PICPA CABANATUAN CITY CHAPTER

ACCOUNTING QUIZ BOWL 2017

LEVEL 2 QUESTIONS
LEVEL 2 - EASY ROUND

1. Given a hyperinflationary economy under PAS 29, which of the following elements of the
statement of financial position is not restated using the general price index?
B a. Monetary and nonmonetary assets
b. Monetary assets and liabilities
c. Nonmonetary assets and liabilities
d. Nonmonetary assets and liabilities

2. The modified accrual basis under the New Government Accounting System (NGAS) prescribes that
a. Expenses are recognized as paid
D b. Expenses are recognized as paid except when a specific law requires otherwise
c. Expenses are recognized as incurred
d. Expenses are recognized as incurred except when a specific law requires otherwise

3. Under PSA 580, if an audit client’s management refuses to provide a representation that the auditor
considers necessary, then the auditor should express
C a. A qualified opinion or an adverse opinion since this constitutes a scope limitation
b. A qualified opinion or an adverse opinion since this does not constitute a scope limitation
c. A qualified opinion or a disclaimer of opinion since this constitutes a scope limitation
d. A qualified opinion or a disclaimer of opinion since this does not constitute a scope limitation

4. Determine the false statement regarding pledge and mortgage.

A a. A third person cannot pledge his property to secure another person’s debt.
b. The thing pledged may be delivered to a third person by the agreement of the debtor and
the creditor.
c. Pledge is constituted on movables while real mortgage is constituted on immovables.
d. A real mortgage extends to the growing fruits and improvements on the property
mortgaged.

5. A parent cannot consolidate a subsidiary when

C a. The parent uses the equity method of accounting
b. The parent changes from cost method to equity method of accounting
c. The parent has definite plans to sell its entire ownership in the subsidiary
d. The parent will present the subsidiary’s FS along with its own separate FS

6. The reciprocity clause in donor’s tax law generally applies to

D a. Resident alien and tangible personal property
b. Non-resident alien and tangible personal property
c. Resident alien and intangible personal property
d. Non-resident alien and intangible personal property

7. Which is not considered as an accessory contract?

A a. Agency c. Antichresis
b. Pledge d. Mortgage

8. Determine the false statement.

C a. The cost of materials used and made part of the finished good shall be considered as a
prime cost.
b. The cost of materials used but not made part of the finished good shall be considered as a
conversion cost.
c. The labor cost paid to factory supervisors shall be considered as both a prime and a
conversion cost.
d. Plant overhead costs may be applied to products using a normal or a standard costing
system.
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9. Assuming all the other requisites of negotiability are present, which of the following instruments is not
payable to bearer?
B a. “pay to the order of cash”
b. “pay to Aljon Lee, bearer”
c. “pay to Aljon Lee or bearer”
d. “pay to the order of Manny Pacquiao, Philippine boxing hero”

10. In the cost function Y = a + bX, Y ÷ X =

D a. Slope of the cost line c. Unit variable cost
b. Unit fixed cost d. Average unit cost

LEVEL 2 - AVERAGE

1. A minimum wage earner is exempt from all of the following, except: (RA 9504)
C a. Tax on holiday pay c. Tax on fringe benefits
b. Tax on overtime pay d. Tax on night shift differential

2. In an attribute sampling by the auditor, which condition usually leads to a smaller sample size?
A a. Higher tolerable deviation rate
b. Higher reliance on internal control
c. Higher expected population deviation rate
d. Lower allowable risk of assessing control risk too low

3. The debt ratio of a company would have increased when recording

D a. Accrual and deferral of income c. Accrual of income and deferral of expense
b. Accrual and deferral of expense d. Deferral of income and accrual of expense

4. On April 3, 2017, Jimmy gave a piece of land to his long-time lover Linda who is a graduate of BS
Taxation. The land had a fair market value of P 50,000. Assuming that the donor’s tax due for this
donation was P 10,500, how much unpaid tax on the land was assumed by the Linda?
Answer: P 15,000

5. Which of the following requires approval of board of directors and the shareholders?
C a. Both cash dividends and stock dividends
b. Cash dividends only
c. Stock dividends only
d. Neither cash dividends nor stock dividends

6. Which condition or event would cause an auditor have substantial doubt about a client’s ability to
continue as a going concern? (PSA 570)
B a. Excessive reliance on long-term borrowings to finance short-term assets
b. Non-compliance with capital and other statutory requirements
c. Loss of key management personnel with immediate replacement
d. Change from cash-on-delivery (COD) to credit transactions with suppliers

7. The following data refer to the units processed by the assembly department for a recent month:
Beginning work-in-process (60% complete) 12,000
Units started 200,000
Units completed 192,000
Ending work-in-process (70% complete) 20,000
What are the equivalent units of production for the month under FIFO method?

Answer: P 198,800

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8. Jonlee Company acquired an asset that had a cost of P 390,000. The asset being depreciated over a 5-
year period using the sum-of-the-years’ digit method. It has a salvage value estimated at P 30,000. If
the asset is to be sold at the end of the third year for a P 20,000 gain, then how much would it have to
be sold?

Answer: P 122,000

9. A non-resident alien not engaged in trade or business is found liable for P 2,400 fringe benefit tax.
What is the monetary value of the fringe benefit received by the taxpayer?

ANSWER: P 7,200

10. Mr. Picpa Manda, a citizen of the Philippines and resident of Mandaluyong, died on July 19, 2017.
Among his gross estate are properties inherited from his deceased father who died on March 1, 2014.
What percentage of deduction will be used in computing the amount of vanishing deduction?

ANSWER: 40%

LEVEL 2 - DIFFICULT

1. Which audit procedure may identify the existence of related party transactions? (PSA 550)
C a. Sending second requests for unanswered positive confirmations of accounts receivable
b. Sending second requests for unanswered negative confirmations of accounts receivable
c. Performing detailed tests of transactions and balances
d. Inquiring of the client’s lawyers concerning litigations and claims

2. The following facts relate to Uberita Company for the year 2017:
Taxable income for 2017 P 2,500,000
Deferred tax liability, January 1 P 864,000
Deferred tax asset, January 1 P 576,000
Cumulative timing difference at December 31 (future taxable amount) P 2,200,000
Cumulative timing difference at December 31 (future deductible amount) P 1,000,000
Income tax rate for all years 32%
Assuming that there were no permanent differences in 2017, what is the amount of pretax financial
income in 2017?

Answer: P 2,800,000

3. A bank recently approved a P 100,000 bank loan application filed by Aljon Merchandising. The loan has
compensating balance requirements and is subject to a discounted interest rate of 12%. Assuming
that the effective annual rate of the loan is computed to be 15%, how much is the loan’s required
compensating balance?

Answer: P 8,000

4. Selling price is P 10; product elimination point in units: 2,500; shutdown cost in pesos, P 1,250;
variable cost ratio is 75%. Determine the break-even point in pesos. (90 seconds)

Answer: P 30,000

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5. Given the following April data for Ireneo Company, which uses a single material for the manufacturing
of its lone product:
Material purchase price variance P 250
Actual price per unit P 1.20
Standard price per unit P 1.10
Materials, April 1 320 units
Materials, April 30 480 units
If the material price remained stable, how much is the actual cost of materials used for the April
production?

Answer: P 2,808

6. Which of the following wordings is usually not found in the auditor’s responsibility paragraph of the
independent auditor’s report? (PSA 700)
A a. “…audited the accompanying financial statements…”
b. “…sufficient and appropriate to provide a basis for our opinion…”
c. “…performing procedures to obtain evidence...”
d. “…we comply with ethical requirements…”

7. Bonafe Company is an audit client that operates a retail store along Session Road and made a year-
end accrual of P 64,250 for the following expenses:
 The store lease calls for fixed rent of P 6,000 per month, paid at the beginning of the month,
and an additional rent equal to 6% of net sales over P 1,250,000 per calendar year, payable
on January 31 of the following year. Net sales for 2016 were P 2,250,000.
 An electric bill of P 4,250 covering the period December 16, 2016 through January 15, 2017
was received January 23, 2017.
 A P 2,000 telephone bill was received on January 2, 2017, covering: service in advance for
January 2017, P 750 and local and toll calls for December 2016, P 1,250.
What adjustment to the “Accrued Expense” account will you propose to Bonafe Company for the
foregoing transactions? Indicate whether debit or credit.

Answer: P 875 debit

8. NCRC, Inc. manufactures refined sugar. The following selected data are taken from its books:
Sales of refined sugar, net of VAT P 2,000,000
Purchase of sugar cane from farmers 500,000
Purchase of packaging materials, gross of VAT 784,000
Purchase of labels, gross of VAT 112,000
Advanced payment of VAT before release from refinery 60,000

How much is the VAT payable using 12% VAT rate?

Answer: P 64,000

9. Assuming P 20,000 net annual cash inflows from a 4-year P 60,492-capital investment project, the
sophisticated rate of return for the project is closest to
C a. 14.4% c. 12.2%
b. 13.3% d. 11.1%

10. A construction company incurred P 2,400,000 for first year of construction of project # 123, which has
a contract price of P 16,000,000. The company reported for the first year ‘Construction-in-Progress’
amounting to P 800,000 (net of progress billings). If the first year percentage-of–completion of project
#123 is 20%, then what percentage of the contract price has been billed so far?

Answer: 15%

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LEVEL 2 - TIE-BREAKER QUESTIONS

1. The Manila Branch of the Blue Company is billed for merchandise by the home office at 20% above
cost. The branch, in turn, prices merchandise for sales purposes at 25% above billed price. On
February 29, all of the branch merchandises are destroyed by fire. No insurance was maintained.
Manila branch accounts show the following information:
Merchandise inventory, January 1 (at billed price) P 36,960
Shipments from home office (through February 29, at billed price) 24,000
Sales 21,000
Sales returns 4,200
What was the true cost of merchandise destroyed by fire? (60 seconds)

ANSWER: P 39,600

2. What is the minimum corporate income tax (MCIT) rate imposed upon any domestic corporation on its
gross income within and without the Philippines?
A a. 2% c. 10%
b. 5% d. 15%

3. What is actual sales less safety margin?

C a. Degree of operating leverage c. Break-even point
b. Contribution margin d. No meaningful amount

4. How much should be the minimum paid-in capital for a newly organized corporation that has an
authorized capital stock amounting P 60,000.00 upon incorporation?
B a. P 15,000 c. P 3,750
b. P 5,000 d. Any amount as decided by the incorporators

5. Which of the following will change the status of a taxpayer?

D a. Marriage of a dependent within the taxable year
b. Dependent becoming 21 years old during the year
c. Dependent gaining employment during the year
d. Marriage of taxpayer himself during the year

6. Given the following data on costs:

Units of product cost 15 25
Total expected cost P 7,500 “X”
Average per unit P 500 “Y”
Assuming that the cost is a fixed cost, the amounts in the cells labeled “X” and “Y” are, respectively,
B a. P 7,500 and P 500 c. P 12,500 and P 625
b. P 7,500 and P 300 d. P 12,500 and P 500

7. A depreciable asset’s carrying value is determined to be P 450,000 at year-end. On the same date,
the fair value less costs to sell is determined to be P 360,000 while value-in-use is determined to be P
380,000. How much is the year-end impairment loss of this depreciable asset?
B a. P 20,000 c. P 80,000
b. P 70,000 d. P 90,000

8. The factory overhead cost in January was P 3,000 (20 hours) and P 2,200 in February (10 hours).
Using the high-low method, determine the annual fixed factory overhead costs.
D a. P 1,200 c. P 14,400
b. P 1,400 d. P 16,800

(Nothing Follows)

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