NATIONAL FEDERATION OF JUNIOR PHILIPINNE INSTITUTE OF ACCOUNTANTS –
NATIONAL CAPITAL REGION
ADVANCED FINANCIAL ACCOUNTING & REPORTING (AFAR)
1.
Certain balance sheet accounts of a foreign subsidiary of Rose Company have
been stated in Philippine pesos as follows:
Stated
Current Rates
Historical Rates
Accounts receivable, current
P 200,000
P 220,000
Accounts receivable, long-term
100,000
110,000
Prepaid insurance
50,000
55,000
Goodwill
80,000
85,000
P 430,000
P 470,000
I. The subsidiary’s functional currency is the local currency unit. What
amount should Rose’s balance sheet include for the preceding items?
a. P430,000
b. P435,000
c. P440,000
d. P450,000
II. The subsidiary’s functional currency is peso. What total amount Rose’s
balance sheet include for the preceding items?
a. P430,000
b. P435,000
c. P440,000
d. P450,000
A. I – c; II – a
C. I – a; II – c
B. I – a; II – d
D. None of the above
2.
A partnership begins its first year with the following capital balances:
Arthur, capital
P 60,000
Baxter, capital
80,000
Cartwright, capital
100,000
The articles of partnership stipulate that profits and losses be assigned in
the following manner:
 Each partner is allocated interest equal to 10 percent of the beginning
capital balance.
 Baxter is allocated compensation of P20,000 per year.
 Any remaining profits and losses are allocated on a 3:3:4 basis,
respectively.
 Each partner is allowed to withdraw up to P5,000 cash per year.
Assuming that the net income is P50,000 and that each partner withdraws the
maximum amount allowed, what is the balance in Cartwright’s capital account
at the end of that year?
A. P105,800
C. P106,900
B. P106,200
D. P107,400
3.
Under PAS 29, one of the following is an indicator of hyperinflation.
a. People prefer to keep their wealth in monetary assets
b. People prefer to keep their wealth in relatively stable foreign currency
c. Interest rates, wages and prices are not linked to a price index
d. The cumulative inflation rate over three (3) years exceeds or is approaching
50%
4.
The following are information regarding partnership business:
I. A partnership has the following capital balances:
Allen, capital
P60,000
Burns, capital
30,000
Costello, capital
90,000
Profits and losses are split as follows: Allen (20%), Burns (30%), and
Costello (50%). Costello wants to leave the partnership and is paid
P100,000 from the business based on provisions in the articles of
partnership. If the partnership uses the bonus method, what is the balance
of Burns’s capital account after Costello withdraws?
a. P24,000
b. P27,000
c. P33,000
d. P36,000
II. At year-end, the Cisco partnership has the following capital balances:
Montana, capital
P130,000
Rice, capital
110,000
Craig, capital
80,000
Taylor, capital
70,000
Profits and losses are split on a 3:3:2:2 basis, respectively. Craig
decides to leave the partnership and is paid P90,000 from the business
based on the original contractual agreement. If the goodwill method is to
be applied, what is the balance of Montana’s capital account after Craig
withdraws?
a. P133,000
b. P137,500
c. P140,000
d. P145,000
A. I – a; II – d
B. I – b; II – c
C. I – b; II – d
D. None of the above
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5.
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The
following
are
information
regarding
a
partnership
undergoing
liquidation:
I. A local partnership is liquidating and is currently reporting the
following capital balances:
Angela, capital (50% share of
all profits and losses)
P 19,000
Woodrow, capital (30%)
18,000
Cassidy, capital (20%)
(12,000)
Cassidy has indicated that a forthcoming contribution will cover the
P12,000 deficit. However, the two remaining partners have asked to
receive the P25,000 in cash that is presently available. How much of this
money should each of the partners be given?
a. Angela, P13,000; Woodrow, P12,000
b. Angela, P11,500; Woodrow, P13,500
c. Angela, P12,000; Woodrow, P13,000
d. Angela, P12,500; Woodrow, P12,500
II. A partnership has the following balance sheet just before the final
liquidation is to begin:
Cash
P26,000
Liabilities
P 50,000
Inventory
31,000
Art, capital (40%)
18,000
Other assets
62,000
Raymond, capital (30%) 25,000
________
Darby, capital (30%)
26,000
Total
P119,000
Total
P119,000
Liquidation expenses are estimated to be P12,000. The other assets are
sold for P40,000. What distribution can be made to the partners?
a. P-0- to Art, P1,500 to Raymond, P2,500 to Darby.
b. P1,333 to Art, P1,333 to Raymond, P1,334 to Darby.
c. P-0- to Art, P1,200 to Raymond, P2,800 to Darby.
d. P600 to Art, P1,200 to Raymond, P2,200 to Darby.
A. I – b; II – b
B. I – c; II – a
C. I – b; II – a
D. None of the above
Under PFRS 11, joint arrangements that are joint ventures (which were ‘jointly controlled entities’
under the PAS 31) are accounted for under
6.
a.
b.
c.
d.
Cost method in accordance with PAS 39
Equity method in accordance with PAS 28
Fair value method in accordance with PFRS 9
Proportionate consolidation method in accordance with PAS 31
Under PFRS 10, when a parent loses control of a subsidiary, it must recognize any investment retained
in the former subsidiary at
7.
a.
b.
c.
d.
8.
Carrying amount
Fair value, with any gain or loss recognized in profit or loss
Fair value, with any gain or loss recognized in other comprehensive
income
Original acquisition cost, adjusted for any dividend received from
the subsidiary
A chemical company manufactures joint products Pep and Vim, and a byproduct. Zest. Costs are assigned to the joint products by the market value
method, which considers further processing costs in subsequent operations. For
allocating joint costs to the by-product, the market value or reversal cost
method is used. The total manufacturing costs for 10,000 units were P172,000
during the quarter. Production and cost data follow:
Pep
Vim
Zest
Units produced
5,000
4,000
1,000
Sales price per unit
P50
P40
P 5
Further processing cost per unit
10
5
Selling and administrative expense per unit
2
Operating profit per unit
1
I. The value of Zest
a. P5,000
II. Compute the gross
a. P
0
A. I – c; II – a
B. I – d; II – d
to be deducted from the joint costs is:
b. P3,000
c. P2,000
d. Zero
profit for Pep:
b. P70,000 c. P 80,000
d. P100,000
C. I – c; II – d
D. None of the above
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9.
Page 3 of 14
The following are information regarding parent and subsidiary:
I. Clark Company had the following transactions with affiliated parties
during 2008:
 Sales of P60,000 to Dean, with P20,000 gross profit. Dean had P15,000
of this inventory on hand at year-end. Clark owns a 15% interest in
Dean and does not exert significant influence.
 Purchases of raw materials totaling P240,000 from Kent Corporation, a
wholly-owned subsidiary. Kent’s gross profit on the sale was P48,000.
Clark had P60,000 of this inventory remaining on December 31, 2008.
Before eliminating entries, Clark had consolidated current assets of
P320,000. What amount should Clark report in its December 31, 2008,
consolidated balance sheet for current assets?
a. P320,000
b. P317,000
c. P308,000
d. P303,000
II. Par Company owns 60% of Sub Corp.’s outstanding capital stock. On May 1,
2008, Par advanced Sub P70,000 in cash, which was still outstanding at
December 31, 2008. What portion of this advance should be eliminated in
the preparation of the December 31, 2008 consolidated balance sheet?
a. P70,000
b. P42,000
c. P28,000
d. P
0
A. I – c; II – a
B. I – d; II – d
C. I – c; II – d
D. None of the above
The modified accrual basis in accounting for government transactions means
10.
a.
Income is recognized when received while expenses are recognized
when incurred
Income is recognized when earned while expenses are recognized when
paid
Income is recognized when received while expenses are recognized
when paid, except for transactions that are required by law to be
accounted for under another basis
Income is recognized when earned while expenses are recognized when
incurred, except for transactions that are required by law to be
accounted for under cash or another basis
b.
c.
d.
To be highly effective, the actual results of the hedge must be within a range of
11.
a.
b.
c.
d.
100% - 150%
100% - 125%
80% - 100%
80% - 125%
Under PFRS 4, it refers to a party that has a right to receive compensation under an insurance
contract if an insured event occurs.
12.
a.
b.
c.
d.
13.
Cedant
Insurer
Reinsurer
Policyholder
Hartwell Company distributes the service department overhead costs to
producing departments and the following information for the month of January
is presented as follows:
Maintenance Utilities
Overhead costs incurred
P18,700
P 9,000
Services provided to:
Maintenance department
10%
Utilities department
20%
Producing department A
40%
30%
Producing department B
40%
60%
Hartwell Company distributes service
reciprocal method, what would be
maintenance costs?
A. M = P18,700 + .10U
C. M
B. M = P 9,000 + .20U
D. M
14.
department overhead costs based on the
the formula to determine the total
= P18,700 + .30U +.40A + .40B
= P27,700 + .40A + .40B
Financial statement of not-for-profit organization focuses on
a.
b.
c.
d.
Basic information for the organization as a whole
Standardization of funds nomenclature
Inherent differences of not-for-profit organization
reporting presentations
Distinctions between current fund and noncurrent fund
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impact
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Page 4 of 14
15. Pistahan Corporation is a manufacturing company engaged in the production of a
single special product known as “Marvel”. Production costs are accumulated
with the use of a job-order-cost system.
The following information is available as of June 1, 2012:
Work-in process.........................................P 10,710
Direct materials inventory.............................. 48,600
In analyzing the job-order cost sheets, the records disclosed that the
compositions of the work-in-process inventory on June 1, 2012 were as follows:
Direct materials used...................................P 3,960
Direct labor (900 hours)................................
4,500
Factory overhead applied................................
2,250
P 10,710
The following manufacturing activity occurred during the month of June 2008:
Purchased direct materials costing P 60,000
Direct labor worked 9,900 hours at P 5 per hour
Factory overhead of P 2.50 per direct labor hour was applied to production.
At the end of June 2012, the following information was gathered in connection
with the inventories:
Inventory of work-in-process:
Direct materials used..........................P 12,960
Direct labor (1,500 hours).....................
7,500
Factory overhead applied.......................
3,750
P 24,210
Inventory of direct materials........................P 51,000
Compute the cost of goods manufactured:
A. P 142,560
C. P 131,850
B. P 118,350
D. P 108,600
16.
X, Y, and Z, a partnership formed on January 1, 2012 had the following
initial investment:
X……………………………………………………………………………………………………………………………P 100,000
Y…………………………………………………………………………………………………………………………… 150,000
Z…………………………………………………………………………………………………………………………… 225,000
The partnership agreement states that the profits and losses are to be shared
equally by the partners after consideration is made for the following:
- Salaries allowed to partners: P60,000 for X, P48,000 for Y, and P36,000
for Z.
- Average partners’ capital balances during the year shall be allowed 10%.
Additional information:
- On June 30, 2012, X invested an additional P60,000.
- ZZ withdrew P70,000 from the partnership on September 30, 2012.
- Share the remaining partnership profit was P5,000 for each partner.
Partnership net profit at December 31, 2012 before salaries, interests and
partners’ share on the remainder was:
A. P199,750
C. P211,625
B. P207,750
D. P222,750
17.
The following statements are based on PFRS 3 (Business Combinations):
Statement I: An entity shall account for each business combination by
applying the acquisition method.
Statement II:The acquirer shall measure the identifiable assets acquired
and the liabilities assumed at their acquisition date fair values.
Statement III:For each business combination, the acquirer shall measure any non-
controlling interest in the acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s identifiable net assets.
a.
b.
c.
d.
18.
All of the statements are true
Only statement I is true
Only statement II is false
Only statement III is false
Kanlaon Corporation started operations on January 1, 2010 selling home
appliances and furniture sets both for cash and on installment basis. Data on
the installment sales operations of the company gathered for the years ending
December 31, 2010 and 2011 were as follows:
2010
2011
Installment sales
P400,000
P500,000
Cost of installment basis
240,000
350,000
Cash collected on installment sales:
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Page 5 of 14
2010 installment sales
2011 installment sales
210,000
150,000
300,000
Additional information:
On January 5, 2012, an installment sales on 2010 was defaulted and the
merchandise with an appraised value of P5,000 was repossessed. Related
installment receivable balance on January 5, 2012 was P8,000.
The balance of the Deferred Gross Profit controlling account at December 31,
2011 was:
A. P 76,000
C. P160,000
B. P130,000
D. P190,000
19.
A Philippine importer that purchases merchandises from a foreign firm’s
foreign current unit (FCU) would be exposed to a net exchange gain on the
unpaid balance if the
a. Peso weakened relative to the FCU and the FCU was the denominated
currency
b. Peso weakened relative to the FCU and the peso was the denominated
currency
c. Peso strengthened relative to the FCU and the FCU was the denominated
currency
d. Peso strengthened relative to the FCU and the peso was the
denominated currency
Abnormal spoilage in a manufacturing process
a. Profit or loss
b. Accumulated profit or loss
c. Manufacturing overhead applied
d. Manufacturing overhead control
20.
21.
should be charged to
What is the correct accounting for Joint Arrangements?
a. All joint arrangements are accounted for under PAS 28.
b. Joint arrangements classified as joint ventures are accounted for under
PFRS 11.
c. Joint arrangements classified as joint ventures are accounted for under
PAS 28.
d. Joint arrangements classified as joint operations are accounted for
under PAS 28.
22.
Gains or losses that arise as a result of translating foreign currency
denominated operations into the reporting currency are recognized in income:
a. only if they are material items
b. only when they are settled in cash
c. in the reporting period in which they arise
d. only when the interest in the foreign operation is sold
Under PAS 11, when it is probable that total contract costs on a fixed price construction
contract will exceed total contract revenue, the expected loss should be
23.
a.
b.
c.
d.
Set off against profit of other construction contract where
available
Recognized as an expense immediately, unless revenue to date exceeds
costs to date
Apportioned to the years of the contract according to the percentage
of completion method
Recognized as an expense immediately
24. Lucille Inc. manufactures a product that gives rise to a by-product called
"Robon." The only costs associated with Robon are additional processing costs
of P1.00 for each unit. Lucille accounts for "Robon" sales first by deducting
its separable costs from such sales and then by deducting this net amount from
the cost of sales of the major product. For the past year 2,000 units of Robon
were produced which were sold for P3.00 each.
Sales revenue and cost of goods sold from the main product were P500,000 and
P400,000 respectively. Compute the gross margin after considering the byproduct sales and costs.
If Lucille changes its method of accounting for Robon sales by showing the net
amount as "Other Income," the effect on the gross margin would be:
A. P 0
C. P4,000
B. P2,000
D. P6,000
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25.
Page 6 of 14
A lumber company produces two-by-fours and four-by-eights as joint products and sawdust as
a by-product. The packaged sawdust can be sold for P2 per pound. Packaging costs for the
sawdust are P.10 per pound and sales commissions are 10% of sales price. The by-product net
revenue serves to reduce joint processing costs for joint products. Joint products are assigned joint
costs based on board feet. Data follows:
Joint processing costs . . . . . . .
Two-by-fours produced (board feet) .
Four-by-eights produced (board feet)
Sawdust produced (pounds). . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
P
.
. .
. .
50,000
200,000
100,000
1,000
What is the cost assigned to two-by-fours?
A. P32,000
C. P32,200
B. P32,133
D. P33,333
26. The following information summarizes the standard cost for producing one metal
tennis racket frame. In addition, the variances for one month's production are
given. Assume that all inventory accounts have zero balances at the beginning
of the month:
Standard Cost
Standard Monthly
Per Unit
Costs _____
Materials
P 4.00
P 8,400
Direct labor 2 hrs @P2.60
5.20
10,920
Factory overhead:
Variable
1.80
3,780
Fixed
5.00
10,500
Variances:
Materials price, P244.75 unfavorable
Materials quantity, P500.00 unfavorable
Labor rate, P520.00 unfavorable
Labor efficiency, P2,080.00 unfavorable
What were the actual direct labor hours worked during the month?
A. 5,000
C. 4,000
B. 4,800
D. 3,400
27. Using the same information in No. 26, what were the actual quantities of
materials used during the month?
A. 2,156
C. 2,225
B. 2,100
D. 1,975
Items 28 and 29 are based on the following information:
Presented below is the unadjusted
Corporation at December 31, 2010:
Cash
Installment accounts receivable, 2009
Installment accounts receivable, 2010
Inventory, 12/31/2010
Other assets
Accounts payable – trade
Unrealized gross profit – 2008
Unrealized gross profit – 2009
Unrealized gross profit – 2010
Capital stock
Retained earnings
Gain on repossession
Operating expenses
Total
trial
balance
of
Sterling
Debit
P
5,000
40,000
140,000
200,000
497,000
Products
Credit
P
___50,000
P 932,000
50,000
10,000
86,000
100,000
600,000
80,000
6,000
________
P 932,000
Cost of goods sold had been uniform over the years at 60% of sales.
Sterling Products Corporation adopts perpetual inventory procedures. On
installment sales, the corporation charges installment accounts receivable and
credits inventory gross profit accounts.
Repossessions of merchandise have been made during 2010 due to some customers’
failure to pay maturing installments. Analyses of these transactions were
summarized as follows:
Inventory………………………………………………………………………………………………… 7,500
Unrealized gross profit, 2008……………………………………………
800
Unrealized gross profit, 2009…………………………………………… 2,400
Installment Accounts Receivable – 2008……
2,000
Installment Accounts Receivable – 2009……
6,000
Gain on repossession……………………………………………………
2,700
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Page 7 of 14
The repossessed merchandise was unsold at December 31, 2010. It was
ascertained that they were booked upon repossession at original costs. A fair
valuation of these items would be a sale price of the repossessed merchandise
at P10,000 after incurring costs of reconditioning of P5,000 and cost to
dispose them in the market at P500.
28. Realized gross profit on 2010 sales was:
A. P44,000
C. P124,000
B. P56,000
D. P136,000
29. Gain/loss on repossession was:
A. P200 loss
B. P200 gain
C. P300 loss
D. P300 gain
30. The joint venture accounts in the books of the venturers (participants) M, N
and O, show the balances below, upon termination of the joint venture and
distribution of the profits:
BOOKS of
M
N
O
Accounts with
Dr
Cr
Dr
Cr
Dr
Cr
M
900
900
N
750
750
O
1,650
1,650
Final
A. M
B. O
C. N
D. M
settlement of the joint venture will require payments as follows;
pays P900 to O and N pays P750 to O
pays P900 to M and P750 to N
pays P1,650 to M and O pays P900 to N
pays P900 to N and N pays P750 to O
The cost per equivalent unit under the weighted average method of process costing considers
31.
a.
b.
c.
d.
32.
Current
Current
Current
Current
cost
cost
cost
cost
only
plus cost of ending work in process inventory
plus cost of beginning work in process inventory
less cost of beginning work in process inventory
The work-in-process account of the Malinta Company which uses a job order
cost system follows:
Work-in-process
April 1 balance
Direct materials
Direct labor
Overhead applied
P25,000
50,000
40,000
30,000
Finished goods
P125,450
Overhead is applied to production at a predetermined rate based on direct
labor cost. The work-in-process on April 30 represents the cost of Job No.
456, which has been charged with direct labor cost of P3,000 and Job No. 789
which has been charged with applied overhead of P2,400.
The cost of direct materials charged to Job Nos. 456 and 789 amounted to:
A. P4,200
C. P7,500
B. P4,500
D. P8,700
33.
The Natural Company acquired 80% of The Loco Company for a consideration
transferred of P100 million. The consideration was estimated to include a
control premium of P24 million. Loco's net assets were P85 million at the
acquisition date. Are the following statements true or false, according to
PFRS3 Business combinations?
(1) Goodwill should be measured at P32 million if the non-controlling interest
is measured at its share of Local's net assets.
(2) Goodwill should be measured at P34 million if the non-controlling interest
is measured at fair value.
Statement (1)
Statement (2)
Statement (1)
Statement (2)
A.
False
False
C.
True
False
B.
False
True
D.
True
True
34.
The Moon Company acquired a 70% interest in The Swan Company for P1,420,000
when the fair value of Swan's identifiable assets and liabilities was
P1,200,000. Moon acquired a 65% interest in The Homer Company for P300,000
when the fair value of Homer's identifiable assets and liabilities was
P640,000. Moon measures non-controlling interests at the relevant share of the
identifiable net assets at the acquisition date. Neither Swan nor Homer had
any contingent liabilities at the acquisition date and the above fair values
were the same as the carrying amounts in their financial statements. Annual
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impairment reviews
recognized.
Page 8 of 14
have
not
resulted
in
any
impairment
losses
being
Under PFRS 3 Business combinations, what figures in respect of goodwill and of
gains on bargain purchases should be included in Moon's consolidated statement
of financial position?
A. Goodwill: P580,000; Gains on the bargain purchases: P116,000
B. Goodwill: Nil or zero; Gains on the bargain purchases: P116,000
C. Goodwill: Nil or zero; Gains on the bargain purchases: Nil or zero
D. Goodwill: P580,000; Gains on the bargain purchases: Nil or zero
35.
A, B, and C are partners in an accounting firm. Their capital account
balances at year-end were A, P90,000; B, P110,000 and C, P50,000. They share
profits and losses on a 4:4:2, after the following special terms:
1. Partner C is to receive a bonus of 10% of net income after the bonus.
2. Interest of 10% shall be paid on that portion of a partners capital in
excess of P100,000.
3. Salaries of P10,000 and P12,000 shall be paid to partners A & C,
respectively.
Assuming a net income of P44,000 for the year, the total profit share of
partner C was:
A. P 7,800
C. P19,400
B. P16,800
D. P19,800
Items 36 and 37 are based on the following information:
The income statement submitted by the Pampanga Branch to the Home Office for
the month of December, 2010 is shown below. After effecting the necessary
adjustments the true net income of the Branch was ascertained to be P156,000.
Sales ……………………………………………………………………………
P 600,000
Cost of sales:
Inventory, December 1………………………………
P 80,000
Shipments from Home Office…………………
350,000
Local purchases………………………………………………
30,000
Total available for sale………………………
P460,000
Inventory, December 31……………………………
100,000
360,000
Gross margin …………………………………………………………
P240,000
Operating expenses …………………………………………
180,000
Net income
P 60,000
The branch inventories were:
12/01/201
12/31/201
0
0
Merchandise from home office…………………
P 70,000
P 84,000
Local purchases……………………………………………………
10,000
16,000
Total ……………………………………………………………………………
P 80,000
P100,000
36.
The billing price based on cost imposed by the home office to the branch,
and
A. 140%
C. 40%
B. 100%
D. 29%
37.
The balance of allowance for overvaluation of branch December 31, 2008
after adjustment.
A. P10,000
C. P16,000
B. P24,000
D. None of the above
38.
The partners of the M&N Partnership started liquidating their business on July 1, 2010, at
which time the partners were sharing profits and losses 40% to M and 60% to N. The balance
sheet of the partnership appeared as follows:
Assets
Cash
Receivable
Inventory
Equipment
P65,200
Accumulated
Depreciation 30,800
Total
P
8,800
22,400
39,400
34,400
P105,000
Liabilities &
Capital
Accounts payable
M, capital
M, drawing
N, capital
N, drawing
N, loan
Total
P 32,400
P31,000
__5,400
P33,200
___200
25,600
33,000
14,000
P105,000
During the month of July, the partners collected P600 of the receivables with
no loss. The partners also sold during the month the entire inventory on which
they realized a total of P32,400.
A.
B.
How much of the cash was paid to M’s capital on July 31, 2010?
P25,600
C.
P320
P 5,400
D.
P 0
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39.
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Following data pertain to Matiisin Company which sells appliances on an
installment basis:
2008
2009
2010
Installment sales
P390,000
P420,000
P480,000
Cost of sales
237,900
243,600
288,000
From Sales Made in:
Installment accounts
receivable balances:
January 1, 2010
December 31, 2010
2008
P 24,000
-
2009
P 300,000
P 60,000
2010
P 320,000
Repossessions on defaulted accounts were made during 2010, as follows:
Account balance
Net resale value of
repossessed merchandise
From Sales Made in:
2009
2010
P 10,000
P 5,000
4,500
3,500
The total realized gross profit in 2010 on the collections of 2008, 2009, and
2010 sales was:
A. P 9,360
C. P 96,600
B. P62,000
D. P167,960
40.
The net gain (loss) on repossession on defaulted sales of 2009 and 2010
was:
A. P 500
C. P
800
B. P(800)
D. P(1,300)
41.
Pasig Garment Company operates a branch in Cabanatuan City. At the end of
the year, the Branch account in the books of the home office at Manila shows a
balance of P150,000. The following information are ascertained:
1. The home office has billed the branch the amount of P37,500 for the
merchandise, which was in transit on December 31.
2.
A home office accounts receivable for P10,500 was collected by the branch.
Said collection was not reported to the home office by the branch.
3.
Supplies of P4,500 was returned by the branch to the home office but the
home office has not yet reflected in its records the receipt of the
supplies.
The branch made profit of P10,100 for the month of December but the home
office erroneously recorded it as P11,180.
The branch has not received the cash in the amount of P25,000 sent by
home office on December 31. This was charged to General Expense account.
4.
5.
All transactions are presumed to have been properly recorded.
What is the balance of the Home Office account on the books of the branch as
of December 31, before adjustments?
A. P121,920
C. P117,420
B. P123,000
D. P106,920
42.
43.
What is the adjusted balance of the reciprocal accounts?
A. P 96,420
C. P117,420
B. P106,920
D. P179,920
The Carly Company owns 75% of The Halley Company. The following figures are
from their separate financial statements:
Carly: Trade receivables P1,040,000, including P30,000 due from Halley.
Halley: Trade receivables P215,000, including P40,000 due from Carly.
According to PAS 27 Consolidated and separate financial statements, what
figure should appear for trade receivables in Carly's consolidated statement
of financial position?
A. P1,215,000
C. P1,255,000
B. P1,225,000
D. P1,185,000
44.
The White Company acquired an 80% interest in The Pulley Company when
Pulley's equity comprised share capital of P100,000 and retained earnings of
P500,000. Pulley's current statement of financial position shows share capital
of P100,000, a revaluation reserve of P400,000 and retained earnings of
P1,400,000.
Under PAS 27 Consolidated and separate financial statements, what figure in
respect of Pulley's retained earnings should be included in the consolidated
statement of financial position?
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A. P 720,000
B. P1,440,000
45.
Page 10 of 14
C. P1,040,000
D. P1,520,000
The Snipes Company owns 65% of The Genie Company. On the last day of the
accounting period Genie sold to Snipes a non-current asset for P200,000. The
asset originally cost P500,000 and at the end of the reporting period its
carrying amount in Genie's books was P160,000. The group's consolidated
statement of financial position has been drafted without any adjustments in
relation to this non-current asset.
Under PAS27 Consolidated and separate financial statements, what adjustments
should be made to the consolidated statement of financial position figures for
non-current assets and retained earnings?
A.
B.
C.
D.
46.
Non-current assets
Increase by P300,000
Reduce by P40,000
Reduce by P40,000
Increase by P300,000
Retained earnings
Increase by P195,000
Reduce by P26,000
Reduce by P40,000
Increase by P300,000
Bonifacio contractors had a 3-year construction contract in 2012 for
P900,000. The company uses the percentage-of-completion method for financial
statement purposes. Income to be recognized each year is based on the ratio of
cost incurred to total estimated cost to complete the contract. Data on this
contract follows:
Accounts receivable – construction contract billings
P
Construction in progress…………………………………………………………………………P 93,750
Less: Amounts billed…………………………………………………………………………………… 84,375
10% retention………………………………………………………………………………………………………
30,000
Net income recognized in 2012 (before tax)…………………………
15,000
9,375
Bonifacio Contractors maintains a separate bank account for each construction
contract. Bank deposits to this contract amounted to P50,000.
What was the estimated total income before tax on this contract?
A. P45,000
C. P135,000
B. P94,000
D. P144,000
47.
The Lakers Company owns 75% of The Viking Company. On December 31, 2012,
the last day of the accounting period, Vikings sold to Lakers a noncurrent
asset for P200,000. The asset's original cost was P500,000 and on December 31,
2012 its carrying amount in Viking’s books was P160,000. The group's
consolidated statement of financial position has been drafted without any
adjustments in relation to this non-current asset.
Under PAS 27 Consolidated and separate financial statements, what adjustments
should be made to the consolidated statement of financial position figures for
retained earnings and non-controlling interest?
A.
B.
C.
D.
48.
Retained earnings
Increase by P225,000
Increase by P300,000
Reduce by P30,000
Reduce by P40,000
Non-controlling interest
Increase by P75,000
No change
Reduce by P10,000
No change
The Virgil Company owns 65% of The Migu Company. On December 31, 2012, the
last day of the accounting period, Virgil sold to Migu a noncurrent asset for
P1,000. The asset's original cost was P2,500 and on December 31, 2012 its
carrying amount in Virgil's books was P800. The group's consolidated statement
of financial position has been drafted without any adjustments in relation to
this non-current asset.
Under PAS27 Consolidated and separate financial statements, what adjustments
should be made to the consolidated statement of financial position figures for
non-current assets and non-controlling interest?
A.
B.
C.
D.
Non-current assets
Increase by P1,500
Reduce by P200
Reduce by P200
Increase by P1,500
49.
Non-controlling interest
Increase by P525
No change
Reduce by P70
No change
The Roel Company acquired equipment on January 1, 2009 at a cost of
P800,000, depreciating it over 8 years with a nil residual value. On January
1, 2012 The Muldon Company acquired 100% of Roel and estimated the fair value
of the equipment at P460,000, with a remaining life of 5 years. This fair
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value was not incorporated into Roel's books and the depreciation expense
continued to be calculated by reference to original cost.
Under PAS 27 Consolidated and separate financial statements, what adjustments
should be made to the depreciation expense for the year and the statement of
financial position carrying amount in preparing the consolidated financial
statements for the year ended December 31, 2013?
Depreciation
Increase by
Increase by
Decrease by
Decrease by
A.
B.
C.
D.
50.
expense
P8,000
P8,000
P8,000
P8,000
Carrying amount
Increase by P24,000
Decrease by P24,000
Increase by P24,000
Decrease by P24,000
Goodwill should be recorded in the accounting records only when
a. It is internally generated
b. It can be established that a definite benefit or advantage has
resulted to a firm from some item such as good name, capable staff,
or reputation
c. It is acquired through the acquisition of another business
d. A firm reports above normal earnings for five or more consecutive
years
Items 51 and 52 are based on the following information:
Apo Supply Company is engaged in merchandising both at Home Office in Makati,
Metro Manila and a branch in Davao. Selected accounts in the trial balances of
the Home Office and the branch at December 31, 2010 follow:
Debits
Inventory, January 1, 2010
Davao Branch
Purchases
Freight-in from home office
Sundry expenses
Home Office
P 23,000
58,300
190,000
Branch
P 11,550
105,000
5,500
28,000
52,000
Credits
Home office
Sales
Sales to Branch
Allowance for
branch inventory, January 1, 2010
P155,000
110,000
P 53,300
140,000
1,000
Additional information:
1. Davao branch receives all its merchandise from the home office. The Home
Office bills the goods at cost plus 10% mark-up. At December 31, 2010, a
shipment with a billing value of P5,000 was in transit to the branch.
Freight on this shipment was P250 which is to be treated as part of
inventory.
2. December 31, 2010 inventories excluding the shipment in transit , are:
Home office, at cost…………………………………………P 30,000
Davao branch, at billed value
(excluding freight of P520)……… 10,400
51.
Net income of the Home Office
A. P10,000
B. P15,000
52. Net income of Davao branch was:
A. P10,470
B. P11,470
53.
54.
was:
C. P20,000
D. P25,000
C. P12,470
D. P13,470
A hospital has the following account balances:
Revenue from newsstand
Amount charged to patients
Interest income
Salary expense – nurses
Bad debts
Undesignated gifts
Contractual adjustments
What is the hospital’s net patient service revenue?
A. P880,000
C. P690,000
B. P800,000
D. P680,000
P
50,000
800,000
30,000
100,000
10,000
80,000
110,000
On January 1, 2013, two real estate companies (the parties - Packet Company
and Sacket Company) set up a separate vehicle (Harrison Company) for the
purpose of acquiring and operating a shopping centre. The contractual
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Page 12 of 14
arrangement between the parties establishes joint control of the activities
that are conducted in Harrison Company. The main feature of Harrison’s legal
form is that the entity, not the parties, has rights to the assets, and
obligations for the liabilities, relating to the arrangement. These activities
include the rental of the retail units, managing the car park, maintaining the
centre and its equipment, such as lifts, and building the reputation and
customer base for the centre as a whole.
As a result, Packet Company paid P1.6 million for 50,000 shares of Harrison’s
voting common stock, which represents a 40% investment. No allocation to
goodwill or other specific account was made. The joint control over Harrison
is achieved by this acquisition and so Packet applies the equity method.
Harrison distributed a dividend of P2 per share during the year and reported
net income of P560,000. What is the balance in the Investment in Harrison
account found in Packet’s financial records as of December 31, 2013?
a. P1,724,000
c. P1,844,000
b. P1,784,000
d. P1,884,000
55.
Connie Corp. had a realized foreign exchange loss of P15,000 for the year
ended December 31, 2011 and must also determine whether the following items
will require year-end adjustment:
• Connie had an P8,000 loss resulting from the translation of the
accounts of its wholly owned foreign subsidiary for the year ended
December 31, 2011.
• Connie had an account payable to an unrelated foreign supplier
payable in the supplier’s local currency. The Philippine peso
equivalent of the payable was P64,000 on the October 31, 2011
invoice date, and it was P60,000 on December 31, 2011. The invoice
is payable on January 30, 2012.
In Connie’s 2011 consolidated income statement, what amount should be
included as foreign exchange loss?
A. P 11,000
C. P 19,000
B. P 15,000
D. P 23,000
56.
Noting that there was a P5,780,000 translation adjustment gain, Dora Inc.
(the parent company) secured a foreign bank loan denominated in the
functional currency when the spot rate was 1 Taiwan Nt dollar = P1,022. The
bank loan has a principal amount of 200,000,000 Nt dollars. Interest
calculations are ignored. The bank loan is designated as a hedge of net
investment and is considered to have satisfied all necessary criteria.
Selected exchange rates between the functional currency (Nt dollar) and the peso are as follows:
Date
January 1, 2011 .
October 1, 2012 .
December 31, 2012
2012 average. . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. .
. .
.
.
Rate
P 0.98
1.00
1.05
1.03
The December 31, 2012 Loans payable account balance obtained to hedge the net
investment amounted to
A. P196,000,000
C. P206,000,000
B. P200,000,000
D. P210,000,000
57.
Kuchen Manufacturing uses backflush costing to account for an electronic
meter it makes. During August 2011, the firm produced 16,000 meters of which
it sold 15,800. The standard cost for each meter is:
Direct material
P 20
Conversion costs
44
Total
P 64
Assume that the company had no inventory on August 1. The following event took
place in August:
1. Purchased P320,000 of direct materials.
2. Incurred P708,000 of conversion costs.
3. Applied P704,000 of conversion costs to Raw and In Process Inventory.
4. Finished 16,000 meters.
5. Sold 15,800 meters for P100 each.
Compute the Finished Goods, ending and the amount of Cost of Goods Sold after
the adjustment of over-under applied conversion cost:
Finished Goods, ending
Cost of Goods Sold as adjusted
A.
P
-0P 1,015,200
B.
12,800
1,011,200
C.
-01,024,000
D.
12,800
1,015,200
Use the following information for questions 58 to 59:
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On January 1, JJ acquired 80 percent of the outstanding voting stock of SZ for
P260,000 cash consideration. The remaining 20 percent of SZ had an acquisitiondate fair value of P65,000. On January 1, SZ possessed equipment (5-year life)
that was undervalued on its books by P25,000. SZ also had developed several
secret formulas that JJ assessed at P50,000. These formulas, although not
recorded on SZ’s financial records, were estimated to have a 20-year future life.
As of December 31, the financial statements appeared as follows:
JJ
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P (300,000)
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . .
140,000
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
P(140,000)
Retained earnings. 1/1 . . . . . . . . . . . . . . . . . . . .
P(300,000)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(140,000)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-0Retained earnings, 12/31 . . . . . . . . . . . . . . . . . .
P(440,000)
Cash and receivables . . . . . . . . . . . . . . . . . . . . . .
P210,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150,000
Investment in JJ . . . . . . . . . . . . . . . . . . . . . . . . . .
260,000
Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . .
440,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P1,060,000
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P(420,000)
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . .
(200,000)
Retained earnings, 12/31 . . . . . . . . . . . . . . . . . .
(440,000)
Total liabilities and equities . . . . . . . . . . . . . . . . . P(1,060,000)
SZ
P(200,000)
80,000
10,000
P(110,000)
P(150,000)
(110,000)
-0P(260,000)
P90,000
110,000
-0300,000
P500,000
P(140,000)
(100,000)
(260,000)
P(500,000)
During the year, JJ bought inventory for P80,000 and sold it to SZ for P100,000.
SZ had paid for only half of this purchase by the end of the year. Of these
goods, SZ still owns60 percent on December 31.
58.
a.
b.
What is the total of consolidated revenues?
P500,000
c.
P420,000
P460,000
d.
P400,000
a.
b.
What is the total consolidated cost of goods sold?
P140,000
c.
P130,000
P152,000
d.
P132,000
59.
60.
For which type of hedge are changes in fair value deferred and amortized as
an equity adjustment?
a. Cash flow hedge
b. Operating hedge
c. Fair value hedge
d. Notional value hedge
61.
Which models are allowed to be used by the private operator for buildoperate-transfer (BOT) schemes under IFRIC 12?
I – Financial Asset model
II – Intangible Asset model
a.
b.
c.
d.
62.
III – Property, Plant & Equipment model
I and II
I and III
II and III
I, II and III
If shares are issued as part of the consideration paid, transactions costs
such as brokerage fees may be incurred. According to PFRS 3 Business
Combinations the appropriate accounting treatment for such costs in the
records of the acquirer is a debit to:
a. Cash
b. Investments
c. Share capital
d. Acquisition expenses
Use the following information for questions 63 to 65:
On 1/3/x6, Pylux sold equipment costing P100,000 to its 100%-owned subsidiary,
Sylux, for P80,000.
At the time of the sale, the equipment had been 50%
depreciated (using the straight-line method and an assigned life of 10 years).
Sylux continued depreciating the equipment by using the straight-line method over
a remaining life of 5 years.
63.
What are the cost and accumulated depreciation, respectively, of this
equipment in the 12/31/x6 consolidated balance sheet?
a.
P80,000 and P16,000.
d.
P100,000 and P16,000.
b.
P80,000 and P56,000.
e.
P100,000 and P60,000.
c.
P80,000 and P60,000.
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What is the amount of the intercompany profit or loss that must be deferred at
12/31/x6?
64.
a.
b.
c.
P6,000
P14,000
P16,000
d.
e.
P24,000
P30,000
65. What is the amount of the adjustment to Depreciation Expense in preparing the
consolidation worksheet at 12/31/x6?
a.
b.
c.
P–0–
P3,000
P4,000
d.
e.
P5,000
P6,000
Use the following information for questions 66 and 67.
CC Corporation subsidiary buys marketable equity securities and inventory on
April 1, 20x4, for 100,000 foreign currencies each. It pays for both items on
June 1, 20x4, and they are still on hand at year- end. Inventory is carried at
cost under the lower-of-cost-or-market rule. Currency exchange rates for 1 peso
follow:
January 1, 20x4 . . . . . . .P0.15=1 FC
April 1, 20x4 . . . . . . . . 0.16=1
June 1, 20x4 . . . . . . .
0.17=1
December 31, 20x4 . . . . . . 0.19=1
66. Assume that the FC (foreign currency) is the subsidiary’s functional currency.
What balances does a consolidated balance sheet report as of December
31,20x4?
a. Marketable equity securities = P16,000 and Inventory = P16,000.
b. Marketable equity securities = P17,000 and Inventory = P17,000.
c. Marketable equity securities P19,000 and Inventory = P16,000.
d. Marketable equity securities P19,000 and Inventory P19,000.
67. Assume that the peso is the subsidiary’s functional currency. What balances
does a consolidated balance sheet report as of December 31, 20x4?
a. Marketable equity securities = P16,000 and Inventory = P16,000.
b. Marketable equity securities = P17,000 and Inventory = P17,000.
c. Marketable equity securities P19,000 and Inventory = P16,000.
d. Marketable equity securities P19,000 and Inventory P19,000.
68. Under PFRS 10, which is NOT one of the three (3) elements of control?
a. power over the investee
b. holding majority voting rights
c. exposure, or rights, to variable returns from involvement with the
investee
d. the ability to use power over the investee to affect the amount of
the investor’s returns
69.
The test indicating that an intra-group business
realized is:
a. the generation of profit from the transaction
b.
c.
d.
70.
transaction
has
been
the involvement of an external party in the transaction
the presence of only within the group as parties to the transaction
whether or not an operating profit or loss occurred as a result of
the transaction
Under NGAS, it is an authorization issued by the DBM to government agencies to withdraw cash from
the National Treasury through the issuance of Modified Disbursement System checks.
a.
b.
c.
d.
Allotment
Obligation
Appropriation
Notice of Cash Allocation
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