Taxation

1. Double taxation in its general sense means taxing the same subject twice during the same taxing
period. In this sense, double taxation:
a. Violates substantive due process
b. Does not violate substantive due process
c. Violates the right to equal protection
d. Does not violate the right to equal protection
2. As regards a revenue bull, which of the following is not correct?
a. The senate may propose amendments if the bull originates from the House of
Representatives
b. The House of Representatives may propose amendments if the bill originates from the
Senate
c. The president may recommend a revenue bill to the Congress
d. A House of Representative version and Senate version approved separately and then
consolidated with both houses approving the consolidated version
3. Which among the following refers to the control number issued by the EFPS to acknowledge that
a tax return, including attachments, has been successfully filed electronically?
a. Filing Reference Number
b. Confirmation Number
c. Acknowledgement Number
d. Electronic Filing Payment System (EFPS) Number
4. One of the following inhabitants is not required to pay basic community tax:
a. Engaged in business or occupation
b. Owns real property with an aggregate assessment value of one thousand (P1,000) pesos
or more
c. Required by law to file an income tax return
d. Diplomatic and consular representatives
5. For cases involving financial incapacity, which of the following is not subject to 20% compromise
rate based on the basic assessed tax?
a. Dissolved corporation
b. Already non-operating companies for a period of less than 3 years
c. Already non-operating companies for 3 years or more as of the date of application for
compromise settlement
d. Taxpayer is declared insolvent or bankrupt
6. The following data are taken from the records of Ms. Nina Mae, not VAT-registered, who owns
various businesses for the current year 2017:
Gross sales from sale of shoes and clothes P 300,000
Gross sales from her boutique 400,000

Gross receipts from her parlor 500,000

 During the month of January, the following data are presented:

Gross sales from sale of shoes and clothes P 30,000

Gross sales from her boutique 40.000

Gross Receipts from her parlor 50,000

How much is the percentage tax due for the month of January?

a. 2,400 c. 3,600
b. 2,700 d. 6,000
7. From the following data, compute the income tax still due from a domestic corporation engaged
in merchandising business. For the calendar year 2017, the net income per books is P150,000,
after considering among others:
Non-taxable income (others) 5,500
Inter-corporate dividends 5,000
Net capital loss 2,500
Bad debts written off 6,500
Non-deductible expenses (others) 12,000
Contributions to a non-profit religious 12,000
organization
Contributions to Government’s priority 1,500
program
Quarterly income tax payments 65,000
Provision for bad debts 8,000

The net income per books should be reconciled with the provisions of the Tax Code,
meaning, items, which are not taxable must be excluded, and items which are not
deductible are to be added back. How much is the net tax due and payable?

a. 66,240 c. 1,240
b. 62,100 d. None of the above
8. On January 15, 2017, Lady Olenna gave a piece of land to her brother-in-law who is getting
married on February 14, 2017. The assessed value and zonal value of the land were P750,000 and
P1,000,000, respectively. The land had an unpaid mortgage of P200,000 which was not assumed
by the donee and an unpaid realty tax of P10,000 which was assumed by the donee. How much
shall be the total deductions?
a. 210,000 c. 10,000
b. 200,000 d. None of the choices
9. A resident citizen, widower, with two (2) dependents: minor brother, who is a PWD, and a foster
child, has the following data on income and expenses: Gross business income, P500,000; Business
expenses, P200,000; Interest from savings deposit, BPI-Makati, Philippines, P50,000; Prize
 received for achievement in literature (did not join the contest), P10,000; Gain from sale of bonds
(maturity is 6 years), P5,000; Separation pay from his former job(terminated due to redundancy),
P250,000; Cash he inherited from his uncle, P300,000; Proceeds of his wife’s life insurance
(revocable beneficiary), P1,000,000; Amount received as return of premium (premium paid,
P150,000), P200,000; Tax Informer’s Award, P500,000; Interest income from Government bonds,
P20,000; Winnings, P10,000.

How much was the total amount of excluded or exempted income?

a. 1,715,000 c. 1,460,000
b. 1,465,000 d. 465,000
10. Doofenshmirtz Evil Inc’s computation of RCIT and MCIT based on its quarterly operations
including data on prior year’s excess MCIT and creditable withholding taxes and current year’s
CWTs are as follows:
Quarter RCIT MCIT CWT Excess MCIT, Excess CWT,
prior year prior year
First 90 000 80 000 20 000 30 000 10 000
Second 120 000 250 000 30 000 - -
Third 250 000 100 000 40 000 - -
Fourth 200 000 100 000 35 000 - -

How much was the income tax payable (overpayment) for the second (2nd) quarter?
a. 230,000 c. 210,000
b. 240,000 d. 220,000

RFBT

1. A debt shall not be understood to have been paid unless the thing or service in which the
obligation consists has been completely delivered or rendered, as the case may be.
a. Principle of integrity
b. Principle of honesty
c. Principle of loyalty
d. Principle of delivery
2. Shall refer to entities engaged in borrowing of funds through the issuance, endorsement or
assignment with recourse or acceptance of deposit substitutes for purposes of re-lending or
purchasing of receivables and other obligations.
a. Banks
b. Quasi-banks
c. Universal Banks
d. Commercial Banks
3. In the case of a work other than an audiovisual work, is the recitation, playing, dancing, acting, or
otherwise performing the work, either directly or by means of any device or process.
a. Private performance
b. Public performance
 c. Private publishing
d. Public publishing
4. I. The PDIC upon payment of any depositor shall be subrogated to all rights of the depositor
against the closed bank to the extent of such payment.
II. All payments by the PDIC of insured deposits in closed banks partake of the nature of public
funds.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
5. Shall refer to a claim that is not secured by a lien.
a. Voluntary proceeding
b. Unsecured creditor
c. Unsecured claim
d. Voting creditor
6. D pledged his specific sewing machine to C for P80,000. D was unable to pay the obligation with
60 days after due date. C sold the machine at a public auction for P6,000.
a. C cannot recover the deficiency of P2,000 even if there is stipulation that he can
b. C can recover the deficiency of P2,0000 even without stipulation
c. C cannot recover the deficiency of P2,000
d. C can recover the deficiency of P2,000
7. When the sale is made through a public instrument.
a. Legal formalities
b. Symbolical tradition
c. Tradition symbolic
d. Traditio longa manu
8. I. Lack of consent and consideration in the deeds of sale makes the sale voidable altogether and
rendered them subject to attack at any time.
II. The defect of inexistence of a contract is permanent and incurable, hence it cannot be cured
either by ratification or by prescription.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
9. Bidder who shall offer to pay the full amount of the balance on the subscription together with
accrued interest, costs of advertisement and expenses of sale for the smallest number of shares
or fraction of a share.
a. Lowest bidder
b. Highest bidder
c. Winning bidder
d. Losing bidder
10. A person secondarily liable on the instrument is discharged, except:
 a. By any act which discharges the instrument
b. By the intentional cancellation of his signature by the holder
c. By the discharge of the subsequent party
d. By a valid tender or payment made by a prior party

MAS

1. Which of the following is not a characteristic of a “Staff” authority?

a. It gives support, advise, and service to line managers.
b. It is exercised laterally or upward.
c. It has the authority to command action or give orders to subordinates.
d. None of the above
2. The following statements about the adoption of variable costing are true, except:
a. All fixed manufacturing costs are recognized as period costs.
b. A direct cost may not become a product cost.
c. It is an acceptable method for general reporting purposes.
d. An indirect cost may be assigned as part of product cost.
3.
4. A company reported a significant materials efficiency variance for the month of January. All of the
following are possible explanations for this variance except
a. Cutting back preventive maintenance.
b. Inadequately training and supervising the labor force.
c. Processing a large number of rush orders.
d. Producing more units than planned for in the master budget.
5. One of the first steps in the creation of a database is to
a. Define common variables and fields used throughout the firm
b. Increase the secondary dotage capacity.
c. Obtain software that will facilitate data retrieval.
d. Integrate the accounting system into the data base.
6. The following information is available from the Tyro Company:

Actual factory O/H P15,000

Fixed O/H expenses, actual P7,200

Fixed O/H expenses, budgeted P7,000

Actual hours 3,500

Standard hours 3,800

Variable O/H rate per DLH P2.50

Assuming that Tyro uses a three-way analysis of O/H variances, what is the spending variance?
 a. P750 F
b. P750 U
c. P950 F
d. P200 U
7. Division P of Turbo Corporation has the capacity for making 75,000 wheel sets per year and
regularly sells 60,000 each year on the outside market. The regular sales price is P100 per wheel
set, and the variable production cost per unit is P65. Division Q of Turbo Corporation currently
buys 20,000 wheel sets (of the kind made by Division P) yearly from an outside supplier at a price
of P90 per wheel set. If Division Q were to buy the 30,000 wheel sets it needs annually from
Division P at P87 per wheel set, the change in annual net operating income for the company as a
whole, compared to what it is currently, would be:
a. P225,000 c. P500,000
b. P325,000 d. P75,000

8. Semibar Co. reports net income of P630,000. The information below or the year just ended is also
available:
January 1 December 31

Shareholders’ equity P4,200,000 P4,480,000

Share price P25 P30

Shares outstanding 400,000 400,000

Cost of equity 10% 10%

Dividends per share P1.00

Equity value creation is:

a. P630,000 c. P420,000
b. 448,000 d. P210,000

9. Fitzgerald is interested in investing in a corporation with a low cost of equity capital. By

using the dividend growth model, which of the following corporations has the lowest
cost of equity capital?
Stock Price Dividend Growth Rate

C.S. Inc. P25 P5 8%

Lewis Corp. 30 3 10%

Screwtape Inc. 20 4 6%
 Wormwood Corp. 28 7 7%

a. C.S. Inc. c. Screwtape Inc.

b. Lewis Corp. d.Wormwood Corp.

10. Arnold Enterprises uses the EOQ model for inventory control. The company has an annual
demand of 50,000 units for part number 101 and has computed an optimal lot size of 6,250
units. Per-unit carrying costs and stock out costs are P13 and P3, respectively. The following
data have been gathered in an attempt to determine an appropriate safety stock level:
Units Short Because of Excess Number of Times Short

Demand during the Lead Time Period in the last 40 Reorder Cycles

200 6

300 12

400 6

The annual cost of establishing a 200-unit safety stock is expected to be

a. P2,600 b. P4,040 c. P4,260 d. P5,200

FAR

1. At the beginning of current year, Rick Company acquired all the assets and liabilities of another
entity. The acquiree has a number of operating divisions, including one whose major industry is
the manufacturing of toy train. The toy train is regarded as a cash generating unit.
In paying P20,000,000 for the net assets of the acquiree, Rick calculated that it had acquired
goodwill of P2,400,000. The goodwill was allocated to each of the divisions, and the assets and
liabilities acquired are measured at fair value at acquisition date. At year-end, the carrying
amounts of the assets of the toy train division were:
Building 2,000,000
Inventory 1,500,000
Trademark 1,000,000
Goodwill 500,000
There is a declining interest in toy train because of the aggressive marketing of computer-based
toys.
The entity measured the value of the toy train division at year-end at P3,600,000
What is the impairment loss to be allocated to the building?
a. 400,000
b. 500,000
c. 900,000
d. 300,000
2. During the current year, Star Labs Co. incurred the following costs to develop and produce a
computer software product:

Completion of detailed program design 1,300,000

Costs incurred for coding and testing to 1,000,000
establish technological feasibility
Other coding costs after establishment of 2,400,000
technological feasibility
Other testing costs after establishment of 2,000,000
technological feasibility
Costs of producing product masters for 1,500,000
training materials
Duplication of computer software and 2,500,000
training materials from product masters
Packaging product 900,000

What amount should be capitalized as software cost?

a. 5,400,000
b. 5,700,000
c. 5,900,000
d. 6,900,000
3. Summer Co. reported the following capital structure at year-end.
2017 2018
Ordinary shares 500,000 500,000
Convertible preference shares 100,000 100,000
10% Convertible bonds payable P3,000,000 P3,000,000

During 2018, the entity paid the annual dividend of P5 per share on the preference share. The
preference shares are convertible into 200,000 ordinary shares and the 10% bonds are convertible
into 100,000 ordinary shares. Net income for 2018 was P5,000,000. The tax rate is 30%
What amount should be reported as diluted earnings per?
a. 6.51
b. 7.85
c. 6.25
d. 9.00
4. Ashe Company has granted share options to employees with a fair market value of P6,000,000.
The options vest in three years. The Monte-Carlo model was used to value the options.

On January 1, 2017, which is the date of the grant, the estimate of employees leaving the entity
during the vesting period is 5%.

On December 31, 2018, the estimate of employees leaving before vesting date is revised to 6%.
 On December 31, 2019, only 5% of the employees actually left the entity.

What is the compensation expense for 2019?

a. 2,000,000
b. 1,900,000
c. 1,880,000
d. 1,940,000
5. During 2017, PTX Company decided to change from the FIFO method of inventory valuation to
the weighted average method.
FIFO Weighted Average
January 1 inventory 7,100,000 7,700,000
December 31 inventory 7,900,000 8,300,000

In the statement of retained earnings for 2017, what amount should be reported as the pretax
cumulative effect of this accounting change?
a. 1,000,000 addition
b. 1,000,000 deduction
c. 600,000 addition
d. 600,000 deduction
6. Conceptually, interim financial statements can be described as emphasizing
a. Timeliness over reliability
b. Timeliness over reliance
c. Relevance of comparability
d. Comparability over verifiability
7. I. Earnings per share amounts should not be presented if they are negative, i.e. losses per share.
II. A reduction in retained earnings per share, after considering the effect of potential ordinary
shares, is an example of a dilution.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
8. What concept justifies the use of accruals and deferrals?
a. Going concern
b. Consistency
c. Materiality
d. Timeliness
9. In a period of rising prices, when the FIFO inventory cost flow method is used, a perpetual
inventory system would
a. Not be permitted
b. Result in a higher ending inventory than a periodic inventory system
c. Result in the same ending inventory as a periodic inventory system
d. Result in a lower ending inventory than a periodic system
 10. Margaery Co. prepares an accounts receivable aging schedule with a series of computations as
follows: 2% of the total peso balance of accounts from 1-60 days past due, plus 5% of the total
peso balance of accounts from 61-120 days past due and so on. How would you describe the total
of the amounts determined in this series of computations?
a. It is the amount of uncollectible accounts expense for the year
b. It is the amount that should be added to the allowance for uncollectible accounts at year-
end
c. It is the amount of the desired credit balance of the allowance for uncollectible accounts
to be reported in the year-end financial statements
d. When added to the total accounts written off during the year, the new sum is the desired
credit balance of the allowance accounts

AFAR

1. The date when revenue from consignment sales must be properly recognized by the consignor is
when:
a. Remittance was made by the consignee to the consignor
b. Notification about sales of consigned goods was received by the consignor
c. Merchandise was shipped to the consignee by the consignor
d. All the consigned goods were already sold by the consignee

2. An insurance contract can contain both deposit and insurance elements. An example might be a
reinsurance contract where the cedent receives repayment of the premiums at a future time if
there are no claims under the contract. Effectively, this constitutes a loan by the cedent that will
be repaid in the future. PFRS 4 requires that:
a. Each payment by the cedent is accounted for as a loan advance and as a payment for
insurance cover
b. The insurance premium is accounted for as a revenue item in the income statement
c. The premium is accounted for under PAS 18
d. The premium paid is treated purely as a loan and Is accounted for under PAS 39
3. Which of the following is the best theoretical justification for consolidated financial statements?
a. In form the companies are separate, in substance they are one entity
b. In form the companies are one entity, in substance they are separate
c. In form and substance, the companies are one entity
d. In form and substance the companies are separate
4. In which order are partnership assets distributed to partners under Partnership Law?
a. Capital balances, loans, profits
b. Loans, capital balances, profits
c. Loans, profits, capital balances
d. Profits, capital balances, loans
5. Agency NNN issued check to Nongovernment Organizations (NGO’s) for fund assistance
amounting to P100,000. The entry to record this transaction would be:
 a. No entry
b. Memorandum entry in RAOMO
c. Due from Nat’l. Gov’t. Agency 100,000
Cash-MDS-Regular 100,000
d. Other receivables 100,000
Cash-MDS-Regular 100,000
6. The Krusty Grab has a secret ingredient in its production. This ingredient costs the company P60
each from the supplier and requires a 6-day lead time. The demand every quarter is 13,680 units.
The ordering cost is P12.50 per order (EOQ is 1,200 units).

The desired safety stock if the maximum daily usage is 175 units is
a. 1,050 units
b. 138 units
c. 912 units
d. 822 units
7. During the month of June, Steve Corporation incurred the following costs on Job 2017 for the
manufacture of 2,000 motors.
Direct materials P 42,000
Direct labor 80,000
Factory overhead (150% of DL) 120,000
Total P 242,000

Direct cost of reworking 100 P20.00

units
Direct materials per unit 50.00
Total P70.00

The final inspection showed that there are 50 spoiled units which can be sold for a total amount
of P3,000. What would be the selling price per unit if the GP rate based on cost is 40%?
a. P182.00
b. P176.62
c. P179.55
d. P174.30
8. Fix-It-Felix Realty Corporation entered into a fixed price contract with Vanellope Homes on July
01, 2014 to construct a medium rise condominium. At that time, Fix-It-Felix Realty Corporation
estimated that it would take between 2 to 3 years to complete the project. The total contract
price for construction of the building is P4,500,000. Fix-It-Felix accounts for this contract under
the percentage of completion method. The building was deemed substantially completed on
December 31, 2016.

Estimated percentage of completion, accumulated contract costs incurred, estimated costs to

complete the contract, and accumulated billings under the contract were as follows:
 2014 2015 2016
Contract costs incurred P1,140,000 P2,820,000 P4,800,000
Est. costs to complete P2,660,000 P1,880,000 -
Progress billings P1,600,000 P2,700,000 P4,500,000

If the company is using the zero-profit method, how much is the recognized loss in 2016?

a. P300,000
b. P200,000
c. P100,000
d. P0
9. Starks Inc., franchisor, entered into a franchise agreement with Tyrell Company on July 1, 2016.
The total franchise fees agreed upon is P750,000, of which P150,000 is payable upon signing and
the balance is covered by a note payable in four equal annual payments. The direct franchise cost
incurred was P255,422. Indirect expenses of P42,500 was also paid. The market rate of interest is
11% and the note is reasonably assured of collection. The franchise outlet commenced its
operations on December 2, 2016 with total sales during the month of P250,000. The parties have
further agreed that the franchisor will charge 5% on the franchisee’s gross sales for continuing
services rendered by the former. Assuming the notes receivable is non-interest-bearing, how
much is the net income reported in 2016?
a. P355,540
b. P329,945
c. P363,790
d. P381,135
10. Talento Technologies acquired an 80% interest from Solar Company on January 1, 2016 for
P2,200,000 when the fair value of Solar Company’s identifiable assets and liabilities was
P2,000,000. Solar Company’s shareholder’s equity accounts on date of acquisition show: Share
capital-P400,000; Share premium-P300,000; and Retained Earnings-P900,000. The price
difference between the carrying value and fair value of net assets is attributable to a non-current
depreciable asset with 5 years remaining life. Both companies are classified as SMEs. The amount
of goodwill in the consolidated balance sheet as of December 31, 2016 is:
a. P750,000
b. P600,000
c. P740,000
d. P540,000

AUD

1. In connection with your audit of Caloocan Corporation for the year ended December 31, 2016,
you gathered the following:

Current account at Metrobank P2,000,000

 Current account at BPI (100,000)
Payroll account 500,000
Foreign bank account – restricted (in 1,000,000
equivalent pesos)
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from controller’s sister 10,000
Credit memo from a vendor for a purchase 20,000
return
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money order 30,000
Petty cash fund (P4,000 in currency and 10,000
expense receipts for P6,000)
Treasury bills, due 3/31/17 (purchased 200,000
12/31/16)
Treasury bills, due 1/31/17 (purchased 300,000
1/1/16) 300,000

Based on the above information and the result of your audit, compute for the cash and cash
equivalent that would be reported on the December 31, 2016 balance sheet.
a. P2,784,000 c. P2,790,000
b. P3,084,000 d. P2,704,000
2. Which of the following auditing procedures would the auditor not apply to a cutoff bank
statement?
a. Trace year end outstanding checks and deposits in transit to the cutoff bank statement.
b. Reconcile the bank account as of the end of the cutoff period.
c. Compare dates, payees and endorsements on returned checks with the cash
disbursements record.
d. Determine that the year-end deposit in transit was credited by the bank on the first
working day of the following accounting period.
3. An auditor would analyze inventory turnover rates to obtain evidence concerning management’s
assertion about:
a. Valuation or allocation
b. Presentation and disclosure
c. Rights and obligations
d. Completeness
4. Once a CPA has determined that the accounts receivable have increased because of slow
collections in a tight money environment, the CPA is likely to:
a. Increase the balance in the allowance for bad debts account
b. Review the going concern ramifications
c. Review the credit and collection policy
d. Expand tests of collectibility
5. The Anda Company is on a calendar year basis. The following data were found during your audit:
 a. Goods in transit shipped FOB destination by a supplier, in the amount of P100,000, had
been excluded from the inventory, and further testing revealed that the purchase had
been recorded.
b. Goods costing P50,000 had been received, included in inventory, and recorded as a
purchase. However, upon your inspection the goods were found to be defective and
would be immediately returned.
c. Materials costing P250,000 and billed on December 30 at a selling price of P320,000, had
been segregated in the warehouse for shipment to a customer. The materials had been
excluded from inventory as a signed purchase order had been received from the
customer. Terms, FOB destination.
d. Goods costing P70,000 was out on consignment with Hermie Company. Since the monthly
statement from Hermie Company listed those materials as on hand, the items had been
excluded from the final inventory and invoiced on December 31 at P80,000.
e. The sale of P150,000 worth of materials and costing P120,000 had been shipped FOB
point of shipment on December 31. However, this inventory was found to be included in
the final inventory. The sale was properly recorded in 2015.
f. Goods costing P100,000 and selling for P140,000 had been segregated, but not shipped
at December 31, and were not included in the inventory. A review of the customer’s
purchase order set forth terms as FOB destination. The sale had not been recorded.
g. Your client has an invoice from a supplier, terms FOB shipping point but the goods had
not arrived as yet. However, these materials costing P170,000 had been included in the
inventory count, but no entry had been made for their purchase.
h. Merchandise costing P200,000 had been recorded as a purchase but not included as
inventory. Terms of sale are FOB shipping point according to the supplier’s invoice which
had arrived at December 31.
Further inspection of the client’s records revealed the following December 31, 2016 balances:
Inventory, P1,100,000; Accounts receivable, P580,000; Accounts payable, P690,000; Net sales,
P5,050,000; Net purchases, P2,300,000; Net income, P510,000.
Based on the above and the result of your audit, determine the adjusted balances of following as
of December 31, 2016:
6. Inventory:
a. P1,230,000 c. P1,550,000
b. P1,650,000 d. P1,480,000
7. Accounts payable
a. P710,000 c. P810,000
b. P540,000 d. P760,000

8. In auditing intangible assets, an auditor most likely would review or recompute amortization and
determine whether the amortization period is reasonable in support of management’s financial
statement assertion of
a. Valuation
b. Completeness
 c. Existence or occurrence
d. Rights and obligations.
9. The auditor is most likely to verify accrued commissions payable in conjunction with the
a. Sales cutoff test
b. Verification of contingent liabilities
c. Review of post balance sheet date disbursements
d. Examination of trade accounts payable
10. The year-end audit of the records of Stamina Farms disclosed a shortage in cash amounting to
P600,000. The treasurer had concealed the fraud by increasing inventories by P300,000, land by
P100,000 and accounts receivable by P200,000.

Faced with prosecution, the treasurer offered to surrender 6,000 Stamina Farms shares owned
by him. The board of directors accepted the offer, with the agreement that the treasurer would
pay any deficiency between the shortage and the book value of the shares, after adjusting for the
fraud. The corporation would in turn pay the excess, if any, of the book value over the shortage.

As of December 31, 2018, there were 40,000 common shares issued and outstanding with a par
value of P100; Retained earnings as of January 1, 2018 was P1,600,000 and net income from 2018
operations was P1,400,000.

What would be the book value per share for purposes of the agreement?
a. P175 b. P206 c. P150 d. None of these