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1.
Which of the following items are likely to be reported in the supplementary items section of
a statement of realization and liquidation?
a. Creditors' claims settled during the period.
b. Trustee's administration fees.
c.
New obligations incurred by the trustee.
d. Assets subsequently acquired by the trustee.
2.
Padi is an industrial partner. Besides his services, he also contributed capital to the
partnership. There is no agreement as to distribution of profits or losses. The share of Padi
in the profit is
a. To be determined by the remaining partners.
b. Such share as may be just and equitable under the circumstances.
c.
Pro-rata to his contribution
d. Combination of b and c.
3.
On a statement of financial affairs, a specific liability may be classified as
a. Current or long-term.
b. Secured or unsecured.
c.
Monetary or nonmonetary.
d. Past due or not yet due.
4.
The following were taken from the Statement of Affairs of Interlink Corporation:
Assets pledged with fully secured creditors (current fair value is
₱166,000)
Assets pledged with partially secured creditors (current fair value
is ₱112,000)
Free assets (current fair value is ₱104,000)
Liabilities with priority
Fully secured creditors
Partially secured creditors
Unsecured creditors
The estimated percentage of recovery of partially secured creditors:
a. 100%
b. 56%
c. 92.94%
5.
₱208,000
144,000
124,000
26,000
76,000
136,000
276,000
d. 44%
Desperate Co.’s statement of affairs shows the following information:
Estimated gains on realization of
assets
Estimated losses on realization of
assets
Additional assets
Additional liabilities
Capital stocks
Deficit
₱1,440,000
2,000,000
1,280,000
960,000
2,000,000
1,200,000
The expected recovery percentage of stockholders is
a. 30%
b. 43%
c. 57%
d. 70%
6.
It is referred to as an integrated set of activities and assets that is capable of being conducted
and managed for the purpose of providing goods or services to customers, generating
investment income (such a dividends or interest) or generating other income from ordinary
activities.
a. Business
c. Investment vehicle
b. Separate vehicle
d. Cash generating unit
7.
Which of the following statements about identifying the acquirer is/are true?
I. In a cash acquisition, the acquirer is generally the entity that pays the cash.
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II. When a new holding entity issues shares to effect the combination, another of the
combining entities must be identified as the acquirer.
III.Usually the acquirer is the entity that becomes the parent of the other combining party
or parties, but not always.
IV. In a reverse acquisition, the entity that becomes the subsidiary of the other entity is the
acquirer.
a.
II, III and IV
b. I, II, III and IV c. I, II and III
d. I and II only
8.
Anders acquired a manufacturing facility from Bane for a total consideration of ₱6,000,000.
The facility contains 4 equipment with fair value of ₱1,500,000, a building with appraisal
value of ₱2,500,000 and land with appraised value of ₱4,000,000. At what value will the
equipment’s be recognized, in the financial statements of Anders?
a. ₱0
b. ₱1,125,000
c. ₱1,500,000
d. ₱2,000,000
9.
On January 1, David Corporation paid ₱800,000 and issued 18,000 shares of ₱50 par ordinary
shares with market value of ₱1,320,000 for all the net assets of Goliath Corporation. In
addition, David paid ₱12,000 for registering and issuing the 18,000 shares and ₱20,000 for
indirect costs of the business combination. Summary statement of financial position
information for the companies immediately before the merger is as follows:
David
Corporation
Goliath Corporation
Book Value
Book Value
Fair Value
Cash
₱1,400,000
₱160,000
₱160,000
Inventories
480,000
320,000
400,000
Other current assets
120,000
80,000
80,000
Plant assets – net
1,040,000
720,000
1,120,000
Current liabilities
640,000
120,000
120,000
Other liabilities
320,000
200,000
160,000
Ordinary shares, ₱50
1,680,000
800,000
par
Accumulated profits
400,000
160,000
The total assets immediately after the merger is
a. ₱4,488,000
b. ₱4,608,000
c. ₱4,008,000
10.
d. ₱5,440,000
An acquirer made the following entry to report an acquisition:
Tangible assets
₱ 4,000
Customer lists
600
Goodwill
1,000
Liabilities
₱ 2,000
Cash
3,600
Six months after the acquisition, the customer lists are determined to be worthless. How is
this information reported if (1) the new information relates to the value of the customer lists
as of the date of acquisition, and (2) the new information relates to changes in value
since acquisition? Customer lists are written off, and
(1)
(2)
a. A gain on acquisition of ₱600 is recorded.
Goodwill decreases ₱600.
b. Goodwill increases ₱600.
A loss of ₱600 is recorded.
c. A loss of ₱600 is recorded.
Goodwill increases ₱600.
d. Cash is reduced by ₱600.
A loss of ₱600 is recorded.
11.
On 1 January 2020 AC acquires 80% of the equity interests of TC, a private entity, in
exchange for cash of ₱150M. Because the former owners of TC needed to dispose of their
investments in TC by a specified date, they did not have sufficient time to market TC to
multiple potential buyers. The management of AC initially measures the separately
recognizable identifiable assets acquired and the liabilities assumed as of the acquisition date
in accordance with the requirements of PFRS 3. The identifiable assets are measured at
₱250M and the liabilities assumed are measured at ₱50M. AC engages an independent
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consultant, who determines that the fair value of the 20% non-controlling interest in TC is
₱42M.
Since the amount of TC's identifiable net assets exceeds the fair value of the consideration
transferred plus the fair value of the non-controlling interest in TC, AC reviews the
procedures it used to identify and measure the assets acquired and liabilities assumed and
to measure the fair value of both the non-controlling interest in TC and the consideration
transferred. After that review, AC decides that the procedures and resulting measures were
appropriate.
The amount of gain to be recognized in the books of AC is
a. ₱50M
b. ₱42M
c. ₱8M
12.
On January 2, the statement of financial position of
prior to the combination are:
Pluto
Company
Cash
₱1,500,000
Inventories
1,000,000
Property and equipment (net)
2,500,000
Total assets
₱5,000,000
Current liabilities
Ordinary shares, ₱100 par
Share premium
Accumulated profits
Total liabilities and shareholder’s
equity
₱ 300,000
500,000
1,500,000
2,700,000
₱5,000,000
d. Nil
Pluto Company and Saturn Company
Saturn
Company
₱ 50,000
100,000
350,000
₱ 500,000
₱ 50,000
50,000
100,000
300,000
₱ 500,000
The fair value of Saturn Company’s equipment is ₱590,000.
Assuming Pluto Company acquired all of the outstanding shares of Saturn Company resulting
to goodwill of ₱248,000, how much is the price paid to Saturn Company’s share?
a. ₱988,000
b. ₱938,000
c. ₱698,000
d. ₱690,000
13.
Harrison, Inc. acquires 100% of the voting stock of Rhine Company on January 1, 2020 for
₱400,000 cash. A contingent payment of ₱16,500 will be paid on April 15, 2021 if Rhine
generates cash flows from operations of ₱27,000 or more in the next year. Harrison
estimates that there is a 20% probability that Rhine will generate at least ₱27,000 next year
and uses an interest rate of 5% to incorporate the time value of money. The fair value of
₱16,500 at 5%, using a probability weighted approach is ₱3,142.
Assuming Rhine generates cash flow from operations of ₱27,200 in 2020, how will Harrison
record the ₱16,500 payment of cash on April 15, 2021?
a. Debit Contingent performance obligation 16,500 and Credit Cash ₱16,500.
b. Debit Contingent performance obligation ₱3,142, debit Loss from contingent
performance obligation ₱13,358 and Credit Cash ₱16,500.
c.
Debit Investment in Subsidiary and Credit Cash, ₱16,500.
d. Debit Goodwill and Credit Cash, ₱16,500.
14.
Entity A purchase 30% of the ordinary share capital of Entity B for ₱10 million on January 1,
2019. The fair value of the assets of Entity B at that date was ₱20 million. On January 1,
2020, Entity A purchases a further 40% of Entity B for ₱15 million, when the fair value of
Entity B’s assets was ₱25 million. On January 1, 2019 Entity A does not have significant
influence over Entity B. If Entity A measures NCI at present ownership instruments'
proportionate share in the recognized amounts of the acquiree's identifiable net assets, what
value would be recognized for goodwill (before any impairment test) in the consolidated
financial statements of A for the year ended December 31, 2020?
a. ₱12.5 million
b. ₱7.5 million
c. ₱9 million
d. ₱8.75 million
15.
The Statement of Financial Position of Lancer Corporation on June 30 is presented below:
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Current assets
Land
Building
Equipment
Total Assets
₱32,500
220,000
110,000
87,500
₱450,000
Liabilities
Capital stock, ₱5 par
Additional paid in capital
Retained earnings
Total equities
₱87,500
150,000
137,500
75,000
₱450,000
All the assets and liabilities of Lancer assumed to approximate their fair values except for
land and building. It is estimated that the land have a fair value of ₱350,000 and the fair
value of the building increased by ₱80,000.
Phantom Corporation acquired 80% of Lancer’s capital stock for ₱500,000.
Assuming the consideration paid excludes control premium of ₱23,000 and the fair value of
the non-controlling interest is ₱122,750, how much is the goodwill/(gain on acquisition) on
the consolidated financial statement?
a. ₱78,250
b. ₱73,250
c. ₱69,500
d. ₱74,750
16.
PPh Corp. and PFJ Co. which are both engaged in the manufacturer of industrial gases are
being consolidated to form Richo Gases Corp. The constituent companies agreed to the
issuance by Richo Gases Corp. of ₱100 par value stock of their contributions and goodwill.
The goodwill shall be equal to earnings in excess of 8% on assets contributions capitalized
at 20%. Their assets and earnings contributions are as follows:
Net tangible
Expected Annual
Assets
Earnings
PPH Corp
₱250,000
₱25,000
PFJ Co.
150,000
14,000
What amount shall be recognized by Richo gases Corp. as goodwill?
a. ₱32,000
b. ₱35,000
c. ₱39,000
d. ₱45,000
17.
Under PFRS for SME, which of the following statements about control is/are true?
a. Control is the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
b. Control is presumed to exist when the parent owns more than half of the voting power
of an entity, without exception.
c.
Both a and b
d. Neither a nor b
18.
Which of the following statements is not a consolidation principle under PFRS 10?
a. The results of operations of subsidiaries should be included from the date of their
acquisition until the date that the parent ceases to control the subsidiary.
b. The elimination of inter-entity transactions and their effects is made in full, except if the
subsidiaries are not wholly owned.
c.
There should be a separate presentation of the non-controlling interest share in the profit
or loss and in equity.
d. Net assets comprise both the amount calculated at the date of the original combination
and the non-controlling interest’s proportion of the net fair value of those items.
19.
Pride, Inc. owns 80% of Simba, Inc.'s outstanding common stock. Simba, in turn, owns 10%
of Pride's outstanding common stock. What percentage of the common stock cash dividends
declared by the individual companies should be reported as dividends declared in the
consolidated financial statements?
Dividends declared by
Dividends declared by
Pride
Simba
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a.
b.
c.
d
90%
90%
100%
100%
0%
20%
0%
20%
20.
The Cavy Company owns 75% of The Haldenby Company. The following figures are from
their separate financial statements:
Cavy:
Trade receivables ₱1,040,000, including ₱30,000 due from Haldenby.
Haldenby: Trade receivables ₱215,000, including ₱40,000 due from Cavy.
According to PFRS 10 Consolidated financial statements, what figure should appear for trade
receivables in Cavy's consolidated statement of financial position?
a. ₱1,215,000
b. ₱1,225,000
c. ₱1,255,000
d. ₱1,185,000
21.
The consolidated income statement of PP Company and its 80% owned subsidiary follows:
Sales
Cost of goods sold
Gross profit
Operating expenses
Consolidated net income
Less: Noncontrolling interest net income
Profit attributable to Equity Holders of Parent
₱402,000
246,000
₱156,000
81,000
₱75,000
6,000
₱69,000
Compute the net income from own operations of the subsidiary, and PP Company,
respectively.
a. ₱30,000; ₱39,000 b. ₱30,000; ₱45,000
c. ₱6,000; ₱75,000 d. ₱45,000; ₱30,000
22.
Able Company owns an 80% interest in Barns Company and a 20% interest in Carns
Company. Barns owns a 40% interest in Carns Company. The reported income of Carns is
₱200,000 for 2020. Which of the following shows how it will be distributed?
Controlling
Barns NCI Carns NCI
Interest
a.
₱104,000
₱16,000
₱80,000
b.
₱20,000
₱80,000
₱80,000
c.
₱120,000
₱0
₱80,000
d.
₱104,000
₱96,000
₱0
23.
The Phoenix Company holds a 70% interest in The Slardar Company. At the current year
end Phoenix holds inventory purchased from Slardar for ₱270,000 at cost plus 20%. The
group's consolidated statement of financial position has been drafted without any
adjustments in relation to this holding of inventory. Under PFRS 10 Consolidated financial
statements, what adjustments should be made to the draft consolidated statement of
financial position figures for non-controlling interest and retained earnings?
Non-controlling
Retained earnings
interest
a.
No change
Reduce by ₱45,000
b.
No change
Reduce by ₱54,000
c.
Reduce by ₱16,200
Reduce by ₱37,800
d.
Reduce by ₱13,500
Reduce by ₱31,500
24.
Port Company owns 100% of Salem Company. On January 1, 2020 Port sold to Sales delivery
equipment at a gain. Port had owned the equipment for two years and used a five-year
straight–line depreciation with no residual value. Salem is using a three-year straight-line
rate with no residual value for equipment. In the consolidated income statement, Salem’s
recorded depreciation expense on the equipment for 2020 will be decreased by:
a. 20% of the gain on sale
c. 50% of the gain on sale
b. 33.33% of the gain on sale
d. 100% of the gain on sale
25.
May Corp. owns 85% of Day Corp’s ordinary shares. On May 1, 2020, Day Corp. sold a
machine to May Corp. for ₱75,000. The carrying amount of the machine is ₱55,000 and has
a remaining life of 10 years.
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Due to this intercompany transaction, how much is the net adjustment (increase/decrease)
to the consolidated net income for 2020?
a. ₱18,667 decrease
c. ₱15,867 decrease
b. ₱15,300 decrease
d. ₱14,400 decrease
26.
Parentis Ltd. has an 80% investment in Salentis Ltd. with a carrying amount of ₱80,000,000.
The fair value of Salentis Ltd. is ₱200,000,000. The following year, Parentis Ltd. decided to
sell a 29% interest in Subsidiary to a third party in exchange for cash.
Determine the gain or loss on disposal of shares to be recognized in the profit or loss
statement:
a. Zero
b. ₱29,000,000 loss
c. ₱29,000,000 gain
d. ₱3,000,000 loss
27.
On December 31, 2021 the home office of Trisha Supply Company recorded a shipment of
merchandise to its Glenda Forth branch as follows:
Glenda Forth branch
Shipments to Glenda Forth branch
Unrealized profit in Glenda Forth branch inventory
Cash (for freight charges)
₱30,000
₱25,000
4,000
1,000
The Glenda Forth branch sells 40% of the merchandise to outside entities during the rest of
December 31, 2021. The books of the home office and Trisha branches are closed on
December 31 of each year. On January 5, 2022, the Glenda Forth branch transfers half of
the original shipments to the Sandy branch, and the Glenda Forth branch pay ₱500 freight
on the shipment.
At what amounts should the 60% of the merchandise remaining unsold at December 31,
2021 be included in (1) the inventory of the Glenda Forth branch at December 31, 2021, and
(2) the published statement of financial position of Trisha Office Supply Company at
December 31, 2021.
a. ₱15,000; ₱17,400
b. ₱17,400; ₱15,000
c.
₱15,600; ₱18,000
d. ₱18,000; ₱15,600
28.
In the separate financial statement of the parent company, which of the following statements
concerning the different accounting treatment for investment in subsidiary is correct?
a. Under equity method, cash or property dividend received shall be recognized as dividend
income by the parent.
b. Under cost method, the transaction cost directly attributable to acquisition of the
investment shall be expensed as incurred.
c.
Under fair value model, the parent company shall recognize share in net income from
the subsidiary.
d. Regardless of the method, the investment in subsidiary account shall be presented as
noncurrent asset in the parent's separate statement of financial position.
29.
A, B and C decided to form ABC Partnership. It was agreed that A will contribute an
equipment with assessed value of ₱200,000 with historical cost of ₱1,600,000 and
accumulated depreciation of ₱1,200,000. A day after the partnership formation, the
equipment was sold for ₱600,000.
B will contribute a land and building with carrying amount of ₱2,400,000 and fair value of
₱3,000,000. The land and building are subject to a mortgage payable amounting to ₱600,000
to be assumed by the partnership. The partners agreed that B will have 60% capital interest
in the partnership. The partners also agreed that C will contribute sufficient cash to the
partnership.
What is the total agreed capitalization of the ABC Partnership? [05.2019]
a. ₱3,000,000
b. ₱4,000,000
c. ₱5,000,000
d. ₱6,000,000
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30.
On January 1, 2019, A, B and C formed ABC Partnership with original contribution of
₱600,000, ₱1,000,000 and ₱400,000. A is appointed as managing partner.
During 2019, A, B and C made additional investments of ₱1,000,000 and ₱400,000 and
₱600,000, respectively. At the end of 2019, A, B and C made drawings of ₱400,000,
₱200,000 and ₱800,000, respectively. At the end of 2019, the partnership had a credit
balance in the income summary account of ₱2,100,000. The profit or loss agreement of the
partners is as follows:
• 10% interest on original capital contribution of the partners.
• Quarterly salary of ₱80,000 and ₱20,000 for A and B, respectively.
• Bonus to A equivalent to 20% of Net Income after interest and salary to all partners
• Remainder is to be distributed equally among the partners.
What is A’s share in partnership profit for 2019?
₱380,000
b. ₱680,000
c. ₱1,080,000
d. ₱400,000
a.
31.
On December 31, 2018, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of 5:1:4:
Current Assets
Noncurrent
Assets
₱3,000,000
4,000,000
Total Liabilities
A, Capital
B, Capital
C, Capital
₱1,000,000
2,200,000
2,400,000
1,400,000
On January 1, 2019, D is admitted to the partnership by investing ₱1,000,000 to the
partnership for 10% capital interest. The total agreed capitalization of the new partnership
is ₱6,000,000.
What is the capital balance of C after the admission of D to the partnership? [05.2019]
a. ₱1,160,000
b. ₱1,640,000
c. ₱1,000,000
d. ₱1,560,000
32.
On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or
loss ratio of 6:1:3 of partners A, B and C respectively, revealed the following data:
Cash
₱2,000,000
Receivable from A
1,000,000
Other
noncash
4,000,000
assets
Other liabilities
Payable to B
Payable to C
₱4,000,000
2,000,000
200,000
A, Capital
1,400,000
B, Capital
(1,300,000)
C, Capital
700,000
On January 1, 2019, the partners decided to liquidate the partnership. All partners are legally
declared to be personally insolvent. The other noncash assets were sold for ₱3,000,000.
Liquidation expenses amounting to ₱200,000 were incurred.
How much was received by B at the end of partnership liquidation?
a. ₱500,000
b. ₱300,000
c. ₱580,000
d. ₱540,000
33.
On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or
loss ratio of 5:3:2 of respective partners A, B and C, showed the following information:
Cash
Noncash assets
₱3,200,000
2,800,000
Total Liabilities
A, Capital
B, Capital
C, Capital
₱4,000,000
200,000
1,000,000
800,000
On January 1, 2019, the partners decided to liquidate the partnership in installment. All
partners are legally declared to be personally insolvent.
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On January 31, 2019, the following transactions occurred:
• Noncash assets with a carrying amount ₱2,000,000 were sold at a gain of ₱200,000.
• Liquidation expenses for the month of January amounting to ₱100,000 were paid.
• It is estimated that liquidation expenses amounting to ₱300,000 will be incurred for the
month of February 2019.
• 20% of the liabilities to third persons were settled.
• Available cash was distributed to the partners.
What is the amount of total cash withheld on January 31, 2019?
₱1,100,000
b. ₱3,200,000
c. ₱3,500,000
a.
d. ₱3,400,000
34.
At the date of partnership formation of ABC partnership, the amount credited to A’s capital
is less than the fair market, value of the property he contributed. Which of the following is
the most valid reason?
a. The property contributed by A is impaired.
b. The property contributed by A has been subjected to positive asset revaluation.
c.
Bonus has been given by partner A to the other partners.
d. Goodwill arising from partnership formation has been recognized.
35.
What is the main reason for the difference between the branch’s income reported by the
branch and the true branch’s net income computed by the home office?
a. Because of overstatement of branch’s cost of sales for goods coming from outsiders
b. Because of overstatement of branch’s cost of sales for goods coming from home office
c.
Because of overstatement of total goods available for sale coming from home office
d. Because of overstatement of branch’s ending inventory coming from home office
36.
Under PFRS 3, in a business combination achieved in stages, if the acquisition date fair value
of the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities
of the acquiree is lower than the aggregate of the (1) acquisition date fair value of the
consideration transferred by the acquirer; (2) amount of noncontrolling interest measured
at fair value or proportionate share; and (3) acquisition date fair value of acquirer’s
previously held equity interest in the acquire, the difference shall be accounted for by the
acquirer in its consolidated financial statement as
a. Goodwill classified as noncurrent asset not subject to amortization but subject to annual
impairment test
b. Gain on bargain purchase to be recognized as part of profit or loss
c.
Expense as incurred
d. Deduction directly to retained earnings
37.
Which of the following items will not affect the acquisition year’s consolidated net income in
a business combination?
a. Stock issuance cost
b. Direct cost of business combination
c.
Gain on bargain purchase
d. Amortization of difference between fair value and book value of net assets of acquiree
38.
On January 1, 2020, Entity A acquired 70% of outstanding ordinary shares of Entity B at a
price of ₱1,000,000. Entity A incurred ₱200,000 cost related to acquisition. At acquisition
date, the book value of net assets of Entity B is ₱2,500,000 but building with useful life of
10 years is overstated by ₱500,000.
For the year ended December 31, 2020, Entity B reported net income of ₱350,000 and
declared dividend in the amount of ₱100,000. The fair value of the Investment in Entity B is
measured at ₱1,700,000 on December 31, 2020.
In the separate financial statement of Entity A, the investment in Entity A shall be reported
on December 31, 2020 at what amount under equity method? [05.2019]
a. ₱1,610,000
b. ₱1,410,000
c. ₱1,210,000
d. ₱1,200,000
39.
On January 1, 2020, Entity A acquired 70% of outstanding ordinary shares of Entity B at a
price of ₱1,000,000. Entity A incurred ₱200,000 cost related to acquisition. At acquisition
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date, the book value of net assets of Entity B is ₱2,500,000 but building with useful life of
10 years is overstated by ₱500,000.
For the year ended December 31, 2020, Entity B reported net income of ₱350,000 and
declared dividend in the amount of ₱100,000. The fair value of the Investment in Entity B is
measured at ₱1,700,000 on December 31, 2020.
In the separate financial statement of Entity A, what is its income in relation to Investment
in Entity B for the year ended December 31, 2020 under equity method? [05.2019]
a. ₱480,000
b. ₱600,000
c. ₱280,000
d. ₱210,000
40.
On January 1, 2019, Entity A acquired 60% of outstanding ordinary shares of Entity B at a
gain on bargain purchase of ₱80,000. For the year ended December 31, 2020, Entity A and
Entity B reported sales revenue of ₱4,000,000 and ₱2,000,000 in their respective separate
income statements. At the same year, Entity A and Entity B reported cost of goods sold of
₱2,400,000 and ₱1,400,000, in their respective separate income statements.
During 2019, Entity A sold inventory to Entity B at selling price of ₱560,000 with gross profit
rate of 40% based on cost. On the other hand, Entity B at a selling price of ₱800,000 with
gross profit rate of 30% based on sales during 2020.
On December 31, 2019, 25% of the goods coming from Entity A remained in Entity B’s
inventory but all were eventually sold to third persons during 2020. As of December 31,
2020, 40% of the goods coming from Entity B were eventually sold to third persons.
For the year ended December 31, 2020, Entity A reported net income of ₱1,120,000 while
Entity B reported net income of ₱400,000 and distributed dividends of ₱100,000. Entity A
accounted for its investment in Entity B using cost method in its separate financial
statements.
What is the consolidated cost of goods sold for the year ended December 31, 2020?
a. ₱3,800,000
b. ₱3,104,000
c. ₱5,440,000
d. ₱3,904,000