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BRAIN GAMES (Donated by: #teamPRTC)



1. Contracts are effective and binding only between the parties, their assigns and their heirs. Three of the following
enumerations are exceptions as provided by law. Which does not belong to the exceptions?
a. Where there is a stipulation in favor of a third party
b. Where one of the parties to the contract dies and thereafter a suit is filed on the basis of the contract.
c. Where the obligations arising from contract are not transmissible by their nature.
d. Where the obligations arising from contract are not transmissible by stipulation or by provision of law.

2. An obligation ceases to be alternative and becomes a simple obligation in the following cases, except:
a. when the debtor has communicated his choice to the creditor.
b. when the right of choice has been expressly granted to the creditor and his choice has been communicated to the
c. when among the several prestations that are due only one is practicable.
d. when three prestations are due but one of them is unlawful or impossible.

3. This check has drawn on its face two transversal parallel lines the effect of which is that the check cannot be encashed but
only be deposited.
a. Cashier's check c. Crossed check
b. Certified check d. Memorandum check


4. JONAS Company received a P1,000,000 cash remittance from its sister company, POGI Company, to be remitted to
its home office REYES Company. Which statement is correct concerning the taxation of this item?
a. Not taxable since the item represents a return of capital.
b. Taxable since it is realized by JONAS Company by means of an actual receipt.
c. Not taxable since the item, although a received in cash, did not redound to the benefit of JONAS Company.
d. Taxable since taxation is the rule, exemption is the exception.

5. Which of the following sale or importation of goods shall not be exempt from VAT?
a. fertilizers
b. seeds, seedlings and fingerlings
c. fish, prawns, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the
manufacture of finished feeds
d. specialty feeds


6. For which of the following products is a process costing system most appropriate?
a. Houses. c. Breakfast cereal.
b. Automobiles. d. Furniture.

7. Partners DIEGO, ELMO, and FRANCO have capital balances of P64,000, P144,000 and P48,000, respectively,
immediately prior to liquidation. Total remaining assets have a book value of P256,000, the liabilities having been
paid. Among these remaining assets is a machine with a fair value of P56,000. The partners split profits and losses
equally. ELMO covets the machine and is willing to accept it for P56,000 in lieu of cash. The other partners have no
designs on specific assets, only cash in liquidation. How much cash in addition to the machine, would first be
distributed to ELMO, before any of the other partners received anything?
a. P30,000 c. P333,334
b. P100,000 d. P 24,000


8. One hundred pounds of raw material W is processed into 60 pounds of X and 40 pounds of Y. Joint costs are
P135. X is sold for P2.50 per pound and Y can be sold for P3.00 per pound or processed further into 30 pounds
of Z (10 pounds are lost in the second process) at an additional cost of P60. Each pound of Z can then be sold
for P6. What is the effect on profits of processing product Y further into product Z?
a. P60 increase.
b. P30 increase.
c. No change.
d. P60 decrease.
9. Fackrell Company has provided the following data:
Common stock:
Shares outstanding 20,000
Market value, December 31 P150,000
Book value, December 31 P80,000
Dividends paid P40,000
Preferred stock, 8%, 100 par P100,000
Net income P100,000
Interest on long-term debt P 10,000

The price-earnings ratio is closest to:

a. 1.50 c. 2.50
b. 1.63 d. 2.88


10. An engagement team comprises the following, except?

a. Partners
b. Managers
c. Employed experts
d. Engaged experts



1. One of the following is not a remedy granted to an unpaid seller:

a. Right of stoppage of goods in transit
b. Right of lien over the goods
c. Right of resale.
d. Right to demand a security for the payment of the price.

2. Under the Negotiable Instruments Law, a signature by procuration operates as a notice that the agent has but a limited
authority to sign. Thus, a person who takes a bill that is drawn, accepted, or indorsed by procuration is duty-bound to
inquire into the extent of the agent's authority by:
a. examining the agents special power of attorney
b. examining the bill to determine the extent of such authority
c. asking the agent about the extent of such authority
d. asking the principal about the extent of such authority.


3. Which is subject to income tax?

a. Compensation for personal injuries
b. Investment income of foreign government in the Philippines
c. Income of resident aliens abroad
d. Business income from jueteng and sale of illegal drugs

4. Educational services are exempt from VAT if rendered by:

I private educational institutions duly accredited by DepED, CHED and TESDA
II government educational institutions
a. both I and II are correct c. Only I is correct
b. neither I nor II is correct d. only II is correct


5. Partners C and D share income and loss equally after each has been credited with annual salary allowances of P40,
000 and P30, 000, respectively. Under this arrangement, C will benefit by P10, 000 more than D in which of the
following circumstances?
a. Only if the partnership has earnings of P70, 000 or more for the year
b. Only if the partnership does not incur a loss for the year
c. Only if the partnership has earnings of at least P10, 000 for the year
d. In all earnings or loss situations.
6. Job No. 41 (consisting of 5,000 units) was started in September, 2016 and it is special in nature because of its strict
specifications. Factory overhead is charged at P 0.80 per unit and includes a P.05 provision for defective work. The
prime costs incurred in September are: Direct materials, P 9,000 and Direct labor, P 4,800. Upon inspection, 80
units were found with imperfections and required the following reprocessing costs, Direct materials, P 1,500 and
direct labor, P 800. The unit cost of Job No. 41, upon completion, is:
a. P 4.10 c. P 3.98
b. P 4.05 d. P 3.62


7. Zig Corp. provides the following information:

Pretax operating profit P 300,000,000
Tax rate 40%
Capital used to generate profits 50% debt, 50% equity P1,200,000,000
Cost of equity 15%
Cost of debt, after tax 5%
What of the following represents Zig's year-end economic value-added amount?
a. P0
b. P60,000,000
c. P120,000,000
d. P180,000,000

8. Altman Corporation has P1,000,000 of debt outstanding, and it pays an interest rate of 12 percent annually.
Altmans annual sales are P4 million, its national-plus-state tax rate is 40 percent, and its net profit margin on sales
is 10 percent. If the company does not maintain a TIE ratio of at least 5 times, its bank will refuse to renew the
loan, and bankruptcy will result. What is the maximum amount Altmans EBIT could decrease and its bank still
renew its loan?
a. P186,667 c. P45,432
b. P66,767 d. P47,898


9. Two overriding considerations affect the many ways an auditor can accumulate evidence:
I. Cost of accumulating evidence should be minimized.
II. Sufficient appropriate evidence must be accumulated to meet the auditors professional responsibility.

In evaluating these considerations:

a. the first is more important than the second.
b. the second is more important than the first.
c. they are equally important.
d. it is impossible to prioritize them.


10. Which of the following is not likely an effect of IFRS 16 on lessees financial statements?
a. Increase in assets and liabilities.
b. Increase in finance costs
c. Increase in operating expenses.
d. Increase in financing cash outflows.



1. A writes a promissory note in favor of his creditor, B. It says: Subject to my option, I promise to pay B Php1 Million or his
order or give Php1 Million worth of cement or to authorize him to sell my house worth Php1 Million. Signed, A. Is the note
a. No, because the exercise of the option to pay lies with A, the maker and debtor.
b. No, because it authorizes the sale of collateral securities in case the note is not paid at maturity.
c. Yes, because the note is really payable to B or his order, the other provisions being merely optional.
d. Yes, because an election to require something to be done in lieu of payment of money does not affect negotiability.

2. ABC Corporation employs both regular and senior citizen employees and paid the following compensation:
Regular employees - Php 800,000
Senior citizen employees:
a. With salary grade above poverty level - Php 200,000
b. With salary grade below poverty level - Php 100,000
The deductible compensation expense is
a. Php 1,100,000
b. Php 1,145,000
c. Php 1,115,000
d. Php 1,120,000

3. On December 9, 2009, A borrowed Php 1,000,000 from ABC Bank payable within 10 years. The loan pays an
annual interest of Php 100,000 payable every December 9 beginning December 9, 2010. On December 9,
2014, A pre-terminated the loan by repaying the principal in full. The gross receipts tax still due from ABC
Bank due to the pre-termination in 2014 is
a. Php 5,000
b. Php 25,000
c. Php 21,000
d. Php 16,000

4. On June 1, 2016, DAVE and MAR are combining their separate businesses to form a partnership. Cash and noncash
assets are to be contributed. The noncash assets to be contributed and the liabilities to be assumed are as follows:
Book Value Fair Value Book Value Fair Value
Accounts Receivable P 25,000 P 26,250 P 20,000 P 19,500
Inventory 40,000 45,000 20,000 20,750
PPE 100,000 91,250 86,250 82,250
Accounts Payable 15,000 15,000 11,250 11,250
DAVE and MAR are to invest equal amounts of cash such that the contribution of DAVE would be 10% more than the
investment of MAR. What is the amount of cash presented on the partnerships Statement of Financial Position on
June 1, 2016?
A. P276,250 C. P251,250
B. P552,500 D. P502,500

5. Pelican Co. produces two products (A and B). Direct material and labor costs for Product A total P35 (which
reflects 4 direct labor hours); direct material and labor costs for Product B total P22 (which reflects 1.5 direct
labor hours). Three overhead functions are needed for each product. Product A uses 2 hours of Function 1 at
P10 per hour, 1 hour of Function 2 at P7 per hour, and 6 hours of Function 3 at P18 per hour. Product B uses 1,
8, and 1 hours of Functions 1, 2, and 3, respectively. Pelican produces 800 units of A and 8,000 units of B each
period. If total overhead is assigned to A and B on the basis of overhead activity hours used, the total product cost
per unit assigned to Product A will be
a. P86.32. c. P115.50.
b. P95.00. d. none of the above.


6. Which of the following combinations is NOT possible?

Profitability Index NPV IRR
a. Greater than 1 Positive More than cost of capital
b. Equals 1 Zero Equals cost of capital
c. Less than 1 Negative Less than cost of capital
d. Less than 1 Positive Less than cost of capital

7. A company obtained a short-term bank loan of P500,000 at an annual interest rate of 8%. As a condition of the
loan, the company is required to maintain a compensating balance of P100,000 in its checking account. The
checking account earns interest at an annual rate of 3%. Ordinarily, the company maintains a balance of P50,000
in its account for transaction purposes. What is the effective interest rate of the loan?
a. 7.77% c. 8.50%
b. 9.44% d. 8.56%

8. Which of the following is an indicator of possible fraudulent financial reporting for the purpose of inflating earnings?
a. A ratio analysis discloses: (1) sales of P500 million and (2) cost of goods sold of P250 million.
b. A cross-sectional analysis of common size statements discloses: (1) the firm's ratio of cost of goods sold to sales
is .5 and (2) the industry average ratio of cost of goods sold to sales is .4.
c. A cross-sectional analysis of common size statements discloses: (1) the firm's ratio of cost of goods sold to sales
is .4 and (2) the industry average ratio of cost of goods sold to sales is .5.
d. A trend analysis discloses: (1) sales increases of 50 percent and (2) cost of goods sold increases of 25 percent.


9. The Waloneke Company has a policy of using non-current assets until they can no longer be operated and are
worthless. On 1 January 2016 it acquired an item of plant and machinery for P100,000. It is being depreciated over
10 years on a straight-line basis. For tax purposes there is an allowance of 20% per annum on a reducing balance
basis. There are two rates of tax: 15% on trading profits and 25% on gains on disposals.
What deferred tax balance should Waloneke recognize at 31 December 2016, according to PAS12 Income taxes?
a. Deferred tax asset of P2,500
b. Deferred tax asset of P1,500
c. Deferred tax liability of P2,500
d. Deferred tax liability of P1,500

10. The Retry Company uses cash-basis accounting for their records. During 2016, Retry collected P500,000 from its
customers, made payments of P200,000 to its suppliers for inventory, and paid P140,000 for operating costs. Retry
wants to prepare accrual-basis statements. In gathering information for the accrual-basis financial statements,
Retry discovered the following:
a. Customers owed Retry P50,000 at the beginning and P35,000 at the end of the year.
b. Retry owed suppliers P20,000 at the beginning and P27,000 at the end of the year.
c. Retry's beginning inventory was P42,000, and its ending inventory was P44,000.
d. Retry had prepaid expenses of P5,000 at the beginning and P7,400 at the end of the year.
e. Retry had accrued expenses of P12,000 at the beginning and P19,000 at the end of the year.
f. Depreciation for the year was P51,000.
Determine the accrual basis net income of Retry Company for the year ended December 31, 2016.
a. P79,600 c. P91,400
b. P84,400 d. P98,400



1. When A voluntarily takes charge of the neglected business of B with the latters authority where reimbursement must be
made for necessary and useful expenses, there is a:
a. Contract of agency c. Negotiorum Gestio
b. Quasi contract d. Solutio Indebiti

2. The Recto Law is applicable

a. Sale of car on straight term
b. Sale of house on installment
c. Sale of car on installment where the buyer constituted a mortgage on his truck
d. In the foreclosure sale, should the vendee's failure to pay cover two or more installments.

3. Which of the following is a valid address to a drawee so as to make the instrument negotiable?
a. "To Joven Mariano or Paul Macapinlac."
b. "To Joven Mariano and Paul Macapinlac "
c. "To Joven Mariano, or in his absence, Paul Macapinlac"
d. "To Joven Mariano and another drawee named Paul Macapinlac."


4. Which of the following is subject to income tax?

a. Salaries or emoluments received during a leave of absence
b. Terminal leave pay received by a government employee
c. Separation pay received by an employee who is separated due to cessation of the business
d. Monetized value of unutilized vacation leave credits of 10 days or less paid to an employee during the
5. The importation of the following is exempt from VAT, except
a. grapes, apples and oranges
b. poultry and livestock
c. race horse, fighting cocks and zoo animals
d. rice, corn and coffee beans


6. Basin Co. has two service departments (A and B) and two producing departments (X and Y). Data provided are as
Service Depts. Operating Depts.
Direct costs P200 P400
Services performed by Dept. A 20% 40% 40%
Services performed by Dept. B. 30% 60% 10%
If Basin uses the reciprocal/algebraic method to allocate service department costs, the service department costs
allocated to Department X is
a. P300. c. P417.
b. P340. d. P468.


7. A company using very tight (high) standards in a standard cost system should expect that
a. no incentive bonus will be paid
b. most variances will be unfavorable
c. employees will be strongly motivated to attain the standards
d. costs will be controlled better than if lower standards were used


8. Which of the following matters is generally included in an auditors engagement letter?

a. Managements liability for illegal acts.
b. The factors to be considered in setting judgments about audit risk.
c. Managements responsibility for the entitys financial statements.
d. Managements responsibility to investigate internal control deficiencies.


9. Porkee Corp. sells equipment with a carrying amount P150,000 to Chopee Corp. for P170,000 when the equipment's
fair value is P100,000, and then enters into a cancellable operating lease agreement to use the equipment for two
years. In the current year, how much profit would Porkee Corp. record on the sale of the equipment?
a. P20,000 c. P70,000
b. P50,000 d. Nil

10. Class Corp. maintains its accounting records on the cash basis but restates its financial statements to the accrual
method of accounting. Class had P60,000 in cash-basis pretax income for 2016. The following information pertains
to Class's operations for the years ended December 31, 2016 and 2015:
2016 2015
Accounts receivable P40,000 P20,000
Accounts payable 15,000 30,000
Under the accrual method, what amount of income before taxes should Class report in its 2016 income statement?
a. P25,000 c. P65,000
b. P55,000 d. P95,000

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