The Professional CPA Review School
Main: 3F C. Villaroman Bldg. 873 P. Campa St. cor Espana, Sampaloc, Manila
(02) 735 8901 / 735 9031 / 0922 861 0191
email add: crc_ace@yahoo.com
Baguio
Davao
Rudel Bldg. V, Lower Mabini cor Diego Silang, Baguio City (074) 442-1440 / 0922-8499196
3/F GCAM Bldg. Monteverde St. Davao City
(082) 285-8805 / 0925-7272223
ADVANCED FINANCIAL ACCOUNTING & REPORTING
SOLUTION TO SUMMARY QUIZZER 1
1.
PROF. ROEL E. HERMOSILLA
Anne, Iris and Alfred formed a partnership on April 30, with the following assets, measured at their
fair market values, contributed by each partner:
Anne
Iris
Alfred
Cash
P 200,000
P 240,000
P 600,000
Automobile
170,000
Delivery trucks
560,000
Computer and printer
102,000
Office furniture
70,000
50,000
Land and building
3,000,000
P 3,370,000 P 972,000
P 650,000
Although Alfred has contributed the most cash to the partnership, he did not have the full amount
of P 600,000 available and was forced to borrow P 400,000. The land and building contributed by
Anne has a mortgage of P 1,800,000 and the partnership is to assume responsibility of the loan. If
the profit and loss sharing agreement is 40 percent, 40 percent, and 20 percent, respectively, for
Anne, Iris and Alfred, what is the total capital investment of all the partners at the opening of
business on April 30?
a. P 4,992,000
b. P 3,192,000
c. P 2,792,000
d. P 3,328,000
1) B
Total assets contributed:
Anne
Iris
Alfred
Less: Liability assumed (Mortgage)
Total capital investment of all partners
P3,370,000
972,000
650,000
P4,992,000
1,800,000
P3,192,000
B
2. Elijah developed an interesting idea for marketing sailboats in Death Valley. He interested Caleb in
joining him in a partnership. Following is the information you have collected relative to their
original contributions.
Caleb contributed P60,000 cash, a tract of land, and delivery equipment. Elijah contributed
P120,000 cash. After giving special consideration to the tax bases of the assets contributed, the
relative usefulness of the assets to the partnership versus the problems of finding buyers for the
assets and contributing cash, and other such factors, the partners agreed that Elijah’s contribution
was equal to 40 percent of the partnership’s tangible assets, measured in terms of the fair value of
the assets to the partnership. However, since the marketing idea originated with Elijah, it was
agreed that he should receive credit for 50 percent of the recorded capital. Recent sales of land
similar to that contributed by Caleb suggest a market value of P80,000. Likewise, recent sales of
delivery equipment similar to that contributed by Caleb suggest P80,000 as the market value of
the equipment. These sales, of course, were not entirely representative of the particular assets
contributed by Caleb and therefore may be a better indicator of their relative values than their
absolute values. In reflecting on their venture, the partners agree that it is a rather risky affair in
respect to anticipated profits. Hopefully, however, they will be able to build good customer
relations over the long run and establish a permanent business with an attractive long-term rate of
return.
Under the most appropriate method, given the circumstances, the entry to record the formation of
partnership must be:
a. Cash
180,000
c. Cash
180,000
Delivery equipment 80,000
Delivery equipment
80,000
Land
80,000
Land
80,000
Elijah, capital
120,000
Goodwill
100,000
Caleb, capital
220,000
Elijah, capital
220,000
Caleb, capital
220,000
b. Cash
180,000
Delivery equipment 80,000
d. Cash
180,000
AFAR: SUMMARY QUIZZER
Land
Elijah, capital
Caleb, capital
PAGE 2
80,000
170,000
170,000
Delivery equipment
80,000
Land
80,000
Elijah, capital
204,000
Caleb, capital
136,000
2) B
Cash
Land and delivery equipment
Bonus (appropriate method)
Equal interest (50% each)
Elijah
Caleb
Total
P120,000
P60,000
P 180,000
160,000
160,000
50,000
( 50,000)
__ .
P170,000
P170,000
P340,000 B
Journal entry:
Cash
Delivery equipment
Land
Elijah, capital
Caleb, capital
180,000
80,000
80,000
170,000
170,000
3. Paul admits Timothy as a partner in business. Accounts in the ledger for Paul on November 30,
2016, just before the admission of Timothy, show the following balances:
Cash
P 52,000
Accounts payable
P 124,000
Accounts receivable 140,000
Paul, capital
528,000
Merchandise inventory
360,000
It is agreed that for purposes of establishing Paul’s interest the following adjustments should be
made:
1. An allowance for doubtful accounts of 2% of accounts receivable is to be established.
2. The merchandise inventory is to be valued at P404,000.
3. Prepaid expenses of P13,00 and accrued liabilities of P8,000 are to be established.
Timothy is to invest sufficient funds in order to receive a 1/3 interest in the partnership. How much
must Timothy contribute?
a. P264,000
b. P286,100
c. P190,720
d. P176,000
3) B
Unadjusted capital of Paul
Adjustment:
Allowance for doubtful accounts (2% x 120,000)
Merchandise inventory (202,000 – 180,000)
Prepaid expenses recognized
Accrued liabilities recognized
Adjusted capital of Paul
P528,000
(
x
Cash contribution by Timothy
4,800)
44,000
13,000
( 8,000)
P572,200 = 2/3
½
P286,100 = 1/3
4. Effective August 1, 2016, Caloy and Bobmarley agreed to form a partnership from their two
respective proprietorships. The balance sheets presented below reflect the financial position of
both proprietorships as of July 31, 2016:
Caloy
Bobmarley
Cash
P 24,000
P 60,000
Accounts Receivable
144,000
84,000
Merchandise Inventory
396,000
504,000
Prepaid Rent
48,000
Store Equipment
480,000
360,000
Accumulated Depreciation
(180,000)
(216,000)
Building
150,000
Accumulated Depreciation
(300,000)
Land
720,000
_
Totals
P2,784,000
P840,000
Accounts Payable
Mortgage Payable
Alex, Capital
Bob, Capital
Totals
P 90,000
720,000
1,956,000
_
P2,784,000
P 36,000
804,000
P840,000
As of August 1, 2016, the fair value of Caloy’s assets were: merchandise inventory, P324,000; store
equipment, P180,000; building, P3,000,000; and land, P1,200,000. For Bobmarley, the fair value of
the assets on the same date were: merchandise inventory, P540,000; store equipment, P78,000;
AFAR: SUMMARY QUIZZER
PAGE 3
prepaid rent, P 0. All other items on the two balance sheets were stated at their fair values. How
much capital must be credited to Caloy upon formation of partnership?
a. P4,062,000
b. P3,582,000
c. P726,000
d. P4,788,000
4) A
Caloy
MI
SE
1,956,000
(72,000)
Bobmarle
y
804,000
36,000
(66,000)
(120,000)
Building
Land
PR
1,800,000
480,000
4,062,00
0
(48,000)
726,000
5. Mahal admits Mora as a partner in the business. Balance sheet accounts of Mahal on September
30, just before admission of Mora show:
Cash
P 31,200
Accounts receivable
144,000
Merchandise inventory
216,000
Accounts payable
P 74,400
Mahal, capital
316,800
It is agreed that for purposes of establishing Mahal interest, the following adjustments shall be
made:
a. An allowance for doubtful accounts of 2% is to be established.
b. Merchandise inventory is to be valued at P242,400
c. Prepaid expenses of P4,200 and accrued expenses of P4,800 are to be
recognized.
Mora is to invest sufficient cash to obtain a 1/3 interest in the partnership. How much is Mora
investment to the partnership?
a. P169,860
b. P211,200
c. P171,660
d. P95,040
5)
A
Mahal’s capital
a.
b.
c.
Mahal’s capital
Cap ratio of Mahal
Total capital
158,400
(1,440)
13,200
2,100
(2,400)
169,860
÷ 2/3
254,790
X 1/3
169,860
6. I and Q formed a partnership on January 2, 2016, and agreed to share income 90%, 10%,
respectively. I contributed a capital of P12,500. Q contributed no capital but has a specialized
expertise and manages the firm full-time. There were no withdrawals during the year. The
partnership agreement provides for the following:
a. Capital accounts are to be credited annually with interest at 5% of
beginning capital.
b. Q is to be paid a salary of P500 a month.
c. Q is to receive a bonus of 20% of income calculated before deducting
his bonus, his
salary, and interest on both capital accounts.
d. Bonus, interest, and Q’s salary are to be considered partnership
expenses.
The partnership’s 2016 income statement follows:
Revenues
P 48,225
Expenses (including salary, interest and bonus)
24,850
Net income
P 23,375
How much is the total share of Q on the 2016 partnership net income?
a. P15,837.50
b. P14,325
c. P16,194
d. P14,169
AFAR: SUMMARY QUIZZER
PAGE 4
6) A
Correct net income:
Reported net income
P23,375
Add back:
Interest on beginning capital (5% x 12,500)
625
Salaries (500 x 12)
6,000
Bonus (23,687.50 + 625 + 6,000)/80% x 20%
7,500
P37,500
I
Q
Total
Interest on beginning capital
P 625
P 625
Salaries
P 6,000
6,000
Bonus (37,500 x 20%)
7,500
7,500
Balance 9:1
21,037.50
4,675
46,750
P21,662.50
P15,837.50
P37,500
A
7. Roel and Jekell, partners, divide profits and losses on the basis of average capitals. Capital
accounts for the year ended December 31, 2016, are shown below. The net profit for 2016 is
P135,000. (Changes in capitals during the first half of a month are regarded as effective as of the
beginning of the month; changes during the second half of a month are regarded as effective as of
the beginning of the following month.)
Roel, Capital
Jekell, Capital
Debit
Credit
Debit
Credit
January 1
P 300,000
P330,000
March 9
P 50,000
April 14
150,000
July 1
100,000
September 4
P 40,000
September 22
100,000
October 26
75,000
The share of Roel on the 2016 profit is:
a. P57,250
b. P77,250
c. P57,750
d. P62,630
7) C
Weighted average capital of Roel:
January 1
300,000 x 12/12
P300,000
March 9
(50,000) x 10/12
( 41,666.50)
July 1
100,000 x 6/12
50,000
September 22100,000 x 3/12
25,000
October 26
(75,000) x 2/12
( 12,500)
P320,833.50
Weighted average capital of Jekell:
January 1
330,000 x 12/12
P330,000
April 14
150,000 x 9/12
112,500
September 4 (40,000) x 4/12
( 13.334)
P429,166.5
Share of Roel on the net income of P135,000:
320,833.50/750,000 x 135,000 = P57,750.00
C
8. Efren and Frenz operate The Gourmet Restaurant as a partnership. Their partnership agreement
has the following provisions for sharing profits and losses:
Income is distributed only as far as it is available.
Available income is to be distributed in the following sequence:
1. Efren, who is the chef, gets a salary of P25,000 a year; Frenz, who is still learning, gets a
salary of P10,000.
2. Interest is imputed on the average capital balances at 15 percent.
3. Any remaining profits and losses are to be shared equally.
a.
b.
c.
d.
The average capital balances during the year were P20,000 for Efren and P50,000 for Frenz. If the
partnership income for the year is P17,500, it should be distributed to the partners as follows:
Efren P8,000; Frenz P9,500
Efren P8,750; Frenz P8,750
Efren P12,500; Frenz P5,000
Efren P14,000; Frenz P3,500
8) C
Inasmuch as the net income of P17,500 is less than the total salaries of P35,000, then the
net income will only be distributed based on salary ratio of 5:2
Efren = 5/7 x 17,500 = P12,500; Frenz = 2/7 x 17,500 = P5,000 C
AFAR: SUMMARY QUIZZER
PAGE 5
9. Ruby, Saphire, and Emerald have been partners throughout 2016. Their average balances and
their balances at the end of the year before closing the nominal accounts are as follows:
Partner
Average Balances Balances, 12/31/16
Ruby
P48,750
P35,000
Saphire
3,650
5,900
Emerald
2,125
850 (debit balance)
The income for 2016 is P51,750 before charging partners’ salary allowances and before payment of
interest on average balances at the agreed rate of 4% per annum. Annual salary allocations are
P6,250 to Ruby, P4,375 to Saphire, and P3,125 to Emerald. The balance of the profits is to be
allocated at the rate of 60% to Ruby, 10% to Saphire, and 30% to Emerald.
It is intended to distribute cash to the partners so that, after credits and allocations have been
made as indicated in the preceding paragraph, the balances in the partners’ accounts will be
proportionate to their residual profit-sharing ratios. None of the partners is to invest additional
cash, but they wish to distribute the lowest possible amount of cash.
How much are capital balances of Ruby, Saphire and Emerald, respectively.
a. P26,211; P4,368.5 and P13,105.50
b. P64,691.50; P14,003 and P13,105.50
c. P55,080; P9,180 and P27,540
d. P55,080; P14,003 and P42,009
9) A
Ruby
Net income distribution:
Salaries
Interest of 4%
Balance 60:10:30
Balances, 12/31/16
Ending capital adjusted
Saphire
Emerald
Total
P 6,250
P 4,375
P 3,125
P 13,750
1,950
146
85
2,181
21,491.50
3,582
10,745.50
35,819
P29,691.50
P 8,103
P13,955.50
P 51,750
35,000
5,900
(
850)
40,500
P64,691.50
P14,003
P13,105.50
P 91,800
The partners wish to distribute the lowest amount of cash, therefore the agreed capital must be
lower than P91,800. The required capital can be determined as follows:
Ruby capital = 64,691.50/60% =
P107,819 cannot be.
Saphire capital = 14,003/10% = P140,030 cannot be.
Emerald capital = 13,105.50/30% = P43,685 can be.
Therefore, the required capital balances must be:
Ruby = P43,685 x 60% = P26,211
Saphire = P43,685x 10% = P4,368.50
Emerald = P43,685 x 30% =
P 13,105.50 A
10. Silver and Swan were partners. Shortly before the close of 2016 their bookkeeper left suddenly,
and they disagreed about the manner of distributing 2016’s net loss from operations, which
amounted to P1,690 before consideration of interest (the partners agree that the rate is 5%),
salaries or drawings. They ask you to arbitrate the matter. You believed that the best evidence of
their understanding is the manner in which the distribution of earnings was made in earlier years.
The partners agree that the division of the 2015 net income of P24,495 was made in accordance
with their understanding of their profit-sharing agreement. The partners’ capital accounts for the
years 2015 and 2016 are shown below:
Silver, capital
---------------------------------------------------------------------------------------------------------------------Dec. 31, 2015 Salary P 6,000
Jan. 1, 2015 Balance
P 60,000
31, 2015 Drawings 1,695
July 1, 2015 Investment
2,400
Balance
65,000
Dec. 31, 2015 Net income
10,565
P 72,965
P72,965
Jan. 1, 2016 Balance
65,000
Sept. 1, 2016 Investment
1,800
Swan, capital
---------------------------------------------------------------------------------------------------------------------May 1, 2015 Excess withdrawal P 3,000 Jan. 1, 2015 Balance
P 90,000
Dec. 31, 2015 Salary
8,000 Nov. 1, 2015 Investment
3,000
31, 2015 Drawings
1,330 Dec. 31, 2015 Net income 13,930
Balance
94,600
__
P106,930
P106,930
Jan. 1, 2016 Balance
P189,200
How should the loss for 2016 be divided between Sin and Vidal?
a. Silver, (P729); Swan, (P961)
c. Silver, (P2,570); Swan, P880
AFAR: SUMMARY QUIZZER
PAGE 6
b. Silver, (P824.50); Swan, (P865.50)
d. Silver, (P676); Swan, (P1,014)
10) C
Distribution of 2015 net income:
Silver
Swan
Total
Salaries
P 6,000
P8,000
P14,000
Interest of 5% on average capital
5% x 61,200
3,060
5% x 88,500
4,425
8,485
Balance equally
1,505
1,505
3,010
P10,565
P13,930
P24,495
Weighted average capital of Silver 2015:
January 1 balance
60,000 x 12/12
July 1 investment
2,400 x 6/12
Weighted average capital of Vidal 2010:
January 1 balance
90,000 x 12/12
May 1 excess withdrawal 3,000 x 8/12
November 1 investment
3,000 x 2/12
P60,000
1,200
P61,200
P90,000
( 2,000)
500
P177,000
Distribution of 2016 net loss:
Silver
Swan
Total
Salaries
P6,000
P8,000
P14,000
Interest of 5% on average capital
5% x 65,600
3,280
5% x 94,600
4,730
8,010
Balance equally
( 11,850)
( 11,850)
( 23,700)
(P 2,570)
P 880
(P 1,690)
C
Weighted average capital of Silver 2016:
January 1 balance
65,000 x 12/2016
P65,000
September 1 investment
1,800 x 4/2016
600
25,600
Weighted average capital of Vidal 2016:
January 1 balance
90,100 x 12/2016
P94,600
11. Allan, Ben and Cindy are partners sharing profit on a 7:2:1 ratio, respectively. On January 1, 2016,
Leo was admitted into the partnership with a 15% share in profits. The old partners continue to
participate in the profits in their original ratios. For the year 2016, the partnership showed profits
of P7,500. However, it was discovered that the following items were omitted from the firm’s
books:
Unrecorded at Year- end
2015
2016
Accrued expense
P 525
Accrued income
437.50
Prepaid expense
P 700
Unearned income
612.50
The share of Ben in the 2016 profits should be:
a. P 1,098.75
b. P 1,245.25
c. P 1,318.50
d. P 3,149.75
11) B
NI -
Unadjusted
AE
AI
PE
7,500
(525)
437.50
(700)
612.50
14,650
Adjusted NI
Leo
Total
7,325
x 85%
x
85%
x 2/10
x
2/10
1,245.25 B
12. Rico, Sean, and Tim are partners sharing profits in the ratio of 3:2;1, respectively. Capital accounts
are P250,000, P150,000 and P100,000 on December 31, 2015, when Tim decides to withdraw. It is
agreed to pay P150,000 for Tim’s interest. Profits after the withdrawal of Tim are to be shared
equally. What entry is required to record the withdrawal of Tim under the bonus method?
AFAR: SUMMARY QUIZZER
a. Tim, Capital 100,000
Cash
100,000
b. Tim, Capital 100,000
Rico, Capital
25,000
Sean, Capital 25,000
Cash
150,000
PAGE 7
c. Tim, Capital
Goodwill
Cash
d. Tim, Capital
Rico, Capital
Sean, Capital
Cash
100,000
50,000
150,000
100,000
30,000
20,000
150,000
12) D
Tim, capital
100,000
Rico, capital
30,000
Sean, capital
20,000
Cash
150,0000 D
13. What entry is required to record the withdrawal of Tim under the goodwill method?
a. Tim, Capital 100,000
c. Tim, Capital
100,000
Goodwill
50,000
Goodwill
300,000
Cash
150,000
Cash
150,000
R, Capital
150,000
S, Capital
100,000
b. Tim, Capital 100,000
d. Tim, Capital
100,000
Goodwill
300,000
Rico, Capital
30,000
Rico, Capital
125,000
Sean, Capital
20,000
Sean, Capital
125,000
Cash
150,000
Cash
150,000
13)
C
Under the goodwill method, the excess payment to Tim of P50,000, represents the
goodwill share of Tim recognized by the business prior to his withdrawal. The total
goodwill of P300,000 (50,000/1/6), was recorded thus increasing too, the capital of Rico
and Sean by P150,000 and P100,000, respectively. Therefore the entry must be:
Tim, capital
100,000
Goodwill
300,000
Cash
150,000
Rico, capital
150,000
Sean, capital
100,000
C
Items 14 and 15 are based on the following:
The following balances as of the end of 2016 for the partnership of P, Q, and R, together with their
respective profit and loss percentages, were as follows:
Assets
P180,000
P, loan
P 9,000
P, capital (20%)
42,000
Q, capital (20%)
39,000
R, capital (60%)
90,000
P360,000
P 180,000
P decided to retire from the partnership. Parties agreed to adjust the assets to their fair market
value of P216,000 as of December 31, 2016. P will be paid P61,200 for P’s partnership interest
inclusive of P loan which is to be repaid in full. No goodwill is to be recorded. After P’s retirement.
14. What will be the balance of Q’s capital account?
a. P39,000
b. P36,450
14)
c. P46,200
d. P45,450
D
P
Q
R
Total
P 42,000
P39,000
P90,000
P171,000
9,000
9,000
7,200
7,200
21,600
36,000
3,000
( 750)
( 2,250)
P61,200
P45,450
P108,900
P216,000
D
15. Assuming that the P61,200 payment to X exclude his loan, what will be the balance of Kathleen’s
capital account, after X’s retirement?
a. P39,000
b. P46,200
c. P45,450
d. P43,200
Capital balances
Loan
Adjustment of assets
Bonus to X
15)
D
Y Capital balance
Add: Share on the asset adjustment
Less: Share on the bonus given to X
P 15,600
7,200
AFAR: SUMMARY QUIZZER
(61,200 – 42,000 – 7,200) x 2/8
Y’s ending capital after X’s retirement
PAGE 8
( 3,000)
43,200 D
Questions 16 through 18 are based on the following:
The partners in the Kenneth, Rhaian, and Marlon partnership have capital balances as follows:
Kenneth, capital P17,500;
Rhaian, capital
P17,500;
Marlon, capital
P20,000
Profits and losses are shared 30%, 30%, and 40%, respectively. On this date, Marlon withdraws
and the partners agree to pay him P22,500 out of partnership cash. (Tangible assets are already
stated at values approximating their fair market values.)
16. Using bonus method, how much must be the ending capital of Kenneth immediately after Marlon’s
withdrawal?
a. P17,500
b. P16,250
c. P16,750
d. P19,375
16)
B
Capital balance of Kenneth
P17,500
Less: Share on the bonus given to Marlon (2,500 x 3/6)
( 1,250)
Capital balance of Kenneth immediately after Marlon’s withdrawal
P16,250
B
17. Using the partial goodwill method, how much must be the ending capital of Kenneth immediately
after Marlon’s withdrawal?
a. P17,500
b. P16,250
c. P16,750
d. P19,375
17)
B
Under the full goodwill method, the P2,500 excess payment to Marlon represents his share on
the total goodwill recognized prior to his withdrawal. Therefore, the total goodwill must be
(2,500/40%) = P6,250.
Capital balance of Kenneth prior to withdrawal
P17,500
Add: Share on the goodwill recognized (12,500 x 30%)
1,875
Capital of Kenneth immediately after Marlon’s withdrawal
P19,375
18. Using the full goodwill method, how much must be the ending capital of Kenneth immediately after
Marlon’s withdrawal?
a. P17,500
b. P16,250
c. P16,750
d. P19,375
18)
A
The P2,500 excess payment to Marlon must be his share on the goodwill recognized prior to his
withdrawal. Under the partial goodwill method, only the share of the withdrawing partner is
the one recorded in the books. Therefore the capital balance of Kenneth immediately after
Marlon’s withdrawal will still be the same, P17,500.
Items 19 to 21 are based on the following:
The balance sheet for Kate, Tim, and Mar partnership shows the following information as of
December 31, 2015:
Cash
P 4,000
Liabilities
P 10,000
Other assets
56,000
Kate, loan
5,000
Kate, capital
25,000
Tim, capital
14,000
Mar, capital
6,000
P60,000
P60,000
Profit and loss ratio is 3:2:1 for Kate, Tim, and Mar, respectively. Other assets were realized as
follows:
Date
Cash Received
Book Value
January 2016
P12,000
P18,000
February 2016
7,000
15,400
March 2016
25,000
22,600
Cash is distributed as assets are realized.
19. The total loss to Kate is:
a. P6,000
b. P4,000
c. P2,000
d. None
20. The total cash received by Tim is:
a. P4,000
b. Zero
d. P3,000
19)
20)
A
C
P 6,000
P 10,000
c. P10,000
21. Cash received by Mar in January 2016 is:
a. P400
b. P2,000
c. P1,000
d. Zero
AFAR: SUMMARY QUIZZER
21)
D
PAGE 9
ZERO
Items 22 and 23 are based on the following:
The following condensed balance sheet is presented for the partnership of Nick, Pick, and Rick, who
share profits and losses in the ratio of 4:3:3, respectively:
Cash
P 4,500
Accounts payable
P10,500
Other assets
41,500
Rick, loan
1,500
Nick, loan
1,000
Nick, capital
15,500
Pick, capital
10,000
Rick, capital
9,500
P47,000
P47,000
22. Assume that the assets and liabilities are fairly valued on the balance sheet and that the
partnership decides to admit Tick as a partner, with a 20% interest. No goodwill or bonus is to be
recorded. How much should Tick contribute in cash or other assets?
a. P7,000
b. P7,100
c. P8,750
d. P8,875
22)
C
P 8,750
23. Assume that instead of admitting a new partner, the partners decide to liquidate the partnership.
If the other assets are sold for P35,000, how much cash should be distributed to Nick?
a. P11,500
b. P11,900
c. P12,900
d. P15,500
23)
B
P 11,900
24. Allan, Boyet, and Chill are partners with a profit and loss ratio of 5:4:1. The partnership was
liquidated, and prior to the liquidation process, the partnership balance sheet shows the following:
Cash
8,000
Allan, capital
32,000
Other assets
72,000
Boyet, capital
32,000
______
Chill, capital
16,000
80,000
80,000
After the partnership was liquidated and the cash was distributed, Boyet received P12,800 in cash
in full settlement of his interest. The amount of realization loss on the sale of the other assets is:
a.
P48,000
b. P32,000
c. P67,200
d. P33,000
24)
A
Capital of Boyet before realization loss
Cash received by Boyer
Share on the realization loss
Total realization loss
P32,000
12,800
P19,200
 4/10
P48,000
A
25. The partnership of Fritz and Frie is in the process of liquidation. On January 1, 2015, the ledger
shows account balances as follows:
Cash
P1,000
Accounts payable
Accounts receivable
2,500
Fritz capital
Lumber inventory 4,000
Frie capital
P1,500
4,000
2,000
On January 10, 2015 the lumber inventory is sold for P2,500, and during
January, accounts receivable of P2,100 are collected. No further collections on the receivables are
expected. Profits are shared 60% to Fritz and 40% to Frie. Of the total equity of Folly, what amount,
appear to be recoverable?
a. P4,000
b. P2,860
c. P2,460
d. P3,760
25)
B
Cash available to partners:
Cash beginning
Accounts receivable collected
Lumber inventory sold
Total cash
Less liabilities paid
Fritz
Capital balances
P4,000
Liquidation loss
( 1,140)
Cash distribution
P2,860
B
P1,000
2,100
2,500
P5,600
1,500
Frie
P2,000
P4,100
Total
P6,000
( 760)
P1,240
( 1,900)
P4,100
AFAR: SUMMARY QUIZZER
PAGE 10
26. CRC-ACE started operations on January 1, 2015 selling home appliances and furniture on
installment basis. For 2015 and 2016, the following represented operational details:
Installment sales
Cost of installment sales
Collections
2015 installment sales
2016 installment sales
In thousand Pesos
2015
2016
2,400
3,000
1,440
2,100
1,260
900
1,800
On January 7, 2017 an installment sale account in 2015 defaulted and the merchandise with a
market value of P30,000 was repossessed. The related installment receivable balance as of date of
default and repossession was P48,000. The balance of the unrealized gross profit as of the end
2015:
A. P456,000
B. P720,000
C. P384,000
D. P550,000
26)
A
P 456,000
Items 27 to 28 are based on the following:
The EMCOR Appliances accounts for its sales on the installment basis. As the beginning of 2017,
ledger accounts include the following balances:
Installment contracts receivable, 2015
P 60,000
Installment contracts receivable, 2016
192,000
Deferred gross profit, 2015
25,200
Deferred gross profit, 2016
72,000
At the end of 2017 account balances before adjustment for realized gross profit on installment
sales are:
Installment contracts receivable, 2015
P --0-Installment contracts receivable, 2016
48,000
Installment contracts receivable, 2017
260,000
Deferred gross profit, 2015
25,200
Deferred gross profit, 2016
68,700
Deferred gross profit, 2017
120,000
Installment sales in 2017 are made at 25% above the cost of merchandise sold. During 2017 upon
default in payment by the customer, the company repossessed the merchandise with an estimated
market value of P4,000. The sales was in 2016 for P21,600, and P12,800 had been collected prior
to repossession.
a.
b.
c.
d.
27. Compute the gain or (loss) on repossession assuming that:
Profit is Recognized when the sale is made Profit is Recognized in proportion
(Point of Sale)
to Periodic Collections (I/Sales M)
P(4,800)
P(3,040)
1,500
( 1,500)
–0-( 3,040)
(4,800)
( 1,500)
27)
D
Point of sale:
Repossessed value
P 4,000
Installment account balance (P21,600 – P12,800)
8,800
Loss on repossession
P 4,800
Installment sale:
Repossessed value
P 4,000
Unrecovered cost (8,800 x 62.5%)
( 5,500)
Loss on repossession
P 1,500
GP rate for 2016 (72/192) = 37.5%
28. The realized gross profit on December 31, 2017 is:
a. P 147,200
b. P 143,900
28)
c.
d.
D
D
P 68,000
P 140,000
B
e.
2015 sales (60,000 x 42%)
f. 2016 sales (192,000 - 48,000 – 8,800) x 37.5%
g.
2017 sales (600,000 - 260,000) x 20%
h.
Total realized gross profit in 2017
i. Sales 2017:
j.
Gross profit
P120,000
P 25,200
50,700
68,000
P143,900
B
AFAR: SUMMARY QUIZZER
PAGE 11
k.
GP to cost
÷ 25%
l. Cost of sales
P480,000
m.
Add: Gross profit
120,000
P600,000
n.
GP rate (120/600) = 20%
o.
p. Items 29 through 31 are based on the following::
q.
The following account balances appear on the books of Bench Co. as of December 31,
2016:
r.
Cash
P 120,000
Capital Stock
P400,000
s.
Accounts receivable
640,000
Retained earnings
39,000
t.
Merchandise inventory
60,000
Sales
1,000,000
u.
Accounts payable
24,000
Purchases
516,000
v.
Unrealized gross profit, 2015
209,000
Expenses
340,000
w. The accounts receivable account is a controlling account for three subsidiary ledgers which
show the following totals:
x.
2015 installment contracts
P 120,000
y.
2016 installment contracts
480,000
z.
Charge accounts (terms, 30 days net)
40,000
aa.
The gross profit on installment contracts for 2015 was 55% of sales price: on installment
contracts for 2016, 50% with the gross profit on regular charge sales being somewhat below 50%.
Collections on installment contracts for 2015 total P240,000 for the year just closed; on installment
contracts for 2016, P320,000; on charge accounts, P192,000. The charge accounts on the books at
the beginning of the year amounted to P32,000. Repossession for the year were on installment
contracts for 2015, on which the uncollected balances at the time of repossession amounted to
P20,000. Merchandise repossessed was charged to Purchases at the amount of the uncollected
balance. Appraisal reports show that this repossessed merchandise actually was worth P16,000 at
the time of repossession. The final inventory of merchandise valued at cost amounted to P52,000,
including the repossessed merchandise of P16,000.
ab.
29. The total realized gross profit before gain or loss on repossession in 2016 is:
ac.
A. P356,000
B. P376,000
C. P372,000
D. P292,000
ad.
29)
C
ae.
Total sales reported both regular and installment
P1,000,000
af.
Less: Regular sales:
ag.
Collected charge accounts
P192,000
ah.
Uncollected balance
40,000
ai.
Less: charge account beginning balance ( 32,000)
( 200,000)
aj.
Installment sales during the year
P 800,000
ak.
Total realized gross profit during 2016:
al.
Realized gross profit on installment sales:
am.
2016 – 320,000 x 50%
P 160,000
an.
2015 - 240,000 x 55%
66,000 P292,000
ao.
Realized gross profit on regular sales:
ap.
Regular sales (see above)
P200,000
aq.
Cost of regular sales:
ar.
Beginning inventory
P60,000
as.
Add: Purchases
at.
Reported
P516,000
au.
Merchandise repossessed
( 20,000)
av.
Correct purchases
496,000
aw.
Add: Repossessed inventory
16,000
ax.
Available for sale
P572,000
ay.
Less: Ending inventory
( 52,000)
az.
Total cost of sales
P520,000
ba.
Less cost of installment sales (800,000 x 50%)
( 400,000)
bb.
P 120,000
80,000
bc.
Total realized gross profit before gain or loss on repossession
P372,000
C
bd.
30. The total deferred gross profit as of December 31, 2016 is
be.
A. P306,000
B. P240,000
C. P314,400
D. P317,000
30)
A
bf.
Total deferred gross profit as of December 31, 2016:
bg.
2015 sales – 120,000 x 55%
P 66,000
bh.
2016 sales – 480,000 x 50%
240,000
bi.
31. The gain (loss) on repossession is:
bj.
A. P(7,000)
B. P7,000
C. P4,000
31)
B
bk.
Repossessed value
P 16,000
P306,000
D. P5,000
A
AFAR: SUMMARY QUIZZER
PAGE 12
bl.
Unrecovered cost = 20,000 x 45%
9,000
bm.
Gain on repossession
P 7,000
B
bn.
bo.Items 32 and 33 are based on the following:
bp.
Khenzo Corporation has been using the cash method to account for income since its first year
of operations in 2015. All sales are made on credit with notes receivable given by the customers.
The income statements for 2015 and 2016 included the following amounts:
bq.
2015
2016
br.
Revenues - collection on principal
P64,000
P100,000
bs.
Revenues - interest
7,200
11,000
bt.
Cost of goods purchased*
90,400
104,040
bu.
bv.
*Includes increase in inventory of goods on hand of P4,000 in 2015 and P16,000 in 2016
bw.
The balances due on the notes at the end of each year were as follows:
bx.
2015
2016
by.
Notes receivable - 2015
P124,000
P 72,000
bz.
Notes receivable - 2016
120,000
ca.
Unearned interest revenue - 2015
14,334
11,158
cb.
Unearned interest revenue - 2016
16,086
cc.
cd.
32. Under the installment method, how much is the realized gross profit in 2015?
ce.
A. P32,160
B. P64,000
C. P35,778
D. P7,082
32)
A
cf.
cg.
ch.
ci.
cj.
ck.
cl.
cm.
cn.
co.
cp.
cq.
GP rate in 2015:
Sales in 2015:
Collected selling price equal to principal collected
Selling price not yet collected:
Notes receivable
P124,000
Less: Unearned interest revenue
( 14,334)
P173,666
Cost of sales in 2015:
Purchases
P90,400
Less: Increase in inventory
( 4,000)
Gross profit
Gross profit rate – 87,266/173,666 = 50.25%
Realized gross profit in 2015 = 64,000 x 50.25% = P32,160
A
P64,000
109,666
86,400
P87,266
cr.
33. Under the installment method, how much is the realized gross profit in 2016?
cs. A. P24,534
B. P22,124
C. P46,658
D. P43,230
ct.
33)
C
cu.
GP rate in 2016:
Sales in 2016:
Collected selling price for 2015 and 2016 sales
Less: Sales of 2015 collected in 2016:
Notes receivable, beginning
Notes receivable, ending
Collected notes
Less: interest collected (14,334 – 11,158)
Collected selling price for 2012 sales
Selling price not yet collected for 2012 sales
Notes receivable, ending
Less: Unearned interest revenue
P155,090
dg.
Cost of sales in 2016:
dh.
Purchases
di.
Less: Increase in inventory
88,040
dj.
Gross profit
dk.
Gross profit rate = 67,050/155,090 = 43.23%
dl.
dm.
Total realized gross profit in 2016:
dn.
2015 sales = 48,824 x 50.25%
do.
2016 sales = 51,176 x 43.23%
cv.
cw.
cx.
cy.
cz.
da.
db.
dc.
dd.
de.
df.
P 100,000
P124,000
72,000
52,000
( 3,176)
P120,000
( 16,086)
( 48,824)
P 51,176
103,914
P 104,040
( 16,000)
P 67,050
P24,534
22,124
P46,658
C
dp.
34. The following information pertain to the building contract of Ronnie Construction Company,
wherein the fixed contract price is P40 million.
dq.
2015
2016
2017
AFAR: SUMMARY QUIZZER
PAGE 13
dr.
Estimated costs
P10.05 million
P15.075 million P8.375 million
ds.
Progress billings
5 million
12.5 million
22.5 million
dt.
Cash collection
4 million
11.5 million
24.5 million
du.
dv.
Assume that all costs are incurred, all billings to customers are made, and all collections
from customers are received within 30 days of billing, as planned. Under the percentage-ofcompletion method of revenue recognition is used, how much is the income from construction for
the year 2017?
dw.
A. P1,950,0000
B. P1,625,000
C. P4,875,000
D. P2,925,000
dx.
34)
B
dy. Total Contract Price
P 40,000,000
Total Estimated costs
2015
P 10,050,000
2016
15,075,000
2017
8,375,000 33,500,000
Estimated gross profit
P 6,500,000
ee.
2017 gross profit:
ef.
8,375,000/33,500,000 x 6,500,000 = P 1,625,000 B
eg.
eh.
ei.
ej.
35. Dixie Construction Company began operations in 2015. Construction activity for the first year is
shown below. All contracts are with different customers, and any work remaining at December 31,
2015, is expected to be completed in 2016.
ek.
Cash
Contract
Estimated
el.
Total
Billings Collections Costs Incurred
Additional
em.
Contract through through
through
Costs to
en.Project Price
12/31/2015
12/31/2015 12/31/2015 Complete
eo.
ep. 1
P 280,000
P 180,000
P340,000
P450,000
P140,000
eq. 2
335,000
110,000
210,000
126,000
504,000
er. 3
250,000
250,000
440,000
330,000
-0es.
P 865,000
P 540,000 P 495,000
P 453,000
P322,000
et. Determine the income from construction to be reported in the income statement for the year
2015.
eu. A. P45,000
B. P30,000
C. P43,000
D. P74,000
ev.
dz.
ea.
eb.
ec.
ed.
35)
D
ew. Project 1:
ex.
Contract price
P 280,000
ey.
Total estimated costs:
ez.
Costs incurred during 2015
P 225,000
fa.
Est. additional costs to complete
70,000
295,000
fb.
Gross loss during the year totally recognized
P( 15,000)
fc.
Project 2:
fd.
Contract price
P 335,000
fe.
Total estimated costs:
ff.
Costs incurred during 2015
P 63,000
fg.
Est. additional costs to complete
252,000
315,000
fh.
Estimated gross profit
20,000
fi.
Percentage of completion (63/315 or 20%)
x
20%
fj.
Gross profit realized during the year
4,000
fk.
Project 3:
fl.
Contract price
P 250,000
fm.
Total actual costs incurred
165,000
fn.
Actual gross profit realized during the year
85,000
fo.
Total income from construction recognized during the year
P 74,000
D
fp.
36. Mill Construction Company started a project with a contract price of P40 million. The cost incurred
to date is P6 million and the estimated cost to complete is still P24 million. Under the cost to cost
basis, how much is the income from construction?
fq.
A. P2 million
B. P4 million
C. P5 million
D. P8 million
fr.
36)
ft.
fu.
A
fs. Contract price
Total estimated costs
Costs incurred
P 40,000,000
P 6,000,000
AFAR: SUMMARY QUIZZER
fv.
fw.
fx.
fy.
Estimated costs to complete
24,000,000
Estimated gross profit
Percentage of completion (6,000,000/30,000,000)
Income from construction
PAGE 14
30,000,000
P 10,000,000
x
20%
P 2,000,000
A
fz.
37. Manny Construction is in its fourth year of business. Manny performs long-term construction
projects and accounts for them using the percentage of completion method. Manny built an
apartment building at a price of P500,000. The costs and billings for this contract for the first three
years are as follows:
ga.
2014
2015
2016
gb.
Cost incurred to date
P160,000
P300,000
P395,000
gc.
Estimated costs yet to be incurred 240,000
100,000
-0gd.
Customer billings to date
75,000
205,000
500,000
ge.
Collections of billings to date
60,000
170,000
475,000
gf.
gg. Determine the income from construction in 2015?
gh. A. P75,000
B. P40,000
C. P35,000
D. P30,000
37)
C
gi. Contract price
gj.
Total estimated costs 2016:
gk.
Cost incurred to date
P
gl.
Estimated costs yet to be incurred
gm.
Estimated gross profit, 2016
gn.
Percentage of completion 2016 (300,000/400,000)
go.
Gross profit to date 2016
gp.
Less: Gross profit 2015
gq.
Contract price
P
gr.
Total estimated costs (160 + 240)
(
gs.
Estimated gross profit 2015
gt.
Percent completed in 2015 (320/800)
gu.
Gross profit recognized in 2016 ?
35,000
C
P 500,000
300,000
100,000
500,000
400,000)
100,000
x
400,000
P 100,000
x
75%
P 150,000
40%
(
40,000)
P
gv.
38. Maharlika Construction has consistently used the percentage-of-completion method. On January
10, 2015, Maharlika began work on P1,500,000 construction contract. At the inception date, the
estimated cost of construction was P1,125,000. The following data relate to the progress of the
contract:
gw.
gx.
Income recognized at December 31, 2015
P 150,000
gy.
Costs incurred January 10, 2015 through Dec. 31, 2016
900,000
gz.
Estimated cost to complete, December 31, 2016
300,000
ha.
hb. What percent was completed in 2016?
hc. A. 75%
B. 40%
C. 35%
D. cannot be determined
hd.
38)
C
he. Cost incorrect January 10, 2015 through December 31, 2016
P 900,000
Estimated cost to complete, December 31, 2016
300,000
Total estimated cost
P 1,200,000
hh. Total percentage of completion as of December 31, 2016:
hi.
900,000/1,200,000
75%
hj.
Less percentage of completion prior year
hk.
Income recognized December 31, 2015
= P 150,000
hl.
Total estimated profit prior year (1,500,000 – 1,125,000) = P 375,000
hm.
Percentage of completion prior year (150,000/375,000)
40%
hn.
Percent completed in 2016
35%
C
ho.
39. On July 1, 2015, Stallion Construction Company Inc. contracted to build an office building for RH
Corporation for a total contract price of P9.75 million. On July 1, Mean estimated that it would take
between 2 to 3 years to complete the building. On December 31, 2017, the building was deemed
substantially completed. Following are accumulated contract costs incurred, total estimated costs,
and accumulated billings to RH for 2015, 2016, and 2017.
hp.
At 12/31/2015
At 12/31/2016 At 12/31/2017
hq.
Contract costs incurred to date
P 750,000
P 6,000,000 P 10,500,000
hr.
Total estimated costs
7,500,000
10,000,000
-0hs.
Billings to RH
1,500,000
5,500,000
9,250,000
ht.
hf.
hg.
AFAR: SUMMARY QUIZZER
A.
B.
C.
D.
PAGE 15
hu. Using the percentage of completion method, determine the correct income (loss) from
construction to be presented in the income statement of the company for the years 2015, 2016,
and 2017, respectively.
P225,000; (P250,000); (P500,000)
P225,000; (P225,000); (P750,000)
P225,000; (P475,000); (P500,000)
P225,000; P250,000; (P750,000)
hv.
39)
C
hw.
2015
2016
2017
hx.
Contract price
P 9,750,000 P 9,750,000 P 9,750,000
hy.
Total estimated costs
7,500,000
10,000,000 10,500,000
hz.
Estimated (Actual) Profit (loss)
P 2,250,000 P( 250,000) P( 750,000)
ia.
Percentage of completion:
ib.
750,000/7,500,000
x
10%
ic.
Recognized in full
x
100% x
100%
id.
Gross profit to date
P 225,000 P( 250,000) P( 750,000)
ie.
Less: Gross profit(loss) prior year
225,000
( 250,000)
if.
Gross profit(loss) during the year P 225,000 P( 475,000) P( 500,000)
C
ig.
ih.
40. In 2015, Winston Construction Company was contracted to do private road network of Phillip
Corporation for P50 million. The project was estimated to be complete in two years.
ii.
ij.
The construction contract provided among other things the following:
A. 5% mobilization fee (to be deducted from the last billing) payable within 15 days after
the signing of the contract;
B. Retention provision of 10% on all billings;
C. Progress billings on construction are payable within seven days from date of
acceptance.
ik.
Winston estimated its gross margin on the project at 25% and used the percentage of
completion method of accounting. By the end of the year, Winston presented progress billings
corresponding to 50% completion. Phillip Corp. accepted all the bills presented except the last one
for 10% which was accepted on 10 January. With the exception of the last billing of 8% accepted in
2015, which was due on 3 January 2017 all accepted billings were settled in 2015.
il. The gross profit recognized by Winston Construction Company for 2015 is:
im.
a. P25 million
b. P12.5 million
c. P6.25 million
d.
Not
determinable
in.
40) C Gross profit realized (50 million x 25% x 50%)
P 6.25 million
io.
41. On December 31, 2015, Intel, Inc. authorized. Chiquito to operate as a franchisee for an initial
franchise fee of P15,000. Of this amount, P6,000 was received upon signing the agreement and the
balance represented by a note due in three annual payments of P3,000 each beginning December
31, 2017. The present value on December 31, 2015, for three annual payment appropriately
discounted is P7,200. According to the agreement, the non- refundable down payment represents
a fair measure of the services already performed by Intel and substantial future services are still to
be rendered. However, the collectibility of the note is not reasonably assured. Intel’s December 31,
2015, balance sheet unearned franchise fee from Chiquito’s franchise should report as:
ip. A. P13,200
iq. B. P10,000
ir. C. P - 0 is. D. P7,200
it.
41)
D
P 7,200
42. On December 31, 2015, McKing Inc. signed an agreement authorizing Burge Company to operate
as a franchise for an initial franchise fee of P500,000. Of this amount, P200,000 was received upon
signing of the agreement and the balance is due in three annual payment of P100,000 each,
beginning December 31, 2011. No future services are required to be performed. Burge Company’s
credit rating is such that collection of the note is reasonably assured. The present value at
December 31, 8 of the three annual payments discounted at 14% (the implicit rate for a loan of
this type) is P232,200. On December 31, 2016, Mcking should record earned franchise fees of:
iu. A. P232,200
iv. B. P432,200
iw. C. P300,000
ix. D. P 0
42)
B
P 432,200
iy.
43. On December 31, 2015, Bulaklak Company signed an agreement to operate as franchisee of
Bluewich for a franchise fee of P800,000. Of this amount, P300,000 was paid upon signing of the
agreement and the balance is payable in five annual payments of P100,000 each beginning
December 31, 2016. The present value of the five payment, at an appropriate rate of interest, is
AFAR: SUMMARY QUIZZER
PAGE 16
P560,000 at December 31, 2015. The agreement provides that the down payment is not
refundable and no future services are required of the franchisor. The collection of note receivable is
reasonably certain. Bluewich’s Company should report unearned revenue from franchise fee in its
December 31, 2012 balance sheet at:
iz. A. P800,000
ja. B. P300,000
jb. C. P660,000
jc. D. P 0
43)
D
P0
jd.
44. The franchise agreement between Minute’s Burger and Ms. Paganda which was signed at the
beginning of the year required a P5,000,000 franchise fee payable P1,000,000 upon signing of the
franchise and the balance in four annual installments starting the end of the current year. At the
time of the granting of the franchise, the present value using 12% as discount rate of the four
installments would approximate P1,996,500. The fees once paid are not refundable. The franchise
may be cancelled subject to the provisions of the agreement. Should there be unpaid franchise fee
attributed to the balance of main fee (P5,000,000), same would become due and demanable upon
cancellation. Further, the franchisor is entitled to a 5% fee on gross sale payable monthly within
the first ten days of the following month. The Credit Investigation Bureau rated Ms. Paganda as AA
credit rating. Further the balance of the franchise fee was guaranteed by a commercial bank. The
first year of operations yielded gross sales of P90 million. As of the signing of the franchise
agreement, Minute’s Burger unearned franchise fee amounted to
je. A. P6,496,500
jf. B. P4,000,000
jg. C. zero
jh. D. P1,996,500
44)
D
P 1,996,500
ji.
45. At the beginning of the year, Frenz Haus got the franchise of KFCC, a known steak house of upscale
patronage. The franchise agreement required a P5,000,000 franchise fee payable P1,000,000 upon
signing of the franchise and the balance in four annual installments starting the end of the current
year. At present value using 12% as discount rate, the four installments would approximate
P3,037,350. The fees once paid are not refundable. The franchise may be canceled subject to the
provisions of the agreement. Should there be unpaid franchise fee attributed to the balance of
main fee (P5,000,000), the same would become due and demandable upon cancellation. Further,
the franchiser is entitled to a 5% fee on gross sales payable monthly within the first ten days of the
following month. The Credit Investigation Bureau rated Frenz as 1+ credit rating. The balance of
the franchise fee was guaranteed by a commercial bank.
jj.
jk. The first year of operations yielded gross sales of P90 million. KFCC’s earned franchise fees
from Frenz for the first year of operation, amounted:
jl. A. P9,500,000
B. P8,537,350 C. P5,000,000
D. P4,037,350
45)
B
jm.
jn. Questions 46 to 50 are based on the following:
jo.
Comparative trial balances of the home office and the two branches of Metallica Corporation at
December 31, 2015 were as follows:
jp.
Home office Branch No. 1
Branch No. 2
jq.
Cash
P
50,000 P 150,000
P 220,000
jr.
Accounts receivable (net)
800,000
300,000
400,000
js.
Inventories
1,500,000
600,000
480,000
jt.
Branch No. 1
1,700,000
ju.
Branch No. 2
1,650,000
jv.
Plant assets (net)
7,300,000 2,500,000
2,000,000
jw.
Purchases
9,000,000
jx.
Shipments from home office
3,000,000
2,400,000
jy.
Expenses
3,000,000
750,000
500,000
jz.
Total
P25,000,000 P7,300,000
P6,000,000
ka.
kb.
Accounts payable
P 1,000,000 P 450,000
P 300,000
kc.
Other liabilities
800,000
150,000
50,000
kd.
Loading in branch inventories
1,080,000
ke.
Capital stock, P10 par
5,000,000
kf.
Retained earnings
2,620,000
kg.
Home office
1,700,000
1,650,000
kh.
Sales
10,000,000 5,000,000
4,000,000
ki.
Shipments to branches
4,500,000
0
0
kj.
Total
P25,000,000 P7,300,000
P6,000,000
kk.
kl.
Additional information:
km.
Home office and Branch inventories at December 31, 2015 were:
kn.
Home office (at cost)
P1,200,000
AFAR: SUMMARY QUIZZER
PAGE 17
ko.
Branch No. 1 (at billed price)
720,000
kp.
Branch No. 2(at billed price)
960,000
46. What is the mark-up rate on merchandise transfers to branch?
kq.
A. 20 percent of billed price
C. 16-2/3 percent of billed price
kr.
B. 25 percent of cost.
D. 25 percent of billed price
46)
C
47. How much is the beginning inventory of Metallica Corporation?
ks.
A. P1,500,000
B. P2,580,000
C. P2,400,000
P900,000
47)
C
48. How much is the ending inventory of Branch No. 1 at cost?
kt.
A. P720,000
B. P576,000
C. P600,000
48)
D.
C
D. P540,000
49. How much is the correct net income of Branch No. 2 as far as home office is concerned?
ku.
A. P1,900,000
B. P1,580,000
C. P1,850,000
D.
P940,000
49)
A
50. How much net income will the home office report in its separate income statement?
kv.
A. P2,200,000
B. P5,950,000
C. P4,940,000
P1,000,000
D.
50)
A
kw.
kx. Question 51 and 52 are based on the following:
ky. The following information came from the books and records of Linkin Park Corporation and its
branch. The balances are as of December 31, 2015.
kz.
Home Office
Branch
la.
Dr. (Cr.)
Dr. (Cr.)
lb.
Sales
P(5,000,000)
lc.
Expenses
1,500,000
ld.
Shipments to branch
P(2,400,000)
le.
Unrealized profit in branch inventory
( 740,000)
lf. The branch purchases all of its merchandise from the home office. The home office ships this
merchandise at 125 percent of its cost. The ending inventory of the branch is P600,000 at the
billed price. There are no shipments in transit between the home office and the branch.
lg.
lh.
51. The beginning inventory of the branch per GAAP must be:
li.
A. P640,000
B. P700,000
C. P600,000D. P560,000
51)
D
lj.
52. The correct net income of the branch must be:
lk.
A. P400,000
B. P1,020,000
52)
B
C. P500,000D. P620,000
ll.
lm.Items 53 through 57 are based on the following:
ln. The preclosing general ledger trial balances at December 31, 2015, for the Westlife Company
and its Vigan City branch office are shown below:
lo.
Trial Balance
lp.
Home Office Branch Office
lq.
Dr. (Cr.)
Dr. (Cr.)
lr.
Cash
P 3,600,000 P 800,000
ls.
Accounts receivable
3,500,000
1,200,000
lt.
Inventory
7,000,000
1,500,000
lu.
Plant assets - net
9,000,000
lv.
Branch office
2,000,000
lw.
Accounts payable
(3,600,000) (1,350,000)
lx.
Accrued expenses
(1,400,000) ( 250,000)
ly.
Home office
( 900,000)
lz.
Capital stock
(5,000,000)
ma.
Retained earnings
(4,500,000)
mb.
Sales
( 44,000,000) (9,500,000)
mc.
Purchases
29,000,000
2,400,000
md.
Purchases from Home office
4,500,000
me.
Expenses
4,400,000
1,600,000
mf.
mg.
Your audit disclosed the following data:
AFAR: SUMMARY QUIZZER
mh.
mi.
mj.
mk.
ml.
mm.
mn.
mo.
mp.
PAGE 18
1. On December 23 the branch office manager purchased P400,000 of furniture and fixtures
but failed to notify the home office. The bookkeeper, knowing that all fixed assets are carried
on the home office recorded the proper entry on the branch office records. It is the
company’s policy not to take any depreciation on assets acquired in the last half of a year.
2. On December 27 a branch office customer erroneously paid his account of P200,000 to
the home office. The bookkeeper made the correct entry on the home office books but did
not notify the branch office.
3. On December 30 the branch office remitted cash of P500,000, which was received by the
home office in January, 2016.
4. On December 31 the branch office erroneously recorded the December allocated
expenses from the home office as P50,000 instead of P150,000..
5. On December 31 the home office shipped merchandise billed at P300,000 to the branch
office, which was received in January, 2015.
6. The entire opening inventory of the branch office had been purchased from the home
office. Home office 2015 shipments to the branch office were purchased by the home office
in 2015. The physical inventories at December 31, 2015, excluding the shipment in transit,
are:
Home office - P5,500,000 (at cost)
Branch office - P2,000,000 (comprised of P1,800,000 from home office and
P200,000 from outside vendors.)
7. The home office consistently bills shipments to the branch office at 20% above cost. The
sales account is credited for the invoice price.
mq.
53. How much is the correct ending inventory of Westlife Company?
mr. A. P7,500,000
B. P7,200,000
C. P7,450,000
53)
D. P7,380,000
C
ms.
mt.
mu.
mv.
mw.
mx.
my.
na.
Total ending inventories of WESTLIFE Company.
Home office
Branch office:
From home office
P 180,000,000
Shipments in transit (No. 5)
30,000,000
Total
P 210,000,000
Less: Mark up (1/6 of 210) ( 35,000,000)
mz.
P 175,000,000
From outsiders
20,000,000
P 550,000,000
1,950,000
P 7,450,000
C
54. How much is the adjusted balance of reciprocal account before net income of branch?
nb. A. P1,100,000
B. P1,900,000
C. P800,000
D. P1,300,000
nc.
54)
A
nd.
Branch account Home office account
ne.
Unadjusted balance
P 2,000,000 P 9,000,000
nf.
1) Furniture purchased by the branch
( 4,000,000)
ng.
2) Collection of branch accounts
( 2,000,000)
nh.
3) Remittance in transit
( 5,000,000)
ni.
4) Error on allocated expenses
1,000,000
nj.
5) Shipment in transit
____
3,000,000
nk.Adjusted balance
P 1,100,000 P 1,100,000
A
nl.
55. How much is the correct net income of the branch?
nm.
A. P2,200,000
B. P2,100,000
C. P2,340,000
D. P2,240,000
55)
B
nn. Correct cost of sales:
no.
Beginning inventory (150,000 x 5/6)
np.
Add: Purchases from outsiders
nq.
Add: Shipments from home office at cost
nr.
(450,000 + 30,000 x 5/6)
ns.
Less: Ending inventory (refer to no. 2)
nt.
Gross profit
nu.
Less: Correct expenses (160,000 + 10,000)
nv.
Correct net income of the branch
P 125,000,000
240,000,000
400,000,000
( 1,950,000) ( 5,700,000)
P 3,800,000
( 1,700,000)
P 2,100,000
56. How much is the correct cost of sales of the Westlife Company?
nw. A. P36,650,000
B. P35,950,000
C. 32,900,000
D. P32,200,000
AFAR: SUMMARY QUIZZER
56)
PAGE 19
D
nx. Beginning inventory:
ny.
nz.
oa.
ob.
oc.
od.
oe.
of.
og.
Home office
P 700,000
Branch (refer to no. 3)
125,000
P 825,000
Add: Purchases:
Home office
P 2,900,000
Branch
240,000
3,140,000
Available for sale
P 3,965,000
Less Ending inventory (refer to no. 2)
( 745,000)
Cost of sales of G Wholesale Company
P 3,220,000
D
57. How much is the correct sales of Westlife Company?
oh. A. P53,500,000
B. P49,000,000
P49,750,000
57)
C. P48,700,000
C
D.
oi. Sales of the home office reported
P 4,400,000
oj.
Less: Sales to branch (450,000 + 30,000)
( 480,000)
ok.
Correct sales of the home office
P 3,920,000
ol.
Correct sales of the branch
950,000
om.
Total correct sales of the company
P 4,870,000
C
on.
58. The Smallville Company provides the following data for 2015:
oo.
Dec. 31, 2014
Dec. 31, 2015
op.
Inventories:
oq.
Raw materials *
P
1,200
P 1,350
or.
Work in process
1,510
1,760
os.
Finished goods
1,950
2,120
ot.
Operating data:
ou.
Cost of goods manufactured
15,170
ov.
Direct labor cost
5,000
ow.
Factory overhead cost (utilities only)
6,250
ox.
Indirect materials cost
500
oy.
oz.
* Consisting of both direct and indirect materials.
pa.
The cost of materials purchases for 2015:
pb.
a. P4,320
b. P3,820
c. P3,670
d. P3,320
pc.
pd.
pe.
pf.
58)
A
pg. Cost of goods manufactured
P 15,170
ph.
Add: Work in process, December 31, 2015
1,760
pi.
Less: Work in process, December 31, 2014
( 1,510)
pj.
Manufacturing cost
P 15,420
pk.
Less: Direct labor cost
(
5,000)
pl.
Applied factory overhead (6,250 + 500)
(
6,750)
pm.
Direct materials used
P 3,670
pn.
Add: Raw materials, December 31, 2011
1,350
po.
Indirect materials used
500
pp.
Less: Raw materials, December 31, 2010
( 1,200)
pq.
Raw materials purchases
P 4,320 A
pr.
ps.
pt. Questions 59 through 61 are based on the following:
pu.
Jean Smith knows the following about the production process in her plant:
pv.
Department 1: Prime costs are 40 percent of total manufacturing costs.
pw.
Direct labor is 25 percent of factory overhead costs.
px.
Factory overhead is P600,000.
59. Find the total direct material costs.
py. a. P400,000
b. P250,000
c. P150,000
c. P1,000,000
pz.
59)
B
AFAR: SUMMARY QUIZZER
PAGE 20
qa.
qb.
qc.
qd.
Department 2: Direct product costs are materials and direct labor.
Conversion costs are 300 percent of materials.
Indirect product costs are 50 percent of conversion costs.
Total manufacturing costs are P600,000.
qe.
qf.
Factory overhead
P 600,000
qg.
Factory overhead rate to manufacturing cost (100% -40%)
 60%
qh.
Total manufacturing cost
P 1,000,000
qi.
Direct material costs (1,000,000 x 40%) – (600,000 x 25%) = P250,000 B
qj.
60. Find the direct labor costs.
qk. a. P225,000
b. P150,000
c. P450,000
c. P300,000
ql.
60)
A
qm.
Department 3: Conversion costs are P100,000.
qn.
Prime costs are P100,000.
qo.
Materials purchases are P70,000.
qp.
Increase in materials inventory is P10,000.
qq.
Decrease in work in process inventory is P20,000.
qr.
qs.
Total manufacturing cost
P600,000
qt.
Direct materials (600,000/400%)
P150,000
qu.
Direct labor cost (600,000 – 150,000) x 50% P225,000
qv.
61. Find the cost of goods manufactured.
qw. a. P160,000
b. P180,000
c. P140,000
d. P200,000
61)
B
qx. Materials purchases
P 70,000
Less: Increase in materials inventory
( 10,000)
Materials used
P 60,000
Conversion costs
100,000
Manufacturing cost
P160,000
Add: Decrease in work in process inventory
20,000
Cost of goods manufactured
P180,000 B
re.
rf. Questions 62 and 63 are based on the following:
rg.
Newport Company, a manufacturer of fiber optic communications equipment, uses a job-order costing
system. Since the production process is heavily automated, manufacturing overhead is applied on the basis of
machine hours using a predetermined overhead rate. The current annual rate of P15 per machine hour is based
on budgeted manufacturing overhead costs of P1,200,000 and a budgeted activity level of 80,000 machine
hours. Operations for year 2014 have been completed, and all of the accounting entries have been made for the
year except the application of manufacturing overhead to the jobs worked on during December, the transfer of
costs from Work in Process to Finished Goods for the jobs completed in December, and the transfer of costs
from Finished Goods to Cost of Goods Sold for the jobs that have been sold during December. Summarized data
as of November 30, 2014 and for December 2014 are presented in the following table. Jobs T11-007, N11-013,
and N11-015 were completed during December. All completed jobs except Job N11-013 have been turned over
to customers by the close of business on December 31, 2014.
rh.
ri.
Work in Process
December 2014 Activity
rj.
Balance
Direct Direct
Machine
rk. Job No.
11/30/2014
Material
Labor
Hours
rl.
T11-007
P 87,000
P 1,500
P 4,500
300
rm. N11-013
55,000
4,000
12,000
1,000
rn. N11-015
-025,600
26,700
1,400
ro. D12-002
-037,900
20,000
2,500
rp.
D12-003
-026,000
16,800
800
rq.
Total P142,000
P95,000
P80,000
6,000
rr.
rs.
Activity through December 2014
rt. Operating Activity
11/30/2014
Activity
ru. Actual manufacturing overhead:
rv. Indirect material
P125,000
P 9,000
rw. Indirect labor
345,000
30,000
rx. Utilities
245,000
22,000
ry. Depreciation
385,000
35,000
rz. Total overhead
P1,100,000
P96,000
sa. Other items:
sb. Raw material purchases *
P965,000
P98,000
sc. Direct-labor costs
P845,000
P80,000
qy.
qz.
ra.
rb.
rc.
rd.
AFAR: SUMMARY QUIZZER
a.
b.
PAGE 21
sd. Machine hours
73,000
6,000
se.
Account Balances at Beginning of Year:
1/1/2014
sf.
Raw material inventory*
P105,000
sg.
Work in process inventory
60,000
sh.
Finished goods inventory
125,000
si.
sj.
* Raw material purchases and raw material inventory consist of both direct and indirect materials.
The balance of the Raw Materials Inventory account as of December 31, 2014 is P85,000.
sk.
62. Determine the amount by which the overhead is overapplied or underapplied as of Dec. 31, 2014.
P11,000 underapplied.
c. P6,000 underapplied.
P11,000 overapplied
d. P6,000 overapplied.
62)
A
sl.
sm.
Actual overhead for 2014:
for 11 months of 2014
P1,100,000
for December 2014
96,000
P 1,196,000
Applied factory overhead (15 x {73,000 + 6,000})
1,185,000
Underapplied overhead
P
11,000 A
sr.
63. Determine the balance in Newport Company’s Finished Goods Inventory account on Dec. 31, 2014.
P86,000
b. P31,000
c. P39,000
d. P211,000
ss.
sn.
so.
sp.
sq.
a.
63)
A
st.
su.
Cost of Job N11-013:
sv.
Cost last month
P55,000
sw.
Cost this month:
sx.
Direct materials
P 4,000
sy.
Direct labor
12,000
sz.
Applied factory overhead (15 x 1,000 hrs.) 15,000
31,000
ta.
Total
P86,000 A
tb.
64. During 2014, Danzi Company purchased materials costing P152,600. Materials requisitioned for
jobs cost P98,000, and indirect materials costing P42,000 were charged to Factory Overhead.
Factory payrolls were P212,000 with payroll taxes deducted of P60,000. Indirect labor of P71,000
included in the payrolls was charged to Factory Overhead. All other labor was direct labor charged
to the jobs. Factory overhead was applied to the jobs at the rate of P8 per machine hour. During
the year, the company operated at 45,000 machine hours and incurred factory overhead costs of
P259,000 (in addition to the indirect materials and indirect labor previously stated). Deprecation
of P47,000 was included in the P259,000 of factory overhead costs.
tc.
td.Product costing P465,000 were completed during the year, and the cost of goods sold was
P480,000. At the beginning of the year, Danzi had the following balances:
te.
Materials P27,000;
Work in Proces P48,000; Finished Goods
P34,000
tf.
tg.
th.
ti.
64)
B
tj.
tk.
tl.
tm.
tn.
to.
tp.
tq.
tr.
Determine the cost of work in process ending inventory for 2014.
a. P134,000
b. P182,000
c. P167,000
d. P194,000
Beginning work in process inventory
Add: Production costs:
Direct materials costs
Direct labor (212,000 – 71,000)
Applied factory overhead (8 x 45,000)
Total cost placed in process
Less: Completed products
Work in process ending inventory
P 48,000
P 98,000
141,000
360,000
599,000
P647,000
465,000
P182,000
B
ts.
65. Safety First Parachute Company uses a job order cost system and has two production
departments, T and P. Budgeted information for the year is as follows:
tt.
Department T Department P
tu.
Machine hours
500
25,000
tv.
Direct materials
P 400,000
P 600,000
tw.
Direct labor
350,000
100,000
tx.
Factory overhead
455,000
300,000
ty.
AFAR: SUMMARY QUIZZER
tz.
ub.
uc.
ud.
ue.
uf.
ug.
PAGE 22
Both Department T and Department P apply factory overhead to production orders through the use
of predetermined factory overhead application rates, which are based upon the yearly budget. Department T
applies factory overhead on a direct labor cost basis while Department P does so on a machine hours basis.
Actual information relating to job 194 during the year was as follows:
ua. Department T
Department P
Total
Machine hours
150
2,500
2,650
Direct materials
P18,000
Direct labor
P11,000
P 4,500
P 15,500
Factory overhead control P14,500
P24,600
P 39,100
If Safety First Parachute Company contracted to sell Job 194 for P100,000, and if estimated selling
and administrative expenses are 5% of the selling price, what is the estimated profit on job 194?
uh.
a. P17,200
b. P22,400
c. P28,600
d. P33,700
65)
A
ui.
uj.
Selling price
P100,00
uk.
Cost of goods sold:
ul.
Direct materials cost
P18,000
um.
Direct labor cost (11,000 + 4,500)
15,500
un.
Factory overhead:
uo.
Dept. T (455,000/350,000 x 11,000)
14,300
up.
Dept. P (300,000/25,000 x 2,500)
30,000
77,800
uq.
Selling and administrative expenses ( 5% x 100,000)
5,000
ur.
Net profit
P17,200 A
us.
66. Belgium Company uses a job order cost system. The following debits (credits) appeared in
Belgium’s work in process account for the month of April, 2014:
ut.
April
Description
Amount
uu.
1
Balance
P 4,000
uv.
30
Direct materials
24,000
uw.
30
Direct manufacturing labor
16,000
ux.
30
Factory overhead
12,800
uy.
30
To finished goods
( 48,000)
uz.
va.
Belgium applies overhead to production at a predetermined rate of 80% of direct
manufacturing labor costs. Job No. 5, the only job still in process on April 30, 2014, has been
charged with direct manufacturing labor of P2,000. What was the amount of direct materials
charged to Job No. 5?
vb.
a. P3,000
b. P5,200
c. P8,800
d. P24,000
vc.
66)
B
vd.
Beginning work in process inventory
P 4,000
ve.
Add: Direct materials used
24,000
vf.
Direct labor cost
16,000
vg.
Factory overhead
12,800
vh.
Less: To finished goods
( 48,000)
vi.
Ending work in process inventory
P 8,800
vj.
Less: Direct labor
P2,000
vk.
Factory overhead (2,000 x 80%)
1,600 3,600
vl.
Direct materials to work in process end
P 5,200 B
vm.
vn.Questions 67 and 68 are based on the following:
vo.
Vita Products Company produces Dalandan fruit drink. The units and equivalent units (in liters),
as well as unit costs, for the Initial Mix Department are as following:
vp.
Materials Conversion
vq.
Equivalent units in beginning work in process
6,000
1,200
vr.
Units started and completed
40,000
40,000
vs.
Equivalent units in ending work in process
3,000
1,800
vt.
Unit costs
P6.50
P10.50
vu.
67. Assuming the company uses the FIFO method. If the beginning work in process inventory was
valued at P126,000, what would be the cost of goods completed?
vv.
a. P770,000
b. P896,000
c. P644,000
d. P857,600
vw.
67)
D
vx.
vy.
vz.
wa.
Cost of goods completed:
In process beginning:
Cost last month
Cost this month:
P126,000
AFAR: SUMMARY QUIZZER
PAGE 23
wb.
Materials (6,000 x 6.50)
39,000
wc.
Conversion cost (1,200 x 10.50)
12,600
P177,600
wd.
Started and completed (40,000 x 17)
680,000
P857,600 D
we.
68. Assuming the company uses the weighted average method. If the beginning work in process
inventory was valued at P126,000, what would be the cost of ending work in process inventory?
wf.
a. P19,500
b. P18,900
c. P38,400
d. P51,600
68)
C
wg.
wh.
Cost of work in process inventory:
Materials (3,000 x 6.50)
P19,500
Conversion cost
(1,800 x 10.50)
wi.
18,900
P38,400 C
wj.
69. The Jake Department is the first of a two-stage production process. Spoilage is identified when the
units have completed the Jake process. Costs of spoiled units are assigned to units completed and
transferred to the second department in the period spoilage is identified. The following
information concerns Jake’s conversion costs in May 2014:
wk.
Units Conversion costs
wl.
Beginning work in process (50% complete)
2,000
P10,000
wm.
Units started during May
8,000
75,500
wn.
Spoilage - normal
500
wo.
Units completed and transferred
7,000
wp.
Ending work in process (80% complete)
2,500
wq.
Using the average method, what was Jake’s conversion cost transferred to the second
department?
wr.
a. P59,850
b. P64,125
c. P67,500
d. P71,250
69)
C
ws.
wt.
Equivalent production
wu.
Units completed and transferred
7,000
wv.
Ending work in process (2,500 x 80%)
2,000
ww.
Spoilage – normal
500
9,500
wx.
Costs
P85,500
wy.
Unit costs
P 9.00
wz.
Cost accounting:
xa.
Completed and transferred:
xb.
Original cost (7,000 x 9.00)
P 63,000
xc.
Add: Cost of normal spoilage (500 x 9.00)
4,500
xd.
P 67,500 C
xe.
70. A company produces plastic drinking cups and uses a process cost system. Cups go through
three departments - mixing, molding, and packaging. During the month of June the following
information is known about the mixing department
xf.
Work in process at June 1
10,000 units
xg.
An average 3/4 complete
xh.
Units complete during June
140,000
xi.
Work in process at June 30
20,000
xj.
An average 1/4 complete
xk.
Materials are added at two points in the process: Material A is added at the beginning of the
process and Material B at the midpoint of the mixing process. Conversion costs are incurred
uniformly throughout the mixing process. Under the FIFO costing flow, the equivalent units for
Material A, Material B, and conversion costs respectively for the month of June (assuming no
spoilage) would be
xl.
a. 150,000; 130,000; and 137,500
c. 160,000; 130,000; and 135,000
xm.
b. 150,000; 140,000; and 135,000
d. 160,000; 140,000; and 137,500
xn.
70)
A
xp.
xq.
xr.
xs.
xo.
Material A
Material B
Conversion
Finished and transferred out 140,000
140,000
140,000
In process, end
20,000
5,000
In process, beginning (WDLM)
( 10,000)
( 10,000)
( 7,500)
Equivalent production
150,000
130,000
137,500
A
xt. Questions 71 and 72 are based on the following:
xu.
Tess is the supervisor of Department 5 in the Davao plant of Myles Instrument Company.
She is responsible for the cost of direct materials, direct labor, and variable overhead costs
incurred in this department. The fixed overhead cost is not under her jurisdiction.
xv.
xw.
During a recent week, actual factory overhead costs for Department 5 were as follows:
xx.
Actual Variable Overhead:
AFAR: SUMMARY QUIZZER
xy.
xz.
ya.
yb.
yc.
yd.
ye.
yf.
yg.
yh.
yi.
yj.
yk.
yl.
ym.
yn.
yo.
yp.
yq.
yr.
ys.
yt.
yu.
yv.
yw.
yx.
yy.
yz.
za.
zb.
zc.
zd.
ze.
zf.
zg.
PAGE 24
Indirect materials
Supplies
Telephone
Heat and light
Power
Repairs and maintenance
Total variable overhead
P19,400
14,200
700
1,600
7,000
3,200
P 46,100
Actual Fixed Overhead:
Indirect labor
P61,000
Supervision
42,000
Heat & light
7,000
Repairs & maintenance
9,000
Depreciation
21,000
Total fixed overhead
140,000
Total actual overhead
P186,100
The department operated at 45,000 direct labor hours during the week. A budget of factory overhead
for 45,000 direct labor hours is as follows:
Budgeted Variable Overhead:
Indirect materials
Supplies
Telephone
Heat & light
Power
Repairs & maintenance
Total variable overhead
Budgeted Fixed Overhead:
Indirect labor
Supervision
Heat & light
Repairs & maintenance
Depreciation
Total fixed overhead
Total budgeted overhead
P16,500
12,400
700
1,550
7,000
2,350
P 40,500
P61,000
42,000
7,000
9,000
21,000
140,000
P180,500
zh.
zi.
Variable overhead is costed to the products at the rate of 0.90 per direct labor hour, and
fixed overhead is costed to the products at the rate of 2.80 per direct labor hour.
zj.
71. How much overhead was costed to the products during the week?
zk.
a. P166,500
b. P186,100
c. P180,500
d. P172,100
zl.
zm.
zn.
71)
A
zo.
zp.
Variable overhead
Fixed overhead
Total
P0.90
2.80
zq.
P3.70 x 45,000 hrs. = P166,500
zr.
zs.
72. Compute the overapplied or underapplied overhead for the week?
zt.
a. P5,600 overapplied
c. P19,600 overapplied
zu. b. P5,600 underapplied
d. P19,600 underapplied
A
72) D
zv.
zw.
zx.
zy.
Actual factory overhead
Applied factory overhead – per answer in no. 2
Underapplied overhead
P186,100
166,500
P 19,600 D
zz.
73. Delerico Manufacturing Company makes a variety of backpacks. The activity centers and
budgeted information for factory overhead for the year are:
aaa.
Activity Center
Overhead Costs
Cost Driver
Activity Center Rate
aab.
Materials Handling P 3,000,000
Weight of materials P 3.00 per pound
aac.
Cutting
13,000,000
Number of shapes
P30.00 per shape
aad.
Assembly
46,000,000
Direct labor hours
P120.00per labor hour
aae.
Sewing
12,000,000
Machine hours
P
80.00 per
machine hour
AFAR: SUMMARY QUIZZER
PAGE 25
aaf.
Two styles of backpacks were produced in December, the EasyRider and the Ovenighter.
The quantities and other operating data for the month are:
aag.
EasyRider
Overnighter
aah.
Direct materials costs
P150,000
P200,000
aai.
Direct labor cost
P300,000
P 50,000
aaj.
Direct materials weight in pounds
50,000
15,000
aak.
Number of shapes
35,000
15,000
aal.
Assembly direct labor hours
7,500
1,200
aam.
Sewing machine hours
12,500
1,800
aan.
Units produced
5,000
1,000
aao.
aap.
Calculate the cost per unit for each backpack.
a. EasyRider, P620; Overnighter, P783
b. EasyRider, P1,232; Overnighter, P1,240
c. EasyRider, P783; Overnighter, P620
d. EasyRider, P710; Overnighter, P1,033
aaq.
73)
D
aar.
EasyRider
Overnighter
aas.
Direct materials costs
P 150,000
P 200,000
aat.
Direct labor cost
300,000
50,000
aau.
Overhead cost:
aav.
Materials Handling = 3 x 50,000
150,000
aaw.
= 3 x 15,000
45,000
aax.
Cutting = 30 x 35,000
1,050,000
aay.
= 30 x 15,000
450,000
aaz.
Assembly = 120 x 7,500 hrs
900,000
aba.
= 120 x 1,200 hrs
144,000
abb.
Sewing = 80 x 12,500 hrs
1,000,000
abc.
= 80 x 1,800 hrs
144,000
abd.
Total cost
P3,550,000
P1,033,000
abe.
Units produced
5,000
1,000
abf.
Cost per unit
P
710 P
1,033 D
abg.
abh.
abi.
74.
Gasoline
Heating Oils Kerosene
abj.
Total market value of gallons sold
P400,000
P285,000
P365,400
abk.
Market value per gallon
P 10.00
P
6.00
P
7.00
abl.
Beginning inventory (gallons)
10,275
20,000
25,000
abm.
abn.
The above chart was used by the GET Rich Company for allocating P450,000 of joint
costs incurred in March x7 for Department A.
abo.
abp.
During March the company had no ending inventory. No additional processing costs
were incurred. The GET Rich Company uses a process cost system.
abq.
abr.
If management decided to use the physical output method to allocate joint costs, what
would the joint cost for Gasoline?
abs.
a. P128,848
b. P116,034
c. P 146,580
d. P158,440
74)
D
abt.
Gasoline
Heating Oil
Kerosene
Total
abu.
abv.
abw.
abx.
aby.
abz.
Units sold:
P400,000/10
P285,000/6
P365,400/7
Less: Beginning inventory
Units produced
40,000
47,500
(10,275)
29,725
(20,000)
27,500
52,200
(25,000)
27,200
84,425
aca.
Joint Cost for Gasoline = 29,725/84,425 x P450,000 = P158,440
D
acb.
acc.
acd.
ace.
acf.
Questions 75 through 78 are based on the following:
acg.
UNILEVER Corporation manufactures two products out of a joint process: Compod and
Ultrasene. The joint costs incurred are P2,500,000 for a standard production run that generates
AFAR: SUMMARY QUIZZER
PAGE 26
120,000 gallongs of Compod and 80,000 gallons of Ultrasene. Compod sells for P20 per gallon
while Ultrasene sells for P32.50 per gallon.
ach.
75. If there are no additional processing costs incurred after the split-off point, calculate the amount
of joint cost of each production run allocated to Compod on a physical-units basis.
aci.
a. P1,500,000
b. P1,000,000
c. P1,200,000
d.
P1,300,000
acj.
75)
Joint cost to Compod = 120,000/200,000 x 2,500,000 = P1,500,000
A
ack.
76. If there are no additional processing costs incurred after the split-off point, calculate the amount
of joint cost of each production run allocated to Ultrasene on a relative-sales-value basis.
acl.
a. P1,500,000
b. P1,000,000
c. P1,200,000
d.
P1,300,000
acm.
76)
D
acn.
Market value of:
aco.
Compod = 120,000 x P20 = P2,400,000
acp.
Ultrasene = 80,000 x P32.50 =
2,600,000
acq.
Total
P5,000,000
acr.
Joint cost to Ultrasene = 2,600,000/5,000,000 x P2,500,000 = P1,300,000
D
acs.
77. Suppose the following additional processing costs are required beyond the split-off point in order
to obtain Compod and Ultrasene: P1.00 per gallon for Compod and P11.00 per gallong for
Ultrasene, calculate the amount of joint cost of each production run allocated to Compod on a netrealizable-value basis.
act.
a. P1,200,000
b. P1,300,000
c. P1,425,000
d.
P1,075,000
77)
C
acu.
a.
b.
c.
d.
acv.
NRV
Joint Costs
acw.
Compod (20 – 1) x 120,000
P2,280,000
P1,425,000
C
acx.
Ultrasene (32.50 – 11) x 80,000
1,720,000
1,075,000
acy.
P4,000,000
P2,500,000
acz.
78. Suppose the following additional processing costs are required beyond the split-off point in order
to obtain Compod and Ultrasene: P1.00 per gallon for Compod and P11.00 per gallong for
Ultrasene. Suppose also, Compod can be processed further into a product called Compodalene, at
an additional cost of P4.00 per gallon. Compodalene will be sold for P26.00 per gallon by
independent distributors. The distributor’s commission will be 10% of the sales price. Should
UNILEVER sell Compod or Compodalene?
Compod because of an advantage of P240,000.
Compod because of an advantage of P72,000
Compodalene because of an advantage of P240,000.
Compodalene because of an advantage of P72,000.
78)
B
ada.
Incremental revenue if further processed {(26 X
90%) – 20} x 120,000
P 408,000
adb.
Incremental costs = additional processing costs (4 x 120,000)
480,000
adc.
Advantage of NOT further processing (Compodalene)
P 72,000 B
add.
ade.
adf.
adg.
79. Mark, the cost accountant for Billings Plastics, Inc., has provided you with actual and standard
cost data for one of the basic product lines for the month of February.
adh.
Direct materials Direct labor
adi.
Purchased and used at actual cost, 38,000 units P104,500
adj.
Actual direct labor payroll
P63,000
adk.
Standard materials units per product unit
2
adl.
Standard labor time per product unit
20 minutes
adm.
Standard price per unit of materials
P2.50
adn.
Standard direct labor rate per hour
P10
ado.
Labor rate variance (unfavourable)
P6,000
adp.
During February, 18,000 units of product were manufactured.
adq.
adr.
Determine the entry to record direct materials charged to production under the standard
costing system.
AFAR: SUMMARY QUIZZER
ads.
adt.
9,500
adu.
adv.
adw.
adx.
79)
PAGE 27
a. Work in Process
90,000
Material Qty Variance 5,000
Materials
b. Work in Process
Materials
c. Work in Process
104,500
Material Qty Variance
95,000
Materials
90,000
d. Work in Process
90,000
Materials
95,000
95,000
95,000
A
ady.
The debit to work in process account must be the total
standard material costs of 18,000 units produced multiply by 2 materials per unit multiply by
P2.50 per material. (18,000 x 2 x 2.50) = P90,000. The material used is 38,000 units but the
standard quantity allowed is just 36,000, therefore, there is an unfavourable quantity variance
of 5,000 (38,000 – 36,000 x 2.50). A
adz.
80. Patrick Company acquired the assets (except for cash) and assumed the liabilities of Steve
Company on January 2, 2014 and Steve Company is dissolved. As compensation, Patrick Company
gave 24,000 shares of its common stock, 12,000 shares of its 8% preferred stock, and cash of
P240,000 to the stockholders of Steve Company. On the date of acquisition, Patrick Company had
the following characteristics:
aea.
aeb.
Common , par value P5; fair value, P20
Preferred, par value P100; fair value, P
100
aec.
Immediately prior to acquisition, Steve Company’s balance sheet was as follows:
aed.
Cash
P 132,000
Current liabilities
P 228,000
aee.
Accounts receivable
Bonds payable , 10%
400,000
aef.
(net of P4,000 allowance)
170,000 Common stock, P5 par value 600,000
aeg.
Inventory – LIFO cost
200,000 Additional paid-in capital
380,000
aeh.
Land
384,000 Retained earnings
310,000
aei.
Buildings and equipt. (net)
1,032,000
.
aej.
P1,918,000
P1,918,000
aek.
ael.
An appraisal of Steve Company showed that the fair values of its assets and liabilities
were equal to their book values except for the following, which had fair values as indicated:
aem.
Accounts receivable
P158,000
Land
P540,000
aen.
Inventory
412,000
Bonds payable
448,000
aeo.
How much must be the goodwill recognized as a result of this business combination?
aep.
a. P322,000
b. P454,000
c. P94,000
d. P0
80)
B
aeq.
Cost of investment:
aer.
Common shares (24,000 x 20)
P 480,000
aes.
Preferred shares (12,000 x 100)
1,200,000
aet.
Cash
240,000 P1,920,000
aeu.
Fair value of identifiable net assets acquired:
aev.
Accounts receivable
P 158,000
aew.
Inventory
412,000
aex.
Land
540,000
aey.
Buildings and equipment
1,032,000
aez.
Current liabilities
( 228,000)
afa.
Bonds payable
( 448,000)
1,466,000
afb.
Goodwill from business combination
P 454,000
B
afc.
afd.
afe. Questions 81 to 82 are based on the following:
aff.
On January 1, 2016, Joshua Company acquired all the net assets of Fowl Company in exchange
for 9,000 newly issued common shares of Joshua with a par value of P100 and a market value of
P250. Immediately prior to the purchase combination, on January 1, 2016, the book values and fair
values of Fowl were presented in the following balance sheet:
afg.
Book value Fair value
afh.
Cash
P 100,000
P 100,000
afi.
Inventory
300,000
300,000
afj.
Plant and equipment (net)
1,650,000
2,000,000
afk.
Total assets
P2,050,000
P2,400,000
afl.
Notes payable
P 200,000
P 200,000
afm.
Common stock
1,000,000
afn.
Excess over par
250,000
afo.
Retained earnings
600,000
afp.
P2,050,000
AFAR: SUMMARY QUIZZER
PAGE 28
afq.
As part of the combination plan, Joshua agreed to give additional consideration to Fowl if
certain future events or transactions occur.
afr.
81. Assume that Joshua agreed to issue 1,000 additional shares of common stock to the former
stockholders of Fowl if Joshua’s total net income for the next two years exceeds a specified
amount. Assume the contingency is met and that the market price of Joshua’s common shares at
the end of the contingency period is P300 per share. What entry is to be recorded by Joshua
Company to record the contingency met?
afs.
a. Goodwill
300,000
c. Goodwill
300,000
aft.
Capital stock
100,000
Cash
300,000
afu.
Additional paid-in capital
200,000
afv. b. Additional paid-in capital300,000
d. Additional paid-in capital 100,000
afw.
Cash
300,000
Capital stock
100,000
81)
D
afx.
afy.
82. Assume that Joshua agreed to pay P250,000 cash to the former stockholders of Fowl if Joshua’s
total net income for the next three years exceeds a specified amount. Assume the contingency is
met, what entry is to be recorded on the books of Joshua Company?
afz.
a. Goodwill
250,000
c. Goodwill
250,000
aga.
Capital stock
100,000
Cash
250,000
agb.
Additional paid-in capital 150,000
agc.
b.
Additional paid-in capital 250,000 d. P/L Summary
250,000
agd.
Cash
250,000
Capital stock
250,000
age.
82)
D
agf.
agg.
83. Prudence, Inc. acquired a 60 percent interest in Generali Co. several years ago. During 2014,
Generali sold inventory costing P75,000 to Prudence for P100,000. A total of 16 percent of this
inventory was not sold to outsider until 2015. During 2015, Generali sold inventory costing
P96,000 to Prudence for P120,000. A total of 35 percent of this inventory was not sold to outsiders
until 2016. In 2015, Prudence reported cost of sales of P380,000 while Generali reported
P210,000. What is consolidated cost of sales?
agh.
a. P594,400
b. P473,440
c. P474,400
d. P522,400
83)
C
agi.
agj.
Cost of sales of Prudence
P380,000
agk.
Cost of sales of Generali
210,000
agl.
Less: Intercompany sales 2015
( 120,000)
agm.
Mark-up on beginning inventory (100,000 – 75,000) x 16%
( 4,000)
agn.
Add: Mark-up on ending inventory (120,000 – 96,000) x 35%
8,400
ago.
Consolidated cost of sales
P474,400
C
agp.
agq.
84. In 2015, ACE BUILDERS agreed to construct a commercial building at a price of P3,750,000. ACE BUILDERS
uses the percentage of completion method. The information relating to the costs and billings for the contract
were as follows:
ags.
agt. 2016
agu.
201
agr.
2015
7
agv.
Cost incurred to date
agw.
agx.
2,2
agy.
2,9
1,050,
50,000
43,750
00
0
agz.
Estimated costs yet
aha.
ahb.
75
ahc.
to be incurred
1,950,
0,000
00
0
ahd.
Customer billings to
ahe.
ahf. 1,500,000
ahg.
3,7
date
562,5
50,000
00
ahh.
Collection of billings
ahi. 45
ahj. 1,200,000
ahk.
3,5
to date
0,
25,000
00
0
ahl.
ahm.
How much is the excess of construction in progress over progress billings or progress billings over
construction in progress in ACE’s December 31, 2016 balance sheet?
a. P1,312,500
AFAR: SUMMARY QUIZZER
PAGE 29
b. P2,062,500
c. P 750,000
d. P2,943,750
ahn.
84)
A
aho.
85. Using the same problem, assuming there is no dependable or reliable estimate available, how much is the
construction in progress, net of progress billings or progress billings net of construction in progress in ACE’s
December 31, 2016 balance sheet?
a. P1,312,500
b. P2,062,500
c. P 750,000
d. P2,943,750
ahp.
85)
C
86.
a.
b.
c.
d.
86)
ahq.
ahr.
On January 2, 2016, Pure Foods signed an agreement to operate as a franchisee of Julie’s Bakery for an initial
franchise fee of P2,812,5000 for 10 years. Of this amount, P525,000 was paid when the agreement was signed
and the balance payable in four annual payments beginning on December 31, 2016. Pure Foods issued a
promissory note for the balance, the relevant interest rate being 24%. Assume that substantial services
amounting to P417,450 had already been rendered by Julie’s Bakery and that additional indirect franchise cost
of P70,500 was also incurred. The franchisee started operations during 2016 with a total sales of P450,000. The
agreement further provides that the franchisee must pay a continuing franchise fee equal to 3% of its gross
sales. If needed, the PV factor is 2.40.
ahs.
aht.
Assuming the note is non-interest-bearing and its collection is reasonably assured, calculate the net
income reported by Julie’s Bakery on the Pure Food franchise for the year ended December 31, 2016.
P598,630.50
P1,761,450
P1,752,450
P2,835,000
ahu.
C
87.
a.
b.
c.
d.
ahv.
ahw.
Assuming the note is interest-bearing and its collectability is doubtful, determine the realized gross profit on the
initial franchise fee for the year ended December 31, 2016. (Use 2 decimal places for the gross profit rate, forexample, 80.16%)
P1,920,000
P2,835,000
P598,630.50
P934,098.75
ahx.
87)
D
ahy.
88. MEKENI Enterprises operates a branch in Pampanga City. At the close of business on December 31, 2016, the
Pampanga City branch account in the home office books showed a debit balance of P200,000. The inter-office
accounts were in agreement at the beginning of the year. For purposes of reconciling the inter-office accounts,
the following facts were ascertained:
A. A machinery costing the home office P17,500 was picked up by the branch as P1,750. + P15,750
B. The branch did not take up insurance premium of P2,000 charged by the home office.
C. Freight charge on merchandise made by the home office for P9,800 was recorded in the branch books
as P8,900. + 900
D. Home office credit memo representing a discount on merchandise for P1,500 was taken up twice by the
branch
E. The branch failed to take up a P2,000 debit memo from the home office representing the share of the
branch in advertising.
F. A remittance of P15,000 from the San Carlos branch was inadvertently taken up in the Pampanga City
branch account but was corrected before yearend.
G. The home office inadvertently recorded a remittance for P13,500 from its Tarlac City branch as a
remittance from its Pampanga City branch
ahz.
aia.
Determine the balance in the branch books of the Home Office account (before adjustment) as of
December 31, 2016.
a.
P191,350
b.
P164,350
c.
P198,350
d.
P209,350
AFAR: SUMMARY QUIZZER
PAGE 30
aib.
aic.
88)
A
aid.
89. On May 1, 2016, the Home Office in Baguio City establishes a sales agency in Davao City. The following assets
are sent to the sales agency on that date:
aif. P10
aie. Cash (for the working fund to be operated under the imprest
0,00
system,)
0
aig. Merchandise samples
aih. 240,
000
aii.
aij.
aik.
During the month, the sales agency submits sales on account of P1,500,000 which was duly
approved by the home office. Cost of merchandise shipped to fill the orders from customers obtained by the
sales agency is P800,000. Home office disbursements chargeable to the agency are as follows: Furniture and
fixtures, P150,000; manager’s and salesmen’ salaries, P88,000; and rent, P35,000. On May 31, the sales
agency working fund is replenished: paid vouchers submitted by the sales agency amounted to P42,000. Sales
agency samples are useful until December 31, 2016, which at that time, are believed to have a salvage value of
15% of cost. Furniture are depreciated at 30% per annum.
ail. What is the net profit of the Davao City Agency for the month of May 2016?
a.
P327,250
b.
P315,250
c.
P463,750
d.
P505,750
aim.
89)
D
ain.
aio.
90. On December 1, 2015, Prada Corp. a Philippine firm, paid P6,000 to purchase a 90-day option contract for FC
400,000. The option’s purpose is to hedge an exposed accounts receivable of FC 400,000 from a sale of
merchandise. The merchandise is to be shipped on December 1, 2015, payment for which is due on March 1,
2016.
aip.
Relevant rates and market values at different dates are as follows:
air. 12/01/15
ais. 12/31/1
ait. 03/01/16
aiq.
5
aiu. Spot rate (market price)
aiv. P1.20
aiw.P1.12
aix. P1.13
aiy. Strike
price
(exercise
aiz. 1.20
aja. 1.20
ajb. 1.20
price)
ajc. Fair value of Put Option
ajd. P6,000
aje. P36,00
ajf. P28,000
0
ajg.
ajh. How much total/ net gain (loss) is recognized in the option contract at March 1, 2016?
a. P4,000
b. P(4,000)
c. P8,000
d. P(8,000)
aji.
90)
D
ajj.
ajk.
91. On June 1, 2016, a Philippine firm purchased an inventory costing FC100,000 from a foreign firm to be paid for
on August 1, 2016. Also on June 1, 2016, the Philippine firm entered into a forward contract to purchase FC100,
000 for delivery on August 1, 2016. The exchange rates were as follows:
ajm.
Spot
ajn. Forward
ajl.
ajo. June 1, 2016
ajp. 1FC = P0.73
ajq. 1FC = P0.74
ajr. June 30, 2016
ajs. 1FC = P0.70
ajt. 1FC = P0.75
aju. August
1,
ajv. 1FC = P0.68
ajw.1FC = P0.68
2016
ajx.
ajy.
The Philippine firm’s fiscal year end is June 30, 2016. The changes in the value of the forward
contract should be discounted at 8%.
ajz.
What is the value of the Forward Contract Receivable- FC on June 1, 2016?
a.
P73,000
b.
P74,000
c.
P68,000
d.
P70,000
aka.
91)
B
akb.
AFAR: SUMMARY QUIZZER
PAGE 31
akc.
92. What is the value of the Forward Contract Receivable- FC on June 30, 2016?
a. P75,000
b. P75,693
c. P74,693
d. P74,993
akd.
ake.
akf.
92)
D
93. An operator build a road at a cost of P100 M that fair value her of construction services is P110 M, the total
operating costs of the road are P70 M and total cash inflows over the life of the concession are P200 M.
akg.
akh.
Applying IFRIC 12, Service Concession Arrangement, by how much is total revenue under the
intangible asset model higher or lower than the total revenue under the financial asset model over the life of the
concession?
A. No difference
C. P110 M
B. P10 M
D. (P110M)
93)
C
E.
94. ANDROMEDA Construction was recently awarded a P6,730,000 contract a trade center for Ayala Inc.
ANDROMEDA Construction estimates it will take 46 months to complete the contract. The company uses the
percentage of completion method to estimate profits. (use two decimal places for the percentage of completion)
Example 62.48%
F. The following information details the actual estimated costs for the year 2014-2014:
G. Ye
ar
H. Actual Cost Each Year
I. Estimated Cost to Complete
J. 20
14
K. P3,120,000
L. P3,264,000
M. 20
15
N. 1,584,000
O. 1,800,000
P. 20
16
Q. 1,152,000
R. 912,000
S. 20
17
T. 1,080,000
U.
V. How much is the balance of Construction in Progress account as of 2016?
A. P5,800,000
B. P5,808,000
C. P5,818,000
D. P5,856,000
W.
94)
C
95. Home office XYZ shipped merchandise costing P18,840 to XX branch and paid for the freight charges of P3,000
XX branch was subsequently instructed to YY branch wherein XX branch paid P2,400 freight.
X.
Y. If the shipment was made directly from XYZ to YY, the freight cost would have been P4,500. Which of the
following is incorrect?
A. Upon transfer of merchandise by XX to YY, XX debits Home office account by P24,240
B. Upon transfer of merchandise by XYZ to XX, XYZ debits Investment in Branch XX account by P21,840
C. Upon transfer of merchandise by XX to YY, XYZ debits Investment in Branch XX account by P23,340
D. Upon receipt of merchandise by YY from XX, YY credits Home office account by P23,340
Z.
95)
A
AA.
AB.
96. On March 1, 2012, Evan and Helen decide to combine their business and form a partnership. The balance
sheets of Evan and Helen on march 1, 2012 before adjustments show the following:
AD.
AE.
AC.
Evan
Helen
AF.
AG.
AH.
Cash
P 9,000
P 3,750
AI.
AJ.
AK.
Accounts receivable
18,500
13,500
AL.
AM.
AN.
Inventories
30,000
19,500
AO.
AP.
AQ.
Furniture & Fixtures (net)
30,000
9,000
AR.
AS.
AT.
Office equipment (net)
11,500
2,750
AFAR: SUMMARY QUIZZER
AU.
Prepaid expenses
AX.
BA.
Accounts payable
BD.
Evan, capital
BG.
Helen, capital
BJ.
A.
B.
C.
D.
PAGE 32
AV.
AW.
6,375
AY.
P 105,375
BB.
P 45,750
BE.
59,625
BH.
3,000
AZ.
P 51,500
BC.
P 18,000
BF.
BI.
33,500
BK.
BL.
P 105,375
P51,500
BM.They agreed tom provide 3% for doubtful accounts of their accounts receivables and found Helen’s furniture
and fixtures to be under depreciated by P900.
BN. If each partner’s share in equity is to be equal to the net assets invested, the capital accounts of Evan and
Helen respectively would be:
P58,170 and P33,095
P58,320 and P32,495
P59,070 and P32,195
P104,820 and P50,195
BO.
96)
C
BP.
BQ.
BR.
a.
b.
c.
d.
BS. Items 97 and 98 are based on the following information:
BT. Arthur, Baker, and Carter are partners in textile distribution business, sharing profits and losses equality. On
December 31, 2012 the partnership capital and partners drawings were as follows:
BV.
BW.
BX.
BY.
BU.
Arthur
Baker
Carter
Total
BZ.
Captial
CA.
CB.
CC.
CD.
P100,000
P 80,000
P 300,000
P 480,000
CE.
Drawing
CF.
CG.
CH.
CI.
60,000
40,000
20,000
120,000
CJ. The partnership was unable to collect on trade receivable and was forced to liquidate. Operating profit in
2012 amounted to P72,000 which was all exhausted including the partnership assets. Unsettled creditors’
claims at December 31, 2012 totaled P84,000. Baker and Carter have substantial private resources but
Arthur has no personal assets.
97. Loss on liquidation was:
P360,000
P432,000
P480,000
516,000
97)
a.
b.
c.
d.
D
98. Final cash distribution to Carter was:
P78,000
P84,000
P108,000
P162,000
98)
A
99. Delima Company is insolvent and its statement
CK.
gains on realization of assets
CM.
losses on realization of assets
CO.
assets
CQ.
liabilities
CS.
A.
B.
C.
D.
of affairs shows the following information:
CL.
Estimated
P1,440,000
Estimated
CN.
2,000,000
Additional
CP.
1,280,000
Additional
CR.
960,000
Capital stock
CT.
2,000,000
CU.
Deficit
CV.
1,200,000
CW.
The pro-rate payment on the peso to stockholders (estimated
amount to be recovered by stockholders) is:
P.30
P.43
P.57
P.70
99)
D
AFAR: SUMMARY QUIZZER
PAGE 33
100. The data below are taken from the records of SM Appliance Co, which sells appliances exclusively on the
installment basis:
CY.
CZ.
DA.
CX.
2015
2016
2017
DB.
DC.
DD.
DE.
Installment sales
P365,500
P417,800
P610,750
DF.
DG.
DH.
DI.
Gross profit rate
36%
39%
40%
DJ.
The balances on the Installment Accounts Receivable controlling
accounts at the beginning and end of 2017 were:
DL.
DM.
DK.
January 1
December 31
From sales made in:
DN.
DO.
DP.
2015
P17,400
DQ.
DR.
DS.
2016
205,400
P25,800
DT.
DU.
DV.
2017
305,520
DW.
There was a repossession recorded during 2017. It related to a 2016
sale. Thereafter, the repossessed appliance having a fair market value of P200, which equaled the uncollected
balance in the customer’s installment accounts receivable.
DX.
There was a gain from the sale of the repossessed appliance of:
A.
P72
B.
P78
C.
P80
D.
Some other answer
100) B
101. The data below are taken from the records of SM Appliance Co. which sells appliances exclusively on the
installment basis:
DZ.
EA.
EB.
DY.
2015
2016
2017
EC.
ED.
EE.
EF.
Installment sales
P365,500
P417,800
P610,750
EG.
EH.
EI.
EJ.
Gross profit rate
36%
39%
40%
EK.
EL.
The balances on the Installment Accounts Receivable controlling
accounts at the beginning and end of 2017 were:
EN.
EO.
EM.
January 1
December 31
From sales made in:
EP.
EQ.
ER.
2015
P17,400
ES.
ET.
EU.
2016
205,400
P25,800
EV.
EW.
EX.
2017
305,520
EY. There was a repossession recorded during 2017. It related to a 2016 sale. Thereafter, the repossessed
appliance having a fair market value of P200, which equaled the uncollected balance in the customer’s
installment accounts receivable.
EZ.
FA. There was a gain from the sale of the repossessed appliance of:
a.
P 72
b.
P 78
c.
P 80
d.
Some other answer
101) B
FB. Questions102 and 103 are based on the following:
FC. Following data were taken from the books of Sony Company from 2016
FD.
FG. Installment sales
FJ. Cost of installment sales
FM.Collections:
FE. 20
15
FH. P
80
0,
00
0
FK. 48
0,
00
0
FN. 40
FF. 2016
FI. P900,
000
FL. 600,0
00
FO. 33 1/3
AFAR: SUMMARY QUIZZER
FP.
2015 installment contracts
FS.
2016 installment contracts
FV. Defaults and repossessions
FY.
Unpaid balance of prior year’s installment of contracts
defaulted
GB.
Value assigned to repossessed merchandise
PAGE 34
%
FQ. 25
0,
00
0
FT.
FW.
FZ. 12
,0
00
GC.7,
00
0
FR. 300,0
00
FU. 360,0
00
FX.
GA.15,00
0
GD.8,000
GE.
102. The realized gross profit on 2016 installment sales during 2016 amounted to:
a. P120,000
c. P180,000
b. P144,000
d. P220,000
102) A
103.
The unrealized gross profit on the 2015 installment sales as of December 31, 2016 was:
a. P160,000
c. P94,000
b. P120,000
d. P64,000
103) C
104.
i.
In 2015, AJD Construction Company was constructed to build Village Company’s private road network for
P100 million. The project was estimated to be completed in two years and the contract provided for:
e. (1) 5% mobilization fee (to be deducted from the last billing) payable within 15 days after signing of the
contract.
f. (2) 10% retention provision on all billings, and
g. (3) Payment of progress billings within 10 days from acceptance.
h.
AJD, which uses the percentage-of-completion method of accounting,
estimated a 25% gross margin on the project. By the end of 2015, AJD has presented progress billings
corresponding to 50% completion. All of the progress billings presented in 2015 were accepted, except the
last one for 10% which was accepted on January 5, 2016. With the exception of one bill for 8% which was due
January 7, 2016, all of the billings accepted in 2015 were settled. Payments made by Village Company in
2015 amounted to:
A. P33,800,000
C. P40,000,000
B. P38,500,000
D. P45,000,000
104) A
E.
105. On September 30, 2016, Star Corp. was awarded to contract to build a 1,000- room hotel for P120 million.
Among others, the parties agreed to the following:
1. Ten percent mobilization fee (deductible from “final billing”) payable within ten days from the signing
of the contract;
2. Retention of ten percent on all billings (to be paid within the final billing upon completion and
acceptance of the project); and
3. Progress billings are to be paid within 2 weeks upon acceptance.
F.
G.
By the end of 2016, the company had presented one progress billing,
corresponding 10% completion, which was evaluated and accepted by the client on December 29, 2016 for
payment in January of next year. In 2016, assuming use of the percentage-of-completion method of
accounting, Star Corp. received cash a total fee of:
A. P1,200,000
C. P12,000,000
B. P11,880,000
D. P13,200,000
105) C
106.
106)
CAUSEWAY Restaurant, sold a fastfood restaurant franchise to Turtles. The sale agreement, signed on
January 2, 2016, called for P30,000 down payment plus two P10,000 annual payments, representing the
value of initial franchise services rendered by CAUSEWAY Restaurant. In addition, the agreement required
the franchisee to pay 5% of its gross revenues to the franchisor; this was deemed sufficient to cover the cost
and provide a reasonable profit margin on continuing franchise services to be performed by CAUSEWAY
Restaurant. The restaurant opened early in 2016, and its sales for the year amounted to P500,000.
Assuming a 10% interest rate is appropriate, CAUSEWAY Restaurant’s 2016 total revenue will be:
A. P30,000
C. P72,355
B. P47,355
D. P74,090
D
E.
F. Items 107 to 109 are based on the following information:
G.
The Pangasinan Branch of Cecilia Company submitted trial balance as of
December 31, 2016, after the first year of operations:
AFAR: SUMMARY QUIZZER
PAGE 35
I.
W. Sales
De
bit
L. P1
0,4
00
O. 63,
20
0
R. 16
8,0
00
U. 10,
80
0
X.
Z. Home office current
AA.
H.
K. Cash
N. Accounts Receivable
Q. Shipments from home office
T.
AC.
Expenses
J.
Credi
t
M.
P.
S.
V.
Y. P134
,400
AB. 118,0
00
AE. P252
,400
AD. P2
52,
40
0
Merchandise inventory, P50,400.
Shipments to the branch are billed at 140% of cost.
AF.
AG.
AH.
107. The adjustment to the cost of goods sold of the Branch account amounts to:
A. P0
C. P33,600
B. P14,400
D. P48,000
E.
107) C
F.
108. The true net income of the branch during 2016 was:
A. P6,000
B. P33,600
C.
D.
P39,600
P54,000
108) C
E.
109. The overstatement in the Branch inventory at December 31, 2016 was:
A. P0
C. P14,400
B. P6,000
D. P33,600
E.
109) C
F.
110.
Bellas Company branch in Avenue began operations on January 1, 2016. During the first year of operations,
the home office shipped merchandise to the Avenue branch that cost P250,000 at a billed price of P300,000.
One-fourth of the merchandise remained unsold at the end of 2016. The home office records the shipments to
the branch at the P300,000 billed price at the time shipments are made.
G.
Freight-in of P2,000 on the shipments from the home office was paid by
the branch. The home office should make an adjusting entry for freight-in as follows:
A. A year-end adjusting entry debiting the branch account for P500
B. A year-end adjusting entry debiting the branch account for P2,000
C. A year-end adjusting entry crediting the branch account for P500
D. No year-end adjusting entry for the freight charge
H.
110) D
I.
111.
Music Box and Company has several branches located in the cities in the south namely, Davao, Tacloban,
Cebu, Bacolod, and Cagayan de Oro. It authorizes transfers of cash and inventories among branches. The head
office ships goods P100,000 cost to Davao branch paying freight charges for P6,000. The home office authorizes
the transfer of goods from Davao Branch to Cebu Branch where the latter is charged for the cost of the goods,
P100,000 and freight charges of P2,000 for the transfer. If the shipment had been made by the head office to the
Cebu Branch, the freight charges would have been P9,000. The transfers resulted to difference in freight charge
which should be disposed of as follows:
A. P1,000 charge to Cebu branch by Davao branch.
B. P1,000 charge to Cebu branch by Head office
C. P1,000 to be equally charge among Head office, Davao branch, and Cebu branch.
D. P1,000 savings
J.
111) D
K.
AFAR: SUMMARY QUIZZER
112.
PAGE 36
ACE Corp. has several branches. Goods costing P10,000 were transferred by the head office to Cebu Branch
with the latter paying P600 for freight cost. Subsequently, the head office authorized Cebu branch to transfer the
goods to Davao Branch for which the latter was billed for the P10,000 cost of the goods and freight charge of
P200 for the transfer. If the head office had shipped the goods directly to Davao Branch, the freight charge would
have been P700. the P100 difference in freight cost would be disposed as follows:
A.
Considered as savings
B.
Charged to Cebu Branch
C.
Charged to Davao Branch
D.
Charged to the Head office
L.
112) D
M.
113.
Barcelona, a private limited company, has acquired 100% of Coal, a private limited company, on January 1,
2016. The fair value of the purchases consideration was 10 million ordinary shares of P1 of Barcelona, and the
fair value of the net assets acquired was P7 million. At the time of the acquisition, the value of the ordinary
shares of Barcelona and the net assets of Coal were only provisionally determined. The value of the shares of
Barcelona (P11 million) and the net assets of Coal (P7.5 million) on January 1, 2016, were finally determined on
November 30, 2016. However, the directors of Barcelona have seen the value of the company decline since
January 1, 2016, and as of February 1, 2016, wish to change the value of the purchase consideration to P9
million. What value should be placed on the purchase consideration and assets of Coal as at the date of
acquisition?
A.
Purchase consideration P10 million, net asset value P7 million
B.
Purchase consideration P11 million, net asset value P7.5 million
C.
Purchase consideration P9 million, net asset value P7.5 million
D.
Purchase consideration P11 million, net asset value P7 miliion.
N.
113) B
O.
114.
Hillside Company had common stock of P350,000 and retained earnings of P490,000. Blue Town Inc. had
common stock of P700,000 and retained earnings of P980,000. On January 1, 2016, Blue Town issued 34,000
shares of common stock with a P12 par value and a P35 fair value for all of Hillside Company’s outstanding
common stock. This combination was accounted for as an acquisition. Immediately after the combination, what
was the consolidated net asset?
A.
P2,870,000
C.
P1,680,000
B.
P2,520,000
D.
P1,190,000
114) A
115. BDO Company acquired 100 percent of the voting common shares of MBTC Corporation, its bitter rival, by
issuing bonds with a par value and fair value of P150,000. Immediately prior to the acquisition, BDO reported
total assets of P500,000, liabilities of P280,000, and stockholders’ equity of P220,000. At the date, MBTC
reported total assets of P400,000, liabilities of P250,000, and stockholders’ equity of P150,000. Included in
Standard’s liabilities was an account payable to BDO in the amount of P20,000, which BDO included in its
accounts receivable.
E.
Based on the preceding information, what amount of total assets did
BDO report in its balance sheet immediately after the acquisition?
A. P500,000
C. P750,000
B. P650,000
D. P900,000
115) B
116. Using the same information in No. 115, what amount of total assets was reported in the consolidated balance
sheet immediately after acquisition?
A.
P650,000
C.
P920,000
B.
P880,000
D.
P750,000
116) B
117. On January 1, 2015, Brendan, Inc. reports net assets of P760,000 although (equipment with a four-year life)
having a book value of P440,000 is worth P500,000 and unrecorded patent is valued at P45,000. Brandon
Corporation pays P692,000 on that date for an 80 percent ownership in Brendan. If the patent is to be
written-off over a 10-year period, at what amount should it be reported on consolidated statements at
December 31, 2016?
A. P28,000
B. P32,400
C. P36,000
D. P40,500
E.
117) C
F.
118. On January 1, 2016, James Corp. reports net assets of P480,000 although a building (with a 10-year life)
having a book value of P260,000 is now worth P300,000. ROCKFORD Corporation pays P540,000 on that
date for a 90 percent ownership interest in Turner. On December 31, 2013, Turner reports a Building account
of P182,000 and ROCKFORD reports a Building account of P510,000. What is the consolidated balance of
the Building account?
AFAR: SUMMARY QUIZZER
A.
B.
P720,000
P724,000
PAGE 37
C.
D.
P780,000
P810,000
118) A
E.
F.
G.
119. On January 1, 2016, Post Company acquired an 80% investment in Stake Company. The acquisition cost was
equal to Post’s equity in Stake’s net assets at that date. On January 1, 2016, Post and Stake had retained
earnings of P500,000 and P100,000, respectively. During 2016, Post had net income of P200,000, which
included its equity in Stake’s earnings, and declared dividends of P50,000; Stake had net income of P40,000
and declared dividends of P20,000. There were no other intercompany transactions between the parent and
subsidiary. On December 31, 2016, what should the consolidated retained earnings be?
a. P650,000
c. P766,000
b. P666,000
d. P770,000
119) A
120. Dean, Inc. owns 100% of Roy Corporation, a consolidated subsidiary, and 80% of Wall, Inc. an
unconsolidated subsidiary at December 31. On the same date, Dean has receivables of P200,000 from Roy
and P175,000 from Wall. In its December 31 consolidated balance sheet, Dean should report accounts
receivable from investees at:
A. P0
C. P175,000
B. P35,000
D. P235,000
120) C
121. Courtney Company’s current receivables from affiliated companies at December 31, 2016 are: (1) a P75,000
cash advance to Hill Corporation (Courtney owns 30% of the voting stock of Hill and accounts for the
investment by the equity method), (2) a receivable of P260,000 from Vick Corporation for administrative and
selling services (Vick is 100% owned by Courtney and included in Courtney’s consolidated financial
statements), and (3) a receivable of P200,000 from Ward Corporation for merchandise sales on credit (Ward
is 90% owned unconsolidated subsidiary of Courtney accounted for the equity method). In the current assets
section of its December 31, 2016 consolidated balance sheet, Courtney should report accounts receivable
from investees in the amount of:
A. P180,000
C. P275,000
B. P255,000
D. P535,000
121) C
122. Samuel Company had a Swiss franc receivable resulting from exports to Switzerland and a Mexican peso
payable resulting from imports from Mexico. Samuel recorded foreign exchange gains related to both its
franc receivable and peso payable. Did the foreign currencies increase or decrease in Philippine peso value
from the date of the transaction to the settlement date?
F. Mexican
E. Franc
Peso
G. a.
H. Increase
Increase
I. b.
J. Decrease
Decrease
K. c.
L. Increase
Decrease
M. d.
N. Decrease
Increase
122) D
123. CRC entered into the first forward contract to manage the foreign currency risk from a purchase of inventory in
November 2016, payable in March 2017. The forward contract is not designated as a hedge. At December
31, 2016, what amount of foreign currency transaction gain should CRC include in income from this forward
contract?
A. P0
C. P5,000
B. P3,000
D. P10,000
123) B
124. CRC entered into the second forward contract to hedge a commitment to purchase equipment being
manufactured to CRC’s specifications. At December 31, 2016, what amount of foreign currency transaction
gain should CRC include in income from this forward contract?
A. P0
C. P5,000
B. P3,000
D. P10,000
124) B
125. CRC entered into the third forward contract for speculation. At December 31, 2016, what amount of foreign
currency transaction gain should CRC include in income from this forward contract?
A. P0
C. P5,000
B. P3,000
D. P10,000
125) B
E.
F.
G. Items 126 and127 are based on the following information:
AFAR: SUMMARY QUIZZER
PAGE 38
H. Emerald Corporation subsidiary buys marketable equity securities and inventory on April 1, 2015, and they are
still on hand at year-end. Inventory is carried at cost under the lower-of-cost-or-market rule. Currency
exchange rates for 1 FC follow:
J. P 0.15 = 1
I. January 1, 2016
FC
K. April 1, 2016
L. 0.16 = 1
M. June 1, 2016
N. 0.17 = 1
O. December 31, 2016
P. 0.19 = 1
Q.
126. Assume that the foreign currency is the subsidiary’s functional currency. What balances does a consolidated
balance sheet report as of December 31, 2016?
A. Marketable equity securities = P 19,000 and Inventory = P 16,000
B. Marketable equity securities = P 19,000 and Inventory = P 19,000
C. Marketable equity securities = P 17,000 and Inventory = P 17,000
D. Marketable equity securities = P 16,000 and Inventory = P 16,000.
126) B
R.
127. Assume that the peso is the subsidiary’s functional currency. What balances does a consolidated balance
sheet report as of December 31, 2017?
A. Marketable equity securities = P 16,000 and Inventory = P 16,000.
B. Marketable equity securities = P 17,000 and Inventory = P 17,000.
C. Marketable equity securities = P 19,000 and Inventory = P 16,000.
D. Marketable equity securities = P 19,000 and Inventory = P 19,000.
127) C
128. An entity started trading in country A, whose currency was the peso. After several years the entity expanded
and exported its product to Country B, whose currency was the Euro. The business was conducted through a
subsidiary in country B. The subsidiary is essentially an extension of the entity’s own business, and the
directors of the two entries are common. The function currency of the subsidiary is:
A. The peso
C. The peso or the euro
B. The euro
D. Difficult to determine
128) A
129.
The following equity relates to an entity operating in a hyperinflationary economy:
F.
Before PAS 29
G.
After
E.
Restatement
H.
Share capital
I.
100
J.
170
K.
Revaluation reserve
L.
20
M.
N.
Retained earnings
O.
30
P.
Q.
R.
150
S.
270
T.
What would be the balances on the revaluation reserve and retained earnings after the restatement
for PAS 29?
a. Revaluation reserve 0, retained earnings 100
b. Revaluation reserve 100, retained earnings 0
c. Revaluation reserve 20, retained earnings 80
d. Revaluation reserve 70, retained earnings 30
129) A
130.
Fatima of the Philippines, a private not-for-profit health-care entity located in Aroceros, Manila, charged a
patient of P8,600 for services. It actually billed this amount to the patient’s third-party payor. The third-party payor
submitted a check for P7,900 with a note stating that “the reasonable amount is paid in full per contract”. Which
of the following statements is true?
a. The patient is responsible for paying the remaining P700.
b. The health-care facility will rebill the third-party payor for the remaining P700.
c. The health-care facility recorded the P700 as a contractual adjustment that it will not collect.
d. The third-party payor retained the P700 and will convey it to the health-care facility at the start of the next
fiscal period.
130) C
131.
A non-for-profit hospital provides its patients with services that would normally be charged to P1 million.
However, it estimates a P200,000 reduction because of contractual adjustments. It expects another P100,000
reduction because of bad debts. Finally, the hospital loss does not expect to collect P400,000 because this
amount is deemed to be charity care. Which of the following is correct?
a. Patient service revenue = P600,000; net patient service revenues = P300,000
b. Patient service revenue = P600,000; net patient service revenues = P400,000
c. Patient service revenue = P1 million; net patient service revenues = P300,000
d. Patient service revenue = P1 million; net patient service revenues = P400,000
131) B
132.
Which of the following statement is TRUE?
A. A promise to give (pledge) whether conditional or unconditional is recognized as condition revenue upon
commitment of a prospective donor.
B. When a permanent restriction on resources of a not-for-profit organization is met by the incurrence of an
expense for the restricted purpose, the expenses is reported in the restricted net assets.
AFAR: SUMMARY QUIZZER
PAGE 39
C. Net assets that are restricted by the governing board of a not-for-profit organization are reported as a
part of temporarily restricted for reason that the board had the control anytime to lift such restrictions.
D. In the statement of activities, separate revenue, expenses, gain, losses and reclassifications for each
class including its increases and decreases must be reported.
132) D
133.
Which of the following is FALSE?
A. Voluntary Health and Welfare Organization must also provide a Statement of Functional Expenses.
B. Contributed services are recognized on the Statement of Activities if either the services create or
enhance a non financial asset, or the services required specialized skills, are provided by individuals
possessing those skills and would typically need to be purchased if not provided by donation.
C. Donation medicines for hospital use should be recorded as an increase in Other Operating Revenue
D. A regular endowment fund is used to account for funds received from donors where the principal and its
earnings is non-expendable.
133) .D
134.
Which of the following statements is FALSE?
A. Collection of income taxes from individuals by the BIR shall be credited to a liability account of the
collecting agency.
B. In the construction of building by contract, Advances to Contractor account ma be credited when billing
are received.
C. It is the policy of the Department of Budget and Management that the NCA will only be used for the year
it was issued.
D. For agencies which are authorized to use income collected for their operations, Cash in Bank – LCCA
account is credited upon use of collection for repairs and maintenance.
134) A
135.
Which of the following statements is FALSE?
A. A budget is defined as a sum of money or other resources set aside for the purpose of carrying out
specific activities.
B. Budget authorization includes the formulation of an appropriation bill to be forwarded to the president for
approval and signature.
C. Maintenance and other operating expenses are expenses which are not used in the actual operating of
the agency, examples an, interest expense and bank changes.
D. National Government books shall be used to record the receipt of Notice of Cash Allocation and other
income/receipts for which the agencies are authorized to use.
135) B
136.
Which of the following statement is FALSE?
A. The unused NCA is to be reverted to the Commission on Audit by crediting the Cash – National Treasury
– DS account.
B. Borrowings, taxes, grants and donations are sources of income and collections made by the agency.
C. In the construction of building by contract, Construction in Progress account is credited to recognize the
Building account.
D. Upon issuance of purchase order for the office equipment it requires only a memo entry in RAOCO.
136) A
137.
Which of the following statements is TRUE?
A. Appropriate entries are made in the regular agency books upon receipt of budgetary allotments from the
DBM as well as the incurrence of obligations.
B. In the construction of the building, the obligation for the contract price is entered in the RAOCO. Upon
payment of the first billing less withholding tax, a liability account and an asset account are credited.
C. In an interagency upon issuing the completion report to the source agency.
D. All collections which are recorded in the national government books requires a debit to an assets
account upon remittance to bureau of treasury.
137) B
138.
PFRS 11 Joint Arrangements provide that joint control exists where:
A. One party alone has power to control the strategic operating decisions of the joint arrangement
B. No single party is in a position to control the activity unilaterally
C. The decisions in areas essential to the goals of the joint arrangement do not require the consent of the
parties
D. No one party may be appointed as the manager of the joint arrangement
138) B
139.
Which of the following is correct?
A. Where the joint operators have designed the joint arrangement so that its activities primarily aim to
provide the parties with an output it will be classified as a joint control?
B. All joint arrangements are not structured through a separate vehicle are classified as joint ventures
C. For a joint venture, the rights pertain to the rights and obligations associated with individual assets and
liabilities, whereas with a joint operation, the rights and obligations pertain to the net assets
D. In considering the legal form of the separate vehicle if the legal form establishes rights to individual
assets and obligations, the arrangement is a joint operation. If the legal form establishes rights to the net
assets of the arrangement, then the arrangement is a joint venture.
139) D
140.
Which of the following statements is not true in relation to joint control?
AFAR: SUMMARY QUIZZER
A.
B.
C.
D.
PAGE 40
Joint control exists only where there is contractually agreed sharing of control
Entities over which a party has joint control are accounted for in accordance with PFRS 11 Joint
Arrangements
Joint control requires the unanimous consent of the parties sharing control
Each party must have an equal interest for joint control to exist
140) D
141.
In relation to the supply of a service to a joint operation by one of the joint operators, which of the following
statements is correct?
A. A joint operator cannot earn a profit on supplying services to itself
B. A joint operator is not able to recognize the service revenue or service cost for the services supplied to
the joint operation
C. A joint operator can recognize 100% of the earned through the supply of services to the joint operation
D. A joint operator is entitled to recognize a profit from the supply of services to itself
141) A
142.
When eliminating any unrealized profit arising when a joint operator provides services to a joint operation, the
profit is eliminated against:
A. Retained earnings
B. Cost of goods sold
C. The investment in the joint operation
D. Work in progress, finished goods and other inventory related accounts
142) D
143.
Which of the following statements is correct?
A. All joint arrangements are accounted for under PAS 28.
B. Joint arrangements classified as joint ventures are accounted for under PAS 28
C. Joint arrangements classified as joint operations are accounted for under PAS 28
D. Joint arrangements classified as joint ventures are accounted for under PFRS 11
143) B
144.
For the purposes of equity accounting for an investment in an associate, it is presumed that the investor has
significant influence over the other entity where the investor holds:
A. 20%or more of the voting power of the investee
B. 50% or more of the voting power of the investee
C. Between 1% and 5% of the voting power of the investee
D. Between 5% and 10% of the voting power of the investee
144) A
145.
When disclosing information about investments in associate, PAS 28 Investments in Associates and Joint
Ventures, requires separate disclosure of which of the following?
I. Shares in associates, in the statement of financial position
II. Share profit or loss associates, in the statement of profit or loss and other comprehensive income
III. Share of any discontinuing operations, in the statement of changes in equity
IV. Shares of changes recognized directly in the associate’s equity, in the statement of changes in equity
A. I, II, III and IV
C. II, III, and IV only
B. I, II and IV only
D. I, II and III only
145) A
146.
Program of the Philippine government guided by the principles of transparency, accountability and sustained
partnerships with the private sector:
A. Feeding Program
B. Housing Program
C. Conditional Cash Transfer Program
D. Public-Private Partnership Program (Service Concession Arrangement)
146) D
147.
The program intends to provide the public with adequate, safe, efficient, reliable, and reasonably-priced
infrastructure and development facilities while affording the private sector a level playing field, reasonable returns
and appropriate sharing risks
A. Feeding Program
B. Housing Program
C. Conditional Cash Transfer Program
D. Public-Private Partnership Program (Service Concession Arrangement
147) D
148.
The arrangement is governed by a contract between the operator and the government (the grantor) that sets
out performance standards, mechanisms for adjusting prices or rates and arrangement for arbitrating disputes.
Such arrangements are often described as:
A. Conditional Cash Transfer Program
B. Feeding Program
C. Housing Program
D. A “build-operate-transfer” (BOT) arrangement, a “rehabilitate-operate-transfer” (ROT) or “public-toprivate” service concession arrangement.
148) D
149.
The PFRIC 12 applies only if:
AFAR: SUMMARY QUIZZER
A.
B.
C.
D.
PAGE 41
Both a and b
None of the above
The grantor controls or regulates what services the operator must provide with the infrastructure, to
whom it must provide them, and what price; and
The grantor controls- through ownership, beneficial entitlement or otherwise- any significant residual
interest in the infrastructure at the end of the term of the arrangement
149) A
150.
This interpretation provides the accounting principles for recognizing and measuring the obligations and
related rights in service concession arrangements. The issues addressed are:
I. Treatment if the operator’s right over the infrastructure
II. Recognition and measurement of arrangement consideration construction or upgrade services
A. I and II only
C. I and III only
B. II and III only
D. I, II, and III
150) A
151.
This interpretation provides the accounting principles for recognizing and measuring the obligations and
related rights in service concession arrangements. The issues addressed are:
I. Operating services;
II. Borrowing Costs;
III. Subsequent accounting treatment of a financial asset and an intangible asset; and items provided to the
operator by the grantor
E.
C. I and III only
A. I and II only
D. I, II and III
B. II and III only
151) D
152. Which of the following statement(s) is (are) false?
I. PFRIC 12 specifies that the infrastructure to be recognized as property, plant and equipment of the
operator because the contractual service arrangement does not convey the right to control the use of
the public service infrastructure to the operator.
II. The operator has access to operate the infrastructure to provide the public service on behalf of the
grantor, in accordance with the terms specified in the contract.
III. Under the terms of the contractual arrangement, the operator acts as a service provider by constructing
or upgrading the infrastructure (construction or upgrade services) used to provide a public service,
and operates and maintains that infrastructure (operation services) for a specified period of time.
A. I only
C. I and II only
B. II only
D. I and III only
152) A
153. The operator of the BOT arrangement shall recognize and measure revenue in accordance with:
A. PAS 11
C. PAS 23
B. PAS 18
D. PAS 11 and PAS 18
153) D
154. In construction or upgrade services, the operator shall account for revenue and costs relating to construction
or upgrade services in accordance with PAS 11, generally using the:
A. Cash method
B. Cost recovery method
C. Completed contract method
D. Stage of completion method
154) D
155. The operator has an unconditional right to receive cash if the grantor contractually guarantees to pay the
operator based on:
A.
Nil
B.
Current market value of the right
C.
Future value of the said unconditional right
D. Specified or determinable amounts or the shortfall, if any, between amounts received from users of the
public services and specified or determinable amount, even if payment is contingent on the operator
ensuring that the infrastructure meets specified quality or efficiency requirements
155) D
156. The operator shall account for revenue and costs relating to operation services in accordance with:
A. PAS 11 and PAS 18
C. PAS 18
B. PAS 23
D. PAS 11
156) C
157. In accordance with PAS 23, borrowing costs attributable to the arrangement in the period in which they are
incurred shall be:
A. Claims receivable
C. liability
B. expense
D. asset
157) B
158. In accordance with PAS 23, borrowing costs attributable during the construction phase of the arrangement
shall be:
A.
Expense
B.
Liability
AFAR: SUMMARY QUIZZER
C.
Claims receivable
PAGE 42
D.
Intangible asset
158) D
159.
Which of the following statement is TRUE?
When a permanent restriction on resources of a not-for-profit organization is met by the incurrence of an
expense for the restricted purpose, the expenses is reported in the restricted net assets.
B. Net assets that are restricted by the governing board of a not-for-profit organization are reported as a part of
temporarily restricted for reason that the board had the control anytime to lift such restrictions.
C. A promise to give (pledge) whether conditional or unconditional is recognized as condition revenue upon
commitment of a prospective donor.
D. In the statement of activities, separate revenue, expenses, gain, losses and reclassifications for each class
including its increases and decreases must be reported.
D
Which of the following statements is TRUE?
A. The EUP computed under the weighted average costing may be equal with the EUP arrived at using FIFO
costing.
B. In a process cost system, abnormal lost units if discreet are only extended to the unit column but not to
the EUP column.
C. If loss is continuous and normal, los units are not included in the quality schedule of the cost of production
report.
D. Unit material cost is computed by taking total material costs changed to the department for the period and
dividing by the physical units in the process during the period.
A
Which of the following statements is TRUE?
A. Applied overhead consists of estimated activity times predetermined overhead rate.
B. In Order to obtain more accurate product costs, many companies now allocate overhead using just-in time
method
C. If actual overhead is less than applied overhead, upon closing, overhead is underapplied and Cost of
Goods Sold s credited.
D. Actual overhead exceeds applied overhead and the amount is immaterial, upon closing, overhead is
underapplied and Cost of Goods Sold will increase.
D
Which of the following is FALSE?
A. The FIFO method of process costing when beginning and ending work in process inventories are each
50 percent complete.
B. For a manufacturing company, indirect manufacturing costs may be included in both work in process
inventory and finished goods inventory.
C. A discrete loss is assumed to occur at specific point in the production process.
D. Abnormal spoilage is always accounted for an equivalent unit basis.
A
Which of the following statements is FALSE?
A. On the balance sheet date, the account Forward Contract Receivable which is the receivable from the
bank is credited to recognize foreign exchange loss the decrease in the forward rate under a derivative
instrument which is a forward contract to purchase foreign currency.
B. Assuming CG Company a Philippine Company acquired an “at the money” foreign currency call option
contract, under a fair value hedge, if the spot rate decreases from transaction date to year-end then the
intrinsic value at year-end is also equal to the gain on derivates as to the effective portion which affects
current earnings or profit and loss.
C. A Philippine Company sold and delivered merchandise on account to a customer in another country in
2016, the transaction is denominated in the country’s local currency to be settled in 2017, the said
transaction is not automatically a hedge item even if the bid spot rate is decreasing.
D. On the settlement date, in the books of XYZ Company a Philippine Company with importing transaction
which is also a hedge item and a forward contract to buy foreign currency which is also a hedging
instrument the amount of each debited is measured in pesos but denominated in a foreign currency.
B
An insurance contract can contain both deposit and insurance elements. An example might be a reinsurance
contract where the cedent receives a 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.
A.
159)
160.
160)
161.
161)
162.
162)
163.
163)
164.
164) A
165.
Which of the following accounting practices has been outlawed by PFRS No. 4?
A. Shadow Accounting
B. Catastrophe Accounting
C. A test for the adequacy of recognized insurance liabilities
D. An impairment test for reinsurance assets
165) B
E.
F.
G. ..reh/cde09192016