Sample questions

CPALE sample questions with worked answers

Six questions, one from each subject of the CPA board exam. Try each one, then open the answer for the working and the standard or law it rests on.

FAR · Property, plant and equipment

Mabini Corp. bought a machine for its new plant in Batangas and paid the following.

List price of the machine: ₱1,200,000
Trade discount, 10% of list price: ₱120,000
Import duties: ₱60,000
Freight and handling to the plant: ₱25,000
Installation and assembly: ₱45,000
Training for staff at the new plant: ₱30,000
Advertising for the new product the machine will make: ₱20,000

At what amount should Mabini first recognise the machine?

A₱1,240,000
B₱1,210,000
C₱1,260,000
D₱1,330,000

Show the answer and working

Answer: B. ₱1,210,000

₱1,210,000 is the net purchase price plus the costs of getting the machine to the plant and ready to run.

Worked solution

Purchase pricePAS 16.16(a)₱1,200,000
Trade discounts are deductedPAS 16.16(a)(₱120,000)
Import duties are part of the purchase pricePAS 16.16(a)₱60,000
Initial delivery and handlingPAS 16.17(c)₱25,000
Installation and assemblyPAS 16.17(d)₱45,000
Staff training for a new location: expensePAS 16.19(c)Expense
Advertising a new product: expensePAS 16.19(b)Expense

Cost of the machine₱1,210,000

Source: PAS 16, Property, Plant and Equipment, paragraphs 16, 17 and 19. PAS 16 is IAS 16 as adopted in the Philippines, with the same paragraph numbers.

AUD · Subsequent events

CPA Garcia is auditing a client for the fiscal year ended December 31, 2025. On February 15, 2026, before the audit report date, a fire destroyed the client's main warehouse. The loss is material but fully insured. How should this event be treated?

ATreat the fire as a non-adjusting subsequent event and disclose the nature of the event and the insurance coverage in the notes
BTreat the fire as an adjusting subsequent event and write down the carrying amount of the warehouse in the year-end financial statements
CIgnore the event entirely because the loss is fully covered by insurance and therefore has no effect on the financial statements
DRecognize the expected insurance proceeds as a receivable and the fire loss as an expense in the year-end financial statements

Show the answer and working

Answer: A. Treat the fire as a non-adjusting subsequent event and disclose the nature of the event and the insurance coverage in the notes

The fire happened after the reporting date and says nothing about conditions that existed at December 31, so it is a non-adjusting event. The year-end figures stay as they are. Because the loss is material, the notes disclose the nature of the event and an estimate of its financial effect, including the insurance cover.

The auditor's work under PSA 560 is to see that this disclosure is made.

A fire after year end is a non-adjusting event: disclose it, do not adjust.

Source: PAS 10, paragraphs 3, 10, 21 and 22(e); PSA 560.

TAX · VAT exempt transactions

Which of the following is VAT-exempt?

ASale of agricultural and marine food products in their original state
BSale of commercial real property held primarily for lease to business tenants
CImportation of luxury goods for sale in the ordinary course of trade or business
DSale of professional services rendered by a VAT-registered individual practitioner

Show the answer and working

Answer: A. Sale of agricultural and marine food products in their original state

Section 109(1)(A) of the NIRC exempts the sale or importation of agricultural and marine food products in their original state. Simple preparation for the market, such as freezing, drying, salting, broiling, roasting or smoking, does not take a product out of its original state.

Commercial real property held for lease, goods imported for sale, and the services of a VAT-registered professional are all subject to VAT.

Agricultural and marine food products in their original state are VAT exempt.

Source: NIRC, Section 109(1)(A).

MAS · Cost-volume-profit analysis

Solace Manufacturing: price ₱120, variable cost ₱72, fixed costs ₱1,440,000, volume 45,000 units. If a ₱5 reduction in selling price increases volume by 15%, compute the new operating income.

A₱1,080,000
B₱963,750
C₱785,250
D₱851,250

Show the answer and working

Answer: C. ₱785,250

Operating income is units sold times contribution margin per unit, less fixed costs. The new price is ₱115, so the contribution margin is ₱115 less ₱72, or ₱43 a unit. The new volume is 45,000 × 1.15 = 51,750 units.

₱2,225,250,
= 51,750 × ₱43
less fixed costs of ₱1,440,000, gives ₱785,250.

Working

Contribution margin, 51,750 units × ₱432,225,250
Less fixed costs(1,440,000)
New operating income785,250

New operating income = new units × new contribution margin per unit, less fixed costs.

Source: Horngren, Datar and Rajan, Cost Accounting: A Managerial Emphasis, cost-volume-profit analysis.

RFBT · Labor law: holiday pay

Hilario works 8 hours a day, 6 days a week. His daily wage is ₱700. His employer required him to work on a regular holiday that also fell on his scheduled rest day. What is his compensation for that day, assuming he worked 8 hours?

A₱1,400
B₱910
C₱1,820
D₱2,100

Show the answer and working

Answer: C. ₱1,820

Work on a regular holiday is paid at 200% of the daily wage for the first 8 hours. When the holiday also falls on the employee's rest day, he gets an additional 30% of that 200% rate.

₱1,400,
= ₱700 × 200%
plus 30% of ₱1,400, or ₱420, gives ₱1,820, which is 260% of the daily wage.

Working

Regular holiday, 200% of ₱7001,400
Add rest day premium, 30% of ₱1,400420
Pay for the day1,820

Regular holiday on a rest day: 200% of the daily wage, plus 30% of that.

Source: Labor Code, Article 94; Omnibus Rules, Book III, Rule IV.

AFAR · Cash flow hedge of a forecast purchase

Tago Fish Processing Corp. hedges a highly probable purchase of 200,000 kilograms of tuna expected in 4 months using a forward contract. At year-end, the forward contract has a cumulative fair value loss of ₱250,000, all of which is effective. In the following period, the purchase occurs and the tuna is processed into canned goods. Under PFRS 9, what would happen to the cumulative fair value loss?

AThe entity must include the ₱250,000 directly in the initial cost of the inventory
BThe ₱250,000 is reclassified to profit or loss evenly over the estimated shelf life of the canned goods
CImmediately upon the purchase of the tuna, the ₱250,000 is reclassified from OCI to profit or loss
DThe ₱250,000 remains permanently in OCI and is never reclassified to profit or loss

Show the answer and working

Answer: A. The entity must include the ₱250,000 directly in the initial cost of the inventory

When a hedged forecast purchase results in a non-financial asset, such as inventory, PFRS 9 requires the amount in the cash flow hedge reserve to be removed and included directly in the asset's initial cost. This basis adjustment is not a reclassification to profit or loss.

The ₱250,000 loss becomes part of the cost of the tuna and reaches profit or loss as the canned goods are sold.

Hedge of a forecast purchase of inventory: the hedge reserve goes into the inventory's cost.

Source: PFRS 9, paragraph 6.5.11(d)(i).

About these questions

They are practice questions written in the style of the exam, not questions from a past CPALE. Each answer was checked against its source before it went on this page, and each names the standard or law it comes from, so you can check it yourself. For what else each subject covers, see the syllabus breakdown and the CPALE schedule by day.

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