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Since 1977
AFAR
FINAL PRE-BOARD EXAMINATION
DE LEON/DE LEON/ALENTON
APRIL 27, 2021
Multiple Choice. Select the letter that corresponds to the best answer. This examination
consists of 70 items (ignore the extra answer options in the answer sheet after number
70) and the exam is good for three (3) hours. Good luck!
1. The Home Office ledger account in the accounting records of a branch is best described
as
a. A revenue account
b. An equity account
c. A deferred revenue account
d. None of the foregoing
2. The Shipments to Branch ledger account in the accounting records of the home office
of a business enterprise:
a. Is an asset valuation account
b. Indicates thot the home office uses the periodic inventory system
c. Is adjusted at the end of the accounting period to equal the unrealized profit in the
branch's ending inventories
d. Is not displayed in the home office's separate financial statement
3. In an acquisition where there is an exchange of stock (acquirer) for assets (acquiree),
how does the value of the acquiree net assets change
a. The net assets increase
b. The net assets decrease
c. There is no change in net assets
d. The net assets may increase, decrease or remain the same
4. Which of the following is not a true statement with regard to a statutory merger?
a. One entity continues to exist
b. One entity ceases to exist
c. The name of the new entity is not the same as either of the entities
d. All of the above one true statements with regard to a statutory merger
5. When a subsidiary is acquired sometime after the first day of the fiscal year, which of
the following statements is true?
a. Income from subsidiary is not recognized until there is an entire year of
consolidated operations.
b. Income from subsidiary is recognized from date of acquisition to year-end.
c. Excess cost over acquisition value is recognized at the beginning of the fiscal year.
d. No goodwill can be recognized.
6. When preparing a consolidated balance sheet. the noncontrolling interest amount must
be presented:
a. It is not disclosed on the balance sheet
b. As a part of liabilities
c. As a part of stockholders' equity
d. In the notes to financial statements
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EXCEL PROFESSIONAL SERVICES, INC.
7. Any goodwill on the subsidiary's company's books on the date of acquisition:
a. must be recorded as a loss on acquisition
b. must be revalued
c. must be eliminated
d. must be subject to on impairment
8. In the cash distribution plan, which partner gets the first cash distribution?
a. The partner with the largest loan balance
b. The partner with the largest loss absorption potential
c. The partner with the largest capital balance
d. The partner with the largest profit or loss ratio
9. A simple partnership liquidation requires
1. Periodic payments to creditors and partners determined by a safe payment
schedule
2. Periodic payments to partners as cash becomes available
3. Creditors be paid in an orderly manner
4. Partnership assets be converted into cash with full payment made to outside
creditors before remaining cash is distributed to partners in a lump sum payment.
10. In the reporting of a corporate liquidation, assets are shown at
a. Present value calculate using an appropriate discount rate
b. Net realizable value
c. Historical rate
d. Book value
11. In a
a.
b.
c.
d.
statement of affairs, assets are classified
according to whether they are pledged with particular creditors.
as current or noncurrent.
as monetary or nonmonetary.
as operating or nonoperating.
12. What are free assets?
a. assets for which net realizable value is greater than historical cost.
b. assets for which no market exists.
c. assets for which replacement cost is greater than historical cost.
d. assets available to be distributed for liabilities with priority and other unsecured
obligations.
13. Which of the following is a characteristic of a joint arrangement?
a. The parties are bound by a contractual arrangement.
b. The contractual arrangement gives two or more parties joint control over the
arrangement.
c. The parties are bound by a contractual arrangement and the contractual
arrangement gives the parties joint control over the arrangement.
d. None of these.
14. A joint arrangement that is structured without a separate vehicle is a
a. Joint asset
c. Joint operation
b. Joint entity
d. Joint venture
15. According to PFRS 15, a good or service is distinct if
a. it is tangible.
b. the customer can benefit from it, either on its own or together with other
resources that are readily available to the customer.
c. the good or service is separately identifiable.
d. b and c
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EXCEL PROFESSIONAL SERVICES, INC.
16. If an entity’s promise to grant a license is not distinct,
a. the general principles of PFRS 15 are applied to determine whether the
performance obligation is satisfied over time or at a point in time.
b. the specific principles of PFRS 15 are applied to determine whether the
performance obligation is satisfied over time or at a point in time.
c. both the general and specific principles are used to determine whether the
performance obligation is satisfied over time or at a point in time and whether the
nature of the promise to grant the license is a ‘right to access’ or a ‘right to use.’
d. US GAAP (FAS No. 45) is applied to determine whether there is substantial
performance of the initial services required in the contract.
17. In a consignment arrangement, which party bears inventory and credit risk
(respectively)?
a. Consignor
Consignor
b. Consignor
Consignee
c. Consignee
Consignor
d. Consignee
Consignee
18. Black Co., a consignee, paid the freight costs for goods shipped from White Co., a
consignor. These freight costs are to be deducted from Black’s payment to White when
the consignment goods are sold. Until Black sells the goods, the freight costs should
be included in Black’s
a. Cost of goods sold
c. Selling expenses
b. Freight-out costs
d. Receivable
19. In a
a.
b.
c.
d.
job order costing system, indirect labor used should be debited to
Payroll liability
Work in process control
Finished goods control
Factory overhead control
Use the following information for the next four (4) questions:
Home office bills its branch for merchandise shipments at 30% above cost.
The following are some of the account balances on the books of home office and its branch
as of December 31, 2030:
Home Office Books
Branch Books
Inventory, January 1
35,000
101,500
Shipments from Home Office
263,900
Purchases
1,575,000
350,000
Shipments to Branch
253,750
Branch Inventory Allowance
91,875
Sales
2,100,000
1,260,000
Operating Expenses
507,500
192,500
Per physical count, the ending inventory of the branch is P73,500 including goods from
outside purchases of P48,475; the ending inventory of the home office is P210,000.
20. What is the cost of goods available for sale of the home office?
a. P1,610,000
b. P1,863,750
c. P1,356,250
d. P1,575,000
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EXCEL PROFESSIONAL SERVICES, INC.
21. What is cost of goods available for sale of the branch?
a. P715,400
b. P781,375
c. P689,500
d. P638,750
22. What is the total ending inventory to be shown on the combined financial statements?
a. P118,475
b. P277,725
c. P328,475
d. P280,000
23. What is the combined net income for the year?
a. P957,950
b. P871,850
c. P891,975
d. P942,725
Use the following information for the next two (2) questions:
A Company issued 120,000 shares of its P25 par common stock for all the outstanding
stocks of B Corporation in a business combination completed on August 1, 2019. A
Company’s stock has a FMV of P32 per share. B Corporation’s net assets are worth P3.04
million at book value. Out of pocket costs of the combination were as follows:
Legal fees
Contingent consideration
(reasonable & measurable)
Printing costs of stock certificates
Finder’s fees
Professional fees paid to a CPA
Fees paid to company lawyers
Fees paid to company accountants
P
20,800
14,400
6,400
21,600
16,800
8,000
12,000
24. If the combination is treated as a purchase transaction, the cost of the combination
will be:
a. P 3,840,000
c. P 3,920,000
b. P 3,940,000
d. P 3,899,200
25. The goodwill from the combination is
a. P 800,000
c. P 880,000
b. P 900,000
d. P 859,200
Rambutan Company issues 400,000 shares of its own P10 par common stock for all the
net assets of Coconut. Inc. on August 4, 2018. On this date Rambutan’s stock is quoted
at P20 per share. Summary balance sheet data for the two companies at August 4, just
before the merger are as follows:
Rambutan
Coconut
Current assets
P18,000,000
P 1,500,000
Plant and Property
22,000,000
6,500,000
Total assets
P40,000,000
P 8,000,000
Liabilities
P12,000,000
P 2,000,000
Share capital, P10 par
20,000,000
3,000,000
Share premium
3,000,000
1,000,000
Retained profit
5,000,000
2,000,000
Total equities
P40,000,000
P 8,000,000
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EXCEL PROFESSIONAL SERVICES, INC.
Out of pocket costs for the acquisition are as follows:
Direct acquisition costs
Indirect acquisition costs
Stock registration and issuance costs
P
120,000
15,000
10,000
Assume the fair value of Rambutan’s net assets is P30,000,000 and Coconut’s net
assets is P9,000,000.
26. The amount of retained profit shown on the balance sheet just after the business
combination will be
a. P4,855,000
c. P6,865,000
b. P5,865,000
d. P5,855,000
27. Using the same information, but assuming Rambutan’s stock is selling at P22.81 each,
calculate the goodwill from the business combination
a. P124,000
c. P214,000
b. P142,000
d. P140,200
Use the following information for the next two (2) questions:
On January 1, 2020, X Company signed an agreement with Z Corporation to form a new
corporation (XXYY) for the production of special gadgets. They contributed P1,000,000
each and will share in equity and profits equally.
During 2020 XXYY Corporation reported a net profit of P92,000 and declared dividends of
P30,000 at year-end. On the other hand, X Company reported a net profit of P1,216,000
for year 2020. At January 1, 2020, its share capital and retained earnings were P2,400,000
and P736,000, respectively.
Before adjustments for its share of XXYY’s profit and the recognition of the dividend
receivable, the balance sheet draft of X Company shows a total assets of P5,024,000.
28. Determine the balance of the Investment in JV account to be reported by X Company
in its balance sheet at December 31, 2020.
A. P1,031,000
C. P1,046,000
B. P1,040,320
D. P1,000,000
29. Determine the amount of Retained Earnings X Company will report in its balance sheet
at December 31, 2020.
A. P 736,000
C. P4,398,000
B. P 782,000
D. P1,998,000
Use the following information for the next two (2) questions:
On January 1, 2020, SME Voltex 5 Company has a 30% equity of Takuza 4 Enterprises for
P92,800. The latter company is a joint venture undertaking. Transaction costs of 3% of
the purchase price of the shares were incurred by SME Voltex 5 Company.
On December 31, 2010, Takuza 4 declared and paid dividends of P24,000 and reported a
profit of P67,200
Published price quotations do not exist for Takuza shares but appropriate valuation
techniques determined the fair value of the investment at P104,000. Costs to sell are
estimated at P5,200.
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EXCEL PROFESSIONAL SERVICES, INC.
30. What is the amount of profit or (loss) to be recognized by SME Voltex 5 under the
equity model?
a. P ( 9,744 )
c. P 20,160
b. P (20,610)
d. P 10,416
31. What is the amount of Investment in JV to be recognized by Voltex 5 in its 2020
balance sheet under the equity method.
a. P 108,544
c. P98,800
b. P 180,445
d. P89,800
Use the following information for the next two (2) questions:
On March 31, 2019, Emong, Bobby, and Ramil formed the POGI Partnership to operate a
CPA review center. The following is a list of their contributions at that date:
Emong
Book Fair value
Value
P132,000 P132,000
Bobby
Ramil
Book Fair value
Book
Fair
Value
Value
Value
P100,000 P100,000 P120,000 P120,000
80,000
75,000
Cash
Inventory
Land
150,000
188,000
Equipment,
net
________ ________ ________ ________
90,000
90,000
Totals
P282,000 P320,000 P180,000 P175,000 P210,000 P210,000
Bobby has an accounts payable of P50,000 on the inventory and Ramil has a mortgage
payable of P60,000 on the equipment. The partners have agreed to assume only the
mortgage payable but not the accounts payable. They further agreed for the capital ratio
to be 50%, 20%, and 30% to Emong, Bobby, and Ramil, respectively.:
The partnership starts operation on April 1, 2019 and on December 31, 2019 reported a
net income of P305,400.
The following is the profit and loss agreement among the partners
•
•
•
•
10% interest to each partner’s beginning capital
Salaries of P30,000 per quarter will be given to Emong and Ramil
Bonus of 10% of net income after interest, salaries, and bonus will be given to
Emong.
Residual profit/(loss) will be divided equally.
32. Share of net income of Partner Emong on December 31, 2019?
A. P149,210
C. P148,035
B. P261,715
D. P144,531
33. The capital balance of Partner Ramil on December 31, 2019
A. P344,495
C. P343,120
B. P485,983
D. P321,353
34. Alma and Bella formed a partnership in the Philippines, which uses PFRS based on
IASB accounting principles. The two partners agree on a profit and loss ratio of 60%
and 40% to Alma and Bella, respectively. At a later date, the partners agree to admit
Clara into the partnership for a 50%interestin capital and in earnings.
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EXCEL PROFESSIONAL SERVICES, INC.
Capital accounts of the partners immediately before the admission of Clara are: Alma,
P300,000 and Bella, P300,000.
Clara invested P400,000 for the partnership interest and that this is a fair price for the
share of partnership interest to be acquired. Clara paid the money directly to Alma and
Bella for 50% each of their existing interests. The partners have decided to revalue
partnership interest to current fair value through the non-cash assets prior to Clara’s
admission.
How much will be the capital balances of Alma and Bella after the admission of Clara?
A. P 150,000 and P150,000
B. P 210,000 and P190,000
C. P210,000 and P210,000
D. P190,000 and P19,000
Use the following information for the next two (2) questions:
The following data were taken from the Statement of Affairs of Greenfield Corporation.
Pledged Assets :
Plant, property, and equipment (PPE)
Merchandise inventory
Free assets
Total assets
Secured liabilities
Bonds payable (secured by PPE)
Notes payable (secured by merchandise
inventory)
Unsecured liabilities:
Taxes
Salaries and wages
Accounts payable
BCV
P72,000
59,200
56,000
P187200
ERV
P60,000
41,600
32,000
P133,600
P24,000
48,000
P 3,000
2,600
5,600
89,600
35. What is the estimated amount the holders of the notes payable will receive in the event
of liquidation?
A. P52,700
C. P56,200
B. P45,760
D. P57,000
36. What is the estimated amount the unsecured creditors with priority will receive in the
event of liquidation?
A. P5,600
C. P7,500
B. P6,000
D. P6,200
Use the following information for the next two (2) questions:
Publisher Co. delivers 1,000 books to Bookstore Co. under a consignment arrangement.
The cost per book is ₱300. Publisher Co. pays freight of ₱22 per book.
Bookstore Co. is entitled to a 20% commission based on the Publisher’s suggested retail
price. However, Bookstore Co. marks up the Publisher’s suggested retail price for another
15%.
Six (6) months after the end of the semester, Bookstore Co. remits ₱245,700 to the
Publisher for the sale of 700 books, after deduction of ₱69,300 for the following:
• 2% withholding tax based on the publisher’s suggested retail price.
• Bookstore’s commission.
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EXCEL PROFESSIONAL SERVICES, INC.
37. How much profit is recognized by the Publisher?
a. 315,000
b. 225,400
c. 20,300
d. 27,300
38. How much income is recognized by the Bookstore?
a. 63,000
b. 47,350
c. 110,250
d. 110,350
39. On January 1, 20x1, ABC Co. enters into a contract with a customer to transfer a
license.
•
•
•
•
•
•
The initial franchise fee is ₱100,000 payable as follows: 20% cash down payment
upon signing of the contract and the balance is payable in 4 equal annual
installments starting December 31, 20x1. The appropriate discount rate is 12%.
The contract also requires ABC Co. to transfer equipment to the customer. The
equipment has a cost of ₱30,000 and a stand-alone selling price of ₱40,000.
The license has a stand-alone selling price of ₱38,000.
ABC Co. regularly sells the license and the equipment separately.
The license provides the customer the right to use the entity’s intellectual property
as it exists at the point in time at which the license is granted.
The equipment is transferred to the customer on January 15, 20x1 while the license
is transferred to the customer on February 1, 20x1.
How much revenue is recognized on February 1, 20x1?
a. 80,747
b. 41,409
c. 39,338
d. 0
40. VALEDICTION Construction Co. entered into a P80M fixed price contract for the
construction of a private road for FAREWELL SPEECH, Inc. The performance obligation
on the contract is satisfied over time. VALEDICTION measures its progress on the
contract using the “cost-to-cost” method. The estimated total contract cost is P40M.
The following were the actual costs incurred by VALEDICTION during the first year of
the construction:
Costs of negotiating the contract (charged immediately
as expense)
Costs of materials used in construction
Costs of materials purchased but not yet used in construction
Site labor costs
Site supervision costs
Depreciation of equipment used in construction
Depreciation of idle construction equipment
Costs of moving plant, equipment and materials to and
from the contract site
Costs of hiring plant and equipment
Advance payments to subcontractors (subcontracted
work is not yet started)
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400,000
12,000,000
2,000,000
4,000,000
800,000
480,000
240,000
160,000
560,000
80,000
AFAR.FinPB5.21
EXCEL PROFESSIONAL SERVICES, INC.
How much revenue is recognized as of the end of the first year?
a. 25M
b. 36M
c. 45M
d. 46M
Use the following information for the next two questions:
On September 1, 20x1, ABC Co. enters into a contract with a customer to remodel a
plant’s electrical wirings and install a new generator for a total consideration of ₱12M. The
remodeling and the installation are treated as a single performance obligation satisfied
over time.
The expected contract costs are as follows:
Generator
Other costs
Expected total contract costs
4,000,000
5,000,000
9,000,000
Additional information:
•
•
•
•
•
ABC Co. uses the cost-to-cost method in measuring its progress towards the complete
satisfaction of the performance obligation.
ABC Co. incurs total costs of ₱6,000,000 in 20x1, including the cost of the generator.
The customer obtains control of the generator when it is delivered to the site in
December 20x1. However, the generator will not be installed until March 20x2.
ABC Co. regards the cost of the generator as significant in relation to the expected total
contract costs (i.e., 4M ÷ 9M = 44.44%).
Although ABC Co. acted as a principal in procuring the generator, ABC Co. is not
involved in designing or manufacturing the generator.
41. How much revenue is recognized in 20x1?
a. 7,200,000
b. 3,200,000
c. 4,000,000
d. 5,600,000
42. How much profit is recognized from the contract in 20x1?
a. 1,200,000
b. 1,800,000
c. 2,400,000
d. 5,600,000
43. The license provides Customer X the right to use Entity A’s patented processes.
Customer X continues to operate using its trade name and has the discretion of
developing a new product name for the products it will produce using the patented
processes. The license does not explicitly require Entity A to undertake activities that
will significantly affect the intellectual property to which Customer A has rights. Neither
does Customer X expect that Entity A will undertake such activities. Entity A grants
the license to Customer X on December 31, 20x1. How much revenue from the
franchise contract will Entity A recognize in 20x1?
a. 80,747
b. 21,187
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EXCEL PROFESSIONAL SERVICES, INC.
c. 20,000
d. 0
44. P Company acquired a 90% interest in S Company in 2016 at a time when S Company's
book values and fair values were equal to one another. On January 1, 2018, S sold a
machine with a P24,000 book value to P Company for P48,000. P depreciates the
machine over 10 years using the straight line method. Separate incomes for P and S
for 2018 are as follows:
Sales
Gain on sale of machinery
Cost of goods sold
Depreciation expense
Other expenses
Separate incomes
P Co.
P960,000
(400,000)
(240, 000)
(96,000)
P224,000
S. Co.
P560,000
24,000
(152,000)
(72,000)
(240,000)
P120,000
The consolidated net income for 2018 is:
a. P344,000
c. P310,400
b. P322,400
d. P312,560
Use the following information for the next two (2) questions:
On January 1, 2013 P Corporation acquired 70% of the voting common stock of S Co. at
a time when S Co.’s book values and fair values were equal, except for a equipment which
has a fair value of 50,000 more than its book value and with remaining life of 5 years.
Separate income statement of P Corporation and S Co. for 2013 are as follows:
Sales
Dividend income
Cost of Goods Sold
Operating expenses
Gain on sale of equipment
Separate incomes
P Corporation
P
660,000
42,000
400,000
295,000
150,000
P
157,000
S Corporation
P
365,000
200,000
100,000
P
65,000
Intercompany sales from P to S for 2012 and 2013 are summarized as follows:
Cost
Selling Price Unsold at year-end
Intercompany sales – 2012
P 250,000
P 300,000
30%
Intercompany sales – 2013
P 175,000
P 250,000
40%
Also on January 3, 2013, P Corporation sold equipment (with original cost of P750,000
and carrying cost of P375,000) to S Co. for P525,000. The equipment have a remaining
life of three years and was depreciated using the straight-line method by both companies.
45. Depreciation expense on the consolidated income statement of the equipment sold to
S Co.?
a. P 50,000
c. P 175,000
b. P 125,000
d. P 375,000
46. How much does the depreciation recorded on the above question differ from the
depreciation expense as per consolidated financial statements?
a. P 50,000
c. P 175,000
b. P 125,000
d. P 375,000
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EXCEL PROFESSIONAL SERVICES, INC.
Use the following information for the next two (2) questions:
PAMPANGA CORPORATION acquired 75% of SULU COMPANY’s outstanding voting shares
for P1,650,000 on July 1, 2012. Selected transactions for the two affiliated companies
from the date of acquisition to December 31, 2015 are as follows:
•
•
•
•
SULU sold a piece of land to PAMPANGA on July 31, 2012 at a gain of P60,000.
PAMPANGA sold the land to MARIKINA ENTERPRISES, an outsider to the group, for
P305,500 on April 1, 2015.
PAMPANGA sold special merchandise items to BULACAN, INCORPORATED, an
unaffiliated company, on August 1, 2013 for P80,000 at a gross profit of P28,000.
BULACAN sold the same merchandise after minor enhancements to SULU 2 months
later at a gross profit of P30,500, sixty percent (60%) of which were still held by
SULU at December 31, 2013.
SULU sold goods to PAMPANGA on October 1, 2014 at a gross profit of P35,000;
80% of the merchandise were sold to outsiders by PAMPANGA during 2014.
On July 1, 2014, PAMPANGA sold an equipment to SULU for P320,000. The
equipment is carried in PAMPANGA’s records at P380,000. It had an estimated
remaining life of 5 years from the date of the transfer.
The following additional information is relevant:
REPORTED NET INCOME
PAMPANGA
CORPORATION
BULACAN,
INCORPORATED
SULU COMPANY
DECLARED CASH
DIVIDEND
2014
2015
2014
2015
P620,000
P750,000
P380,000
P420,000
250,000
350,000
300,000
420,000
120,000
80,000
100,000
100,000
47. The consolidated net income to be reported for the year 2014 will be
a. P 951,000
c. P 957,000
b. P 1,150,000
d. P 1,157,000
48. The 2014 consolidated net income attributable to the shareholders of PAMPANGA is
a. P857,750
c. P 871,250
b. P856,250
d. P 875,750
On December 31, 2020 a foreign subsidiary of ARTS-PRTC COMPANY, a Philippine
corporation, submitted the following balance sheet measured in its local currency.
Monetary assets
FC 200,000 Monetary liabilities
FC 180,000
Non monetary assets
800,000 Non monetary liabilities
20,000
Share capital
400,000
Share premium
100,000
Retained earnings
300,000
Total
FC 1,000,000 Total
FC 1,000,000
The relevant exchange rates for one (1) unit of the FC are as follows:
Current rate - P0.34 Historical rate – P0.31 Average rate – P0.30
49. Assuming the Retained Earnings of the subsidiary on December 31, 2020 translated
to Philippine pesos is P91,525, what amount of cumulative translation adjustment must
be reported in the consolidated balance sheet presented in Philippine pesos on
December 31, 2020?
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EXCEL PROFESSIONAL SERVICES, INC.
a.
b.
P25,000
P24,2 55
c. P24,525
d. P25,475
50. How much will be the Philippine peso retained earnings of the foreign subsidiary on
December 31, 2020 if the functional currency of the foreign subsidiary is also the
Philippine peso rather than the local currency?
a. P 92,000
c. P 94,100
b. P 93,600
d. P 91,525
51. During 2020, there was no change in either the raw material or the work in process
beginning and ending inventories. However, finished goods, which had a beginning
balance of P25,000, increased by P 15,000.
If the manufacturing costs incurred totaled P 600,000 during 2020, the goods available
for sale must have been:
a. P 585,000
c. P 610,000
b. P 600,000
d. P 625,000
52. SOLID Corporation manufactures products W, X, Y, and Z from a joint process.
Additional information is as follows:
Products
W
X
Y
Z
Units
Produced
6,000
5,000
4,000
3,000
18,000
Sales Value
at Split-off
Point
80,000
60,000
40,000
20,000
200,000
IF PROCESSED FURTHER
Sales Value
Additional
at Final Point
Costs
7,500
90,000
6,000
70,000
4,000
50,000
2,500
30,000
20,000
240,000
Assuming a joint production cost of P160,000 and the use of the relative sales value
at the split-off-point, what joint costs were allocated to each product?
W
X
Y
Z
a. P40,000
P40,000
P40,000
P40,000
b. P53,333
P44,000
P35,556
P26,667
c. P60,000
P46,667
P33,333
P20,000
d. P64,000
P48,000
P32,000
P16,000
53. In accounting for by-products, the value of the by-product may be recognized at the
time of
PRODUCTION
SALE
a.
Yes
Yes
b.
Yes
No
c.
No
No
d.
No
Yes
54. The following cost data pertain to HAHABOL-HABOL Fishball Company for the month
of June, 2021:
Inventories
Materials
Work-in-process
Finished goods
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06/01/21
P 40,000
25,000
60,000
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06/30/21
P 50,000
35,000
70,000
AFAR.FinPB5.21
EXCEL PROFESSIONAL SERVICES, INC.
Other information
Direct labor cost
Factory overhead applied
Cost of goods sold
P120,000
108,000
378,000
Determine the cost of goods manufactured for June, 2021.
a. P378,000
c. P398,000
b. P388,000
d. P423,000
Use the following information for the next two (2) questions:
Manila Corporation operates two (2) production departments, namely, Department A and
Department B. Appropriately, Department A uses weighted average costing while
Department B uses FIFO costing in accounting for their respective operations.
The following data are available for the August, 2021 operations of Department B, the
company’s final production process.
Units: In process, August 1 (40% converted)
Received from Department A during the month
Completed and transferred
In process, August 31 (60% converted)
6,000 units
34,000
30,000
9,200
Materials in this department are added as follows:
40% at the start of the process; 30% at mid-point of the process; and 30% at the end of
the process. Quality control inspection is at the end of the process and lost units, if any,
are discovered only at this point.
Units lost within 2% of good output is deemed normal. Among the normal losses are 20
units from the In-Process at the beginning.
Costs: In process, beginning
From the preceding department
In this department: Materials
Conversion
Transferred in during August
Added during the month: Materials
Conversion
Total charged to the department in August
P
1,060
2,725
1,015
34,000
51,900
28,832
P119,532
55. Compute the EUP for materials in the Finishing Department during August, 2021.
a. P36,400
c. P30,640
b. P30,680
d. P34,600
56. Compute the total cost of completed units from the IP, beginning
a. P13,232
c. P11,326
b. P13,216
d. P12,316
57. Sangley, Inc. manufactures a product which goes through three consecutive
processes, Process 1, Process 2, and Process 3. Data for the month of September,
2016 are as follows:
Work in Process, beg.
Materials added
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PROCESS 1
P8,000
20,000
PROCESS 2
P13,000
4,000
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PROCESS 3
P2,000
13,000
AFAR.FinPB5.21
EXCEL PROFESSIONAL SERVICES, INC.
Conversion costs
Closing work in process
10,000
6,000
10,000
9,000
6,000
4,000
What was the value of the output transferred from Process 3 to the finished goods
warehouse for the month of September?
a. P63,000
c. P 67,000
b. P 65,000
d. P 69,000
58. The units transferred in from the first department to the second statement should be
included in the computation of the equivalent units for the second department for
which of the following methods of process costing
FIFO
AVERAGE
a.
Yes
Yes
b.
Yes
No
c.
No
Yes
d.
No
No
Davao Company had a merchandise transfer transaction with an UAE Corporation for
Dirham 150,000 on December 1, 2020, to be paid by the buyer on February 29, 2021.
Davao Company’s functional currency is the Philippine peso.
To manage the risk of exposure to probable foreign currency losses, Davao Company had
decided to hedge the merchandise transaction by a derivative forward exchange contract,
designed in a way to assure full effectiveness.
Relevant exchange rates on specific dates are as follows:
12/01/ 2020 12/31/2020 02/29/2021
Spot rates
P 12,320
P 12,330
P 12,300
Forward rates thru 2/29/21:
Sales Forward Contract
P 12,305
P 12,316
P
Purchase Forward Contract
P 12,336
P 12,347
P
Assume Davao Company was the SELLER
59. Davao Company had decided to hedge the sale of merchandise probably because
a. There is no cost involved, the forward contract is executory in nature, hence no
cash will be paid upon inception.
b. It is always a win-win situation, a minimal cost is incurred if predicted changes
in spot rates materialize, as chances of foreign currency gains unaffected should
rate changes went the opposite way.
c. The Philippine peso might probably strengthen against the Dirham by the time
the payment is received.
d. Since the Dirham is predicted to strengthen against the peso by February 29,
2021, the foreign currency gain on a purchase forward contract will hedge the
loss on the hedged item.
60. The amount of Sales recognized by Davao from this foreign currency transaction in
the 2020 income statement was
a. P1,849,500
c. P1,845,000
b. P1,845,750
d. P1,848,000
61. If designated as a fair value hedge, the portion of the “cost of hedging” to Davao
Company to be recognized in 2020 will reflect in the records as a combination of
a.
Forex gain on the sales transaction, P1,500 and Forex loss on forward contract,
P1,650
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AFAR.FinPB5.21
EXCEL PROFESSIONAL SERVICES, INC.
b.
c.
d.
Forex loss on the sales transaction, P 4,500 and Forex gain on forward contract,
P2,400
Discount expense of P750 on the Forward Contract. (Forex gains and losses
will exactly offset.)
Discount expense of P1,500 on the Forward Contract; (Forex gains and losses
will exactly offset.
62. In a job order costing system, indirect labor used should be debited to
a. Payroll liability
b. Work in process control
c. Finished goods control
d. Factory overhead control
63. On January 1, 2018, P Company purchased 80% of S Company’s outstanding stock for
P2,000,000, an amount equal to the book value of interest acquired. Appraisal of S
Company’s net assets revealed that land is undervalued by P80,000 while Plant Assets
with remaining life of 5 years is overvalued by P200,000. Substantial portion of S
Company’s inventories came from P Company. Summary of inter-company shipments
are given below:
Jan. 1
May 1
Nov. 1
Merchandise costing P420,000 are shipped at
25% gross profit based on cost.
Merchandise costing P660,000 are shipped at
the same gross profit rate used on Jan.1
Merchandise costing P209,600 are shipped at
the same gross profit rate used on Jan.1 of
which 1/5 is on hand at December 31, 2018.
The amount of inter-company sales to be eliminated
a.
P 1,289,600
c. P 2,257,500
b.
P 1,612,500
d. P 1,612,000
Use the following information for the next two (2) questions:
PARENT CORPORATION regularly sells merchandise to its 80%-owned subsidiary, RENDOR
ENTERPRISES. In 2020, Parent sold merchandise that cost P64,000 to RENDOR for
P80,000. Half of this merchandise remained in Rendor’s December 31, 2020 inventory.
During 2021, Parent sold merchandise that cost P100,000 to Rendor for P125,000. Forty
percent of this merchandise inventory remained in Rendor’s December 31, 2021
inventory. Selected income statement information for the two affiliates for the year 2021
is as follows:
Parent Company
Sales revenue
P 600,000
Cost of goods sold
480,000
Gross profit
120,000
OPEX
40,000
Net Income
P 80,000
Rendor Enterprises
P 300,000
250,000
50,000
20,000
P
30,000
64. Consolidated sales revenue
a. P775,000
b. P855,000
c. P800,000
d. P900,000
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AFAR.FinPB5.21
EXCEL PROFESSIONAL SERVICES, INC.
65. Consolidated cost of good sold
a. 603,000
b. 607,000
c. 600,000
d. 610,000
66. The firm liquidates on January 1, 2018 through February 28, 2018. On January 31, a
sale of non-cash assets having a book value of P180,000 realized P140,000- On
February 28, the remaining non-cash assets were sold forP80,000.
Determine the amount payable to Partner T if cash is paid just before the start of
liquidation. (BONUS)
a. P 0
c. P20,000
b. P 17,333
d. P 2,667
For items 67 and 68, ignore the cash distribution in item 66 above.
67. Determine the amount payable to Partner S if cash is paid to partners on January 31,
2018 (BONUS)
a. P18,000
c. P68,000
b. P
0
d. P74,000
68. Determine the amount payable to Partner R if cash is paid to partners in final cash
settlement to partners on February 28, 2018: (BONUS)
a. P32,000
c. P16,000
b. P
0
d. P48,000
69. Any negative goodwill arising on the date of the business combination
a. Is recognized as a gain on the date of acquisition
b. Is prorated among the parent company’s identifiable net assets
c. Should be amortized over a predetermined period
d. Is recognized as a loss on the date of acquisition.
70. A company owning a majority (but less than 100%) of another’s voting shares on the
date of acquisition should account for its subsidiary
a. By including only its share of the fair market values of the subsidiary’s net assets
b. By including only its share of the book values of the subsidiary’s net assets
c. By including 100% of the fair values of the subsidiary’s net assets
d. By including 100% of the fair market values of the subsidiary’s net assets and
accounting for any un-owned portion of the voting shares using the noncontrolling interest account.
End of Examination
Thank you for participating in Team PRTC Nationwide Online Final Pre-Board Examination
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AFAR.FinPB5.21