cul \ 14 \ NO Gon Or 4 Ow r (CPA REVIEW SCHOOL OF THE PHILIPPINES MANILA lay, April 23, 2017 ADVANCED FINANCIAL ACCOUNTING AND REPORTING — Sut 8:00 a.m to 11:00 a.m. Final Preboard Examination 1. Inpreparing the schedule of safe payments, its assumed that: ‘a. All non-cash assets are considered worthless +p. Unpaid liabilities: will be settled by the partners own personal property. \e.All partners are solvent y 4. No liquidation expenses will be setled. ‘A and B are partners sharing profits and losses in the ratio G 1:2) respectively. On August 1, 2020, they decided to form the ABC.Corp. by transferring assets ‘and liabilities from the partnership to the Corporation in exchange of its stocks. The following is the post closing tral balance of the partnership. DR cR Cash ( 45,000, Accounts Receivable 12. « 60,000"4° Inventory 90,000 Fixed assets. 174,000, Liabilities: ~ 60,000 A, capital 94,800 =} / B, capital 214200-}% Ge * 197 369,000 __ 369,000 It. was agreed that adjustments be made to the following assets to be transferred to the corporation: Accounts receivable 40,000 Inventory 68,000 Fixed assets 180,600 “The corporation was authorized to issue R100 par preference shares and P10 par ordinary shares. A and B agreed to receive for their equity in the partnership, "720 shares of the ordinary shares each, plus evem tnultiples of 10 shares of preference shares for their remaining imeres 2” What is the oxaDnumber of shares of preference and ordinary shar issued by the corporation in excharigeof the assets and Tiabilitieg of the partnership respectively? ~ merr, ‘a. 2,540 and 1,500 shares , and b. 2642 and 1,550 shares») ) 4 Yc. 2,892 and 1,440 shares A ‘ i 2,642 and 1,440 shares y RETO S bwwf 7229? 40 Which of the following procedures is not necessary steps affecting a dissolution of partnership? ‘a. Revaluing partnership assets 2 aeragnizing undistributed profit or loss share of partner a dissouion date ¢, Closing of partnership books 4, Revising partners” equity 5Page 2 The follos cosa fare the capital account balances and profit and loss ratio of the partners in ABC Capital P&L ratio A 120,000 25% B 160,000 50% cS 400,000 25% (On January 2, 2020, D is admitted to the partnership under the following agreement: ‘© Dis to share.1/3 in the profits and losses while the i icipate in profits and loss ratio in their original ratio. ie to ihe ees cots Pee ge * Dis to pay B, P48,000 for al interest of the latter's capital i i and is to peaded an beat din cares er's capital in the partnership net assets and i . pes eave after D’s admission is to be 1,040,000 of which, D's capital account is to show 4. ‘What is the capital account of the partners after D's admission? A B c a. 147,000 166,000 427,000 } “CB 145,000 170,000 425,000 ~ c, 138,366 156,744 418,336-£ 4. 145,000 166,000 427,000 ‘There is no agreement as to distribution ts or lo: ‘of Paul in is 2. to be determined by the remaining partners. b. such share as may be just and equitable under the cireumstances . pro-rata to his contribution. d. combination of b end c. (A{B and C are partners with average capital balances during 2017 of P472,S00: 238,650 and ‘P162,350; respectively. The partners receive 10% interest on their average capital balances; after {leduotfg salaries of P122,325 to A and P82,62570C, the residual proSit or loss is divided equally. 1n 2017, the partnership had | netfoss of P125,624 before interest and salaries wo partner. s 6,-What amount should A and C capital change respectively? ~~". 40,844 decrease and P31,237 decrease b. 30,267 increase and 40,448 decrease J* ¢. 29,476 increase and 17,536 increase 4, 28,358 increase and 32,458 increasePage 3 realanee sheet for the partnership of Net, Elena and Tin who share profits inthe ratio of 2:1:1, shows the following balances just before the liquidation Cash 48,000 Other assets 238,000 Liabilities 80,000 Net, capital 88,000 Elena, capital 62,000 Tin, capital 56,000 On the first installment of the liquidation, certain assets are sold for P 128,000, Ligaistlon expanacs ‘of P4,000 ae paid and additional liquidation expenses are anticipated. Liabilities are ald amounting to P21,600 and sufficient cash is retained to insure the payment to creditors before making payment Partners. On the first payment to partners, Net receives P25,000. 7. What is rene Payment to partners in the first installment? a Pio — b. P80,000 ©. 50,000 4 P40,000 8.In case of general partnership liquidation, which ofthe following credits shall be setled first by the ~ liquidating partner? * Those owing for partaer’s cavital contribution Those owing to third persone 96 Those owing for the share in artnership profits Those owing to partners for their advances to partnership aogp 9. Which of the following transactions will not affect the tofal'equity of a partnership? —. Recognition of impairment I6ss in case of admission of a new partner by investment Withdrawal by a partner Admission of a new partner by purchase of existing partner’s interest below its book value % Retirement of an existing partner with payment of above the book value of such intercet, pegs 20, A partner was admitted in an existing partnership through investment of cash equivalent to % of the new capititizatfon If the capital balance of the old partners increases, what is the most valid reason under Philippine GAAP? & a. Asset revaluation of existing partnership's assets 72 b. Impairment loss of existing partnershio's assets © Recognition of goodwill of existing parinership cn 4. Receipt of bonus from the new partnerPage 4 The following data are provided by Worldwide Corporation which is undergoing liquidation process: 1 Total liabilities amounts to P692,000. 35% is fully secured by assets amounting to P270,000 With ftir market value of P250,000; 40% is partially secured by assets amounting to P300,000 With realizable value df P225,000; and the remaining balance is unsecured, U, Total assets amounts to P890,000 and has a total far market value P695,000. MIL Unpaid income taxes amounts to P35,000. Additional salaries payable and administrative expenses totaled 28,000. IV. Deficit amounts to P79,000 11. Which of the following statements is correct? a. Assets available to all unsecured creditors with and without priority is P227,800 The amount paid to partially secured creditors is P225,000 ¢. The estate deficit amount to P60,000 > 4. The amount paid to all secured creditors is P695,000 ABC filed a petition for insolvency. The liquidation of the corporation is entrusted to Rian, receiver. The following information were gathered: Book Value Realizable Value Assets 6,000,000 5,000,000 wy Toral 6,000,000 3,000,000 # fe" —£000,000__ 5,000,000 Liabilities Unsecured Liabilities with priority 400,000 400,000 + Fully secured creditors 2,400,000 _.-2,400,000 Partially secured creditors 800,000 $00,000 Unsecured liabilities without priority 2,800,000 2,800,000 ‘ Total 6,400,000 6,400,000, a Yyq7e — S00 __ 6,400,000 Unrecorded items. Dividend Receivable 100,000 Interest Payable 40,000, Estimated administrative e> penses 200,006 \.f 12. What is the estate equi:y deficit) in the-opeaing jounal entry made by the Rian in ‘its books? a. 1,400,000 Y (stk {mo} b. ( 400,000) A, \y c. 1,260,000 d._ (1,400,000) 13, Wifi the estimated deficiency to unsecured creditors withou priory Jn the statement of affairs? a. (1,540,000) qoh0 > b. ( $40,000) ag ©. ( 400,000) oa” xy d, (1,409,000) a 14. At the end of comporatrtiquidaiion, the commcn stockholders were not able to reeeive liquidating dividends while the p. srcuce shareholders were able to receive the ‘iquinatiop value of theit shares. Given this data, hich of the Following corporate creditors were tot able to fully recover their claims? @ Partially secured er dntors b. Unsecured creditors without priority ¢. Both A and B d. Neither A nor BPage 5 On December 31. 2014 entity A acquired 30 per cent of the ordinary shares that carry voting rights of entity Z for P100,000,000. In acquiring those shares entity A incurred transaction costs of P 900,00. Entity A has entered into a contractual arrangement with another party (entity C) that owns 25 per me Of the ordinary shares of entity Z, whereby entities A and C jointly control entity 2. Entity A uses the cost model under IFRS for SMEs to account for its investments in jointly controlled entities. published price quotation does not exist for entity Z. In January 2015, entity Z declared and paid a dividend of P20,000,000 out of profits earned in 2014. No further dividends were paid in 2015, 2016 or 2017 is investment in entity At December 31,2014, 2015 and 2016, management assessed the fair values of its investment Z. as P102,000,000, P110,000,000 and 90,000,000 respectively. Costs 10 sell are estimated at 4,000,000 throughout 15, What is the measure of Entity A's investment in entity Z on December 31, 2014, 2015 and 2016 respectively? k elm ‘a. P101,000, P101,000, P90,000 5 . P 98,000, P106,000, P86,000 e. P 98,000, P101,000, P86,000 ; 4. P102,000, P/ 10,000, P90,000 4 Buk lie A= WO 16. Using the same facts above. However, a published price quotation exists for entity Z. What is the. ‘measure of Entity A's investment in entity Z on December 31, 2014, 2015 and 2016 respectively? 98,000, P9S,000, P86,000 98,000, P106,000, P86,000 +¥ 98,000, P101,000, P86,000 ¢ 102,000, P1 10,000, P90,000, eeoe Assume that two parties, A and B, structure a joint arrangement in an incorporated entity (entity C) in which each party bas a 50 per cent ownership interest. The purpose of the arrangement is to ‘manufacture materials required by the parties both for their own, individual manufacturing processes, ‘or re-sold to third parties. The arrangement ensures that the parties operate the facility that produces the materials to the quantity and quelity specifications of the parties. The legal form of entity C (an incorporated entity) through which the activities are conducted initially indicates that the assets and liabilities held in entity C are the assets and liabilities of entity C. The contractual arrangement between the parties dees not specify that the parties have rights to the assets or obligations for the Tiabilities of entity C However, the panties also consider the following aspects of the arrangement: * The parties agreed to purchase all the output produced by entity C in a ratio of $0:80. Enfity C cannot sell any of the output to third parties, unless this is approved by the two parties to the arrangement. Because the purpose of she arrangenvent is to provide the parties with output they require, such sales to third parties are expecied to be uncommon and not material. + The price of the output sold to the parties is set by both parties at a level that is designed to cover the costs of production and administrative expenses incurred by entity C. On the basis of this operating model, the arrangement is intended to operate at a break-even level. In other words, the parties, not entity C, assumes demand, inventory and credit risks as one-half of the produced are subsequently re-sold by A and B to third parties. The incorporated entity has the following financial information for 2016 z Debit Credit Cash 60,000,000 Accounts Payable 360,000,000 Inventory 420,000,600 Employee Benefit Plan Obligation 150,000,000 PPE 300,000,000 Equity, Beg 210,000,000 Expenses 120,000,005 Revenue 180,000,000Page 6 (_ 17¥fow shold and B clesfy and present to arangementin their own financial statements under { 11? Joint Venture, using either equity, cost or fair value method Venture, with Investment in JV of P135,000,000 using equity method ** Joint Operation, A and B will recognize their share of the assets, liabilities, revenue and expenses of Entity C per line item 4. Joint Operation, but since Entity C is a separate vehicle, an Investment in JV of P135,000,000 is presented in the financial statements of A and B Electricity companies A and B (involved in electricity sales but not distribution) jointly establish @ power generation entity (company C) to build and operate a CCGT power plant. Companies A and B each have a 50% ownership interest in company C, which is structured as a corporation. The incorporation enables the separation of company C from companies A and B and, as a consequence, the assets and liabilities held in company C are the assets and liabilities of company C. The contractual arrangement between the parties does not specify that the parties have rights to the assets or obligations for the liabilities of company C. However, the parties also enter into an off-take agreement requiring the following: + Companies A and B agree to purchase all the power generated by company C in a ratio of 50:50. Company C cannot sell any of the output to third parties, unless this is approved by companies A and B. Because the purpose of the arrangement is to provide companies A and B with power they require, such sales 10 third parties are expected to be uncommon and not material. + The price of the power sold to companies A and B is set forth in the off-take agreement at a level that is designed to cover the costs of production and administrative expenses incurred by company C. The arrangement is intended to operate at a break-even level. 18, Giveh the relevant deta. what is the proper classification of this joint arrangement? “a. It is classified as joint venture because the arrangement is established through a separate Vehicle, an incorporn'ed entity Company C. b. Itis classified as joint venture because the incorporation enables the separation of company C from companies “ und 3 and, as a consequence, the assets and liabilities held in company C are the assets and lia" lities of company C ©. It is classified as mt operation because the off-take agreement reflects the exclusive dependence of company C upon companies A and 8 for the generation of cash flows and the rights of Company A and B to all of the economic benefits of the assets of company C. e 4. It ig classified a3 joint eperation because IFRS 11 provides that in case of doubt, a joint arrangement shall be -lassified as joint operation instead of joint venture. GROWTH Sales Corporati m sells on installment basis and accounts for it using the installment method. Some information re'ated ‘9 its operations are summarized below: 2014 2015 2016 Cost of Sales P3790 500 P855,360 ‘PS68,890 Gross Profit on sales 35% 34% 37% January 1, 2016 December 31, 2016 Installment Receivable — 2014 72,060 = Installment Receivable ~ 2015 1,033,380 P 208,320 ZS Installment Receivable — 2° 6 Ggy 327270 ~ ye % * ‘ed an inventory which hud beea sold in 2015. GROWTH values eee J During 2016, the company -pos: the repossessed goods at 1m \ei value, The resale prive of the repossessed me P5,100 after ineurring recor tioning cosi of P1,000 and the loss op tepossession 56.) 19. What is the total realized protit for the yeah 20267! roy 26-20) & 511010 > : 40- i of installment sales: 2014; P2,725,000 ; 2015, P3.925,000 ; 2016, P4.840,000. Mark up on cost is “40% Collections after downpayment are: 45% during the year of sale ; 35% during the year after sale 20% on the third year. a nA \ po y 20, Whi isthe amount pt deferred smn prof at Becepiber 31/2035 tobe preted in the Sis of Financial P ion a, X 467, R7 LOS er ‘ a. 757,050 3 ° : p b. 659.400 AS vif -. (40% e a3 75 : J : pen ras a ot wl | onl |. P604.450 os 7 ae Se ae aimed to be built at @ total cost of P7,000,000 and is scheduled for completion on October 2017. The contract contains a penalty clause to the effect that the other partyywas to deduct P14,000 from the contract prise for each week of delay. Completion was delayed for Rive Weeks. Below are data pertaining to the construction period : & 2015 | 2016 ) Be AS oe gd Cost incurpa for the year ~_*° P 700,000 # P2,576,0005 P 434,000 Estimated cos{ to pomplete Xt & ep! 2,300,000 364,000e— =e Progress billingsor the year «- 560,000) 6,090,000 1,680,000 —< 5 7 21. Using the percentage of completion method, what is the realizet gross profit (loss) for the year, (por? eer ol aS we rt, + a 329,000 1) : Bc 49,000) tap CH pb) e. P336,000 6, pede aa eas - ad PC 14,000) Arad v4 x 2 44024 = Aye On January 1, 2016, Karl, Inc. signed an agreement authorizing Mr. de Castro to operate as a franchisee for an initial franchise fee of P5,000.000. Of this amount, P2,000,000 was received upon signing of the agreement and the balance evidenced by a 16% promissory note which is due in three ‘annual installments of P1,000,000 each beginning December 31, 2016. Mr. de Castro started franchise ‘operations on September 1, 2016 after Karl rendered initial services required at a total cost of. P1,500,000. The first installment was collected on due date. The collectibility of the nove is reasonably assured. cS , 22. How much net income is to be recognized on December 31, 2016? a 2,100,000 7 b. P2,580.000 ce. P 600,000 d. 1,080,000 (On January 2, 2017, Magnolia Ice Cream signed an agreement authorizing Trisha to operate a5 franchise for an inal franchise fee PS00,900 received pon signing | of the sgreemen Trisha commenced operations on August 1, 2017, at which date all of the initial services required of Magnolis Tce Cream had been performed at a cost of P120,000. The franchise agreement further provides that Jesse must pay 4 10% monthly continuing franchising fee. Sales reported from August | to December 31, 2017 amounts to P400,000. 23, What is tn peincyos related with franchise fee to be reparted by Magnolia Ice Cream in 20177 a. 380,000 b. P500,000\_/ c. P420,000 4. PS40,000Poge 8 Juanita Company uses installment method of accounting and has the following data at year end: Gross margin on cost 66 2/3% Unrealized gross profit 192,000 & Cash collections including down payments 360,000 24, What was the amount of Sale on installment basis? 648,000 ) 840,000. > 480,000 552,000 pose In 2016, ETC Builders agreed to construct a commercial building at a price of P7,500,000. ETC uses the percentage of completion method. The information relating to the costs and billings for the contract were as follows: 2016 2017 2018 Cost incurred to date 2,100,000 4,500,000 5,887,500 Estimated cost to complete 3,900,000 1,500,000 0 Progress billings to date 1,125,000 3,000,000 7,500,000 Collection to date ‘900,000 2,400,000 7,050,000 28: How much is construction in progress net of progress billings as of December 31, 2017? a. 1,500,000 \ b. 2,625,008 , c. 4,125,000 4. 5,887,500 26. Using the same given, but assuming there is ne dependable estimate available for the future cost, how much is the construction in progress, net of progress billings as of December 31, 2017? d. 5,887,500 27. When the outcome of the construction contract can be estimated reliably, which of the following accounting treatment is proper? ‘a. The construction revenue shall be recognized only to the extent of contract costs incurred that it is probable will be recoverable. b. The construction costs shall be deferred without reference to the stage of completion of the contract activity at the end of the reporting period. ¢. When it is probable that total contract costs will exceed total contract revenue, the expected Joss shall be recognised as an expense immediately without reference to the stage of completion of the contract activity at the end of the reporting period 4. The balance construction in progress account will be equal to cumulative construction revenve ‘p> Fecopaized even if itis probable that total contract costs wil exceed rot contract revenue,Page 9 28, Under IFRS 15, an entity shall recognize revenue when (or as) the entity satisfies a performance obligation by transfetfing & promised good or service (je. an asset) to a customer. In which of the following instances shail an entity recognize revenue through satisfaction of performance obligation at a point in time? 44 The customer simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs. b. The entity's performance ereates or enhances an asset that the customer controls as the asset is ‘reated or enhanced ©. The entity's performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. d. The entity has transferred the legal title, control and physical possession of the asset at a specific di Selected information from the trial balances for the home office and the branch of Psalm Company at December 31, 2017 is provided. These trial balances cover the period from December 1 to December 31, 2017. The branch acquires some of the merchandise from the home office (the branch jis billed at 20% above the cost of the home office) and some of it from outsiders. Differences in the shipments accounts result entirely from the home office policy of billing the branch at 20% above cost Home Office Branch Sales — P60,000_ P30,000 Shipments to branch 8,000 0 Shipments to branch — foading/Unrealized profit in Branch inventory 3,600 0 Purchases (outsiders) 35,000 5,500 Shipments from home office 0 9,600 Merchandise inventory, December 1, 2017 20,000 15,000 Expenses 14,000___ 6,000 Additional information: Merchandise inventory, December 31, 2017: Home office 20,000 Branch (outsiders, P},600) 10,000 ~~ 29. HOw much is the beginning inventory of the branch acquired from home office? a. P12,000¢ b. Plu.000 ©. P15.006 &. P1250 30.How much is the ov fehl of os of con good sold ofthe brane? a. P1933 \ Gare b. P2,201 WA c. P2,004 4d. P2,5u0‘The following transactions were incurred for the year by the RCF Company: ‘Transfer of P13,000 merchandise to an agency to establish a working fund. Receipt of sales orders from the agency, P130,000. Collection of agency accounts by the home office, P91,000. Home office disbursements representing agency expenses, 11,700. Replenishment of the agency working fund upon receipt of expense vouchers for P5,850. Cost of goods sold identified with the agency sales, P93,600. 31. How much is the net income traceable to the agency” 2 5,880 WF 18,850% 36,400 > (72.150) pege ye On December 31, 2017, the home office of Trisha Supply Company recorded a shipment of merchandise to its Glenda Forth branch as follows: Glenda Forth branch 30,000 < ‘Shipments to Glenda Forth branch 25,000 41 «Uf Unrealized profit in Glenda Forth branch inventory 4,000 ‘Cash (for freight charges) 1,000 ‘The Glenda Forth branch sells 40% of the merchandise to outside entities during the rest of December 31, 2017. The books of the home office and Trisha branches are closed on December 31 of each year. On January 5, 2018, the Glenda Forth branch transfers half of the original shipments to the Sandy branch, and the Glenda Forth branch pays P500 freight on the shipment. A2. At what amounts should the 60% of the merchandise remaining unsold at December 31, 2017 be ‘included in (1) the inventory of the Glenda Forth branch at December 31, 2017, and (2) the Published balance sheet o/ Trisha Office Supply Company at December 3T, 2017. ~PIS,000; P17,409 ¢ Oo P17,400; P15,000 ua P15,600; P18,000 * mH P18,000; P15,600 poop 33, Whtich of the following transactions will inerease the normal balance of home office acegunt inthe separate statement of financial position of the branch? Collection by the hoine office of branch's receivable b, Debit memo received frora the home office ¢. Credit memo issued by the home office . Payment by the branch of hame office’s loans payablePage 11 On : eee oi ae 31, 2017, PBB Corporation enters into a business combination by acquiting all the considers ll the liabitities of SUV Corporation in which the latter will be dissolved. PBB's siderations consist of the following: Cash payment of P1,977,500 60,000 unissued shares of its P100 par ordinary shares with a market value of P101 per share. {6% P2,000,000 bonds payable. A contingent payment of P1,500,000 cash on December 31, 2019 if the cash flows from operations during the 2-year period 2017-2019 exceed P2,500,000 per year. PBB estimates that there is a 4% chance of probability that the P1,$00,000 will be required. 4 { ned In addition, PBB paid the following at the time of the merger: “ * Finder's fee t HE P110,000. \ ‘Diligent audit fee prior to business combination £° 75,000 | ny ‘* SEC registration cost 125,000 * Cost of printing and issuing stock certificates © 25,000 * General and Administrative salaries attributable to the merger ~ 75,000 Statements of financial position for the two companies as of December 31, 2017 before the merger follow: PBB CORPORATION _ SUV CORPORATION |Book Value | Fair Value | Book Value | Fair Value ‘Cash 1P2,930,000 |~P 720,000 | P_720,000 Receivables 1,200,000 900,000 Inventories 2,500,000 1,750,000 Land 200,000 | 3,100,000. Building, net 70,000,000 4,500,000 ‘Equipment, net 000,000. 950,000. ‘Goodwill fale "750,000 - Tn Process Research @Dev't 500,000, TOTAL, her “Accrued Expenses ‘Share Capital, P1U0 par Share Prem ‘Retained Earnings TOTAL 2,500,000 3,070,000 is —[Pi2.570,000, 1 34, What is the amount of goodwill to be recognized on the acquisition date? © "a. P3I7,50 b. PI,067,5 © P617,500 @.P1,217,500 35. Whaisthe amount Seto penta after the merger? i P34,332,500 2 - ato% %. b. P34,650,000 a4 Lk 5 are ©. 34,687,500) » 4. P34,650,000 ed ¢ AA. edt 2? wi ees Rte ¥ esd Heke’7 Page 12 36, Wat is the amount of total Betis Wma sc ge & P9,537,500 vy : b. P10,990,000 9,800,000 4. P9,787,500 r 37-What ere the amounts of (1) share premium and (2) retained eamings immediately after the merger? & 4,110,000; P4,740,000 7” b. 4,740.00; P4,110,000 4,080,000; P4,650,000 4. P4,650,000; P4,050,000 38. Assume that on July 31, 2018 and on July 31, 2019, because of the improved information about _ facts and circumstances that existed at the date of acquisition date, the amount of contingent of consideration was increased by P7S0,000 and P500,000, respectively, what is the revised amount of goodwill (bargain price) that would have to be recognized on July 31, 2018 and July 31,2019, a respectively? e' &. P1,067,500; P1,067,500 — th b. P1,067,500, P1,567,500 t ©. P1,817,500; P1,817,500 ™ 4. P1,817.500, P1,567,500 PDF Company owns an 80% interest in SMB Corporation. PDF's investment in SMB Corporation is carried on cost basis was equal to book value of SMB" s stockholder’ s equity. During 2017, SMB Corp. sold merchandise to PDF Co. for PS00,000 at a gross profit of P100 000. At December 31, 2017, half of this merchandise ip included in PDF's inventory. Meanwhile, included in SMB" s beginning “inventory was P200,000 merchandise from inter-company sales which was made at 20% profit. PDF ‘and SMB declared dividends P300,000 and 250,000 respectively und paid 90% of the declared ‘amount in 2017. Separate income statements for PDF and SMB for the yeer ended, 2017 are summarized as follows: PDF CO. SMBCORP. ot Sales P1.500,000 P2,000,000 Y 4s ¥ Cost of Sales (800,000) (1,200,000) icy Operating Expenses (200,000) (420,000) ' Dividend Revenue £200,000 __140,000 Net Income 600 000 Ps20,000 145.9 — 1 39. What is the gross profit on tite 201 7 consolidated statement of comprehensive income? a P1,100,006 b. P1,490,000 ¢ P1,$90,000 d. P1,210,000 P 0a 916,000 b. Pa10,000 . P910,000 4. PB16,000 the net income stribuable to the controlling interest? pp} Gyn 5Page 13 Pi hd creas owns 90% of the outstanding common shares of SVG Company. On Jémmaary 2, 2016, hes spas that had a carrying value to SVG Company P 480,000 and has a remaining life of 10 ‘was sold to PSY Corporation for P 400,000. On the other hand, last-August 31, 2017, PSY. a ion sold a second hand delivery van to SVG Company at a gain of P30,000 fremaining life $ Hlued inte Jaa 1,207 inventory of PSY Company was mechanic inventory worth P6S,000 le SVG)Company had P8OOO on its December 31, 2017. ‘These igventaries came front inter-company sales.and-purchases. PSY Corporation included a mark-up 91 ‘25% on cost while SVG Company charged a 30% mark-upop sates. a y f » Re * pple Each of the two companies has net incomes in 2016 and 2017 as follows: a 2016 2017 r PSY Corporation P 1,200,000 P 1,500,000 / SVG Company 900,000 1,000,000 41, What isthe amount of the consolidated ne income tribuable to controling interest i)20160 a. P2,073,900 b. P2,061,300 ec. 2,041,350 4. P2,0S7,250 42. What the amount of the consolidated net ingome attributable to controlling interest in 2017? z- 72,366,350 72,369,500 72,398,350 72,377,600, epee ae smining Ie of 3 yeurs). On December 31, 2018, SRP was able to sell the above delivery equipment to a non-affiliated company for P350,000; 42, What rete nt aumento com 201 consolidated income before income tax would be an {increase (decrease)? Fo a. P146,250 ¢ _ : € b. PI27,500 ‘ » kon, aD, c. P(132,500) \e § valon ee ¥ $ mo b> 4d, PA3,750 “44 Wat ae the net adjustments to compile 2018 onsite income before income tax would ff | increase (decrease)? fee ren a. PS0,000 > ( 182 bv, P97,500 fe WS c. 25,000 > \ 4. P(50,000)Poge 14 45: Ima business combination achieved in stages, if the acquisition date fair value of the net of the ‘equisition-date amounts of the identifiable assets acquired and the liabilities of the acquiree is higher than the aggregate of the (1) acquisition date fair value of the consideration transferred by the acquirer; (2) amount of noncontrolling interest measured at fair value or proportionate share; and (3) acquisition date fair value of acquirer's previously held equity interest in the acquire, the difference shall be accounted for by the acquirer in its consolidated statement of financial position as 4 ( tL 8. Goodwill x i 46.In the separate financial statement of the parent company, which of the following statements ‘conceming the different accounting treatment for investment in subsidiary is correct?” '& Under equity method, cash or property dividend received shall be recognized as dividend income by the parent. 4. dnc Under cost method, the transaction cost directly attributable to acquisition of the investment shall be expensed as incurred. y= €. Under fair value model, the parent company shall recognize share in net income from the subsidiary. \ \ Regardless of the method, the investment in subsidiary account shall be presented as noncurrent asset in the parent's separate statement of financial position. 5, b. a. 47. In the consolidated statement of comprehensive income to be prepared by the parent corporation, which of the following items will affect both consolidated net income attributable to parent and non-controlling interest in net income? Amortization of difference between fair value and book value of liability of subsidiary. b. Recognition of gain on bargain purchase arising from business combination. c. Realization of unrealized gain or (loss) from sale of parent company to subsidiary company. d. Impairment loss on goodwill recognized when the noncontrolling interest is measured at proportionate share of fair value of net assets of subsidiary. yO am 48 On December 1, 2017, Pinoy Inc. exported on account Filipino products to an American company vat a price of $1,000.00 collectible on January 31, 2018. Pinoy Inc. operates in the Philippine territory wherein the functional currency is Philippine Peso. The said exposed item is presented in the December 31, 2017 statement of financial position of Pinoy Ine. at P40,000. For the years ended December 31, 2017 and 2018, Pinoy Inc. recognized foreign currency gain/(loss) of (P4,000) and P2,000, respectively, in connection with this foreign currency denominated export transaction. In the statement of comprehensive income of Pinoy Inc. for the year ended December 31, 2017, how much shall sales shall be presentgd as « result of this foreign currency denominated export transaction? 44,000 36,000 44 38,000 42,000 eosePage 15 On December 1, 2019, Tagalog Inc. anticipated the purchase of inventory from an American company at a price of $2,000 which will probably occur on March 1, 2020/4n order to hedge the foreign Currency risk related to this forecasted transaction, Tagalog purchased a 90-day call option from BDO to buy $2,000 at a strike price of P10 by paying option premium of P400 _/ ‘The following direct exchange rates are provided: 12/472019 12/31/2019 3/1/2020 Buying spot rate PL Pld P13 Selling spot rate P10 P13 PI2 Fair value of call option ? 6,200 ? ‘The anticipated purchase occurred on March 1, 2020. For the year ended December 31, 2020, Tagalog Inc. sold 20% of the imported inventory to third person. 49. What is the net effect on profit or loss in relation to the hedging fr loss for the year ended December 31,2020? ee (P2,200) net loss } 2 P200 net loss Pas P800 net gain p> t. 4 P600 net gain | strument foreign currency gain = 1 RR \ pose On October 3, 2020, Noypi Inc. entered into forward contract with BPI Bank for the speculation to buy $100 to be delivered on January 30, 2021. The following direct exchange rates were provided: October 3, 2020 December 31,2020 January 30, 2021 Spot-buying P40 P43, Pat Spot-selling p42 Pad P44 Forward-buying 120days Pal p40 P42 Forward-selling 120 days P43 pas Paz Forward-buying 90 days P42 P4a P45 Forward-selling 90 days P45 Pal p44 Forward-buying 60 days P46 p40 P42 Forward-slling 0 days P43 ma mal Forward-buying 30 days ay ms Forward-selling 30 days PAL 50What is the net forcign currency gain or (Joss) to be recagnized by Noypi Ine. for the years - December 31, 2020 and December 31, 2021, respectively? ve 4 Ae a. P200 and (P1060) yy? b, (P300) and P400 7* . : 7 | . P300 and (P200) ) J Allordinary shares are issued on January 1, 2015 > The translated amount of retained earnings at Philippine Peso on December 31, 2019 is P8,000. > The following direct exchange rates are determined: © W205 Pas © 12/31/2019 42 © 12/1/2020 41 © 12/31/2020 43 © Average rate for year 2020 44 Si. What is the translation gain or (loss) to be recognized by BPI US in its Statement of Comprehensive Income for the year ended December 31, 2020? a. P100 gain b. (P700) loss c. (P600) loss d. P80 gain 52.1n presenting foreign currency denominated transactions to the functional currency of the entity, which of the following statements is correct? a. Monetary items shall be initially recognized and measured at the exchange rate prevailing at the end of the reporting period. b. Foreign currency gain or loss arising from the translation of the foreign currency denominated items to functional currency shall be presented in other comprehensive income with reclassification adjustment to profit or loss if realized. cc. When nonmonetary items are translated from foreign currency to functional currency in the financial statements, foreign currency gain or loss will be recognized. d. Foreign currency denominated income statement accounts shall be translated using the exchange rate at the date of the transaction. 53.Which of the following statements concerning the different types of hedging transactions is incorrect? . In hedging transaction designated as cash flow hedge, unrealized holding gain or loss on : hedged iter will be recognized in other comprehensive income with reclassification adjustment to profit or loss if realized. ie Wis b. In hedging transaction designated as fair velue hedge, unrealized holding gain or hedged item wall be recognized in profit or toss. : In hedeing transaction which is undosignated, unrealized holding gain or loss on hedging instrument will be recognized 1n profit or loss, de atipins aneectovekesigate 2s hedge Cast investment i foreign oneration, sored * holding guin or loss on hedging ‘natumen’ hich is consiered effective portion will be Reba in other compretignsive incom: with reclassification adjustment to profit or real —zPage 17 ‘4. ly translating the financial statements of an entity from its functional currency to its different Presentation currency, which of the following statements is incorrect? & Income and expense accounts shall be translated at exchange rates at the dates of the transactions. . Resulting exchange gain or loss arising from translation shall be recognized in profit oF loss. €. Equity necounts other than retained earings shall be translated using exchange rates at the dates of the transactions 4. Assets und liabilities, whether monetary oF nonmonetary shall be translated at the closing rate Of the statement of financial position, 55, When the results and financial postion of an entity whose functional cure} is the currency of @ hyperinflutionary economy, what is the rate to be used when translating income and expense accounts into a different presentation currency? a. At the closing rate at the date of the most recent statement of financial position b, At the exchange rates at the dates of the transactions ¢. Atte average rate during the year ™ id. Atthe exchange rate at the beginning of the year 56.1n June 2017, Ralph Hospital purchased medicines from Winner Pharmaceutical Co, at a T5000; However, Winner notified Ralph thatthe invoice was being cancelled, and the medicines were being donated to Ralph . Ralph should record this donation of medicines as a. A memorandum entry only b. Other operating revenue of PS,000 €. APE,000 credit to operating expenses 4. AP5,000 credit to non-operating expenses 57. This registry shall be maintained by NGAs to monitor appropriations und allotments charged thereto” It shail show the original, supplemental and final budget for the year and al allotments received charged against the corresponding appropriation. a. Registries of Revenue and Other Receipt (RROR) b. Registry of Appropriations and Allotments (RAPAL)* ¢. Registries of Budget, Utilization and Disbursements (RBUD) 4. Registries of Allotments, Obligations and Disbursements (RAOD) 58. Which of the following shall be properly classified as unrestricted net asset in the statement of financial position of the nonprofit educational institution? 4. Fund whose principal is required to be invested indefinitely b. Fund designated by the board for construction of building if ¢. und which is restricted by the donor to be non-expandablé for until 2020 Sad eh it held in rust by te institution forthe benefit of the diferent schoo! agarizasion 59, Which ofthe following transactions by « sational government ageney will require joural «TH 1 its accounting book? Receipt of appropriation ftom the depariment of budget and management Receipt of allotment (-om the department of budget und management. ¥ Receipt of notice of cash allocation from the department of budget and management Entering into « contract with x supplics forthe acquisition of office supplies essePage 18 The following data were extracted in the firm department of a three step process to complete the Sompany’s product and opted to use the RIFO,method in accounting the process: Beginning inventory units were 8,000 (25% to complete). watt inventory units were 5,000 (15% to complete). Units Started were 20,000, Normal lost units were 2,000 and abnormal lost units were 1,000. Materials were added when the conversion process was 80% complete. Beginning inventory cost: Conversion P38,000. Costs during the year were the following: Direct materials P375,000 and Conversion 569,800. Units were inspected when the conversion process was 70%. ‘60. What is cost of transferred-out goods to the next department? w a. 730,000 { b. 769.200" It 780,124 758.948 ye A) 64. What is the ending inventory cost? iat 1G a 194,000 b 208,252 f 7 x c. 213,076 of i ; 4. 233,200 1 | AY) 62:'What is the period cost? a. 19,600. b. 34,600 . 43,000 d. 30,100 The following data were ascertained during the year: January 1 December 31 Work-in-process 130,000 382,000 Finished goods 89,000 231.250 F Raw materials used was P504,950 and the direct labor rate was P15, Actual overhead was P156,500 of which P76,550 was indirect labor and the rest-were indirect materials. Budgeted overhead cO8t-and direct labor hours was P250,000-and 31,254 respectively. At the end ot the year the overhead control account has @ debit balance of P18,S00. It was the company's policy to consider any difference from the actual and applied overhead fess than P50,000 immaterial. eae » TD? 63. What is the prime cost during the yer? Ly wed Ary a. 833,075, quy- 799° b. 973,700 coe ©. 753,125 (Py 7 d. 683,750 7 64, What is the cost of goods manufactured at the end of the year? a. 786,075 b. 599,750 ec. 871,700 4. 706,125\ eo Page 19 pany has ty ipa ess ae ain products, Alpha and Beta. Charlie on the other hand was a by-product of joint process. The cont homh® same Faw material, Charlie was manufactured from the residue of ( achat te aaa eel eerstion was P375,000. The company opted to use the NRV penmen . int costs and the NRV of product Charl luction Te it came from. The following data were tscerained during the eon aaeer ae re Alpha Beta Charlie a oe 25,001 14,425 12007% -B&e™ oes Z 23,000 12,000 \ 1,200 Cost ater separation P16200 | 49.300. P3500 ing price per unit PIS” P20 Ps 322 poh e mey hcg, em Pas (65, What i the gross profit of product hiphar LL Ut Te 1 IPS a. 105,300 : ; taked 7°44 b. 124476 4p 2here (24 fe y ots gor a ig aia gO : Dy) Can ye? ae (24, 176 Parmigiani Fleurier Company has two (2) products Tonda and Kalpa. For the first month of business, 150 tondas and 550 kaipas were produced. Total overhead costs is P105,000. The following were given by their accountant in preparation if they will adapt Activity-Based Costing in their company: as ~ Budgeted - Budgeted Activity Cost Driver pe Overhead Cost = ey Materials Handling | No. of requisitions 2,000. Machine setups No of setups aa) {Quality Contro! No. of inspections 750 “The actual cost driver volumes used to produce the 2 products for the month are as follows: Aetivity hows ated No, of requisiti¢ v No. of setups on No. of inspections an 66, What is the overhead cost of Tonda? . ty / 45,450 uy A 7380” 4 «. 41,045 f yay dé. 45,500 %Page 20 ABC ct i “ ores the following data in their accounting system. Their manager wanted their resident x © compute some variances, It shows that the comp! h Roy cuore compu oe te npany purchased 4,850 pieces of .75 1e 1 of units that is produced during the year I 2,250 and onl) Kis Bless of material are used. The company requires 3 pieees of material for a single eit udgeted overhead for the year is P570,000, Overhead is applied based on machine hours, Expected machine hours are 120,000. The company’s required cost for a pieve of material is P38, 67, What is the material price variance? a. 14,250 F \ \ ‘ ay As” Be 14,550 F v tf ce. 14,250U a. 14,5500 68, What amount should be debited in the work-in-prgcess aecount” a. 184,300 47) b, 166,250 \ We c. 256,500 Vg | d. 236,250 + oS 69, Which of the following is the Wulid reason for the presence of debit in purchase variance in the journal entry for standard costing? ( ‘a. The actual rate of factory workers is higher than the standard rate EL The actual direct material used is higher than the standard direct mmateriah The standard price of direct material is lower than the actual price of direct material {The standard direct labor hour is lower than the actual direct labor bout 70, SUPLEX Inc. enters into an arrangement under which it will build and operate a toll bridge. Company B is entitled to charge users for driving over the toll bridge for the period from the completion of construction until | million ears have driven across the ‘bridge, at which point the Concession arrangement will end. SU Tne, incurred a total cost of P1B for the construction of the toll bridge. How shall SUPLEX Inc, account for its infrastructure asset? a. It shall be classified and treated as financial asst t ttshall be bifurcated into intangible asset and financial asset. 5 Ot shal be classified and treated as intangible asset fo be amortized using straight line method of resumed life of 10 years. 4. Te shall be classified and treated as intangible asset 10 be amortized on the basis of usage of unit method of | million cars. // END