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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 subsidiarys functional currency is the local currency unit. What
amount should Roses balance sheet include for the preceding items?
a. P430,000 b. P435,000 c. P440,000 d. P450,000
II. The subsidiarys functional currency is peso. What total amount Roses
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 Cartwrights 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 Burnss 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 Montanas capital account after Craig
withdraws?
a. P133,000 b. P137,500 c. P140,000 d. P145,000
A. I a; II d C. I b; II d
B. I b; II c D. None of the above
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5. 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 C. I b; II a
B. I c; II a D. None of the above

6. Under PFRS 11, joint arrangements that are joint ventures (which were jointly controlled entities
under the PAS 31) are accounted for under
a. Cost method in accordance with PAS 39
b. Equity method in accordance with PAS 28
c. Fair value method in accordance with PFRS 9
d. Proportionate consolidation method in accordance with PAS 31

7. Under PFRS 10, when a parent loses control of a subsidiary, it must recognize any investment retained
in the former subsidiary at
a. Carrying amount
b. Fair value, with any gain or loss recognized in profit or loss
c. Fair value, with any gain or loss recognized in other comprehensive
income
d. Original acquisition cost, adjusted for any dividend received from
the subsidiary

8. A chemical company manufactures joint products Pep and Vim, and a by-
product. 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 to be deducted from the joint costs is:
a. P5,000 b. P3,000 c. P2,000 d. Zero
II. Compute the gross profit for Pep:
a. P 0 b. P70,000 c. P 80,000 d. P100,000
A. I c; II a C. I c; II d
B. I d; II d D. None of the above

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9. 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. Kents 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 C. I c; II d
B. I d; II d D. None of the above

10. The modified accrual basis in accounting for government transactions means
a. Income is recognized when received while expenses are recognized
when incurred
b. Income is recognized when earned while expenses are recognized when
paid
c. 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
d. 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
11. To be highly effective, the actual results of the hedge must be within a range of
a. 100% - 150%
b. 100% - 125%
c. 80% - 100%
d. 80% - 125%

12. Under PFRS 4, it refers to a party that has a right to receive compensation under an insurance
contract if an insured event occurs.
a. Cedant
b. Insurer
c. Reinsurer
d. Policyholder
13. 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 department overhead costs based on the
reciprocal method, what would be the formula to determine the total
maintenance costs?
A. M = P18,700 + .10U C. M = P18,700 + .30U +.40A + .40B
B. M = P 9,000 + .20U D. M = P27,700 + .40A + .40B
14. Financial statement of not-for-profit organization focuses on
a. Basic information for the organization as a whole
b. Standardization of funds nomenclature
c. Inherent differences of not-for-profit organization that impact
reporting presentations
d. Distinctions between current fund and noncurrent fund

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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:
XP 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 interests
proportionate share of the acquirees identifiable net assets.
a. All of the statements are true
b. Only statement I is true
c. Only statement II is false
d. Only statement III is false

18. 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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2010 installment sales 210,000 150,000
2011 installment sales 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 firms


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

20. Abnormal spoilage in a manufacturing process should be charged to


a. Profit or loss
b. Accumulated profit or loss
c. Manufacturing overhead applied
d. Manufacturing overhead control

21. 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

23. 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
a. Set off against profit of other construction contract where
available
b. Recognized as an expense immediately, unless revenue to date exceeds
costs to date
c. Apportioned to the years of the contract according to the percentage
of completion method
d. 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 by-
product 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. 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 . . . . . . . . . . . . . . P 50,000
Two-by-fours produced (board feet) . . . . . . . . 200,000
Four-by-eights produced (board feet) . . . . . . . . 100,000
Sawdust produced (pounds). . . . . . . . . . . . . . 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 trial balance of Sterling Products
Corporation at December 31, 2010:
Debit Credit
Cash P 5,000
Installment accounts receivable, 2009 40,000
Installment accounts receivable, 2010 140,000
Inventory, 12/31/2010 200,000
Other assets 497,000
Accounts payable trade P 50,000
Unrealized gross profit 2008 10,000
Unrealized gross profit 2009 86,000
Unrealized gross profit 2010 100,000
Capital stock 600,000
Retained earnings 80,000
Gain on repossession 6,000
Operating expenses ___50,000 ________
Total P 932,000 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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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 C. P300 loss
B. P200 gain 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 settlement of the joint venture will require payments as follows;
A. M pays P900 to O and N pays P750 to O
B. O pays P900 to M and P750 to N
C. N pays P1,650 to M and O pays P900 to N
D. M pays P900 to N and N pays P750 to O
31. The cost per equivalent unit under the weighted average method of process costing considers
a. Current cost only
b. Current cost plus cost of ending work in process inventory
c. Current cost plus cost of beginning work in process inventory
d. Current cost less cost of beginning work in process inventory
32. The work-in-process account of the Malinta Company which uses a job order
cost system follows:
Work-in-process

April 1 balance P25,000 Finished goods P125,450


Direct materials 50,000
Direct labor 40,000
Overhead applied 30,000
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 have not resulted in any impairment losses being
recognized.
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 Liabilities &
Capital
Cash P 8,800 Accounts payable P 32,400
Receivable 22,400 M, capital P31,000
Inventory 39,400 M, drawing __5,400 25,600
Equipment P65,200 N, capital P33,200
Accumulated N, drawing ___200 33,000
Depreciation 30,800 34,400 N, loan 14,000
Total P105,000 Total 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.
How much of the cash was paid to Ms capital on July 31, 2010?
A. P25,600 C. P320
B. P 5,400 D. P 0

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39. 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: 2008 2009 2010
January 1, 2010 P 24,000 P 300,000
December 31, 2010 - P 60,000 P 320,000
Repossessions on defaulted accounts were made during 2010, as follows:
From Sales Made in:
2009 2010
Account balance P 10,000 P 5,000
Net resale value of
repossessed merchandise 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.
4. The branch made profit of P10,100 for the month of December but the home
office erroneously recorded it as P11,180.
5. 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.
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. What is the adjusted balance of the reciprocal accounts?
A. P 96,420 C. P117,420
B. P106,920 D. P179,920
43. 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 C. P1,040,000
B. P1,440,000 D. P1,520,000
45. 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?
Non-current assets Retained earnings
A. Increase by P300,000 Increase by P195,000
B. Reduce by P40,000 Reduce by P26,000
C. Reduce by P40,000 Reduce by P40,000
D. Increase by P300,000 Increase by P300,000
46. 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 30,000
Construction in progressP 93,750
Less: Amounts billed 84,375
10% retention 9,375
Net income recognized in 2012 (before tax) 15,000
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 Vikings 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?
Retained earnings Non-controlling interest
A. Increase by P225,000 Increase by P75,000
B. Increase by P300,000 No change
C. Reduce by P30,000 Reduce by P10,000
D. Reduce by P40,000 No change
48. 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?
Non-current assets Non-controlling interest
A. Increase by P1,500 Increase by P525
B. Reduce by P200 No change
C. Reduce by P200 Reduce by P70
D. Increase by P1,500 No change
49. 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 expense Carrying amount
A. Increase by P8,000 Increase by P24,000
B. Increase by P8,000 Decrease by P24,000
C. Decrease by P8,000 Increase by P24,000
D. Decrease by P8,000 Decrease by P24,000
50. 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 Home Office Branch


Inventory, January 1, 2010 P 23,000 P 11,550
Davao Branch 58,300
Purchases 190,000 105,000
Freight-in from home office 5,500
Sundry expenses 52,000 28,000
Credits
Home office P 53,300
Sales P155,000 140,000
Sales to Branch 110,000
Allowance for
branch inventory, January 1, 2010 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 costP 30,000
Davao branch, at billed value
(excluding freight of P520) 10,400

51. Net income of the Home Office was:


A. P10,000 C. P20,000
B. P15,000 D. P25,000
52. Net income of Davao branch was:
A. P10,470 C. P12,470
B. P11,470 D. P13,470
53. A hospital has the following account balances:
Revenue from newsstand P 50,000
Amount charged to patients 800,000
Interest income 30,000
Salary expense nurses 100,000
Bad debts 10,000
Undesignated gifts 80,000
Contractual adjustments 110,000
What is the hospitals net patient service revenue?
A. P880,000 C. P690,000
B. P800,000 D. P680,000
54. 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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arrangement between the parties establishes joint control of the activities
that are conducted in Harrison Company. The main feature of Harrisons 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 Harrisons
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 Packets 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 suppliers 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 Connies 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 Rate
January 1, 2011 . . . . . . . . . . . . P 0.98
October 1, 2012 . . . . . . . . . . . . 1.00
December 31, 2012 . . . . . . . . . . 1.05
2012 average. . . . . . . . . . . . . 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 -0- P 1,015,200
B. 12,800 1,011,200
C. -0- 1,024,000
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 acquisition-
date 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 SZs financial records, were estimated to have a 20-year future life.
As of December 31, the financial statements appeared as follows:
JJ SZ
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P (300,000) P(200,000)
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . 140,000 80,000
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 10,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P(140,000) P(110,000)
Retained earnings. 1/1 . . . . . . . . . . . . . . . . . . . . P(300,000) P(150,000)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (140,000) (110,000)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- -0-
Retained earnings, 12/31 . . . . . . . . . . . . . . . . . . P(440,000) P(260,000)
Cash and receivables . . . . . . . . . . . . . . . . . . . . . . P210,000 P90,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 110,000
Investment in JJ . . . . . . . . . . . . . . . . . . . . . . . . . . 260,000 -0-
Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . 440,000 300,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P1,060,000 P500,000
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P(420,000) P(140,000)
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . (200,000) (100,000)
Retained earnings, 12/31 . . . . . . . . . . . . . . . . . . (440,000) (260,000)
Total liabilities and equities . . . . . . . . . . . . . . . . . P(1,060,000) 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. What is the total of consolidated revenues?
a. P500,000 c. P420,000
b. P460,000 d. P400,000
59. What is the total consolidated cost of goods sold?
a. P140,000 c. P130,000
b. P152,000 d. P132,000
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 build-
operate-transfer (BOT) schemes under IFRIC 12?
I Financial Asset model II Intangible Asset model
III Property, Plant & Equipment model
a. I and II
b. I and III
c. II and III
d. I, II and III

62. 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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64. What is the amount of the intercompany profit or loss that must be deferred at
12/31/x6?
a. P6,000 d. P24,000
b. P14,000 e. P30,000
c. P16,000
65. What is the amount of the adjustment to Depreciation Expense in preparing the
consolidation worksheet at 12/31/x6?
a. P0 d. P5,000
b. P3,000 e. P6,000
c. P4,000
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 subsidiarys 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 subsidiarys 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 investors returns

69. The test indicating that an intra-group business transaction has been
realized is:
a. the generation of profit from the transaction

b. the involvement of an external party in the transaction


c. the presence of only within the group as parties to the transaction
d. whether or not an operating profit or loss occurred as a result of
the transaction

70. 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. Allotment
b. Obligation
c. Appropriation
d. Notice of Cash Allocation

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