CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING

First Preboard Examination

SOLUTIONS
1. A

Estimated OH 300,000
Estimated direct labor cost ÷ 150,000
Predetermined OH rate 2

Job A Job C
Direct materials 10,000 15,000
Direct labor 5,000 2,500
MOH
Job A: (5,000 x 2) 10,000
5,000
Job C: (2,500 x 2)
Total Cost 25,000 22,500

2. C

Job B
Direct materials 20,000
Direct labor 4,000
MOH (4,000 x 2) 8,000
Total Cost 32,000

3. B

Applied OH Job A 10,000

Applied OH Job B 5,000
Applied OH Job C 8,000
Total applied OH 23,000
Actual OH (24,000)
Under applied 1,000 DR

4. D
5. D

6. C

NRV of spoiled goods (4 x 170) 680

Cost of spoiled goods (7 x 170) (1,190)
Loss (510)

Spoiled Goods Inventory 680

MOH 510
Work-in-process 1,190

7. D

Spoiled Goods Inventory 680

Work-in-process 680
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8. B
9. A
10. A

11. C

Allocation base for joint raw materials cost Kilos

Joint Product A: (50,000 x 5/10) 25,000
Joint Product B: (50,000 x 3/10) 15,000
Joint Product C: (50,000 x 2/10) 10,000
50,000

Allocation base for joint conversion Cost NRV

Joint Product A: (10 x 25,000) - 30,000 220,000
Joint Product B: (12 x 15,000) - 20,000 160,000
Joint Product C: (15 x 10,000) - 30,000 120,000
500,000

Direct materials of Product A: (120,000 x 25/50) 60,000

Conversion cost of Product A: (200,000 x 220/500) 88,000
Further processing cost of Product A 30,000
Total cost of Product A 178,000
Kilos produced ÷ 25,000
Cost per unit 7.12

12. A

Direct materials of Product B: (120,000 x 15/50) 36,000

Conversion cost of Product B: (200,000 x 160/500) 64,000
Further processing cost of Product B 20,000
Total cost of Product B 120,000

13. B

Direct materials of Product C: (120,000 x 10/50) 24,000

Conversion cost of Product C: (200,000 x 120/500) 48,000
Further processing cost of Product C 30,000
Total cost of Product C 102,000
Kilos produced ÷ 10,000
Cost per unit 10.20
Unsold kilos x 2,000
Ending inventory of Product C 20,400
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14. A

Final sales price of by-product Z: (420 x 1,000) 420,000

Further processing cost of by-product Z (180,000)
NRV of by-product Z 240,000

Total joint cost 3,840,000

NRV of by-product Z (240,000)
Adjusted joint cost 3,600,000

Allocation base for joint cost NRV

Joint Product A: (3,000 x 2,000) - 1,000,000 5,000,000
Joint Product B: (2,000 x 3,000) - 1,000,000 5,000,000
10,000,000

Joint cost allocated to Product B: (3,600,000 x 5/10) 1,800,000

15. A

Actual quantity purchased x Actual rate (2,000 x 1.55) 3,100

Actual quantity purchased x Standard rate (2,000 x 1.60) (3,200)
Material Price Variance Favorable 100

Raw materials inventory 3,200

Accounts payable 3,100
Material price variance 100

16. C

Actual quantity used x Standard rate (1,900 x 1.60) 3,040

Standard quantity x Standard rate (1,800 x 1.60) (2,880)
Material Quantity Variance Unfavorable 160

Work-in-process 2,880
Material quantity variance 160
Raw materials inventory 3,040

17. B

Total payroll 126,000

Direct labor rate variance unfavorable (3,000)
Actual direct labor hours x Standard direct labor rate 123,000
Actual direct labor hours ÷ 20,000
Standard direct labor rate 6.15
Standard direct labor hours x 21,000
Standard direct labor hours x Standard direct labor rate 129,150
Actual direct labor hours x Standard direct labor rate (123,000)
Direct labor efficiency variance favorable 6,150

Work-in-process 129,150
Labor rate variance 3,000
Labor efficiency variance 6,150
Payroll 126,000
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18. C

Raw and In-process 200,000

Accounts payable 200,000

19. D

Est. FMV trading securities 320,000 Est. FMV land and building 450,000
Notes payable (280,000) Mortgage payable (250,000)
Excess trading securities 40,000 Excess land and building 200,000

20. C

Excess trading securities 40,000

Excess land and building 200,000
Est. FMV Inventory with no liab assigned to it (70,000 - 40,000) 30,000
Total free assets 270,000

21. D
22. C
23. D
24. A
25. B

26. B

Sales 100,000
Cost of goods sold (72,000)
Gross profit 28,000
Trustee expense (6,000)
Depreciation (24,000)
Loss in Marketable Securities (15,000 - 20,000) (5,000)
Loss (7,000)

27. B

Uncollected portion of existing AR (50,000 - 28,000) 22,000

Uncollected portion of additional AR (100,000 - 65,000) 35,000
Unsold carrying amount of plant asset (120,000 - 24,000) 96,000
Assets not realized at the end of the period 153,000

28. A
29. D

Equity, end (100,000 - 85,000) 15,000

Loss 12,000
Equity, beg 27,000
Liability, beg (liabilities to be liquidated) 80,000
Total assets, beg 107,000
Non-cash assets, beg (assets to be realized) (60,000)
Cash, beg 47,000
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30. D

Unadjusted home office current 975,000

Branch erroneous recording of advertising exp (12,000 - 1,200) 10,800
Branch erroneous recording of merch. from home office (53,000 - 50,300) (2,700)
Adjusted balance home office current 983,100

31. C

Shipments from home office 66,600

Freight-in 6,200
Cash 2,800
Home office current 70,000

32. B

Unadjusted branch current QC 386,000 Unadjusted home office current 391,400

Erroneous remittance 4,800 Unrecorded marketing expense 1,500
Unrecorded credit memo from home office (2,100)
Adjusted balance 390,800 Adjusted balance 390,800

33. B

Allowance for overvaluation, beg (360,000 ÷ 225% x 125%) 200,000

Allowance for overvaluation from shipments (1,800,000 x 125%) 2,250,000
Allowance for overvaluation before adjustment 2,450,000
Allowance for overvaluation, end (285,000)
Overstatement of cost of goods sold of the branch / Additional branch income 2,165,000

34. D

Allowance for overvaluation before adjustment 245,000

Allowance for overvaluation from shipments (650,000 ÷ 130% x 30%) (150,000)
Allowance for overvaluation, beg 95,000
Beginning inventory from home office at cost 475,000
Beginning inventory from home office at billed price 570,000
Shipments from home office at billed price 650,000
Goods available for sale from home office 1,220,000

35. A

Freight from Mindoro to Batangas (2,100 x 60%) + 700 1,960

Freight from Home office to Batangas (1,400)
Excess Freight 560

36. C

Sales 12,862,500
Cost of goods sold (12,862,500 x 75%) (9,646,875)
Gross profit before sales discount 3,215,625
Sales discount (6,868,085 ÷ 97% x 3%) (212,415)
Gross profit 3,003,210
Expenses (857,500)
Sample expense (1,960,000 x 90% x 7/12) (1,029,000)
Net income 1,116,710

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37. A

Sylvie
Cash 875,000
Office equipment 937,500
Building, net 2,812,500
Mortgage (1,125,000)
Contributed capital / Capital Credit 3,500,000

38. C

Capital credit of Sylvie 3,500,000

÷ 70%
Total agreed capital 5,000,000
x 30%
Capital credit of Loki 1,500,000
Cash (375,000)
Office equipment (312,000)
Furniture and Fixtures (125,000)
Additional cash 688,000

39. A

Total agreed capital (210,000 ÷ 70%) 300,000

x 30%
Total agreed capital 90,000
Cash invested (42,000)
FMV inventory 48,000

40. A

Accounts Receivable 53,000

Inventory 107,000
Equipment 34,000
Notes payable (56,000)
Contributed capital of Mobius 138,000

Capital credit of Mobius 210,000

Contributed capital of Mobius (138,000)
Additional cash 72,000

41. A

Ramona Kang Total

Salaries 200,000 300,000 500,000
Remainder (3:2) 60,000 40,000 100,000
Net income 260,000 340,000 600,000

Capital beginning 600,000

Additional investment 100,000
Withdrawals other than salary allowance (200,000)
Share in net income 260,000
Regular drawings (salary allowance) (200,000)
Capital ending 560,000

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42. A

Additional investment 200,000

Withdrawals other than salary allowance (100,000)
Share in net income 340,000
Regular drawings (salary allowance) (300,000)
Net increase 140,000

43. A

Eddy (50%) Fox (30%) Grimm (20%)

Capital balances before retirement 160,000 96,000 64,000
Bonus to Eddy 20,000 (12,000) (8,000)
180,000 84,000 56,000
44. B

Eddy (50%) Fox (30%) Grimm (20%) Hamm

Capital balances
160,000 96,000 64,000 140,000 460,000 TCC
before admission
Bonus to old partners 12,500 7,500 5,000 (25,000)
172,500 103,500 69,000 115,000 460,000 TAC

Capital Credit to Hamm: 460,000 x 25% = 115,000

45. D

Capital balance of Alfa and Beda (348,000 + 232,000) 580,000

Agreed ratio to old partners ÷ 80%
Total agreed capital 725,000
Agreed ratio to Capp x 20%
Investment needed 145,000

46. B

A (50%) B (25%) C (25%)

Interests before liquidation 76,000 64,000 56,000
Loss on realization (56,000 - 120,000) (32,000) (16,000) (16,000)
MPL (212,000 - 120,000) (46,000) (23,000) (23,000)
Balances (2,000) 25,000 17,000
B and C's share in A's deficiency 2,000 (1,000) (1,000)
- 24,000 16,000

47. D

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48. C

A (50%) B (30%) C (20%)

Capital balances before liquidation 250,000 86,000 40,000
Loan balances - 64,000 20,000
Interests before liquidation 250,000 150,000 60,000
Loss on realization (320,000 - 720,000) (200,000) (120,000) (80,000)
Balances 50,000 30,000 (20,000)
Additional investment of C 20,000
Cash received after liquidation 50,000 30,000 -

49. C
50. C
51. D
52. B
53. A
54. D
55. B
56. B
57. B

58. B
59. C
60. D

DGP-2020, January 1, 2021 300,000

IAR-2020, January 1, 2021 ÷ 2,000,000
DGP-2020 Rate 15%

Installment sales 2021 contracts 5,000,000

Cost of installment sales 2021 contracts (4,500,000)
DGP-2021 500,000

DGP-2021 500,000
Installment sales 2021 contracts ÷ 5,000,000
DGP-2021 Rate 10%

IAR-2020, January 1, 2021 2,000,000

IAR-2020 write-off (500,000)
IAR-2020 unpaid balance due to repossession (600,000 x 50%) (300,000)
IAR-2020, December 31, 2021 (400,000)
Collections IAR-2020 contracts during 2021 800,000

IAR-2021 5,000,000
IAR-2021 unpaid balance due to repossession (600,000 x 50%) (300,000)
IAR-2021, December 31, 2021 (2,100,000)
Collections IAR-2021 contracts during 2021 2,600,000

2021 Contracts 2020 Contracts 2019 Contracts

Collections 2,600,000 800,000 N/A
DGP Rate x 10% x 15% N/A
RGP 260,000 120,000 180,000

NOTE: Since the IAR-2019, December 31, 2021 balance is 0, therefore it means all of the
receivable were already collected on December 31, 2021. Furthermore, the DGP-2019
balance of P180,000 will be realized on December 31, 2021. This is the reason behind the
DGP-2019 collections and rate were irrelevant in the problem because at the end of the
year all of the deferred gross profit of 2019 contracts will be realized already at the end of
the year.
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61. B

July 19, 2021

Cash 1,235,000
Revenue (1,235,000 x 93%) 1,148,550
Refund liability (1,235,000 x 7%) 86,450

Cost of goods sold (19,000 x 26 x 93%) 459,420

Estimated inventory returns (19,000 x 26 x 7%) 34,580
Inventory 494,000

62. D

Net remittance 1,306,000

All payments made by consignee on behalf of consignor
27,800
(5,000 + 12,000 + 3,000 + 7,800)
Cash collected net of commission 1,333,800
÷ 90%
Total sales 1,482,000
Selling price per unit ÷ 19
Units sold 78,000

Cost of goods consigned 1,000,000

Freight-in 10,000
Freight from consigner to consignee 5,000
Total cost of goods consigned 1,015,000
Units unsold ratio (22,000/100,000) x 22%
Cost of goods still out on consignment 223,300

63. A

Sales 1,482,000
Cost of goods sold (1,015,000 x 78%) (791,700)
Gross profit 690,300
Expenses (12,000 + 3,000 + 7,800) (22,800)
Commission expense (1,482,000 x 10%) (148,200)
Net income 519,300
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64. B

2021 2022 2023 2024

Cost incurred to date 2,550,000 5,250,000 7,750,000 11,200,000
Estimated cost to complete 14,450,000 9,750,000 7,750,000 2,800,000
Total estimated cost 17,000,000 15,000,000 15,500,000 14,000,000

Cost incurred to date 2,550,000 5,250,000 7,750,000 11,200,000

Total estimated cost ÷ 17,000,000 ÷ 15,000,000 ÷ 15,500,000 ÷ 14,000,000
Percentage of completion 15% 35% 50% 80%

Contract price for 2021 and 2022 15,000,000

Bonus (1,000,000 x 40%) 400,000
Penalty (1,500,000 x 25%) (375,000)
Adjusted contract price 2021 and 2022 15,025,000

Contract price for 2023 and 2024 15,000,000

Bonus (1,000,000 x 50%) 500,000
Penalty (1,500,000 x 20%) (300,000)
Adjusted contract price 2023 and 2024 15,200,000

Adjusted contract price 2022 15,025,000

Percentage of completion 2022 x 35%
Revenue to date as of 2022 5,258,750

Adjusted contract price 2023 15,200,000

Percentage of completion 2023 x 50%
Revenue to date as of 2023 7,600,000
Revenue to date as of 2022 (5,258,750)
Revenue for the year 2023 2,341,250

65. C

2021 2022 2023 2024

Adjusted contract price 15,025,000 15,025,000 15,200,000 15,200,000
Total estimated cost (17,000,000) (15,000,000) (15,500,000) (14,000,000)
Est. Gross profit / (loss) (1,975,000) 25,000 (300,000) 1,200,000
x 100% x 35% x 100% x 80%
Gross profit / (loss) to date (1,975,000) 8,750 (300,000) 960,000
Prior gross profit / (loss) - 1,975,000 (8,750) 300,000
Gross profit / (loss) for the year (1,975,000) 1,983,750 (308,750) 1,260,000

66. B

Down payment 550,000

Present value of note (Interest Bearing) (2,200,000 - 550,000) 1,650,000
Initial franchise fee 2,200,000
Direct cost of franchise (770,000)
Gross profit from initial franchise fee 1,430,000
Interest income (1,650,000 x 10%) 165,000
Continuing franchise fee (1,800,000 x 1%) 18,000
Indirect cost (expense) (50,000)
Net income 1,563,000
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67. C

Down payment 550,000

Present value of note (Interest Bearing) (2,200,000 - 550,000) 1,650,000
Initial franchise fee 2,200,000
Direct cost of franchise (770,000)
Deferred gross profit from initial franchise fee 1,430,000
Initial franchise fee ÷ 2,200,000
Deferred gross profit rate 65%

Down payment 550,000

Collection from principal (1,650,000 ÷ 3) 550,000
Total collections exclusive of interest 1,100,000
Deferred gross profit rate x 65%
Realized gross profit on installment sales 715,000
Interest income (1,650,000 x 10%) 165,000
Continuing franchise fee (1,800,000 x 1%) 18,000
Indirect cost (expense) (50,000)
Net income 848,000

68. B

Performance obligation allocation bases

Right to access license 700,000
Construction and renovation 875,000
Delivery of goods 175,000
1,750,000

Allocation of initial franchise fee to performance obligation

Right to access license (1,600,000 x 700/1,750) 640,000
Construction and renovation (1,600,000 x 875/1,750) 800,000
Delivery of goods (1,600,000 x 175/1750) 160,000

Revenue from right to access license (640,000 x 1/5 x 3/12) 32,000

Revenue from construction and renovation (800,000 x 70%) 560,000
Revenue from delivery of goods (160,000 x 312/400) 124,800
Total revenue recognized at December 31, 2021 716,800
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69. A

Cost incurred to date 2021 3,550,000

Percentage of completion 2021 ÷ 10%
Total estimated cost 35,500,000

Contract price 2021 34,000,000

Total estimated cost 2021 (35,500,000)
Est. Gross profit / (loss) 2021 (1,500,000)
x 100%
Gross profit / (loss) to date 2021 (1,500,000)
Prior gross profit / (loss) -
Gross profit / (loss) for the year 2021 (1,500,000)

Gross profit / (loss) for the year 2021 (1,500,000)

Gross profit / (loss) for the year 2022 2,000,000
Gross profit / (loss) for the year 2023 0
Gross profit / (loss) to date 2023 500,000
Percentage of completion 2023 ÷ 40%
Est. Gross profit / (loss) 2023 1,250,000

Contract price 2023 34,000,000

Est. Gross profit / (loss) 2023 (1,250,000)
Total estimated cost 2023 32,750,000
Percentage of completion 2023 x 40%
Cost incurred to date 2023 13,100,000
Gross profit / (loss) to date 2023 500,000
Construction in progress as of 2023 13,600,000

70. A

Contract revenue to date 2022 (34,000,000 x 25%) 8,500,000

Contract revenue to date 2021 (34,000,000 x 10%) (3,400,000)
Contract revenue for the year 2022 5,100,000
Realized gross profit for the year 2022 (2,000,000)
Construction cost of sales for the year 2022 3,100,000

END