Toaz - Info Afar PR

INTEGRATED REVIEW MAY 2020 BATCH
SECOND MONTHLY EXAMS AFAR
PROBLEM B: (With full payment of liabilities) Alfonso, Bravo and Claudio are partners who share profits and losses in the
ratio of 5:2:3, respectively. On January 1, 2016, they decided to liquidate the partnership and the statement of financial position
was prepared as follows:
ASSETS LIABILITIES & CAPITAL
Cash 5,000 Liabilities 6,000
Non Cash Assets 50,000 Bravo, Loan 7,000
Claudio, Loan 2,500
Alfonso, Capital 17,450
Bravo, Capital 12,550
Claudio, Capital 9,500
Total Assets 55,000 Total Liabilities & Capital 55,000
The following transactions occurred as a result of the liquidation process:

Payment of
Book Value of Liquidation Payment to
Assets Sold Proceeds Expenses Creditors Cash Withheld
January 12,000 10,500 500 6,000 2,000
February 7,000 6,000 750 1,000
March 15,000 10,000 1,000 2,500
April 2,000 5,000 5,000 0
1. How much total cash should the partnership distribute in order to apply the profit or loss ratio of all partners in
distribution?
A. P11,500 B. P14,100
C. P20,750 D. P22,540
2. Using Cash Priority Program (CPP), how much is the amount to be received by Alfonso, Bravo and Claudio for the month
of January?
A. P0; 3,500; 3,500 B. P3,500; 1,400; 2,100
C. P0; 7,000; 0 D. P7,000; 0; 0
of February?
A. P0; 3,125; 3,125 B. P3,125; 1,250; 1,875
C. P0; 1,020; 5,230 D. P0; 5,230; 1,020
of March?
A. P0; 3,750; 3,750 B. P3,750; 1,500; 2,250
C. P3,325; 1,670; 2,505 D. P2,505; 1,670; 3,325
5. Which of the following statements about process costing system is incorrect?

A. In a process costing system, each processing department has a work in process account.
B. In a process costing system, equivalent units are separately computed for materials and for conversion costs.
C. In a process costing system, overhead can be under- or overapplied just as in joborder
costing. D. In a process costing system, materials costs are traced to units of products.
PROBLEM 2: (With partial payment of liabilities) Klay, Kyrie and Kevin are partners who share profits and losses in the ratio
of 40:30:30, respectively. On January 1, 2017, they decided to liquidate the partnership and the statement of financial position
was prepared as follows:
ASSETS LIABILITIES & CAPITAL

Non Cash Assets 90,000 Kyrie, Loan 10,000
Kevin, Loan 15,000
Klay, Capital 20,000
Kyrie, Capital 20,000
Kevin, Capital 25,000
Total Assets 130,000 Total Liabilities & Capital 130,000
In January, non cash assets with book value of P30,000 was sold for P17,500 to a Mr. Thompson; liquidation expense of
P5,000 was paid and only 40% of the outstanding liabilities were paid in January. The partnership withholds cash of P2,500 for
next month’s liquidation expenses.
In February, non cash asset with book value of P40,000 was sold to Mr. James but a loss on realization of P10,000 was
recognized. Liquidation expense of P5,500 was paid and only P10,000 recorded liabilities were paid during the month. The
partnership withholds cash of P2,000 for next month’s liquidation expenses.
In March, the remaining non cash assets were sold to Ms. Smith for P25,000. A liquidation expense of P7,000 was paid and the
remaining liabilities were paid during the month to end the liquidation process.
6. How much should Kyrie receive in the month of January?
A. P0 B. P3,000
C. P10,000 D. P12,250
7. How much is the beginning total interest of Kevin in the month of February?
A. P22,250 B. P23,350
C. P30,000 D. P40,000
8. How much should Kevin receive in the month of February?
A. P0 B. P12,500
C. P25,000 D. P40,000
9. On December 1, 2012, EE and FF formed a partnership, agreeing to share for profits and losses in the ratio of 2:3
respectively. EE invested a parcel of land that cost him P 25,000. FF invested P 30,000 cash. The land was sold for P
50,000 on the same date, there hours after formation of the partnership. How much should be the capital balance of EE
right after information?
a. P25,000 b. 30,000 c. 60,000 d. 50,000
10. On March 1, 2012, II and JJ formed a partnership with each contributing the following assets:
II JJ
Cash P 300,000 P 700,000
Machinery and equipment 250,000 750,000
Building - 2,250,000
Furniture and fixture 100,000 -
The building is subject to mortgage loan of P800,000, which is to be assumed by the partnership agreement provides
that II and JJ share profits and losses 30% and 70% respectively. On March 1, 2012 the balance in JJ’s capital account
should be:
a. P3,700,000 b. P3,140,000 c. 3,050,000 d. 2,900,000
11. On August 1, AA and BB pooled their assets to form a partnership, with firmed to take over their businesses assets and
assumed the liabilities. Partners’ capitals are to be based on net assets transferred after the following adjustments. (Profit
and loss are allocated equally.)
BB’s inventory is to be increased by P4,000; an allowance for doubtful accounts of P1,000 and P 1,500 are to be set
up in the books of AA and BB, respectively; and accounts payable of P4,000 is be recognized in AA’s book. The
individual trial balances on August 1, before adjustments, follow:
AA BB
Assets P 75,000 P 113,000
Liabilities 5,000 34,500
What is the capital of AA and BB after the above
adjustment? a. AA, P 68,750; BB, P 77,250 c. AA, P 65,000; P 76,000
b. AA, P 75,000; BB, P 81,000 d. AA, P 65,000; P 81,000
12. As of July 1, 2012, FF and GG decided to form a partnership. Their balance sheets on this date are:
FF GG
Cash P 15,000 P 37,500
Account receivable 540,000 225,000
Merchandise inventory - 202,500
Machinery and equipment 150,000 270,000
TOTAL P 705,000 P 735,000
Accounts payable P 135,000 P 240,000

FF, capital 570,000 -
GG, capital - 495,000
TOTAL P 705,000 P 735,000
The partners agreed that the machinery and equipment of FF is under depreciated by P15,000 and that GG by
P45,000. Allowance for doubtful accounts is to be set up amounting to P 120,000 for FF and P45,000 for GG. The
partnership agreement provides for a profit and loss ratio and capital interest of 60% to FF and 40% to GG. How
much cash must FF invest to bring the partner’s capital balances proportionate to their profit and loss ratio?
a. P 142,000 b. 52,500 c. P 172,000 d. 102,000
Use the following to answer questions 13 – 14:

SASA Enterprises
Inventories: March 1 March 31
Raw material PHP18,000 PHP15,000
Work in process 9,000 6,000
Finished goods 27,000 36,000
Additional information for March:
Raw material purchased PHP42,000
Direct labor payroll 30,000
Direct labor rate per hour 7.50
Overhead rate per direct labor hour 10.00
13. Refer to SASA Enterprises. For March, conversion cost incurred was
A. PHP70,000. C. PHP40,000.
B. PHP30,000. D. PHP72,000.
14. The cost of abnormal continuous losses is

a. absorbed by all units past the inspection point.
b. considered a product cost.
c. written off as a loss on an equivalent unit basis.
d. absorbed by all units in ending inventory and transferred out on an equivalent unit basis.
15. The following information is available for HYUNDAI Company for the current year:
Beginning Work in Process Costs of Beginning Work in Process:
(75% complete) 14,500 units Material PHP25,100
Started 75,000 units Conversion 50,000
Ending Work in Process Current Costs:
(60% complete) 16,000 units Material PHP120,000
Abnormal spoilage 2,500 units Conversion 300,000
Normal spoilage (continuous) 5,000 units
Transferred out 66,000 units
All materials are added at the start of production.
Using FIFO, what are equivalent units for conversion costs?
a. 72,225 c. 67,225
b. 78,100 d. 69,725
16. In allocating variable costs to products,

A. a company should never use more than one cost driver.
B. a company should use the same allocation base that it uses for fixed costs.
C. a volume-based cost driver should be used.
D. direct labor hours should always be used as the allocation base.
17. Manufacturing cycle efficiency should be increased by employing which of the following
techniques? JIT Flexible Batch
Inventory Manufacturing Systems Manufacturing
A. yes yes yes
B. no no no
C. yes yes no
D. yes no yes
19. In process costing, the cost of normal continuous losses is handled through the method of neglect, which:
a. excludes the spoiled units from the equivalent unit computation, thereby increasing the cost per equivalent
unit
b. includes the spoiled units in the equivalent unit computation, thereby increasing the cost per equivalent unit
c. excludes the spoiled units from the equivalent unit computation, thereby decreasing the cost per equivalent
unit
d. includes the spoiled units in the equivalent unit computation, thereby decreasing the cost per equivalent unit

Samantha Corporation uses the weighted average method in its process costing system. This month, the beginning inventory in
the first processing department consisted of 700 units. The costs and percentage completion of these units in beginning
inventory were:
Cost Percent Complete
Materials cost P12,700 85%
Conversion costs P10,900 30%
A total of 9,800 units were started and 8,800 units were transferred to the second processing department during the month.
The following costs were incurred in the first processing department during the month:
Materials cost P175,600
Conversion costs P420,900
The ending inventory was 15% incomplete with respect to materials and 70% complete with respect to conversion costs.
20. The total cost transferred from the first processing department to the next processing department during the month is
closest to:
a. P620,100 c. P542,106
b. P646,832 d. P596,500
21. The cost of ending work in process inventory in the first processing department according to the company's cost system
is closest to:
a. P77,994 c. P104,725
b. P73,308 d. P89,016
22. Which of the following statements is true concerning job order costing and management decision making?
a. Job order costing assists managers in their planning, controlling, decision making and performance
evaluations functions.
b. Job order costing allows managers to trace costs associated with specific current jobs to better estimate costs
of future jobs.
c. Job order costing provides a means by which managers can better control the costs associated with their
operations.
d. All of the above are true statements.
23. Which of the following is not a source document used in job order costing systems?
a. Cost of production report c. Job cost sheet
b. Employee time sheet d. Material requisition form
24. Depreciation on a personal computer used in the marketing department of a manufacturing firm would be classified as:
a. a product cost that is fixed with respect to the company's output
b. a period cost that is fixed with respect to the company's output
c. a product cost that is variable with respect to the company's output
d. a period cost that is variable with respect to the company's output
25. The partnership Melinda, Garret and Bobby is to be liquidated. At this date, the partnership books reveal the following:
Cash, P50,000; Liabilities, P200,000; Melinda Capital(25), P40,000; Garret Capital(35),P70,000; Bobby Capital(40),
P60,000. After the first sale of the non-cash assets, Garret already received P15,225. How much should the remaining
non-cash assets be sold for Melinda to receive a total of P11,250 if at this time the partnership incurred additional
liabilities of P30,000.
The partnership withheld P10,000 cash in the prior cash distribution.
A. P48,900 C. P78,900
B. P68,900 D. P38,900
Use the following to answer questions 25 – 26

Mike Company had only one job in process on May 1. The job had been charged with P3,400 of direct materials, P4,640 of
direct labor, and P9,200 of manufacturing overhead cost. The company assigns overhead cost to jobs using the predetermined
overhead rate of P23 per direct labor-hour.
During May, the activity was recorded:
Raw materials (all direct materials):
Beginning balance P8,500
Purchased during the month P42,000
Used in production P48,500
Labor:
Direct labor-hours worked during the month 2,200
Direct labor cost incurred P25,520
Actual manufacturing overhead costs incurred P52,800
Inventories:
Raw materials, May 30 ?
Work in process, May 30 P32,190
Work in process inventory on May 30 contains P7,540 of direct labor cost. Raw materials consist solely of items
that are classified as direct materials.
26. The balance in the raw materials inventory account on May 30 was:
a. P33,500 c. P40,000
b. P2,000 d. P6,500
27. The cost of goods manufactured for May was:
a. P109,670 c. P143,300
b. P124,620 d. P126,820
28. In reviewing the accounting records at year-end, Soda Co.'s accountant has determined that the following items and
amounts were debited to the Manufacturing Overhead account during the year:
Factory supervisor’s salary P8,000
Sales commissions P7,000
Vacation pay for the materials storeroom clerk P2,000
Including the items above, the debits to the Manufacturing Overhead account totaled P245,000 for the year. Credits
to the account totaled P240,000 for the year. Based on this information, if all entries had been made correctly during
the year the Manufacturing Overhead account would have been:
a. overapplied by P4,000 c. underapplied by P5,000
b. overapplied by P12,000 d. overapplied by P2,000
29. The following information has been taken from the cost records of Zap Company for the past year:
Raw material used in production P326
Total manufacturing costs charged to production during the year (includes direct 686
material, direct labor, and overhead equal to 60% of direct labor cost)
Cost of goods available for sale 826
Selling and Administrative expenses 25
Inventories Beginning Ending
Raw Material P75 P 85
Work in Process 80 30
Finished Goods 90 110
Direct labor cost charged to production during the year was
A. P135.
B. P216.
C. P225.
D. P360
Toyota Corporation uses the FIFO method in its process costing system. Data concerning the first processing department for the most
recent month are listed below:
Beginning work in process inventory:
Units in beginning work in process inventory 200
Materials costs P1,800
Conversion costs P600
Percentage complete with respect to materials 55%
Percentage complete with respect to conversion 10%
Units started into production during the month 5,000
Units transferred to the next department during the month 4,500
Materials costs added during the month P74,800
Conversion costs added during the month P128,800
Ending work in process inventory:
Units in ending work in process inventory 700
Percentage incomplete with respect to materials 15%
Percentage incomplete with respect to conversion 30%
Note: To reduce rounding error, carry out all computations to at least three decimal
places.
30. What are the equivalent units for conversion costs for the month in the first processing
department? a. 490
b. 4,300
c. 4,970
d. 5,200
31. The cost per equivalent unit for materials for the month in the first processing department is closest
to: a. P16.36
b. P14.38
c. P16.62
d. P15.01
END OF EXAMINATION
FIRST DRILL - AFAR MAY 2020 BATCH
ADVANCED FINANCIAL ACCOUNTING & REPORTING

1. Which of the following will not result to automatic dissolution of a general partnership?
A. Assignment of partner’s interest to third persons C. Insolvency of the partnership
B. Death of a partner D. Civil interdiction of a partner
2. How shall the net profit or net loss of the partnership be divided among the partners, whether capitalist or industrial?
A. In accordance with their capital contribution ratio.
B. In accordance with just and equitable sharing taking into account the circumstances of the partnership.
C. Equally
D. In accordance with the partnership agreement.
3. Partnership capital and drawing accounts are similar to the
corporate. A. Paid in capital, retained earnings, and dividends
accounts.
B. Retained earnings account.
C. Paid in capital and retained earnings accounts.
D. Preferred and common stock accounts.
On May 1, 2020, the business assets of John and Paul appear below:
John Paul
Cash P 11,000 P 22,354
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000
Building 428,267
Furniture & Fixtures 50,345 34,789
Other assets 2,000 3,600
Total P1,020,916 P1,317,002
Accounts payable P178,940 P243,650

Notes payable 200,000 345,000
John, Capital 641,976
Paul, Capital 728,352
Total P1,020,916 P1,317,002
John and Paul agreed to form a partnership contributing their respective assets and equities subject to the following adjustments:
a. Accounts receivable of P20,000 in John’s books and P35,000 in Paul’s are uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in John’s and Paul’s respective books.
c. Other assets of P2,000 and P3,600 in John’s and Paul’s respective books are to be written off.
4. The capital accounts of the partners after the adjustments will
be: A. John’s 614,476 and Paul’s 683,052
B. John’s 615,942 and Paul’s 717,894
C. John’s 640,876 and Paul’s 712,345
D. John’s 613,576 and Paul’s 683,350
5. How much assets does the partnership have?
A. 2,337,918
B. 2,237,918
C. 2,265,118
D. 2365,218
6. Peter offered to join for a 20% interest in the firm. How much cash should he
contribute? A. 330,870
B. 337,487
C. 344,237
D. 324,382
7. After Peter’s admission, the profit and loss sharing ratio was agreed to be 40:40:20, based on capital credits. How much
should cash settlement be between John and Paul?
A. 33,602
B. 32,930
C. 32,272
D. 34,288
8. During the first year of their operations, the partnership earned P325,000. Profits were distributed in the agreed manner.
Drawing were mad in these amounts: John, P50,000; Paul, P65,000; Peter, P28,000/
How much are the capital balances after the first year?
A. John, Capital 750,627
Peter, Capital 372,223
B. John, Capital 728,764
C. John, Capital 757,915
D. John, Capital 743,121
9. The Flat and Iron partnership agreement provides for Flat to receive a 20% bonus on profits before bonus. Remaining profits
and losses are divided between Flat and Iron in the ratio of 2:3, respectively. Which partner has a greater advantage when the
partnership has a profit or when it has a loss.
Profit Loss
A. Flat Iron
B. Flat Flat
C. Iron Flat
D. Iron Iron
10. X,Y and Z are partners in XYZ Partnership and share profits and losses in a 5:3:2 ratio. The partners have agreed to liquidate
their partnership. Prior to the liquidation, the partnership balance sheet reflects the following balances in their books:
Cash 25,200 X, Capital 72,000
Non-cash Assets 297,600 Y, Capital (12,000)
Notes payable to Z 38,400 Z, Capital 39,600
Other Liabilities 184,800
Assuming that the partnership incurred liquidating expenses of P16,800 and that the non-cash assets with a book value of
P24,000 was sold for P216,000, how much cash would Z receive?
-0- 46,457
39,600 74,571
11. Rene, Jose, Allan and Noel are partners with profit and loss ratios of 45:15:20:20 each respectively. The partners decide to
liquidate their business. Prior to their liquidation, their accounts reflected the following balances: Cash-P50,000; Liabilities-
P150,000; Rene, Capital-P90,000; Jose, Capital-P45,000; Allan, Capital, P35,000 and Noel, Capital-P25,000. The buyer of the
non-cash assets of the partnership pays the partnership P90,000 and agrees to pay 75% of the liabilities. The partners also incur
liquidating expenses of P15,000. How much cash would Jose receive after the first sale of the non-cash assets?
28,875 -0-
21,375 12,000
12. Using the information in problem no 11, as an independent case, assuming that after the first installment sale of the non-cash
assets, Rene and Jose already receive a total of P45,000 and the second sale of non-cash assets generated P75,000 with the
partners withholding P5,000, how much would Rene receive after the 2nd installment sale?
34,031 33,750
36,281 36,000
On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or loss ratio of 5:3:2 of respective
partners A, B and C. showed the following information:
Cash 1,600,000 Total Liabilities 2,000,000
Noncash assets 1,400,000 A, Capital 100,000
B, Capital 500,000
C, Capital 400,000
On January 1, 2020, the partners decided to liquidate the partnership in installment. All partners are legally declared to be
personally insolvent.
As of January 31, 2020, the following transactions occurred:
 Noncash assets with a carrying amount P1,000,000 were sold at a gain of P100,000.
 Liquidation expenses for the month of January amounting to P50,000 were paid.
 It is estimated that liquidation expenses amounting to P150,000 will be incurred for the month of February, 2020.
 20% of the liabilities to third persons were settled.
 Available cash was distributed to the partners.
As of February 28, 2020, the following transactions occurred:

 Remaining noncash assets were sold at a loss of P100,000.
 The final liquidation expenses for the month of February amounted to P100,000.
 The remaining liabilities to third persons were settled at a compromise amount of P1,500,000.
 Remaining cash was finally distributed to the partners.
13. What is the amount of cash received by partner C on January 31, 2020?
A. 260,000 B. 240,000 C. 300,000 D. 350,000
14. What is the share of B in the maximum possible loss on January 31, 2020?
A. 275,000 B. 110,000 C. 120,000 D. 165,000
15. What is the amount of total cash withheld on January 31, 2020?
A. 550,000 B. 1,600,000 C. 1,750,000 D. 1,700,000
Several years ago Nestle Corporation purchased an 80 percent interest in Magnolia Company. The book values of Magnolia’s
assets and liability accounts at that time were considered to be equal to their fair market values. Nestle paid an amount
corresponding to the underlying book value of Magnolia so that no allocations or goodwill resulted from the purchase price.
The following selected account balances are from the individual financial records of these two companies as of December 31,
2020:
Nestle Magnolia
Sales P640,000 P360,000
Cost of goods sold 290,000 197,000
Operating expenses 150,000 105,000
Retained earnings, January 1, 2020 740,000 180,000
Inventory 346,000 110,000
Buildings 358,000 157,000
Investment income not given
16. Assume that Magnolia sells inventory to Nestle at a markup equal to a 40 percent of cost. Intercompany transfers at cost
were P50,000 in 2019 and P80,000 in 2020. Of these inventory, P21,000 of the 2019 transfers were retained and then sold by
Nestle in 2020, whereas P35,000 of the 2020 transfers were held until 2021. On consolidated financial statements for 2020,
what cost of goods sold balance would appear?
A. P290,000 B. P487,000 C. P492,600 D. P380,600
17. In addition to the above, Nestle sells a building to Magnolia on January 1, 2019, for P80,000, although the book value of this
asset was only P50,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-
line method with no salvage value. On consolidated financial statements for 2020, what amount would appear for
noncontrolling interest in subsidiary’s net income (MINI)?
A. P11,600 B. P12,800 C. P6,600 D. P10,480
Items 18 and 19 are independent problems based on the following capital account
balances: Bogs (40% of gains and losses) P 220,000
Juris (40%) 160,000
Greco (20%) 110,000
18. Drei invests P270,000 in cash for a 30 percent ownership interest. The money goes to the original partners. Goodwill is to be
recorded. How much goodwill should be recognized, and what is Drei’s beginning capital balance?
A. P 410,000 and P270,000 C. P140,000 and P189,000
B. P 140,000 and P270,000 D. P410,000 and P189,000
19. Drei invests P250,000 in cash for a 30 percent ownership interest. The money goes to the business. No goodwill or other
revaluation is to be recorded. After the transaction, what is Juris’ capital balance?
A. P160,000 B. P168,000 C. P170,200 D. P171,200
20. A partnership begins its first year of operations with the following capital
balances: Gaylord, Capital P 110,000
Arman, Capital 80,000
Leandro, Capital 110,000
According to the Articles of Partnership, all profits will be assigned as follows:
 Gaylord will be awarded an annual salary of P20,000 with P10,000 assigned to Leandro.
 The partners will be attributed with interest equal to 10 percent of the capital balance as of the first day of the year.
 The remainder will be assigned on a 5:2:3 basis, respectively.
 Each partner is allowed to withdraw up to P10,000 per year.
Assume that the net loss for the first year of operations is P20,000 with net income of P40,000 in the subsequent year. Assume
further that each partner withdraws the maximum amount from the business each period. What is the capital balance in
Gaylord’s Capital account at the end of the second year?
A. P102,600 B. P104,400 C. P108,600 D. P102,200
21. A local partnership is in the process of liquidating and is currently reporting the following capital
balances: Margarette, capital (50% share of all profits and losses) P19,000
Woody, capital (30%) 18,000
Cassie, capital (20%) ( 12,000)
Cassie has indicated that the P12,000 deficit will be covered by a forthcoming contribution. 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 partner be
given?
A. Margarette, P13,000; Woody, P12,000 C. Margarette, P12,000; Woody, P13,000

B. Margarette, P11,500; Woody, P13,500 D. Margarette, P12,500; Woody, P12,500.
22. A local partnership is considering the possibility of liquidation because one of the partners (Bell) is insolvent. Capital
balances at the current time are as follows. Profits and losses are divided on a 4:3:2:1 basis, respectively:
Bell, capital P5 0,000Dennard, capital P14,000

Hardy, capital 56,000 Suddath, capital 80,000
Bell’s creditors have filed a P21,000 claim against the partnership’s assets. The partnership currently holds assets
reported at P300,000 and liabilities of P100,000.
If the assets can be sold for P190,000, what is the minimum amount that Bell’s creditors would receive?
A. P0 B. P2,000 C. P2,800 D. P6,000
23. A partnership has the following capital balances: A (20% of profits and losses) = P100,000; B, (30% of profits and losses) =
P120,000; C, (50% of profits and losses) = P180,000.
If the is to be liquidated and P30,000 becomes immediately available, who gets the money?
A. P6,000 to A, P9,000 to B, P15,000 to C. C. P22,000 to A, P8,000 to B, P0 to C.
B. P22,000 to A, P3,000 to B, P5,000 to C. D. P24,000 to A, P6,000 to B, P0 to C.
24. A partnership has the following balance sheet just before 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
P119,000 P119,000
Liquidation expenses are estimated to be P12,000. The other assets are sold for P40,000.
What liquidation can be made to the partners?
A. P0 to Art, P1,500 to Raymond, P2,500 to Darby.
B. P1,333 to Art, P1,333 to Raymond, P1,334 to Darby.
C. P0 to Art, P1,200 to Raymond, P2,800 to Darby.
D. P600 to Art, P1,200 to Raymond, P2,200 to Darby.
Items 25 to 28 are based on the following:

Entity A acquired the net assets of Entity B by issuing 10,000 ordinary shares with par value of P10 and bonds payable with face
amount of P500,000. The bonds are classified as financial liability at amortized cost.
At the time of acquisition, the ordinary shares are publicly quoted at P20 per share. On the other hand, the bonds payable are
trading at 110.
Entity A paid P10,000 share issuance costs and P20,000 bond issue costs. Entity A also paid P40,000 acquisition related costs
and P30,000 indirect costs of business combination.
Before the date of acquisition, Entity A and Entity B reported the following data:
Entity A Entity B
Current assets 1,000,000 500,000
Noncurrent assets 2,000,000 1,000,000
Current liabilities 200,000 400,000
Noncurrent liabilities 300,000 500,000
Ordinary shares 500,000 200,000
Share premium 1,200,000 300,000
Retained earnings 800,000 100,000
At the time of acquisition, the current assets of Entity A have fair value of P1,200,000 while the noncurrent assets of Entity B
have fair value of P1,300,000. On the same date, the current liabilities of Entity B have fair value of P600,000 while the
noncurrent liabilities of Entity A have fair value of P500,000.
25. What is the goodwill or gain on bargain purchase arising from business combination?
A. 50,000 goodwill
B. 150,000 gain on bargain purchase
C. 120,000 goodwill
D. 70,000 gain on bargain purchase
26. What total amount should be expensed as incurred at the time of business combination?
A. 20,000 B. 70,000 C. 30,000 D. 50,000
27. What is Entity A’s amount of total assets after the business combination?
A. 4,520,000 B. 4,810,000 C. 4,750,000 D. 4,440,000
28. What is Entity A’s amount of total liabilities after the business combination?
A. 2,240,000 B. 2,510,000 C. 2,320,000 D. 2,130,000

On January 1, 2019, Entity A acquired 70% of outstanding ordinary shares of Entity B at a price of P210,000. On the same date,
the net assets of Entity B were reported at P260,000. On January 1, 2019 Entity A reported retained earnings of P2,000,000 while
Entity B reported retained earnings of P200,000.
All the assets and liabilities of Entity B are fairly valued except machinery which is undervalued by P80,000 and inventory which
is overvalued by P10,000. The said machinery has remaining useful life of four years while 40% of the said inventory remained
unsold at the end of 2019.
For the year ended December 31, 2019, Entity A reported net income of P1,000,000 and declared dividends of P200,000 in the
separate financial statements while Entity B reported net income of P150,000 and declared dividends of P20,000 in the separate
financial statements.
Entity A accounted the investment in Entity B using cost method in the separate financial statements.
29. What is the noncontrolling interest in net assets on December 31, 2019?
A. 124,800 B. 130,200 C. 126,000 D. 133,800
30. What is the consolidated net income attributable to parent shareholders for the year ended December 31, 2019?
A. 1,102,200 B. 1,162,200 C. 1,141,200 D. 1,095,200
31. What is the amount of consolidated retained earnings on December 31, 2019?
A. 3,012,200 B. 2,991,200 C. 2,952,200 D. 2,945,200

On January 1, 2019, Entity A acquired 60% of outstanding ordinary shares of Entity B at a gain on bargain purchase of P40,000.
For the year ended December 31, 2020, Entity A and Entity B reported sales revenue of P2,000,000 and P1,000,000 in their
respective separate income statements. At the same year, Entity A and Entity B reported cost of goods sold of P1,200,000 and
P700,000 in their respective separate income statements.
During 2019, Entity A sold inventory to Entity B at a selling price of P280,000 with gross profit rate of 40% based on cost. On
the other hand, Entity B sold inventory to Entity A at a selling price of P400,000 with gross profit rate of 30% based on sales
during 2020.
On December 31, 2019, 25% of the goods coming from Entity A remained in Entity B’s inventory but all were eventually sold to
third persons during 2020. As of December 31, 2020, 40% of the goods coming from Entity B were eventually sold to third
persons.
For the year ended December 31, 2020, Entity A reported net income of P500,000 while Entity B reported net income of
P200,000 and distributed dividends of P50,000. Entity A accounted for its inventory in Entity B using cost method in its separate
32. What is the consolidated sales revenue for the year ended December 31, 2020?
A. 2,600,000 B. 2,320,000 C. 3,000,000 D. 2,720,000
33. What is the consolidated gross profit for the year ended December 31, 2020?
A. 1,120,000 B. 1,048,000 C. 1,028,000 D. 1,152,000
34. What is the noncontrolling interest in net income for the year ended December 31, 2020?
A. 100,800 B. 59,200 C. 51,200 D. 88,000
35. What is the consolidated net income attributable to parent’s shareholders for the year ended December 31, 2020?
A. 766,800 B. 596,800 C. 606,800 D. 626,800

On January 1, 2019, Entity A acquired 80% of outstanding ordinary shares of Entity B at a gain on bargain purchase of P180,000. The
following intercompany transactions occurred for between the two entities:
 On January 1, 2019, Entity B sold a land to Entity A with a cost of P1,000,000 at a selling price of P1,100,000. The land was
eventually sold by Entity A to third persons during 2020.
 On January 1, 2019, Entity A sold a white machinery to Entity B with a cost of P200,000 and accumulated depreciation of
P40,000 at a selling price of P180,000. The machinery is already 4 years old at the date of sale. The residual value of white
machinery is immaterial.
 On July 1, 2020, Entity B sold a black machinery to Entity A at with a cost of P270,000 and accumulated depreciation of
P180,000 at a selling price of P60,000. The machinery is already 6 years old at the date of sale. The residual value of black
machinery is immaterial.
For the year ended December 31, 2020, Entity A reported net income of P800,000 while Entity B reported net income of
P500,000 and distributed dividends of P150,000. Entity A accounted for its inventory in Entity B using cost method in its separate
36. What is the consolidated depreciation expense of machinery for 2020?
A. 40,000 B. 55,000 C. 61,667 D. 42,333
37. What is the consolidated carrying amount of machinery on December 31, 2020?
A. 225,000 B. 215,000 C. 200,000 D. 210,000
38. What is the noncontrolling interest in net income for 2020?
A. 124,000 B. 105,000 C. 125,000 D. 104,000
39. What is the consolidated net income attributable to parent shareholders for 2020?
A. 1,538,750 B. 1,518,750 C. 1,398,750 D. 1,418,750
40. Under GAAP, what is the most valid reason for the incremental credit to the capital of a newly admitted partner in addition
to his properly valued contributed capital?
A. Capital bonus coming from existing partners
B. Impairment of the existing assets of the partnership
C. Asset revaluation of the existing assets of the partnership
D. Goodwill arising from admission of a new partner in an existing partner
Items 19 to 21 are based on the following information:

On July 1, 2020, Entity A, a public entity, acquired 80% of ordinary shares of Entity B by issuing its own 20,000 ordinary shares with
par value of P10 and quoted price of P15. In addition to the shares issued, Entity A also issued bonds payable classified as financial
liability at amortized cost with face value of P80,000 and quoted at 125. In connection with the acquisition, Entity A paid the
following costs:
 Transaction cost related to business combination capitalized by Entity A as part of its

Investment in Subsidiary P12,000
 Indirect cost of business combination 5,000
 Stock issuance cost 30,000
 Bond issue costs 20,000
On December 31, 2019, Entity B’s net assets is reported at P550,000 in its statement of financial position. The interim statement of
financial position for the six months ended June 30, 2020 of Entity B reported net income of P70,000 with no dividend declaration.
On July 1, 2020, Entity B’s assets and liabilities are properly valued except for an equipment which is overvalued by P20,000 that has
remaining life of 5 years on such date. On July 1, 2020, the noncontrolling interest is appraised at a fair value of P110,000.
On September 1, 2020, Entity A leased an investment properly to Entity B at a monthly rental of P2,500 for a period of two years. On
October 1, 2020, Entity B sold a machinery to Entity A with a book value of P12,000 at a selling price of P16,000. The machinery has
remaining life of 4 years on the date of sale.
Entity A accounted its Investment in Entity B using cost method in its separate financial statements. On December 31, 2019, the
retained earnings of Entity A has balance of P5,000,000 in its separate statement of financial position. Entity A and Entity B reported
the following information in their separate income statements for the year ended December 31, 2020:
Entity A Entity B
Net Income P1,000,000 P100,000
Dividend declared P200,000 P20,000
41.What is the goodwill or (gain on bargain purchase) as a result of business combination?

A. 10,000 B. (80,000) C. (90,000) D. 100,000
42. What is the amount of noncontrolling interest in net assets to be presented by Entity A in its December 31, 2020 Consolidated
Statement of Financial Position?
A. 121,250 B. 113,650 C. 123,650 D. 125,450
43. What is the amount of consolidated retained earnings to be presented by Entity A in its December 31, 2020 Consolidated
Statement of Financial Position?
A. 5,792,600 B. 5,872,600 C. 5,888,600 D. 5,884,600
44.Under IFRS 10, the following are the essential elements of control of an investor (acquirer) over the investee (acquiree),
except
A. The investor has power over the investee which means that the investor has existing right that give it the ability to direct
the relevant activities of the investee.
B. The investor has exposure or rights to variable returns from its involvement with the investee.
C. The investor has the ability to use its power over the investee to affect the amount of the investor’s
return. D. The investor has ownership of more than 50% of the ordinary shares of investee.
45. Under PFRS 3, which of the following statements concerning the accounting treatment of the different types of costs incurred
in relation to a business combination is correct?
A. Direct costs of business combination shall form part of the consideration given up for purposes of computation of
goodwill or gain on bargain purchase.
B. Transaction costs incurred for the issuance of bonds payable classified as financial liability at fair value through profit
or loss that forms part of consideration given up shall be amortized over the term of the bonds using effective interest
method.
C. Costs incurred for the issuance of stocks issued as consideration given up for business combination shall be initially
charged to share premium arising from issuance of the related shares.
D. Listing fees incurred for registering the stocks of a corporation to stock exchange market shall be capitalized as
goodwill arising from business combination.
46. Under PFRS 3, which of the following transactions is a measurement period adjustment that must be retroactively adjusted to
goodwill or gain on bargain purchase within the measurement period not exceeding one year from the acquisition date?
A. Change in the fair value of contingent consideration as a result of meeting an earnings target that occurred after the
acquisition date.
B. Change in the fair value of contingent liability as a result of additional information that the acquirer obtained after the
acquisition date about facts and circumstances that existed at the acquisition date.
C. Change in the fair value of contingent liability as a result of reaching a specified share price that occurred after the
acquisition date.
D. Change in the fair value of contingent consideration as a result of reaching a milestone on research and development
project that occurred after the acquisition date.
47. Parent Corporation has different investment in stocks consisting of investment in subsidiary, investment in associate,
investment in joint venture and investment in fair value. Under PFRS 3 and PFRS 10, which of the following dividends from
investee will be presented in the Consolidated Statement of Comprehensive Income of the Parent Corporation if the latter
account for all its investment in subsidiary using cost method in its separate financial statements?
A. Dividend from subsidiary
B. Dividend from associate
C. Dividend from joint venture
D. Dividend from fair value investment
Items 48 and 50 are based on the following:
Menong, Samuel, and Elizabeth decided to engage in a real estate venture as a partnership. Menong invested P70,000 cash and
Samuel provided an office and furnishings valued at P110,000. (There is a P30,000 note payable remaining on the furnishings to
be assumed by the partnership.) Although Elizabeth has no physical assets to invest, both Menong and Samuel believe that
Elizabeth’s expert salesmanship provide and adequate investment. The partners agreed to receive an equal capital interest in the
partnership.
48. Under the bonus method, how much are the capital balances of partners immediately after the formation of partnership?
A. Menong, P70,000; Samuel, P110,000; Elizabeth, none.
B. Menong, P75,000; Samuel, P75,000; Elizabeth, none.
C. Menong, P60,000; Samuel, P60,000; Elizabeth, P60,000.
D. Menong, P50,000; Samuel, P50,000; Elizabeth, P50,000.
49. Under the goodwill method, assume a total goodwill of P90,000; how much are the capital balance of partners immediately after
the formation of partnership?
A. Menong, P70,000; Samuel, P80,000; Elizabeth, none.
B. Menong, P70,000; Samuel, P80,000; Elizabeth, P90,000.
C. Menong, P80,000; Samuel, P80,000; Elizabeth, P80,000.
D. Menong, P120,000; Samuel, P120,000; Elizabeth, none.
50. On January 1, 2019, Jose and Karen formed the J&K Company with capital investments of P500,000 and P312,500,
respectively. The partners wanted to draft a profit and loss agreement that would reward each individual for the resources
invested in the partnership. Accordingly, the partnership agreement provides that profits are to be allocated as follows:
1. Annual salaries of P43,750 and P68,750 are granted to Jose and Karen, respectively.
2. In addition to the salary, Jose is entitled to a bonus of 12% of net income after salaries and bonus but before interest on
capital investment is subtracted.
3. Each partner is to receive an interest credit of 3% on the original capital investment.
4. Remaining profits are to be allowed 40% to Jose and 60% to Karen.
On December 31, 2019, the partnership reported net income before salaries, interest, and bonus of P162,500. Calculate the 2019
allocation of partnership income.
A. Jose, P72,214; Karen, P90,286. C. Jose, P70,648; Karen, P91,852.
B. Jose, P80,700; Karen, P81,800. D. Jose, P65,000; Karen, P97,500
FIRST MONTHLY EXAM ADVANCED FINANCIAL ACCOUNTING &

REPORTING INTEG REVIEW
1. Aside from the initial amount of revenue agreed in the long-term construction contract, additional
revenues may be recognized by the contractor (1) to the extent that it is probable that they will result in
revenue and (2) they are capable of being reliably measured. Which of the following will not be
considered as additional contract revenue by a contractor?
A. Variation in contract work as instructed by the customer regarding the scope of work to be
performed.
B. Claim that the contractor may seek to collect from the customer for customer caused delays or
errors in specification or design.
C. Incentive payments to be paid to the contractor if specified performance standards are met or
exceeded or for early completion of the contract.
D. Gain on sale of scrap materials from construction.
2. Which of the following costs shall be excluded in the contract costs of construction contract?
A. Costs that relate directly to the specific contract.
B. Costs that are directly attributable to contract activity in general and can be allocated to the contract.
C. Such other costs as are specifically chargeable to the customer under the terms of the contract.
D. Selling costs such as advertisement expense or commissions of real estate agents or brokers.
3. The following costs shall be capitalized as part of construction in progress or contract costs, except
A. Costs of hiring and moving or plant and equipment to and from the contract site.
B. Systematically, rationally and consistently allocated construction overheads and borrowing costs.
C. Costs that are specifically chargeable to the customer under the terms of the contract may include
some general administration costs and development costs for which reimbursement is specified in
the terms of the contract.
D. General and research and development costs for which reimbursement is not specified in the
contract.
4. When the outcome of a construction contract can be estimated reliably, how shall contract revenue and
contracts costs associated with the construction contract be recognized?
A. They shall be recognized as revenue and expenses respectively by reference to the state of
completion of the contract activity at the end of the reporting period also known as by percentage of
completion method.
B. They shall be recognized as revenue and expenses respectively by reference to the percentage of
collection of receivables from customers also known as by installment method.
C. They shall be recognized as revenue and expenses respectively by the date of earning of revenue or
incurring of expenses also known as accrual method.
D. Revenue shall be recognized only to the extent of contract cost incurred that it is probable will be
recoverable and the contract cost shall be recognized as an expense in the period in which there are
incurred also known as cost recovery or zero-profit method.
5. When the outcome of a construction contract cannot be estimated reliably, how shall contract revenue and
contracts costs associated with the construction contract be recognized?
A. They shall be recognized as revenue and expenses respectively by reference to the state of
completion of the contract activity at the end of the reporting period also known as by percentage of
completion method.
B. They shall be recognized as revenue and expenses respectively by reference to the percentage of
collection of receivables from customers also known as by installment method.
C. They shall be recognized as revenue and expenses respectively by the date of earning of revenue or
incurring of expenses also known as accrual method.
D. Revenue shall be recognized only to the extent of contract cost incurred that it is probable will be
recoverable and the contract cost shall be recognized as an expense in the period in which there are
incurred also known as cost recovery or zero-profit method.
Use the following for item nos. 6 – 7:
AAA Company is bankrupt and has undergone corporate liquidation. Presented below is its statement of
financial position before the start of liquidation:
Cash 300,000 Accounts Payable 100,000
Machiner 500,000 Salaries Payable 200,000
y
Building 1,200,000 Income tax Payable 300,000
Loan Payable 400,000
Mortgage payable 500,000
Contributed capital 800,000
Deficit (300,000)
 Liquidation expenses amounting to P600,000 were paid.
 The loan payable is secured by the machinery with fair value of P300,000.
 The mortgage payable is secured by the building (fair value equal its book value).
 At the end of liquidation, the holder of loan payable received P340,000.
6. What is the amount received by the holder of accounts payable at the end of liquidation?
a. 85,000 b. 15,000 c. 40,000 d. 60,000
7. What is the amount of net free assets available at the end of liquidation?
a. 80,000 b. 40,000 c. 120,000 d. 200,000
8. In every corporate liquidation, which of the following creditors will always fully recover their claims from
a liquidating corporate?
a. Unsecured creditors with priority c. Partially secured creditors
b. Unsecured creditors without priority d. Fully secured creditors
9. It refers to the term used when the total shareholders’ equity has a negative balance.
a. Deficit b. Deficiency c. Surplus d. Insufficiency
10. When it is probable that total contract costs will exceed total contract revenue, how shall the long term
contractor account for the difference?
a. The expected loss shall be recognized as an expense immediately.
b. The expected profit shall be recognized as a profit immediately.
c. The expected loss shall be recognized as an expense taking into account the percentage of completion
as of the period.
d. The expected loss shall be recognized as a profit taking into account the percentage of completion as
of the end period.
11. When the outcome of a construction contract cannot be estimated reliably, what accounting method shall
be used by the long term constructor for the recognition of construction revenue and construction cost?
a. Percentage of completion method c. Installment method
b. Cost recovery method d. Accrual basis
12. When comparing the percentage-of-completion and completed-contract methods of accounting for long-
term construction contracts, both methods will report
a. the same balances each period in the Progress Billings account.
b. the same expense for cost of construction each year.
c. the same amount of income in the year of completion.
d. the same inventory carrying value each year during the construction period.
13. In accounting for a long-term construction contract for which there is a projected profit, the balance in the
Construction in Progress account at the end of the first year of work using the percentage-of-completion
method would be
a. zero.
b. the same as the completed-contract method.
c. higher than the completed-contract method.
d. lower than the completed-contract method.
14. Franchise fees are properly recognized as revenue
a. when received in cash.
b. when a contractual agreement has been signed.
c. after the franchise business has begun operations.
d. after the franchiser has substantially performed its service.
15. Mabi Corp. was contracted by Mr. Tristan P. to construct 35 condominium units. The estimated total cost
of construction was P28,000,000. Mabi bills its clients at 120% of total costs estimated to complete a
project. Details regarding the contract are given below:
Units finished Costs incurred to date Estimated cost at
completion
2011 10 P8,412,500 P33,650,000
2012 18 P20,735,000 P31,900,000
2013 7 P31,500,000 ?
What is the RGP during 2012 using the output measures?
A. P1,105,000 C. P1,360,000
B. P1,700,000 D. P1,410,000
16. On December 1, 2013, Dewyze Inc. authorized Cook to operate as a franchise for an initial franchise fee
of P3,400,000. P900,000 was received upon signing the contract, and the balance is to be paid by a non-
interest bearing note, due in five equal annual installments beginning December 31, 2014. Prevailing
market rate is 12%. PV factor is 3.60478. The down payment is nonrefundable and it represents a fair
measure of the services already performed by Dewyze, however, with regards to the balance, substantial
future services are still required. How much is the deferred franchise revenue to be recognized as of
December 31, 2013?
A. P1,802,390 C. P2,500,000
B. P2,702,390 D. P1,518,677
24. On a statement of financial affairs prepared for purposes of corporate liquidation, how are assets
classified?
A. Current and noncurrent C. Secured and unsecured
B. Fully pledged and partially pledged D. Monetary and nonmonetary
25. The partnership of Claudine, Ella, Joy and Glenda is being liquidated over the first few months of 2018.
The trial balance at January 1, 2018 is as follows:
Debits Credits
Cash P 200,0000
Accounts receivable 56,000
Inventory 142,000
Equipment – net 300,000
Land 150,000
Loan to Claudine 20,000
Accounts payable P 400,000
Claudine, capital – 20% 170,000
Ella, capital – 10% 80,000
Joy, capital – 50% 140,000
Glenda – capital 20% _ 78,000
P 868,000 P 868,000
Additional information:
1. The partners agree to retain P20,000 cash on hand for contingencies and distribute the rest of the
available cash at the end of each month.
2. In January, half of the receivables were collected. Inventory that cost P75,000 was liquidated for
P45,000. The land was sold for P250,000.
3. The accounts payable was liquidated.
How much will each partner receive for the month of January 2018?
A. Claudine, P68,000; Ella, P39,000; Joy, P0; Glenda, P 0
B. Claudine, P81,000; Ella, P45,500; Joy, P0; Glenda, P 9,000
C. Claudine, P65,333; Ella, P37,667; Joy, P0; Glenda, P 0
D. Claudine, P103,000; Elsie, P – 0; Joy, P0; Glenda, P 0
26. When the outcome of a construction contract can be estimated reliably, what accounting method shall be
used by the long – term constructor for the recognition of construction revenue and construction cost?
a. Percentage of completion method c. Zero – profit method
b. Cost recovery method d. Installment method
Use the following for item nos. 27–28:

MENTOS Co. entered into a long term construction contract for 3 years. Contract price agreed was
P8,300,000. The outcome of the contract was estimated reliably. The following data were ascertained for the
contract:
2020 2021 2022
Percentage of completion 30% 82.5% ?
Estimated costs to P3,920,000 P1,680,000 ?
complete
27. What is the construction cost of sales for the year 2021?
A. 6,240,000 C. 7,920,000
B. 8,957,500 D. 6,467,500
28. What is the construction-in-progress as of 2021?

A. 6,620,000 C. 6,847,500
B. 4,940,000 D. 4,130,000
Use the following for item nos. 29 – 30:

The following were taken from the statement of affairs of TITUS Corp.:
Assets pledged for fully secured creditors (estimated market value P180,00
P150,000) 0
Assets pledged for partially secured creditors (estimated market value 148,000
104,000)
Free assets (estimated market value 80,000) 140,000
Salaries, Taxes, and Estimated liquidation expenses 14,000
Partially secured creditors 120,000
Fully secured creditors 60,000
Unsecured creditors without priority 224,000
The Free assets were those assets other than the assets pledged to fully and partially secured creditors.
The Unsecured creditors without priority were those creditors with no assets secured to them from the start
of liquidation.
29. What is the amount of net free assets?
A. 66,000 C. 186,000
B. 216,000 D. 156,000
30. What is the estimated recovery of the partially secured creditors?

A. 114,400
B. 108,400
C. 118,400
D. 116,400
ADVANCED FINANCIAL ACCOUNTING & REPORTING MAY 2020 BATCH
FIRST PRE-BOARD EXAMINATION FEB 7, 2020; 2:30-5:30PM
1. MORAINE Corp. acquired 70% of the voting common stock of LOUISE Co. at the time when LOUISE Corp.’s
book values and fair values were equal. Separate income of MORAINE and LOUISE Co. for 2020 are as
follows:
MORAINE Corp LOUISE Co.
Sales 700,000 400,000
COGS 400,000 200,000
OPEX 120,000 100,000
Separate Income 180,000 100,000
Intercompany sales from MORAINE to LOUISE for 2019 and 2020 summarized as follows:
Selling Unsold at year end
Cost Price
Intercompany sales – 2019 250,000 390,000 40%
Intercompany sales – 2020 175,000 275,000 50%
The consolidated income statement will show COGS of:

A. 350,000 B. 319,000 C. 340,000 D. Other amount
2. On January 1, 2019 John Corp. purchased 80% of the outstanding shares of Adams Corp. by paying P
320,000 with an allocated excess of 20,000 attributable entirely to undervalued equipment with remaining life
of 10 years. On January 1, 2021 Adams Company had P 150,000 of capital stock and P 300,000 of retained
earnings. Also on the same date, John Corp. had P 1,000,000 of capital stock and P 700,000 of retained
earnings.
During the year, John sold merchandise to Adams for P 60,000 and in turn, purchased P 40,000 from Adams.
Intercompany sales of merchandise were made at the following gross profit rates:
Sales made by John 25% based on cost
Sales made by Adams 20%
On December 31, 2021, 30% of all intercompany sales remains in the ending inventory of the purchasing
affiliate.
The beginning inventory of John includes P 2,500 worth of merchandise acquired from Adams on which
Adams reported a profit of P 1,000. While, the beginning inventory of Adams also includes P 3,000 of
merchandise acquired from at 35% mark up.
The net income from own operations and dividends for 2021 using the cost method were as follows:
Net Income Dividends
John 100,000 60,000
Adams 30,000 10,000
The NCINIS for 2020 should be
3. Consolidated financial statements are prepared primarily to satisfy the needs of which of the following users?
A. Non-controlling shareholders of the subsidiary
B. Bureau of Internal Revenue
C. Controlling shareholders of the
subsidiary D. Shareholders of the
parent company
4. The partnership agreement for the partnership of Bernardo and Ricardo provided for salary allowances of
P450,000 to Bernardo and P350,000 to Ricardo, and the residual profit was allocated equally. During 2020,
Bernardo and Ricardo each withdraw cash equal to 80 percent of their salary allowances. If during 2008, the
partnership had profit in excess of P1,000,000 without regard to salary allowances and withdrawals,
Bernardo’s equity in the partnership would
A. Increase more than Ricardo’s C. Decrease more than Ricardo’s
B. Increase the same as Ricardo’s D. Decrease the same as Ricardo’s
5. C and D wish to acquire the partnership interest of their partner E on July 10, 2020. Partnership assets are to
be used to acquire E’s partnership interest, the balance sheet for the CDE Partnership on that date shows the
following:
CDE Partnership
QUIZ – AFAR
Page 18
Balance Sheet
July 10, 2020
Cash P 74,000 Liabilities P 45,000

Receivables (net) 36,000 C, capital 120,000
Equipment (net) 135,000 D, capital 60,000
Goodwill 30,000 E, capital 50,000
P 275,000 P 275,000
C, D, and E share earning in the ratio of 3:2:1, respectively. E wants to retire from the partnership. If
E is paid P54,000 and bonus method is used, what is the capital account balance of C and D:
C D C D
A. P117,000 P58,400 C. P117,600 P60,000
B. P120,000 P60,000 D. P122,400 P61,600
6. Partners R, E, and H share net income and losses in a 5:3:2 ratio, respectively. At the end of a very
unprofitable year, they decided to liquidate the partnership. The partners’ capital account balances on this date
were as follows: R P22,000; E P24,900 and H P15,000. The liabilities in the balance sheet amounted to
P30,000, including a loan of P10,000 form R. The cash balance was P6,000.
The partners plan to sell the noncash assets on a piece meal basis and to distribute cash as rapidly
as it becomes available. All three partners are personally solvent.
If R received a total of P20,000 as a result of the liquidation, what was the total amount realized by
the partnership on the sale of the non cash assets?
A. P61,900 B. P85,900 C. P73,900 D. P24,000
7. Belinda, Daniel and Lorna are partners in a business and share in its earnings at the respective rates of 50%,
30%, and 20%. At the beginning of the new fiscal year, they admit Fidel who is to invest in the firm sufficient
cash funds to give him a one-third interest in the capital and in the earnings. The following closing balance is
taken from the old firm’s books:
Cash P 200,000 Accounts payable P 100,000

Marketable securities 150,000 Loans payable – bank 60,000
Accounts receivable 450,000 Belinda, capital 350,000
Daniel, capital 200,000
Lorna, capital 90,000
P 800,000 P800,000
The securities have a market value of P100,000, and an allowance of P50,000 is required to cover bad debts.
No other adjustment of the net assets is necessary, but the three old partners must among themselves bring
the balances in their capital accounts into agreement with their interest in the earnings. The settlement among
the old partners
A. Belinda will receive from Daniel, C. Daniel pays Lorna, P8,000.
P30,000. B Belinda will receive from Lorna, D. Lorna pays Belinda, P30,000.
P38,000.
8. Las Vegas retired from the partnership of Las Vegas, New York, and New Jersey. Las Vegas’s cash settlement
from the partnership was based on new goodwill determined at the date of retirement plus the carrying amount
of the other net assets. As a consequence of the settlement, the capital accounts of New York and New Jersey
were decreased. In accounting for Las Vegas’s withdrawal, the partnership could have used the
Bonus Method Goodwill Method
A. No Yes
B. No No
C. Yes Yes
D. Yes No
9. Partners Lovelle and Carlo share income and loss equally after each has been credited in all circumstances
with annual salary allowances of P15,000 and P12,000, respectively. Under this arrangement, Lovelle will
benefit by P3,000 more than Carlo in which of the following circumstances?
A. Only is the partnership has earnings of P27,000 or more for the year.
B. Only if the partnership does not incur a loss for the year.
C. In all earnings or loss situations.
D. Only if the partnership has earnings of at least P3,000 for the year.
10. Melrose, Petersen, and Ronald are partners with capital balances of P50,000, P30,000, P20,000, respectively.
The partners share income and loss equally. For an investment of P50,000 cash, Andersen is to be admitted
as a partner with a one-fourth interest in capital and income. Based on this information, the amount of
Andersen’s investment can best be justified by which of the following?
A. Andersen will receive a bonus from the other partners upon her admission to the partnership.
B. Assets if the partnership were overvalued immediately prior to Andersen’s investment.
C. The books value of the partnership’s net assets was less than their fair value immediately prior
to Andersen’s investment.
D. Andersen is apparently bringing goodwill into the partnership, and her capital account will be
credited for the appropriate amount.
11. If L is the total capital of a partnership before the admission of a new partner, I is the total capital of the
partnership after the investment of a new partner, M is the amount of the new partner’s investment, B is the
amount of the capital credit to the new partner, then there is:
A. L bonus to the new partner if I = L + M and B < M.
B. Goodwill to the old partners if I > (L + M) and B = M.
C. Neither bonus nor goodwill if I = L – M and B > M.
D. Goodwill to the new partner if I > (L + M) and B < M.
12. The partnership of Eugene, Alfred and Jericho shared profits and losses equally. When Eugene withdrew from
the partnership, the partners agreed that there was unrecorded goodwill in the partnership. Under the bonus
method, the capital balances of Alfred and Jericho were
A. Not affected.
B. Each reduced by one-half of the total amount of the unrecorded goodwill.
C. Each reduced by one-third of the total amount of the unrecorded goodwill.
D. Each reduced by one-half of Eugene’s share of the total amount of the unrecorded goodwill.
13. If A is the total capital of a partnership before the admission of a new partner, M is the total capital of the
partnership after the admission of the new partner, I is the amount of the new partner’s investment, and E is
the amount of capital credited to the new partner, then there is
A. Goodwill to the new partner if M > (A + I) and E < I
B. Goodwill to the old partners if M = A + I and E > I
C. A bonus to the new partner if M = A + I and E > I
D. Neither bonus nor goodwill if M > (A + I) and E > I
14. On December 1, 2020, the ACE Company established an agency in Laguna, sending its merchandise samples
costing P 15,750 and a working fund of P 9,000 to be maintained on the imprest basis. During the month of
December, the agency transmitted to the home office sales orders which were billed at P 64,380 of which
20,400 was collected. A home office disbursement chargeable to the sales agency is the acquisition of
furniture and fixtures for Laguna, P 25,000 to be depreciated at 24% per annum. The agency paid expenses of
P 3,815 and received replenishment thereof from the office. On December 31, 2020, the agency samples were
valued at P 10,075. It was estimated that the gross profit of goods shipped to bill agency sales orders average
25% of cost.
How much is the net income of the agency for the month ended December 31, 2020?
A. P 2,886 B. P 12,876 C. P 3,386 D. Other amount
15. A home office ships inventory to its branch at 125% of cost. The required balance of the deferred profit account
is 78,750. During the year, the home office sent merchandise to the branch costing P 784,000. At the start of
the year, the branch’s balance sheet shows P 315,000 of inventory on hand that was acquired from the home
office.
By what amount is the COGS overstated


On May 1, 2020, the business assets of TINAPAY Corner and TONY’S Bakeshop appear below:
TINAPAY Corner TONY’S Bakeshop
Cash P 11,000 P 22,354
Accounts receivable 234,536 567,890
Land 603,000
Building 428,267
Furniture and fixtures 50,345 34,789
Other assets 2,000 3,600
Total P 1,020,916 P 1,317,002
Notes payable 200,000 345,000
TINAPAY Corner, capital 641,976
TONY’S Bakeshop, capital 728,352
Total P 1,020,916 P 1,317,002
TINAPAY Corner and TONY’S Bakeshop agreed to form a partnership contributing their respective assets and
equities subject to the following adjustments:
A) Accounts receivable of P20,000 in TINAPAY Corner’s books and P35,000 in TONY’S Bakeshop’s
books are uncollectible.
B) Inventories of P5,500 and P6,700 are worthless in TINAPAY Corner’s and TONY’S Bakeshop’s
respective books.
C) Other assets of P2,000 and P3,600 in TINAPAY Corner’s and TONY’S Bakeshop’s respective books
are to be written off.
16. The capital accounts of the partners after the adjustments will be
A. TINAPAY Corner P613,576; TONY’S Bakeshop P683,350
B. TINAPAY Corner P614,476; TONY’S Bakeshop P683,052
C. TINAPAY Corner P615,942; TONY’S Bakeshop P717,894
D. Other amount
17. VILLARICA offered to join for a 20% interest in the firm. How much cash should VILLARICA
contribute? A. P324,382 B. P337,487 C. P344,237 D. Other
amount
18. After VILLARICA’s admission, the profit and loss sharing ratio was agreed to be 40:40:20 based on capital
credits. How much should the cash settlement be between TINAPAY Corner and TONY’S Bakeshop?
A. P34,288 B. P32,930 C. P32,272 D. Other amount
19. On March 31, 2019, Gabriel received from Billy P 550,000 representing franchise fee. Franchise services were
immediately started by Gabriel and these were completed on October 31, 2019 at a cost of P 330,000. Further
the franchisor is entitled to a 5% fee on gross sales payable within the first ten days of the following month.
The following year, the franchisee yielded gross sales of P 9,000,000. Gabriel’s earned franchisee fee for the
year 2020.
20. On March 1, 2020, Desire and Anna decide to combine their business and form a partnership. The balance
sheets of Desire and Anna on March 1, 2020 before adjustments show the following:
Desire Anna
Cash P 9,000 P 3,750
Furniture and fixtures (net) 30,000 9,000
Office equipment (net) 11,500 2,750
Prepaid expenses 6,375 3,000
P 105,375 P 51,500
Desire, capital 59,625
Anna, capital 33,500
P 105,375 P 51,500
They agreed to provide 3% for doubtful accounts of their accounts receivables and found Anna’s furniture
and fixtures to be under depreciated by P 900.
If each partner’s share in equity is to be equal to the net assets invested, the capital accounts of Desire and
Anna respectively would be:
A. P 58,170 and P 33,095 C. P 59,070 and P 32,195
B. P 58,320 and P 32,495 D. Other amount
Items 21 and 22 are based on the following information:

Joshua, Julia, and Charlie are partners sharing profits on a 5:3:2 ratio. On January 1, 2021, Amanda was
admitted into the partnership with a 20% share in profits. The old partners continue to participate in profits in
their original ratios.
For the year 2021, the partnership book showed a net income of P 25,000. It was disclosed, however, that the
following errors were committed:
2020 2021
Accrued expenses not recorded at year-end P 1,200
Inventory overstated P 3,100
Purchases not recorded, for which goods have been received
and inventories 2,000
Income received in advance not adjusted 1,500
Unused supplies not taken up at year-end 900
21. The new profit and loss ratio of Joshua, Julia, Charlie and Amanda, respectively for 2021
is: A. 40%; 25%; 15% and 20% C. 45%; 30%; 15%; and 20%
B. 40%; 24%; 16%; and 20% D. Other amount
22. The share of partner Joshua in the 2021 corrected net income is:
A. P 9,400 B. 10,000 C. P 11,750 D. Other amount

Andre, Brian and Clarence are partners in textile distribution business, sharing profits and losses equally. On
December 31, 2020 the partnership capital and partners drawings were as follows:
Andre Brian Clarence Total
Capital P 100,000 P 80,000 P 300,000 P 480,000
Drawing 60,000 40,000 20,000 120,000
The partnership was unable to collect on trade receivables and was forced to liquidate. Operating profit in 2020
amounted to P 72,000 which was all exhausted including the partnership assets. Unsettled creditors’ claims at
December 31, 2020 totalled P 84,000. Brian and Clarence have substantial private resources but Andre has
no personal assets.
23. Loss on liquidation was:
24. Final cash distribution to Clarence was:
25. James uses the percentage of completion method. In May 2020, the company began work on a project that has
a contract price of P 5,000,000. At the end of 2021 a summary of the company’s cost data follows:
2020 2021
Cost incurred to date P 1,125,000 P 3,825,000
Estimated costs to complete 3,375,000 1,275,000
Total estimated cost P 4,500,000 P 5,100,000
In its income statement for the year 2021, the company would recognize a gross profit(loss)
of
A. (P 100,000) B. (P 200,000) C. (P 225,000) D. Other amount
26. Ricardo, Oscar and Delfin are partners with capital balances on June 30, 2020, of P 90,000; P 90,000
and P 60,000 respectively. Profits are share equally. Delfin withdraws from the partnership. The partners agree
that Delfin is to take certain furniture and fixture and their second hand value of P 3,600, and a note for the
balance of his interest. The furniture and fixture are carried on the books as fully depreciated.
What is the entry would be made to record the settlement with Delfin?
A. Delfin, capital 60,000
Notes payable 60,000
B. Delfin, capital 60,000
Furniture and fixture 3,600
Ricardo, capital 1,800
Oscar
1,800
C. Delfin, capital 61,200
Furniture and fixture 3,600
D. Delfin, capital 61,200
Ricardo 1,200
Oscar, capital 1,200
Delfin, capital 1,200
27. Andrew and Buren wish to acquire the partnership interest of their partner Calvin on July 10, 2020. Partnership
assets are to be used to acquire Calvin’s partnership interest. The balance sheet for the ABC partnership on
that date shows the following:
Receivables, net 36,000 Andrew, capital 120,000
Equipment, net 135,000 Buren, capital 60,000
Goodwill 30,000 Calvin, capital 50,000
P 275,000 P 275,000
Andrew, Buren and Calvin share earnings in the ratio of 3:2:1, respectively. Calvin wants to retire from the
partnership. If Calvin is paid P 54,000 and the bonus method is used, what is the capital account balance of
Andrew and Buren after the retirement of Calvin?
A. Andrew P 117,600; Buren, P 58,400
B. Andrew P 120,000; Buren, P 60,000
C. Andrew P 117,600; Buren, P 60,000
D. Other amount
28. Paper Lunch charges new franchisees an initial fee of P 2,500,000. Of this amount, P 1,000,000
is payable in cash when the agreement is signed, and the remainder is to be paid in three annual installments,
which are evidenced by an interest bearing promissory notes. In consideration therefore, Paper Lunch will
assist in locating the business site, conduct a market study to estimate the earnings potential, supervise
construction of a building, and provide initial training to employees.
On December 31, 2020, Paper Lunch entered into a franchise agreement with REH Inc. by the end of the year.
Paper Lunch has completed about 25% of the initial services at a cost of P 150,000 and it
has ascertained that collection of the notes is reasonably assured.
For 2020, Paper Lunch Company should recognize franchise revenue of
A. P 0 B. P 850,000 C. P 1,000,000 D. P 2,500,000
29. Kendra and Romeo are partners in an excavating business known as K and R Excavating. The partners are
considering a number of options regarding the partnership including the admission of a new partners and a
potential sale of the partnership. The following information has been prepared as a basis for evaluating various
alternatives.
Item Book Value Fair Value Tax Basis
Cash and cash equivalents P 20,000 P 20,000 P 20,000
Accounts receivable 85,000 72,000 92,000
Inventory 42,000 30,000 50,000
Prepaid and other current assets 18,000 15,000 18,000
Property, plant and equipment (net) 358,000 300,000 320,000
Total Assets P 523,000 P 437,000 P 500,000
Accounts payable P 54,000 P 54,000 P 54,000

Other current liabilities 29,000 35,000 29,000
Notes/loans payable 240,000 240,000 240,000
Kendra, capital 120,000
Romeo 80,000
Total liabilities and capital P 523,000
The partners currently share profits and losses 60% and 40%, respectively, for Kendra and Romeo. As
agreed any adjustment in assets is recognized.
Assume a new partner was admitted to the partnership with a 40% interest in capital in exchange for a cash
contribution of P 60,000. What would Romeo’s capital balance as a result of this transaction, assuming use of
the bonus method?
30. A construction contractor builds a home under a contract with a fixed price of P 1,000,000. The contractor
incurred contract costs of P 200,000, P 400,000 and P 100,000 in 2019, 2020 and 2021 respectively. At the
end of 2020 the contractor estimated with (with sufficient reliability) the future costs to complete the contract
as P 150,000. The contract was completed in 2021.
The contractor determines the stage of completion of the construction contract by reference to the proportion
that costs incurred for work performed to date bear to the estimated total costs.
The contractor must recognize contract revenue at:
A. P 333,333 in 2019, P 466,667 in 2020 and P 200,000 in 2021.
B. P 1,000,000 in 2019, P 0 in both 2020 and 2021.
C. P 0 in both 2019 and 2020 and P 1,000,000 in 2021.
D. P 333,333 in 2019, P 333,333 in 2020 and P 333,333 in 2021.

The Baguio branch of CRC-ACE Inc. submitted trial balance as of December 31, 2020, after the first year of
operations:
Debit Credit
Cash P 10,400
Shipments from home office 168,000
Expenses 10,800
Sales P 134,400
Home office current 118,000
P 252,400 P 252,400
Merchandise inventory, P 50,400.
Shipments to the branch are billed at 140% of cost.
31. The adjustment to the cost of goods sold of the Branch account amounts to:
A. P -0 - B. P 14,400 C. P 33,600 D. Other amount
32. The true net income of the branch during 2020 was:
33. The overstatement in the branch inventory at December 31, 2020 was:
A. P 0 B. P 6,000 C. P 14,400 D. Other amount
34. The balance sheet of Sacramento Company as of December 31, 2021 is as follows:
Assets Liabilities and Stockholders’ Equity
Cash P 175,000 Current liabilities P 250,000
Accounts receivable 250,000 Mortgage payable 450,000
Inventories 725,000 Common stock 200,000
Property, plant and equipment 950,000 Additional paid-in capital 400,000
Retained earnings 800,000
Total Assets P 2,100,000 Total Liabilities and SHE P 2,100,000
On December 31, 2021 the Calgary Inc. bought all of the outstanding stock of Sacramento Company for P
1,800,000 cash. On the date of purchase, the fair market value of Sacramento’s inventories was P 675,000,
while the fair value of Sacramento’s property, plant and equipment was P 1,100,000. The fair values of all
other assets and liabilities of Sacramento were equal to their book values.
The consolidated balance sheet of Calgary and Sacramento, after the acquisition of Sacramento should
reflect goodwill in the amount of
A. P 300,000B. P 400,000 C. P 500,000 D. Zero
35. Using the same information in No. 34, the amount of goodwill recorded in the books of Calgary amounted
to: A. P 300,000 B. P 400,000 C. P 500,000 D. Zero
36. Charlie, a private limited company has acquired 100% of Charles, a private limited company, on January 1,
2020. The fair value of the purchases consideration was 10 million ordinary shares of P 1 of Charlie, and
the fair value of the net assets acquired was P 7 million. At the time of the acquisition, the value of the ordinary
shares of Charlie and the net assets of Charles were only provisionally determined. The value of the shares of
Charlie (P 11 million) and the net assets of Charles(P 7.5 million) on January 1, 2020, were finally determined
on November 30, 2020. However, the directors of Charlie have seen the value of the company decline since
January 1, 2020, and as of February 1, 2021, wish to change the value of the purchase consideration to P 9
million.
What value should be placed on the purchase consideration and assets of Charles as at the date of
acquisition?
A. Purchase consideration P 10 million, net asset value P 7 million.
B. Purchase consideration P 11 million, net asset value P 7.5 million
C. Purchase consideration P 9 million, net asset value P 7.5 million.
D. Purchase consideration P 11 million, net asset value P 7 million.
37. The partnership of Gabriel, Carlos, Mia, and Alexa is being liquidated over the first few months of 2020. The
trial balance at January 1, 2020 is as follows:
Debits Credits
Cash P 200,000
Inventory 142,000
Equipment – net 300,000
Land 150,000
Loan to Gabriel 20,000
Gabriel, capital – 20% 170,000
Carlos, capital – 10% 80,000
Mia, capital – 50% 140,000
Alexa, capital – 20% 78,000
P 868,000 P 868,000
1. The partners agree to retain P 20,000 cash on hand for contingencies and distribute the rest of the available
cash at the end of each month.
2. In January, half of the receivables were collected. Inventory that cost P 75,000 was liquidated for
P 45,000. The land was sold for P 250,000.
3. The accounts payable was liquidated.
How much will partner Gabriel receive for the month of January 2020?
A. P 65,333 B. P 68,000 C. P 81,000 D. P 103,000
38. A construction contract or builds a home under a contract with a fixed price of P 1,000,0000. The contractor
incurred contract costs of P 10,0000, P 890,000 and P 200,000 in 2019, 2020 and 2021 respectively. At the
end of 2019 the outcome of the transaction cannot be estimated reliably however it is probable that the costs
incurred in 2019 will be recoverable. At the end of 2020 the contractor can estimate the outcome of the
contract reliably and estimates costs to complete the contract at P 200,000. The contract was completed in
2021.
The contractor determines the stage of completion of the construction contract by reference to the proportion
that costs incurred for work performed to date bear to the estimated total costs.
In 2020 the contractor must:
A. Recognize contract revenue of P 818,182 and contract costs of P 900,000.
B. Recognize contract revenue of P 808,182 and contract costs of P 890,000.
C. Recognize contract revenue of P 808,182 and contract costs of P 908,182.
D. Recognize contract revenue of P 808,182 and contract costs of P 900,000.
39. In 2020, Stonerich Construction company was contracted to build Village Company’s private road network for
P 100 million. The project was estimated to be completed in two years and the contract provided for:
(1) 5% mobilization fee (to be deducted from the last billing) payable within 15 days after the signing
of the contract.
(2) 10% retention provision on all billings, and
(3) Payment of progress billings within 10 days from acceptance.
Stonerich, which uses the percentage-of-completion method of accounting, estimated a 25% gross margin on
the project. By the end of 2020, Stonerich has presented progress billings corresponding to 50% completion.
All of the progress billings presented in 2020 were accepted, except the last one for 10 % which was
accepted on January 5, 2021. With the exception of one bill for 8% which was due on January 7, 2021, all of
the billings accepted in 2020 were settled. Payments made by Village Company in 2020 amounted:
A. P 33,800,000 C. P 40,000,000
B. P 38,500,000 D. Other amount

Several years ago Daniela and Romina formed DR Partnership. The partnership agreement states that each
partner is to receive a salary of P10,000 per month and 5% interest on beginning-of-the-year capital balances;
any remainder would be divided between Daniela and Romina in the ratio 2:3, respectively. The unadjusted trial
balance of DR Partnership as of December 31, 2020, appears as follows:
Debits Credits
Accounts receivable 300,000 Notes payable 200,000
Inventory, January 1, 2020 400,000 Daniela, capital 750,000
Furniture & fixtures, net 150,000Romina, capital 620,000
Building, net 300,000 Sales 800,000
Daniela, drawing 100,000
Romina, drawing 120,000
Purchases 600,000
Operating expenses 250,000
Total P2,720,000 Total P2,720,000
1. December 31, 2020, inventory was P550,000. 2020 purchases of P600,000 were recorded using the
periodic inventory method.
2. Depreciation for 2020 on furniture and fixtures and building is determined to be 10% and 20%
respectively, of net valuation.
3. On July 1, 2020, the partnership recorded a P100,000 additional capital contribution by Romina. Daniela
made no additional capital contributions during the year.
40. Determine the share of partner Daniela on the net income of 2020.
A. (P21,100) B. (P19,100) C. P44,100 D. P 46,100
41. Determine the ending capital balance of partner Romina on December 31, 2020.
A. P478,900 B. P480,100 C. P521,100 D. P694,100
42. The following balance sheet is for a local partnership in which the partners have become very unhappy with
each other. To avoid further conflict, they have decided to cease operations and sell all assets.
Cash P 40,000,000 Liabilities P 30,000,000
Land 130,000,000 Charles, capital 80,000,000
Building 120,000,000 Edgar, capital 30,000,000
Arthur, capital 60,000,000
JL, capital 90,000,000
P290,000,000 P290,000,000
Assume that profits and losses are allocated on a 1:3:4:2 basis, respectively. How much money must
be received from selling the land and building to assure that all partners receives cash?
A. More than P50,000,000 C. More than P150,000,000
B. More than P100,000,000 D. More than P250,000,000
43. DMCI Corporation contracted to build a building for DIAZ Company. The contract price was P5,000,000 and
DMCI estimated that construction costs would total P4,200,000. The construction period lasted until September
1, 2021. Costs during each period, estimated total cost of the product at the end of the year, billings and cash
collected during the year were as follows:
2019 2020 2021
Costs during period P1,050,000 P1,950,000 P1,250,000
Estimated or Actual Total Costs 4,200,000 4,250,000 4,250,000
Billings during the period 1,000,000 1,500,000 2,500,000
Cash collected during period 800,000 1,400,000 2,600,000
The amount of gross profit recognized in 2020 using the percentage of completion method must
be: A. P200,000 B. P329,412 C. P365,000 D. P800,000
44. CRC has two construction jobs, which commenced during 2021:
Project 1 Project 2
Contract Price P 2,100,000 P 750,000
Cost incurred during 2021 600,000 700,000
Estimated cost to complete 300,000 175,000
Contract billings during 2021 625,000 725,000
Collections 600,000 700,000
Expenses 50,000 25,000
Compute the net income (loss) that CRC would report in its 2021 Statement of Comprehensive Income.
Zero-Profit Percentage of
Completion A. P (100,000) P
675,000
B. P (150,000) P 600,000
C. P (150,000) P 750,000
D. P (200,000) P 600,000
45. S & R Pizza charges initial franchise fee of P500,000 for the right to operate as a franchisee of S & R
Pizza. Of this amount, P100,000 is payable when the arrangement is signed and the balance is payable in five
annual payments of P80,000 each. In return for the initial franchise fee, the franchisor will help locate the site,
negotiate the lease or purchase of the site, supervise the construction activity, and provide the bookkeeping
services. The credit rating of the franchisee indicates that money can be borrowed at 8%. The present value of
an ordinary annuity of five annual receipts of P80,000 each discounted at 8% is P310,941.68.
Assuming that there is reasonable expectation that the down payment may be refunded and substantial future
services remain to be performed, how much is the unearned franchise revenue?
A. P0 B. P500,000 C. P310,941.68 D. P410,941.68
46. Savory charges an initial franchise fee of P 75,000 for the right to operate as a franchise of All’s Restaurant.
Of this amount, P 25,000 is collected immediately. The remainder is collected in four equal annual installment
payments of P 12,500 each. These installments have a present value of P 39,623. There is reasonable
expectation that the down payment may be refunded and substantial future services are yet to be performed
by Savory.
The journal entry to record the franchise would be:

A. Cash 25,000
Notes Receivable 50,000
Unearned interest income 10,377
Franchise Revenue 64,623
B. Cash 25,000
Unearned franchise revenue 64,623
C. Cash 25,000
Unearned Interest Income 10,377
Unearned Franchise Revenue 39,623
D. Cash 25,000
Unearned Franchise Revenue 39,623
47. ACE operates a branch in Dagupan City. Selected accounts taken from December 31, 2020 financial
statements of ACE and its branch follows.
Home Office Branch

Sales P 6,900,000 P 3,765,000
Shipments to Branch 1,750,000
Shipment from home office 2,187,500
Inventory, Jan 1 800,000 120,000
Inventory, December 31 640,000 250,000
Purchases 6,800,000 1,000,000
Allowance for overvaluation before adjustment 452,500
Expenses 356,000 250,000
The ending inventory of the branch includes P 120,000 purchased from outside suppliers. The
consolidated net income is:
A. P 1,791,500 B. P2,220,000 C. P 2,244,000 D. P2,218,000
48. Summary adjusted trial balance for the home office and branch of EMERALD Corporation at December 31,
2020 are as follows:
Home office Branch
Debits:
Other assets P 530,000 P 165,000
Inventories, January 1, 2020` 50,000 45,000
Branch 200,000 -
Purchases 500,000 -
Shipments from home office - 240,000
Expenses 120,0000 50,000
Dividends 100,000
Total debits P 1,500,000 P 500,000
Credits:
Other liabilities P 90,000 P 25,000
Capital stock 500,000 -
Retained earnings 100,000 -
Home office - 175,000
Unrealized profit in branch inventory/loading 10,000 -
Sales 537,500 300,000
Shipments to branch 200,000 -
Branch profit 62,500
Total credits P 1,500,000 P 500,000
1. The home office ships merchandise to its branch at 120% of home office cost.
2. Inventories at December 31, 2020 are P 70,000 for the home office and P 60,000 for the branch. The
branch inventory is at transfer prices.
The combined net income of the home office and the branch amounted to:
A. P 370,000 B. P 200,000 C. P 132,500 D. P 170,000
49. As you begin to audit the books of the CLI Company, you notice a discrepancy between the balance in the
Investment in Branch (P136,020 Dr.) and the Home Office (P175,400 Cr.) accounts. The following information
is available:
1. The home office bills goods shipped to the branch at 150% of cost. At the beginning of the
year, branch inventory was stated at P75,000 after the annual physical count, and the home
office unrealized profit account had a credit balance of P5,000. You find that a shipment with a
billed value of P60,000 made toward the end of the prior year had not been recorded by the
home office.
2. On December 31 of the year under review, the branch mailed to the home office a check for
P25,000 and a notice that the branch had collected P4,380 on a home office account
receivable. These items had not been recorded by the home office.
3. The branch was opened during the preceding year and its operating loss of P42,800 for the
year was capitalized by the branch as a start-up costs by the following entry:
Start-up Cost (Intangible Asset) 42,800
Income Summary 42,800
The account is not being amortized by the branch, and no entry was made by the home office to
record the net loss.
How much must be the adjusted balance of reciprocal accounts?

A. P175,400 B. P192,600 C. P115,400 D. P132,600
50. Vanessa and Booz operate Dagupeña Restaurant as a partnership. Their partnership agreement has the
following provisions for sharing profits and losses:
A. Income is distributed only as far as it is available.
B. Available income is to be distributed in the following sequence:
1. Vanessa, who is the chef, gets a salary of P50,000 a year; Booz, who is still learning, gets a salary of
P20,000.
2. Interest is imputed on the average capital balances at 15 percent.
3. Any remaining profits and losses are to be shared equally.
The average capital balances during the year were P40,000 for Vanessa and P100,000 for Booz. If the
partnership income for the year is P85,000, it should be distributed to the partners as follows:
A. Vanessa, P60,715; Booz, P24,285 C. Vanessa, P54,285; Booz, P30,715
B. Vanessa, P53,000; Booz, P32,000 D. Vanessa, P42,500; Booz, P42,500
51. A, B, C, and D are partners, sharing profits and losses 30%; 30%; 20%; 20%, respectively. After sale of firm
assets and payment of the available cash to the partnership creditors, a partnership trial balance and the
personal status of each partner are as follows:
Personal Status
Trial Balance Exclusive of Partnership Interest
Debit Credit Partner Asset Liabilities
Creditors P 20,000
A, capital 5,000 A P150,000 P100,000
B, capital 75,000 B 80,000 200,000
C, capital P 60,000 C 150,000 40,000
D, capital 40,000 D 60,000 80,000
P100,000 P100,000
Assuming that A pays the partnership creditors, how much B can still recover from the
partnership? A. P75,000 B. P54,000 C. P60,000 D. P0
52. The following information came from the books and records of CRC Corporation and its branch. The balances
are as of December 31, 2020, the second year of the corporation’s existence.
Home office Branch
Dr. (Cr.) Dr. (Cr.)
Sales P(400,000)
Expenses 137,500
Shipments to branch P(150,000)
Unrealized profit in branch inventory ( 32,500)
The branch purchases all of its merchandise from the home office. The home office ships this merchandise at
120 percent of its cost. The ending inventory of the branch is P30,000 at the billed price.
There are no shipments in transit between the home office and the branch.
The effect of the above information will be:

A. The total realized profit in branch inventory will be P32,500.
B. The net income reported by the branch is understated by P27,500.
C. The correct beginning inventory of the branch is P15,000.
D. The correct net income of the branch is P97,500.
53. In 2020, Metropolis Corp., successfully bided on a fixed-price contract for a factory building at a price of
P28,000,000. Metropolis uses the percentage-of-completion method and the following data are obtained on the
project.
Percentage of Estimated total Income recognized
Completion cost of completion to-date
December 31, 2021 60% P 20,800,000 P3,120,000
December 31, 2020 20% 19,500,000 1,300,000
What is the contract cost incurred in 2021 assuming that costs incurred are used to measure the extent of
progress toward project completion?
A. P 8,580,000 B. P 9,100,000C. P9,380,000 D. P12,480,000
54. Gerald, James, and Joshua have been partners throughout 2020. Their average balances and their balances
at the end of the year before closing the nominal accounts are as follows:
Partner Average Balances Balances, 12/31/2020
Gerald P 97,500 P 70,000
James 7,300 11,800
Joshua 4,250 1,700 *
*debit balance
The income for 2020 is P103,500 before charging partners’ salary allowances and before payment of interest
on average balances at the agreed rate of 4% per annum. Annual salary allocations are P12,500 to Gerald,
P8,750 to James, and P6,250 to Joshua. The balance of the profits is to be allocated at the rate of 60% to
Gerald, 10% to James, and 30% to Joshua.
The partners agreed that after credits and allocations have been made as indicated in the preceding
paragraph, the balances in the partners’ accounts will be proportionate to their residual profit-sharing ratios.
None of the partners is to invests additional cash nor withdraw cash. The partners agree to just settle among
themselves outside of the partnership.
The settlement among partners will involve:
A. Payment of Gerald to Joshua of P19,222.80. C. Payment of Joshua to Gerald of P9,645.80.
B. Payment of James to Joshua of P9,645.80. D. Payment of Joshua to James of P9,645.80.
55. Roger, Mark, and Leandro intend to start a business together that will be organized as a partnership. The
partners are considering adopting one of the following two alternative profit-sharing agreements:
Agreement #1 Agreement #2
Salaries:
Roger P 70,000 P 29,200
Mark 30,000 30,000
Leandro
Bonus to Roger as a percentage of profit after the bonus 5% 15%
Interest on average capital 8 10
Estimated average capital balances:
Roger P 50,000 P 50,000
Mark 100,000 100,000
Leandro 150,000 150,000
Remaining profit percentage:
Roger 40% 50%
Mark 40 35
Leandro 20 15
Roger seeks your advice as to which agreement would be best for him to accept.
Calculate the level of income at which Roger is indifferent between the choices.
A. 210,545 B. P240,000 C. P254,673 D. P257,240
The partnership of Mary Anne, Jackqui, and Ester has the following account
balances: Cash P 36,000 Liabilities P 17,000
Noncash assets 100,000 Mary Anne, capital 69,000
Jackqui, capital ( 8,000) deficit
Ester, capital 58,000
P136,000 P136,000
This partnership is in the process of being liquidated. Mary Anne and Jackqui are each entitled to 40 percent
of all profits and losses with the remaining 20 percent to Ester.
56. What is the maximum amount that Jackqui might have to contribute to this partnership because of the deficit
capital balance?
A. P 0 B. P8,000 C. P 40,000 D. P 48,000
57. How much is to be paid to Ester?
A. P0 B. P 6,333 C. P 9,500 D. P 19,000
58. If the noncash assets are sold for a total of P41,000, what is the minimum amount of cash that could be
received by Mary Anne?
A. P 0 B. P 24,333 C. P 35,667 D. P 46,200
59. The partnership of Melanie, Alfred, and Love have asked you to assist it in winding up the affairs of the
business. You compile the following information.
A. The trial balance of the partnership on June 30, 2020, is:
Debit Credit
Cash P 12,000
Accounts receivable (net) 44,000
Inventory 28,000
Plant and equipment (net) 198,000
Loan to Melanie 24,000
Loan to Love 15,000
Melanie, capital 134,000
Alfred, capital 90,000
Love, capital 63,000
Total P321,000 P321,000
B. The partners share profits and losses as follows: Melanie, 50%; Alfred, 30%, and Love, 20%.
C. The partners decided to liquidate their partnership by instalments. Cash is distributed to the partners at the
end of each month. No interest on partners’ loans accrues during liquidation. A summary of the July
liquidation transactions follows:
P 33,000 collected on accounts receivable; balance is uncollectible.
P 20,000 received for the entire inventory.
P 2,000 liquidation expense paid.
P 34,000 paid to outside creditors.
P 16,000 cash retained in the business at the end of the month.
Determine the share of Alfred on the July cash distribution.

A. P0 B. P 8,000 C. P 18,000 D. P 52,800
60. In the preparation of a consolidated balance sheet, the elimination entry as to goodwill in the consolidated
working paper will be
A. A credit to the Investment account by P6,120.
B. A credit to the Investment account by P7,650.
C. A charge to the Investment account by P3,178.
D. A credit to the Plant and Equipment account by P6,120.
61. To complete the eliminating entries, the other accounts affected are the capital stock and retained earnings of
Sydney Co. in these amounts.
A B. C D.
Capital Stock P 8,265 10,000 P 6,470 P 8,000
Retained Earnings P 28,558 P 32,350.00 P 25,880 P 25,880
During the liquidation, the assets of liquidated corporation resulted to net proceeds of P500,000. Liquidation expense
amounting to P30,000 has been paid at the start of liquidation from the net proceeds of disposal of all assets. Before
the liquidation, the following data are provided concerning the financial position of the said financially distressed
corporation:
 The corporation has total assets with book of P1,000,000 and deficiency amounting to (P170,000)
 An investment property with book value of P250,000 and realizable value of P150,000 secured a loan
payable amounting to P50,000
 Inventory with book value of P500,000 and realizable value of P50,000 secured a note payable amounting to
P100,000.
 Salaries payable and income tax payable amounted to P50,000 and 20,000, respectively.
62. What is the amount received by partially secured

creditor? A. P40,000
B. P60,000
C. P70,000
D. P65,000
63. What is the amount received by pure unsecured creditors without

priority? A. P580,000
B. P285,000
C. P400,000
D. P300,000
64. The Felix Contracting Co. uses the percentage of completion method of recognizing profit. Data for a recently
awarded project is given below:
Contract price P80,000,000
2006 2020 2021
Estimated costs per year P20,100,000 P30,150,000 P16,750,000
Progress billings per year 10,000,000 25,000,000 45,000,000
Cash collections 8,000,000 23,000,000 49,000,000
Using the data provided above, calculate Felix’s gross profit for 2020. Assume that the estimated costs were
actually incurred during the year.
a. P5,850,000 b. P3,900,000 c. P3,250,000 d. P9,750,000
65. On April 1, 2020, Starbucks entered into franchise agreement with Love to sell their products. The agreement
provides for an initial franchise fee of P4,218,750 payable as follows: P1,181,250 cash to be paid upon signing
of the contract and the balance in five equal annual payment every December 31, starting at the end of 2020.
Starbucks signs 12% interest bearing note for the balance. The agreement further provides that the franchise
must pay a continuing franchise fee equal to 5% of its monthly gross sales. On August 30 the franchisor
completed the initial services required in the contract at a cost of P1,350,000 and incurred indirect costs of
P232,500. The franchise commenced business operations on September 3, 2020. The gross sales reported to
the franchisor are September sales, P110,000; October sales, P125,000; November sales P138,000; and
December sales, P159,000. The first installment payment was made on due date.
Assume the collectibility of the note is reasonably assured. How much is the income earned from the franchise
agreement.
A. P2,868,750 B. P2,936,225 C. P2,895,350 D. P3,168,725
ADVANCED FINANCIAL ACCOUNTING & REPORTING MAY 2019 BATCH

FIRST PRE-BOARD EXAMINATION FEB 10, 2019; 3:00 –
6:000PM

On December 31, 2019, Galaxy acquired all the net assets of Milkway through an exchange of common stock.
Galaxy is to issue two shares of its common stock for each of the common shares of Milkway. The common
stock of Galaxy has an established market value of P35 per share. The financial statements of each of the
companies immediately prior to the business combination on December 31, 2019, the last date of their fiscal
year, are presented below; the balance sheet for Milkway shows fair values as well as book values.
Galaxy Milkway
Income statement
Sales P40,000 P15,000
Gross margin 28,000 11,000
Expenses 8,000 5,000
Net income P20,000 P 6,000
Milkway
Galaxy Book value Fair value
Balance sheets
Cash P 3,500 P 500 P 500
Inventories 7,500 2,500 3,100
Plant and equipment 70,000 22,500 30,000
Accumulated depreciation ( 14,000) ( 7,000) (12,000)
Patents 20,000 8,000 11,000
Total assets P87,000 P26,000 P32,600
Common stock (P13 par) 50,000
Excess over par 1,200 1,000
Total liabilities and SHE P87,000 P26,000
a) Galaxy incurred the following costs associated with the combination; these costs have been
paid by Galaxy but not yet recorded.
Finder’s and consultants’ fees P 1,900
Cost to register securities with the SEC 1,100
b) The combination is to be treated as a statutory merger with Milkway liquidating and Galaxy
assuming the liabilities of Milkway.
1. In the income statement of Galaxy Corporation prepared immediately after the business combination, how
much is the total net income?
A. P20,000 B. P16,000 C. P18,100 D. P24,900
2. Determine the goodwill resulting from the business combination.

A. P2,900 B. P4,800 C. P5,900 D. P0

The following Statement of Financial Position were prepared for MOLDEX and CROWN Company on January
1, 2019 just before they entered into business combination:
MOLDEX Company CROWN Company
Book Value Fair Value Book Value Fair Value
Cash and Receivables 450,000 500,000 225,000 250,000
Inventory 900,000 1,000,000 150,000 250,000
Building and Equipment 1,687,500 1,500,000 450,000 525,000
Accounts Payable 225,000 200,000 60,000 45,000
Bonds payable 675,000 450,000 75,000 105,000
Common Stocks
P 20 par value 1,200,000
P 10 par value 300,000
Additional paid in capital 225,000 75,000
Retained Earnings 712,500 315,000
MOLDEX Company acquired CROWN Company by issuing 15,000 shares of common stocks and paying Cash
amounting to P450,000. In additional, the following were incurred;’ Legal fees, Cost of SEC registration, Cost of
issuing stock certificates and General administrative costs were incurred and paid costing the MOLDEX Company of
P37,500; P37,500, P15,000 and P22,500 respectively.
If the market stock price of the MOLDEX and CROWN Company are P 25 and P 14, respectively at the time of
acquisition,
3. How much is the Goodwill or Gain from Acquisition?

A. P 25,000
B. (P25,000)
C. P 50,000
D. (P50,000
4. How much is the Total Retained Earnings after the acquisition?

A. P 625,500
B. P 702,500
C. P 712,500
D. P 1,027,500
5. How much is the Total Assets after the acquisition?

A. P 3,037,000
B. P 3,500,000
C. P 3,525,000
D. P 3,550,000

On January 1, 2019, SONY Corporation and JVC Company decided to enter into enter into a business
combination. SONY Corporation’s book shows assets and liabilities amounting to P1,350,000 and P
300,000, respectively. The shareholder’s equity is composed of P300,000 common stock (P10par); P
150,000 APIC and P 600,000 retained earnings. The book value asset for SONY is understated by P
150,000 while its liability is overstated by P 75,000.
JVC Company assets inclusive of P15,000 goodwill amounted to P500,000 while its liabilities amounted to
P150,000. The shareholder’s equity is composed of P120,000 common stocks (P10 par); P 105,000 APIC
and P 125,000 retained earnings. The fair value assets without goodwill and liabilities should be reduced
both by P75,000.
SONY Company required the net assets of JVC Company by issuing 25,000 shares and cash of P 10,000.
Moreover, a contingent consideration of P80,000 will be paid when the market price per share exceeded P15
or the average income for 2 years will amount to P1,500,000. The determinable amount of the said
contingent consideration at the date of combination amounted to P50,000. The current market price of SONY
stock is traded at P 12 per share.
SONY Corporation paid the following as a result of business combination:

Finder’s fee P 50,000
Legal, accounting and other consulting fees P 50,000
Cost of stockholder’s meeting to vote on the acquisition P 20,000
SEC Registration of the business combination P 15,000
General administrative cost P 15,000
Cost printing stock certificates P 10,000
Accountants fee related to the stock issuance P 20,000
SEC Registration P 20,000
Stock listing application fees P 10,000
Under writing cost . P 10,000
6. How much is the result of the combination on January 1, 2019?

A. 10,000 goodwill C. 25,000 goodwill
B. (10,000) income D. (25,000) income
7. How much is the Combined total Assets?

A. 1,330,000 C. 1,555,000
B. 1,550,000 D. 1,575,000
8. How much is the Stockholders’ Equity?

A. 1,130,000 C. 1,110,000
B. 1,422,500 D. 1,040,000
Items 9 and 10 are based on the following data:

The following selected accounts appeared in the trial balance of MAGIC as of December 31, 2020.
Debit Credit
Installment Receivable – 2019 sales P 15,000 P
Installment Receivable – 2020 sales 200,000
Inventory, December 31, 2018 70,000
Purchases 555,000
Repossession 3,000
Installment Sales 425,000
Sales 385,000
Unrealized Gross Profit 2019 54,000
Installment Receivable – 2019 sales, as of 2/ 31/ 2019 P 120,000
Inventory of new and repossessed merchandise as of 12/31/2020 95,000
Gross Profit percentage on regular sales during the year 30% on sales
Repossession was made during the year. It was a 2019 sale and the corresponding uncollected
account at the time of repossession
was P 7,750.
9. The gross profit realized on collections for installment sales in 2019 was:
A. P 47,250 B. P 50,737.50 C. P 43,762.50 D. answer not given
10. The gross profit realized on collection for installment sales in 2020 was:
A. P 87,075 B. P 88,672.50 C. P 85,500 D. answer not given
11. The loss on repossession made on a 2019 sale was:

A. P 1,262.50 B. P 487.50 C. P 1,805 D. answer not given
12. SUN Realty bought two adjoining lots (Lot A and B) with a total area of 1,600 sq. m. Lot A was bought for P
160,000 in 2014 and Lot B was bought for P 240,000 in 2015. SUN Realty resubdivided the two lots and
made a 400 sq. m. lot out of the original two lots by taking 200 sq. m. from each to make Lot C. The cost of
Lot C was by allocating a portion of the cost of the original two lots. SUN Realty build a house on Lot C at a
cost of P 152,000. It was completed on June 30, 2019, and had an estimated useful life of 20 years.
The three lots and house were sold during 2019 on the following terms:
Lot Date of Sale Sale Price Down Payment Balance
Lot A March 31 P 171,428 P 51,428 P 120,000
Lot B Oct 31 240,000 80,000 160,000
Lot C & House June 30 420,000 180,000 420,000
Balance, payable in
Equal Installments
Lot A P 12,000 every 3 months
Lot B 20,000 every 2 months
Lot C 40,000 every 6 months
Installment payment is to be applied first to accrued interest on the balance to a reduction of principal. The
rate of interest is 10% p.a. on the carrying balance of the principal.
After repeated demand from the buyer of Lot C and house he failed to meet the installment due on June 30,
2020 and the property was repossessed:
The realized gross profit from the sale of the lots and house on December 31, 2019 are:
Lot A Lot B Lot C & House Total
A. P 23,733.33 P 25,333.33 P 78,300 P 127,366.66
B. P 24,333.33 P 24,533.33 86,700 135,566.66
C. P 23,732.58 P 24,333.33 83,200 131,265.91
D. P 24,733.33 P 25,333.33 86,500 136,566.66
13. On January 1, 2019 Belgian Waffles entered into a franchise agreement with Diaz, Inc. to sell specialty items.
The agreement provides for an initial franchise fee of P2,500,000, payable as follows: P500,000 cash to be
paid upon signing of the contract, and the balance in five annual payments every December 31, starting
December, starting December 31, 2019.
Belgian Waffles sign a 12% interest-bearing note for the balance. The agreement further provides for a
continuing franchise fee equal to 5% of its monthly gross sales. On October, the franchisor completed the
initial services required in the contract at a cost of P637,500 and incurred expenses of P82,900. The
franchisee commenced operations on November 2019 and was able to generate gross sales amounting to
P181,500 and P221,500 for the month of November and December.
Assuming the collections of the note is not reasonably assured, what is the amount of net income to be
reported in the income statement for the year ended December 31, 2019?
A. P767,750 B. P847,750 C. P549,750 D. P784,250
Items 13 and 14 are based on the following data:

IBM Company sells a franchise that requires an initial franchise fee of P7,000,000. A down payment of
P2,000,000 cash is required with the balance covered by the issuance of a P5,000,000, 10% note, payable by
the franchisee in 5 equal annual installments. How much must be the franchise revenue earned under the
following assumptions:
14. If all material services have been substantially performed by the franchisor, the refund period has expired,
and the collectibility of the note is reasonably assured.
A. P7,000,000 B. P5,790,000 C. P2,000,000 D. P0
15. If the refund period has expired and the collectibility of the note is reasonably assured, but all material
services have not been substantially performed by the franchisor.
A. P7,000,000 B. P5,790,000 C. P2,000,000 D. P0
16. If all material services have been substantially performed by the franchisor and the collectibility of the note is
reasonably assured, but the refund period has not expired.
A. P7,000,000 B. P5,790,000 C. P2,000,000 D. P0
17. Company Z engages in long-term construction contracts and uses the percentage of completion method to
recognize gross profits. The company started contract 1 in 2017, contract 2 in 2018, and contract 3 in 2019.
The total gross profit (estimated and actual) and the percentage complete for each contract at the end of 2018
through 2020 are:
Contract 1 * Contract 2 Contract 3
Gross profit P800,000 P350,000 P600,000
% complete at the end of:
2018 75% 50% -
2019 100% 70% 35%
2020 - 100% 90%
* 30% was complete at the end of 2017.
The gross profit from construction for 2018, 2019 and 2020, respectively must be:
A. P535,000; P480,000; P435,000 C. P775,000; P480,000;
P435,000 B. P775,000; P655,000; P435,000
D. P535,000; P655,000; P890,000
18. The following information pertains to a river-control project of SMDC Construction Inc. in Taguig which was
commenced in 2019 and completed the following the year:
Costs incurred to-date
at June 30, 2019 P 9,750,000
at June 30, 2020 15,750,000
Estimated total cost at completion
at June 30, 2019 19,500,000
at June 30, 2020 20,250,000
The project is a P22,500,000 fixed-price construction contract and SMDC uses the percentage-of-completion
method of accounting. What is the income reported by SMDC on its Taguig project on June 30, 2020?
A. P750,000 B. P1,500,000 C. P1,750,000 D. P250,000
19. DMCI Corporation is executing a gigantic project of constructing the tallest boarding house in the
country. The project is expected to take three years to complete.
The company has signed a fixed price contract of P24,000,000 for the construction of this prestigious
boarding house.
The details of the costs incurred to date in 2019 are:
Site labor costs P2,000,000
Costs of construction material 6,000,000
Depreciation of special plant and equipment used in 1,000,000
constructing to build the boarding house
Marketing and selling costs to get the boarding house in the
country the right exposure 2,000,000
Total P10,000,000
Total contract cost estimated to complete P11,000,000
Calculate the revenue costs and profit to be recognized in 2019:

Revenue Costs Gross Profit (loss)
A. P 10,800,0000 P 9,000,000 P1,800,000
B. 10,800,000 11,000,000 (200,000)
C. 12,000,000 9,000,000 3,000,000
D. 12,000,000 11,000,000 1,800,000
20. REH Company opened a Davao branch in January 2019. During 2019, REH recorded merchandise transfers
to the branch and merchandise returns from the branch with the following entries:
Branch Current 156,000
Sales 156,000
Sales Returns 3,900
Branch Current 3,900
Transfers to and from the branch were recorded by REH at 130 percent of Edward’s cost.
The Davao branch reported to the home office a net loss of P12,000 for 2019. In addition, the branch reported
a closing inventory of P65,000, all of which was acquired from the home office.
As a result of the above information:
A. The correct result of operation of the branch will be a net income of P8,100.
B. The balance of unrealized profit on branch inventory account on the home office books must be
P19,500.
C. The combined net income will be overstated by P39,000.
D. The correcting entry will reduce branch current account by P152,100.

At the beginning of the year, San Miguel Company establishes branches in Makati and Cebu. The
following transactions occur during the year.
 The home office purchases equipment on account for P40,000 and immediately transfers half
to each of the two branches at cost.
 The home office transfers cash of P3,000 to the Makati branch and P5,000 to the Cebu
branch.
 The company sells inventory to unrelated parties at a 40 percent gross profit and transfers
inventory to its branches at a 20 percent gross profit. During the year, the home office has
sales of P175,000 to unrelated parties and transfers inventory to the Makati branch at a
P140,000 price and to the Cebu branch at a P150,000 price.
 The branches sell their inventory, all acquired from the home office, at a 25 percent gross
profit. During the year, the Makati branch has sales of P136,000, and the Cebu branch has
sales of P152,000.
 Operating expenses during the year, excluding cost of goods sold and depreciation, total
P85,000 for the home office, P13,000 for the Makati branch, and P11,000 for the Cebu
branch.
 Selected balance sheet accounts at the end of the year are as follows:
Home office Makati branch Cebu branch
Accounts receivable P28,000 P11,000 P14,000
Inventory 45,000 38,000 36,000
Accounts payable 20,000 1,000 2,000
Notes payable 30,000 35,000 40,000
Accumulated depreciation 28,000 4,000 4,000
 During the year, the Makati branch transfers P135,000 of cash to the home office and the
Cebu branch transfers P151,000.
21. The correct net income of Makati branch must be:
A. P21,000 B. P41,400 C. P37,400 D. P34,000
22. The correct net income of Cebu branch must be:

A. P 45,800 B. P49,800 C. P42,000 D. P23,000
23. The adjusted balance of Makati branch account must be:

A. P28,000 B. P65,400 C. P24,000 D. P45,000
24. The account balances shown below were taken from the trial balances submitted to CDE Corporation by its
La Union Branch.
2019 2020
Petty cash fund 1,500 1,500
Inventory - 37,170
Sales 173,180 195,120
Shipments from Home Office (140% of Cost) 107,450 136,080
Expenses 51,260 57,930
Accounts written off 1,220 1,920
All branch collections are remitted to the home office. All branch expenses are paid out of the petty cash
fund. When the petty cash fund is replenished, the branch debits appropriate expense accounts and credits
Home Office Current. The petty cash is counted every December 31, and its composition was as follows:
12/31/19 12/31/20
Currency and coins 580 860
Expense vouchers 920 640
The branch inventory on December 31, 2019 was 41,370. What is the correct branch net income for 2020?
A. 3,390 B. 41,350 C. 3,670 D. 41,070
25. The following balance sheet was prepared for the X, Y and Z Partnership on March 31, 2019:
Assets Liabilities and Capital
Other Assets 180,000 X, capital (40%) 40,000
Y, capital (40%) 65,000
Z, capital (20%) 48,000
Total Assets P 205,000 Total liabilities and capital P 205,000
The partnership is being liquidated by the sale of assets in installments. The first sale of non-cash assets
having a book value of P 90,000 realizes P 50,000.
Assume that each partner properly received some cash after the second sale of assets. The cash to be
distributed amount to P 14,000 from the third sale of assets, and unsold assets with a P 6,000 book
value remain. How should the P 14,000 be distributed to X, Y and Z respectively.
A. P 5,600; P 6,500; P 2,800 C. P 0 ; P 11,200; P 2,800
B. P 5,000; P 5,000; P 4,000 D. P 5,600; P 5,600; P 2,800
26. The J, K and L Partnership shows the following profit and loss ratios and capital balances:
J, Capital 60% P 252,000
K, Capital 30% 126,000
L, Capital 10% 42,000
The partners decided to sell to M 20% of their respective capital and profit and loss interests for a total
payment of P 90,000. M will pay the money directly to the other partners.
How much cash should J, K, and L receive, respectively from M?

A. P 50,400, P 25,200, and P 8,400, if and only if no goodwill is recorded
B. P 50,400, P 25,200, and P 8,400, whether or not goodwill is recorded
C. P 54,000, P 27,000, and P 9,000, if and only if goodwill is recorded
D. P 54,000, P 27,000, and P 9,000, whether or not goodwill is recorded
27. On December 31, 2018, Larry Inc. signed an agreement authorizing Lino Company to operate as a franchisee
for an initial franchisee fee of P 50,000. Of this amount, P20,000 was received upon signing of the agreement
and the balance is due in three annual payments of P10,000 each beginning December 2019. The agreement
provides that the down payment (representing a fair measure of the services already performed by Nike, Inc.)
is not refundable and substantial services are required of Larry. Lino Company’s credit rating is such that
collection of the note is reasonably assured. The present value at December 31, 2018 of the three annual
payments discounted at 14% (the implicit rate for a loan of this type) is P 23,220.
On December 31, 2018, Lino Company should record unearned franchise fees
of: A. P 0 B. P 50,000 C. P 43,220 D. P 23,220
28. Santiago, Juan, and Manuel invest P 40,000, P 30,000, and P 25,000, respectively, in a partnership on June
30, 2018. They agree to divide net income or loss as follows:
1) Interest at 10% on beginning capital account balances
2) Salaries of P 10,000, P 8,000, and P 6,000, respectively, to Santiago, Juan, and Manuel.
3) Remaining net income or loss divided equally
4) A minimum of P 15,000 of income guaranteed to Manuel.
If the net income for the year ended June 30, 2019, before interest and salary allowances to partners, was P
44,000, the net income credited to Santiago is:
A. P 17,500 B. P 16,500 C. P 16,000 D. P 14,000
29. On December 1, CRCACE Company opened a branch in Cebu to which merchandise billed at P
30,000 was shipped. During the month, additional shipments were made at billed prices of P 12,000.
During December, Cebu branch returned merchandise that was defective and received credits of P 750 on
the returns. At the end of the month, the branch record its inventory at P 18,500, which is from the
following sources:
Merchandise acquired from home office at billed price P 16,500
Merchandise acquired from outsiders 2,000
Total inventory P 18,500
A branch loss for December is calculated at P2,600. The home office has followed the practice of billing the
branch at 20% above merchandise cost.
Compute: 1) the balance of the allowance for overvaluation of branch inventory at December 31, before
adjustments, and 2) the net income (loss) of the branch in so far as the home office is concerned:
A. (1) P 4,125; (2) P (2,600) C. (1) P 7,000; (2) P 1,525
B. (1) P 6,875; (2) P 1,525 D. (1) P 6,875; (2) (P2,600)
30. Ellen, Juliet and Marian were partners with capital balances on January 2, 2019 of P 560,000,
P 672,000, and P 496,000, respectively. Their profit and loss ratio is 3:5:2. On August 1, 2019, Ellen retires
from the partnership. On the date of retirement, the partnership net loss from January 2 is P 384,000; and the
partners agreed to revalue inventories to P 296,000 (from the carrying amount of P 272,000). The payment to
Ellen in settlement of her interest is to be
P 454,800.
Upon the retirement of Ellen, which of the following will result?
A. Bonus to Juliet of P 2,000
B. Bonus to Marian of P 800
C. Goodwill to Marian of P 2,800
D. Juliet capital is P 66,800 more than Marian’s.
31. Andy and Brenan have just formed a partnership. Andy contributed cash of P 782,000 and office equipment
that cost P 390,000. The equipment had been used in his sole proprietorship and had been 80% depreciated.
The current fair value of the equipment is P 252,000. An unpaid mortgage loan on the equipment of P 84,000
will be assumed by the partnership. Andy is to have a 60% interest in the partnership net assets.
Brenan is to contribute, only, merchandise with a fair value of P 630,000. Both partners agreed on a profit and
loss ratio of 55% to Andy and the balance to Brenan.
To finalize the partnership agreement, Andy should make additional investment (withdrawal) of cash in the
amount of
A. P(12,000) B. P(180,000) C. P 88,000 D. P ( 5,000)
32. Claudine, Ella, and Joy decided to liquidate their partnership on July 31, 2019. Their capital balances and
profit and loss ratios on this date, before liquidation, are:
Capital P & L Ratio
Claudine P 224,000 25%
Ella 288,000 30%
Joy 128,000 45%
The net loss from January 1 to July 31, 2019 is P 48,000. Also, on this date, cash and liabilities are P 136,000
and P 232,000, respectively.
Which of the following is inconsistent with the result of liquidation if Ella received P 247,200 in full settlement of
her interest in the firm?
A. Total cash paid to partners, P 736,000
B. Non-cash assets were sold for P 600,000
C. Joy received P 66,800
D. Claudine’s share in loss, P 22,000
33. On September 2, 2019, Nino, Olan, and Pete formed a partnership investing cash of P 945,000, P
850,500, and P 264,600., respectively. The partners share profits and losses in the ratio of 3:2:2 and on
October 31, 2019 the firm has cash of P 63,000, other assets of P 2,992,500, and liabilities of P 1,612,800.
On this date they decided to go out of business and sell all the assets for P 1,890,000. Pete has
personal assets of P 94,500 that may, if necessary, be used to meet partnership obligations. Loss from
operations was P 617,400.
How much should be distributed to Olan upon liquidation of the

partnership? A. P 128,520 C. P 0
B. P 306,180 D. P 268,380
34. A, B, and C agree to liquidate their consulting practice as soon as possible after the close of business on July
31, 2019. The trial balance on that date shows the following account balances.
Accounts receivable 120,000Loan to A 40,000
Furniture and fixtures 350,000 A, capital 200,000
B, capital 150,000
C, capital 150,000
P 600,000 P 600,000
The partners share profits and losses 50%, 20%, and 30% to A, B, and C, respectively, after C is allowed a
monthly salary of P 40,000.
August transactions and events are as follows:
1. The accounts payable are paid.
2. Accounts receivable of P 80,000 are collected in full. C accepts accounts receivable with a face value
and fair value of P 30,000 in partial satisfaction of his capital balance. The remaining accounts
receivable are written off as uncollectible.
3. Furniture with a book value of P 250,000 is sold for P 150,000.
4. Furniture with a book value of P 40,000 and an agreed upon fair value of P 10,000 is taken by B in
partial settlement of his capital balance. The remaining furniture and fixtures are donated to Goodwill
Industries.
5. Liquidation expenses of P 30,000 are paid.
6. Available cash is distributed to partners on August 31.
How much of B’s equity was recovered from the partnership liquidation?
A. P 25,000 B. P 94,000 C. P 51,000 D. none
35. The Carlos, Apollo, and Warlito Partnership has not been successful. Hence, the partners have sadly
concluded that operations must be terminated and their partnership liquidated. Profits and losses are shared
as follows: Carlos, 45 percent; Apollo, 35 percent; and Warlito, 20 percent. As the accountant placed in
charge of this partnership, you have responsibility for the liquidation and distribution of assets. When you
assume your responsibilities, the partnership balance sheet is as follows:
Other assets 540,000 Loan from Carlos 180,000
Carlos, capital 60,000
Apollo, capital 300,000
Warlito, capital 60,000
P 720,000 P 720,000
During the first two months of your duties, the following events occur:
1. Assets having a book value of P 400,000 are sold for P 120,000 cash.
2. Previously unrecorded liabilities of P 10,000 are recognized.
3. Before distributing available cash balances to creditors and partners, you conclude that a cash
reserve of P 10,000 should be set aside for future potential expenses.
4. Remaining cash balances are distributed to creditors and
partners. How much cash Carlos should receive?
A. P 180,000 B. P 42,000 C. P 26,250 D. P 31,875

Tiyago and Marcial are partners with capital balances of P32,000 and P68,000, respectively, as of July 1,
2019. Tiyago has a 30% interest in profits and losses. All assets of the partnership are at fair market value
except as follows:
Book value Market value Book value Market value
Equipment P150,000 P142,000 Building P274,000 P250,000
Inventory 43,000 50,000 Land 60,000 105,000
The partnership has decided to admit Corazon and Amanda as new partners. Corazon contributes cash of
P55,000 for a 20% interest in capital and a 30% interest in profits and losses. Amanda contributes cash of
P10,000 and equipment with a fair market value of P50,000 for a 25% interest in capital and a 35% interest
in profits and losses. Amanda is also bringing special expertise and client contacts to the new partnership.
36. The capital balance of Tiyago after Corazon and Amanda’s admission under the bonus method
is: A. P40,775 B. P34,775 C. P38,000 D. P70,500
37. The method (bonus or goodwill) advantageous to Corazon and Amanda and the total amount of advantage is:
A. Bonus method for an advantage of P 2,055
B. Bonus method for an advantage of P 5,944
C. Bonus method for an advantage of P
12,750 D. Bonus method for an advantage of P
4,111.
38. Vendetta Construction Company has used the cost-to-cost percentage of completion method of recognizing
profits. Cardo Dalisay assumed leadership of the business after the recent death of his father, Juan Dalisay In
reviewing the records, Cardo Dalisay finds the following information regarding a recently completed building
project for which the total contract price was P 5,000,000.
Construction in progress account balance 2017 P 1,000,000
Construction cost incurred during 2019 2,050,000
Gross profit (loss) recognized in 2017 100,000
Gross profit (loss) recognized in 2018 350,000
Gross profit (loss) recognized in 2019 ( 50,000)
How much cost was incurred in 2018?

A. P 1,650,000 B. P 2,550,000 c. P 900,000 d. P 4,600,000
39. Congestions have always been a way of life most specially in Metro Manila. One way to decongest traffic and
minimize use of gasoline is to phase out the internationally known jeepneys as well as the use of dilapidated,
smoke-belching and fully depreciated buses. To partially solve the problem as well as to motivate car owners
to use public transportation, an underground monorail system similar to that of Hongkong was the solution.
The system covered the stretch of the famous Edsa, from Roxas Boulevard to Bonifacio Monument and would
go as far as the area of Malabon as well as Navotas, a thickly populated fishermen’s village. The project
covers several stages and was awarded to different contractors here and abroad. Competitive bids were held
for stage one of the project. The bids are:
Northern City Construction P560 billion
Hongkong Systems 392 billion
JJ Ram Construction Company 400 billion
A project that undergoes competitive bid is normally awarded to the lowest bidder. However, the government
reserves the right to reject any and all bids after a careful review of the track record of the bidders. Even though
JJ Ram Construction Company had the second lowest bid. Stage one of the project was awarded to them. The
contract price was P400 billion pesos which was covered by a two-year construction contract. The following data
were available from the records for the years 2018 and 2019:
2018 2019
(In billion of pesos)
Costs incurred P 120 P 216
Progress billings 100 300
Cash collections on billings 96 304
Estimated costs to complete 216
How much is the income from construction in 2019, using the cost to cost percentage of completion method?
A. P41.143 billion B. P64 billion C. P22.857 billion D. P161.143 billion

Comparison between the interoffice account of the DR Wholesale Company with its suburban branch
and the corresponding account carried on the latter’s books shows the following discrepancies at the
close of business on September 30, 2019:
(a) A charge of P8,700 (Office Furniture) on the home office books is taken up by the branch as P7,800.
(b) A credit by the home office for P3,000 (Merchandise Allowances) is taken up by the branch as P3,500.
(c) The home office charges the branch P3,250 for interest on open account, which the branch fails to take
up in full; instead, the branch sends to the home office an incorrect adjusting memo, reducing the charge
by P750, and sets up a liability for the net amount.
(d) A charge of labor by the home office, P4,330, is taken up twice by the branch.
(e) A charge of P7,850 is made by the home office for freight on merchandise, but the amount is entered by
the branch as P785.
(f) The branch incorrectly sends the home office a debit note for P2,930, representing its proportion of a bill
for truck repairs; the home office does not record it.
(g) The home office receives P4,750 from the sale of a truck, which it erroneously credits to the branch; the
branch does not charge the home office therewith.
(h) The branch accidentally receives a copy of the home office entry dated October 10, 2019, correcting item
(g), and enters a credit in favor of the home office as of September 30, 2019.
The balance of the account with the branch on the home office books shows P1,316,900
receivable from the branch at September 30, 2019. The interoffice accounts were in balance at the
beginning of the year.
40. The correct amount of interoffice accounts is:

A. P1,321,650 B. P1,316,900 C. P1,316,085 D. P1,330,750
41. The balance of home office account per branch books before adjustments
is: A. P1,316,085 B. P1,316,900 C. P1,300,520 D. P1,321,650

Mark, Louie and Christopher operate a local accounting firm as a partnership. After working together for
several years, they have decided to liquidate the partnership’s property. The partners have presented the
following sheet:
Mark, loan 80,000 Louie, loan 100,000
Noncash assets 1,620,000 Mark, capital (10%) 900,000
Louie, capital (50%) 300,000
Christopher, capital (40%) 200,000
Total P1,900,000 Total P1,900,000
The noncash assets are sold for P 800,000, with P 210,000 of this amount being used to pay liquidation
expenses. All three of these partners are personally insolvent.
42. How much of the cash must Mark receive?

A. P 261,667 B. P 305,000 C. P 128,333 D. P 390,000
43. Assuming the total cash received by Louie is P 300,000 how much is the selling price of noncash assets?
A. P 1,220,000B. P 1,430,000 C. P 1,630,000 D. P 1,830,000
44. ABS and GMA entered into a partnership as of March 1, 2019 by investing P 125,000 and P 75,000,
respectively. They agreed that ABS, as the managing partner, was to receive a salary of P 30,000 per year
and a bonus computed at 10% of the net profit after adjustment for the salary; the balance of the profit was to
be distributed in the ratio of their original capital balances. On December 31, 2019, account balances were as
follows:
Cash P 70,000 Account payable P 60,000
Account Receivable 67,000 ABS, capital 125,000
Fur. and fixtures 45,000 GMA, capital 75,000
Sales returns 5,000 ABS, drawing (20,000)
Purchases 196,000 GMA, drawing (30,000)
Operating expenses 60,000 Sales 233,000
Inventories on December 31, 2019 were as follows: supplies, P 2,500; merchandise, P 73,000. Prepaid
insurance was P950 while accrued expenses were P 1,550. Depreciation rate was 20% per year.
The partner’s capital balances on December 31, 2019, after closing the net profit and drawing accounts
were: ABS GMA
A. P 135,940 P 47,960
B. P 139,540 P 49,860
C. P 139,680 P 48,680
D. P 142,350 P 47,670
45. As of December 31, 2019, the books of MERCEDEZ Partnership showed capital balances of Menandro-
P25,000; Elliot-P25,000; Romeo-P5,000. The Partners’ profit and loss ratio was 3.2.1. respectively. The
Partners decided to dissolve and liquidate. They sold all the non-cash assets for P 37,000 cash. After
settlement of all liabilities amount to P 12,000, they still have P 28,000 cash left for distribution.
Assuming that any debit balance of partners’ capital is uncollectible, the share of Menandro on P 28,000
cash for distribution was:
A. P 19,000 B. P 17,800 C. P 18,000 D. Answer not given
DRILL - AFAR MAY 2019 BATCH
1. On December 31, 2014, the books of A, B and C partnership showed capital balances of P40,000; P25,000
and P5,000 to A,B and C respectively. Moreover, the partners share in the profit and loss ratio of 3:2:1 each,
respectively. The books of the partnership also showed current liabilities amounting to P12,000. The first
installment sale of the NCA’s amounting to P70,000 was made for P40,000. If the partnership had beginning
cash of P1,000, how much would be the share of A in the first cash distribution to the partners?
17,000 19,000
18,000 17,800
2. X,Y and Z are partners in XYZ Partnership and share profits and loses in a 5:3:2 ratio. The partners have
agreed to liquidate their partnership. Prior to the liquidation, the partnership balance sheet reflects the
following balances in their books:
Cash 25,200 X, Capital 72,000
Non-cash Assets 297,600 Y, Capital (12,000)
Notes payable to Z 38,400 Z, Capital 39,600
Other Liabilities 184,800
Assuming that the partnership incurred liquidating expenses of P16,800 and that the non-cash
assets with a book value of P24,000 was sold for P216,000, how much cash would Z receive?
-0- 46,457
39,600 74,571
3. Alpha, Beta and Charlie formed a partnership on July 1, 2014 and are to share profits and losses in
the ratio of 20:50:30 each, respectively. The partners also agree that Alpha is to receive annual
salaries of P280,000 and that Charlie is to receive a minimum of P112,000 in his share of the profits.
By the end of 2014, the partnership reported total revenues amounting to P1,000,000, operating
expenses of P600,000 and interest expense for a loan to Alpha amounting to P50,000. The
partnership failed to record depreciation of a machine with a 5-year life which was donated by
Charlie with a value of P800,000. How much would be the share of Alpha in the net income?
328,000 305,143
196,000 188,000
4. One, Two and Three are partners with average capital balances during 2014 of P472,500; P238,650
and P162,350, each respectively. The partners receive a 10% interest on their average capital
balances; after deducting salaries of P122,325 to One and P82,625 to Three. The residual profits or
loss is then divided equally. In 2014, the partnership had a net loss of P125,624 before the interest
and salaries to the partners. By what amount would the capital of One change because of the
results of operations?
29,476 (40,844)
30,267 28,358
5. John and Jane are partners who share in the profits and losses in the ratio of 6:4 each respectively.
John retires to the partnership with the agreement that the fixed assets with a value of P17,000 are
first to be revalued by increasing their amount by P29,000. Total liabilities of the partnership at this
time amount to P10,000 while the working capital amounts to P85,000. John receives cash
amounting to 25% of his adjusted capital, and inventory items costing P18,750 and a note receivable
for the balance. Both partners agreed that the inventory’s book value is a fair representation of its’
fair value. Right after the retirement of John, the partnership reported total current assets of P56,000;
fixed assets amounting to P46,000, current liabilities of P52,000 and Jane capital of P50,000. How
much was the adjustment to John’s capital before his retirement?
7,200 51,000
17,400 Cannot be determined
6. Partners John and Doe, who share equally in the profits and losses, have the following balance
sheet as of December 31, 2014:
Cash 120,000 Payables 172,000
Receivables 100,000 Accumulated depreciation 8,000
Inventory 140,000 John, Capital 140,000
Equipment 80,000 Doe, Capital 120,000
The partners agreed to incorporate their partnership with the new corporation absorbing the net
assets after the following adjustments; provision for allowance for doubtful accounts of P10,000;
restatement of the inventory to its current fair value of P160,000 and recognition of further
depreciation on the equipment of P3,000. The corporation’s capital stock is to have a par value of
P100 and the partners are to be issued corresponding total shares equivalent to their adjusted
capital balances. How much is the total par value of the shares of stock issued to the partners?
280,000 260,000
267,000 273,000
7. Easy Partnership reported the following account balances: Sales, P70,000; Cost of Sales, P40,000;
Operating expenses, P10,000; Partners’ salaries, P13,000; Interest to partners, P8,000; Interest paid
to banks, P1,500; Interest paid to partner (loan to partner), P500. What is the partnership net
income/(loss)?
5,000 17,500
18,000 (3,000)
8. First, Second and Third have capital balances of P11,200; P13,000 and P5,800, each respectively,
and share in the profit and loss ratio of 4:2:1. If the partnership is liquidated and cash available for
distribution amount to P1,400, who among the partners shall be paid first?
First Third
Second No one
9. Seven, Eight, Nine and Ten are partners who share in the profits and losses in the ratio of 5:3:1:1
each respectively, and have capital balances of P160,000; P120,000; P60,000 and P100,000 each
respectively. The partners decide to liquidate when their books reflect Advances (dr.) from Nine and
Ten amounting to P18,000 and 10,000 each respectively and Loans (cr.) to Seven and Eight
amounting to P20,000 40,000 each respectively. If the partnership is liquidated and P72,000 is
available for distribution, who among the partners are to share in the P72,000 cash distribution?
Nine and Ten All, equally
Eight and Ten Seven and Eight
10. Armscor, Gloc and Taurus agreed to form a partnership by contributing the following: Armscor and
Gloc are to invest their existing businesses with the following account balances:
Armscor Gloc
Cash 98,000 50,000
Accounts Receivable 50,000
Allowance for Bad Debts 2,000
PPE 300,000
Accumulated Depreciation 50,000
Accounts Payable 25,000
Taurus on the other hand is to invest cash so that his capital account would be equal to 40% of the
partnership after the following adjustments to the non-cash assets are to be made:
a. The Accounts Receivable is to have a 90% realizable value
b. The PPE are to have a condition percentage of 80%.
How much should the cash investment of Taurus be?
238,667 272,000
237,333 270,667
11. Apple, Banana and Grape are partners who initially invested P80,000; P120,000 and P75,000 each
respectively on June 30, 2014 and share profits and losses in the ratio of 5:2:3, each respectively
after annual salaries of P60,000 each are given to Apple and Banana; 10% interest on beginning
capital to Banana and Grape and a 25% bonus to Grape with the bonus being considered as an
expense in the distribution of the net income. If after the first year of operations, Apple and Banana
received a total of P76,000, how much would be the bonus to be given to Grape?
14,875 12,000
12. From the data given in No 11, assume that on January 1, 2018, the partners decided to admit Duhat
into the partnership by him purchasing 30% of the capital of Grape for P60,000 for a 25% interest in
the partnership. The partners agree that the assets of the partnership must be adjusted prior to the
admission of Duhat. The books further shows that the net income of the partnership for the past four
years amount to 2014-P50,000; 2015-P125,000; 2016-P95,000; 2017-P105,000. What would be the
capital balance of Grape immediately after the admission of Duhat?
200,000 150,000
13. Rene, Jose, Allan and Noel are partners with profit and loss ratios of 45:15:20:20 each respectively.
The partners decide to liquidate their business. Prior to their liquidation, their accounts reflected the
following balances: Cash-P50,000; Liabilities-P150,000; Rene, Capital-P90,000; Jose, Capital-
P45,000; Allan, Capital, P35,000 and Noel, Capital-P25,000. The buyer of the non-cash assets of
the partnership pays the partnership P90,000 and agrees to pay 75% of the liabilities. The partners
also incur liquidating expenses of P15,000. How much cash would Jose receive after the first sale of
the non-cash assets?
28,875 -0-
21,375 12,000
14. Using the information in problem no 13, as an independent case, assuming that after the first
installment sale of the non-cash assets, Rene and Jose already receive a total of P45,000 and the
second sale of non-cash assets generated P75,000 with the partners withholding P5,000, how much
would Rene receive after the 2nd installment sale?
34,031 33,750
36,281 36,000
15. Using the information in problem no 13, as an independent case, assuming that after the first
installment sale of the non-cash assets, Allan and Jose already receive a total of P45,000 and the
second sale of non-cash assets generated P75,000 with the partners withholding P5,000, how much
would Rene receive after the 2nd installment sale?
18,900 35,100
32,850 31,500
16. On January 2, 2014, Papa Company issues its own P10 par common stock for all the outstanding
stock of Mama Corporation. After the acquisition, Mama is to be dissolved. Papa pays P40,000 for
registering and issuing the securities and P60,000 for other costs related to the business
combination. The stocks of Papa were selling at P30 per share on January 2,2014. Relevant
balance sheet information for Papa and Mama on January 2, 2014 just before the business
combination are as follows:
Papa Company Mama Corporation
Book Value Fair Value Book Value Fair Value
Cash 120,000 120,000 10,000 10,000
Non-Cash Assets 880,000 950,000 240,000 540,000
Liabilities 200,000 190,000 50,000 50,000
Common Stock-P10 500,000 100,000
par
APIC 200,000 50,000
Papa Company will issue 25,000 shares of its stock for all of the outstanding shares of Mama
Company. Moreover, Papa agrees to Mama an additional P50,000 in cash if the net income of the
combined company in 2015 exceeds P3,000,000. As of the acquisition date, Papa determines that
there is a 60-70% probability that the net income in 2015 would be more than P3,000,000. How
much would be the total assets to be reported in the balance sheet of Papa immediately after the
business combination?
a. 1,730,000 c. 1,750,000
b. 1,735,000 d. -0-
17. Using the information in problem no 16, how much would be the total stockholders equity to be
reported in the balance sheet of Papa immediately after the business combination?
a. 1,510,000 c. 900,000
b. 1,010,000 d. -0-
18. Using the information in problem no 16, how much would be the total liabilities to be reported in the
balance sheet of Mama immediately after the business combination?
a. 250,000 c. 285,000
b. 280,000 d. -0-
19. Mac Company paid P110,000 for the net assets of Bee Company. At the time of the acquisition, the
following information was available related to Bee Company’s balance sheet:
Bok Value Fair Value Book Value Fair Value
Current Assets 50,000 50,000 Equipment 40,000 50,000
Building 80,000 100,000 Liabilities 30,000 30,000
What is the amount to be recorded by Mac for the building?
a. 20,000 c. 100,000
b. 80,000 d. 110,000
20. Using the same information in no 19, what amount of gain/(loss) on disposal of a business should
Bee Company recognize?
a. Gain-P30,000 c. Loss-P30,000
b. Gain-P60,000 d. Loss-P60,000
21. On January 1, 2014, Alien Corporation and Earth Corporation’s condensed balance sheet are
presented as follows:
Alien Corporation Earth Corporation
Current Assets 70,000 20,000
Non-Current Assets 90,000 40,000
Current Liabilities 30,000 60,000
Long-term Liabilities 50,000
Stockholders’ Equity 80,000 50,000
On January 1, 2014, Alien Corporation borrowed P60,000 and used the proceeds to obtain 80% of
the outstanding common shares of Earth Corporation. The acquisition price was considered
proportionate to Earth’s fair value. The P60,000 debt is payable in 10 equal annual principal
payments plus interest, beginning December 31, 2014. The excess fair value of the investment over
the underlying book value of the acquired net assets is allocated to inventory (60%) and to goodwill
(40%).
From the data above, how much would be the reported goodwill; using the proportionate basis, to be
presented in the consolidated balance sheet immediately after the business combination?
a. 8,000 c. 10,000
b. -0- d. 20,000
22. Using the same information in no 21, how much would be the total current assets to be presented in
the consolidated balance sheet immediately after the business combination?
a. 105,000 c. 100,000
b. 102,000 d. 90,000
23. Using the same information in no 21, how much would be the total non-current assets to be
a. 140,000 c. 134,000
b. 130,000 d. 138,000
24. Using the same information in no 21, how much would be the total long-term liabilities to be
a. 110,000 c. 50,000
b. 104,000 d. 90,000
25. Using the same information in no 21, how much would be the total current liabilities to be presented
in the consolidated balance sheet immediately after the business combination?
a. 46,000 c. 40,000
b. 30,000 d. 50,000
26. Using the same information in no 21, how much would be the stockholders’ equity to be presented in
the consolidated balance sheet immediately after the business combination?
a. 80,000 c. 130,000
b. 95,000 d. 93,000
27. Using the same information in no 21, how much would be the non-controlling interest to be
a. 80,000 c. 130,000
b. 95,000 d. 93,000
28. On January 1, 2011, X Corporation purchased 10,000 of the 100,000, P10par value outstanding
shares of Y Corporation for P10/share. On January 2, 20,13, X Corporation purchased additional
15,000 shares of Y Corporation at P12/share (this price approximates the FV of Y Co’s Net Assets)
and on January 1, 2014, X Corporation purchased additional 40,000 shares of Y Corporation at P15
per share. Moreover, it was determined that the net assets of Y corporation amounted to
P1,100,000 on January 1, 2014. This amount is a fair representation of Y Corporation’s non-cash
assets at fir value.
X Corporation Y Corporation
Dividends FV/Shares
Net Income Net Income Declared on 12/31
2011 150,000 80,000 20,000 11.00
2012 160,000 90,000 15,000
2013 185,000 85,000 25,000 13.00
From the data above, how much would be the goodwill to be presented in the consolidated balance
sheet immediately after the business combination?
a. 280,000 c. 400,000
b. 330,000 d. none
29. Using the same information in no 28, what is the gain/(loss) from the change in the investment in
classification in the books of X Company?
a. 35,000 c. 1,250
b. (8,750) d. 45,000
30. Using the same information in no 28, how much would be the value of the non-controlling interest to
be presented in the consolidated balance sheet immediately after the business combination?
a. 525,000 c. 420,000
b. 455,000 d. 385,000
31. Guy Company acquired 60% of the outstanding common shares of Girl Company on January 1,
2014 for P200,000. On this date, Girl Company reports Common Stock amounting to P175,000 and
Retained earnings amounting to 50,000.Guy on the other hand, reports retained earnings of
P240,000 on this date. The book values of Girl Company’s net assets are fairly stated except for a
machine which is undervalued by P30,000. The machine has a remaining life of 4 years and
goodwill if any is not to be depreciated.
The financial statements for Guy and Girl Company of December 31, 2014 reflected the following
balances:
Guy Company Girl Company
Cash 40,000 25,000
Accounts Receivable 30,000 15,000
Investment in Girl 200,000
Other Assets 500,000 260,000
Liabilities 90,000 70,000
Common Stock 500,000 200,000
Additional Information:
a. During the year, Guy paid dividends amounting to P20,000 and Girl paid dividends of P10,000
b. Girl Company sold to Guy inventory items costing P40,000 for P60,000. It was determined that 30% of
these items remain unsold at the end of the year and Guy still owes Girl P10,000 for the transaction.
c. Girl sold an equipment to Guy Company on July 1, 2014 for P50,000. The equipment had a book value
of P35,000 during the sale and had a remaining life of 5 years.
d. Girl sold land to Guy on October 1, 2014 for P150,000. Girl reported a gain of P20,000 for this sale.
From the data above, what would be the Equity Holders of Parent’s Net Income to be reported in the
consolidated financial statements on December 31, 2014?
a. 100,100 c. 99,800
b. 94,400 d. 106,700
32. Using the same information in problem no 31, what would be the Equity Holders of Parent’s retained
earnings to be reported in the consolidated financial statements on December 31, 2014?
a. 320,700 c. 319,800
b. 314,400 d. 326,700
33. Using the same information in problem no 31, what would be the Non-Controlling Interest Net
Income to be reported in the consolidated financial statements on December 31, 2014?
a. 1,000 c. 1,200
b. 6,600 d. 1,800
34. Using the same information in problem no 31, what would be the total assets to be reported in the
a. 1,104,000 c. 1,075,500
b. 1,105,500 d. 1,074,000
35. Using the same information in problem no 31, what would be the goodwill to be reported in the
a. 47,000 c. 17,000
b. 65,000 d. 83,000
DRILL – AFAR MAY 2019 BATCH
13. Under the installment sales method,

a. revenue, costs, and gross profit are recognized proportionate to the cash that is received from the
sale of the product.
b. gross profit is deferred proportionate to cash uncollected from sale of the product, but total revenues
and costs are recognized at the point of sale.
c. gross profit is not recognized until the amount of cash received exceeds the cost of the item sold.
d. revenues and costs are recognized proportionate to the cash received from the sale of the product,
but gross profit is deferred until all cash is received.
14. Income recognized using the installment method of accounting generally equals cash collected
multiplied by the
a. net operating profit percentage.
b. net operating profit percentage adjusted for expected uncollectible accounts.
c. gross profit percentage.
d. gross profit percentage adjusted for expected uncollectible accounts.
15. According to the cost recovery method of accounting, the gross profit on an installment sale is
recognized in income:
a. after cash collections equal to the cost of sales are received.
b. in proportion to cash collections.
c. on the date the final cash collection is received.
d. on the date of sale.
16. When assets that have been sold and accounted for by the installment method are subsequently
repossessed and returned to inventory, they should be recorded on the books at
a. Selling price.
b. The amount of the installment receivable less associated deferred gross profit.
c. Net realizable value.
d. Net realizable value minus normal profit.
17. When using the installment sales method,

a. gross profit is deferred until all cash is received, but revenues and costs are recognized in proportion
to the cash collected from the sale.
b. gross profit is recognized only after the amount of cash collected exceeds the cost of the item sold.
c. revenue, costs, and gross profit are recognized proportionally as the cash is received from the sale
of product.
d. total revenues and costs are recognized at the point of sale, but gross profit is deferred in proportion
to the cash that is uncollected from the sale.
18. The theoretical support for using the percentage-of-completion method of accounting for long-term
construction projects is that it
a. is more conservative than the completed-contract method.
b. reports a lower Net Income figure than the completed-contract method.
c. more closely conforms to the cost principle.
d. produces a realistic matching of expenses with revenues.
19. The principal disadvantage of using the percentage-of-completion method of recognizing revenue from
long-term contracts is that it
a. is unacceptable for income tax purposes.
b. gives results based upon estimates which may be subject to considerable uncertainty.
c. is likely to assign a small amount of revenue to a period during which much revenue was actually
earned.
d. none of these.
20. How should the balances of progress billings and construction in progress be shown at reporting dates
prior to the completion of a long-term contract?
a. Progress billings as deferred income, construction in progress as a deferred expense.
b. Progress billings as income, construction in progress as inventory.
c. Net, as a current asset if debit balance and current liability if credit balance.
d. Net, as income from construction if credit balance, and loss from construction if debit balance.
21. When a new partner is admitted to an existing partnership through the purchase of a portion of existing
interest of incumbent partner, which of the following is correct?
A. The total capital of the old and new partnership will be the same.
B. The partnership will recognize gain or loss on the difference between the amount paid and capital
transferred.
C. Goodwill may be recognized by virtue of the admission.
D. There will be increase in the total assets of the partnership equivalent to the amount paid by the
newly admitted partner.
For item nos. 10 – 11:

Carmela Appliance Company operates a branch in Quezon City. The following are transactions between
the home office and branch for the current year:
a. The home office sends P100,000 cash to the branch.
b. Shipments to branch are billed at cost of P78,750.
c. The Home Office pays branch expense of P78,750.
d. Home office expense of 3,375 are paid are the branch.
e. The branch returned merchandise costing P 15,000 to the home office.
f. Home office acquires branch furniture for P 22,500 cash. The said fixed asset is carried on Branch
Books.
g. The depreciation of the branch furniture is 10%.
h. The branch sends a P5,000 cash remittance to home office.
22. What is the adjusted balance of Branch Current account in the Home Office Books?
a. P 0 b. P 83,125 c. P 185,375 d. P 187,625
23. What is the adjusted Home Office Current account in the Home Office Books?
a. 0 b. P 183, 125 c. P 185,375 d. P 187, 625

On December 31, 2016, the Branch current ledger account in the accounting records of the home office of
Pearly Shell company shows a debit balance of P41,625. You ascertained the following facts in analyzing
this account:
a. On December 31, 2016, merchandise billed at P8,700 was in transit from the home office to the
branch. The periodic inventory system is used by both home office and branch.
b. The branch issued a credit memo to home office to the collection of the trade accounts receivable of
P1,500: the home office did not yet receive the said memo.
c. The branch acquired equipment costing P17,000. The equipment account is to be maintained in the
home office books. The home office had not been notified of the acquisition.
d. A debit memo amounting to P1,500 was is issued by the home office to the branch for the share of
the branch in advertising in expense. however, the same was not yet recorded by the branch.
e. A branch customer erroneously remitted P2,500 to the home office. The home office recorded this
cash collection on December 29, 2016 by crediting account receivable. Meanwhile, back at the
branch, no entry has been made yet.
f. Branch net income for December 2016, was recorded erroneously by the home office at 48,000
instead of P84,000. The credit was recorded by the home office in the Branch income Summary
Ledger account.
24. What is the balance of the Home office Current account on the books of Branch as of December 31,
2016 before its adjustment?
a. 0 b. P 41,625 c. P 51,925 d. P 59,625
25. What is the adjusted balance of Branch Current Account?
a. 0 b. P 44,625 c. P 51,925 d. P 59,625
26. What is the net adjusted for Home office current account and Branch current account respectively?
a. P 18,000 Dr; P 7,700 Dr c. P 18,000 Dr; P 7,7000 Cr
b. P 7,700 Cr; P 18,000 Dr d. P 7,7000 Dr; P 18,000 Cr

ASH Company maintains branches that market the products it produces. Merchandise is billed to the
branches at cost, with the branches paying the freight charges for the Home office to the branch. On April
27, MEISY – branch ship a portion of its merchandise to ROBB – branch upon authorization by Home
Office. Originally, MEISY – branch had been billed for this merchandise at P25,000 and paid freight
charges of P3,125 on the shipments from Home Office ROBB – branch, upon receiving the merchandise,
pays freight charges of P1,875 on the shipment from MEISY – branch. If the shipment had been made from
the Home office direct to ROBB – branch, the freight cost to ROBB – branch, the freight cost to n ROBB –
branch would have been P4000.
27. How much is the excess freight cost to be credited in the books of Home Office?
a. P 0 b. P 1000 c. P 2,000 d. P 2,750
28. How much is the ROBB – branch current in the books of the Home office?
a. 25,000 b. 26,875 c. P 27,125 d. P 28,125
29. Upon receipt of shipment by ROBB – branch freight in is debited in the amount of?
a. P 1,000 b. P 1,875 c. P 2,125 d. P 4,000
30. Home office current is debited by MEISY – branch in the amount of?
a. P 25,000 b. P 26,875 c. P 27,125 d. P 28,125

LEIGHT Company maintains branches that market the products it produces. Merchandise is billed to the
branches at cost and the freight charges were paid by the shipper. On March 3, 2016, MEISY – branch
ships a portion of its merchandise to ROBB – branch upon authorization by Home Office. Originally,
MEISY – branch had been billed for this merchandise at P31,250. The freight charges of shipment from
home office amounted to P3,750. On the other hand, the inter branch freight charge amounted to P2,250. If
the shipment had been made from the Home office directly to ROBB – branch, trhe freight cost to ROBB –
branch would have been P 40,000.
31. How much is the express freight cost to be debit in the books of Home Office?
a. P 0 b. P 1000 c. P 2,000 d. P 2,250
32. How much is to be debited as ROBB – branch current in the books of the Home Office?
a. P 31,250 b. P 35,250 c. P 37,250 d. P 38,250
33. Upon receipt of shipment by ROBB – branch, how much cash was credited in its books for the freight
payment?
a. P 0 b. P 1000 c. P 2,000 d. P 4,000
34. Home office current is debited by MEISY – branch in the amount of?
a. P 31,250 b. P 35,250 c. P 37,250 d. P 38,250

The following records were taken from the books of the Company and its branch on December 31, 2016:
Home Office Books Branch Books
Sales P 920,000 P 800,000
Shipment to branch 600,000
Beginning inventory 96,000 64,000
Purchases 1,200,000 24,000
Shipment from home office 750,000
Allowance for overvaluation 158,000
Ending inventory 112,000 82,800
Expenses 40,000 20,000
Ending inventory to the branch includes P 34,800 acquired from outsiders.

35. Compute for the true net income of the branch
a. P 0 b. P (42,800) c. P 42,800 d. P (191,200)
36. Ending balance and balance before adjustment of Unrealized Profit on Branch Inventory
a. P 9,600 ; 158,000 b. P 158,000 ; 9,600 c. P 9,600 ; 185,000 d. P 185,000 ; 9,600
37. Combine net income
a. P 104,800 b. P 253,000 c. P 253,200 d. P 255,200
38. Beginning and ending inventory at cost presented in the combine financial statements
a.P 152,000; 185,000 b. P 185,200; 152,000 c. P 131,250; 152,000 d. P 152,000; 131, 250
The Home Office in Global City bills its QC branch for shipments of goods at 25% above cost. at the close
of the business on April 27,2016, a fire gutted the branch warehouse and destroyed 70% of the merchandise
stock stored therein. Thereafter, the following data were gathered:
January 1 Inventory P 672,000
Shipments from Home office, January 1 through April 27 1,008,000
Net Sales, January 1, through April 27 1,428,000
Undamaged merchandise recovered are marked to dell 378,000
for
39. What is the amount of inventory destroyed by fire per home office records?
a. 178,500 b. 273,000 c. 441,000 d. 892,500
40. How much is the branch cost of goods sold?
a. 178,500 b. 273,000 c. 441,000 d. 892,500
41. How much is the branch net income as provided by GAAP?
a. 178,500 b. 273,000 c. 441,000 d. 892,500
42. How much is the overvaluation in branch Cost of Goods Sold?
a. 178,500 b. 273,000 c. 441,000 d. 892,500
A, B and C decided to form ABC Partnership. It was greed that A will contribute an equipment with
assessed value of P200,000 with historical cost of P1,600,000 and accumulated depreciation of P1,200,000.
A day after the partnership formation, the equipment was sold for P600,000.
B will contribute a land and building with carrying amount of P2,400,000 and fair value of P3,000,000. The
land and building are subject to a mortgage payable amounting to P600,000 to be assumed by the
partnership. The partners agreed that B will have 60% capital interest in the partnership. The partners also
agreed that C will contribute sufficient cash to the partnership.
43. What is the total agreed capitalization of the ABC Partnership?
A. 3,000,000 B. 4,000,000 C. 5,000,000 D. 6,000,000
44. What is the cash to be contributed by C in the ABC Partnership?
A. 1,000,000 B. 1,200,000 C. 1,400,000 D. 1,600,000
45. On December 31, 2018, the Statement of Financial Position of ABC Partnership provided the following
data with profit or loss ratio of 1:6:3:
Current Assets 2,000,000 Total Liabilities 1,200,000
Noncurrent Assets 4,000,000 A, Capital 1,800,000
B, Capital 1,600,000
C, Capital 1,400,000
On January 1, 2019, D is admitted to the partnership by purchasing 40% of the capital interest of B at a
price of P1,000,000. What is the capital balance of B after the admission of D on January 1, 2019?
A. 1,080,000 B. 960,000 C. 840,000 D. 600,000
46. Which of the following will not result to automatic dissolution of a general partnership?
C. Assignment of partner’s interest to third persons C. Insolvency of the partnership
D. Death of a partner D. Civil interdiction of a partner
47. How shall the net profit or net loss of the partnership be divided among the partners, whether capitalist
or industrial?
E. In accordance with their capital contribution ratio.
F. In accordance with just and equitable sharing taking into account the circumstances of the
partnership.
G. Equally
H. In accordance with the partnership agreement.
48. Allan Company is one of the leading construction firms in the country. On January 1, 2021, it entered
into a long-term construction contract with a fixed contract price of P4,500,000. The construction
started on July 1, 2021 and ended on October 31, 2023. The following costs were provided by the chief
accountant of Allan Company:
2021 2022 2023
Construction costs P1,000,000 P2,916,000 P4,556,250
incurred to date
Estimated costs to P3,000,000 P1,640,250 P0
complete as of the end
of the year
Assuming the outcome of the construction can be estimated reliably and the company decided to
employ cost-to-cost method, what is the amount of (1) revenue from long term contract, (2) costs of
construction and (3) gross profit/(gross loss), respectively to be reported by Allan Company for the year
ended December 31, 2022?
a. 1,734,750 and 1,916,000 and (181,250)
b. 1,755,000 and 1,936,250 and (181,250)
c. 1,859,250 and 1,916,000 and (56,250)
d. 1,755,000 and 1,811,250 and (56,250)
49. JK restaurant sold a fastfood restaurant franchise to Keisha. The sale agreement, signed on January
2020 called for a P100,000 down payment plus two P50,000 payments representing the value of the
initial franchise services rendered by JK restaurant. In addition, the agreement required the franchisee
to pay 8% of its gross revenue to the franchisor. The restaurant opened early in 2020 and its sales for
the year amounted to P750,000. The prevailing rate for similar note was 12% (PV factor was 1.6901).
How much is the total revenue for 2020?
a. 84,505
b. 244,505
c. 254,646
d. 266,646

On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or loss
ratio of 4:1:5 is presented below:
Cash 4,000,000 Liability to third person 8,000,000
Noncash asset 16,000,000 A, capital 7,000,000
B, capital 3,000,000
C, capital 2,000,000
On January 1, 2019, ABDC Partnership has been subjected to installment liquidation. As of
December 31, 2019, the following data concerning liquidation are provided:
 None cash asset with book value of P12,000,000 has been sold at a loss of P4,000,000.
 Liquidation expense amounting to P800,000 has been incurred for the month of January.
 P1,200,000 cash has been with held for future liquidation expense.
 P6,000,000 liability has been paid.
50. What is C’s share in the maximum possible loss on January 31, 2019?
a. P2,600,000 b. P2,400,000 P3,000,000 c. P1,500,000
51. What is the amount received by B on January 31, 2019?
a. P1,300,000 b. P1,400,000 c. P2,000,000 d. none
52. At the time of partnership liquidation, which credit shall be settled first?
a. Those amount owing to third persons
b. Those amount owing to partners other that capital contribution and share in profit
c. Those amount owing to partners with respect to capital contribution n
d. Those amount owing to partners with respect to share in profit
INTEGRATED REVIEW ADVANCED FINANCIAL ACCOUNTING &

REPORTING VALIDATING EXAMINATION AUGUT 8, 2018; 1:15 – 3:15
1. Tep admits James as a partner in business. Accounts in the ledger of Tep on November 30, 2016 just before
the admission of James, show the following balances:
Cash 40,000 Accounts payable 90,000

Accounts Receivable 150,000 Tep, Capital ?
Merchandise Inventory 200,000
It is agreed that for purposes of establishing Tep’s interest the following adjustments should be made:
1. An allowance for doubtful accounts of 5% of accounts receivable should be established.
2. The merchandise inventory is to be valued at 240,000
3. Prepaid expenses of 7,000 and accrued liabilities of 5,000 are to be established.
James is to invest sufficient funds in order to receive a ¼ interest in the partnership.

How much must James contribute?
a. 116,500 c. 114,833
b. 110,833 d. 111,500
Items 2 & 3 are based on the following information:

M,N and O are partners sharing profits and losses. The combined salaries of M and O is 175,000 while the
combined salaries of M and N is 165,000. The partners paid total interest of 33,500 of which M and O received
21,700 in total which is 2,600 less than what M and N received combined. Since M is the managing partner, he
received a bonus of 10,500. The partners share the remainder in the ratio 25:35:40. Partner O’s share in the
remainder is 10,400. Partner N received a share in the net income of 105,900.
2. How much is the total net income of the partnership?

a. 350,000 c. 345,000
b. 330,000 d. 355,000
3. How much is the monthly salaries of the partners?

a. M: 20,000; N: 21,250; O: 23,750 c. M: 7,272; N: 7,727; O: 8,636
b. M: 16,000; N: 17,000; O: 19,000 d. M: 6,667; N: 7,083; O: 7,917
Items 4 through 5 are based on the following information:

Nikko and Carlo have capital balances of 150,000 and 180,000 respectively. Gina is to invest 60,000 for 15% in the
partnership interest and also in the profits and losses. There is an undistributed net income in the amount of 80,000.
Partners Nikko and Carlo share profits and losses 65:35.
4. How much is the capital credit of Gina after her admission?

a. 60,000 c. 72,000
b. 61,500 d. 70,500
5. How much is the bonus to partner Nikko from partner Gina?
a. 10,500 c. 3,675
b. 6,825 d. 0

Capital balances of partners Q, R and S are the following before liquidation: 87,000, 95,500 and 106,250 each
respectively. The partnership has a loan from partner Q in the amount of 8,000; loan to partner R in the amount of
4,500, advances to partner S in the amount of 6,500. The partners’ profit and loss ratio is 25:40:35 each
respectively.
6. In the first installment sale, the total cash paid to partners is 57,000, how much did partner S
receive? a. 0 c. 13,854
b. 19,396 d. 20,125
7. If partner Q received 20,000 in the first installment and partner S received 12,396 in the second installment,
how much is received by partner Q as of the second installment and how much is the total cash paid to the
partners in the second installment?
a. 12,604 and 25,000 c. 23,750 and 30,000
b. 8,854 and 30,000 d. 32,604 and 25,000
8. NKE partnership has the following account balances before liquidation:

Noncash Assets 1,475,000 Loan from E 10,000
Loan to K 30,000 N, Capital (40%) 250,000
Receivable from N 4,000 K, Capital (40%) 380,000
Expenses 446,000 E, Capital (20%) 200,000
Revenues 960,000
During May, some noncash assets were sold that resulted to a loss of 9,225. Liquidation expenses of 35,000
were paid and additional expenses amounting to 18,000 were expected to be incurred through the following
months of liquidating the partnership. Liabilities to outsiders amounting to 175,000 were paid.
What is the book value of the noncash assets which were sold for K to receive 111,110?
a. 465,775 c. 416,775
b 426,000 d. 475,000
.
9. Calvin Company is a dealer of a mobile system. On May 1, 2016, Maine purchased a mobile system with an
invoice price of 780,000. The mobile system costs 520,000. Calvin granted an allowance of 120,000 for
Maine’s old mobile system which was accepted as a trade-in. The current market value of the old mobile
system is 140,000. The balance is payable as follows: 30% at the time of purchase, while the rest is payable in
five installments at the end of each month commencing the month of sale. Maine defaulted on her payments
starting August 31, 2016 and the mobile system was repossessed. The fair value of the repossessed
merchandise is 120,000 before reconditioning costs of 20,000.
What is the resulting net income form the foregoing

transactions? a. 215,320 c.
215,200
b. 199,000 d. 195,200
10. Car Co began operations on January 1, 2016 and appropriately uses the installment method of accounting. The
following information pertains to Car’s operations for the year:
Installment sales 800,000 General and Administrative exp 80,000
Cost of installment sales 480,000 Collections on installment 300,000
During the year, a buyer defaulted on his installment payments and the goods sold to him was repossessed.
The repossessed merchandise was given a value of P2,500 and a loss on repossession of 500 was recorded
by Car.
The balance in the deferred gross profit account at December 31,

2016? a. 120,000 c.
200,000
b. 199,000 d. 198,000
11. Jam Construction Company has consistently used the percentage-of-completion method. On January 10, 2015,
Jam began work on a 6,000,000 construction contract. At the inception date, the estimated cost of construction
was 4,500,000. The following data relate to the progress of the contract:
Income recognized at 12/31/15 600,000

Cost incurred 1/10/13-12/31/15 3,600000
Estimated cost to complete 1,200,000
How much income should Jam recognize for the year ended December 31, 2015?
a 300,000 c. 600,000
.
b 525,000 d. 900,000
.
12. On January 1, 2020, Mark’s Fried Chicken granted a franchise to Chicks Co to sell Mark’s products. The
franchise agreement provides for the following terms:
 Initial franchise fee in the amount of 15,000,000 payable at 5,000,000 down payment on January 1, 2020
and the balance payable in five equal annual installments every December 31. Chicks Co issued a 5-
year non-interest bearing promissory note. The prevailing market rate of the similar note is 10%. The
PV factor of P1 for five periods at 10% is 0.6209 and the PV factor of an annuity of P1 at 10% for five
periods is 3.7908
 Contingent franchise fee equal to 5% of the sales revenue of Chicks Co.
As of December 31, 2020, Chicks Co has not yet performed substantially all material services or conditions
required of the franchise contract. For the year ended December 31, 2020, Chicks Co reported sales revenue
in the amount of P1,000,000.
What is the amount of total income to be reported by Chicks Co for the year ended December 31,
2020? a. -0- c. 12,631,577
b. 50,000 d. 808,160
13. On July 2, 20x14, the Home Office opened a sales agency in Baguio City, sending samples of its merchandise
amounting to P14,000 and a working fund amounting to P120,000 to be maintained on the imprest basis. The
samples sent were intended to last until March 1, 20x15. During the first two months of operations, the agency
transmitted to the home office sale of goods costing P486,000, but the home office was not able to fill-up 25%
of the said transmitted sales orders. Collections from customers amounted to P123,235, net of 2% sales
discount. Payments made by the agency during July and August were as follows: annual rent of P96,000,
advertising expenses worth P25,000 and utilities amounting to P30,000. It also purchased an equipment worth
P30,000 which will be depreciated at 20% per annum. The gross profit rate on sales agency order is 25% of
sales.
What is the net income of the agency as of August 31, 20x14?

a P43,235 b. P43,485 c. P13,110 d. P44,485
.
14. Home Office opened a sales agency in La Union on January 1, 20x14. The following is a summary of the
transactions of the sales agency:
Volume discount 1.5% & 2.5% Selling expense P7,500
Invoice price P214,000 Freight on shipment to agency 3,500
Administrative expenses of 4% of net Collections(20% availed of a 5%
agency sales disc) 140,125
Samples shipped to the agency amounting to P11,000 are to be properly depreciated to its carrying amount of
P9,539 as of December 31, 20x14. Remaining receivables are estimated to be 95% collectible. The company’s
gross profit rate based on invoice price is 30% excluding the freight cost on shipments to agency.
What is the net income of the agency for 20x14?

a. P38,143 b. P41,643 c. P38,489 d. P39,618
15. The following transactions were entered in the branch current account of Confused Co for the year 20x11.
Branch Current - Baguio
Beg. Balance 1/1/11 P765,430 Collection of AR, 9/12/11 P55,500
Shipments to branch 354,000
Cash forwarded, 6/1/11 25,000
Operating expenses charged
To branch 12/31/11 4,800
Shipments to the branch during the year were made at 20% above cost. The balance of the Allowance for
Overvaluation of Branch Inventory account was P35,500 at the beginning, and the allowance was written down
to P24,500 at year-end. On December 10, 20x11, the home office purchased a piece of equipment amounting
to P60,000 for its branch in Baguio. The said equipment has a useful life of five years and will be carried in the
books of the branch, but the home office recorded the purchase by debiting Equipment. The branch recorded
the depreciation of the equipment by debiting the Home Office Current account and crediting Accumulated
Depreciation. Debit memo regarding the allocation of operating expenses to the Baguio branch was received by
the branch on January 2, 20x12.
The Baguio branch reported net income of P329,550. It also remitted cash to the home office on December 31,
20x11 amounting to P55,000 which the home office received and recorded on January 1, 20x12. The interoffice
accounts were in agreement at the beginning of the year.
How much is the adjusted balance of the branch current account on December 31, 20x11 before the necessary
closing entries were made?
a. P1,169,530 b. P1,038,730 c. P1,098,730 d. P1,109,530
16. What is the amount of adjustment in the allowance for overvaluation of branch inventory account?
a P70,000 b. P81,800 c. P94,500 d. P24,500
.
17. The following data pertain to installment sales of Kath’s store: Down payment is 30%; Cost of installment sales:
20x9, P2,725,000; 20x10, P3,925,000; 20x11, P4,843,000. 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.
What is the amount of gross profit at December 31, 20x10 to be presented in the statement of financial position?
a P757,050 b. P659,400 c. P431,750 d. P604,450
.
18. Uniss Corporation sells on installment basis and accounts for it using the installment method. Some information
related to its operations are summarized as follows:
20x9 20x10 20x11
Cost of Sales P370,500 P855,360 P568,890
Gross profit on sales 35% 34% 37%
Beginning and Ending balance of receivables 1/1/x11 12/31/x11
Installment Receivable-x9 72,060
Installment Receivable-x10 1,033,380 208,320
Installment Receivable-x11 327,270
During 20x11, the company repossessed an inventory which had been sold in 20x10 for P16,200 and P9,600
had been collected prior to default. Uniss values the repossessed goods at market value. The resale price of
the repossessed merchandise amounted to P5,100 after incurring reconditioning cost of P1,000.
Compute for the total realized profit for the year 20x11.
a P511,010 b. P516,518 c. P518,762 d. P513,254
.
19. Robina Corporation began operations on July 1, 20x14. The following information was extracted from its
records at year-end:
Cost of installment sales P546,875 Balances at December 31, 20x14
Cost of regular sales 525,000 Accounts receivable P367,500
Mark-up on regular sales 33 1/3 on sales Operating expenses 398,125
Mark-up on installment sales 140% of cost Net income 170,625
A write-off of installment receivable amounting to P126,000 was made prior to the closing of 20x14. What is the
ending balance of installment receivable as of December 31, 20x11?
a P661,500 b. P787,500 c. P211,500 d. P114,625
.
20. On July 1, 20x11, Peace Co contracted to construct a factory building for War Co for a total contract price of
P2,688,000. The building was completed by December 1, 20x13. The company uses the input measures –
cost to cost method. The following are date related to the project:
20x11 20x12 20x13
Contract cost incurred P1,024,000 P832,000 P464,000
Estimated cost to complete the contract P1,024,000 P464,000 -
Billings to War P1,024,000 P1,120,000 P544,000
What is the amount of profit/(loss) to be recognized for the year ended December 31, 20x12 and the excess of
construction in progress over progress billings/progress billings over construction in progress in 20x11?
a (P25,600); P320,000 current asset c. P294,400; P320,000 due to
.
b P25,600; P320,000 due from d. (P25,600; P320,000 current liability
.
21. On January 1, 20x11, Strong Co began constructing a P3,500,000 contract. As of year-end, the following are
relevant information provided by the corp.
20x11 20x12 20x13
Construction in Progress P 735,000 P2,248,750 ?
Estimated costs to complete 2,666,250 1,251,250 -
Cost incurred 708,750 1,615,000 P1,126,250
How much is the (1) realized gross profit/(loss) in 20x12 using the percentage of completion method and (2)
realized gross profit/(loss) in 20x13 using the zero profit method?
a. (P48,750); P97,250 c. (P75,000); P125,000
b. (P101,250); P125,000 d. (P101,250); P0
22. Flow Corp enters into a contract with Queue Co to construct a 12-storey building for P3,600,000. The following
data were taken from the corp’s files. Cost incurred in 20x12, P1,435,000; percentage of completion in 20x12,
75%; estimated cost to complete in 20x11, P2,040,000 while in 20x12, P840,000; income recognized to date in
20x11, P175,000 while in 20x12, P180,000.
What is the percentage of completion in 20x11 of this construction contract?

a 20% b. 35% c. 40% d. 25%
.
23. On June 30, 2017, Parent, Inc. purchased 70 percent of the common stock of Subsidiary Company for
1,750,000. At that date, Subsidiary had 1,625,000 of common stock outstanding and retained earnings of
625,000. All of the purchase difference was related to a building with a book value of 437500 and a remaining
life of 10 years. Parent’s retained earnings balance at December 31, 2016 was 1,887,500. The income and
dividend figures for both Parent and Subsidiary for 2017 are as follows:
Income Dividends
Parent (own Operations) 687,500 175,000
Subsidiary: Jan 1 to June 30 200,000 75,000
: July 1 to Dec 31 250,000 0
How much is the consolidated retained earnings on December 31,
2017? a. 2,053,750 c.
2,566,250
b. 2,141,250 d. 2,553,750
24. On January 1, 2017, Bright Company acquired 80% of Animo Company’s common stock for 280,000 cash. At
that date, Animo reported common stock outstanding of 200,000 and retained earnings of 100,000 and the fair
Animo’s assets and liabilities were equal, except for other intangible assets which has a fair value 50,000
greater than book value and an 8-year remaining life. Animo reported the following data for 2017 and 2018.
Year Net Income Comprehensive Income Dividends Paid
2017 25,000 30,000 5,000
2018 35,000 45,000 10,000
Bright reported separate net income from own operations of 100,000 and paid dividends of 30,000 for both
years.
Based on the preceding information, what is the amount of consolidated comprehensive income reported for
2016?
a. 125,000 c. 118,750
b. 123,750 d. 130,000
25. The Steph Company owns 65% of the Prince Company. On the last day of the accounting period, Prince sold
to Steph a non-current asset for 200,000. The asset originally cost 500,000 and at the end of the reporting
period its carrying amount in Prince’s books was 160,000. The group’s consolidated statement of financial
position has been drafted without any adjustments in relation to this current asset.
Under PAS 27 Consolidated and Separate Financial Statements, what adjustments should be made to the
consolidated statement of financial position for non-current assets and retained earnings?
Non-current assets Retained Earnings
a. Increase- 300,000 Increase- 195,000
b. Decrease- 40,000 Decrease- 26,000
c. Decrease- 40,000 Decrease- 40,000
d. Increase- 300,000 Increase- 300,000
26. Mamba Corporation sold equipment to its 80% owned subsidiary, King Co., on January 1, 2017. Mamba sold
the equipment for 110,000 when its book value was 85,000 and it had a 5-year remaining useful life with no
expected salvage. Separate balance sheets for Mamba and King included the following equipment and
accumulated depreciation amounts on December 31, 2017.
Mamba King
Equipment 750,000 300,000
Accumulated Depreciation (200,000) (50,000)
Equipment-net 550,000 250,000
Consolidated amounts of equipment and accumulated depreciation at December 31, 2014 were
respectively: a. 1,025,000 and 245,000 c. 1,050,000 and
245,000
b. 1,025,000 and 250,000 d. 1,050,000 and 250,000
27. The working paper eliminating entry recorded by Acquired Company on January 1, 2017, the date of acquisition
of its subsidiary follows:
Common stock-Acquiring Company 200,000
APIC-Acquiring Company 300,000
Retained Earnings-Acquiring Company 250,000
Inventory 75,000
Plant Assets (net) 105,000
Patent 70,000
Goodwill 200,000
Investment in Acquiring Company 920,000
Non-controlling interest in Acquired Company 280,000
Of the goodwill recorded, 30,000 belongs to the non-controlling interest.

Determine the percentage of outstanding voting shares of the subsidiary acquired by the parent.
a 76.67% c. 72%
.
b 78% d. 75%
.
28. On December 31, 2017, the following figures were taken from the trial balance of Papa Company and Mama
Company:
Papa Mama
Cash 400,000 100,000
Receivables 300,000 300,000
Inventory 500,000 350,000
Property and Equipment 1,000,000 500,000
Goodwill - 150,000
Current Liabilities 100,000 50,000
Long-term Liabilities 350,000 250,000
Common Stock 550,000 500,000
APIC 100,000 -
Retained Earnings 1,100,000 600,000
On December 31, 2017, Papa issues 25,000 shares of its P10 par value stock for the net assets of Mama.
Papa’s stock had a 34/share market value. Papa would also issue bond debentures with face value of 500,000
maturing 3 years from the date of issue. Discount related to the bonds issued amounted to 100,000. Patriot
also paid the following: 125,000 for broker’s fee; 100,000 for pre-acquisition audit fee; 107,500 for legal fees;
90,000 for audit fee for SEC registration of stock issue and 27,500 for printing of stock certificates. Mama holds
an equipment that is worth 200,000 more than its current book value. The retained earnings of Mama on
January 1, 2017 amounted to 350,000.
How much is the total assets after the merger?

a 3,750,000 c. 3,200,000
.
b 3,100,000 d. 3,300,000
.
29. Shaky Inc acquires 100% of the voting stock of Moving Co on January 1, 2017 for 400,000 cash. A contingent
payment of 16,500 will be paid on April 1, 2018 if Moving generates cash flows from operations of 27,000 or
more in the next year. Shaky estimates that there is a 20% probability that Moving will generate at least 27,000
or more in the next year and uses an interest rate of 5% to incorporate the time value of money. The fair value
of 16,500 at 5%, using a probability-weighted approach is 3,142.
What will Shaky record as investment in subsidiary on January 1, 2016?

a 416,500 c. 400,000
.
b 427,000 d. 403,142
.
30. Pastor Company acquired 80% of the outstanding shares of Sierra Company common stock for 350,000 cash.
At that date, the non-controlling in Sierra has a fair value of 150,000. Identifiable assets were carried at 600,000
in the books of Sierra but had a fair value of 800,000. Liabilities had a book value of 250,000 which was equal
to the fair value on the same date.
If fair value of the net identifiable assets is to be valued on the proportionate basis, how much should be
recognized as a gain on bargain purchase?
a. 90,000 c. 50,000
b. 40,000 d. 0
Questions 31 and 32 are based on the following:

CDE Corp., manufactures a product that passes through two departments. Data for a recent
month for the first department follow:
Units Materials Labor Overhead
Work in process, beginning 5,000 P 4,320 P 1,040 P 1,790
Units started in process 45,000
Units transferred out 42,000
Work in process, ending 8,000
Costs added during the month P52,800 P21,500 P32,250
The beginning work in process inventory was 80% complete with respect to materials and
60% complete with respect to labor and overhead. The ending work in process inventory was
75% complete with respect to materials and 50% complete with respect to labor and
overhead.
31. Assume that the company uses weighted-average method of accounting for units and costs, determine the
costs per equivalent completed unit.
A. P2.42 B. P2.45 C. P2.44 D. P2.43
32. Assume the company uses the FIFO method of accounting for units and costs, determine the cost per equivalent
completed unit.
A. P2.42 B. P2.45 C. P2.44 D. P2.43
33. On January 1, 20x5, Nathan Co paid P6,000 cash to acquire a put foreign exchange option for FC37,500 which
expires at the end of the year. The option hedges 20x5’s forecasted sales of FC37,500. Nathan’s fiscal year
ends every October 31.
1/1/x5 10/31/x5 12/31/x5
Spot rate (market price) P1.45 P1.20 P1.30
Strike price (exercise price) 1.40 1.40 1.40
Fair value of put option 6,000 25,250
Determine the intrinsic value at inception of the option contract.
a. P 12,750 c. P 4,125
b. P 6,000 d. P0
34. On December 23, 20x9, the liaison officer of Alam Co was given an P18,000 travel advance for a 10-day trip to
Hong Kong. On that day, the amount was converted into 36,000 Hong Kong dollars (HK$). During the 10-day
trip, the HK$ steadily weakened against the peso. The exchange rate at December 31, 20x9 was HK$1 equals
P.48. On January 5, 20x10, the liaison officer returned and submitted to the company cashier HK$3,300 and
receipts for HK$32,700 baht that he spent. On this date, the exchange rate was HK$1 equals P.42. Of the
HK$32,700 spent during the trip, HK$17,100 had been spent by December 31, 20x9.
Determine the foreign exchange gain or loss on December 31, 20x9.

a. 549 loss c. 378 loss
b. 1,022 loss d. 8,298 loss
35. Jules Co, a local company in the Philippines purchased a 30% interest of Foreign Co, a foreign entity for
FC50,000 on account on January 1, 20x7. The company settled the account on March 1, 20x7. On January 1,
the book values of Foreign Co approximated their fair values. During the year, Foreign Co declared a FC7,000
cash dividend on July 1, 20x7 payable on August 31, 20x7 and a FC3,500 cash dividend on November 1, 20x7
payable on January 31, 20x8. Foreign also reports net income of FC20,000. The peso equivalent of the foreign
currencies on their respective dates are as follows; January 1, 20x7, P45; March 1, 44; July 1, 20x7, P41.50;
August 31, 20x7, P42.10; November 1, 20x7, P42; December 31, 20x7, P40; January 31, 20x8 P41 and the
average for the year 20x7, P43.
Determine the net increase or decrease in the company’s current earnings because of the investment Foreign
Company.
a. 307,160 c. 289,160
b. 49,160 d. 258,000
36. On September 1, 20x0, Easy Company purchased FC15,000 worth of inventory items on account due on March
1, 20x1. The Company entered into a forward contract to hedge this transaction on October 1, 20x0. On
November 1, 20x0, the company reported sales on account of FC25,000 due on January 31, 20x1. The
company hedged this transaction on the same date. The related spot and forward rates of the finance company
are as follows:
Spot rates Forward Rates
Buying Selling
September 1, 20x0 15 14 16
October 1, 20x0 13 15 17
November 1, 20x0 15 12 17
December 31, 20x0 16 14 18
January 31, 20x1 17 17 19
March 1, 20x1 16 14 20
Determine the net effect of the forward contracts on Easy Company’s net income for 20x1.
a. P 15,000 increase c. P 15,000 increase
b. P 15,000 decrease d. P 25,000 decrease
37. Sony and Philip formed a joint venture to purchase and sell a special type of merchandise. The venturers
agreed to contribute cash of P168,750 each to be used in purchasing the merchandise, and to share profits and
losses equally. They also agreed that each shall record his own joint venture transactions in their respective
records.
Upon termination of the joint venture, the following data are available:
Sony Philip
Joint venture P146,250 cr P131,625 cr
Inventory taken 4,500 14,062.50
Expenses paid out of JV cash 6,750 12,375
How much cash is to be received by Sony in the final settlement?
A. P 296,437.50 C. P 316,968.75
B. P 312,468.75 D. P 318,093.75
38. On June 30, 2008,Agency R collected P35,000 from tenants for the rent of office space in its building and
deposited the collections to PNB (AGDB). On July 10, the agency used P17,000 of this collection for the repair
of the office space. Which of the following is true to record the payment of the repair of the office space?
A. Debit Repairs and Maintenance, P35,000
B. Credit Cash-Disbursing Officer, P35,000
C. Debit Cash- Collecting Officer, P17,000
D. Credit Cash in Bank- LCCA, P17,000
39. These are amounts which are committed to be paid by the government which arise from acts of a duly authorized
administrative officer and which binds the government to the immediate or eventual payment of a sum of
money.
A. Obligation
B. Appropriation
C. Allocation
D. Allotment
40. Under the NGAS the following are types of financial statements except:
A. Statement of Income and Expenses
B. Balance Sheet
C. Cash Flow Statement
D. Income Statement
41. Kimberly Corporation acquired a 60% interest in Erica Company on January 1, 2016 for P468,000 when Erica’s
net assets had a book value and fair value of P790,000. During 2016, Kimberly sold inventory items that cost
P780,000 to Erica for P1,040,000, and Erica’s inventory at December 31, 2016 included one-fourth of this
merchandise. Kimberly reported separate income from its own operations of P390,000, and Erica reported a
net loss of P195,000 for 2016.
Consolidated net income for Kimberly Corporation and Subsidiary for 2016
is: a. 234,000 c. 300,000
b. 130,000 d. 136,000
Use the following information for numbers 47 – 50:
On Jan 1, 2017, Magic Co purchased 75% of the outstanding shares of Mike Co for P850,000. On the date of
acquisition, Mike Co’s inventory was overstated by P20,000 and equipment with a 6 year remaining life on the date
of acquisition was understated by P30,000. The non-controlling interest is to be stated using proportionate basis. The
following transactions affected both companies results of operations for the next two years.
Magic Co Mike Co
2017 2018 2017 2018
Sales 2,500,000 2,750,000 2,000,000 1,800,000
Cost of Sales 2,000,000 2,200,000 1,400,000 1,200,000
Net Income 300,000 250,000 175,000 200,000
Dividends Declared 40,000 35,000 20,000 18,000
Intercompany sales 150,000 135,000 100,000 80,000
Gross profit rates 10% 15% 20% 25%
Intercompany ending inventory 40,000 35,000 20,000 25,000
Total assets 3,000,000 2,900,000 2,000,000 1,800,000
The following intercompany sale of fixed assets transpired as follows:

1. June 30, 2017, Magic sold a machine to Mike Co reporting a gain of P50,000.
2. December 31, 2017, Mike Co sold a machine to Magic reporting a loss of P20,000.
3. On December 1, 2018, Mike Co sold the machine they purchased from Magic Co to Angel Co reporting a
loss of P10,000.
a. All fixed assets have remaining useful lives of 5 years on the dates of their respective sale.
b. The retained earnings of Magic Co on January 1, 2017 amounted to P125,000.
c. The retained earnings of Mike Co on the date of acquisition amounted to P75,000 while the outstanding
shares amounted to P925,000..
d. Income is earned evenly throughout the
year. Determine the following:
47. Equity holders of parents net income for 2017.
a. 386,250 c. 389,500
b. 461,250 d. 391,500
48. Equity holders of parents retained earnings for 2018.
a. 861,938 c. 836,105
b. 834,312 d. 814,938
49. Non-controlling interest in net assets as of December 31, 2018.

a. 341,062 c. 343,520
b. 339,313 d. 336,646
50. As an independent situation, if Magic’s retained earnings and outstanding shares amount to P600,000 and
P300,000, respectively as of December 31, 2017, determine the equity holders of parent’s retained earnings
as of December 31, 2017.
a. 689,500 c. 704,500
b. 600,000 d. 686,000

Amanda Co, is a 70% owned company of Charlize Co. Amanda Co was acquired on January 1, 2015 for P350,000.
Each year, Amanda declares dividends of P20,000 every December 20, and is paid every January 10, the next year.
Data for both companies for 2018 follow:
Amanda Charlize
Net Income 200,000 500,000
Retained Earnings-Jan 1, 2018 750,000 2,000,000
Intercompany sales 500,000 400,000
Mark-up on intercompany sales 20% 25%
Intercompany beginning inventory 15,000 20,000
Intercompany ending inventory 10,000 25,000
Total Assets 4,000,000 6,000,000
Amanda Co’s retained earnings on the January 1, 2015 was P350,000 and an asset with a remaining 5-year life was
understated by P25,000 on this date. No goodwill was reported. The non-controlling interest is stated at fair value.
From the data above determine:
51. Consolidated Retained Earnings as of December 31, 2018.
a. 2,844,000 c. 2,346,950
b. 2,890,000 d. 2,886,000
52. Non-controlling Interest as of December 31, 2018.
a. 316,500 c. 298,500
b. 322,500 d. 264,300
53. Consolidated Assets as of December 31, 2018.

a. 9,633,500 c. 9,997,500
b. 9,647,500 d. 9,673,500
54. For each business combination, the acquirer shall measure at the acquisition date components of non-
controlling interest in the acquiree that are present ownership interests and entitle their holders to a
proportionate share of the entity’s net assets in the event of liquidation at either
55. a. Fair value.

b. The present ownership instruments’ proportionate share in the recognized amounts of the
acquiree’s identifiable assets.
c. Either A or B
d. Neither A or B
Under IFRS 3, contrary to IAS 37, what is the recognition principle of contingent liability assumed in a business
combination?
a. The acquirer shall recognize as of the acquisition date a contingent liability assumed in a business
combination if it is a present obligation that arises from past events and its fair value can be
measured reliably even only reasonably possible.
b. The acquirer shall recognize a contingent liability assumed in a business combination at the
acquisition date only if it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation.
c. The acquirer shall recognize a contingent liability assumed in a business combination at the
acquisition date only if it is virtually certain that an outflow of resources embodying economic
benefits will be required to settle the obligation.
d. The acquirer shall recognize a contingent liability assumed in a business combination at the
acquisition date only if it is remote that an outflow of resources embodying economic benefits will be
required to settle the obligation.
56. Determine the MOST accurate statement regarding partnerships.

a. A partnership is a taxable entity
b. A partnership is not required to pay any taxes
c. A partnership is a tax-reporting entity but may not be a tax-paying entity
d. Partners are exempted from paying income taxes when the partnership pays the corporate
income tax

On January 1, 2018 Papa Co purchased 80% of the outstanding shares of Son Co for P3,469,500. P125,000 of the
excess is attributable to goodwill and the balance to a depreciable asset with an economic life of ten years. The non-
controlling interest is measured at fair value on the date of acquisition and its fair value is P883,000. On the date of
acquisition, Son Co reported ordinary shares of P2,500,000 and retained earnings of P1,500,000. Papa Co's
retained earnings on January 1, 2018 is P3,000,000.
Papa Co reported net income of P1,500,000 and declared dividends of P500,000 while Son reports net income for
the year of P800,000 and pays parent dividends of P200,000 on December 1, 2018. Goodwill is impaired by
P20,000 by the end of the year.
Required:
57. Equity holder's income of parent for 2018.
a. 621,800 c. 447,800
b. 407,800 d. 1,907,800
58. Consolidated net income of parent to be reported on December 31, 2018.
a. 1,907,800 c. 1,947,800
b. 2,057,250 d. 2,057,250
59. Non-controlling interest presented in the consolidated statement of financial position on December 31,
2018. a. 1,084,450 c. 982,450
b. 1,082,450 d. 992,450
60. R contributed land with assessed value from the city assessor in the amount of P1,000,000. The land is
subject to real estate mortgage, which is annotated to the title of the land in the amount of P800,000. The
appraised value of the land is P2,400,000. J contributed a building with a cost of P2,000,000 and
accumulated depreciation of P1,500,000. The fair value of building is P800,000. N contributed investment in
trading securities with historical cost of P6,000,000. The trading securities have quoted price in active
market of P3,000,000.
The partners decided to bring their capital balances in accordance with their profit or loss sharing agreement.
The total agreed capitalization of the partnership is P10,000,000.
Which of the following statements is correct?
a. The agreed capital of N is P500,000.
b. R should contribute additional capital in the amount of P1,800,000
c. J should contribute additional capital in the amount of P2,200,000.
d. N is entitled to withdraw in the amount of P1,000,000.
ADVANCED FINANCIAL ACCOUNTING AND REPORTING OCTOBER 2018 BATCH

The accounts of the partnership of Bernard, David and Melvin at the end of the fiscal year on September 30,
2018 are as follows:
Cash 36,000 Loan from Melvin 18,000
Other Assets 225,000 Bernard, Capital (30%) 81,000
Loan to David 9,000 David, Capital (50%) 54,000
Liabilities 90,000 Melvin, Capital (20%) 27,000
Melvin received 16,200 on the first distribution of cash.
1. What was the cash realized from the initial sale of
assets? A. 18,000
B. 108,000
C. 180,000
D. 120,000
2. What is the loss from the initial sale of the Non-cash

Assets? A. 144,000
B. 54,000
C. 117,000
D. 134,000
3. The partnership of One, Two, Three and Four share profits and losses in the ratio of 20:20:20:40 each,
respectively. The capital balances of each partner on September 1, 2014 are: One, P60,000; Two, P80,000;
Three, P70,000 and Four, P40,000. On September 1, 2014, with the consent of One, Two and Four; Three
retires from the partnership and was Paid P50,000 cash in full settlement of his interest in the partnership and
Five was admitted to the partnership with a P20,000 cash investment for a 10% interest in the net assets of
One, Two and Four.
How much is the capital account to be credited to Five in the new

partnership? A. 25,000 C. 27,000
B. 22,000 D. 20,000
4. Mike and Mark enter into a partnership agreement in which Mike is to have a 55% interest in the partnership
and 35% in the profits and losses, while Mark will have a 45% interest in the partnership and 65% in the profits
and losses. Mike contributes the following:
Cost Fair Value
Building 235,000 255,000
Equipment 168,000 156,000
Land 500,000 525,000
The building and the equipment has a mortgage of P50,000 and P35,000 respectively. Mark is to invest
P150,000 cash and an equipment. The partners agreed that only the building mortgage will be assumed by
the partnership.
How much is the fair market value of the equipment which Mark
contributed? A. 615,818
B. 989,143
C. 574,909
D. 546,273
5. How much is the total assets of the partnership upon formation?

A. 1,660,909
B. 1,701,818
C. 1,892,143
D. 1,632,273
6. May, a partner in a law firm, decided to withdraw from the partnership. May’s share of the partnership profits
and losses was 20%. Upon withdrawing from the partnership he was paid cash in final settlement for his
interest. The total of the partners’ capital accounts before recognition of partnership goodwill prior to May’s
withdrawal was P210,000.
After his withdrawal the remaining partners’ capital accounts, excluding their share of goodwill, totaled
P160,000, but including their share of goodwill, totaled P256,000. The total amount of cash paid to May must
be:
a. P50,000 b. P96,000 c. P74,000 d. P120,000
7. T, M and I, decide to form a partnership and agree to distribute profits in the ratio of 5:3:2. It is agreed
however, that T and M shall guarantee income from their customers of P600,000 and P500,000, respectively,
that any deficiency is to be charged directly against the account of the partner failing to meet the guarantee,
and that any excess is to be credited directly to the account of the partner with income exceeding the
guarantee. Income earned during 19x4 are classified as follows: Customers of T, P1,000,000; customers of M,
P400,000; and customers of I, P100,000. Operating expenses for 19x4 are P200,000. The effect on the final
capital balances of T, M, and I, respectively will be:
a. Increase of P500,000; P300,000; and P200,000
b. Increase of P900,000; P300,000; and P200,000.
c. Increase of P900,000; P200,000 and P200,000
d. Increase of P650,000; P390,000 and P260,000
8. Maria, Magdalena, and Lucila are partners with capital accounts of P70,000, P120,000, and P90,000,
respectively. They share income and losses a 2:3:4 ratio. Although she believes the asset of the partnership
are fairly valued, Lucila is so anxious to retire that she accepts P80,000 cash as payment in full for her equity.
What is the capital balance of Magdalena after Lucila’s retirement?

a. P123,333 b. P123,000 c. P124,000 d. P126,000
9. N, S and G form a partnership on January 1, 2014, investing P150,000, P100,000 and P100,000, respectively.
Profits and losses are to be shared in the ratio 2:1:1, respectively. It is agreed that 6% (1/2 of 1% per month) is
to be charged on withdrawals that decrease capital below the original investments. On March 1, N withdraws
P50,000. Business is unsatisfactory and it is decided to dissolve partnership. Partnership assets realized
P50,000 and the accountant distributes this cash to the proper parties on November 1, 2014. All parties are
solvent, and proper settlement is made among partners the same day.
The final cash settlement among partners will involve:

A. N paying S, P13,000 and G, P13,000.
B. N paying S, P12,500 and G, P12,500
C. N receiving from S, P13,000 and from G, P13,000
D. No settlement is required.
10. Emilio, a senior partner in an accounting firm, has a profit share of 25% and 30% interest in 2018. During
2018, Emilio withdrew P260,000 against his capital but invested property with a fair value of P50,000.
If Emilio’s ending capital is P120,000 lesser than his capital beginning, how much is the partnership net income
or net loss for 2018?
a. P360,000 b. P300,000 c. P480,000 d. P400,000
11. At the date of partnership formation XYZ partnership, the amounted credited to X’s capital is less than the fair
market value of the property he contributed. Which of the following is the most valid reason?
A. The property contributed by A is impaired.
B. The property contributed by A has been subjected to positive asset revaluation.
C. Bonus has been given a partner A to the other partners.
D. Goodwill arising from partnership formation has been recognized
12. At the time of retirement, a retiring partner receives more than the amount of his capital contribution while the
remaining partners capital increase after the retirement. Which of the following is most valid reason?
A. Goodwill during retirement is recognized.
B. Asset revaluation is recognized
C. Bonus is given by retiring partner to remaining partners
D. Bonus is given by the remaining partners to retiring partners
13. At the time of partnership liquidation, which credits shall be settled first?
A. Those amount owing to third persons
B. Those amount owing to partners other than capital contribution and share in profit
C. Those amount owing to partners with respect to capital contribution
D. Those amount owing to partners with respect to share in profit.

ACE Marketing Co. started operations in 2018, selling exclusively on installment basis. Data for the first two
years follows:
2018 2019
Installment sales P 400,000 P 500,000
Cost of installment sales 240,000 350,000
Collection on 2018 accounts 210,000 150,000
Collection on 2019 accounts 300,000
Defaulted account balances 15,000
The default related to a 2018 sale, and the appliance which the company estimated to have a resale value of
P10,000 after reconditioning at a cost of P300 was repossessed.
14. The deferred gross profit at the end of 2018 was:

A. P70,000 B. P76,000 C. P114,000 D. P130,000
15. The deferred gross profit at the end of 2019 was:

A. P45,000 B. P60,000 C. P70,000 D. P114,000
16. The realized gross profit during the year 2019 was:
A. P60,000 B. P90,000 C. P150,000 D. P200,000
17. The default and related repossession resulted in a:

A. No gain/loss B. P700 gain C. P2,000 loss D. P2,300 loss
18. If the sale transaction provides for periodic installments over an extended period of time and the collectability
of the sales price cannot be reasonably estimated, what method of revenue recognition is the most
appropriate?
A. Cost recovery method C. Installment method
B. Accrual basis D. Cash basis
19. On Dec. 29, 2018, Sigay signed a franchising agreement for the operation of an outlet in Dagupan City by
Dagupena Corp. The franchising agreement required the franchisee, Dagupena Corp., to make an initial
payment of P200,000 upon signing of the contract and three payments each of P100,000 beginning one year
from the agreement date and yearly thereafter. The franchisor agrees to prepare market studies, find a suitable
location, train employees, and perform some other related services. The location, train employees, and
perform some other related services.
The initial payment is refundable until substantial performance is affected. In 2018, SIGAY should report
franchise fee revenue of:
A. P-0- B. P200,000 C. P125,000 D. P500,000
20. Jollibee, franchisor, entered into a franchising agreement with Jo Levy, franchisee, on October 31, 2018. The
total franchise fee is P500,000, of which P100,000 is payable upon signing of the agreement with the balance
payable in four equal annual installments. The down payment is refundable in the event the franchisor fails to
render stipulated services and, thus far, none has been performed.
When Jollibee prepares its October 31, 2018 financial statements, the franchise fee revenue to be reported is:
A. - 0 - B. P400,000 C. P100,000 D. P500,000
Items 21 & 22 are based on the following information:

On January 1, 2018, an entity granted a franchise agreement to a franchisee. The contract provided that the
franchisee shall pay an initial franchise fee of P 500,000 and on-going payments of royalties equivalent to 8%
of the sales of the franchisee.
On January 1, 2018 the franchisee paid downpayment of P 200,000 and issued 3-year noninterest bearing
note for the balance payable in three equal annual installments starting December 31, 2018. The note has
present value of P 240,183 with effective interest rate of 12%.
On June 30, 2018, the entity completed the performance obligation of the franchise at a cost of P352,146.
Aside from that, the entity incurred indirect cost of P22,009.
The franchisee started operation on July 1, 2018 and reported sales revenue amount to P 50,000 for the year
ended December 31, 2018. The franchisee paid the first installment on its due date.
21. If the collection of the note receivable is reasonably assured, what is the gross profit to be recognized by the
entity for the year ended December 31, 2018 in relation to the initial franchise fee?
A. P 66,028 B. 44,014 C. 22,009 D. 88,037
22. If the collection of the note receivable is reasonably assured, what is the net income to be reported by the
entity for the year ended December 31, 2018?
A. 98,850 B. 94,850 C. 70,028 D. 92,037
23. JPC Company entered into a construction agreement in 2017 for the rip-rapping of Pier 4. The original
contract price was P9,600,000 but a change order was issued in 2018 increasing the contract price by
P480,000. D uses the percentage of completion method of revenue recognition on long-term construction
contracts. The following information are obtained on the project of 2017 and 2018.
2017 2018
Cost incurred to date P4,920,000 P8,640,000
Estimated costs to complete 4,920,000 2,160,000
Billings made 5,280,000 8,520,000
Cash collections 4,380,000 7,500,000
What is the gross profit (loss) of JPC on the project for 2018?
A. (P960,000) B. (P480,000) C. (P1,080,000) D. (P840,000)
24. When it is probable that total contract costs will exceed total contract revenue, how shall the long-term contract
account for the difference?
A. The expected loss shall be recognized as an expense immediately.
B. The expected profit shall be recognized as a profit immediately
C. The expected loss shall be recognized as an expense taking into account the percentage of completion as
of the end of the period.
D. The expected loss shall be recognized as a profit taking into account the percentage of completion as of
the end of the period

Platinum Builders Inc. recently acquired the Golden Builders Company. Golden has incomplete
accounting records. On one particular project, only the information below is given. Because the
information is incomplete, you are asked the following questions assuming the percentage of
completion method is used and an output measure is used to estimate the percentage completed, and
revenue is recorded using the costs actually incurred.
2017 2018 2019
Costs incurred during year P2,000,000 P2,500,000 ?
Estimated cost to complete 4,500,000 1,900,000 -0-
Contract revenue 2,500,000 ? ?
Gross profit on contract ? 100,000 P(200,000)
Contract price P7,000,000
25. How much is the total cost of the contract?
A. P2,100,000 B. P6,600,000 C. P6,900,000 D. P6,800,000
26. What would be the gross profit for 2018 if the cost to cost percentage of completion method were used? Ignore
the revenue amount for 2017 and gross profit amount for 2018?
A. P268,029 B. P422,600 C. P100,000 D. P(77,600)

Comparative trial balances of the home office and the two branches of UKAY-UKAY Corporation at December
31, 2018 were as follows:
Home office Branch A Branch B
Cash P 5,000 P 15,000 P 22,000
Accounts receivable (net) 80,000 30,000 40,000
Inventories 150,000 60,000 48,000
Branch No. 1 170,000
Branch No. 2 165,000
Plant assets (net) 730,000 250,000 200,000
Purchases 900,000
Shipments from home office 300,000 240,000
Expenses 300,000 75,000 50,000
Total P2,500,000 P730,000 P 600,000

Other liabilities 80,000 15,000 5,000
Loading in branch inventories 108,000
Capital stock, P10 par 500,000
Retained earnings 262,000
Home office 170,000 165,000
Sales 1,000,000 500,000 400,000
Shipments to branches 450,000 0 0
Total P 2,500,000 P 730,000 P600,000
Home office and Branch inventories at December 31, 2018 were:
Home office (at cost) P120,000
Branch No. A (at billed price) 72,000
Branch No. B (at billed price) 96,000
27. What is the mark-up rate on merchandise transfers to branch?

A. 20 percent of billed price C. 16-2/3 percent of billed price
B. 25 percent of cost. D. 25 percent of billed price
28. How much is the beginning inventory of UKAY-UKAY Corporation?

A. P150,000 B. P258,000 C. P240,000 D. P90,000
29. How much is the correct net income of Branch No. 2 as far as home office is concerned?
A. P190,000 B. P158,000 C. P185,000 D. P94,000
30. An operator build a road at a cost of P100 M that fair value her of construction services is P110 M, the total
operating costs of the road are P70 M and total cash inflows over the life of the concession are P200 M.
Applying IFRIC 12, Service Concession Arrangement, by how much is total revenue under the
intangible asset model higher or lower than the total revenue under the financial asset model over the
life of the concession?
A. No difference
B. P10 M
C. P110 M
D. (P110M)
31. ANDROMEDA Construction was recently awarded a P6,730,000 contract a trade center for Ayala Inc.
ANDROMEDA Construction estimates it will take 46 months to complete the contract. The company uses the
percentage of completion method to estimate profits. (use two decimal places for the percentage of
completion) Example 62.48%
The following information details the actual estimated costs for the year 2014-2017:
Year Actual Cost Each Year Estimated Cost to Complete
2014 P3,120,000 P3,264,000
2015 1,584,000 1,800,000
2016 1,152,000 912,000
2017 1,080,000
How much is the balance of Construction in Progress account as of
2016? A. P5,800,000
B. P5,808,000
C. P5,818,000
D. P5,856,000
32. Home office XYZ shipped merchandise costing P18,840 to XX branch and paid for the freight charges of
P3,000 XX branch was subsequently instructed to YY branch wherein XX branch paid P2,400 freight.
If the shipment was made directly from XYZ to YY, the freight cost would have been P4,500. Which
of the following is incorrect?
A. Upon transfer of merchandise by XX to YY, XX debits Home office account by P24,240
B. Upon transfer of merchandise by XYZ to XX, XYZ debits Investment in Branch XX account by P21,840
C. Upon transfer of merchandise by XX to YY, XYZ debits Investment in Branch XX account by P23,340
D. Upon receipt of merchandise by YY from XX, YY credits Home office account by P23,340
33. Music Box and Company has several branches located in the cities in the south namely, Davao, Tacloban,
Cebu, Bacolod, and Cagayan de Oro. It authorizes transfers of cash and inventories among branches. The
head office ships goods P100,000 cost to Davao branch paying freight charges for P6,000. The home office
authorizes the transfer of goods from Davao Branch to Cebu Branch where the latter is charged for the cost
of the goods, P100,000 and freight charges of P2,000 for the transfer. If the shipment had been made by the
head office to the Cebu Branch, the freight charges would have been P9,000. The transfers resulted to
difference in freight charge which should be disposed of as follows:
A. P1,000 charge to Cebu branch by Davao branch.
B. P1,000 charge to Cebu branch by Head office
C. P1,000 to be equally charge among Head office, Davao branch, and Cebu branch.
D. P1,000 savings
34. What is the main reason for the difference between the branch’s net income reported by the branch and the
true branch’s net income computed by the home office?
A. Because of overstatement of branch’s cost of sales for goods coming from outsiders
B. Because of overstatement of branch’s cost of sales for goods coming from home office
C. Because of overstatement of total goods available for sale coming from home office
D. Because of overstatement of branch’s ending inventory coming from home office
35. On December 31, 2018, Yabu Corp. signed an agreement authorizing Cecille Company to operate as a
franchise for an initial franchise fee of P50,000. Of this amount, P20,000 was received upon signing of the
agreement and the balance is due in three annual payment of P10,000 each, beginning December 31, 2019.
No future services are required to be performed. Cecille Company’s credit rating is such that collection of the
note is reasonably assured. The present value at December 31, 8 of the three annual payments discounted
at 14% (the implicit rate for a loan of this type) is P23,220. On December 31, 2018, Yabu should record
earned franchise fees of:
A. P23,220 B. P43,220 C. P30,000 D. P 0
ADVANCED FINANCIAL ACCOUNTING & REPORTING OCTOBER 2018 BATCH

FINAL PRE-BOARD EXAMINATION SEPT 25, 2018; 11:30AM–2:30PM
1. The following information are related to STANK Corporation which is undergoing liquidation:
A) A bank loan amounting to P455,000 is secured by inventories with book value of P525,000 an d net
realizable value of P350,000.
B) Of the P1,120,000accounts payable, P343,000 is secured by accounts receivable amounting to
P413,000 which is 10% uncollectible.
C) Property and equipment costing P875,000 and which is depreciated by 20% has a net realizable
value of P588,000.
Page 67
D) Other unrecorded liabilities are accrued interest payable on bank loan, P45,500; salaries payable,
P112,000; taxes payable, P63,000 and trustee’s fee, P52,500.
E) Cash available before liquidation amounts to P87,500.
Compute for the estimated deficiency to unsecured creditors.

A. 450,800 C. 927,500
B. 882,000 D. 980,000
1)
FV Secured Unsecured Free
Inventories 350,000.00 350,000.00 105,000.00 -
Accounts Receivable 371,700.00 343,000.00 28,700.00
PPE 588,000.00 588,000.00
Cash 87,500.00 87,500.00
Free Assets 704,200.00
Unsecured W/Priority
Salaries payable 112,000.00
Taxes payable 63,000.00
Trustees fee 52,500.00 227,500.00
Net Free Assets 476,700
Unsecured w/o Priority
Accounts payable 777,000.00
Interest expense 45,500.00 927,500.00
Deficiency A - 450,800.00
2. On October 5, 2018, HAREM COMPANY sold goods on account to a Malaysian Corporation for
50,320 Ringgits. The date of invoice is October 29, 2018 and payment is due on January 30, 2019.
Exchange rates were as follows:
BID rate OFFER rate
Oct 5, 2018 67.50 69.20
Oct 29, 2018 68.70 66.80
Dec 31, 2018 64.10 63.40
Jan 30, 3019 62.40 65.60
What is the reportable foreign exchange gain/(loss) in HAREM COMPANY’s 2019 income
statement?
A. (85,544) C. 105,672
B. (231,472) D. (171,088)
2)
A/R-12/31 3,225,512.00
A/R-1/30/19 3,139,968.00
Loss A 85,544.00
3. Given the following information for Foreign Currencies (FC), compute for the following independent
cases below: the following direct rates were as follows:
10/02/19 10/25/19 11/02/19 12/01/19 12/31/19 1/30/20 2/28/20 3/31/20
Buying 20.70 20.85 20.70 20.50 20.40 20.30 20.15 20.10
Selling 20.95 21.10 22.40 20,30 25.25 29.35 29.50 29.70
150-day 120-day 90-day 60-day 30-day

forward-rate forward-rate forward-rate forward-rate forward-rate
03/31/2020 23.40 22.70 25.85 26.50 29.40
02/28/2020 23.15 22.40 25.20 26.25 29.25
01/30/2020 22.10 21.75 20.55 23.75 25.50
12/31/2019 21.30 22.80 20.20 21.40 25.30
12/01/2019 20.25 23.15 21.40 23.50 24.10
11/02/2019 20.40 24.10 22.85 24.15 23.30
On October 25, 2019, RIA Company ordered merchandise worth FC975,000 form a Foreign
Company, payable on February 28, 2020. It was shipped on November 2, 2019. To hedge this
foreign currency exposure, RIA Company bought FC975,000 on December 1, 2019 for delivery on
January 30, 2020 under a forward contract with BPI.
What amount will affect profit or loss regarding the derivative instrument on its settlement date in
2020?
A. 5,958,750 B. 1,755,000 C. 3,948,750 D. 97,500
3)
Foreign Receivable 3,948,750.00 C
4. As a result of all foregoing transactions, what amount will affect current earnings on the financial
statement date in 2019?
A (2,778,750) C. 1,775,000
.
B (1,023,750) D. 292,500
.
4)
Accounts Payable - 2,778,750.00
Foreign Receivable 1,755,000.00
Loss - 1,023,750.00
5. On October 2, 2019, VIVA Company received an order of merchandise from a Company in New
Zealand. It was invoiced and shipped on October 25, 2019 to the customer. The price of
FC370,000 is to be collected on February 28, 2020. To hedge this foreign currency exposure, VIVA
Company sold FC370,000 for delivery on March 31, 2020 under a forward contract with MBTC,
which was entered into by VIVA Company on November 2, 2019.
What amount will affect profit or loss regarding the hedging instrument on the financial statement
date in 2019?
A. (166,500) C. 92,500
B. 166,500 D. 74,000
5)
FX Pay 74,000.00
6. As a result of the foregoing transactions, what amount will affect current earnings in 2020?
A. (166,500) C. (55,500)
B. (92,500) D. (37,000)
6)
Accounts Receivable - 92,500.00
FX Pay - 37,000.00
Loss 55,500.00
7. The following data applies to JEAN Company’s purchase of FC45,400 under a forward contract
dated November 1, 2019 for delivery on January 31, 2020.
11/1/2019 12/31/2019 01/31/2020
Spot rate 55.75 53.90 54.50
30-day forward rate 51.30 56.15 53.20
60-day forward rate 57.65 52.30 55.75
90-day forward rate 54.25 55.45 52.10
JEAN entered into a forward contract to speculate in the foreign currency.

In its income statement for the year ended December 31, 2019, what amount of gain/(loss) should
JEAN report from this forward contract?
A. (86,260) C. 86,260
B. (83,990) D. 83,990
7)
FX Receivable 86,260.00
8. On November 1, KARENN Company entered into a firm commitment to acquire a machine from a
UAE Company. Delivery and passage of title would be on February 28, 2020 at the price of 37,800
dirhams, accounted for as a fair value hedge. On the same date, to hedge against unfavorable
changes in the exchange rate, KARENN entered into a 120-day forward contract with a bank for
37,800 dirhams. Exchange rates were as follows:
Spot Rate Forward Rate
Nov. 01, 2019 96.50 94.30
Dec. 31, 2019 97.25 96.50
Feb. 28, 2020 99.70 99.70
What is the December 31, 2019 foreign exchange gain/(loss) on the hedging instrument?
A 83,160 C. (83,160)
.
B 28,350 D. (28,350)
.
8)
FX Receivable 86,160.00
9. What is the Firm Commitment account balance shown in the December 31, 2019 statement of
Financial Position?
A. 83,160 asset C. 28,350 asset
B. 83,160 liability D. 28,350 liability
9)
Firm Commitment Liability 83,160.00
10. MBC Corporation of Cebu paid P1,128,750 for a 35% interest in EMU Company of Taiwan on
January 1, 2019, when EMU’s net assets totaled 375,000 NT Dollars and the exchange rate for NT
Dollars was P8.60. A summary of changes in EMU’s net assets during 2019 were as follows:
NT Dollar Exchange Rate
Net Assets, January 1 375,000 8.60
Net income for the year 75,000 8.55
Dividends paid for the year 25,000 8.54
MBC Corporation anticipated a strengthening of the Philippine peso against the NT Dollar during the
last half of 2019, and it borrowed 150,000 NT Dollars from a Taiwanese bank for one year at 10%
interest on July 1, 2022 to hedge its investment in EMU. The loan was made when the exchange
rate for NT Dollars was P8.55. the loan was denominated in NT dollars and the current exchange
rate at December 31, 2019 was P8.50.
What is the other comprehensive income-translation adjustment presented in equity in 2019 as a

result of hedging?
A 20,675.00 C. 6,587.50
.
B 15,087.50 D. -0-
.
10)
Net Assets 375,000.00 8.60 3,225,000.00
Net Income 75,000.00 8.55 641,250.00
Dividends - 25,000.00 8.54 213,500.00
Total 425,000.00 3,652.750.00
Investment (35%) 148,750.00
1,264.375.00
Translation loss -14,087.50
Translation gain (L/P) 7,500.00
Adjustment - 6,587.50
11. On January 1, 2019, MARK Corporation organized GEN Company as a subsidiary in Hong Kong
with an initial investment cost of HK$90,000. GEN’s December 31, 2019, trial balance in HK$ is as
follows:
Debit Credit
Cash HK$ 10,500
Accounts Receivable 30,000
Receivable from MARK 7,500
Inventory 37,500
Plant and equipment 150,000
Accumulated depreciation HK$ 15,000
Accounts payable 18,000
Bonds payable 75,000
Common stock 90,000
Sales 225,000
Cost of goods sold 105,000
Depreciation expense 15,000
Operating expense 45,000
Dividends paid 22,500
Total HK$ 423,000 HK$ 423,000
1. Purchase of inventory goods are made evenly during the year. Items in the ending inventory were
purchased November 1.
2. Equipment is depreciated by the straight-line method with a 10-year life and no residual value. A full
year’s depreciation is taken in the year of acquisition. The equipment was acquired on March 1.
3. The dividends were declared and paid on November 1.
4. Exchange rates were as follows:
January 1 HK$1= 5.30
March 1 HK$1= 5.40
November 1 HK$1= 5.70
December 1 HK$1= 5.00
Average for the year HK$1=5.50
What is the cumulative translation adjustment gain/(loss)?
A. (P41,250) C (78,750)
.
B. 45,750 D (14250)
.
11)
Assets 1,102,500.00
Liabilities 465,000.00
SHE
Common Stock 477,000.00
Sales 1,237,500.00
COS - 577,500.00
Opex -330,000.00
Dividends -128,250.00 201,750.00 678,750.00 1,143,7500.00
Translation loss - 41,250.00
12. The following are taken from the records of EMU Imports Company, a foreign subsidiary in New
Zealand.
NZ Dollar
Total Assets 12/31/2019 146,000
Total Liabilities 12/31/2019 45,000
Common Stock 12/31/2019 60,000
Retained Earnings 01/01/2019 29,000
Net Income 2019 15,000
Dividends declared 12/31/2019 3,000
Exchange rates:
Current rate 10
Historical rate 11
Weighted Average rate 12
The peso balance of retained earnings on December 31, 2018 is P325,000.
What amount of cumulative translation adjustment is to be reported in the Consolidated Statement

of Financial Position on December 31, 2019?
A 122,000 debit C 125,000 debit
. .
B 116,000 credit D 125,000 credit
. .
12)
Assets 1,460,000.00
Liabilities 450,000.00
Common Stock 660,000.00
Retained earnings 325,000.00
Net Income 180,000.00
Dividends -30,000.00 475,000.00 1,585,000.00
FX adjustment debit balance -125,000.00
13. TIM HORTONS Inc. sells franchises to independent operators throughout the northwestern part of
the United States and some other countries. The contract with four (4) franchisees includes the
following provisions:
1. The franchisee is charged an initial fee of P800,000. Of this amount, P300,000 is
payable when the agreement is signed, and a P100,000 non-interest-bearing note at
the end of each of five subsequent years.
2. All of the initial franchise fee collected by TIM HORTONS Inc. is to be refunded and
the remaining obligation canceled if, for any reason, the franchisee fails to open his or
her franchise.
3. In return for the initial franchise fee, TIM HORTONS Inc. agrees to (a) assist the
franchisee in selecting the location for the business, (b) negotiate the lease for the
land, (c) obtain financing and assist with building design, (d) supervise construction,
(e) establish accounting and tax records, and (f) provide expert advice over a 5-year
period relating to such matters as employee and management training, quality control,
and promotion.
4. In addition to the initial franchise fee, the franchisee is required to pay to TIM
HORTONS Inc. a monthly fee of 2% of sales for menu planning, recipe innovations,
and the privilege of purchasing ingredients from TIM HORTONS Inc. at or below
prevailing market prices.
5. The franchisees will replace all equipments at the end of the 10 th year and agree to
buy them from BONCHON at a discount of P 50,000.
Management of TIM HORTONS Inc. estimates that the value of the services rendered to each
franchisee at the time the contract is signed amounts to at least P300,000. All franchisees to
date have opened their locations at the scheduled time and none have defaulted on any of the
notes receivable. The credit ratings of all franchisees would entitle them to borrow at the current
interest rate of 10%. The franchise revenue earned during the year must be:
A. P2,716,000 B. P1,516,000 C. P 1,440,000 D. P1,200,000
Franchise revenue earned:
Down payment (300,000 x 4) P1,200,000
Installments (100,000 x 3.79) = 379,000 x 4 1,516,000
P2,716,000
Less: Franchise costs (300,000 x 4) ( 1,200,000)
Discounts (50,000 x .38) 4 ( 76,000)
Franchise profit P1,440,000 D
14. On November 30, 2018, CLN Company authorized Shipped-line Corp. to operate as a franchisee for
an initial franchise fee of P 1,950,000. Of this amount, P 750,000 was received upon signing the
agreement and the balance, represented by a note, is due in four annual payments starting
November 30, 2019. Present value of P 1 at 12% for 4 periods is 0.6355. Present value of an
ordinary annuity of P 1 at 12% for 4 periods is 3.0374. The period of refund will elapsed on January
31, 2019. The franchisor has performed substantially all of the initial services but the operations of
the store have yet to start. Collectibility of the note is reasonably certain.
How much is the unearned franchisee fee?

A. P 1,661,220 B. P 750,000 C. P 911,220 D. P0
14) A
DP P 750,000
PV of note (300,000 x 3.0374) 911,220
Total unearned fee P 1,661,220 (period of refund has not yet elapsed)
15. MAGIC Corporation, which began business on January 1, 2018, appropriately uses the instalment
sales method of accounting for tax purposes, but records net income under the accrual method. The
following data were obtained for the years 2018 and 2019:
2018 2019
Instalment sales P7,500,000 P8,400,000
Cost of instalment sales 5,250,000 6,048,000
General & administrative expenses 700,000 840,000
Outstanding accounts on sales of 2018 4,400,000 1,400,000
Outstanding accounts on sales of 2019 -0- 4,000,000
A 2018 sale resulted in default in 2019. At the date of default, the balance on the instalment
receivable was P120,000, and the repossessed merchandise had a fair value of P80,000.
Determine the net income for the year 2019 under the instalment method and full accrual method.
A. Instalment method, P1,252,000; Full accrual method, P1,472,000.
B. Instalment method, P1,288,000; Full accrual method, P1,392,000
C. Instalment method, P1,472,000; Full accrual method, P1,252,000.
D. Instalment method, P2,132,000; Full accrual method, P2,352,000
15) A
GP rate 2018 = 7,500,000 – 5,250,000/7,500,000 = 30%
GP rate 2019 = 8,400,000 – 6,048,000/8,400,000 = 28%
Realized gross profit:
Collections – 2018 sales (4,400,000 – 1,400,000 – 120,000) x 30% = P 864,000
- 2019 sales (8,400,000 – 4,000,000) x 28%
1,232,000
P2,096,000
Less: General and administrative expenses P840,000
Loss on repossession:
Recovered value P 80,000
Unrecovered cost (120,000 x 70%) 84,000 4,000 844,000
Net income under the instalment method P1,252,000 A
Installment sales – 2019 P8,400,000

Cost of instalment sales ( 6,048,000)
Gross profit realized P2,352,000
Less: General and administrative expenses ( 840,000)
Loss on bad accounts:
Installment balance P120,000
Fair value of repossessed inventory 80,000 ( 40,000)
Net income under the full accrual method P1,472,000
16. Ace and Archie are partners. Their capital accounts during 2018 were as follows:
Ace, Capital: Debit Credit Archie, Capital: Debit Credit
January 1 40,000 January 1 60,000
April 3 8,000 March 5 9,000
August 28 6,000 July 6 7,000
October 31 3,000 October 7 5,000
Net income of the partnership is P40,000 for the year. The partnership agreement provides for the
division of income as follows:
a. Each partner is to be credited 10 percent interest on his average capital.
b. Any remaining income or loss is to be divided based on the beginning capital ratio.
Determine the share of Archie on the net income of 2018. (Assume that changes in the capital
accounts made at the first half of the month are considered changes at the beginning of the month
and changes at the last half of the month are considered changes at the beginning of the following
month).
A. P19,000 B. P21,000 C. P15,900 D. P 24,100
16)
Weighted average capital of Ace: Weighted average capital of Archie:
January 1 (40,000 x 12/12) 40,000 January 1 (60,000 x 12/12) 60,000
April 1 (8,000 x 9/12) ( 6,000) March 1 (9,000 x 10/12) ( 7,500)
September 1 (6,000 x 4/12) 2,000 July 1 (7,000 x 6/12) 3,500
November 1 (3,000 x 2/12) 500 October 1 (5,000 x 3/12) 1,250
36,500 57,250
Ace Archie Total

Interest of 10% on average capital P 3,650 P 5,725 P 9,375
Balance 40:60 12,250 18,375 30,625
Total share of each partner P15,900 P24,100 P40,000 D

The Jockey, Jade, and Julie Partnership is being liquidated. All liabilities have been paid. The
balance of assets on hand is being realized gradually. The following are details of partners’ accounts:
Capital Account Drawing Account Loans to P/L
Balances Balances Partnership Ratio
Jockey P 200,000 P15,000 Cr. P150,000 5
Jade 250,000 20,000 Dr. - 2
Julie 100,000 30,000 Cr. 50,000 3
17. If you are to rank the partners from the most vulnerable to the least vulnerable, the ranking will be
as follows:
A. Jockey, Jade, and Julie, respectively. C. Julie, Jade and Jockey, respectively
B. Jade, Jockey, and Julie, respectively. D. Julie, Jockey and Jade, respectively.
17) D
Loss absorption capacity of partners:
Jockey = 365,000/50% P 730,000
Jade = 230,000/20% P 1,150,000
Julie = 180,000/30% P 600,000
The partner who has the lowest loss absorption capacity is considered the most vulnerable and the partner
who has the highest loss absorption capacity is considered the least vulnerable, therefore, the ranking must
be Julie, Jockey and Jade respectively. D
18. If partner Jockey receives P150,000, how much partner Jade receives?
A. P 144,000 B. P 51,000 C. P 86,000 D. P 129,000
18) A
Equity balance of Jockey P365,000
Cash received by Jockey ( 150,000)
Assumed share of liquidation loss P215,000 = 5
X 2/5
Share of Jade on the liquidation loss P 86,000
Equity balance of Jade 230,000
Cash received by Jade P144,000 A
OR
Priority Program:
Priority 1 to Jade (1,150,000 – 730,000) x 20% = P84,000
Priority 2 to Jade (730,000 – 600,000) x 20% = P26,000
to Jockey (730,000 – 600,000) x 50% = P65,000
Priority 3 to all 5:2:3.
Cash distribution:
Jockey Jade
Priority 1 P 84,000
Priority 2 P 65,000 26,000
Priority 3 – 5:2 85,000 34,000
Total P150,000 P144,000
19. J, K, L, and M are partners, sharing profits and losses 30%; 30%; 20%; 20%, respectively. After
sale of firm assets and payment of the available cash to the partnership creditors, a partnership
trial balance and the personal status of each partner are as follows:
Personal Status
Trial Balance Exclusive of Partnership Interest
Debit Credit Partner Asset Liabilities
Creditors P 20,000
J, capital 5,000 J P150,000 P100,000
K, capital 75,000 K 80,000 200,000
L, capital P 60,000 L 150,000 40,000
M, capital 40,000 M 60,000 80,000
P100,000 P100,000
Assuming that A pays the partnership creditors, how much B can still recover from the
partnership?
A. P75,000 B. P54,000 C. P60,000 D. P0
19) C
J K L M Total
Capital balances 5,000 75,000 (60,000) (40,000) (20,000)
Creditors paid by J 20,000 20,000
Deficiency of M 3:3:2 ( 15,000) ( 15,000) (10,000) 40,000 -
Contributions of L 70,000 70,000
Cash distribution 10,000 60,000 - - (70,000)
C
20. On January 1, 2017, Uno Corp., reports net assets of P480,000 although a building (with a 10-year
life) having a book value of P260,000 is now worth P310,000. Dos Corp. Corporation pays
P400,000 on that date for a 70 percent ownership in Uno Corp.. On December 31, 2019, Uno Corp.
reports a Building account of P245,000 while Dos Corp. reports a Building account of P510,000.
What is the consolidated balance of the Building account?

A. P779,500 B. P783,500 C. P790,000 D. P805,000
20) C
Building account of Uno Corp. P245,000
Building account of Dos Corp. 510,000
Add: Unamortized building (50,000 x 7/10) 35,000
Total consolidated building December 31, 2019 P790,000 C
21. Asia Star Company purchased in the open market 60 percent of the capital stock of The Golden
Tree Company on January 1, 2016, at P100,000 more than 60 percent of its book value. The
differential was allocated P40,000 to plant and equipment (net) and P60,000 to goodwill. The plant
and equipment had an estimated remaining life of 10 years, and the goodwill is not amortized. The
Golden Tree reported net income of P60,000 in 2016, P50,000 in 2017 and P75,000 in 2018. Fifty
percent of the net income was declared as dividends.
On January 1, 2019, minority shareholders in The Golden Tree Company have an equity of
P114,667 in the net assets of the company.
Determine the January 1, 2016, cost of investment.

A. P223,000 B. P188,500 C. P247,500 D. P167,500
21) B
Total SHE of The Golden Tree, January 1, 2016 (96,000 / 40%) P240,000
Less net income (2016 – 2018) ( 185,000)
Add dividends (2016 – 2018) 50% of 185,000 92,500
SHE of The Golden Tree, January 1, 2016 P147,500
Percent of control x 60%
Book value of investment, January 1, 2016 P 88,500
Add excess of cost 100,000
Cost of investment, January 1, 2016 P188,500
22. Monica purchased equipment from its 85% owned subsidiary, Eloisa Company for P150,000 on
January 1, 2015 and the equipment and its accumulated depreciation were carried on the books of
Eloisa at P200,000 and P100,000, respectively. Monica estimates a remaining life of the equipment
to be 5 years, at which time no salvage value is expected to exist. Straight-line depreciation is
used. Eloisa reported a net income for 2015 of P150,000.
What portion of the depreciation recorded by Monica must be eliminated for consolidation
purpose? A. 20% of the gain on saleC. 33-1/3% of the gain on sale
B. 40% of the gain on sale D. 66-2/3% of the gain on sale
22) A
Intercompany selling price P150,000
Net book value carried on the books of Eloisa Company 100,000
Intercompany gain on sale P 50,000
Amortized for 5 years the remaining life (50,000/5 years) P 10,000
Portion of the gain eliminated from depreciation (10/50) 20% A
23. A subsidiary company sells equipment with a four-year remaining useful life to its parent at a
P12,000 gain on December 31, 2018. The effect of this intercompany transaction on the parent’s
retained earnings for 2018 will be:
A. A decrease of P12,000 if the subsidiary is 100 percent owned.
B. An increase of P9,000 if the subsidiary is 100 percent owned.
C. A decrease of P9,000 if the subsidiary is 100 percent owned.
D. A decrease of P3,600 if the subsidiary is 60 percent owned.
23) A
The gain is considered unrealized thus, it will decrease the net income or retained earnings of the parent if it
is a 100% owned subsidiary. A
24. The after closing balances of FILO Corporation’s home office and its branch at January 1, 2018
were as follows
Home Office Branch
Cash P 7,000 P 2,000
Accounts receivable-net 10,000 3,500
Inventory 15,000 5,500
Plant assets net 45,000 20,000
Branch 28,000 -
Total assets P 105,000 P 31,000
Accounts Payable P 4,500 P 2,500

Other Liabilities 3,000 500
Unrealized profit-branch inv. 500 -
Home Office - 28,000
Capital stock 80,000 -
Retained Earnings 17,000 -
Total Equities P 105,000 P 31,000
A summary of the operations of the home office and branch for 2018 follows:
 Home Office sales: P 100,000, including P 33,000 to the branch. A standard 10% mark up on cost
applies to all sales to the branch. Branch sales to its customers totaled P 50,000.
 Purchases from outside entities: Home Office, P 50,000; Branch P 7,000
 Collections from sales: Home Office P 98,000 (including P 30,000 from branch); Branch Collections; P
51,000
 Payments on account; Home Office, P 51,500; Branch P 4,000
 Operating Expenses paid; Home Office , P 20,000; Branch P 6,000
 Depreciation on Plant assets; Home Office , P 4,000; Branch P 1,000
 Home Office operating expenses allocated to the branch, P 2,000
 At December 31, 2018, the Home Office inventory is P 11,000 and the Branch Inventory is P
11,000 and the Branch inventory is P 6,000 of which P 1,050 was acquired from outside suppliers
The combined net income amounted to:

A. P 0 B. P 4,550 C. P 21,000 D. P 25,550
24) D
Sales 117,000
COS 20 + 57 - 16,550 60,450
GP 56,550
OE (26 + 5) 31,000
C . NI 25,550

Cooperative of Bayanihan Negros Occidental makes a unique syrup using sugar cane and local
herbs. The syrup is sold in small bottles and is prized as a flavouring for drinks and for use in
desserts. The bottles are sold for P12 each. The first stage in the production process is carried out in
the Mixing Department, which removes foreign matter from the raw materials and mixes them in the
proper proportions in large vats. The company uses the weighted-average method in its process
costing system.
A hastily prepared report for the Mixing Department in April appears below:
Quantity Schedule:
Units to be accounted for:
Work in process, April 1 (materials 90% complete; conversion 80% complete) 30,000
Started into production 200,000
Total units to be accounted for 230,000
Units accounted for as follows:
Transferred to next department 190,000
Work in process, April 30 (materials 75% complete; conversion 60% complete) 40,000
Total units accounted for 230,000
Total Cost
Cost to be accounted for:
Work in process, April 1, (materials, P67,800; conversion, P29,300) P 97,100
Cost added during the month (materials, P579,000; conversion, P248,900) 827,900
Total cost to be accounted for P 925,000
Cost Reconciliation
Cost accounted for as follows:
Transferred to next department P 805,600
Work in process, April 30 119,400
Total costs accounted for P 925,000
Cooperative Bayanihan has just been acquired by another company, and the management of the
acquiring company wants some additional information about Cooperative Bayanihan’s operations.
25. How much material costs were charged to units transferred out to next
department? A. P247,000B. P558,600 C. P648,800
D. P278,200
25) B
Materials Conversion Cost
Units transferred to next department 190,000 190,000
Work in process, April 30 30,000 24,000
Equivalent completed units 220,000 214,000
Costs P646,800 P278,200
Unit cost P 2.94 P 1.30
Cost of materials charged to units transferred out to next

department: 190,000 x 1.94 = P558,600 B
26. How much conversion costs were charged to work in process ending inventory?
A. P88,200 B. P31,200 C. P30,200 D. P90,000
26) B
Conversion costs charged to work in process ending
inventory: 24,000 x 1.30 = P31,200 B
27. Assuming the company is using FIFO method of accounting units and cost, how much is the
cost of goods finished and transferred out?
A. P803,560 B. P805,600 C. P818,900 D. P752,600
27) A
Materials Conversion Cost
Units transferred to next department 190,000 190,000
Work in process, April 30 30,000 24,000
Work in process, April 1 (WDLM) ( 27,000) ( 24,000)
Equivalent completed units 193,000 190,000
Costs P579,000 P248,900
Unit cost P 3.00 P 1.31
Total cost to be accounted for P925,000
Less cost of work in process ending:
Materials (30,000 x 3) P90,000
Conversion costs (24,000 x 1.31) 31,440 121,440
Cost of units finished and transferred out P803,560 A
28. Rogelio and Fernando establish a partnership to operate a used-furniture business under the
name of R & F Furniture. Rogelio contributes furniture that cost P90,000 and has a fair value of
P60,000. Fernando contributes P30,000 cash and delivery equipment that cost P30,000 and has
a fair value of P40,000. The partners agree to share profits and losses 40% to Rogelio and 60%
to Fernando.
Calculate the peso amount of inequity that will result if the initial noncash contributions of the
partners are recorded at cost rather than fair market value.
A. P40,000 B. P20,000 C. P18,000 D. P22,000
28) D
(30,000 – 40,000), capital under P 10,000
Effect of furniture on net income reported:
Over cost of sales or depreciation, thus
Understating capital 40:60 12,000 18,000
Effect of delivery equipment on net income reported
Understated depreciation, thus overstating
Net income 40:60 ( 4,000) ( 6,000)
Total inequity (P22,000) P22,000 D
29. On January 1, 2018, Ligaya and Tiyago formed the L & T Company with capital investments of
P500,000 and P312,500, respectively. The partners wanted to draft a profit and loss agreement
that would reward each individual for the resources invested in the partnership. Accordingly, the
partnership agreement provides that profits are to be allocated as follows:
1. Annual salaries of P43,750 and P68,750 are granted to Ligaya and Tiyago, respectively.
2. In addition to the salary, Ligaya is entitled to a bonus of 12% of net income after salaries
and bonus but before interest on capital investment is subtracted.
3. Each partner is to receive an interest credit of 3% on the original capital investment.
4. Remaining profits are to be allowed 40% to Ligaya and 60% to Tiyago.
On December 31, 2018, the partnership reported net income before salaries, interest, and bonus
of P162,500. Calculate the 2018 allocation of partnership income.
A. Ligaya, P72,214; Tiyago, P90,286 C. Ligaya, P70,648; Tiyago, P91,852
B. Ligaya, P80,700; Tiyago, P81,800 D. Ligaya, P65,000; Tiyago, P97,500
29) A
Ligaya Tiyago Total
Salaries P43,750 P68,750 P112,500
Bonus (162,500 – 112,500) x 12%/112% 5,357 5,357
Interest – 3% of initial capital 15,000 9,375 24,375
Balance 40:60 8,107 12,161 20,268
P72,214 P90,286 P162,500 A
30. The Descendants Partnership shows the following profit and loss ratios and capital balances:
Big Boss 60% P252,000
Beauty 30% 126,000
Myeong 10% 42,000
The partners decide to sell Jong 20 percent of their respective capital and profit and loss
interests for a total payment of P90,000. Jong will pay the money directly to the other partners.
What are the capital balances of the partners after Jong’s admission to the partnership?
Big Boss Beauty Myeong Jong
A. P198,000 P 99,000 P33,000 P90,000
B. P201,600 P100,800 P33,600 P84,000
C. P216,000 P108,000 P36,000 P90,000
D. P255,699 P127,800 P42,600 P84,000
30) B
Big Boss Beauty Myeong Jong
Capital balances P252,000 P126,000 P42,000
Transfer 20% to Jong ( 50,400) ( 25,200) ( 8,400) P84,000
Ending capital balances P201,600 P100,800 P33,600 P84,000 B

7-Eleven has three all-night grocery stores located in Sampaloc. Each store has a branch manager
with authority to accept inventory items at home office cost plus mark-up or to purchase from outside
wholesalers, at her discretion.
Inventories at December 31, 2018 were as follows:
Home office P 1,109,000 cost
P. Campa branch 264,000 transfer price
España branch 297,000 transfer price
R. Papa branch 462,000 transfer price
Partial trial balance information for 7-Eleven and its branches at December 31, 2018 includes the
following accounts and amounts:
Home P. Campa España R. Papa
office branch branch branch
Inventories, January 1, 2018 P 609,000 P 374,000 P 330,000 P 187,000
Purchases 10,000,000
Shipments from home office 3,300,000 2,750,000 4,400,000
Unrealized profit in branch inventories 1,031,000
Shipments to P. Campa branch 3,000,000
Shipments to España branch 2,500,000
Shipments to R. Papa branch 4,000,000
31. Determine the total realized profit in branch inventories for 2018.
A. P938,000 B. P93,000 C. P1,031,000 D. P838,000
Total unrealized profit per home office books P1,031,000

Less unrealized profit on ending inventories of branches:
P. Campa branch (264,000 x 10%/110%) P24,000
España branch (297,000 x 10%/110%) 27,000
R. Papa branch (462,000 x 10%/110%) 42,000 ( 93,000)
Realized profit on branch inventories sold P 938,000 A
Mark-up rate:
Shipments from home office per P. Campa branch P3,300,000
Shipments to P. Campa branch per home office 3,000,000
Mark-up P 300,000
Mark-up rate (300,000/3,000,000) = 10% of cost.
32. Determine the correct value of 7-Eleven inventory at December 31, 2018.
A. P930,000 B. P2,039,000 C. P1,938,000 D. P1,419,000
Correct ending inventory of 7-Eleven as of December 31, 2018:

Home office P1,109,000
P. Campa branch (264,000/110%) 240,000
San Fernanco branch (297,000/110%) 270,000
R. Papa branch (462,000/110%) 420,000 P2,039,000 B

On December 31, 2018, R Company acquired all the net assets of W Company through an exchange
of common stock. R is to issue two shares of its common stock for each of the common shares of W.
The common stock of R has an established market value of P35 per share. The financial statements
of each of the companies immediately prior to the business combination on December 31, 2018, the
last date of their fiscal year, are presented below; the balance sheet for W shows fair values as well
as book values.
R Company W Company
Income statement
Sales P40,000 P15,000
Gross margin 28,000 11,000
Net income P20,000 P 6,000
W Company
R Company Book value Fair value
Balance sheets
Cash P 3,500 P 500 P 500
Inventories 7,500 2,500 3,100
Plant and equipment 70,000 22,500 30,000
Accumulated depreciation ( 14,000) ( 7,000) (12,000)
Patents 20,000 8,000 11,000
Total assets P87,000 P26,000 P32,600
Excess over par 1,200 1,000
Total liabilities and SHE P87,000 P26,000
a. R incurred the following costs associated with the combination; these costs have been
paid by R but not yet recorded.
Finder’s and consultants’ fees P 1,900
Cost to register securities with the SEC 1,100
b. The combination is to be treated as a statutory merger with W liquidating and R assuming the
liabilities of W.
33. In the income statement of R Corporation prepared immediately after the business combination,
how much is the total net income?
A. P20,000 B. P26,000 C. P23,000 D. P24,900
33) A
The net income of R Company immediately after the business combination must be equal to the reported
net income of R because there is no combined operations yet. The answer must be
P20,000.
34. Determine the goodwill resulting from the business combination.

A. P2,900 B. P4,800 C. P5,900 D. P0
34) B
Cost of investment:
Fair value of stocks issued (9,000/20 x 2 shares x P35) P31,500
Finders and consultant’s fees 1,900
Total P33,400
Fair value of net assets of W Company (32,600 – 4,000) 28,600
Goodwill P 4,800 B

REH Company acquired a majority interest in MFT Company on 1/1/x1 by issuing 500,000 shares
of P2 par, common stock (current market price – P10 per share) for MFT Company shares. Treat
each of the two situations below as independent cases, and select the best answer.
35. Assume that REH Company guaranteed that if the market price of its shares fell below P10 per
share at the end of one year, it would issue additional shares to restore the total market value of
the consideration given to P5 million. Further assume that the market price at the end of the year
was P5 per share and that REH Company issued an additional 500,000 shares to meet its
obligation. Issuance of the additional 500,000 shares would be recorded by REH Company:
A. Investment in MFT Company 2,500,000
Capital Stock 1,000,000
Additional paid-in capital 1,500,000
B. Investment in MFT Company 5,000,000
C. Goodwill 2,500,000
D. Additional paid-in capital 1,000,000
Capital stock 1,000,000
35) D
Contingent consideration pertaining to decrease in market value of shares issued in a business combination if
materialized must be recorded as decrease in additional paid-in capital, therefore the entry to record the
issuance of additional shares must be:
Additional paid-in capital (500,000 x 5) 2,500,000
Capital stock (500,000 x 2) 1,000,000
Additional paid-in capital (500,000 x 3) 1,500,000
OR
Capital stock 1,000,000 D
36. Assume that REH Company guaranteed that it would issue additional shares worth P1 million (at
12/31/x1 market prices) if MFT Company’s earnings for 20x1 exceed a specific amount. Further
assume that the condition was satisfied and REH Company issued 50,000 additional shares (at a
12/31/x1 market price of P20 per share). Issuance of the additional 50,000 shares at 12/31/x1
would be recorded by REH Company
A. Investment in MFT Company 1,000,000
Capital Stock 100,000
Additional paid-in capital 800,000
B. Investment in MFT Company 500,000
C. Additional paid-in capital 1,000,000
D. Some other entry would be made.
36) D
Contingent consideration pertaining to increase in the earning potential of the acquired company in a business
combination if materialized must be charged to goodwill, therefore the entry to record the issuance of
additional shares must be:
Goodwill (50,000 x 20) 1,000,000
Capital stock (50,000 x 2) 100,000
Additional paid-in capital (50,000 x 18) 900,000 D
37. ACER Corporation applies overhead on the basis of machine hours. Budget and actual data for
direct labor hours, machine hours, and overhead for 2018 are as follows:
Budget Actual
Direct labor hours 20,000 19,600
Machine hours 50,000 48,000
Factory overhead costs P400,000 P389,000
Compute the overapplied or underapplied factory overhead for 2018.

A. P5,000 underapplied C. P3,000 underapplied
B. P5,000 overapplied D. P3,000 overapplied.
37) A
Actual overhead incurred P389,000
Applied overhead:
Actual machine hours 48,000
Overhead rate = 400,000/50,000 x 8 384,000
Underapplied overhead P 5,000 A

The following information were taken from the records of Gold Manufacturing Corporation.
Units Costs
Work in process inventory (50% complete) 300,000 P 660,960
Finished goods inventory 200,000 1,009,800
Materials are added to production at the beginning of the manufacturing process and overhead is
applied to each product at the rate of 60% of direct labor costs. There was no finished goods
inventory on Jan. 1. A review of Gold inventory cost records disclosed the following information:
Units Materials Labor
Work in process, January 1 (80% complete) 200,000 P 200,000 P 315,000
Units started - production 1,000,000
materials costs 1,300,000
labor costs 1,995,000
Units completed 900,000
38. Using weighted average method, the correct cost assigned to the 300,000 units in the ending work
in process inventory is
A. P900,000 B. P875,000 C. P918,000 D. P903,000
38) D
Materials Conversion Costs
In process, end 300,000 150,000
Equivalent production – WA 1,200,000 1,050,000
Costs P1,500,000 P3,696,000
Unit costs P1.25 P3.52
Cost of work in process, end:
Materials (300,000 x 1.25) P375,000
Conversion costs (150,000 x 3.52) 528,000 P903,000 D
Conversion costs: Direct labor (315,000 + 1,995,000) P2,310,000

Manufacturing overhead applied (60% x 2,310,000) 1,386,000
Total P3,696,000
39. The cost assigned to the 200,000 units finished goods inventory ending under the FIFO method is
(round off unit cost to four decimal places):
A. P 948,450 B. P1,009,800 C. P954,000 D. P1,154,667
39) A
Materials Conversion Costs
In process, end 300,000 150,000
In process, beginning (WDLM) ( 200,000) ( 160,000)
Equivalent production (FIFO) 1,000,000 890,000 Beginning WIP Total
Costs P1,300,000 P3,192,000 + P704,000 = P5,196,000
Unit costs P1.30 P3.5865
Cost accounting:
Work in process end:
Materials (300,000 x 1.30) P390,000
Conversion costs (150,000 x 3.5865) 537,975 ( 927,975)
Cost of finished goods = 900,000 units P4,268,025
Answer: Cost of 200,000 units finished goods ending:
200,000/900,000 x 4,268,025 = P948,450 A
40. Farrah and Sarah each operate local French fry shops. Farrah’s place is called AutoFries and is
highly automated. Farrah pours potatoes into one end of an expensive machine, and fries come out
at the other end. Farrah’s costs are P10,000 per month plus P0.10 per box of fine fries.
Sarah’s place is called Human Touch Fries. Sarah uses manual peelers and frypersons. Sarah’s
costs are P2,000 per month plus P0.30 per box of fine fries.
At what volume of boxes would the cost per box be the same for both?
A. 10,000 B. 20,000 C. 30,000 D. 40,000
40) D
Let X = the number of boxes,
Farrah’s operating cost must be = P10,000 + P0.10(X)
Sarah’s operating cost must be = P2,000 + P0.30(X)
Therefore;
P10,000 + P0.10(x) = P2,000 + P0.30(X)
P10,000 – P2,000 = P0.30X – P0.10X
P8,000 = P0.20X
P8,000/P0.20 = X
40,000 = X D
41. The Minesky Shop Inc. keeps accounting and cost records on a personal computer. During the
month of January, data were lost as a result of errors made by a new operator. Fortunately, some
data were retrieved and are set forth as follows:
A) The debit balance in the Payroll account was P130,000. This balance included P20,000 in
indirect labor that was charged to the Factory Overhead account.
B) The debit balance in the Factory Overhead account totaled P166,000. This balance
included the indirect labor amount in (a).
C) Factory overhead is applied to the products at 150 percent of direct labor cost.
D) The Work in Process account showed a January 1 balance of P91,000. Materials
requisitioned and charged to Work in Process during the period amounted to P98,000.
The balance in Work in Process on January 31, was P82,000.
E) The Finished Goods balance at January 1 was P48,000.
F) Cost of Goods Sold had a debit balance of P389,000. This amount did not included
underapplied or overapplied factory overhead.
Determine the finished goods ending inventory.

A. P 41,000 B. P 72,000 C. P91,000 D. P7,000
41) A
Direct materials used P 98,000
Direct labor (P130,000 – P20,000) 110,000
Factory overhead applied (150% x 110,000) 165,000
Manufacturing costs P373,000
Add: Work in Process, January 1 91,000
Less: Work in Process, December 31 ( 82,000)
Cost of goods manufactured P382,000
Add: Finished goods, January 1 48,000
Less: Cost of goods sold ( 389,000)
Finished goods, December 31 P 41,000 A
42. Iron Man Company manufactures a type of tubular steel furniture. The tubing that is used to
produce the furniture is purchased from Jack Distributors. Jack Distributors is not a manufacturer.
Jack buys tubes of steel and resells to customers without doing any work to convert the tubes to
other forms.
Jack had no inventory on hand at the beginning of the year. During the year, the distributor
purchased tubing at a cost of P380,000. The costs per unit remained the same through the year.
Tubing with a cost of P310,000 was sold during the year. Operating costs of sales and office
salaries, advertising, taxes and insurance, rent, heat and light, and telephone in aggregate
amounted to P65,000 and were period costs for the year. Sales revenue was P435,000.
Iron Man Company had no inventory of materials at the beginning of the year. Tubing having a
cost of P175,000 was purchased from Errol Distributors. Other materials costing P275,000 were
also purchased. At the end of the year, Iron Man company counted materials inventory and
assigned a cost of P50,000 to this inventory.
During the year, Iron Man operated at a normal capacity of 80,000 product units. Labor cost of
manufacturing was P240,000. Various other costs of manufacturing, such as plant supervision,
factory taxes and insurance, factory heat and light, and factory telephone, amounted to P120,000.
Iron Man Company also incurred selling and administrative expenses for the period, such as
sales and office salaries, advertising, rent, taxes and insurance, and telephone. These operating
expenses for the year amounted to P130,000. During the year, 75,000 units of furniture were sold
for P900,000. There was no inventory of partially completed or completed furniture on hand at the
beginning of the year.
Determine the net income reported by Iron Man Company.
A. P8,654 B. P117,500 C. P57,500 D. P10,000
42) C
Sales P900,000
Less: Cost of sales:
Direct materials used:
Purchases (P175,000 + P275,000) P450,000
Less: Materials, ending ( 50,000)
P400,000
Direct labor 240,000
Manufacturing overhead 120,000
Cost of goods manufactured P760,000
Cost of sales = 75,000/80,000 x P760,000 712,500
Gross profit ` P187,500
Less: Operating expenses 130,000
Net income P 57,500 C
43. Kim is the supervisor of Department 5 in the Davao plant of JAC Instrument Company. She is
responsible for the cost of direct materials, direct labor, and variable overhead costs incurred in
this department. The fixed overhead cost is not under her jurisdiction.
During a recent week, actual factory overhead costs for Department 5 were as follows:
Actual Variable Overhead:
Indirect materials P19,400
Supplies 14,200
Telephone 700
Heat and light 1,600
Power 7,000
Repairs and maintenance 3,200
Total variable overhead P 46,100
Actual Fixed Overhead:
Indirect labor P61,000
Supervision 42,000
Heat & light 7,000
Repairs & maintenance 9,000
Depreciation 21,000
Total fixed overhead 140,000
Total actual overhead P186,100
The department operated at 45,000 direct labor hours during the week. A budget of factory
overhead for 45,000 direct labor hours is as follows:
Budgeted Variable Overhead:

Indirect materials P16,500
Supplies 12,400
Telephone 700
Heat & light 1,550
Power 7,000
Total variable overhead P 40,500
Budgeted Fixed Overhead:
Indirect labor P61,000
Supervision 42,000
Heat & light 7,000
Depreciation 21,000
Total fixed overhead 140,000
Total budgeted overhead P180,500
Variable overhead is costed to the products at the rate of 0.90 per direct labor hour, and fixed
overhead is costed to the products at the rate of 2.80 per direct labor hour.
What is the normal capacity?

A. 48,000 hours B. 45,000 hours C. 50,000 hours D. 52,000 hours
43) C
Total budgeted fixed overhead P140,000
 P2.80/direct labor hour
Normal capacity 50,000 hours C

Silver Company, a manufacturer of fiber optic communications equipment, uses a job-order costing
system. Since the production process is heavily automated, manufacturing overhead is applied on
the basis of machine hours using a predetermined overhead rate. The current annual rate of P15 per
machine hour is based on budgeted manufacturing overhead costs of P1,200,000 and a budgeted
activity level of 80,000 machine hours. Operations for year 2019 have been completed, and all of the
accounting entries have been made for the year except the application of manufacturing overhead to
the jobs worked on during December, the transfer of costs from Work in Process to Finished Goods
for the jobs completed in December, and the transfer of costs from Finished Goods to Cost of Goods
Sold for the jobs that have been sold during December. Summarized data as of November 30, 2019
and for December 2019 are presented in the following table. Jobs T11-007, N11-013, and N11-015
were completed during December. All completed jobs except Job N11-013 have been turned over to
customers by the close of business on December 31, 2019.
Work in Process December 2019 Activity
Balance Direct Direct Machine
Job No. 11/30/19 Material Labor Hours
T11-007 P 87,000 P 1,500 P 4,500 300
N11-013 55,000 4,000 12,000 1,000
N11-015 -0- 25,600 26,700 1,400
D12-002 -0- 37,900 20,000 2,500
D12-003 -0- 26,000 16,800 800
Total P142,000 P95,000 P80,000 6,000
Activity through December 2019
Operating Activity 11/30/19 Activity
Actual manufacturing overhead:
Indirect material P125,000 P 9,000
Indirect labor 345,000 30,000
Utilities 245,000 22,000
Depreciation 385,000 35,000
Total overhead P1,100,000 P96,000
Other items:
Raw material purchases * P965,000 P98,000
Direct-labor costs P845,000 P80,000
Machine hours 73,000 6,000
Account Balances at Beginning of Year: 1/1/19
Raw material inventory* P105,000
Work in process inventory 60,000
Finished goods inventory 125,000
* Raw material purchases and raw material inventory consist of both direct and indirect materials.
The balance of the Raw Materials Inventory account as of December 31, 2019 is P85,000.
44. Determine the amount charged to cost of sales during December 2019.
A. P256,800 B. P170,800 C. P407,000 d. P295,800
44) B
Cost of sales:
Job T11-007:
Beginning balance cost P87,000
Add: Direct materials, December 1,500
Direct labor, December 4,500
Applied overhead (300 x 15) 4,500 P 97,500
Job N11-015:
Direct materials, December P25,600
Direct labor, December 26,700
Applied overhead (1,400 x 15) 21,000 73,300
Cost of sales, December P170,800 B
45. Determine the value of work in process inventory at December 31, 2019.
A. P150,200 B. P210,200 C. P236,200 D. P 104,000
45) A
Work in process, inventory end: Job
D12-002
Direct materials P37,900
Direct labor 20,000
Applied overhead (2,500 x 15) 37,500 P 95,400
Job D12-003
Direct materials P26,000
Direct labor 16,800
Applied overhead (800 x 15) 12,000 54,800
P150,200 A
46. In manufacturing roller blades, Diamond Company’s plant used 400 direct labor hours, 500
machine hours, and 20 setups. The following overhead costs were taken from the factory
accounts.
Overhead Expenses Volume of activities
Machining center P120,000 20,000 machine hours
Setup center 40,000 100 setups
Total expenses P160,000 4,000 direct labor hours
The plant was using a factory-wide overhead rate based on direct labor hours. A new ABC
system will use machine hours in the Machining Department and number of setups in the Setup
Department as cost drivers.
By what amount would the overhead costs assigned to roller blades differ between the prior
system and the ABC system?
A. P11,000 B. P16,000 C. P5,000 D. P26,000
46) C
Traditional system:
Overhead rate = P160,000/4,000 direct labor hours = P40 per hour
ABC system:
Overhead rate: Machining center = P120,000/20,000 machine hours = P6 per hour
Setup center = P40,000/100 setups = P400 per set up
Overhead applied:
Traditional system = P40 x 400 direct labor hours = P16,000
ABC system:
Machining center = P6 x 500 machine horus = P3,000
Setup center = P400 x 20 setups = 8,000 11,000
Difference P 5,000 C

Pilot Company makes a chemical spray that goes through two processes. Data for February are as
follows:
Mixing Dept Boiling Dept.
Gallons transferred to Boiling Department 75,000
Gallons transferred to finished goods 68,000
Gallons on hand at the end of month 9,000 15,000
Percent complete:
Prior department costs - 100%
Materials 100% -
Labor and overhead 60% 40%
Costs incurred during February:
Materials P184,800 -
Labor and overhead 321,600 P259,000
Beginning inventories:
Gallons 8,000 8,000
Costs:
Materials P16,800 -
Prior department costs - P 63,500
Labor and overhead P40,200 P 22,200
47. Determine the costs transferred out from Mixing Department to Boiling
Department. A. P563,400 B. P506,400 C. P517,500
D. P449,400
47) C
Mixing Department:
Materials Labor & Overhead
Finished and transferred to Boiling Dept. 75,000 75,000
In process, end 9,000 5,400
Equivalent production 84,000 80,400
Costs P201,600 P361,800
Unit costs P 2.40 P 4.50
Costs transferred out to Boiling Department (75,000 x 6.90) P517,500 C
48. Determine the work in process ending inventory of Pilot Company.

A. P173,700 B. P45,900 C. P127,800 D. P81,900
48) A
Boiling Department:
Transferred In Labor & Overhead
In process, end 15,000 6,000
Equivalent units 83,000 74,000
Costs P581,000 P281,200
Total work in process ending inventory of Pilot Company:

Mixing Department:
Materials (9,000 x 2.40) P21,600
Labor & Overhead (5,400 x 4.50) 24,300 P 45,900
Boiling Department:
Prior department costs (15,000 x 7) P105,000
Labor & Overhead (6,000 x 3.80) 22,800 127,800
P173,700 A

DOS DESEÑOS Manufacturing Company produces a wood refinishing kit that sells for P179.50. The
final processing of the kits occurs in the Packaging Department. A quilted wrap is applied at the
beginning of the packaging process. A compartmented outside box printed with instructions and the
company’s name and logo is added when units are 60 percent through the process. Conversion
costs, consisting of direct labor and applied overhead, occur evenly throughout the packaging
process. Conversion activities after the addition of the box involve package sealing, testing for
leakage, and final inspection. The following data pertain to the activities of the Packaging Department
during the month of October.
 Beginning work in process inventory was 10,000 units, 40 percent complete as to
conversion.
 40,000 units were transferred to Packaging during October.
 There were 10,000 units in ending work in process, 80 percent complete as to
conversion.
The Packaging Department’s October costs were as follows:
Quilted wrap P800,000
Outside boxes 500,000
Direct labor 220,000
Applied overhead (P30.00 per direct labor hr) 660,000
The costs transferred in from prior processing were P30.00 per unit. The cost of goods sold for the
month was P2,400,000, and the ending finished goods inventory was P840,000. DOS DESEÑOS
uses the first-in, first-out (FIFO) method for inventory valuation and for process costing.
49. Determine the cost of ending work in process inventory.

A. P620,000 B. P760,000 C. P840,000 D. P785,000
49) B
Transferred In Quilted Wrap Outside Boxes Labor & Overhead

Finished goods 40,000 40,000 40,000 40,000
In process, end 10,000 10,000 10,000 8,000
In process, beg (WDLM) (10,000) (10,000) - ( 4,000)
Equivalent units 40,000 40,000 50,000 44,000
Costs P1,200,000 P800,000 P500,000 P880,000
Unit costs P 30.00 P 20.00 P 10.00 P 20.00
Cost accounting:
Work in process, ending inventory:
Transferred in = 10,000 x 30 P300,000
Quilted wrap = 10,000 x 20 200,000
Outside boxes = 10,000 x 10 100,000
Labor & overhead = 8,000 x 20 160,000 P760,000 B
50. Determine the cost of finished goods beginning inventory. (Ignore cost of Beginning WIP inventory)
A. P760,000 B. P785,000 C. P620,000 D. P840,000
50) C
Cost of goods sold P2,400,000
Add: Finished goods inventory ending 840,000
Available for sale P3,240,000
Less: Cost of goods manufactured:
Total costs to be accounted for:
Transferred-in costs P1,200,000
Quilted wrap 800,000
Outside boxes 500,000
Labor & overhead 880,000
Total P3,380,000
Less: Work in process, end ( 760,000) 2,620,000
Finished goods, beginning inventory P 620,000 C
51. The Loreal Company manufactures hair rinses and colourings. Direct materials are introduced into
production at the 50% stage of completion in Department A. Direct labor and factory overhead are
incurred evenly throughout the process. Because of the timing of certain chemical processes, units
are often at different stages of completion.
Management uses the fifo costing method in an effort to analyze costs.
Beginning units in process in Department A for May were at the following stages of completion.
40% of the units were 10% complete.
Beginning units in process amounted to 26,000 units, with a total costs of P37,700.
During May, 68,000 units were started in process. The following costs were incurred: direct
materials, P47,092; direct labor, P34,658; and factory overhead, P51,987.
Ending units in process for May amounted to 6,000 units. They were at the following stages of
completion:
There were no spoiled units during the month.
Determine the cost of goods finished and transferred out.

A. P130,565.25 B. P168,082.25 C. P133,737 D. P171,437
51) B
In process, beginning 26,000 units
Started in process 68,000
In process, ending ( 6,000)
Finished and transferred out 88,000 units
Materials Labor & Overhead
Finished and transferred out 88,000 88,000
In process, end
6,000 x 35% x 25% - 525
6,000 x 50% x 45% - 1,350
6,000 x 10% x 75% 600 450
6,000 x 5% x 95% 300 285
In process, beginning (WDLM)
26,000 x 40% x 10% - ( 1,040)
26,000 x 15% x 40% - ( 1,560)
26,000 x 20% x 55% ( 5,200) ( 2,860)
26,000 x 25% x 70% ( 6,500) ( 4,550)
Equivalent units 77,200 80,600
Costs P 47,092 P 86,645
Cost of goods finished and transferred out:

Beginning work in process, cost P 37,700
Cost this month: Materials 47,092
Labor and Overhead 86,645
Total cost to be accounted for P171,237
Less: Work in process, ending:
Materials (900 x 0.61 P 549
Labor & Overhead (2,610 x 1.075) 2,805.75 3,354.75
P168,082.25 B
52. SMDC Construction Company entered into two construction jobs which both commenced in 2018
(in thousands).
Project 1 Project 2
Contract Price P 52,500 P 37,500
Costs incurred during 2018 30,000 35,000
Estimated Cost to Complete 15,000 8,700
General and administrative
Billings for clients during 2018 31,500 30,000
Collections during 2018 28,000 25,000
Based on the information given, how much is the gross profit would SMDC Construction report in
its 2018 income statement?
Percentage of completion Zero profit
A. (6,200,000) (1,200,000)
B. 5,000,000 (6,200,000)
C. (1,200,000) (6,200,000)
D. 1,300,000 (1,200,000)
52) C
Percentage of completion method:
Project 1: 30,000/45,000 = 66,67% x (52,500,000 – 45,000,000) = 5,000,000
Project 2: 37,500,000 – 35,000,000 – 8,700,000 = (6,200,000)
Total 1,200,000
*Zero profit method will only recognized gross profit upon completion but losses will be recognized
immediately in profit or loss.
53. JKL Company recognizes construction revenue and expenses using the percentage of completion
method. During 2018, a single long term project was begun which continued through 2019.
Information on the project was as follows:
2018 2019
Accounts receivable from construction P 200,000 P 600,000
contract
Construction expense 210,000 384,000
Construction in progress 244,000 728,000
Partial billings on contrast 200,000 840,000
The profit recognize from the long term construction contract should amount
to 2018 2019
A. P 44,000 P 456,000
B. P 44,000 P 200,000
C. P 34,000 P 256,000
D. P 34,000 P 100,000
54. On January 1, 2020, the Department of Agriculture (DA) received a P10,000,000 appropriation
from the national government for the acquisition of construction machinery. On February 1, 2020,
DA received the allotment from the Department of Budget and Management. On March 1, 2020,
DA entered into a contract with Entity A for the acquisition of the machinery with a price of
P8,000,000. On April 1, 2020, DA received the Notice of Cash Allocation from Department of
Budget and Management net of 1% withholding tax for income tax supplier and 5% withholding of
Final Tax on VAT of supplier. On May 1, 2020, Entity A delivered the machinery to DA. On June 1,
2020, DA paid the obligation to Entity A. on July 1, 2020, DA remitted the withheld income tax and
final VAT at BIR.
What is the journal entry on July 1, 2020?

A. Debit Cash – MDS, Regularly P7,520,000 and Credit Subsidy Income from National
Government P7,520,000
B. Debit Machinery P8,000,000 and Credit Accounts Payable P8,000,000
C. Debit Accounts Payable P8,000,000 and Credit Due to BIR P480,000 and Cash – MDS, Regular
P7,520,000
D. Debit Due to BIR P480,000 and Credit Subsidy Income from National Government P480,000.
55. Which of the following statements is TRUE?

A. A term endowment fund and board designated funds are classified as unrestricted and temporary
restricted funds respectively.
B. In the Statement of Cash Flow, all types of contributions/donations that are unrestricted will be
classified as operating activity and contributions/donations that are restricted will be classified as
financing activity.
C. A not for profit organization receives P12,500 from a donor. The donor receives two tickets to a
theatre show and an acknowledgement in the theatre program. The tickets have a far value of
P8,750. The amount recorded as contribution revenues is P12,500.
D. In 2018, the Board of Trustee of Kalinga Foundation designated an amount of P175,000 of its
current funds for college scholarships. Also in 2018, the foundation received a bequest of P225,000
from an estate of a benefactor who specified that the bequest was to be used for hiring teachers to
tutor handicapped students. The amount of P225,000 should be accounted for in the current
restricted fund
ADVANCED FINANCIAL ACCOUNTING and REPORTING
Average
1.Assume that C has a P50,000 equity in the partnership of “A, B, and C.” Partner C arranges to sell his entire
interest to D for P80,000 Cash. Partners A and B agree to the admission of D. At what amount will the equity
of the incoming partner, D, be shown in the balance sheet?
A. at P50,000.
B. at P50,000 and the P30,000 will be divided equally among the original partners.
C. at P80,000
D. at P80,000 and the P30,000 will represent Goodwill which will be apportioned between the existing
equities of A and B.
2.During 2018, Young and Zinc maintained average capital balances in their partnership of P160,000 and P100,000
respectively. The partners receive 10% interest on average capital balances, and residual profit or loss is
divided equally. Partnership profit before interest was P4,000. By what amount should Zinc’s capital account
change for the year?
a. P1,000 decrease. c. P11,000 decrease.
b. P2,000 increase. d. P12,000 increase.
3.VERDI, Inc. has several branches. Goods costing P10,000 were transferred by the head office to Cebu Branch
with the latter paying P600 for freight cost. Subsequently, the head office authorized Cebu Branch to transfer
the goods to Davao Branch for which the latter was billed for the P10,000 cost of the goods and freight charge
of P200 for the transfer. If the head office had shipped the goods directly to Davao Branch, the freight charge
would have been P700. The P100 difference in freight cost would be disposed of as follows:
a. Considered as savings. c. Charged to Davao Branch.
b. Charged to Cebu Branch. d. Charged to the Head Office.
4.Which represents the proper journal entry for a periodic inventory system that should be made on the books of the
home office when goods that cost the home office P100,000 to manufacture are shipped to a branch at a
transfer price of P125,000 and the billed price is not recorded in the shipments to branch account?
A. Branch office P100,000
Shipments to branch P100,000
B. Branch office P125,000
C. Branch office P125,000
Unrealized profit 25,000
D. Shipment to branch P100,000
Shipments from home office P125,000
5.Which represents the proper journal entry for a periodic inventory system that should be made on the books of the
branch when goods that cost the home office P100,000 to manufacture are shipped to the branch at a price of
P125,000?
A. Shipments from home office P100,000
Home office P100,000
B. Shipments from home office P125,000
Home office P125,000
C. Shipments from home office P125,000
Unrealized profit P 25,000
Home office 100,000
D. Shipments to branch P100,000
Shipments from home office P125,000
6. On January 1, 2018, Hood Company sold specialized computers costing P760,000 to Crater, Inc. for
P990,000. Hood Company’s technicians must complete the installation, and Hood Company’s trainers present
numerous training sessions for Crater’s employees during the installation period. Carter made a 50% down
payment, with the balance due upon completion of installation. How much revenue should Hood Company
recognize on its books on January 1, 2018?
a. P-0-
b. P760,000.
c. P495,000.
d. P990,000.
Page 91
Use the following information for questions 7 and 8.

In 2018, Fargo Corporation began construction work under a three-year contract. The contract price is P2,400,000. Fargo
uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is
based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement
presentations relating to this contract at December 31, 2018, follow:
Statement of Financial Position
Accounts receivable—construction contract billings P100,000
Construction in progress P300,000
Less contract billings 240,000
Costs and recognized profit in excess of billings 60,000
Income Statement
Income (before tax) on the contract recognized in 2018 P60,000
7.How much cash was collected in 2018 on this

contract? a. P100,000
b. P140,000
c. P20,000
d. P240,000
8.What was the initial estimated total income before tax on this
contract? a. P300,000
b. P320,000
c. P400,000
d. P480,000
9.On April 1, 2018 Weston, Inc. entered into a franchise agreement with a local business-man. The franchisee paid
P240,000 and gave a P160,000, 8%, 3-year note payable with interest due annually on March 31. Weston recorded
the P400,000 initial franchise fee as revenue on April 1, 2012. On December 30, 2018, the franchisee decided not to
open an outlet under Weston's name. Weston canceled the franchisee's note and refunded P128,000, less accrued
interest on the note, of the P240,000 paid on April 1. What entry should Weston make on December 30, 2018?
a. Loss on Repossessed Franchise......................................................... 128,000
Cash .......................................................................................... 128,000
b. Loss on Repossessed Franchise......................................................... 118,400
Cash .......................................................................................... 118,400
c. Loss on Repossessed Franchise......................................................... 278,400
Cash .......................................................................................... 118,400
Note Receivable............................................................................ 160,000
d. Revenue from Franchise Fees............................................................. 400,000
Interest Income.............................................................................. 9,600
Cash .......................................................................................... 118,400
Note Receivable............................................................................ 160,000
Revenue from Repossessed Franchise......................................... 112,000
10. On December 31, 2018, the home office of Berry Company recorded a shipment of merchandise to its Calamba
branch as follows:
Calamba branch 30,000
Shipment to Calamba branch 25,000
Unrealized profit in branch inventory 4,000
Cash (for freight charges) 1,000
The Calamba branch sells 40% of the merchandise to outside entities during the rest of December, 2018. The books of
the home office and Calamba branch are closed on December 31 of each year. At what amounts should the 60% of
the merchandise remaining unsold at December 31, 2018 should be included in the published statement of financial
position of Berry Company at December 31, 2018?
a. 15,600 b. 15,000 c. 18,000 d.18,600
End of Exams
ADVANCED FINANCIAL ACCOUNTING & REPORTING OCTOBER 2018 BATCH

1. The non-controlling interests shall be presented in the consolidated statement of financial position.
a. As part of the parent shareholder’s equity
b. Within equity, separately from the equity of the owners of the parent
c. As part of noncurrent liabilities
d. As part of current liabilities
2. In a Business combination, goodwill is measured as the excess of

a. The total of the consideration transferred, the amount of any non-controlling interest in the acquiree and
the fair value of previously held interest in the acquiree over the identifiable net assets acquired.
b. The consideration transferred over the identifiable net assets acquired.
c. The total of the consideration received and the fair value of the previously held interest in the acquiree
over the identifiable net assets acquired.
d. The total of the consideration transferred and the amount of any non-controlling interest in the acquiree
over the identifiable net assets acquired.
3. What is the initial measurement of an investment in subsidiary retained by the investor when control is lost?
a. Fair value at the beginning of the reporting period
b. Carrying amount at the date when control is lost
c. Carrying amount at the beginning of the reporting
period d. Fair value at the date when control is lost
4. It is a transaction or other event in which an acquirer obtains control of one or more

businesses. a. Business combination
b. Merger
c. Consolidation
d. Controlling interest
5. Control exist even if the parent owns half or less of the voting power of an entity where there is (choose
the incorrect one)
a. Power over more than half of the voting rights by virtue of a contractual agreement with other investors.
b. Power to govern the financial and operating policies of the entity under a
statue. c. Power to appoint or remove the employees of the entity.
d. Power to cast the majority of votes at meetings of the board of directors or equivalent governing body.
6. In a business combination, any “gain on bargain purchase”

shall a. Be recognized in profit or loss.
b. Be recognized in other comprehensive income.
c. Be recognized in retained earnings
d. Not be recognized.
7. Control is presumed to exist when the parent owns directly or indirectly through
subsidiaries a. More than half of the voting power of an entity.
b. More than half of the equity of an entity.
c. More than half of the ordinary shares of an entity.
d. More than half of the preference and ordinary shares of an entity.
8. This is defined as “the financial statements of a group in which the assets, liabilities, equity, income,
expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic unit”.
a. Consolidated financial statements
b. General purpose financial statements
c. Separate financial statements
d. Group financial statements
9. Which of the following is not a valid condition that will exempt an entity from preparing consolidated
financial statements?
a. The parent entity is a wholly owned subsidiary of another entity.
b. The parent entity’s debt or equity capital is not traded in the stock exchange.
c. The ultimate parent entity produces consolidated financial statements available for public use that
comply with PFRS.
d. The parent entity is in the process of filing its financial statements with a securities commission for
the purpose of issuing any class of instruments in a public market.
10. A “group” for consolidation purposes is

a. A parent and all its subsidiaries.
b. An entity that has one or more subsidiaries.
c. An entity, including an unincorporated entity such as partnership that is controlled by another entity.
d. An entity that obtains control over entities or businesses.
11. On June 30, 2012, Wendy Corporation issued 100,000 shares of its P20 par value common stock for the net
assets of Ben Company. The market value of Wendy’s common stock on June 30 was P36 per share. Wendy
paid a fee of P 100,000 to the broker who arranged this acquisition. Costs of SEC registration and issuance of the
equity securities to P 50,000.
Contingent consideration determined to be paid after acquisition amounts to P 120,000.
What amount should Wendy capitalize as the cost of acquiring Ben’s net assets?
a. P 3,720, 000 b. P 3,750,000 c. P 3,650,000 d. P 3,700, 000
12. Mila Company acquired all of Mark Corporation’s assets and liabilities on January 2, 2012, in a business
combination at that date, Mark reported assets with a book value of P 624,000 and liabilities of P 356,000. Mila
noted that Mark had P40, 000 of research and development costs on its books at the acquisition date that did not
appear to be of value. Mila also determined that patents developed by Mark had a fair value of P 120,000 but had
not been recorded by Mark. Except for building and equipment, Mila determined the fair value of all other assets
and liabilities reported by Mark approximated the recorded amounts. In recording the transfer of assets and
liabilities to its books, Mila recorded goodwill of P 93,000. Mila paid P 517,000 to acquire Mark’s assets and
liabilities
If the book value of Mark’s buildings and equipment was P 341,000 at the date of acquisition, what
was their fair value?
a. P 341,000
b. P 417,000
c. P 417,500
d. P 441,000
13. When Roxanne Company acquired Regine Company’s net assets by issuing its own capital stock, it had the
following expenditures:
Broker’s fee P 50,000
Pre-acquisition audit fee 40,000
Legal fees for merger agreement 47,000
Audit fee for SEC registration of stock issue 46,000
Printing of stock certificates 11,000
Under IFRS-3 (2009), the expenditures that should be debited to Additional Paid in Capital (APIC) account
is: A. P 0 b. P 46,000 c. P 57,000 d. P 137,000

Peter Corporation issued 120,000 shares of P10 par common stock with a fair value of P 2,550,000 for all the
outstanding stock of Mya Company. In addition, Peter incurred the following costs:
Professional fees to arrange the business combination P 27,000
Cost of SEC registration 12,000
Cost of printing and issuing stock certificates 3,000
Immediately before the business combination in which Mya Company was dissolved, Mya’s assets and equities
were as follows (in thousands)
Book value Fair value
Current assets P 1,000 P 1,100
Plant assets 1,500 2,200
Liabilities 300 300
Common stock 2,000
Retained earnings 200
14. Using the data above, how much additional paid in capital is recorded by
Peter? a. P 1,330,000
b. P 1,335,000
c. P 1,350,000
d. P 1,365,000
15. Using the data above, Peter should recognize expense

of a. P 12,000
b. P 15,000
c. P 27,000
d. P 32,000
16. Using the data above, the net increase (decrease) in the retained earnings of Peter
is a. (P 27, 000)
b. P 423,000
c. P 408,000
d. (P 42,000)
17. On May 31, 2012, Cecile Company has assets and liabilities with the following fair values:
Current assets P 180,000
Noncurrent assets 220,000
Liabilities 40,000
June 1, 2012, Rachel Corporation purchases the net assets of Cecil Company for P 310,000 cash
In the books of Rachel Corporation, the acquisition resulted in:
a. Negative goodwill of P 50,000
b. Income from acquisition of P 50,000
c. Reduction from current assets of P 50,000
d. Deduction from noncurrent assets of P 50,000
18. Diggle Corporation will issue common shares with a par value P10 for the net assets of Oliver Company. Diggle’s
common stock has a current market value of P40 per share. Oliver’s statement of financial position on the date of
acquisition follow
Current assets P 320,000
Property and equipment 880,000
Liabilities 400,000
Common stock, P5 par P 80,000
Additional paid in capital Retained earnings
320,00 400,000
0
Oliver’s current assets are appraised at P 400,000 and the property and equipment was also appraised at P
1,600,000. Its liabilities are fairly valued. Accordingly, Diggle Corporation issued shares of its common stock with a
total market value equal to that of Oliver’s net assets including goodwill.
To recognize goodwill of P 200,000, how many shares were to be issued by Diggle?
A. P 40,000 B. P 45,000 C. P 50,000 D. P 55,000
19. Pearl Corporation and Sammie Company agreed to combine their businesses, with Pearl Corporation as the
surviving entity. Pearl will issue 48,000 shares of its capital stock, with a par value of P100 per share, and a
fair market value of P175 per share. Pearl incurred the following additional acquisition related costs.
Professional fees P 120,000
Broker’s fees 80,000
Costs to register and issue stock 50,000
Before combination, their respective statement of financial position showed stockholder’s equity account as
follows:
Pearl Sammie
Capital stock P 7,200,000 P 3,600,000
Additional paid in capital 3,120,000 360,000
Retained earnings 6,000,000 2,040,000
The total stockholder’s equity of Pearl Corporation after the combination is

a. P 24,470,000
b. P 24,670,000
c. P 24,720,000
d. P 24,890,000
20. The stockholders equities of Melay Corporation and Jason Company at July 1, 2012 were as follows:
Melay Jason
Capital stock, P100 par P 15,000,000 P 8,000,000
Additional paid in capital 2,000,000 4,000,000
Retained earnings 6,000,000 3,000,000
On July 2, 2012, Melay issued 150,000 of its shares with a market value of P120 per share for the assets and
liabilities of Jason, and Jason was dissolved. On the sammiee day, Melay paid P 50,000 for professional fees and P
100,000 for SEC registration of equity securities.
After the combination, what is the total stockholders’ equity of Melay Corporation?
A. P 40,850 B. P 40,900,000 C. P 41,000,000 D. 41,150,000

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INTEGRATED REVIEW MAY 2020 BATCH

SECOND MONTHLY EXAMS AFAR

The following transactions occurred as a result of the liquidation process:

5. Which of the following statements about process costing system is incorrect?

ASSETS LIABILITIES & CAPITAL

Accounts payable P 135,000 P 240,000

Use the following to answer questions 13 – 14:

14. The cost of abnormal continuous losses is

16. In allocating variable costs to products,

Use the following to answer questions 19 – 20:

Use the following to answer questions 25 – 26

FIRST DRILL - AFAR MAY 2020 BATCH

ADVANCED FINANCIAL ACCOUNTING & REPORTING

Accounts payable P178,940 P243,650

As of February 28, 2020, the following transactions occurred:

A. Margarette, P13,000; Woody, P12,000 C. Margarette, P12,000; Woody, P13,000

Bell, capital P5 0,000Dennard, capital P14,000

Items 25 to 28 are based on the following:

Items 29 to 31 are based on the following:

Items 32 to 35 are based on the following:

Items 36 to 39 are based on the following:

Items 19 to 21 are based on the following information:

 Transaction cost related to business combination capitalized by Entity A as part of its

41.What is the goodwill or (gain on bargain purchase) as a result of business combination?

FIRST MONTHLY EXAM ADVANCED FINANCIAL ACCOUNTING &

Use the following for item nos. 27–28:

28. What is the construction-in-progress as of 2021?

Use the following for item nos. 29 – 30:

30. What is the estimated recovery of the partially secured creditors?

The consolidated income statement will show COGS of:

Cash P 74,000 Liabilities P 45,000

Cash P 200,000 Accounts payable P 100,000

By what amount is the COGS overstated

Items 16 to 18 are based on the following:

Items 21 and 22 are based on the following information:

Items 23 and 24 are based on the following information:

Accounts payable P 54,000 P 54,000 P 54,000

Items 31 and 33 are based on the following information:

Items 40 and 41 are based on the following:

The journal entry to record the franchise would be:

Home Office Branch

How much must be the adjusted balance of reciprocal accounts?

The effect of the above information will be:

Determine the share of Alfred on the July cash distribution.

62. What is the amount received by partially secured

63. What is the amount received by pure unsecured creditors without

ADVANCED FINANCIAL ACCOUNTING & REPORTING MAY 2019 BATCH

Items 1 and 2 are based on the following:

2. Determine the goodwill resulting from the business combination.

Items 3 and 5 are based on the following information:

3. How much is the Goodwill or Gain from Acquisition?

4. How much is the Total Retained Earnings after the acquisition?

5. How much is the Total Assets after the acquisition?

Items 6 and 8 are based on the following information:

SONY Corporation paid the following as a result of business combination:

6. How much is the result of the combination on January 1, 2019?

7. How much is the Combined total Assets?