No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
AFAR FINAL PREBOARD
Problem 1: Paul, Anton and DJ are partners with account balances and profit and loss ratio of the partners
as follows:
Account Payable
6,000
Anton, capital (25%)
15,000
DJ, capital (40%)
30,000
Due from DJ
2,000
Due to Paul
3,000
Loan from Anton
5,000
Paul, capital (35%)
25,000
The partners decided to liquidate the partnership. After the realization of assets, the entity has cash on hand
of P18,700. The entity paid liquidation expenses amounting P10,000.
The total loss on realization of non-cash assets amounts to:
a. P57,300
c. P73,300
b. P63,300
d. P47,300
Problem 2: Using the information in no. 1, what is the amount of cash receive by partner DJ upon settlement
of his interest?
a. P1,125
c. P0
b. P2,400
d. P1,675
Problem 3: Which of the following will reduce the balance of capital of the partners upon liquidation of the
partnership by installment?
A. Remaining non-cash assets
D. Condone liabilities
B. Liquidation expenses paid
E. Loss on realization
C. Cash withheld for possible losses
a. C, B and A
b. C, B, and E
c. A, B, C and E
d. B and E
e. D, E, C, and B
Problem 4: A partnership had the following condensed financial position on December 31, 2030:
Cash
Non-cash Assets
A, loan
100,000
250,000
3,000
Total
353,000
Accounts payable
B, loan
A, capital (30%)
B, capital (45%)
C, capital (25%)
Total
50,000
8,000
75,000
125,000
95,000
353,000
On March 1, 2031, D was admitted into the partnership as a new partner for 30% interest in capital and
20% interest in profit and loss. The net income prior to admission of D was P80,000. Partner B receive
monthly salary allowance of P5,000. D invested P100,000 cash and pays P20,000 Partner C for its ¼ capital
interest. The total agreed capitalization of the partnership after admission of new Partner D is P500,000
1|P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
What is the total agreed capital of C after admission of D?
a. P102,968.75
c. P91,250
b. P102,500
d. P89,812.50
Problem 5: Using the same information in no. 4, what is the total amount of bonus given by A?
a. P6,187.50
c. P6,000
b. P13,687.50
d. P9,000
Problem 6: Using the same information in no. 4,the total capital contribution of D?
a. P105,000
c. P104,375
b. P120,000
d. P100,000
Problem 7: Using the same information in no. 4, what is the new profit or loss ratio after admission of
Partner D?
A
B
C
D
a.
30%
45%
25% 30%
b. 24%
36%
20% 20%
c.
21% 31.50% 17.50% 30%
d . 30%
45%
25% 20%
Problem 8: One of the partners decided to buy the interest of other partner, which of the following is
incorrect?
a. Total partnership assets will remain the same
b. There is no need to revise the partnership equity
c. The partners equity will not change
d. Partnership profit & loss ratio will change
Problem 8: A partnership had the following condensed financial position on December 31, 2030:
Cash
120,000 Accounts payable
100,000
Non-cash Assets
300,000 B, loan
12,000
A, loan
20,000 A, capital (25%)
86,000
C, loan
6,000 B, capital (35%)
120,000
C, capital (40%)
128,000
Total
446,000 Total
446,000
Partner C retires from the partnership on May 1, 2030. The net income of the partnership for year 2030
was P120,000. Partner A receive bonus of 25% of net income after bonus. The partnership revalued the
assets and paid Partner C for his total interest amounting to P118,000. Partners A and B continue to use
their profit and loss agreement after retirement of C.
What is the total interest of Partner A after retirement of C on May 1, 2030?
a. P91,500
c. P107,500
b. P87,500
d. P71,500
Problem 9: What is the capital of Partner B on December 31, 2030?
a. P153,833
c. P128,500
2|P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
b. P163,167
d. P116,500
Problem 10: What is the total assets on December 31, 2030?
a. P380,000
c. P406,000
b. P400,000
d. P490,000
Problem 11: Which of the following forms of new partner admission will not result in a change in
partnership capital?
a. Bonus method
b. Revaluation method
c. Purchase of interest directly from an existing partners
d. Purchase of interest directly from the partnership
Problem 12: PFRS 3 does not apply to:
a. The formation of joint venture/joint arrangement
b. The acquisition of assets or group of assets that does not constitute a business
c. A combination of entities or business under common control
d. All of the above
Problem 13: Which of the following event is not a business combination?
a. A Corp. acquired 75% voting shares of B Corp.
b. A Corp. acquired all the assets of B Corp.
c. A Corp. made a basket purchase of 45% of B Corp. assets
d. A Corp. acquired an operating division of B Corp.
Problem 14: Under PFRS 3, if the terms of the contract giving rise to a reacquired right are favorable or
unfavorable relative to the terms of current market transactions for the same or similar items, the acquirer
shall recognize
a. A liability if it unfavorable
c. Intangible assets if it is favorable
b. Settlement gain or loss
d. All of the above
Problem 15: Sam Corp acquired the identifiable assets of Prince Corp by issuing ordinary shares with par
value of P20. Sam Corp. ordinary shares are currently traded at P30 per share. Prince Corp. statement of
financial position before business combination follow:
Cash
Other current assets
Property, plant and equipment
1,000,000
2,000,000
2,500,000
Total
5,500,000
Liabilities
Ordinary share
Share premium
Retained Earnings
Total
600,000
2,400,000
600,000
1,900,000
5,500,000
Sam Corp other current assets are appraised to increase to P2,200,000; and its property plant and equipment
is undervalued by P500,000. The liabilities are fairly valued. What is the total shares issued by Sam Corp.
to acquire Prince Corp to recognize a goodwill of P400,000?
a. 200,000 shares
c. 260,000 shares
3|P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
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: icarecpareview@gmail.com
b. 300,000 shares
d. 350,000 shares
Problem 16: On January 2, 20x1, Paul Corp. acquired 20% ownership interest in Simon Corp. for
P1,350,000 and the carries the investment using the cost model. On December 31, 20x1, Simon Corp.
declared and paid dividends amounting to P500,000 and the net income was P2,000,000.
On January 10, 20x2, Paul Corp. acquired another 50% ownership interest in Simon Corp for P3,000,000.
At that date, Simon Corp. has identifiable assets with book value of P6,000,000 and fair value of P7,200,000
and it has liabilities with book and fair value of P1,500,000.
Assuming Paul Corp. measures the NCI at fair value amounting to P2,250,000, what is the amount of
goodwill?
a. P600,000
c. P210,000
b. P300,000
d. P750,000
Problem 17: What is the total investment in subsidiary in the separate financial statements of Paul?
a. P4,200,000
c. P4,500,000
b. P3,000,000
d. P3,990,000
Problem 18: Presto Inc. acquired 75% outstanding ordinary shares of Sun Corp. Presto regularly sells
inventory to Sun Corp with profit. The computation of non-controlling interest in net income will be:
a. (Net income of subsidiary + realized profit in beginning inventory – unrealized profit in ending
inventory) x 25%
b. (Net income of subsidiary – realized profit in beginning inventory + unrealized profit in ending
inventory) x 25%
c. (Net income of subsidiary + amortization of overvalued assets – amortization of undervalued assets) x
25%
d. (Net income of subsidiary + amortization of overvalued assets – amortization of undervalued assets +
realized profit in beginning inventory – unrealized profit in ending inventory) x 25%
Problem 19: Pam acquired 60% of the outstanding ordinary shares of Sam. The following data were
gathered from the books of Pam and Sam in year 20x5:
Net Income
Dividends declared
Gross Profit based on sales:
20x4
20x5
Pam
800,000
500,000
Sam
620,000
350,000
30%
25%
40%
20%
The inventory from intercompany sales in Pam’s inventory are P80,000 – January 1, 20x5 and December
31, 20x5 P100,000.
What is the consolidated net income attributable to parent under cost method?
a. P969,200
c. P974,000
b. P950,000
d. P961,000
4|P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
Problem 20: On January 5, 20x2, Paul Corp. sold land for P1,500,000 to its 80% own subsidiary, Simon
Company. The land had a book value of P1,000,000. On August 20, 20x3, Simon Company sold the land
for P1,800,000 to outside party.
Which of the following statements is correct?
a. Consolidated working paper journal entry is required only if the land was held for resale to in 20x3.
b. A consolidation working paper journal entry is required only if the subsidiary was a wholly owned
subsidiary.
c. No consolidation working paper journal entry is required in 20x2.
d. A consolidation working paper journal entry is necessary each year until the land is sold to outside
party.
Problem 21: The S Company owns 95% of the G Company. On the last day of the accounting period G
sold to S a non-current asset for P230,000. The asset originally cost P480,000 and at the end of the reporting
period its carrying amount in G’s books was P175,000. The group’s consolidated statement of financial
position has been drafted without any adjustments in relation to this non-current asset. What adjustments
should be made to the consolidated statement of financial position figures for non-current assets and
retained earnings?
Non-current assets
a.
b.
c.
d.
Increase by P250,000
Reduce by P55,000
Reduce by P55,000
Increase by P250,000
Retained earnings
Increase by P237,500
Reduce by P55,000
Reduce by P52,250
Increase by P250,000
Problem 22: On January 2, 20x1, Paul Corp. acquired 20% ownership interest in Simon Corp. for
P1,350,000 and the carries the investment using the cost model. On December 31, 20x1, Simon Corp.
declared and paid dividends amounting to P500,000 and the net income was P2,000,000.
On January 10, 20x2, Paul Corp. acquired another 50% ownership interest in Simon Corp for P3,000,000.
At that date, Simon Corp. has identifiable assets with book value of P6,000,000 and fair value of P7,200,000
and it has liabilities with book and fair value of P1,500,000.
Req. 1: Assuming Paul Corp. measures the NCI at fair value amounting to P2,250,000, what is the amount
of goodwill?
a. P600,000
c. P210,000
b. P300,000
d. P750,000
Problem 23: Entity A, a government entity, had the following transactions during the period:
• Received Notice of Cash Allocation (NCA) amounting to ₱430,000.
• Earned total revenue of ₱40,000 from billings and collections of unbilled income.
• Incurred total expenses of ₱240,000.
• Receipt of NCA for Tax Remittance Advice P37,000
• Remitted total taxes withheld of ₱37,000 to the BIR through Tax Remittance Advice (TRA).
• The “Cash-Modified Disbursement System (MDS), Regular” has an unused balance of ₱52,000 at the
end of the period.
How much is the surplus (deficit) for the period?
5|P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
a.
b.
c.
d.
P230,000
P215,000
P(200,000)
P178,000
Problem 24: In 2030, the NPO receive a P400,000 cash contribution to its endowment fund. During the
year, hospital administration invested P250,000 of the funds . which of the following statements regarding
the effect of these transactions on the preparation of NPO’s statement of cash flows is correct?
a. The 250,000 contribution will appear in the financing activities section of the cash flow statement as
cash inflow
b. The 250,000 investment will appear in the investing activities section of the cash flow statement as
cash inflow
c. The 400,000 contribution will appear in the financing activities section of cash flow statement as cash
inflow
d. The 400,000 contribution will appear in the investing activities section of cash flow statement as cash
inflow
Problem 25: Which account would be credited in recording a gift of medicine to a not for profit hospital
from a donor?
a. Patient service revenue - donation
c. Drugs and Medicine - donation
b. Non-Operating Revenue
d. Other Operating Revenue - donation
Problem 26: Which of the following statements is/are true?
Statement 1: An expense item allocated by the home office to a branch is recorded by the branch by a debit
to an expense ledger account and a credit to the Home Office account.
Statement 2: A debit to the Home Office ledger account and a credit to the Trade Accounts Receivable
account in the accounting records of a branch indicate that the home office collected accounts receivable
of the branch.
a.
b.
c.
d.
Only Statement 1 is true.
Both statements are true
Neither of the statements are true
Statement 2 is true
Problem 27: In a working paper for combined financial statements of the home office and branch, the
branch’s net income is included in :
a. The debit column of the branch income statement section and the credit column of the home office
statement of retained earnings section.
b. The credit column of the branch income statement section and the debit column of the branch statement
of retained earnings section.
c. The debit column of the branch income statement section and the credit column of the branch statement
of retained earnings section.
d. Recorded in some other manner.
Problem 28: The fiscal year of KKK Company which is located in Manila ends on December 31. On
December 31, 2041, the home office of KKK Company shipped merchandise costing ₱80,000 to Rizal
6|P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
Branch and prepared an appropriate entry for the shipment. The Rizal Branch did not receive the
merchandise on that same day. Both the home office and the branch use the perpetual inventory system.
The end of period adjustments on December 31, 2041 should include:
a. A debit to Branch Current and a credit to Inventories in home office accounting records.
b. A debit to Home Office Current and a credit to Inventories in the branch accounting records.
c. A debit to inventories and a credit to Home Office Current in the branch accounting records.
d. Other journal entry.
Problem 29: QQQ Corporation operates a number of branches in the provinces. On December 31, 2041, its
Morong branch showed a Home Office account balance of ₱109,400 and the home office books showed an
Investment in Morong branch account balance of ₱102,200. The following information may help in
reconciling both accounts:
● A ₱48,000 shipment, charged by Home Office to Morong branch, was actually sent to and retained
by Baras Branch.
● A ₱60,000 shipment, intended and charged to Antipolo Branch was shipped to Morong branch and
retained by the latter.
● A ₱8,000 emergency cash transfer from Baras Branch was not taken up in the Home Office books.
● Home office collects a Morong branch accounts receivable of ₱14,400 and fails to notify the branch.
● Home office was charged for ₱ 4,800 for merchandise returned by Morong branch on December 30.
The merchandise is in transit.
Home office erroneously recorded Morong Branch’s net income for 2041 at ₱65,100. The branch reported
a net income of ₱50,700.
What is the adjusted balances of the Home Office and Morong branch reciprocal accounts on December
31, 2041?
a. ₱80,600
b. ₱109,400
c. ₱95,000
d. ₱87,000
Problem 30: The Machine Sales Company established a branch in Zambaoga City early last year. It shipped
merchandise and billed the branch for ₱600,000 prior to its opening. For the year, it made additional
shipments at billed price of ₱ 240,000. Within the year, the branch shipped back ₱15,000 inventory and got
the credit memo for said returns. On the last working day of the year, an inventory count was made. Ending
inventory of ₱370,000 was established consisting of purchases from third parties at ₱40,000, with the
balance coming from home office shipments at billed price. The home office billed the branch at 20% above
cost. The total purchases of the branch from outside suppliers amounted to ₱ 145,000. The total cost of
goods sold available for sale by the branch at cost (net of overvaluation and returns ) amounted to:
a. ₱832,500
b. ₱845,000
c. ₱870,400
d. ₱970,000
Problem 31: GE Philippines has two merchandise outlets, its main store in Manila and its Cebu City branch.
For control purposes, all purchases are made by the main store, and shipments to the Baras City branch are
at cost plus 10%. On January 1, 2041, the inventories of the main store and Baras City branch were ₱27,200
and ₱7,920 respectively. During 2041, the main store purchased merchandise costing ₱80,000 and shipped
7|P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
40% of these to the Baras City branch.
Sale
Inventory
Inventory
Shipments from main store
Expenses
Main store
64,000
9,680
7,920
35,200
20,960
9,600
At December 31, 2041, the following journal entry was made to prepare the Baras City branch books for
the next accounting period:
(1)What was the actual branch income of 2041 on a cost basis, assuming the use of the provisions of the
PAS and (2) if the main store has ₱22,400 worth of inventory on hand at the end of 2041, the total inventory
that should appear on the combined balance sheet at December 31, 2041.
a. (1) 9,600; (2) 31,200
b. (1) 12,240; (2) 30,320
c. (1) 12,640; (2) 31,200
d. (1) 12,960; (2) 32,080
Problem 32: The following are some of the account balances on the books of the home office and its branch
on December 31,2041:
Home office books
Branch books
Inventory, January 1,2041
₱40,000
₱116,000
Shipments from home office
301,600
Purchases
1,800,000
400,000
Shipments to branch
290,000
Allow. for overvaluation of branch
105,000
inventory
Sales
2,400,000
1,440,000
Operating expenses
580,000
220,000
Per physical count, the ending inventory of the branch is ₱84,000 including goods purchased from
outsiders of ₱55,400 while the ending inventory of the home office is ₱240,000. Home office bills its
branch for merchandise shipments at 30% above cost.
What is the amount of the unrealized inventory profit in the books of the home office on December 31,
2041?
a. ₱18,000
b. ₱14,520
c. ₱24,000
d. ₱6,600
Problem 33: Which of the following is correct?
a. All joint arrangements which are not structured through a separate vehicle are classified as joint
ventures.
b. 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.
8|P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
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c. 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.
d. 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 venture.
e. None of the above.
Problem 34: When disclosing information about investments in associates, PAS 28 Investments in
Associates and Joint Ventures requires separate disclosure of which of the following?
I.
II.
III.
IV.
a.
b.
c.
d.
Shares in associates, in the statement of financial position
Share of profit or loss in associates, in the statement of profit or loss and other comprehensive
income
Share of any discontinuing operations, in the statement of changes in equity.
Shares of changes recognized directly in the associate’s equity, in the statement of changes in
equity.
I, II, III, and IV
I, II, and IV only
II, III, and IV only
I, II, and III only
Problem 35: Which of the following statements is not true in relation to joint control?
a. Each party must have equal interest for joint control to exist
b. Joint control exists only when there is contractually agreed sharing of control
c. Entities over which a party has joint control are accounted for in accordance with PFRS 11 Joint
Arrangements
d. Joint control requires the unanimous consent of the parties sharing control
Problem 36: Two entities established a joint arrangement in an incorporated entity. The assets and liabilities
of the entity will be in the name of the incorporated entity. The activities of the arrangement will be decided
by its own board of directors. The rights of the two parties are limited only to the net assets of the
incorporated entity. How should the two parties account for their investment?
a. Financial asset at amortized cost
b. Joint venture
c. Joint operation
d. Investment in trading securities
Problem 37: Two entities established a business. The contractual agreement provided that the relevant
activities of the business will require unanimous consent of the two parties. The business is not incorporated
before SEC. The two parties equally own interest in the said business. How should the two parties account
for their investment?
a. Equity method
b. Joint operation
c. Joint venture
9|P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
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Gmail
: icarecpareview@gmail.com
d. Business combination
Problem 38: On January 1, 2031, Glenda Inc., a small and medium enterprise (SME), invested P4,350,000
cash in a joint venture for 50% interest with a transaction cost of P150,000. For the year ended December
31,2031, the joint venture reported a net income of P1,800,000 and distributed cash dividend in the amount
of P540,000. As of December 31, 2031, the fair value of the investment in joint venture is P5,100,000 and
the estimated cost of disposal is 15% of fair value. The value in use of the investment is estimated at
P4,950,000.
Under IFRS for SMEs, what is the book value of the Investment in Joint Venture to be reported by
Glenda Inc. as of December 31, 2031, if the SME elects to use (1) the equity method, (2) the cost method,
and (3) the fair value method, respectively?
Equity method
Cost method
Fair value method
a.
4,800,000
4,500,000
4,950,000
b.
4,950,000
4,500,000
5,100,000
c.
4,800,000
4,200,000
5,100,000
d.
4,950,000
4,200,000
4,950,000
Problem 39: How much is the net amount that Glenda Inc. should recognize in its profit or loss for the
year ended December 31, 2031 using (1) the equity method, (2) the cost method, and (3) the fair value
method, respectively?
Equity method
Cost method
Fair value method
a.
450,000
270,000
1,020,000
b.
450,000
420,000
870,000
c.
720,000
420,000
1,020,000
d.
720,000
270,000
870,000
Problem 40: Trisha Co. paid the in-transit insurance premium for consignment goods shipped to Vanilla
Co. In addition, Trisha advanced part of the commission that will be due when Vanilla sells the goods.
Should Trisha inclue the in-transit insurance premium and the advanced commission in inventory costs?
Insurance Premium
Advance Commission
a.
Yes
Yes
b.
No
No
c.
Yes
No
d.
No
Yes
10 | P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
Problem 41: The role of the agent in a Principal-Agent relationship is to
a. Arrange for the principal to provide goods or services to a customer
b. Provide the goods or services for a customer
c. Market the principal goods and services to prospective customers
d. Develop and maintain goodwill of the principal’s customers
Problem 42: On January 1, OAMG Company shipped twenty-five Samsung phones to MDSK Store on
consignment. The DVD iPad is to be sold at an advertised price of 1,000 Php per item. The cost of each
iPad to the consignor is 500 Php. The consignor paid 375 Php to shit the merchandise. Commission is to
be 25% of sales price. During the month, two Samsung phones were returned.
On January 31, MDSK store remitted the amount due to consignor after deducting the commission of
2,000 Php.
The amount remitted by MDSK Store is:
a.
5,500
b.
8,000
c
6,000
d.
10,000
Problem 43: Max’s Company consigns ballpens to retailers, debiting Accounts Receivable for the retail
price of the pens consigned and crediting sales. All costs relating to the consigned pencils are debited to
expenses of the current account period. Net remittances of the consignees are credited to Accounts
Receivable.
On December, 800 pencils costing 300 Php and retailing for 500 Php a unit were consigned to Wendy’s
Store. Freight cost of 4,000 Php was debited to freight expense by the consignor. On December 31, Wendy’s
store remitted 177,525 Php to Max’s company in full settlement of the balance due. Accounts receivable
was credited for this amount. The consignee deducted a commission of 50 pesos on each ballpen sold and
225 Php for delivery expense.
The number of pencils sold by Wendy’s store is:
a.
355
b.
395
c
490
d.
500
Problem 44: Psalm Company consigned five hospital beds, with cost of 40,000 Php each, to Trisha Inc.
which was to sell these goods for the account and risk of the former for a commission of 15% of selling
price. The Psalm company paid trucking costs of 10,000 Php on the shipment. Correspondingly, Trisha
11 | P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
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: 0927 283 8234
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Inc. paid 16,000 Php on the freight of the shipment.
On the last day of the year, Trisha Inc. reported that it sold three of the computers two for cash at 75,000
Php each and one on credit at 90,000 Php of which 25% was collected as downpayment. Trisha Inc.
remitted all cash due.
The amount remitted by Trisha Inc. is:
a.
67,500
b.
120,500
c
172,500
d.
188,000
Problem 45: Evaluate the following statements:
I.
Franchise fees should be recognized when performance obligations are satisfied.
II.
Franchise revenue is recognized over time if the franchisor is providing access to the
right rather than transferring control.
a. Both statements are true
b. Both statements are false
c. Only statement 1 is true
d. Only statement 2 is true
Problem 46: Evaluate the following statements:
I.
Upon signing the franchise contract the franchisee is required to pay the continuing
franchise fee
II.
Continuing franchise fees should be recorded by the franchisor as revenue when
uncertainty related to the variable consideration is resolved
a. Both statements are true
b. Both statements are false
c. Only statement 1 is true
d. Only statement 2 is true
Problem 47: On January 1, 2026, L9M entered into a franchise agreement with 6DP which required the
latter to pay a non-refundable upfront fee of P1,600,000 at the signing of the contract and on-going payment
of royalty equal to 5% of the sales of the franchisee. On the date of the signing of the contract, the franchisee
paid the non-refundable upfront fee. As part of the franchise agreement, the franchisor shall render the
following performance obligations which are considered separate and distinct from one another.
Performance Obligation
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Stand-Alone Selling Price
Training ten personnel of the franchisee
P200,000
Construction of the franchisee’s building and
landscape
800,000
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
Delivery of one thousand units of raw materials to
the franchisee
600,000
Allowing the franchisee to use the franchisor’s
trademark and tradename for a term of 10 years
starting Jan. 1, 2026
400,000
At the end of 2026, the accounting department of L9M found out that they were able to train 7 out of 10
personnel of 6DP. In addition, the percentage of completion of the construction of the franchisee’s building
and landscape was estimated by the engineer and architect at 90% although the building was fully completed
because the landscape was not started. Delivery of 600 units of raw materials were also accomplished by
L9M. For the year ended, December 31, 2026, L9M reported sales revenue amounting to 200,000 because
it already started operations upon the construction of the building on October 1, 2026.
What is the total franchise fee revenue to be reported by L9M for the year ended December 31, 2026?
a. 1,018,000
b. 1,270,000
c. 976,000
d. 1,064,000
Problem 48: On January 1, 2035, CCC, DDD, and EEE Inc. entered into a franchise agreement with 888K
Company to market their products. The agreement provides for an initial fee of P25,000,000 payable as
follows: P7,000,000 to be paid upon signing of the contract and the balance in five equal annual payments
every end of the year starting December 31, 2035. CCC, DDD, and EEE Inc. signs a non-interest bearing
note for the balance. His credit rating indicates that he can borrow at 15% interest for this type of loan.
The present value of an annuity of P1 at 15% for 5 periods is 3.352. The agreement further provided that
the franchisee must pay a continuing franchise fee equal to 3% of the monthly gross sales. On August 31,
CCC, DDD, and EEE Inc. had completed the initial services required in the contract at a cost of P8,580,240
and incurred an indirect cost of P350,000. 888K commenced business operations on November 30, 2035.
The gross sales reported to CCC, DDD, and EEE Inc. were P3,600,000 for December, 2035. The first
installment payment was made on the due date.
Assume that the collectibility of the note is not reasonably assured, how much is the net income for the year
ended, December 31, 2035?
a. 6,252,536
b. 6,402,536
c. 6,402,563
d. 6,144,536
Problem 49: The Investment in Subsidiary account of the parent is:
a. Reported as part of non-current assets in the Consolidated Statements of Financial Position
b. Eliminated during consolidation
c. Reported as part of current assets in the separate Statements of Financial Position of the parent
d. Reported as a contra-equity account of the parent
Problem 50: When job-order costing is used, costs are accumulated per:
13 | P a g e
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No. 125 Brgy. San Sebastian
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a.
b.
c.
d.
Department
Branch
Item
Job
Problem 51: In a job-order costing system, the use of indirect materials would usually be reflected in the
general ledger as an increase in:
a. Finished Goods Inventory
b. Work in Process Inventory
c. Factory overhead applied
d. Factory overhead control
Problem 52: Which of the following is not a factory overhead item?
a. Factory depreciation and supplies
b. Factory utilities
c. Production line labor
d. Maintenance department of a factory
Problem 53: Which of the following is not a method to allocate joint costs?
a. Relative net realizable value
b. Relative average unit costs
c. Relative sales value
d. Relative weight
Problem 54: All costs that are incurred between the split-off point and the point of sale are known as
a. Sunk costs
b. Joint costs
c. Separable costs
d. Committed costs
Problem 55: Which of the following costs is usually not easily traceable to finished units of product?
a. direct labor
b. manufacturing overhead
c. direct materials
d. prime costs
Problem 56: The principal difficulty with normal costing is that
a. the unit cost information is not received on a timely basis.
b. it can result in fluctuating per-unit overhead costs.
c. estimated overhead and estimated activity are likely to differ from actual overhead and actual costs,
resulting in underapplied or overapplied overhead.
d. there is no difficulty associated with using normal costing.
Problem 57: Statement 1: In a normal job-order costing system, actual factory overhead is applied at the end
of each month.
14 | P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
Statement 2: Over-applied overhead that is material in amount is closed to the Cost of Sales account at yearend.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are false.
Problem 58: Statement 1: Joint costs are incurred after the split-off point in a production process.
Statement 2: If an intercompany sale of a depreciable asset occurs on the last day of the year and results in a
gain to the seller, the asset must be shown on the consolidated balance sheet at its original book value.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are false.
Use the following information for the next five items. 59 - 63
Problem 59: ABC Company paid P2,000,000 for a 70% interest in XYZ Co. on January 1, 2022. ABC Company
elected to measure non-controlling interests at its proportionate share in the net asset of XYZ Company. On
the date of acquisition, the shareholders’ equity of ABC Co. and XYZ Co. are as follows:
ABC Co.
XYZ Co.
Share capital
P7,500,000 P2,500,000
Share premium
2,000,000
600,000
Retained earnings
1,700,000
600,000
All the assets and liabilities of XYZ Co. approximate their fair values except for the following:
Carrying value Fair value
Inventories (all sold in 2022)
P 750,000 P 900,000
Land
1,200,000
1,500,000
Building (5 years remaining life)
1,800,000
2,300,000
Investment in subsidiary is carried using the cost model. During the year, ABC Co. transferred merchandise
costing P350,000 to XYZ Co. at a 20% gross profit. XYZ Co. reported that 25% of this shipment was unsold
at the end of 2022.
The following financial information at the end of the year are reported in the separate financial statements of
both companies:
ABC Co. XYZ Co.
Net income P450,000 P300,000
Dividends
300,000
225,000
How much is the goodwill or gain on bargain purchase to be reported in the 2022 consolidated financial
statements?
a. P1,255,000 goodwill
b. P1,255,000 gain
c. P1,755,000 goodwill
d. P1,755,000 gain
15 | P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
Problem 60: How much is the initial measurement of the non-controlling interest?
a. P105,000
b. P857,143
c. P1,395,000
d. P0
Problem 61: How much is the consolidated net income attributable to the parent for 2022?
a. P305,625
b. P320,625
c. P1,575,625
d. P1,560,625
Problem 62: How much is the consolidated net income attributable to non-controlling interests for 2022?
a. P21,563
b. P8,438
c. P15,000
d. P90,000
Problem 63: How much is the consolidated retained earnings as of December 31, 2022?
a. P1,720,625
b. P2,975,625
c. P1,705,625
d. P2,960,625
Use the following information for the next two items. 64 - 65
Problem 64: ABC and XYZ enter into a contract to set up a separate vehicle (entity 123) for the purpose of
operating a tennis court. The contractual arrangement between the parties establishes joint control of the
activities of the tennis court. The parties have rights to the assets and obligations to the liabilities of the
arrangement. The following transactions of the joint arrangement occurred during 2022 and 2023:
2022:
A.
B.
C.
D.
E.
F.
G.
Received P5,000,000 each from the parties in the joint arrangement as initial investment
Costs of incorporation paid amounted to P200,000
Acquired land at a cost of P2,000,000, cash
Various costs to construct the tennis courts incurred and paid amounted to P6,000,000
Office equipment purchased on account, P500,000
Rental income collected from tennis players, P4 million
Various operating costs paid amounted to P300,000
2023:
A.
B.
C.
D.
Operating costs paid amounted to P500,000
Rental income collected from tennis players, P6 million
Partial payment on the office equipment, P200,000
Declared and paid cash dividends, P1,500,000
16 | P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
Based on the policy of entity 123, the tennis courts are to be depreciated over 25 years while the equipment
are to be depreciated over 5 years. Newly acquired depreciable assets are to be depreciated for a full year in
the year of acquisition and not depreciated on the year of disposition.
How much is the Cash – JO to be reported by ABC as of December 31, 2023?
a. P2,150,000
b. P250,000
c. P4,650,000
d. P0
Problem 65: How much is the Property, Plant and Equipment – JO to be reported by ABC as of December
31, 2023?
a. P3,250,000
b. P3,080,000
c. P2,910,000
d. P0
Problem 66: ABC Company operates an agency in Bicol. During the year, transactions related to the agency are
provided as follows:
Collections from customers P1,500,000
Disbursements:
Purchases
1,200,000
Salaries
250,000
Rent
60,000
Supplies
30,000
Other expenses
20,000
The books also presented the following items in relation to the agency:
January 1 December 31
Accounts receivable P200,000
P350,000
Accounts payable
100,000
180,000
Inventories
180,000
240,000
Unused supplies
15,000
20,000
How much is the net income of the agency for the year?
a. P195,000
b. (P255,000)
c. P255,000
d. P0
Use the following information for the next four questions 67 - 70
Problem 67: ABC Company filed for a voluntary bankruptcy which was granted after having submitted all the
required papers and documents. You are provided the following information as of June 30, 2022:
Assets
Net Book Value
Liquidation Value
Cash
P 4,997
Investments in equity securities
25,000 P40,000 plus uncollected dividends of P5,000
Accounts receivable, net
54,000 P28,000 expected collection
17 | P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
Inventory
Prepaid expense
Land
Building, net
Equipment
Goodwill
Liabilities and Equity
Notes payable
Trade and other payables
Loans payable
Share capital
Retained Earnings (Deficit)
75,000
8,000
140,000
200,000
80,000
10,000
P100,000 after further processing of P10,000
P2,000 is refundable
150% of net book value
90% of net book value
30% of net book value
Carrying Value
Other Information
P120,000 Secured by inventory
100,000
350,000 Secured by land and building
300,000
(273,000)
Additional information:
• ABC Company failed to accrue its interest on the loans payable. Based on the loan agreement,
interest of 10% is payable annually every December 31.
• Trade and other payables included the following: salaries payable, P20,000; taxes payable, P5,000
• Administrative costs for liquidation are expected to be P10,000.
Use XX.XX% in the estimated recovery percentage.
How much is the net free assets?
a. P89,947
b. P91,947
c. P86,947
d. P84,947
Problem 68: How much is the estimated estate equity (deficit)?
a. (P15,503)
b. (P13,503)
c. P15,503
d. P13,503
Problem 69: How much is the expected payment as settlement of the notes payable?
a. P115,571
b. P116,142
c. P90,000
d. P104,568
Problem 70: How much is the expected payment as settlement of the loans payable?
a. P295,740
b. P320,240
c. P313,240
d. P367,500
18 | P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
Use the following information for the next three questions 71 - 73
Problem 71: On March 1, 2022, ABC Co. was contracted to construct a building for a customer at a total
contract price of P16,500,000. The building was estimated to be completed in 2024. The following data were
made available:
2022
2023
2024
Contract costs incurred
P6,400,000 P5,200,000 P2,900,000
Estimated costs to complete
6,400,000
2,900,000
Progress billings each year
6,400,000
7,000,000
3,100,000
How much is the realized gross profit for 2023?
a. P250,000
b. P1,850,000
c. (P250,000)
d. P400,000
Problem 72: How much is the contract asset (liability) as of December 31, 2023 using View 1 of the PIC Q&A?
a. P1,850,000
b. P200,000
c. (P200,000)
d. P0
Problem 73: How much is the realized gross profit for 2024?
a. P250,000
b. P1,850,000
c. (P250,000)
d. P400,000
Use the following information for the next two questions 74 -75:
Problem 74: Two real estate companies, Company GREECE and Company Japan (the parties) set up a
separate vehicle (Entity QQQ) for the purpose of acquiring and operating a shopping centre. The contractual
agreement between the parties establishes joint control of the activities that are conducted by Entity QQQ.
The main feature of Entity QQQ’ legal form is that the entity, not the parties, has the rights to the assets,
and obligations for the liabilities, relating to the activities of the arrangement. These activities include the
rental of the retail units, managing the car park, maintaining the center, and establishing the reputation and
customer base for the center as a whole.
The terms of the contractual arrangement are such that:
● Entity QQQ owns the shopping center. The contractual arrangement does not specify that the
parties have rights to the shopping center.
● The parties are not liable in respect to the liabilities of Entity QQQ. If the entity is unable to pay
any of its liabilities, the liability of each party to third party will be limited to the party’s unpaid
contribution.
● The parties have the right to sell or pledge their interest in Entity QQQ.
● Each party receives a share of the income from the shopping center (which is the rental income
net of the operating costs) in accordance with its interests in Entity QQQ.
Summary transactions of the joint arrangement for 2030 and 2031 are as follows:
19 | P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
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: 0927 283 8234
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2030
a. Company Greece contributed P18 million for a 60% interest in the net assets of Entity QQQ and
Company S contributed P12 million for a 40% interest.
b. Entity QQQ acquired a shopping center at a cost of P36 million.
c. Major repairs incurred to renovate the building amounted to P9 million. This is capitalized to
extend the remaining life of the building to 15 years.
d. Operating expenses (including depreciation) for the year amounted to P7.5 million.
e. Rental income collected from the tenants, P9 million.
f. Net income or loss for the year was distributed to the venturers in accordance with their interests
in the joint venture.
2031
a. Operating expenses (including depreciation) for the year amounted to P12 million.
b. Rental income collected for the year, P18 million.
c. Dividends paid at the end of the year, P600,000.
d. Net income or loss for the year was distributed among the venturers.
What is the ending balance of the Investment in Joint Venture account for the years 2030 and 2031,
respectively in the books of Company Greece?
a. P 18,900,000; P 22,140,000
b. P 18,900,000; P 22,860,000
c. P 18,600,000; P 20,760,000
d. P 18,600,000; P 21,240,000
20 | P a g e
RFERRERRLACO/ATANG/PDEJESUS
No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile
: 0927 283 8234
Telephone
: (043) 723 8412
Gmail
: icarecpareview@gmail.com
Problem 75: What is the ending balance of the Investment in Joint Venture account for the years 2030 and
2031, respectively in the books of Company Japan?
a.
b.
c.
d.
P 12,600,000; P15,000,000
P 12,600,000; P14,760,000
P 12,900,000; P 16,140,000
P 12,900,000; P 16,140,000
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RFERRERRLACO/ATANG/PDEJESUS