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MANILA
Numbers 1, 2, 3 and 4
On January 1, 2022, Parent Corporation purchased 80% of the outstanding shares of Subsidiary
Company for a consideration of P19,000,000. Including in the price paid is control premium in the
amount of P500,000. At that date, Subsidiary had P16,000,000 of ordinary shares outstanding and
retained earnings of P6,400,000. Subsidiary’s equipment with a remaining life of 5 years had a book
value of P9,000,000 and a fair value of P10,520,000. Subsidiary’s remaining assets had book values
equal to their fair values. The income and dividend figures for both Parent and Subsidiary are as
follows: Net income of Parent in 2022 is P3,600,000. Net income of Subsidiary in 2022 is
P1,360,000. Dividends declared by Parent in 2022 is P880,000. Dividends declared by Subsidiary in
2022 is P280,000. Parent’ retained earnings balance at the date of acquisition was P13,800,000.
Number 5
Which of the following consolidation items will affect only the Consolidated Net Income Attributable
to the Parent’s Shareholders but not the Non-controlling Interest in Net Income?
A. Amortization of difference between fair value over book value of the assets or liabilities of the
subsidiary.
B. Impairment loss of the total goodwill arising from business combination
C. Gain on bargain purchase arising from business combination
D. Unrealized or realized gain/loss on upstream transactions
Page 2
Numbers 6 and 7
Parent Corporation acquired an 80% interest in Subsidiary Company on January 1, 2022 for
P10,080,000. On this date, the share capital and retained earnings of the two companies follow:
On January 1, 2022, the assets and liabilities of Subsidiary Co. were stated at their fair values except
for machinery which is undervalued by P900,000 (remaining life is 3 years). On September 30, 2022,
Subsidiary sold merchandise to Parent at an inter-company profit of P600,000; 1/4 was still unsold at
year-end. Likewise, on October 1, 2023, Subsidiary purchased merchandise from Parent for
P14,400,000. The selling affiliate included a 20% mark-up on cost on this sale. Only 3/4 of these
purchases had been sold to unrelated parties as of December 31, 2023. As of December 31, 2023,
goodwill was determined to be impaired by P240,000.
The following is the summary of the 2023 transactions of the affiliated companies:
6. What is the net income attributable to parent shareholders’ equity in the 2023 consolidated
financial statements?
A. 6,432,000
B. 6,744,000
C. 6,552,000
D. 6,834,000
7. What is the non-controlling interest in net income in the 2023 consolidated financial
statements?
A. 330,000
B. 342,000
C. 282,000
D. 402,000
Number 8
On January 1, 2022, Parent Company purchased 80% of the outstanding shares of Subsidiary
Corporation at book value. The stockholders’ equity of Subsidiary Corporation on this date showed:
Ordinary shares – P4,560,000 and Retained earnings – P3,920,000. On April 30, 2022, Parent
Company acquired a used machinery for P672,000 from Subsidiary Corp. that was being carried in the
latter’s books at P840,000. The asset still has a remaining useful life of 5 years. On the other hand, on
August 31, 2022, Subsidiary Corp. purchased an equipment that was already 20% depreciated from
Parent Co. for P2,760,000. The original cost of this equipment was P3,000,000 and had a remaining
life of 8 years. Net income of Parent Co. and Subsidiary Corp. for 2022 amounted to P2,880,000 and
P1,240,000. Dividends paid totaled to P920,000 and P420,000 for Parent Co. and Subsidiary Corp.,
respectively.
10. What is the net income attributable to parent’s shareholders’ equity in the consolidated
financial statements in 2022?
A. 3,336,600
B. 3,307,480
C. 3,643,480
D. 3,584,600
11. What is the non-controlling interest in net assets in the consolidated financial statements in
2022?
A. 1,696,000
B. 1,860,000
C. 1,820,120
D. 1,889,120
Number 12
Which of the following business combination transactions will affect the goodwill or gain on bargain
purchase arising from business combination?
A. Payment for legal, audit and broker’s fees directly connected with the business combination.
B. Incurring costs related to the issuance of ordinary shares given as consideration for the acquisition
of the 51-100% of ordinary shares of subsidiary corporation.
C. Measurement adjustments during measurement period which shall not exceed 12 months from the
date of acquisition date.
D. Payment of costs directly related to the issuance of bonds payable given as consideration for the
acquisition of the net assets of the acquired corporation.
Number 13
In a business combination achieved in stages, if the acquisition date fair value of the net of the
acquisition-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 non-controlling 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
A. Goodwill
B. Gain on bargain purchase
C. Expense as incurred
D. Deduction directly to retained earnings
Page 4
Numbers 14, 15 16 and 17
Condensed Statements of Financial Position of Acquirer Corp. and Acquiree Corp. as of December 31,
2022 are as follows:
Acquirer Acquiree
Current assets P 175,000 P 65,000
Noncurrent assets 725,000 425,000
Total assets 900,000 490,000
On January 1, 2023, Acquirer Corp. issued 35,000 shares with a market value of P25/share for the
assets and liabilities of Acquiree Corp. The book value reflects the fair value of the assets and
liabilities, except that the noncurrent assets of Acquiree have fair value of P630,000 and the noncurrent
assets of Acquirer are overstated by P30,000. Contingent consideration, which is determinable, is equal
to P15,000. Acquirer also paid for the stock issuance costs worth P34,000 and other acquisition costs
amounting to P19,000.
Number 18
Number 19
Partners Red and Blue share profits in the ratio 2:3 respectively. The capital balances of Red and Blue
as of December 31, 2020 are P211,600 and P156,400, respectively. On January 1, 2021, the
partnership commenced its liquidation process. Among the assets of the partnership, P289,800
pertained to non-cash assets. Also, liabilities amounting to P36,800 were still outstanding. It is
expected that a total of P16,560 will be incurred for liquidation expenses in the following months.
Assuming that available cash will be distributed to the partners, how much will be the capital
balance of Partner Red immediately after distribution?
A. 211,600
B. 165,600
C. 158,240
D. 149,960
Numbers 20 and 21
Capital balances of the EK, MH, and CS immediately before liquidation were P25,000, P30,000, and
P45,000, respectively. Partners EK and MH have loss absorption potentials of P125,000 and P100,000,
respectively. Not all non-cash assets were realized this month. Proceeds from the sale of some noncash
assets were P80,000 more than the book value of those noncash assets. A total of P7,500 was
distributed to partners during the first month of liquidation.
20. How much is CS’s capital balance immediately after the sale of noncash asset?
A. 40,000
B. 45,000
C. 85,000
D. 90,000
21. How much cash did Partner EK receive by the end of the first month of liquidation?
A. 7,500
B. 7,000
C. 1,500
D. 6,000
Number 22
An non-cash investment of a capitalist partner should be credited to the contributing partner’s capital
account at
A. Contributing partner’s original cost
B. Fair value on the date of contribution
C. Assessed value for property tax purposes
D. Contributing partner’s original cost less accumulated depreciation using SLM
Number 23
All of the following can be considered for the computation of the recovery rate for unsecured
nonpriority creditors, EXCEPT:
A. Cash
B. Free assets
C. Assets pledged to fully secured liabilities
D. Assets pledged to partially secured liabilities
Page 6
Numbers 24, 25 and 26
DoubleTrouble Inc. will be undergoing liquidation proceedings. Its statement of financial position
immediately before commencement of the liquidation process were as follows:
During the first month of liquidation, trustee’s fee actually incurred amounted to P50,000. All
unsecured liabilities with priority were paid during the first month of liquidation. No other liabilities
were settled during that month. P300,000 of the trade receivables were collected in full. All of the
inventories were sold for a total of only P200,000. Equipment remained unsold as of the month end,
while intangible assets were no longer expected to be realized for any amount.
25. Based on the statement of affairs, what is the estimated recovery rate to unsecured non-priority
creditors?
A. 27.69%
B. 35.38%
C. 58.46%
D. 77.62%
26. In the statement of realization and liquidation, how much is the estate equity / (estate deficit) at
the end of the first month of liquidation?
A. 250,000
B. (50,000)
C. (350,000)
D. (420,000)
Number 27
During July 2020, 40,000 units were produced by Fearless Inc. The standard quantity of material
allowed per unit was 5kg at a cost of P2.50 per kg. There were no beginning nor ending inventory
balances. Upon inspection of the journal, entries made during the month included a credit to usage
variance for P25,000 and a debit to price variance for P28,500.
Numbers 28 and 29
28. Using a plantwide predetermined overhead rate based on direct labor hours, how much is the
cost of Job 143?
A. 125,000
B. 200,000
C. 875,000
D. 3,125,000
29. Using departmental predetermined overhead rates, how much is the cost of Job 143 if the
assembly department is considered labor intensive and the finishing department is
considered machine intensive?
A. 150,000
B. 180,000
C. 200,000
D. 240,000
Number 30
In job-order costing, the basic document to accumulate the cost of each order is the ___
A. Sales invoice
B. Job-cost sheet
C. Purchase order
D. Materials requisition
Number 31
Costs
Stage of
Units Materials Conversion
Completion
Work in process, December 20%
25,000 P 116,400 P 124,300
1
Started during December 100,000 - ? ?
Work in process, December 30%
10,000
31
Goods manufactured ? -
Lost units 5,000 -
The company uses FIFO costing assumption in accounting for its production process. Upon
observation, it can be concluded that 100% of the materials are added at the start of the process. Upon
inquiry with the management, it was determined that no losses were expected to have occurred for this
process this month. Quality inspection occurs at the end of the process.
Looking at the costing report, total goods transferred to finished goods costed P1,322,200. Of this
amount, P943,500 pertained to goods started and finished during December 2021.
32. How much is the current conversion cost for December 2021?
A. 702,800
B. 779,700
C. 943,500
D. 827,100
33. How much is the current materials cost for December 2021?
A. 420,000
B. 407,400
C. 378,700
D. 254,400
34. How much should be treated as period cost for the month of December 2021, if any?
A. 0
B. 34,500
C. 55,500
D. 62,700
Number 35
Number 36
DMF Manufacturing Inc uses only one production process which produces two main products
(Products EUF and Product SCC) and one by-product (Product VGS). The joint cost is allocated
among the main products using the approximated NRV method, while the by-product is treated as a
reduction to production costs from the moment they are produced. The following information were
made available:
Number 37
Number 38
On January 1, 2021, ABC Inc. paid a premium to acquire a put option from a writer. This is in relation
to a forecasted sale of merchandise worth $65,000. (option price = P4.965)
Number 39
On December 6, 2021, XYZ Co. entered into a forward exchange contract to purchase 225,000 euros
in 90 days. The relevant exchange rates are as follows:
The purpose of this derivative instrument is to hedge a liability exposure in November 2021, payable
in March 2022.
Compute the foreign currency transaction gain or loss on the hedged item to be reported in the
December 31, 2021 Statement of Comprehensive Income
A. 11,250 loss
B. 6,750 loss
C. 4,500 loss
D. 9,000 gain
Number 40
Malolos Company sold merchandise for 315,000 pounds to a customer in London on October 01,
2021. Collection in British pounds was due on January 30, 2022. On the same date, Malolos entered
into a 120-day forward contract to sell 315,000 pounds to a writer. Direct exchange rate for pound on
different dates are as follows:
Compute the fair value of the derivative instrument on December 31, 2021
A. 63,000 negative
B. 63,000 positive
C. 126,000 negative
D. 126,000 positive
Page 11
Number 41
On September 1, S Company entered into a firm commitment to sell a machinery. Delivery and
passage of title would be on January 30, 2021 at the price of $15,750 Singapore dollars. On the same
date, S Company entered into a 150-day forward contract with China bank to sell the $15,750
Singapore dollars. Direct exchange rate were as follows:
Compute the gain or loss recognized by S Company on the firm commitment in 2021
A. 44,100 gain
B. 37,800 loss
C. 44,100 loss
D. 37,800 gain
Number 42
Certain Statement of Financial Position accounts of a foreign subsidiary of the Manila Co. had been
stated in Philippine pesos on December 31 as follows:
Stated at
Current Historical
Rates Rates
Accounts receivable — current P 280,000 P 308,000
Accounts receivable — long -term 140,000 154,000
Prepaid insurance 70,000 77,000
Goodwill 112,000 119,000
Totals P 602,000 P 658,000
If the subsidiary’s local currency is its functional currency, what total amount should be
included in Manila’s Statement of Financial Position as a group in Philippine Pesos?
A. 609,000
B. 658,000
C. 602,000
D. 630,000
Page 12
Number 43
A subsidiary of Porter Inc., a Philippine company, is located in a foreign country. The functional
currency of this subsidiary was the Stickle (§) which is the local currency where the subsidiary is
located. The subsidiary acquired inventory on credit on November 1, 2020, for §120,000 that was sold
on January 17, 2021 for §156,000. The subsidiary paid for the inventory on January 31, 2021.
Currency exchange rates between the dollar and the Stickle were as follows:
What amount would have been reported for the Cost of Goods Sold in Porter's Consolidated
Statement of Comprehensive Income for the year ended at December 31, 2021?
A. 26,400
B. 22,800
C. 27,600
D. 28,800
Number 44
On December 31, 2020 a foreign subsidiary in Hongkong submitted the following accounts stated in its
local currency which is the functional currency of the foreign operation. The subsidiary in Hongkong
acquired in 2020 is not integrated with the operations of the parent in the Philippines. Moreover, its
cash flows do not directly affect the parent company. The foreign operation is self-sufficient and is not
dependent on the parent company for financing.
The exchange rate are: Current rate, P8.75 ; Historical rate, P8.10 ; Weighted average rate, P8.50.
Number 45
Agency X received Maintenance and Other Operating Expenses (MOOE) allotment from the
Department of Budget and Management in the amount of P10,000,000 with Notice of Cash Allocation
(NCA) of P6,000,000. Under the Government Accounting Manual (GAM) what is the journal entry to
record the receipt of the NCA?
A. Cash Disbursement Ceiling 6,000,000
Appropriation Allotted 6,000,000
B. Cash – National Treasury MDS 6,000,000
Appropriation Allotted 6,000,000
C. Cash-MDS, Regular 6,000,000
Subsidy from the Nat. Govt. 6,000,000
D. Memo entry in the appropriate registry.
Page 13
Number 46
The Department of Budget and Management ordinarily shall release the allotments and NCA of an
agency before the start of the fiscal year. Under the GAM, this transaction must be recorded in the
books of accounts, except in the
A. Books of the agency
B. Books of the Commission on Audit
C. Books of Bureau of Treasury
D. Books of the Department of Budget and Management
Number 47
It is a cash authority issued periodically by the DBM to the operating units of government agencies to
cover their cash requirements.
A. Notice of Cash Allocation (NCA)
B. Non-Cash Availment Authority (NCAA)
C. Cash Disbursement Ceiling (CDC)
D. Cash Release Program (CRP)
Number 48
Agency MMM have an obligation for equipment per purchase order amounting to P400,000. The
entry for the transaction would be:
A. Office Equipment 400,000
Accounts Payable 400,000
B. Office Equipment 400,000
Cash-MDS, Regular 400,000
C. Memorandum entry in Registry of Allotments, Obligations, and Disbursements – Capital
Outlays RAODCO)
D. Office Equipment 400,000
Subsidy from the Nat’l. Gov’t. 400,000
Number 49
Using the same information in number 48, Agency MMM received the office equipment based on
invoice/delivery receipt. The entry for this transaction would be (ignore tax implication):
A. Office Equipment 400,000
Accounts Payable 400,000
B. Office Equipment 400,000
Cash-MDS, Regular 400,000
C. Memorandum entry in Registry of Allotments, Obligations, and Disbursements – Capital Outlays
RAODCO)
D. Office Equipment 400,000
Subsidy from the Nat’l. Gov’t. 400,000
Number 50
A unique reporting requirement of Not for Profit entities in a cash flow statement would be:
A. Investing activities do not include aquiring and disposing of long term assets.
B. Operating activities do not include transactions involving unrestricted net assets.
C. Finance activities include cash inflows from contributions and investment income that are
restricted for capital assets, endowment, or long term purposes.
D. Depreciation expense is included in operating activities.
Page 14
Number 51
Mr. AFOUR makes an unconditional promise to donate a painting to the CPAR Library on June 1,
2021 for delivery on July 31, 2021. His cost basis in the painting is P250,000 and the current market
value of the painting is P500,000. The Library will record the donation as an asset and contribution
revenue:
A. At 500,000 on June 1, 2021.
B. At 250,000 on June 1, 2021.
C. At 500,000 on July 31,2021.
D. At 250,000 on July 31,2021.
Number 52
Helping Hands is a voluntary welfare organization funded by contributions from the general public.
During 2021 unrestricted pledges of P800,000 were received, half of which were payable in 2021 with
the other half payable in 2022 for use in 2022. It was estimated that 10% of these pledges would be
uncollectible. How much should National report as net contribution revenue for 2021 with respect to
the pledges?
A. 800,000
B. 720,000
C. 360,000
D. 0
Numbers 53 and 54
Falcon Motors sells cars both on installment and cash basis. On March 30, 2021, Falcon Motors sold a
car to Mr. Wilson for P525,000 costing P414,000. A used car is accepted as down payment, P128,000
being allowed on the trade-in. The used car can be resold for P160,200 after reconditioning cost of
P7,660. The company expects to make a 20% gross profit on the sale of used car. The balance of the
sale is to be paid on a 10-month installment basis starting May 1, 2021.
Mr. Wilson defaulted payment starting November 1, 2021, and the car was immediately repossessed.
The repossessed car was appraised at a value of P93,750 at the time of repossession. Falcon Motors
had to incur additional cost of repairs amounting to P9,250 before the car was subsequently resold on
December 1, 2021 cash to Mr. Barnes.
54. What is the net income for the year ended December 31, 2021?
A. 64,200
B. 38,450
C. 49,100
D. 40,100
Page 15
Numbers 55 and 56
On January 1, 2021, White Wolf Builders, Inc. won a bidding to build an athletic stadium. The project
was to be built at a total cost of P5,500,000 and was scheduled for completion by September 1, 2023.
One clause of the contract stated that White Wolf Builders, Inc. was to deduct P15,000 from the
P6,600,000 bid price for each week that completion was delayed. Completion was delayed for six
weeks.
55. What is the net income for the year 2022, using the percentage of completion method?
A. 374,000
B. 284,000
C. 248,000
D. 743,000
56. Using the percentage of completion method, what is the balance of the Construction in
Progress account net of billings at December 31, 2022?
A. 1,520,500
B. 1,784,500
C. 1,520,000
D. 1,250,000
Numbers 57 and 58
The following information are taken from the books and records of Flag Smashers Company and its
branch. The balances at December 31, 2021, the second year of the company’s operations, are:
The branch obtains all of its merchandise from the office. The home office ships the merchandise at
125 percent of its cost. The ending inventory of the branch is P40,000 at the billed price.
57. What was the billed price of the branch beginning inventory?
A. 30,000
B. 32,500
C. 22,500
D. 37,500
58. The branch net income as far as the home office is concerned:
A. 102,000
B. 100,000
C. 112,500
D. 112,000
Page 16
Numbers 59 and 60
On January 1, 2020, Zemo, Inc. granted a franchise right to a franchisee for the operation of coffee
shop using Zemo’s trade name for a nonrefundable initial franchise fee of P10M and continuing
franchise fee of 10% of franchisee’s annual sales. It is the obligation of Zemo to construct the coffee
shop and to deliver the movables. In addition to that, Zemo has the obligation to deliver 100,000 units
of raw maters to the franchisee. The stand-alone selling price of the right to use Zemo’s trade name is
P4m. The stand-alone selling price of the construction of the coffee shop and delivery of movables is
P3M while the standalone selling price of the 100,000 units of raw materials is P1M.
On July 1, 2020, Zemo finished the construction of the coffee shop and delivered all the required
movables. 20,000 units of raw materials have been delivered as of December 31, 2020. The franchisee
reported sales revenue amounting to P2M for the year 2020.
59. How much of the upfront fee is to be allocated to the delivery of raw materials?
A. 200,000
B. 3,750,000
C. 5,000,000
D. 1,250,000
60. What is the total amount of revenue to be reported by Zemo Inc. for the year ended
December 31, 2020?
A. 8,750,000
B. 5,700,000
C. 10,000,000
D. 4,700,000
Numbers 61 and 62
Sharon purchased a 40% interest of Madripoor Joint Venture on January 1, 2021. Sharon has joint
control over Madripoor Joint Venture. On April 1, 2021, Sharon purchased equipment for P500,000
with a carrying amount of P300,000 from Madripoor. The equipment has a remaining life of 8 years on
the date of sale. The entities use the straightline method of depreciating the equipment.
Madripoor reports income amounting to P900,000 and P750,000 in years 2021 and 2022.
61. How much is the investment income to be reported by Sharon on December 31, 2021?
A. 290,000
B. 360,000
C. 287,500
D. 167,500
62. How much is the investment income to be reported by Sharon on December 31, 2022?
A. 278,000
B. 310,000
C. 325,000
D. 300,000
Number 63
Which of these items may be included in the contract price of a construction price?
A. Penalties
B. Incentive payments
C. Variation
D. All of the above
. Page 17
Numbers 64, 65 and 66
BP (SME A) and BTS (SME B) each acquired 30% of the outstanding shares of Big Hit Corporation
for P202,000, including the transaction cost of P2,000. BP and BTS agreed to a joint control over Big
Hit. During the year, Big Hit reported the following:
It was determined after a thorough test that due to economic changes, there was an adverse effect to
Big Hit during the year. Hence, there appears to be impairment of the investment in the said entity.
64. Assuming that BP elected to carry the investment in Big Hit using the Cost Method and the
Fair Value of Big Hit at year end is P196,000 and cost to sell amounts to P1,800, How much
is the impairment loss to be recognized by BP in its investment in Bighit?
A. 0
B. 2,000
C. 7,800
D. 5,800
65. Assuming that BP elected to use the Fair Value method and the fair value of Bighit at year
end is P196,000 and cost to sell amounts to P1,800. How much is the net profit/loss from the
investment?
A. 1,200
B. (1,800)
C. 4,000
D. (4,800)
66. Assuming that BP elected to use the Fair Value method and the fair value of BigHit at year
end is P196,000 and cost to sell amounts to P1,800. How much is the impairment loss to be
recognized for the year?
A. 0
B. 2,000
C. 7,800
D. 12,600
Number 67
A joint arrangement that is structured through a separate vehicle should be accounted for as
A. Joint operation
B. Joint venture
C. Either joint operation or joint venture
D. Neither joint operation nor joint venture
Number 68
Number 69
Which of the following transactions will increase the normal balance of home office account in the
separate statement of financial position of the branch?
A. Credit memo issued by the home office
B. Debit memo received from the home office
C. Collection by the home office of branch receivable
D. Payment by the branch of home offices loans payable
Number 70
Which of the following statements is correct regarding accounting for home office and branch?
A. If the home office purchased an equipment to be used by the branch but the record of the asset is
being maintained by the home office for uniform depreciation policy, no entry is required on the
part of the branch.
B. Assuming the home office ships merchandise to the branch at a mark-up above cost, the account
Shipments from Home Office in the published income statement is reported at billed price.
C. The allowance for overvaluation account must be debited in the separate books of the home office
to adjust the results of operations of the branch whether it is a net income or net loss per branch
books.
D. A credit memo received by the branch may be a notification from the office about allocation of
expense incurred by the latter.
END
CPA REVIEW SCHOOL OF THE PHILIPPINES
MANILA
1. C
NI-P 3,600,000
NI-S (1,360,000 x 80%) 1,088,000
Amortization of excess (1,520,000 ÷ 5) x 80% (243,200)
from undervalued equipment
Gain on acquisition 136,000
Intercompany dividends (280,000 x 80%) (224,000)
CNI-P 2022 4,356,800
2. A
3. A
4. D
BV SHE subsidiary 22,400,000
Undervaluation of an equipment 1,520,000
FMV SHE subsidiary 23,920,000
NOTE: Since the proportionate share is greater than the assumed amount of NCI, then
the FMV of the NCI at the date of acquisition is the proportionate share
5. C
6. A
Aggregate 12,600,000
FMV Ident. Net Asset Subsidiary (11,700,000)
Goodwill 900,000
NOTE: Since the assumed amount is greater than the proportionate share of NCI, then
the FMV of the NCI at the date of acquisition is the assumed amount
Allocation of Goodwill:
Parent (80%) Subsidiary (20%)
Consideration for 80% and Initial Measurement of NCI 20% 10,080,000 2,520,000
FMV Ident. Net Asset Subsidiary (11,700,000) (9,360,000) (2,340,000)
720,000 180,000
NI-Parent 6,000,000
NI-Subsidiary (2,400,000 x 80%) 1,920,000
Amortization of excess (900,000 ÷ 3) x 80% (240,000)
from undervalued machine
Intercompany dividends (720,000 x 80%) (576,000)
Impairment loss [240,000 x (720/900)] (192,000) *use allocation of GW ratio*
Upstream RPBI (600,000 x 1/4) x 80% 120,000
Downstream UPEI (14,400,000 x ¼ x 20/120) (600,000)
CNI-Parent 6,432,000
7. D
8. D
9. C
11. D
12. C
13. B
14. C
15. B
16. A
Acquirer RE 250,000
Other acquisition costs (19,000)
Total RE after acquisition 231,000
17. B
Acquirer OS 550,000
Issued shares at par (35,000 x 20) 700,000
Total OS after acquisition 1,250,000
Total APIC after acquisition 176,000
Total RE after acquisition 231,000
Total SHE after acquisition 1,657,000
18. A
19. D
20. C
24. C
25. A
Statement of Affairs
Cash 250,000
Trade receivables 180,000
Inventory 200,000
Total free assets 630,000
Less: Trustee fee (50,000)
Salaries payable (400,000)
Net free assets 180,000
Add: Estimated deficiency 470,000
Unsecured nonpriority claims 650,000*
*650,000 = 530,000 + (1,120,000 – 1,000,000)
Net free assets 180,000
Total unsecured non-priority claims ÷ 650,000
Estimated recovery percentage 27.69%
26. C
Statement of Realization and Liquidation
27. C
28. B
3,000,000 / 100,000 = 30
125,000 + (30 x 2,500) = 200,000
29. B
750,000 / 75,000 = 10
2,250,000 / 75,000 = 30
30. B
31. B
32. B
33. A
34. C
Total goods to account for 125,000 = 25,000 BWIP + 100,000 Started in production
Whole units CC DM
BWIP 25,000 20,000 0 P378,700
S&F 85,000 85,000 85,000 943,500
EWIP 10,000 3,000 10,000 62,700
A.loss 5,000 5,000 5,000 55,500
TGAAF 125,000 113,000 100,000 1,440,400
35. D
36. C
37. A
38. D
1/1/21 3/31/21
FV of put option P9,800 P11,400
Intrinsic value 2,015 3,705
*Time value 7,785 7,695 = decrease by P90
40. B
NOTE: Since the hedge item is an asset, therefore the exposed account in the hedging
instrument due to the fluctuation of the forward rate is the FC Payable and the fixed
account is the FC receivable. As seen in the solution the multiplier of the FC receivable is
the 120-day forward rate on October 1, 2021 and the balance on December 31, 2021 will be
the same. However, the balance of the FC payable on December 31, 2021 equals the 30-day
forward rate on December 31, 2021 because it is exposed due to the changes in the forward
rate. As for the balance of the Derivative instrument, we get the NET amount of the FC
Receivable and FC Payable. If the FC Receivable > FC Payable, then DR balance or it is
considered as an ASSET. If the FC Receivable < FC Payable, then CR balance or it is
considered as a LIABILITY.
41. A
Forward rate Dec 31 P36.70
Spot rate Jan 31. P39.50
2.80 * 15,750 = P44,100 gain on firm commitment
42. C
43. D
45. C
46. B
47. A
48. C
49. A
50. C
51. A
52. A
53. A
54. A
55. B
57. D
58. A
Sales P400,000
Cost of goods sold – cost to home office
Beginning inventory P 30,000
Shipment from home office 200,000
Ending inventory (P40,000 / 125%) ( 32,000) 198,000
Gross profit P202,000
Expenses 100,000
Branch net income as far as the home office is concerned P102,000
59. D
60. D
62. B
63. D
64. C
65. D
66. A
67. C
68. A
69. B
70. C
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