REV 3 Long Quiz Problem
Chapter 12 Revenue Recognition: Contract with Customers Other Issues
(1-5) On January 1, 20x9, Blesilda Prudencio Company enters into a contract to transfer Product X and Product
Y to Virginia and Nanette Co. for P200,000. The contract specifies that payment of Product X will not occur until
Product Y is also delivered. In other words, payment will not occur until both Product X and Product Y are
transferred to Virginia and Nanette. Blesilda Prudencio determines that standalone prices are P60,000 for
Product X and P140,000 for Product Y. Blesilda Prudencio delivers Product X to Virginia and Nanette on February
1, 20x8. On March 1, 20x9, Blesilda Prudencio delivers Product Y to Virginia and Nanette.
1. On January 1, 20x9, the amount of ACCOUNTS RECEIVABLE to be recorded:
a. P200,000
b. P60,000
c. P140,000
d. None
2. On February 1, 20x9, the amount of ACCOUNTS RECEIVABLE to be recorded:
a. P200,000
b. P60,000
c. P140,000
d. None
3. On March 1, 20x9, the amount of ACCOUNTS RECEIVABLE to be recorded:
a. P200,000
b. P60,000
c. P140,000
d. None
4. On February 1, 20x9, the amount of REVENUE to be recorded:
a. P200,000
b. P60,000
c. P140,000
d. None
5. On March 1, 20x9, the amount of REVENUE to be recorded:
a. P200,000
b. P60,000
c. P140,000
d. None
Chapter 7 Foreign Currency Transactions
(6-10) JJ restaurants purchased green rice, a special variety of rice, from a foreign country for 100,000 FCs on
Nov 1, 20x4. Payment is due on January 30, 20x5.On Nov 1, 20x4, the company also entered into a 90-day
forward contract to purchase 100,000 FC. The forward contract is not designated as a hedge. The rates were as
follows:
Date
Spot Rate
Forward rate for March 1
November 1, 20x4
P .120
P .126 (90 days)
December 31, 20x4
.124
.129 (30 days)
January 30, 20x5
.127
6. The entries on January 30, 20x5, include a:
a. Credit to Foreign Currency Units, P12,600.
b. Debit to Foreign Currency Payable to Exchange Broker, P12,700
c. Debit to Pesos Payable to Exchange Broker, P12,600
d. Debit to Financial Expense, P400.
7. The entries on January 30, 20x5, include a:
a. Credit to Cash, P12,600.
b. Debit to Pesos Payable to Exchange Broker, P12,000.
c. Credit to Foreign Currency Receivable from Exchange Broker, P12,600.
d. Credit to Premium on Forward Contract, P600.
8. The entries on January 30, 20x5, include a:
a. Debit to Pesos Payable to Exchange Broker, P12,700.
b. Credit to Foreign Currency Transaction Gain, P100.
c. Credit to Foreign Currency Receivable from Exchange Broker, P12,600.
d. Debit to Foreign Currency Units, P12,700.
9. The entries on December 31, 20x4, include a:
a. Debit to Financial Expense, P300.
b. Debit to Foreign Currency Receivable from Exchange Broker, P12,600.
c. Debit to Foreign Currency Receivable from Exchange Broker, P12,600.
300
d. Credit to Foreign Currency Payable to Exchange Broker
10. The entry on November 1, 20x4 to record the forward contract includes a:
a. Credit to Premium on Forward Contract, P600.
b. Debit to Foreign Currency Receivable from Exchange Broker, 100,000.
c. Debit to Foreign Currency Receivable from Exchange Broker, P12,600.
d. Credit to Pesos Payable to Exchange Broker, P12,600.
Chapter 13 Home Office and Branch Office Accounting: General Procedures
Betzler
the home office shipped merchandise to the Malate branch that cost P250,000 at a billed priced of P300,000.
One-fourth of the merchandise remained unsold at the end of 20x4. The home office records the shipments to
the branch at the P300,000 billed price at the time shipments are made. Freight-in of P2,000 on the shipments
from the home office was paid by the branch.
11. 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
Chapter 11
(12-14) Comita Nocom and Ellen Riofrio Pasta Inn charges an initial fee of P800,000 for a franchise, withP160,000
paid when the agreement is signed on January 1, 20x5 and the balance in four annual payments starting
December 31, 20x5. The present value of the annual payments, discounted at 10% is P507,200. The franchisee
has the right to purchase P60,000 of kitchen equipment and supplies forP50,000. An additional part of the initial
fee is for advertising to be provided by Comita Nocom and Ellen Riofrio Pasta Inn during the next five years. The
value of the advertising is P1,000 a month. Franchise commences operations on January 20, 20x5.
12. The amount of unearned franchise fee on December 31, 20x5:
a. P70,000
b. P60,000
c. P10,000
d. P132,800
13. The amount of revenue from franchise fee on 20x5:
a. P657,200
b. P800,000
c. P597,200
d. P667,200
14. What entry should Carmita Nocom and Ellen Riofrio Pasta Inn make for the franchise fees on January
1, 20x5?
a. Cash
160,000
Note Receivable
507,200
Franchise Revenue
597,200
pero nd
Unearned interest income/ Discount on N/R
132,800
balance?
Unearned franchise revenue
70,000
b. Cash
160,000
Note Receivable
507,200
Unearned franchise revenue
c. Cash
Note Receivable
160,000
507,200
667,200
Franchise Revenue
Unearned franchise revenue
597,200
70,000
d. Cash
160,000
Note Receivable
507,200
Unearned franchise revenue
700,000
Chapter 11
(15-16) Information relating to regular sales and consignment sales of EE Products for the year ended June 30,
20x4 follows:
Regular Sales
Consignment Sales
Total
Sales
P 120,000
P 30,000
P 150,000
Cost of Sales
84,000
26,000
110,000
Operating expenses
?
1,760
16,910
You ascertain that merchandise costing P6,500 are in the possession of consignees and are included in the cost
of consigned merchandise sold. Operating expenses of P15,150 (more than half of which are fixed) are to be
allocated to regular sales and to consignment sales based on volume. The P1,760 operating expenses relating
to consignment sales include a commission of 5% and P260 Costs incurred by consignees relating to the entire
shipment of merchandise worth P26,000.
15. The net income on regular sales is:
a. P17,380
b. P30,280
c. P23,880
d. None of the above
16. The net income on consignment sales is:
a. P8,740
b. P2,240
c. P5,710
5,775
d. None of the above
Chapter 13 Home Office and Branch Office Accounting: General Procedures
(17-20) Rome Corporation has one branch office, name Timber Branch. Rome is performing the end-of-theperiod reconciliation. The following items are unsettled at the end of the accounting period (you may assume
that the item has been reflected in the accounts of the underlined entity):
Rome has agreed to remove P750 of excess freight charges charged to Timber when Rome shipped twice
as much inventory as timber requested
Timber mailed a check for P11,000 to Rome as a payment for merchandise shipped from Rome to
Timber. Rome has not yet received the check.
Timber returned defective merchandise to Rome. The merchandise was billed to Timber at P4,000 when
its actual cost was P3,000.
Advertising expense attribute to the branch office was paid for by the home office in the amount of
5,000
17. Which of the following statements is correct?
a.
P11,000 of cash in transit and is
decreased for the 750 of excess freight charges.
b.
P5,000 of cash in transit of
advertising expense and decreased for the P750 of excess freight charges.
c.
P11,000 of cash payment to Rome
and is decreased by P4,000 for the billed cost of defective merchandise inventory.
d.
freight charges and increased by the P5,000 of the advertising expenditure.
18. Which of the following statements is correct?
a. The Timber Branch
decreased for the P750 of excess freight charges.
P11,000 of cash in transit and is
b.
P11,000 of cash in transit and is
decreased for the P750 of excess freight charges.
c.
decreased by P4,000 for the billed cost of defective merchandise inventory.
d.
P11,000 of cash in transit and is
decreased for the P5,000 of allocated advertising cost.
19. If the adjusted balances for the Timber Branch Account and the Rome Home Office account is
a.
b.
c.
d.
20. If the
a.
b.
c.
d.
P515,000
P510,250
P514,000
P504,000
adjusted balances for the Timber Branch Account and the Rome Home Office account is
P516,000
P496,750
P505,000
P595,750
Chapter 9 Joint Arrangement
(21-24) Vat Company acquired a 30 percent interest in the voting stock of Zel Company for P331,000 on January
1, 20x1, when Zel's stockholders' equity consisted of capital stock of 600,000 and retained earnings of P400,000.
At the time of Vat's investment, Zel's assets and liabilities were recorded at their fair values, except for
inventories that were undervalued by P30,000 and a building with a 10-year remaining useful life that was
overvalued by P120,000. Zel has income for 20x1 of P100,000 and pays dividends of P50,000. Assume
undervalued inventories are sold in 20x1. Using equity method.
21.
a.
b.
c.
d.
P331,000
P316,000
P338,800
P353,800
a.
b.
c.
d.
P338,800
P315,000
P300,000
P330,000
a.
b.
c.
d.
P22,800
Nil
P30,000
P15,000
22.
ssets at December 31, 20x1?
23.
Chapter 15 Corporate Liquidation
(24-28) On June 1, 20x5, the books of Dremer Corporation show assets with books values and realizable values
as follows:
Book value
Realizable value
Cash
1,850
1,850
Accounts Receivable net
21,200
17,000
Note Receivable
15,000
15,000
Inventory
41,000
20,000
Investment in Calandir Stock
5,800
15,000
Land and Building Stock
98,500
92,800
Equipment net
43,000
8,000
TOTALS
226,350
169,650
Accounts payable (50,000 secured by inventory and equipment)
Wages payable
Other accrued liabilities
Accrued Interest on Notes Payable
Accrued Interest on Mortgage Payable
Notes payable (secured by Calandir Stock)
Mortgage Payable (secured by Land and Building)
TOTAL
BOOK VALUE
90,625
3,775
10,000
375
600
10,000
70,000
185,375
24. The estimated gain (loss) on liquidation
a. (56,700)
b. 51,000
c. 52,500
d. 45,700
25. The estimated payment to fully secured creditors
a. 70,600
b. 90,625
c. 108,975
d. 80,975
26.
a. (3,825)
b. 40,975
c. 3,975
d. 51,175
27. The estimated amount available to unsecured creditors (with and without priority)/ total free assets:
a. 90,625
b. 76,400
c. 72,625
d. 80,625
28. The estimated amount available to unsecured creditors without priority (net free assets):
a. 90,625
b. 80,625
c. 76,400
d. 72,625
Chapter 14 Home Office and Branch Office Accounting: Special Procedures
(29-31) Alamo Company has two merchandise outlets, its main store and its Bonomo branch. All purchases are
made by the main store and shipped to the branch at cost plus 10%. On January 1, 20x4, the main store and
Bonomo inventories were P17,000 and P4,950, respectively. During 20x4, the main store purchased
merchandise costing P50,000 and shipped 40% of it to Bonomo. At December 31, 20x4Bonomo made the
following closing entry:
Sales
40,000
Inventory
6,050
Shipments from main store
22,000
Expenses
13,100
Inventory
4,950
Main store
6,000
29. If the main store inventory at December 31, 20x4 is P14,000, the combined cost of goods sold that
a.
b.
c.
d.
30. If the
P54,000
P33,000
P52,000
P74,000
main store inventory at December 31, 20x4 is P14,000, the combined main store and branch
:
a. P18,950
b. P19500
c. P20,050
d. P21,500
31. What was the actual branch income for 20x4 on a cost basis assuming generally accepted accounting
principles
a. P8,550
b. P6,000
c. P8,100
d. P7,900
Chapter 10 Revenue Recognition: Contract with Customers Long-Term Construction
(32-34) Gorman Construction Co. began operations in 20x4. Construction activity for 20x4 is shown below.
Gorman uses the overtime/ cost recovery method.
Contract
1
2
3
Billings
Contract Price
P 3,200,000
3,600,000
3,300,000
Collections
Through
12/31/x4
P 3,150,000
1,500,000
1,900,000
Estimated
Through
12/31/x4
P2,600,000
1,000,000
1,800,000
Costs to
12/31/x4
P 2,150,000
820,000
2,250,000
Costs to
Complete
P 1,880,000
1,200,000
32. Which of the following should be shown on the balance sheet at December 31, 20x4 related to Contract
1?
a. Gross profit, P1,000,000.
b. Gross profit, P1,050,000.
c. Gross profit, P600,000.
d. Gross profit, P450,000.
33. Which of the following should be shown on the balance sheet at December 31, 20x4 related to Contract
2?
a. Contract assets, P680,000.
b. Contract assets, P820,000.
c. Contract liabilities, P680,000.
d. Contract liabilities, P1,500,000.
34. Which of the following should be shown on the balance sheet at December 31, 20x4 related to Contract
3?
e. Contract assets, P350,000.
f. Contract assets, P200,000.
g. Contract liabilities, P2,250,000.
h. Contract liabilities, P2,100,000.
Chapter 14 Home Office and Branch Office Accounting: Special Procedures
(35-36) The Stone Corporation has one remote location operating as a branch, Rock Branch. Stones make
shipments of merchandise to Rock at cost plus ten percent. For the current accounting period, Rock Branch has
P2,000 of branch profit and has P5,000 of inventory on hand at cost which was originally received from Stone.
35.
following:
a. Credit the Rock Branch account for P2,000 of branch profit and eliminate the P5,000 of ending
inventory
b. Credit the Rock Branch account for P2,000 of branch profit and combine the P5,000 of branch
inventory with its own ending inventory.
c. Debit the Rock Branch account for P2,000 of branch profit , credit the Rock Branch Profit account
for the P2,000 branch profit and eliminate the P5,000 of branch ending inventory
d. Debit the Rock Branch account for P2,000 of branch profit , credit the Rock Branch Profit account
for the P2,000 branch profit and combine the P5,000 of branch ending inventory.
36. Which of the following statements concerning stone and Rock is correct?
a. Stone will have both a Rock Branch account and Shipments from Stone account on its home office
books.
b. Stone will have both a Stone Home Office account and Shipments from Stone account on its
branch office books.
c. Rock will have both a Stone Home Office account and Shipments from Stone account on its
branch office books.
d. Rock will have both a Stone Home Office account and Shipments from Stone account on its
branch office books.
Chapter 9 Joint Arrangement
(37-38)
December 31
October 1
P 500
1,500
800
200
P3,000
P 250
1,550
600
200
P2,600
P 300
1,000
500
1,200
P3,000
P 200
1,000
500
900
P2,600
Debits
Current assets
Plant assets- net
Expenses (including COGS)
Dividends (paid in July)
Credits
Current Liabilities
Capital stock (no change during the year)
Retained earnings, January 1
Sales
and liabilities. Using the equity method
37. Compute the correct ba
a. P625,000
b. P700,000
c. P600,00
d. Nil
38.
a. P300,000
b. P200,000
c. P25,000
d. Nil
Chapter 10 Revenue Recognition: Contract with Customers Long-Term Construction
(39-40) Horner Construction Co. uses the overtime/ percentage-of-completion method. In 20x4, Horner began
work on a contract P5,500,000; it was completed in 20x5. The following cost data pertain to this contract:
Cost incurred
Estimated costs to complete at the end of the year
Year Ended December 31
20x4
20x5
P 1,950,000
P 1,400,000
1,300,000
-
39. The amount of gross profit to be recognized on the income statement for the year ended December
31, 20x5 is:
a. P2,150,000
b. P900,000
c. P860,000
d. P800,000
40. If the point-in-time/ cost recovery method (zero-profit approach) of accounting was used, the amount
of gross profit to be recognized for years 20x4 and 20x5 would be:
a.
20x4
20x5
P 2,250,000
P0
b.
20x4
20x5
P0
P 2,150,00
c.
20x4
20x5
P 2,150,000
(P 100,000)
Problems
(1-7)
On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. The business combination resulted to goodwill of
3,000. On this date, XYZ s equity comprised of 50,000 share capital and 24,000 retained earnings. NCI was
XYZ, Inc.
Inventory
Equipment (4 yrs. Remaining life)
Accumulated depreciation
Total
Carrying amounts
23,000
50,000
(10,000)
63,000
Fair values
31,000
60,000
(12,000)
79,000
Fair value Adjustment (FVA)
8,000
10,000
(2,000)
16,000
During 20x1, the following intercompany transactions occurred:
a) ABC Co. sold goods costing 12,000 to XYZ, Inc., for cash, at a markup of 40% on selling price. A quarter
of these goods are held in inventory by XYZ, Inc. by year-end.
b) ABC Co. acquired inventory from XYZ, Inc. for 12,000 cash. XYZ, Inc. uses a normal markup of 25% above
its cost. ABC's ending inventory included 4,000 from this purchase.
The year-end individual financial statements are shown below:
Statement of Financial Position
As at December 31, 20x1
ABC Co.
ASSETS
Cash
41,000
Accounts Receivable
75,000
Inventory
97,000
Investment in subsidiary (at cost)
75,000
Equipment
200,000
Accumulated depreciation
(60,000)
TOTAL ASSETS
428,000
LIABILITIES AND EQUITY
Accounts payable
Bonds payable
Total liabilities
Share capital
Share premium
Retained earnings
Total equity
TOTAL LIABILITIES AND EQUITY
67,750
22,000
10,400
50,000
(20,000)
130,150
43,000
30,000
73,000
30,000
30,000
170,000
65,000
120,000
355,000
428,000
50,000
50,150
100,150
130,150
Statement of profit or loss
For the year ended December 31, 20x1
ABC Co.
Sales
330,000
Cost of goods sold
(185,000)
Gross profit
145,000
Depreciation expense
(40,000)
Distribution costs
(32,000)
Interest expense
(3,000)
PROFIT FOR THE YEAR
70,000
1. The consolidated ending inventory
a. 99,400
b. 107,400
c. 104,600
XYZ, Inc.
XYZ, Inc.
150,750
(96,600)
54,150
(10,000)
(18,000)
26,150
d. 115,400
2. The consolidated cost of sales
a. 281,600
b. 249,600
c. 320,000
d. 260,400
3. The intercompany sales to be eliminated is
a. 32,000
b. 24,000
c. 21,600
d. 20,000
4. The amount of goodwill at year-end is
a. Zero
b. 10,000
c. Cannot be determined
d. 3,000
5. The unrealized gross profit in ending inventory is
a. 8,000
b. 2,400
c. 2,800
d. 2,000
6. The non-controlling interest in net assets
a. 12,280
b. 21,070
c. Zero
d. 15,250
7. The consolidated retained earnings on Dec. 31, 20x1 is:
a. 130,280
b. 196,300
c. 120,000
d. 170,150
(8-10) Wizard Corporation sells inventory on June 20 to a German Company for 86,000 FCUs (Foreign Currency Units).
Payment occurs on August 10. The exchange rate on June 20 is 1 FCU = P1.016 and 1 FCU = P1.022 on August
10.
8. What is the debit to cash when Wizard collects the Accounts Receivable on August 10?
a. 87,376
b. 86,000
c. 87,892
9. What is the amount recorded on Wizard s financial records for the sale on June 20?
a. 87,376
b. 86,000
c. 87,892
10. What is the amount on Exchange Gain or Loss recorded on Wizard s financial records on August 10?
a. 516 gain
b. 516 loss
(11-12) On September 30, 20x1, ABC Co. acquired all of the identifiable assets and assumed all of the liabilities of XYZ, Inc.
by paying cash of P1,000,000. On this date, the identifiable assets acquired and liabilities assumed have fair values
of P1,600,000 and P900,000, respectively.
ABC engaged an independent valuer to appraise a building acquired from XYZ. However, the valuation report was
not received by the time ABC authorized for issue its financial statements for the year ended December 31, 20x1. As
such, the building was assigned a provisional amount of P700,000. Also, the building was tentatively assigned an
estimated useful life of 10 years from acquisition date. ABC uses the straight line method of depreciation and
On July 1, 20x2, ABC finally received the valuation report from the independent valuer which shows that the fair value
of the building as of September 30, 20x1 is 2,000,000 and remaining useful from that date is 5 years.
11. The adjusted fair value of net identifiable assets acquired
a. 1,600,000
b. 500,000
c. 700,000
d. 900,000
12. The amount of goodwill on September 30, 20x1 is
a. 1,000,000
b. 300,000
c. 50,000
d. 700,000
(13-14) On September 30, 20x1, ABC Co. acquired all of the identifiable assets and assumed all of the liabilities of XYZ, Inc.
by paying cash of P1,000,000. On this date, the identifiable assets acquired and liabilities assumed have fair values
of P1,600,000 and P900,000, respectively.
On July 1, 20x2, ABC obtained new information that XYZ has an unrecorded patent, which was not identified on
September 30, 20x1. It was believed that the unrecorded patent had a fair value of P1,000,000 and a remaining useful
life of 4 years as of September 30, 20x1.
13. The adjusted goodwill is
a. 100,000
b. 200,000
c. 500,000
d. 300,000
14. The adjusted fair value of net identifiable assets acquired is
a. 900,000
b. 500,000
c. 800,000
d. 100,000
(15-17) On January 1, 20x1, ABC Co., acquired 30% ownership interest in XYZ Inc. for P100,000. Because the investment
gave ABC significant influence over XYZ, the investment was accounted for under the equity method in accordance
with PAS 28 Investment in Associates and Joint Ventures.
From 20x1 to the end of 20x3, ABC recognized P50,000 net share in the profits of the associate and P10,000 share
in dividends. Therefore, the carrying amount of the investment in associate account on January 1, 20x3, is P140,000.
On January 1, 20x4, ABC acquired additional 60% ownership interest in XYZ Inc. for P800,000. As of this date, ABC
has identified the following:
1. The previously held 30% interest has a fair value of P180,000.
3. ABC elected to measure non-controlling interests at the nonidentifiable net assets.
15. The gain on remeasurement on January 1, 20x4 is
a. 80,000
b. Zero
c. 40,000
d. 100,000
16. What amount of goodwill is
a. 40,000
b. Zero
c. 100,000
d. 80,000
17. The balance of the Investment in Subsidiary account on January 1, 20x4 is
a. 800,000
b. 980,000
c. 1,080,000
d. 1,000,000
(18-21) Kennedy Company acquired all of the outstanding common stock of Hastie Company of Canada for 350,000 foreign
currency units (FCUs) on January 1, 20x4, when the exchange rate for the foreign currency units (FCUs) was P0.70.
The fair value of the net assets of Hastie was equal to their book value of 450,000 foreign currency units (FCUs) on
the date of acquisition. Any excess cost over fair value was attributed to an unrecorded patent with a remaining life
of five years.
The functional currency of Hastie is the FCU. For the year ended December 31, 2009, Hastie's translated net income
was P25,000. The average exchange rate for the FC during 20x4 was P0.68, and the 20x4 year-end exchange rate
was P0.65
18. Amortization of the patent, translated, for 20x4 would be
a. 13,600
b. 7,000
c. 10,000
d. 6,800
19. The peso amount allocated to the patent at January 1, 20x4.
a. 35,000
b. 60,000
c. 100,000
d. 50,000
20. Kennedy s share of Hastie s net income for 20x4 would be:
a. 18,200
b. 25,000
c. 50,000
d. 6,800
21. Compute the amount of the patent reported on the consolidated balance sheet at December 31, 20x4.
a. 55,000
b. 40,000
c. 50,000
d. 26,000
(22-27) On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with total fair value of
P75,000. Non-controlling interest was measured at a fair value of P18,750. [(P75,000 / 80%) x 20% = 18,750].
Share capital
Retained earnings
Total equity
(at carrying amounts)
50,000
24,000
74,000
On January 1, 20x1
following:
XYZ, Inc.
Inventory
Equipment (4 yrs. Remaining life)
Accumulated depreciation
Total
approximate their fair values except for the
Carrying amounts
23,000
50,000
(10,000)
63,000
Fair values
31,000
60,000
(12,000)
79,000
Fair value Adjustment (FVA)
8,000
10,000
(2,000)
16,000
The remaining useful life of the equipment is 4 years. No dividends were declared by either entity in 20x1. There were
no intercompany transactions and no impairment in goodwill.
The year-end individual financial statements of the entities are shown below:
Statement of Financial Position
As at December 31, 20x1
ABC Co.
ASSETS
Cash
Accounts Receivable
Inventory
Investment in subsidiary (at cost)
Equipment
Accumulated depreciation
TOTAL ASSETS
LIABILITIES AND EQUITY
Accounts payable
Bonds payable
Total liabilities
Share capital
Share premium
Retained earnings
Total equity
TOTAL LIABILITIES AND EQUITY
23,000
75,000
105,000
75,000
200,000
(60,000)
418,000
50,000
(20,000)
124,000
43,000
30,000
73,000
30,000
30,000
170,000
65,000
110,000
345,000
418,000
50,000
44,000
94,000
124,000
Statement of profit or loss
For the year ended December 31, 20x1
ABC Co.
Sales
300,000
Cost of goods sold
(165,000)
Gross profit
135,000
Depreciation expense
(40,000)
Distribution costs
(32,000)
Interest expense
(3,000)
PROFIT FOR THE YEAR
60,000
22. The consolidated total liabilities:
a. 120,00
b. 103,000
c. 30,000
d. 73,000
23. The consolidated total equity
a. 353,000
b. 403,000
373,550
c. 353,500
d. 373,750
24. Profit or loss attributable to parent
XYZ, Inc.
57,000
22,000
15,000
XYZ, Inc.
120,000
(72,000)
48,000
(10,000)
(18,000)
20,000
a.
b.
c.
d.
68,000
70,000
76,000
72,000
25. The consolidated profit or loss
a. 70,000
b. 52,000
c. 90,000
d. 60,000
26. Profit or loss attributable to NCI
a. 2,000
b. 28,000
c. 5,000
d. 20,000
27. The consolidated total assets
a. 551,750
b. 470,750
c. 476,750
d. 473,000
(28-32) Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock on January 1, 20x4. On
December 31, 20x5, Mortar received P390,000 from Granite for an equipment Mortar had purchased on January 1,
20x2, for P400,000. The equipment is expected to have a 10-year useful life and no salvage value.
28. In the preparation of the 20x5 consolidated financial statements, equipment will be:
a. Debited for P15,000
b. Debited for P1,000
c. Debited for P10,000
d. Debited for P25,000
29. In the preparation of the 20x6 consolidated financial statements, accumulated depreciation will be:
a. Debited for P160,000 in the eliminating balance
b. Credited for P160,000 in the eliminating balance
c. Debited for P135,000 in the eliminating balance
d. Credited for P135,000 in the eliminating balance
30. In the preparation of the 20x6 consolidated financial statements, equipment will be:
a. Debited for P15,000
b. Debited for P1,000
c. Debited for P10,000
d. Debited for P25,000
31. The gain on sale of equipment recorded by Mortar for 20x5 is:
a. P65,000
b. P40,000
c. P110,000
d. P150,000
32. In the preparation of the 20x6 consolidated financial statements, depreciation expense will be:
a. Debited for P15,000 in the eliminating balance
b. Credited for P25,000 in the eliminating balance
c. Debited for P25,000 in the eliminating balance
d. Credited for P15,000 in the eliminating balance
33. On March 1, 20x4 Wilson Corporation sold goods for a peso equivalent of P31,000 to a foreign supplier. The transaction
is denominated in foreign curreny (FC). The payment is received on May 10. The exchange rates were:
March 1: 1 FC = P0.31
March 10: 1 FC = P0.34
What entry is required to revalue foreign currency payable to peso equivalent value on May 10?
a. Accounts Receivable
3,000
Foreign Currency Transaction Gain
3,000
b. Sales
93
Foreign Currency Transaction Gain
93
c. Accounts Receivable
Foreign Currency Transaction Gain
93
d. Foreign Currency Transaction Gain
Accounts Receivable
3,000
93
3,000
34. Greco, In. a Philippine corporation, bought machine parts from Franco Company of foreign country on March 1, 20x4, for
-end was March 31, 20x4, when
the spot rate was P0.5495.
(transaction) gain or loss
for the years ended March 31, 20x4 and 20x5?
a.
20x4
P-0b.
20x4
P350 loss
20x5
P-020x5
P-0-
c.
20x4
P350 loss
20x5
P350 loss
20x4
P-0-
20x5
P350 loss
d.
35. On 12/12/x6, a domestic exporter sold inventory for foreign company for P100,000 FCUs (foreign currency units). On that
date, the direct spot rate was P0.20. At 12/31/x6, the direct spot rate was P0.24. On 1/22/x7, which the direct spot rate
was P0.21, the domestic exporter received full payment of P100,000 FCUs.
In the importer
a. 2,400 gain
b. 4,000 loss
c. 2,400 loss
d. 4,000 gain
what should be reported as an FX gain or loss?
36. BR Corporation had a realized foreign exchange loss of P13,000 for the year ended December 31, 20x2, and must also
determine whether the following items will require year-end adjustment.
BR had a P7,000 credit resulting from the restatement in pesos of the accounts of its wholly owned foreign
subsidiary for the year ended December 31, 20x2.
BR has an account payable to an unrelated foreign supplier payable in the supplier s local currency. The peso
equivalent of the payable was P60,000 on the October 31, 20x2 invoice date P64,000 on December 31, 20x2.
The invoice is payable on January 30, 20x3.
What amount of the net foreign exchange loss in computing net income should be reported in BR s 20x2
consolidated statement of income?
a.
Functional Currency - LCU
Functional Currency Peso
P17,000
P17,000
b.
Functional Currency - LCU
Functional Currency Peso
P10,000
P10,000
Functional Currency - LCU
P10,000
Functional Currency Peso
P17,000
Functional Currency - LCU
P17,000
Functional Currency Peso
P10,000
c. .
d.
37. A wholly owned foreign subsidiary of NN Inc. has certain expense accounts for the year ended December 31, 20x4 stated
in local currency units (LCU) as follows:
LCU
Deprecation of equipment (related assets were purchases
on January 1, 20x2
Provisions for Uncollectible Accounts
120,000
80,000
Rent
200,000
The exchange rate at various dates were as follows:
January 1, 20x2
December 30, 20x4
Average, 20x4
Peso Equivalent of 1
LCU
P0.50
0.40
0.44
What total peso amount should be included in NN Inc. s 20x4 consolidated income statement to reflect these
expenses?
a.
Functional Currency - LCU
Functional Currency Peso
P176,000
P183,200
b.
Functional Currency - LCU
P183,200
Functional Currency Peso
P183,200
Functional Currency - LCU
P183,200
Functional Currency Peso
P183,200
Functional Currency - LCU
P176,000
Functional Currency Peso
P176,000
c.
d.
38. The balance in Newsprint Corp. s foreign exchange loss account was P10,000 on December 31, 20x4, before any
necessary year-end adjustment relating to the following:
(1) Newsprint had a P15,000 debit resulting from the restatement in dollars of the accounts of its wholly owned foreign
subsidiary for the year ended December 31, 20x4.
(2) Newsprint had an account payable to an unrelated foreign supplier, payable in the supplier's local currency unit
(LCU) on January 15, 20x5. The peso equivalent of the payable was P50,000 on the December 1, 20x4, invoice date
and P53,000 on December 31, 20x4.
In Newsprint's 20x4 consolidated income statement, what amount should be included as foreign exchange
loss in computing net income, if the LCU is the functional currency and the translation method is
appropriate?
a. 13,000
b. 10,000
c. 17,000
d. 15,000
39. Kettle Company purchased equipment for 375,000 FCUs (foreign currency units) from a supplier in a foreign country on
July 3, 20x4. Payment in FCU is due on Sept. 3, 20x4. The exchange rates to purchase one FCU is as follows:
Spot-rate
30-day-rate
60-day-rate
JULY 3
1.58
1.57
1.56
AUG. 31 (year-end)
1.55
1.53
1.49
SEPT. 3
1.54
-
On its August 31, 20x4, income statement, what amount should Kettle report as a foreign exchange
transaction gain:
a. 11,250
b. 12,500
c. 25,00
d. 1,250
40. Greco, In. a Philippine corporation, bought machine parts from Franco Company of foreign country on March 1, 20x4, for
-end was March 31, 20x4, when
the spot rate was P0.5495.
(transaction) gain or loss
for the years ended March 31, 20x4 and 20x5?
a. 20x4 P3,500 loss / 20x5 P3,500 loss
b. 20x4 P350 loss / 20x5 P350 loss
MIDTERM AFAR
Theories
1. The amount of the adjustment to the non-controlling interest in consolidated in net assets is equal to the nona.
b.
c.
d.
Unrealized intercompany gain at the beginning of the period.
Realized intercompany gain at the beginning of the period.
Realized intercompany gain at the end of the period.
Unrealized intercompany gain at the end of the period.
2.
a. Always the currency of the country in which the company has its headquarters.
b.
c. The currency in which transactions are denominated.
d. The currency in which the entity primarily generated and expends cash.
3. As part of the consolidation process for a partially-held foreign subsidiary, the elimination entry to distribute the excess
of cost over book value will include a credit to Cumulative Translation Adjustment- Parent
a. for the amount of excess attributable to identifiable net assets multiplied by the difference between historical
and current exchange rates
b. for the amount of excess attributable to identifiable net assets multiplied by the difference between average
and current exchange rates
c. for the Parent's portion of the excess attributable to identifiable net assets multiplied by the difference
between historical and current exchange rates
d. for the Parent's portion of the excess attributable to identifiable net assets multiplied by the difference
between average and current exchange rates
4. What is a basic premise of the acquisition method regarding accounting for a non-controlling interest?
a. Consolidated financial statements should not report a non-controlling interest balance because these outside
owners do not hold stock in the parent company.
b. Consolidated financial statements should be primarily for the benefit of the parent company's stockholders.
c. Consolidated financial statements should be produced only if both the parent and the subsidiary are in the
same basic industry.
d. A subsidiary is an invisible part of a business combination and should be included in its entirety regardless
of the degree of ownership.
5. Which of the following terms describes the change in currency values to one another as a result of decisions made
by politicians?
a. Floating exchange rate
b. Exchange rate
c. Fixed exchange rate
6. An exchange rate of P1.32 : 1 FC
a. Means that each peso is worth 1.32 FC.
b. Implies that the peso has strengthened vis-à-vis the FC.
c. Implies that the FC has strengthened vis-à-vis the peso.
d. Can also be expressed as P1: 0.76 FC.
7. In determining controlling interest in consolidated income in the consolidation financial statements, unrealized
intercompany profit on inventory acquired by a parent from its subsidiary should:
a.
b. Not be elimination
c. Be eliminated to the extent of the non-controlling interest in the subsidiary.
d. Be eliminated in full.
8. When an offer is made to acquire a company and the acquire management supports the offer, the offer is called which
of the following?
a. Friendly takeover
b. Tender offer
c. Hostile takeover
d. Defensive measure
9. A parent buys 32 percent of a subsidiary in one year and then buys an additional 40 percent in the next year. In a
step acquisition of this type, the original 32 percent acquisition should be
a. Maintained at its initial value
b. Adjusted to fair value at the date of the second acquisition with a resulting gain or loss recorded
c. Adjusted to its equity method balance at the date of the second acquisition
d. Adjusted to fair value at the date of the second acquisition with a resulting adjustment to additional paid-in
capital
10. A defensive maneuver where a company buys a stock from a potential acquirer at a premium over the marker price
is called which of the following?
a. White knight
b. Shark repellent
c. Greenmail
d. Sale of the crown jewels
11. The business enterprise that enter into a business combination are termed the:
a. Merging companies
b. Combiner companies
c. Joining companies
d. Constituent companies
12. What is the date called when a foreign currency transaction is paid through the exchange of currency?
a. Origination date
b. Settlement date
c. Balance sheet date
d. Transaction date
13. Alpha purchased an 80% interest in Beta on June 30, 20x4.
porting periods end December
31. Which of the following represents the controlling interest in consolidated net income for 20x4?
a.
-December 31 income
b.
-December 31 income
c.
ry 1-December 31 income
d.
-December 31 income
14. In a mid-
he purchased income
a.
b.
c. Consolidated net income
d. Sub
15. In comparing the translation and the remeasurement process, which of the following is true?
a. The reported balance of the inventory is normally the same under both methods
b. The reported balance of equipment is normally the same under both methods
c. The reported balance of depreciation expense is normally the same under both methods
d. The reported balance of sales is normally the same under both methods
16. The amount of intercompany profit eliminated is the same under total elimination and partial elimination in the case
of
(1) upstream sales where the selling affiliate is a less than wholly owned subsidiary.
(2) all downstream sales.
(3) horizontal sales where the selling affiliate is a wholly owned subsidiary/
a. 1
b. 2
c. 3
d. Both 2 and 3
17.
a.
b.
c.
d.
000 of goodwill?
Event's goodwill is an identifiable asset and should be included as part of Raj's purchase price discrepancy
(PPD).
Event's goodwill is an identifiable asset but should not be included as art of Raj's PPD.
Event's goodwill is not an identifiable asset but should be included as part of Raj's PPD.
.
18. Company A makes a hostile take-over bid for Company B. In response, Company B makes a counter-offer to
a.
b.
c.
d.
Selling the crown jewels
A Hostile Defense
Poison Pill
Pac-man defense
19. Under PFRS 3, when a gain is recognized in consolidating financial information?
a. When any bargain purchase is created.
b. In a combination created in the middle of a fiscal year.
c. In an acquisition when the value of all assets and liabilities cannot be determined.
d. When the amount of a bargain purchase exceeds the value of the applicable liability held by the acquired
company.
20. How should accounting fees for an acquisition be treated?
a. Expensed in the period of acquisition.
b. Capitalized as part of the acquisition cost.
c. Deferred and amortized.
d. Deferred until the company is disposed of or wound-up.
21. Polly Inc. owns 80% of Saffron, Inc. During 20x4, Polly sold goods with a 40% gross profit to Saffron. Saffron sold all
of these goods in 20x4. For 20x4 consolidated financial statements, how should the summation of Polly and Saffron
income statement items be adjusted?
a. Sales and cost of goods sold should be reduced by the intercompany sales.
b. Sales and cost of goods sold should be reduced by 80% of the Intercompany sales.
c. Net income should be reduced by 80% of the gross profit on intercompany sales.
d. No adjustment is necessary.
22. Which of the following does NOT constitute a Business Combination under IFRS 3?
a.
b.
c. A Corp enters into a Joint Venture with B Corp.
d. A Corp purchases the net assets B. Corp.
23. In the year an 80% owned subsidiary sells equipment to its parent company at a gain, the non-controlling interest in
consolidated income is calculated by multiplying the nonnet income
a. Minus the net amount of unrealized gain on the intercompany sale
b. Minus the intercompany gain considered realized in the current period
c. Plus the intercompany gain considered realized in the current period
d. Plus the net amount of unrealized gain on the intercompany sale
24. In years subsequent to the year a 90% owned subsidiary sells equipment to its parent company at a gain, the noncontrolling interest in consolidated income is computed by multiplying the non-controlling interest percentage by the
a. Minus the net amount of unrealized gain on the intercompany sale
b. Minus the intercompany gain considered realized in the current period
c. Plus the intercompany gain considered realized in the current period
d. Plus the net amount of unrealized gain on the intercompany sale
25. Which of the following statements is NOT accurate with regard to a purchase or sale denominated in a foreign
currency?
a. The amount recorded in the financial records will be the estimated value of the foreign currency paid or
received.
b. The amount recorded in the financial records is the number of foreign currency units exchanged.
c. The account titles would be the same as a similar transaction undertaken with a Philippine company.
d.
26. Which of the following is NOT a reason why a private enterprise may be acquired as a bargain purchase?
a. It is a family business and the next generation does not want to continue the business.
b. The business only has equity financing and has no debit financing.
c. The owner has health problems and does not have a successor.
d. The owner is no longer interested in the business.
27. What is the most common valuation method used for intangible assets
a. Market-based
b. Amortized cost
c. Income-based
d. Cost-based
28. JJ Company acquired 85% of MR Company on April 1. On its December 31, consolidated income statement, how
e April 1.
a.
-acquisition portion as non-controlling
interest in net income.
b. Deduct 15 percent of the net combined revenues and expenses relating to the pre-acquisition period from
consolidated net income.
c. Exclude 100 percent of the pre-acquisition revenues and 100 percent of the pre-acquisition expenses from
their respective consolidated totals.
d. Exclude 15 percent of the pre-acquisition revenues and 15 percent of the pre-acquisition expenses from
consolidated expenses.
29. Which one of the following is a characteristic of a business combination that should be accounted for as an
acquisition?
a. The transaction may be considered to be the uniting of the ownership interests of the companies involved
b. The two companies may be about the same size and it is difficult to determine the acquired company and the
acquiring company
c. The combination must involve the exchange of equity securities only
d. The acquired subsidiary must be smaller in size than the acquiring parent
e. The transaction establishes an acquisition fair value basis for the company being acquired
30. What is the appropriate accounting treatment for the value assigned to in-process research and development acquired
in a business combination?
a. Expense until future economic benefits become certain and then capitalize as an asset
b. Expenses if there is no alternative use for the assets used in the research and development and technological
feasibility has yet to be reached
c. Expense upon acquisition
d. Capitalize as an asset
31. May foreign currency transaction gains or losses be recognized on the following transactions denominated in a foreign
currency:
a.
Purchase of merchandise?
Purchase of merchandise?
No
Yes
b.
Purchase of merchandise?
No
Purchase of merchandise?
No
Purchase of merchandise?
Yes
Sale of merchandise?
Yes
Purchase of merchandise?
Yes
Sale of merchandise?
No
c.
d.
32. In reference to the downstream or upstream sale of depreciable assets, which of the following statements is correct?
a. The initial effect of unrealized gains and losses from downstream sales of depreciable assets is different from
the sale of non-depreciable assets.
b. Gains, but not losses, appear in the parent-company accounts in the year of sale and must be eliminated by
the parent company in determining its investment income under the equity method of accounting.
c. Gains and losses appear in the parent-company accounts in the year of sale and must be eliminated by the
parent company determining its investment income under the equity method of accounting
d. Upstream sales from the subsidiary to the parent company always result in unrealized gains or losses
33. The material sale of inventory items by a parent company to an affiliated company:
a. Does not require a working paper adjustment if the merchandise was transferred at cost
b. Affects consolidated net income under a periodic inventory system but not under a perpetual inventory system
c.
g.
d. Does not result in consolidated income until the merchandise is sold to outside parties.
34. Goodwill arising from business combination is:
a. Never amortized
b. Amortized over 40 years or its useful life, whichever is higher
c. Amortized over 40 years or its useful life, whichever is shorter
d. Charged to Retained Earnings after the acquisition is completed
35. What is push-down accounting?
a. Inventory transfers made from a parent company to a subsidiary
b.
-value allocations as well as subsequent amortization
c. The adjustments required for consolidation when a parent has applied the equity method of accounting for
internal reporting purposes
d. A requirement that a subsidiary must use the same accounting principles as a parent company
36. In years subsequent to the upstream intercompany sale of non-depreciable assets, the necessary consolidated
workpaper entry under the cost method is to debit the
a. Non-controlling interest and Retained Earnings (Parent) accounts, and credit the non-depreciable asset
b. Retained Earnings (Parent) account and credit the non-depreciable asset
c. Non-depreciable asset, and credit the Non-controlling interest and Investment in Subsidiary accounts
d. No entries are necessary
37. Which of the following statements is true for the translation process (as opposed to remeasurement)?
a. Equipment is translated at the historical exchange rate in effect at the date of its purchase
b.
monetary liabilities caused by exchange rate fluctuations
c. A translation adjustment can affect consolidated net income
d.
exchange rate fluctuations.
38. A parent company regularly sells merchandise to its 80%-owned subsidiary. Which of the following statements
describes the computation of non-controlling interest income?
a.
unrealized profits in the ending
inventory) x 20%
b.
c.
unrealized profits in the beginning
inventory) x 20%
d.
its in the beginning inventory unrealized profits in the
ending inventory
39. Which of the following is the BEST theoretical justification for consolidated financial statements?
a. In form and substance the companies are separate
b. In form and substance the companies are one entity
c. In form the companies are one entity; in substance they are separate
d. In form the companies are separate; in substance they are one entity
40. Business combinations that result in one dominant company in an industry are said to have formed which of the
following?
a. Oligopoly
b. Monopoly
c. Pure competition
d. Free market
Finals (AFAR)
1. On September 30, 20x4, Jaja Inc. was awarded to contract to build a 1,000-room hotel for P120
million. Among others, the parties agreed to the following:
 Ten percent mobilization fee (deductible from "final billing") payable within ten days from the signing
of the contract retention of ten percent on all billings (to be paid within the final billing upon
completion and acceptance of the project); and
 Progress billings are to be paid within 2 weeks upon acceptance.
By the end of 20x4, the company had presented one progress billing, corresponding 10% completion,
which was evaluated and accepted by the client on December 29, 20x4 for payment in January of next
year. In 20x4, assuming use of the percentage-of-completion method of accounting, Jaja Inc. received
cash a total fee of:
Group of answer choices
P13,200,000
P11,880,000
P12,000,000
P 1,200,000
2. On August 5, 20x5, Famous Furniture shipped 20 dining sets on consignment to Furniture Outlet, Inc.
The cost of each dining set was P350 each. The cost of shipping the dining sets amounted to P1,800 and
was paid for by Famous Furniture. On December 30, 20x5, the consignee reported the sale of 15 dining
sets at P850 each. The consignee remitted payment for the amount due after deducting a 6%
commission, advertising expense of P300, and installation and setup costs of P390. The total profit on
units sold for the consignor is
Group of answer choices
P11,295
P4,695
P6,045
P9,945
3. Geri Corporation sells cosmetics through a network of independent distributors. Geri shipped cosmetics
to its distributors and is considering whether it should record P300,000 of revenue upon shipment of a
new line of cosmetics. Geri expects the distributors to be able to sell the cosmetics, but is uncertain
because it has little experience with selling cosmetics of this type. Geri is committed to accepting the
cosmetics back from the distributors if the cosmetics are not sold. How much revenue should Geri
recognize upon delivery to its distributors?
Group of answer choices
None
P300,000
incomplete data
P25,000
4. For 20x6, Pyna reported P500,000 of net income from its own separate operations. This amount
excludes income relating to Syna, its 80%-owned created subsidiary, which reported P100,000 of net
income and declared P55,000 of dividends in 20x6. What is the consolidated net income under the
economic unit concept?
Group of answer choices
P644,000
P544,000
P580,000
P536,000
P600,000
5. For the year ended 12/31/x6, the adjusted financial statements of a home office and its branch show
net income of P700,000 and P100,000, respectively. At the end of 20x5, the home office adjusted the
Intracompany Profit Deferred account by debiting it for P40,000, leaving a balance of P10,000. The
combined net income for 20x6 is
Group of answer choices
P800,000
None of the above.
P690,000
P660,000
P700,000
6. NN Company consigns sign pens to retailers, debiting Accounts Receivable for the retail sales price of
the sign pens consigned and crediting Sales. All costs relating to the consigned sign pens are debited to
expenses of the current accounting period. Net remittances of the consignees are credited to Accounts
Receivable. In December, 800 sign pens costing P60 each and retailing for P100 a unit were consigned to
SS Store. Freight cost of P800 was debited to Freight Expense by the consignor. On December 31, SS
Store remitted P35,505 to NN Company in full settlement of the balance due. Accounts Receivable was
credited for this amount. The consignee deducted a commission of P10 on each sign pens sold and P45
for delivery expense. The number of sign pens sold by SS Store is:
Group of answer choices
None of the above
355
395
400
7. Maxwell is a partner and has an annual salary of 30,000 per year, but he actually draws P3,000 per
month. The other partner in the partnership has an annual salary of P40,000 and draws P4,000 per
month. What is the total annual salary that should be used to allocate annual net income among the
partners?
Group of answer choices
P50,000
P84,000
P70,000
P14,000
8.P Company purchased land from its 80% owned subsidiary at a cost of P100,000 greater than it
subsidiary's book value. Two years later P sold the land to an outside entity for P50,000 more than its
cost. In its current year consolidated income statement P and its subsidiary should report a gain on the
sale of land of:
Group of answer choices
P50,000
P130,000
P120,000
P150,000
9. Dobby Corporation was forced into bankruptcy and is in the process of liquidating assets and paying
claims. Unsecured claims will be paid at the rate of thirty cents on the peso. Carson holds a note
receivable from Dobby for P75,000 collateralized by an asset with a book value of P50,000 and a
liquidation value of P25,000. The amount to be realized by Carson on this note is:
Group of answer choices
P50,000
P40,000
P75,000
P25,000
10. An entity acquired all the share capital of a foreign entity at a consideration of 9 million baht on June
30, 20x4. The fair value of the net assets of the foreign entity at that date was 6 million baht. The
functional currency of the entity is the peso. The financial year-end of the entity is December 31, 20x4.
The exchange rates at June 30, 20x4, and December 31, 20x4, were 1.5 baht = P1 and 2 baht = P1
respectively. What figure for goodwill should be included in the financial statements for the year ended
December 31, 20x4?
Group of answer choices
P2 million
P3 million
3 million baht
P1.5 million
11. During the liquidation of Gym, Hob & Ing Partnership, Partner Hob withdrew equipment with a cost to
the partnership of P18,000, accumulated depreciation of P8,000, and a current fair value of P13,000. The
partners shared net income and losses equally. The net debit to Hob's capital account (including any gain
or loss on disposal of the equipment), assuming the noncash asset may be distributed safely to Hob, is:
Group of answer choices
P12,000
P10,000
P18,000
P13,000
12. Max,Jones and Waters shared profits and losses 20%, 40% and 40% respectively and their
partnership capital balance is P10,000, P30,000 and P50,000 respectively. Max has decided to withdraw
from the partnership. An appraisal of the business and its property estimates the fair value to be
P200,000. Land with a book value of P30,000 has a fair value of P45,000. Max has agreed to receive
P20,000 in exchange for her partnership interest. What amount should land be recorded on the
partnership books?
Group of answer choices
P50,000
P20,000
P30,000
P45,000
13. The home office of Glendale Company, which uses the perpetual inventory system, bills shipments of
merchandise to the Montrose Branch at a markup of 25% on the billed price. On August 31, 20x4, the
credit balance of the home office's Allowance for Overvaluation of Inventories - Montrose Branch ledger
account was P60,000. On September 17, 20x4, the home office shipped merchandise to the branch at a
billed price of P400,000. The branch reported an ending inventory, at billed price, of P160,000 on
September 30, 20x4. Compute the realized gross profit?
Group of answer choices
P108,000
P 28,000
P 120,000
P 20,000
14. At December 31, 20x5, the following information has been collected by Maxwell Company's office and
branch for reconciling the branch and home office accounts. The home office's branch account balance at
December 31, 20x5 is P590,000. The branch's home office account balance is P506,700.
 On December 30, 20x5, the branch sent a check for P40,000 to the home office to settle its account.
The check was not delivered to the home office until January 3, 20x6.
 On December 27, 20x5, the branch returned P15,000 of seasonal merchandise to the home office for
the January clearance sale. The merchandise was not received by the home office until January 6,
20x6
 The home office allocated general expenses of P28,000 to the branch. The branch had not entered
the allocation at the year-end.
 Branch store insurance premiums of P900 were paid by the home office. The branch recorded the
amount at P600.
The correct balance of the reciprocal account amounted to:
Group of answer choices
P534,700
P535,000
P575,000
P507,000
15. Lawrence Company, a Philippine company, ordered parts costing 1,000,000 foreign currencies (FC)
from a foreign supplier on July 7 when the spot rate was P.025 per baht. A one-month forward contract
was signed on that date to purchase 1,000,000 FC at a rate of P.027. The forward contract is properly
designated as a fair value hedge of the 1,000,000 FC firm commitments. On August 7, when the parts
are received, the spot rate is P.028. What is the amount of accounts payable that will be paid at this date?
Group of answer choices
P27,000
P28,000
P25,000
P20,100
P20,000
16. Holmgren Seafoods, Inc. catches and processes salmon and tuna caught off the coast of Maine. In
May 20x6, it placed 100 freshly caught wild salmon with a retail price of P75 each in Joe's Fish Shop.
Holmgren's contract with the shop stipulates that the shop will earn a 15% commission on each salmon
sold. Joe's is responsible for purchasing any fish that remain unsold at the end of a three-day period.
During the three-day period, Joe's Fish Shop was able to sell 88 of the 100 salmon. How much revenue
should Holmgren recognize with respect to this transaction?
Group of answer choices
Incomplete data
None
P7,500
P75
17. Richardson, Peterson, and Wilkerson are forming a partnership. The partners contribute cash and
noncash assets valued at P30,000, P50,000, and P25,000, respectively. The partners choose to apply the
bonus method where applicable. If the partners agree to establish equal capital account balances when
the partnership is formed, how much of a bonus is received by Richardson?
Group of answer choices
P15,000
P10,000
P 5,000
Richardson does not receive a bonus
18. Belgium Co. is constructing a tunnel for P800 million. Construction began in 20x4 and is estimated to
be completed in 20x8 . At December 31, 20x6, Belgium has incurred costs totaling P356 million with P85
million of that incurred in 20x6, P143 million in 20x7, and the remainder during 20x8. Belgium believes
that it completed 30% of the tunnel during 20x6, although that may change based on future activity.
Belgium Co. uses PAS 11 for its accounting and regards its cost numbers as very uncertain (cost recovery
method/zero profit approach). What amount of revenue should Belgium Co. recognize for the year ended
December 31, 20x6?
Group of answer choices
P85 million
No revenue should be recognized until the contract is completed in 20x8 .
P356 million
P240 million
19. SS Corporation had the following foreign currency transactions during 20x4. First, it purchased
merchandise from a foreign supplier on January 20, 20x4, for the Philippine peso equivalent of P90,000.
The invoice was paid on March 20, 20x4, at the Philippine peso equivalent of P96,000. Second, on July 1,
20x4, SS borrowed the Philippine peso equivalent of P500,000 evidenced by a note that was payable in
the lender's local currency on July 1, 20x5. On December 31,20x4, the Philippine peso equivalents of the
principal amount and accrued interest were P520,000 and P26,000, respectively. Interest on the note is
10 percent per annum. In SS's 20x4 income statement, what amount should be included as a foreign
exchange loss?
Group of answer choices
P-0P27,000
P6,000
P21,000
20. Sparkman Co. filed a bankruptcy petition and liquidated its noncash assets. Sparkman was paying
forty cents on the dollar for unsecured claims. Bailey Co. held a mortgage of P150,000 on land that was
sold for P110,000. The total amount of payment that Bailey should have received is calculated to be
Group of answer choices
P44,000
P126,000
P60,000
P110,000
P134,000
21. Meisner Co. ordered parts costing 100,000 foreign currency units (FCUs) for a foreign supplier on May
12 when the spot rate was P.24 per FCU. A one-month forward contract was signed on that date to
purchase 100,000 FCUs at a forward rate of P.25 per FCU. On June 12, when the parts were received and
payment was made, the spot rate was P.28 per FCU. At what amount should inventory be reported?
Group of answer choices
P0
P2,000
P24,200
P25,000
28,000
22. An operator enters into a contract to provide construction services costing P100,000. It has been
determined that the fair value of the construction services provided is P110,000. The total cash inflows
over the entire life of the contract are fixed by the grantor at P200,000. The finance revenue by using the
effective interest rate method in accordance is P10,000 over the entire life of the services concession
arrangement.
Total cash inflows over the life of the contract
Group of answer choices
P80,000
P100,000
P200,000
P110,000
23. On January 1, 20x4 , Chamberlain Corporation pays P388,000 for a 60 percent ownership in Neville.
Annual excess fair-value amortization of P15,000 results from the acquisition. On December 31, 20x5 ,
Neville reports revenues of P400,000 and expenses of P300,000 and Chamberlain reports revenues of
P700,000 and expenses of P400,000. The parent figures contain no income from the subsidiary. What is
consolidated net income attributable to the controlling interest?
Group of answer choices
P366,000
P400,000
P231,000
P351,000
24. Arnold acquired 60 percent of Dunk Corporation on May 1. At that date, Dunk has plant assets with a
book and market value of 2,300,000 and 4,300,000 LCUs respectively. The exchange rates that exist on
May 1 and December 31 are P.57 and P.53, respectively. What is the peso amount of plant assets
included in the consolidated balance sheet at May 1?
Group of answer choices
P1,219,000
P2,451,000
P2,279,000
P1,311,000
25. Mint Corporation has several transactions with foreign entities. Each transaction is denominated in
the local currency unit of the country in which the foreign entity is located. On November 2, 20x4, Mint
sold confectionary items to a foreign company at a price of LCU 23,000 when the direct exchange rate
was 1 LCU = P1.08. The account has not been settled as of December 31, 20x4, when the exchange rate
has increased to 1 LCU = P1.10. The foreign exchange gain or loss on Mint's records at year-end for this
transaction will be:
Group of answer choices
P460 gain
P387 loss
P387 gain
P460 loss
26. The Naples Company uses the overtime/percentage-of-completion method and the point-in-time
/cost-to-cost method for its long-term construction contracts. On one such contract, Naples expects total
revenues of P260,000 and total costs of P200,000. During the first year, Naples incurred costs of P50,000
and billed the customer P30,000 under the contract. At what net amount should Naples' Construction in
Progress for this contract be reported at the end of the first year?
Group of answer choices
P30,000
P65,000
P50,000
P35,000
27. During the liquidation of the partnership of Karr, Rice, and Long. Karr accepts, in partial settlement of
his interest, a machine with a cost to the partnership of P150,000 accumulated depreciation of P70,000,
and a current fair value of P110,000. The partners share net income and loss equally. The net debit to
Karr's account (including any gain or loss on disposal of the machine) is
Group of answer choices
P 90,000
P15,000
P110,000
P100,000
28. Erlinda Magalona Insurance is an insurer which conducts general insurance business. For the year
ended December 31, 20x4, its total gross premiums written on vehicle insurance policies were
P3,000,000, of which P300,000 was ceded out to reinsurers.
By December 31, 20x3, the unearned premium reserve was P960,000. As of December 31, 20x4, an
unearned premium reserve amount of P1,200,000 is considered necessary.
On December 31, 20x4, the net premium amounted to:
Group of answer choices
P2,700,000
Nil
P9,000,000
P 900,000
29. Mallard Corporation purchased 25 percent of Drake Company's stock in January, 20x5. At the
acquisition date, Drake has inventory with a market value P60,000 greater than book value. On that date,
Mallard Corporation gives the ability to have joint control with another entity over Drake Company's.
Drake expects to sell the inventory during 20x5. Drake has net income of P100,000 and pays P30,000 of
dividends. What amount will Mallard's net income change as a result of its investment in Drake?
Group of answer choices
P10,000
P2,500
P7,500
P25,000
30. Gilbert is a 90 percent subsidiary of Ferrante. On September 1, 20x5, Gilbert sells Ferrante equipment
for P72,000. At that date, the equipment has a cost and accumulated depreciation on Gilbert's financial
records of P96,000 and P36,600, respectively. The equipment had a remaining life of six years on
Gilbert's books and was assigned a life of five years by Ferrante. Gilbert and Ferrante have income in
20x5 of P243,000 and P523,000, respectively. What is the worksheet elimination to the non-controlling
interest account if consolidated financial statements are prepared on December 31, 20x6?
Group of answer choices
P1,260 debit
P1,176 credit
P1,176 debit
P1,260 credit
31. Bishop has a capital balance of P120,000 in a local partnership, and Cotton has a P90,000 balance.
These two partners share profits and losses by a ratio of 60 percent to Bishop and 40 percent to cotton.
Lovett invests P60,000 in cash in the partnership for a 20 percent ownership. The goodwill (or revaluation
of asset) method will be used. What is Cotton's capital balance after this new investment?
Group of answer choices
P126,000
P102,000
P 99,600
P112,000
32. Jennifer and Robert are partners who are changing their profit and loss ratios from 60/40 to 45/55. At
the date of the change, the partners choose to revalue assets with market value different from book
value. One asset revalued is land with a book value of P50,000 and a market value of P120,000. Two
years after the profit and loss ratio is changed, the land is sold for P200,000. What is the amount of
change to Robert's capital account at the date the land is revalued?
Group of answer choices
P72,000
P28,000
P30,000
P42,000
33. OC signed a contract to provide office services to PQ for one year from 1 October 20x6 for P500 per
month. The contract required PQ to make a single payment to OC for all 12 months at the beginning of
the contract. OC received P6,000 on October 1, 20x6. What amount of revenue should OC recognize in its
statement of profit or loss for the year ended March 31,20x7?
Group of answer choices
P3,000 profit
Nil
P 300
P6,000 profit
34. Diller owns 80% of Lake Company common stock. During October 20X4, Lake sold merchandise to
Diller for P300,000. On December 31, 20X4, one-half of this merchandise remained in Diller's inventory.
For 20X4, gross profit percentages were 30% for Diller and 40% for Lake. The amount of unrealized
profit in the ending inventory on December 31, 20X4 that should be eliminated in consolidation
is_______ .
Group of answer choices
P60,000
P32,000
P80,000
P30,000
35. A, B, and C have capital balances of P80,000, P80,000, and P40,000, respectively. Profits are
allocated 40% to A, 40% to B and 20% to C. The partners have decided to dissolve and liquidate the
partnership. After paying all creditors the amount available for distribution is P20,000. A, and B are
personally solvent. C is personally insolvent. Under the circumstances, A and B will each
Group of answer choices
receive P10,000.
receive P6,000.
receive P9,000.
receive P8,000.
36. Assume that a partnership had assets with a book value of P240,000 and a market value of P195,000,
outside liabilities of P70,000, loans payable to partner Able of P20,000, and capital balances for partners
Able, Baker, and Chapman of P70,000, P30,000, and P50,000.
How much would Able receive upon liquidation of the partnership assuming profits and losses are
allocated equally?
Group of answer choices
P55,000
P90,000
P75,000
P70,000
37. James Dixon, a partner in an accounting firm, decided to withdraw from the partnership. Dixon's
share of the partnership profits and losses was 20%. Upon withdrawing from the partnership, he was
paid P74,000 in final settlement for his partnership interest. The total of the partners' capital accounts
before recognition of partnership goodwill prior to Dixon's withdrawal was P210,000. After his withdrawal,
the remaining partners' capital accounts, excluding their share of goodwill, totaled P160,000. The total
agreed-upon goodwill (revaluation of asset) of the firm was:
Group of answer choices
P250,000
P160,000
P120,000
P140,000
38. On January 2, Ken Company purchased a 30 percent interest in Pod Company for P250,000 such
interest gives Ken Company the joint control over Pod Company. On this date, the book value of Pod's
stockholders' equity was P500,000. The carrying amounts of Pod's identifiable net assets approximated
fair values, except for land, whose fair value exceeded its carrying amount by P200,000. Pod reported net
income of P100,000 and paid no dividends. Ken accounts for this investment using the equity method. In
its December 31 balance sheet, what amount should Ken report for this investment?
Group of answer choices
P280,000
P270,000
P220,000
P210,000
39. Elizabeth De Leon Insurance Company has one-year vehicle insurance policy with a premium of
P37,500 is written on October 1, 20x4 and the risk covered is up to September 30, 20x5 then for an
insurer with a financial year that ends on December 31, the unexpired risk period of this policy at the
year-end is from January 1, 20x5 to September 30, 20x5.
If the insurer has another similar (second) policy (premium of P50,000) that is written on December 1,
20x4. For the Second Policy, the increased in the unearned premium on December 31, 20x4 (with an
insurance rate of 35%).
On December 31, 20x4, the unearned premium for the first policy:
Group of answer choices
P28,048
P37,500
P18,750
Nil
40. Gentry Inc. acquired 100% of Gaspard Farms on January 5, 20x3. During 20x3 , Gentry sold Gaspard
Farms for P625,000 goods which had cost P425,000. Gaspard Farms still owned 12% of the goods at the
end of the year. In 20x4 , Gentry sold goods with a cost of P800,000 to Gaspard Farms for P1,000,000
and Gaspard Farms still owned 10% of the goods at year-end. For 20x4 cost of goods sold was
P1,200,000 for Gaspard Farms and 5,400,000 for Gentry. What was consolidated cost of goods sold for
20x4?
Group of answer choices
P6,600,000
P6,596,000
P5,620,000
P5,625,000
P5,596,000