 2020?

a. 350,000 decrease

b. 350,000 increase

c. 490,000 decrease

d. 490,000 increase

13. On January 1, 2018, an entity purchased a machine for P7,200,000 and depreciated it by the straight

line method using an estimated useful life of eight years with no residual value. On January 1, 2020,

the entity determined that the machine had a useful life of six years from the date of acquisition with

a residual value of P600,000. What is the accumulated depreciation on December 31, 2020?

a. 4,200,000

b. 3,600,000

c. 3,000,000

d. 4,600,000

14. On January 1, 2018, an entity purchased for P5,000,000 a machine with useful life of ten years and

residual value of P200,000. The machine was depreciated by the double declining balance method.

The entity changed to the straight-line method on January 1, 2020 and the residual value did not

change. What is the carrying amount of the asset on December 31, 2020?

a. 2,825,000

b. 2,800,000

c. 2,625,000

d. 3,200,000