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MOCK PHINMA EXAMName: Date:Section: Rating:G E N E R A L D I R E C T I O N SREAD THIS PAGE BEFORE STARTING THE ASSESSMENTThis is a 16 paged test and is composed of 1 sections and has a total score of one hundred twenty (100) points. You have eighty (180) Minutes to finish this examination. The break...

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INTERMEDIATE ACCOUNTING 3 MOCK PHINMA EXAM Name:

Date:

Section:

Rating: G E N E R A L

D I R E C T I O N S

READ THIS PAGE BEFORE STARTING THE ASSESSMENT

This is a 16 paged test and is composed of 1 sections and has a total score of one hundred twenty (100) points . You have eighty (180) Minutes to finish this examination. The breakdown of the exam is as follows: (1) Multiple-choice Section. The questions in this section is with four answer choices. Encircle the letter of your answer. The test is composed of 100 questions with a rate of 1 points each.

All things unnecessary for the test must be put in front of the testing area. Use BLACK or BLUE ink ballpen only. Write all your answers on the designated answer sheet. Further, erasures are strictly NOT allowed and will invalidate your answers. You may NOT use smart phones or reference materials during the testing session. Only the allowed calculators should be used. Try to answer all questions. In general, if you have some knowledge about a question, it is better to try to answer it. You will not be penalized for guessing.

LEARNING OBJECTIVE: This assessment measures the competence of the student in terms of his/her application of knowledge and skills in the following topics: 1. Financial Liabilities 2. Non – Financial Liabilities 3. Provisions and Contingencies 4. Leases 5. Income Taxes 6. Employee Benefits

Be sure to allocate your time carefully so you can complete the entire test within the exam session. You may go back and review your answers at any time during the exam session. Those who are caught cheating or doing acts not allowed during the exam shall be instructed to surrender their test papers and shall leave the testing room immediately. Subsequently, their papers shall be rated as ZERO. This concludes the instruction page. You may now begin answering.

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INTERMEDIATE ACCOUNTING 3 MOCK PHINMA EXAM 1. Which of the following situations would not lead to a finance lease classification? a. Transfer of ownership to the lessee at the end of the lease term. b. Option to purchase at a value below the fair value of the asset. c. The lease term is for a major part of the asset’s life. d. The present value of the minimum lease payments is 50% of the fair value of the asset. 2. Which of the following is a correct statement of one of the lease capitalization criteria? a. The lease transfers ownership of the property to the lessor. b. The lease contains a purchase option. c. The lease term is equal to or more than 75% of the economic life of the leased property. d. The minimum lease payments excluding executory costs equal or exceed 90% of the fair value of the leased property. 3. Which statement is incorrect regarding IFRS 16 Leases ? a. IFRS 16 eliminates the classification of leases as either operating leases or finance leases as required by IAS 17 and, instead, introduces a single lessee accounting model. b. A lessee is required to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. c. A lessee is required to recognize depreciation of lease assets separately from interest on lease liabilities in the income statement. d. A lessor shall classify its leases as operating leases. 4. Which of the following is not likely an effect of IFRS 16 on lessee’s financial statements? a. Increase in assets and liabilities. b. Increase in finance costs c. Increase in operating expenses. d. Increase in financing cash outflows. Information below are for items 5 to 7: At the beginning of current year, an entity sold building with a remaining useful life of 30 years and immediately leased it back for 5 years. Sale price at below fair value Fair value of building Carrying amount of building Annual rental payable at the end of each year Implicit Interest rate

18,000,000 20,000,000 24,000,000 1,000,000 12%

5. What is the initial lease liability? a. 3,600,000 b. 4,000,000 c. 4,800,000 d. 0 6. What is the cost of right of use of asset? a. 3,000,000 b. 4,320,000 c. 5,760,000 d. 6,720,000 7. What is the loss on right transferred? a. 4,000,000

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INTERMEDIATE ACCOUNTING 3 MOCK PHINMA EXAM b. 2,880,000 c. 5,760,000 d. 6,720,000 Information below are for items 8 to 12: At the beginning of current year, an entity leased a building from a lessor with the following pertinent information: Annual rental payable at the end of each year 1,500,000 Initial direct cost paid 405,000 Lease bonus paid to lessor before commencement of the lease 300,000 Lease incentive received 50,000 Cost of restoring building as required by contract 1,500,000 Present Value of restoration cost discounted at 8% for 6 periods 945,000 Leasehold improvement – useful life 8 years 600,000 Purchase option that is reasonably certain to be exercised 1,000,000 Lease Term 6 years Useful life of building 10 years Implicit Interest rate 10% 8. What is the initial lease liability? a. 7,100,000 b. 6,540,000 c. 9,210,000 d. 9,600,000 9. What is the cost of the right of use asset? a. 8,750,000 b. 8,700,000 c. 9,255,000 d. 7,755,000 10. What total amount of interest expense should be reported for the current year? a. 710,000 b. 785,600 c. 804,500 d. 830,000 11. What is the lease liability at year – end? a. 6,310,000 b. 5,964,000 c. 9,060,000 d. 3,600,000 12. What is the depreciation of the right of use asset for current year? a. 1,450,000 b. 1,550,000 c. 870,000 d. 875,000 Information below are for items 13 to 15:

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INTERMEDIATE ACCOUNTING 3 MOCK PHINMA EXAM On December 31, 2020, an entity leased two automobiles for executive use. The lease required the entity to make five annual payments of P1, 500,000 beginning January 1, 2021. At the end of the lease term, December 31, 2025, the entity had residual value guarantee of the automobiles at P1, 000,000. The interest implicit in the lease is 10%. 13. What is the lease liability on December 31, 2021? a. 4,412,500 b. 5,375,000 c. 6,062,500 d. 4,805,000 14. What is the current portion of the lease liability on December 31, 2021? a. 1,500,000 b. 1,058,750 c. 962,500 d. 750,000 15. What is the interest expense for 2021? a. 480,500 b. 537,500 c. 441,250 d. 606,250 16. On January 1, 2020, an entity entered into 5-year lease with a lessor. Annual lease payments of P1,200,000 including annual executory cost of P200, 000 are payable at the end of each year. The entity knows that the lessor expects an 8% implicit rate on the lease. The entity has a 10% incremental borrowing rate. The equipment is expected to have a 10 years useful life. In addition, a third party had guaranteed to pay the lessor a residual value of P500,000 at the end of the lease. On December 31, 2020, what is the principal amount of the lease obligation? a. 3,990,000 b. 3,309,200 c. 3,676,400 d. 3,971,040 17. At the beginning of current year, an entity entered into an 8-year finance lease for an equipment. The entity accounted for the acquisition of the finance lease at P5,000,000 which included a P500,000 bargain purchase option that is reasonably to be exercised. The expected fair value of the equipment is P400,000 at the end of the 10-year useful life. What amount of straight line depreciation should be recognized for the current year? a. 575,000 b. 460,000 c. 625,000 d. 450,000 18. At the beginning of current year, an entity entered into 8-year lease for an equipment. The entity accounted for the acquisition as a finance lease for P6,000,000 which included a P600,000 residual value guarantee. At the end of the lease, the asset will be revert back to the lessor. It is estimated that the fair value of the asset at the end of the 10-year useful life would be P400,000. What amount of straight line depreciation should be recognized for the current year?

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INTERMEDIATE ACCOUNTING 3 MOCK PHINMA EXAM a. b. c. d.

675,000 700,000 540,000 560,000

19. On January 1, 2020, an entity purchased new machine for P6,000,000 for the purpose of leasing it. The machine had an estimated 10-year life. On April 1, 2020, the entity leased the machine to a lessee for three years at a monthly rental of P400,000. The lessee paid the rental for one year of P4,800,000 on April 1, 2020 and additionally paid P900,000 to the lessor as a lease bonus to obtain the 3 year lease. On April 1, 2020, the entity paid P300,000 to a broker as a finder fee. What is the net rental income for 2020? a. 3,150,000 b. 4,350,000 c. 3,200,000 d. 4,400,000 20. On July 1, 2020, an entity leased an equipment to a lessee under a 3-year operating lease. Total rent for the lease term is P3,600,000 payable P50,000 monthly for the 1 st year, P75,000 monthly for the 2 nd year and P175,000 monthly for the last lease year. All payments were made when due. On June 30, 2022, what amount should be reported as accrued rent receivable? a. 2,100,000 b. 1,200,000 c. 900,000 d. 0 21. During the first year of the entity’s existence, employees earned accumulating vacation leave as follows: Employee Ave. wage per Vacation leave Vacation leave taken day earned Alma 400 10 10 Lorna 600 15 10 Fe 800 20 5 What amount should be recognized as expense from vacation leave during the first year? C. 15,000 A. 29,000 B. 14,000 D. 19,000 22. Refer to the preceding problem. What should be reported as accrued vacation pay at year end? A. 29,000 C. 15,000 B. 14,000 D. 19,000 23. A profit sharing bonus plan requires an entity to pay 10% of net income before bonus and tax to employees who served throughout the current year and will continue to serve the following year. The entity reported P20 million net income before tax and tax. The entity expects to save 5% of the maximum bonus through staff turnover. What should be the bonus expense for the year? A. 2,000,000 C. 1,900,000 B. 1,000,000 D. 1,800,000 24. A company provided the following information for the current year: Current service cost 1,300,000 Actual return on plant assets 600,000 Interest expense-PBO 550,000 Interest income on plan assets 500,000

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INTERMEDIATE ACCOUNTING 3 MOCK PHINMA EXAM Loss on plan settlement 250,000 Past service cost during the year 400,000 Actuarial gain during the year 200,000 What is the defined benefit expense for the current year? A. 1,700,000 C. 2,300,000 D. 1,900,000 B. 2,000,000 25. Refer to the preceding problem. What is the net remeasurement gain – OCI? A. 100,000 C. 300,000 B. 200,000 D. 400,000 26. On January 01, Year 1, a company reported the following information about its defined benefit plan: Fair value of plan assets (FVPA) 7,000,000 Projected benefit obligation (PBO) 7,500,000 Current service cost 1,400,000 Contribution to the plan 1,200,000 Actual return on plan assets 840,000 Decrease in PBO due to actuarial assumptions 200,000 Present value of defined benefit obligation settled 2,000,000 Settlement price of defined benefit obligation 1,900,000 Discount rate 10% What should be the employee benefit expense to be reported in the statement of income? A. 2,150,000 C. 1,350,000 B. 2,050,000 D. 1,450,000 27. Refer to the preceding problem. What should be the net remeasurement gain or loss – OCI for the year? A. 140,000 gain C. 340,000 gain B. 140,000 loss D. 60,000 loss 28. Refer to the preceding problem. What should be the FVPA on December 31, Year 1? C. 8,200,000 A. 7,140,000 B. 7,540,000 D. 7,000,000 29. Refer to the preceding problem. What should be the PBO on December 31, Year 1? A. 7,950,000 C. 7,650,000 D. 9,650,000 B. 7,450,000 30. Refer to the preceding problem. What is the balance of the prepaid/accrued benefit cost on December 31, Year 1? A. 310,000 prepaid C. 650,000 prepaid B. 310,000 accrued D. 650,000 accrued 31. If an actuarial valuation has not been prepared at the date of the report of a defined benefit plan: A. The most recent valuation should be used as a base and the date of the valuation disclosed. B. Actuarial valuation should be used as a base and the date of the valuation disclosed. C. Fair market valuation should be used and the actuarial valuation disclosed. D. All the choices are correct. 32. Remeasurements of the net defined benefit liability (asset) recognized in other comprehensive income A. Shall be reclassified to profit or loss in a subsequent period B. The entity may transfer those amounts recognized in other comprehensive income within equity C. May be transferred to asset or liability account.

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INTERMEDIATE ACCOUNTING 3 MOCK PHINMA EXAM D. None of the foregoing. 33. Which of the following statements is incorrect regarding actuary as used in defined benefit plan? A. The projected unit credit method sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. B. An entity shall determine its mortality assumptions by reference to its best estimate of the mortality of plan members both during and after employment. C. The rate used to discount post-employment benefit obligations (both funded and unfunded) shall be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. D. IAS 19 requires an entity to involve a qualified actuary in the measurement of all material post-employment benefit obligations. 34. Defined benefit plans (Choose the incorrect one.) A. The entity is, in substance, underwriting the actuarial and investment risks associated with the plan. B. Consequently, the expense recognized for a defined benefit plan is not necessarily the amount of the contribution due for the period. C. Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an entity, and sometimes its employees, into an entity, or fund. D. None of the foregoing. 35. Accumulating paid absences (Choose the incorrect one). A. An entity recognizes no liability or expense until the time of the absence, because employee service does not increase the amount of the benefit. B. Accumulating paid absences are those that are carried forward and can be used in future periods if the current period’s entitlement is not used in full. C. Accumulating paid absences may be either be vesting or non-vesting. D. An entity shall measure the expected cost of accumulating paid absences as the additional amount that the entity expects to pay as a result of the unused entitlement that has accumulated at the end of the reporting period. 36. An entity reported advance rental income of P600,000 which is immediately taxable for Year 1.The rent would be fully earned the following year. Tax rate is 30%. Accounting and taxable income are presented as follows: Year 1 Year 2 Accounting income 5,000,000 7,000,000 Taxable income 5,600,000 6,400,000 The deferred tax asset/liability on Year 1 C. 1,500,000, asset A. 180,000, asset B. 180,000, liability D. 1,500,000, liability 37. Refer to no. 36. The tax expense for year 2 is A. 2,100,000 B. 1,920,000

C. 1,740,000 D. 1,800,000

38. Hilton company reported pretax accounting income of P6,200,000 for Year 1. It includes P200,000 interest from investment in government bonds. Accounting depreciation is P500,000 while the depreciation on tax return is P600,000. Tax rate is 30%. The tax expense for Year 1 A. 1,860,000 C. 1,770,000 D. 1,830,000 B. 1,800,000 39. For Year 1, Tantrum reported pretax financial income of P6,000,000. Analysis revealed that P500,000 is exempted from income tax and P400,000 is a taxable temporary difference. Tax rate is 30%. The tax expense for Year 1

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INTERMEDIATE ACCOUNTING 3 MOCK PHINMA EXAM A. 1,800,000 B. 1,530,000

C. 1,650,000 D. 1,950,000

40. Viking Company shows P1 million pretax net income for Year 1. Tax rate is 30%.The following items were observed: Item Tax return Income Statement Rent income 70,000 120,000 Depreciation 280,000 220,000 Premium on officers life - 90,000 insurance Provision for income tax for Year 1 A. 294,000 C. 327,000 B. 300,000 D. 360,000 41. For Year 1, Everlasting Company reported accounting income of P9 million before tax. Tax rate is 30%. Other information follows: Interest income on government bonds 700,000 Tax return depreciation in excess of depreciation per book 1,300,000 Warranty expense (accrual) 600,000 Actual warranty payment 300,000 Income from installment sales reported per tax return, in excess of income per book 200,000 Income tax expense for Year 1 A. 2,700,000 C. 2,490,000 B. 2,250,000 D. 2,130,000 42. West Company leased a building and received P4 million annual rental payment on July 1, Year 1 which was the start of the lease. Rent income is taxable when received. Tax rate is 30%. Deferred tax asset is A. 300,000 C. 1,200,000 D. none B. 600,000 43. Xavier Co. is in the first year of operations. The entity reported pretax accounting income of P4,000,000 and provided the following items: Premium on life insurance of key officer 100,000 Depreciation on tax return in excess of book depreciation 120,000 Interest on municipal bonds 53,000 Warranty expense 40,000 Actual warranty repairs 33,000 Bad debt expense 14,000 Beginning balance in allowance for uncollectible accounts 0 Ending balance in allowance for uncollectible accounts 8,000 Rent received in advance that will be recognized evenly over the next three years 240,000 What is the taxable income for 2017? A. 4,182,000 C. 4,047,000 B. 4,102,000 D. 4,082,000 44. Bio Co. reported the following information during the first year of operations: Pretax financial income 8,000,000 Nontaxable interest received 250,000 Long-term loss accrual in excess of deductible amount 500,000 Tax depreciation in excess of financial depreciation 1,250,000 Income tax rate 30% What is the taxable income?

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INTERMEDIATE ACCOUNTING 3 MOCK PHINMA EXAM A. 7,000,000 B. 7,250,000

C. 8,500,000 D. 8,750,000

45. Refer to the preceding problem. What is the current tax expense? A. 2,325,000 C. 2,400,000 B. 2,100,000 D. 1,950,000 46. Refer to the preceding problem. What is the accounting income subject to tax? A. 8,000,000 C. 8,250,000 D. 7,250,000 B. 7,750,000 47. Refer to the preceding problem. What is the total tax expense? A. 2,400,000 C. 2,100,000 D. 2,175,000 B. 2,325,000 48. Refer to the preceding problem. What is the deferred tax liability at year-end? A. 150,000 C. 375,000 B. 225,000 D. 525,000 49. Refer to the preceding problem. What is the deferred tax asset at year-end? C. 225,000 A. 150,000 B. 375,000 D. 350,000 50. Which of the following guidance on measuring deferred taxes is incorrect? A. Where the tax rate or tax base is impacted by the manner in which the entity recovers its assets or settles its liabilities, the measurement of deferred taxes is consistent with the way in which an asset is recovered or liability settled. B. Where deferred taxes arise from revalued non-depreciable assets, deferred taxes reflect the tax consequences of selling the asset. C. Deferred taxes arising from investment property measured at fair value reflect the rebuttable presumption that the investment property will not be recovered through sale. D. If dividends are paid to shareholders, and this causes income taxes to be payable at a higher or lower rate, or the entity pays additional taxes or receives a refund, deferred taxes are measured using the tax rate applicable to undistributed profits. 51. Magiging CPA Ako Inc. has the following accounts on December 31, Year 1: Accounts payable 425,000 Notes payable due on July 1, Year 2 200,000 Premium on notes payable 12,000 Bonds payable due on March Year 3 850,000 Discount on bonds payable 27,000 Advances from customers 36,000 Advances to employees 64,000 Bank loans payable (semiannual installment of 50,000) 450,000 Accrued interest expense 75,000 Deferred rent income 117,000 Bank overdraft PBI (no other account on PBI) 28,000 Share dividends payable 150,000 Deferred tax liability 73,000 How much is the current liabilities as of December 31, Year 1? A. 993,000 C. 1,038,000 B. 876,000 D. 1,066,000

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INTERMEDIATE ACCOUNTING 3 MOC...