UNION CHRISTIAN COLLEGE

City of San Fernando, La Union

School of Business and Sciences

Accountancy Program

MOCK BOARD EXAMINATION

SY 2019-2020

Instructions: Kindly encircle the correct letter using black or blue ball pen. Double encircling,
erasures, usage of pencil and friction pen in encircling means wrong.

1. ABC Company reported pretax financial income of P2,000,000 for the year ended December
31,2020. The taxable income was P1,500,000.
The difference is due to accelerated depreciation for income tax purposes.
The income tax rate is 30% and ABC Company made estimated tax payment of P200,000 during
the current year.
Required:
a. Prepare journal entries for 2020.
b. Compute the total income tax expense for 2020.

2. Zeus Company reported pretax financial income of P3,000,000 for the year ended December
31,2020. The taxable income was P4,000,000.
The difference is due to rental received in advance. Rental income taxable when received.
The income tax rate is 30% and Zeus Company made estimated tax payment of P500,000during
the current year.
Required:
a. Prepare journal entries relating to income tax for 2020.
b. Compute the total income tax expense for 2020.

3. On January 1,2020, Valley Company entered into a 3-year construction contract that had an
estimated gross revenue of P3,000,000.

The entity used the percentage of completion in recognizing income and reported construction
income as:
2020 600,000
2021 1,500,000
2022 900,000

The cost recovery method is used for income tax purposes and the entity reported income on
the tax return.
2020 -
2021 -
2022 3,000,000

This is the only timing difference between pretax accounting income and taxable income.
The entity reported income before construction income and tax as:
 2020 2,400,000
2021 3,600,000
2022 3,200,000
income tax rate 30%

Required:
Prepare journal entries to record income tax and deferred tax for 2020,2021 and 2022.

4. On January 1,2020, Aye Company purchased an equipment for P1,000,000.

The equipment has an estimated useful life of 4 years and no residual value.
The entity used the straight-line method of depreciation for accounting purposes and the SYD
method for tax purpose.
The comparative depreciation charges for each of the four years are:

The depreciation charge is the only timing difference between the accounting income and
taxable income.
Aye Company generated P4,000,000 income before depreciation and tax for each of the four
years and that the applicable tax rate is 30%.

Required:
1. Prepare journal entries to record income tax and deferred tax for each of the four years.
2. Present the deferred tax liability on December 31,2021.

5. Complex Company reported the following information relating to income before tax for
accounting purposes:

In 2020, the entity recognized doubtful accounts of P100,000. Such accounts were considered
worthless or uncollectible in 2021.
Analysis of the tax and book records disclosed P120,000 in unearned rent income on December
31,2020 that has been recognized as taxable income in 2020 when the cash was received.
Also on December 31,2020, estimated warranty cost of P300,000 had been recognized as
expense on the books in 2020 when the product sales were made but is not deductible for tax
purposes until paid.
The unearned rent income on December 31,2020 is realized and the actual warranty payments
were made as follows:
Rent income per book Actual warranty payments
2021 40,000 20,000
2022 40,000 80,000
2023 40,000 200,000

Required:
1. Prepare journal entries for 2020.2021,2022 and 2023 to record income tax expense and
deferred income tax arising from the temporary differences.
2. Present the deferred tax asset on December 31,2021.
 6. On December 31,2020 the statement of financial position accounts of Simple Company has
the same basis for accounting and tax purposes, except the following:
Carrying amount Tax base Difference
Computer software cost 4,000,000 0 4,000,000
Equipment 15,000,000 12,000,000 5,000,000
Accrued liability-health care 2,000,000 0 2,000,000

In January 2020, the entity incurred cost of P6,000,000 in relation to the development of a
computer software product.
Considering the technical feasibility of the product, this cost was capitalized and amortized over
3 years for accounting purposes using straight line. However, the total amount was expensed in
2020 for tax purposes.
The equipment was acquired on January 1,2020 for P20,000,000. The useful life of the
equipment is 4 years with purposes.
In January 2020, the entity entered into an agreement with the employees to provide health
care benefits. The cost of such plan for 2020 was P2,000,000.
This amount was accrued as expense in 2020 for accounting purposes.
However, health care benefits are deductible for tax purposes only when actually paid.
The pretax accounting income for 2020 is P13,000,000. The tax rate is 30% and there are no
deferred taxes on January 1,2020.

Required:
1. Prepare journal entries to record the deferred tax liability, deferred tax asset and current tax
expense.
2. Present the income tax expense in the income statement.

7. West Company disclosed the following assets and liabilities at carrying amount at year-end:
Property 10,000,000
Plant and equipment 5,000,000
Inventory 4,000,000
Trade receivables 3,000,000
Trade payables 6,000,000
Cash 2,000,000

The value for tax purposes for property and for plant and equipment was P7,000,000 and
P4,000,000 respectively.
The entity has made a provision for inventory obsolescence of P2,000,000 which is not allowable
for tax purposes.
Further, an impairment charge against trade receivables of P1,000,000 has been made. This
charge will not be allowed in the current year for tax purposes.
West Company reported net income of P9,000,000 for the current year.
There is no temporary difference at the beginning of the current year. The tax rate is 30%

Required:
1. Prepare journal entry to record the current tax expense.
2. Prepare journal entry to record the deferred tax liability.
3. Prepare journal entry to record the deferred tax asset.
 4. Determine the net deferred tax expense or benefit.
5. Determine the total income tax expense.

8. Tower Company began operations on January 1,2020. For financial reporting the entity
recognized revenue from all sales under accrual method.
However, in the income tax return, the entity reported qualifying sales under the installment
method. The gross profit on these installment sales under each method was:
Accrual method Installment method
2020 3,200,000 1,200,000
2021 5,200,000 2,800,000
8,400,000 4,000,000

The income tax rate is 30% . There are no other temporary or permanent differences.

What amount should be re[ported as deferred tax asset or liability on December 31,2021?
a. 1,320,000 asset
b. 1,320,000 liability
c. 720,000 asset
d. 720,000 liability

9. Ranger Company located business in two jurisdictions, Singapore and Malaysia.

In both countries, the entity has the legal right to offset the taxes receivable and payable.
The following information related to deferred tax assets and liabilities:
Classification Amount Taxing jurisdiction
Deferred tax asset 800,000 Singapore
Deferred tax liability 300,000 Malaysia
Deferred tax liability 600,000 Singapore

How should the entity present deferred taxes at year end?

Deferred tax asset Deferred tax liability
a. 800,000 900,000
b. 0 1,000,000
c. 200,000 600,000
d. 200,000 300,000

10. Chamber Company revealed the following differences between the book and tax basis of the
assets and liabilities on December 31,2020:
Book basis Tax basis
Installment accounts receivable 1,000,000 0
Litigation liability 200,000 0

It is expected that the litigation liability will be settled in 2021. The difference in accounts
receivable will result in taxable amounts of P600,000 in 2021 and P400,000 in 2022.
The entity has a taxable income of P7,000,000 in 2020. The income tax rate is 30%. This is the
first year of operations of the entity.
1. What amount should be reported as a current tax expense?
a. 2,100,000
b. 2,400,000
c. 2,460,000
d. 2,040,000

2. What amount should be reported as total tax expense?

a. 2,400,000
b. 2,340,000
c. 2,160,000
d. 2,400,000

3. What amount should be reported as deferred tax liability?

a. 240,000
b.360,000
c. 300,000
d. 0

4. What amount should be reported as deferred tax asset?

a. 300,000
b. 300,000
c. 60,000
d. 0

11. Rona Company started to manufacture in 2020 copy machines that are sold on the
installment basis.
Rona Company recognizes revenue when the equipment is sold for financial reporting purposes
and when installment payments are received for tax purposes.
In 2020, the entity recognized gross profit of P6,000,000 for financial reporting purposes and
P1,500,000 for tax purposes.
The amounts of gross profit expected to be recognized for tax purposes in 2021 and 2022 are
P2,500,000 and P2,000,000 respectively.

The entity guaranteed the copy machines for two years.

Warranty costs are recognized on the accrual basis for financial reporting purposes and when
paid for tax purposes.
Warranty cost accrued in 2020 is P2,500,000 but only P500,000 of warranty cost is paid in 2020.

It is expected that in 2021 and 2022, P1,000,000 and P1,000,000 respectively of warranty cost
will be paid.

In addition, during 2020, P500,000 interest, net of 20% final income tax was received and
earned.
Insurance premium of P100,000 on life insurance policy that covered the life of entity’s
president was paid. The entity is the beneficiary for this policy.
Pretax accounting income in 2020 was P2,000,000. Any 2020 operating loss will be carried
forward to 2021.
The tax rate is 30%
1. What is the accounting income subject to tax?
a. 2,000,000
b. 1,600,000
c. 2,100,000
d. 1,500,000

2. What is the deferred tax asset on December 31,2020?

a. 870,000
b. 600,000
c. 270,000
d. 480,000

3. What is the deferred tax liability on December 31,2020?

a. 1,800,000
b. 1,350,000
c. 1,500,000
d. 1,320,000

4. What is the current tax expense for the current year?

a. 180,000
b. 600,000
c. 750,000
d. 0

5. What is the total tax expense for the current year?

a. 600,000
b. 630,000
c. 480,000
d. 0

13. ABC Company has a defined contribution plan that covers the existing employees. The terms
of the plan required ABC to contribute 5% of the annual employees’ salaries to the retirement
plan each year. The payroll records show the following annual series.
2020 4,000,000
2021 4,200,000

Required:
Prepare journal entry to record the employees’ benefits expense for 2020 and 2021.

14. On December 31,2020, Sun Company paid P400,000 contribution to a defined contribution
plan.
Of this amount P350,000 is in part exchange for services performed by employees for 2020, and
the balance of P50000 is in respect of services to be performed in 2021.

Required:
Prepare journal entry to recognize the contribution on December 31,2020.
 15. Woodstock Company has established a defined benefit pension plan for the employees.
Annual payments under the pension plan are equal to an employee’s highest lifetime salary
multiplied by 2% multiplied by number of years with the entity.

On December 31,2020 an employee had worked for Woodstock Company for 10 years. The
current salary of the employee is P500,000.
The employee is expected to retire in 25 years and the salary increases are expected to average
3% per year during that period.
The employee is expected to live 15 years after retiring and will receive the first annual pension
payment one year after retirement.

The discount rate is 8%. The relevant present value and future value factors are:
Future value of 1 at 3% for 25 periods 2.094
PV of an ordinary annuity of 1 at 8% for 15 periods 8.559
PV of 1 at 8% for 25 periods 0.146

Required:
Determine the projected benefit obligation on December 31,2020.

16. Wendy Company has established a defined benefit plan for the employees. Annual
payments under the plan are equal to highest lifetime salary multiplied by 2% multiplied by the
number of years with the entity. On December 31,2020, an employee had worked with the
entity for 15 years. The current annual salary of the employee is P600,000.

The employee is expected to retire in 10 years and the increase in salary is expected to be 4%
per year. The discount rate is 10% The employee is expected to live 8 years after retirement and
shall receive the first annual pension payment one year after retirement.
Future value of 1 at 4% for 10 periods 1.480
PV of an ordinary annuity of 1 at 10% for 8periods 5.335
PV of 1 at 10% for 10 periods 0.386

Required:
Determine the projected benefit obligation on December 31,2020.

17. A director of Easy Company receives a retirement benefit of 10% of final salary per annum
for a contractual period of three years. The director does not contribute to the scheme.
The anticipated salary of the director over three years is P1,000,000 for 2020, P1,200,000 for
2021 and P1,440,000 for 2022.

The discount rate is 5%. The present value of 1 at 5% for:

One period .9524
Two period .907
Three period .8638

Required:
1. Determine the current service cost for 2020, 2021 and 2022.
 2. Prepare a schedule the pension liability on December 31 each of each year and the interest
expense for 2020, 2021 and 2022.
18. Jessabelle Company has established a defined benefit pension plan for an employee. Annual
payments under the pension plan are equal to the employee’s highest lifetime salary multiplied
by 3% multiplied by number of years with the entity.
On December 31,2020 the employee had worked for Jessabelle Company for 15 years. The
current salary is P500,000.

The employee is expected to retire in 5 years and the salary increases are expected to average
4% per year during that period.
The employee is expected to live 6 years after retiring and will receive the first annual pension
payment one year after retirement. The discount rate is 12%.
Future value of 1 at 4% for 5 periods 1.217
PV of an ordinary annuity of 1 at 12% for 6periods 4.111
PV of 1 at 12% for 5 periods 0.567

What is the projected benefit obligation on December 31,2020?

a. 638,269
b. 225,000
c. 524,460
d. 608,500

19. At the beginning of current year, Shakira Company had the following balances in the
memorandum records with respect to a defined benefit plan:

During the year, the accountant had determined that current service cost is P1,550,000.
The discount rate is recognized at 10% and the expected return on plan assets is 12%
The actual return on plan assets for the year is P650,000. The entity contributed P1,200,000 to
the plan at the end of the year.

Required:
1. Determine the employee benefit expense for the current year.
2. Determine the “remeasurement” at year end.
3. Prepare journal entry to record the employee benefit expense.
4. Determine the balance of the prepaid/accrued benefit cost at year end.
5. Reconcile the balance of the prepaid/accrued benefit cost with memorandum records.

20. At the beginning of the current year, Rachel Company provided the following data in
connection with a defined benefit plan.
Fair value of plan assets 6,700,000
Projected benefit obligation 7,600,000

The accountant revealed the following information for the current year:
Current service cost 1,450,000
Past service cost 300,000
Discount rate 10%
Actual return on plan assets 500,000
Contribution to the plan 1,500,000
Benefits paid to retirees 800,000

Required:
1. Determine the employee benefit expense for the current year.
2. Determine the remeasurement at year end to be recognized as component of other
comprehensive income.
3. Prepare journal entry to record the employee benefit expense.
4. Compute the balance of the prepaid/accrued benefit cost at year end.
5. Reconcile the general ledger of the entity with the memorandum ledger.

21. At the beginning of current year, the memorandum records of Klaudine Company showed
the following balances related to a defined benefit plan prior to the adoption of revised PAS 19:
Fair value of plan assets 6,000,000
Unamortized past service cost 300,000
Projected benefit obligation (7,500,000)
Prepaid/accrued benefit cost (1,200,000)

The remaining average vesting period for the employees covered by the past service cost is 3
years.
The transactions affecting the defined benefit plan for the current year are as follows:
Current service cost 900,000
Interest expense- 8% 600,000
Actual return on plan assets 700,000
Contribution to the plan 500,000
Benefits paid to retirees 150,000

Effective in the current year, the entity is adopting the provisions of revised PAS 19 in relation to
the defined benefit plan.

Required:
1. Prepare the adjustment to recognize the transitional effect of revised PAS 19.
2. Determine the employee benefit expense for the current year.
3. Prepare journal entry to record the employee benefit expense for the current year.
4. Compute the prepaid/accrued benefit cost at year end.
5. Reconcile the general ledger of the entity with the memorandum records.

22. Charlton Company provided the following information concerning a defined benefit plan at
the beginning of current year period to the adoption of revised PAS 19:
Debit Credit
Fair value of plan assets 4,750,000
Unamortized past service cost 1,250,000
Projected benefit obligation 5,500,000
Unrecognized actuarial gain 850,000

The transactions for the current year relating to the defined benefit plan are as follows:
 Effective in the current year, the entity has applied the provisions of revised PAS 19 in the
relation to the defined benefit plan.

Current service cost 925,000

Discount rate 0
Actual return on plan assets 485000%
Contribution to the plan 1,350,000
Benefits paid to retirees 995,000
Increase in projected benefit obligation due to changes in
actuarial assumptions 150,000

Required:
1. Prepare journal entry to recognize the transitional effect of adopting revised PAS 19.
2. Determine the employee benefit expense for the current year.
3. Compute the remeasurement related to the defined benefit plan.
4. Prepare journal entry to record the employee benefit expense.
5. Compute the prepaid/accrued benefit cost at year end.
6. Reconcile the general ledger account with the memorandum record.

23. At the beginning of the current year, Rachelleen Company provided the following
information in relation to a defined benefit plan:
Fair value of plan assets 6,000,000
Projected benefit obligation 5,000,000
Prepaid/accrued benefit cost-surplus 1,000,000
Asset ceiling 700,000
Effect of asset ceiling 300,000

During the current year, the following data are gathered:

Current service cost 700,000
Actual return on plan assets 900,000
Contribution to the plan 1,000,000
Pat service cost 200,000
decrease in projected benefit obligation due to changes in
actuarial assumptions 500,000
Asset ceiling at year end 1,200,000
Discount rate 10%

Required:
1. Determine the fair value of plan assets at year end.
2. Determine the projected benefit obligation at year end
3. Determine the effect of asset ceiling at year end.
4. Compute the employee benefit expense for the current year.
5. Compute the remeasurement s for the current year.
 6. Prepare journal entry to record the employee benefits expense.
7. Reconcile the prepaid/accrued benefit cost account.

24. Catician Company provided the following information:

January 1 31-Dec
Fair value of plan assets 3,500,000 3,900,000
Market related value of plan assets 2,800,000 2,900,000
Contribution to the plan 280,000
Benefits paid to retirees 250,000

What is the actual return on plan assets for the current year?
a. 400,000
b. 370,000
c. 430,000
d. 100,000

25. Marion Company provided the following data for the current year:

January 1 Fair value of plan assets 9,000,000

During year Pension benefits paid 700,000
Contribution to the fund 1,000,000
Expected return on plan
assets 1,200,000
Interest income on plan
assets 900,000
December 31 Fair value of plan assets 9,900,000

What is the remeasurement gain or loss on plan assets for the current year?
a. 300,000 gain
b. 300,000 loss
c. 600,000 gain
d. 600,000 loss

26. At the beginning of current year, Maximus Company had a projected benefit obligation of
P10,000,000 and a pension fund with a fair value of P9,200,000.
The entity provided the following information related to the pension plan during the current
year:
Current service cost 1,200,000
Actual return on plan assets 250,000
Benefits paid to retirees 1,100,000
Contribution to the pension fund 1,050,000
Discount rate 9%
Expected return on pension fund 10%
 1. What is the pension expense for the current year?
a. 1,272,000
b. 2,100,000
c. 1,850,000
d. 1,050,000

2. What is the remeasurement gain or loss for the current year?

a. 578,000 gain
b. 578,000 loss
c. 250,000 gain
d. 250,000 loss

3. What is the pension asset or liability at year end?

a. 1,600,000 liability
b. 1,600,000 asset
c. 800,000 liability
d. 800,000 asset

27. Danica Company provided the following information related to a defined benefit plan for the
current year:
Current service cost 30,000
Benefits paid 31,000
Contribution to the fund 21,000
Fair value of plan assets
January 1 2,100,000
December 31 2,400,000
Projected benefit obligation:
January 1 2,200,000
December 31 2,500,000
Past service cost for the current year 115,000

At the beginning of the current year, the discount rate and expected rate of return are 5% and
7% respectively.

At the current year, the discount rate and expected rate of return are 6% and 8% respectively.

1. What amount should be recognized as employee benefit expense in income statement for the
current year?
a. 150,000
b. 145,000
c. 115,000
c. 140,000
2. What is the actual return on the plan assets?
a. 310,000
b. 147,000
c. 163,000
d. 341,000

3. What is the actuarial loss arising from the increase in projected benefit obligation?
a. 191,000
b. 300,000
c. 185,000
d. 76,000

4. What is the net remeasurement gain or loss for the current year?
a. 281,000 gain
b. 281,000 loss
c. 129,000 gain
d. 129,000 loss

5. What amount should be reported as prepaid or accrued benefit cost at year end?
a. 150,000 accrued
b. 150,000 prepaid
c. 100,000 accrued
d. 100,000 prepaid

28. Ultimate Company provided the following information in relation to a defined benefit plan
for the current year:

January1 December 31
Fair value of plan assets 2,600,000 3,000,000
Projected benefit obligation 2,000,000 2,100,000
Prepaid/accrued benefit cost-surplus 600,000 900,000
Asset ceiling 200,000 300,000
Effect of asset ceiling 400,000 600,000
Current service cost 100,000
Contribution to the plan 350,000
Benefits paid 150,000
Discount rate 10%
1. What is the actual return on plan assets for the current year?
a. 200,000
b. 350,000
c. 150,000
d. 260,000

2. What is the actuarial gain due to decrease in PBO?

a. 50,000
b. 40,000
c. 30,000
d. 0

3. What amount should be reported as employee benefit expense?

a. 200,000
b. 100,000
c. 80,000
d. 40,000

4. What is the net remeasurement loss for the current year?

a. 110,000
b. 220,000
c. 270,000
d. 170,000