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NAME: Date:
Professor: Section: Score:

ACCOUNTING FOR SPECIAL TRANSACTIONS

FINAL GRADING EXAMINATION

1. A and B agreed to form a partnership. The contributions of the partners are as follows:

A B
Cash 600,000
Inventory 20,000
Land 400,000
Equipment 50,000

Additional information:
 Half of the inventory is unpaid. The partnership agreed to assume the related accounts payable.
 The land has a fair value of ₱700,000 and is subject to a mortgage of ₱100,000. However, B agreed
to settle the mortgage personally.

How much are the adjusted capital contributions of A and B, respectively?

a. 670,000; 690,000 c. 670,000; 700,000
b. 660,000; 700,000 d. 670,000; 600,000

2. A and B formed a partnership. The following are their contributions:

A B
Cash 400,000 -
Accounts receivable 100,000 -
Equipment 700,000
Total 500,000 700,000

A, capital 500,000
B, capital 700,000
Total 500,000 700,000

Additional information:
 The accounts receivable includes a ₱30,000 account that is deemed uncollectible.
 The equipment is over-depreciated by ₱50,000. The equipment was obtained by B through
financing. The related loan payable has an unpaid balance of ₱250,000 which the partnership
assumes on repaying.

Which partner has the higher capital credit, and how much?
a. A, ₱470,000 c. A, ₱500,000
b. B, ₱500,000 d. B, ₱400,000
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3. Under the bonus method, the asset contribution of the partner receiving a bonus is debited
a. at fair value.
b. at an increased amount with a corresponding decrease to the other partners’ asset
contributions.
c. at a decreased amount with a corresponding increase to the other partners’ asset
contributions.
d. b or c, depending on which partner is receiving the bonus.

4. A and B formed a partnership. The partnership agreement stipulates the following:

 Annual salary allowances of ₱80,000 for A and ₱40,000 for B.
 The partners share in profits and losses equally.

The partnership earned profit of ₱100,000. How much is the share of B?

a. 70,000 c. 48,000
b. 30,000 d. 52,000

5. A and B formed a partnership. The partnership agreement stipulates the following:

 Annual salary allowances of ₱10,000 for A and ₱40,000 for B.
 Bonus to A of 10% of the profit after partner’s salaries but before bonus.
 The partners share profits and losses on a 60:40 ratio.

During the period the partnership incurred a loss of ₱20,000 before deduction for salaries. By what
amount did B’s capital account change?
a. Increased by ₱12,000 c. Increased by ₱32,000
b. Decreased by ₱12,000 d. Decreased by ₱32,000

6. A and B formed a partnership. The partnership agreement stipulates the following:

 Annual salary allowances of ₱10,000 for A and ₱40,000 for B.
 Bonus to A of 10% of the profit after partner’s salaries but before bonus and interest.
 Interest of 12% on the beginning capital balance of A.
 The partners share profits and losses on a 60:40 ratio.

During the period the partnership earned profit of ₱200,000 before deduction for salaries. B’s
beginning capital balance was ₱60,000. How much is the share of A in the profit?
a. 101,680 c. 110,820
b. 98,320 d. 96,720

7. A and B formed a partnership. The partnership agreement stipulates the following:

 First, A shall receive 2% of profit up to ₱200,000 and 5% over ₱200,000.
 Second, B shall receive 1% of the remaining profit over ₱200,000.
 Any remainder shall be shared equally.

During the year, the partnership earned profit of ₱500,000.

How much is the share of A in the profit?

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a. 258,095 c. 241,095
b. 268,885 d. 241,905

8. A, B and C formed a partnership. The partnership agreement stipulates the following:

 Annual salary allowances of ₱100,000 for A and ₱20,000 for B.
 10% interest on the beginning capital balance of C.
 The partners share in profits and losses on a 40:40:20 ratio.

The partnership earned profit of ₱500,000. C’s capital account had a beginning balance of
₱300,000. The difference between the amounts received by A and B is
a. 160,000. c. 80,000.
b. 240,000. d. 60,000.

9. A and B formed a partnership. The partnership agreement stipulates the following:

 Annual salary allowances of ₱80,000 for A and ₱40,000 for B.
 The partners share in profits and losses equally.

The partnership earned profit of ₱100,000 after salaries. How much is the share of B?
a. 70,000 c. 130,000
b. 30,000 d. 90,000

10. A and B formed a partnership. The partnership agreement stipulates the following:
 Monthly salary allowances of ₱10,000 for A and ₱4,000 for B. The salaries are recognized as
expenses.
 The partners share equally in profits and losses.

The partnership earned profit of ₱360,000. How much is the share of A?

a. 300,000 c. 148,000
b. 228,000 d. 128,000

11. A and B share equally in partnership profits and losses. During the year, A’s capital account has
a net increase of ₱50,000. Partner A made contributions of ₱10,000 and capital withdrawals of
₱60,000 during the year. How much was the partnership profit for the year?
a. 180,000 c. 210,000
b. 200,000 d. 480,000

12. A and B formed a partnership. The partnership agreement stipulates the following:
 Annual salary allowance of ₱100,000 for A, the managing partner.
 10% bonus to A after salaries but before deduction for the bonus.
 The partners share in profits and losses equally.

The share of A in the partnership profit during the period was ₱595,000, including a bonus of
₱90,000. How much was the share of B?
a. 386,000 c. 405,000
b. 398,000 d. 504,000
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Use the following information for the next eight questions:

The partners’ capital accounts in AB Partnership before the admission of a new partner are as
follows:

Capital accounts P/L ratios

A, Capital 200,000 60%
B, Capital 120,000 40%
320,000

13. C purchases 20% interest in the partnership from A for ₱120,000. How much is the capital
balance of A after the admission of C?
a. 133,333 c. 96,000
b. 24,000 d. 148,000

14. C purchases 20% interest in the partnership proportionately from A and B for ₱120,000. How
much is the gain or loss recorded in the partnership books?
a. 48,000 c. 60,000
b. 56,000 d. 0

15. Using the case in #14 above, how much is the total equity of the partnership after the admission
of C?
a. 320,000 c. 240,000
b. 440,000 d. 200,000

16. C acquires 20% interest in the partnership by investing ₱120,000 to the business. No bonus is
given to C. How much is the capital balance of A after the admission of C?
a. 200,000 c. 240,000
b. 264,000 d. 0

17. What is the P/L ratio of B after the admission of C?

a. 22% c. 32%
b. 28% d. 40%

18. Before the admission of C, B decides to retire. A acquires B’s interest for ₱180,000. How much is
the capital balance of A after the retirement of B?
a. 200,000 c. 280,000
b. 264,000 d. 320,000

19. Before the admission of C, B decides to retire. The partnership pays B ₱180,000 in settlement of
his partnership interest. How much is the capital balance of A after the retirement of B?
a. 200,000 c. 260,000
b. 140,000 d. 320,000

20. Using the case in #18 above, how much is the total equity of the partnership after the retirement
of B?
a. 320,000 c. 240,000
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b. 440,000 d. 500,000

21. A and B decided to liquidate their partnership business. The statement of financial position of
the business shows the following information:

Assets Liabilities A, Capital (50%) B, Capital (50%)

100,000 20,000 40,000 40,000

The partners were able to convert all assets into ₱90,000 cash. How much did B receive from the final
settlement of his interest?
a. 30,000 c. 28,000
b. 35,000 d. 36,667

22. A and B decided to liquidate their partnership business. The statement of financial position of
the business shows the following information:

Assets Liabilities A, Capital (50%) B, Capital (50%)

200,000 80,000 70,000 50,000

The partners were able to convert all assets into ₱180,000 cash. How much did A and B receive from
the final settlement of their interests, respectively?
a. 50,000; 50,000 c. 70,000; 30,000
b. 60,000; 40,000 d. 56,667; 43,333

23. Partners A, B and C decided to liquidate their partnership. A summary of the partnership’s
statement of financial position is shown below:

Cash 50,000
Noncash assets 1,200,000
Total 1,250,000

Accounts payable 100,000

Payable to A 50,000
A, Capital (40%) 400,000
B, Capital (40%) 450,000
C, Capital (20%) 250,000
Total 1,250,000

Three-fourths (3/4) of the noncash assets were sold for ₱920,000. The partnership paid ₱5,000
transaction costs on the sale. How much cash did C receive from the settlement of the partners’
interests?
a. 163,000 c. 193,000
b. 186,000 d. 206,000

24. Partners A, B and C decided to liquidate their partnership. A summary of the partnership’s
statement of financial position is shown below:
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Assets Liabilities Equity

Cash Noncash A (20%) B (30%) C (50%)
20,000 480,000 30,000 100,000 170,000 200,000

Half of the noncash assets were sold for ₱370,000. The partnership paid ₱2,000 liquidation expenses.
How much cash did B receive from the settlement of the partners’ interests?
a. 163,400 c. 139,600
b. 168,000 d. 136,400

Use the following information for the next three questions:

Partners A, B and C decided to liquidate their partnership. A summary of the partnership’s
statement of financial position is shown below:

Assets Liabilities Equity

Cash Noncash A (20%) B (30%) C (50%)
160,000 ? 90,000 200,000 370,000 480,000

All the noncash assets were sold for ₱870,000. The partnership paid ₱12,000 liquidation expenses.

25. How much is the carrying amount of the noncash assets?

a. 740,000 c. 980,000
b. 860,000 d. 1,020,000

26. How much is the loss on the sale of noncash assets, including the effect of liquidation expenses?
a. 98,000 c. 120,000
b. 112,000 d. 122,000

27. How much cash did A receive from the settlement of the partners’ interests?
a. 175,600 c. 149,600
b. 183,400 d. 128,400

28. Partners A, B and C decided to liquidate their partnership. A summary of the partnership’s
statement of financial position is shown below:

Assets Liabilities Equity

Cash Noncash A (20%) B (30%) C (50%)
20,000 480,000 30,000 100,000 170,000 200,000

One-third of the noncash assets were sold for ₱70,000. The partnership paid ₱8,000 liquidation
expenses. Partner C is insolvent. How much cash did A receive from the settlement of the partners’
interests?
a. 12,400 c. 13,600
b. 16,800 d. 12,800

Use the following information for the next two questions:

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Partners A, B and C decided to liquidate their partnership. A summary of the partnership’s

statement of financial position is shown below:

Cash 50,000
Noncash assets 1,200,000
Total 1,250,000

Accounts payable 100,000

Payable to A 50,000
A, Capital (50%) 540,000
B, Capital (30%) 360,000
C, Capital (20%) 200,000
Total 1,250,000

29. If a cash priority program is prepared, which partner is paid first and how much is the total
payments to that partner before all partners will share on the available cash based on their profit
or loss ratios?
a. A, ₱20,000 c. B, ₱96,000
b. B, ₱90,000 d. B, ₱60,000

30. Three-fourths (3/4) of the noncash assets were sold for ₱920,000. The partnership paid ₱5,000
transaction costs on the sale. How much cash did A receive from the settlement of the partners’
interests under the cash priority program?
a. 447,500 c. 493,500
b. 386,500 d. 306,500

31. Bye-bye Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is

shown below:

Carrying
Net realizable values
ASSETS amounts
Cash 200,000 200,000
Accounts receivable 500,000 450,000
Equipment - net 600,000 150,000
Land 1,000,000 1,300,000
TOTAL ASSETS 2,300,000 2,100,000

LIABILITIES
Accounts payable 700,000 700,000
Salaries payable 800,000 800,000
Notes payable 500,000 500,000
Loan payable 750,000 750,000
Total liabilities 2,750,000 2,750,000

EQUITY
Share capital 1,000,000
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Deficit (1,450,000)
Capital deficiency (450,000)

TOTAL LIABILITIES & EQUITY 2,300,000

Additional information:
 Administrative expenses expected to be incurred during the liquidation process is ₱180,000.
 The equipment is pledged as collateral security for the notes payable.
 The land is pledged as collateral security for the loan payable.

Assuming all the assets were sold, and all the liabilities were settled, equal to their realizable values,
how much would Mr. A, an unsecured non-priority creditor, would expect to receive from his
₱500,000 claim from Bye-bye Corporation?
a. 98,312.24
b. 104,761.90
c. 130,912.34
d. 214,711,24

Use the following information for the next two questions:

A, B, and C formed a joint operation. The joint operators shall make initial contributions ₱40 each.
Profit and loss shall be divided equally. The following data relate to the joint operation’s
transactions:
A B C
Joint operation 32 Cr. 40 Cr. 48 Cr.
Expenses paid from JO cash 20 8 12
Value of inventory taken 20 24 16

32. How much is the joint operation’s sales?

a. 280
b. 40
c. 80
d. 76

33. How much is the cash settlement to B?

a. ₱80 receipt
b. ₱80 payment
c. ₱32 receipt
d. ₱76 receipt

Use the following information for the next two questions:

A, B and C formed a joint operation for the sale of assorted fruits during the Christmas season. Their
transactions during the two-month period are summarized below:

Joint operation
Nov. 5 Merchandise-A 8,500 Nov. 15 Cash sales-C 20,400
12 Merchandise-B 7,000 18 Cash sales-C 4,200
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14 Freight-in-C 200 30 Merchandise-B 1,210

Dec. 10 Purchases-C 3,500 Dec. 25 Unsold mdse. 540
charged to A
22 Selling expenses-C 550

The joint arrangement provided for the division of gains and losses among A, B and C in the ratio of
2:3:5. The joint operation is to close on December 31, 2008.

34. What is the joint operation profit?

a. (6,600) b. 6,600 c. 6,060 d. (6,060)

35. What is the amount of cash that A will receive on final settlement?
a. 9,280 b. 9,712 c. 8,500 d. 1,212

Use the following information for the next two questions:

A and B agreed on a joint operation to purchase and sell car accessories. They agreed to contribute
₱25,000 each to be used in purchasing the merchandise, share equally in any gain or loss, and record
their joint operation transactions in their individual books. After one year, they decided to terminate
the joint operation, and data from their records were:

A B
Joint operation 18,000 Cr. 20,200 Cr.
Expenses paid from JO cash 1,850 2,600
Value of inventory taken 1,000 1,800

36. How much is the joint operation sales?

a. 84,670 b. 88,450 c. 92,650 d. 93,350

37. How much is the joint operation profit?

a. 32,880 b. 34,650 c. 41,000 d. 42,750

38. LL, MM and NN formed a joint operation to purchase a piece of lot and to erect an apartment
building for sale. LL is to manage the joint operation; hence, he will receive a bonus of 10% of the
joint operation’s gain before deducting the bonus as an expense. Any remaining gain or loss is to
be divided equally among the participants. The joint operation is completed on August 31, 20x1.
On this date, the accounts of MM and NN show the following balances:
Books of
MM NN
Account with LL 16,000 Cr. 16,000 Cr.
Account with MM 32,000 Cr.
Account with NN 18,000 Dr.

There are unused constructions supplies which LL agreed to take over at its cost of ₱42,000.Final
settlement with the joint operators will require payments as follows:
a. LL pays NN ₱11, 200, and MM pays NN ₱14, 000.
b. LL pays NN ₱25, 600, and MM ₱14, 400.
c. LL pays MM ₱14, 400, and NN pays LL ₱30,800.
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d. LL pays MM ₱35,600, and NN pays LL ₱14,400.

39.The following are the transactions of a joint operation formed by A, B and C during a year:
a. A contributed cash of ₱100 and merchandise costing ₱200.
b. B contributed merchandise costing ₱400. Freight-in paid by B is ₱20.
c. C made purchases amounting to ₱100 using the cash contributed by A.
d. C paid expenses of ₱200 using its own cash.
e. C made total sales of ₱800. All the merchandise was sold except one-half of those contributed by
B.
f. C is appointed as the manager of the joint operation. As compensation, C is entitled to a ₱30
salary plus bonus of 25% on profit after salary and bonus.
g. Interest of 10% per annum is allowed to A and B’s capital contributions.
h. C is charged for the cost of any unsold inventory. Profit or loss after necessary adjustments shall
be divided equally.

How much is B’s cash settlement?

a. 34 receipt
b. 322 receipt
c. 454 payment
d. 454 receipt

40. At contract inception, PFRS 15 requires an entity to determine how the performance obligations
identified in the contract will be satisfied. According to PFRS 15, how does an entity satisfy a
performance obligation in a long-term construction contract?
a. over time c. dismissal time
b. at a point in time d. either a or b

41. Which of the following statements is correct?

a. Long-term construction contracts are unique from other contracts with customers. Therefore,
PFRS 15 excludes from its scope the accounting for long-term construction contracts.
b. Long-term construction contracts are unique from other contracts with customers. Therefore,
PFRS 15 requires an entity to recognize revenue from long-term construction contracts using
either the percentage of completion method or the zero-profit method.
c. PFRS 15 does not provide a special distinction between long-term construction contracts
from other contracts with customers. Therefore, an entity shall apply the same principles in
accounting for long-term construction contracts as those applied to other contracts with
customers.
d. PFRS 15 does not exclude long-term construction contracts from its scope. However, because
of the unique nature of long-term construction contracts, PFRS 15 requires an entity to
recognize revenue from a long-term construction contract that is expected to be completed
within 3 years or more using the percentage of completion method. For those that are
expected to be completed within a shorter period, revenue shall be recognized when
construction is complete.
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Use the following information for the next two questions:

PARAMOUR Co. was contracted by LOVER, Inc. for the construction of a flyover in 20x1. The
contract price is ₱10M. Information on costs is as follows:
20x1 20x2
Total costs incurred to date 1,600,000 6,000,000
Estimated costs to complete 6,400,000 1,500,000

42. How much revenue is recognized in 20x2?

a. 8M
b. 6M
c. 4M
d. 0

43. What is the percentage completed in 20x2?

a. 60% b. 50% c. 40% d. 16%

44. State the correct sequence of the following steps of revenue recognition under PFRS 15.
I. Determine the transaction price
II. Recognize revenue when (or as) the entity satisfies a performance obligation
III. Identify the performance obligations in the contract
IV. Allocate the transaction price to the performance obligations in the contract
V. Identify the contract with the customer

a. V, IV, II, I, III c. V, I, IV, III, II

b. V, III, I, IV, II d. V, I, III, IV, II

Use the following information for the next two questions:

On January 1, 20x1, Franchisor Co. enters into a contract with Franchisee Co. The franchise contract
gives Franchisee Co. the right to use Franchisor’s trade name and the right to sell Franchisor’s
products for a period of 4 years. The franchise requires payment of an upfront fee of ₱1,000,000,
payable at contract inception, and 5% of future sales of the products, payable at each month-end.

The franchise contract requires Franchisor Co. to undertake activities that would further improve its
brand and its products, to which Franchisee Co. has rights, by continuously undertaking research
and development projects and marketing and promotional activities. Although those activities do
not result in the transfer of a good or a service to Franchisee Co. as those activities occur, it is
expected that Franchisee Co. will benefit from those activities.

All of the necessary preparations were completed, and TIPPLE Co. started operations, on January
31, 20x1.

45. How should Franchisor Co. recognize revenue from the ₱1,000,000 initial franchise fee?
a. Recognize the ₱1,000,000 initial franchise fee as revenue in full on January 1, 20x1.
b. Recognize the ₱1,000,000 initial franchise fee as revenue in full on January 31, 20x1.
c. Recognize the ₱1,000,000 initial franchise fee as revenue throughout the license period.
d. Any of the above, as a matter of accounting policy choice.
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46. How should Franchisor Co. recognize revenue from the 5% of sales continuing franchise fee?
a. Franchisor Co. shall estimate the variable consideration and amortize it as revenue over the
license period.
b. Franchisor Co. shall estimate the variable consideration, subject the estimate to the
“Constraining estimates of variable consideration” principle of PFRS 15 and amortize it as
revenue over the license period.
c. Franchisor Co. shall discount the amount determined in Choice (b) above and amortize it as
revenue over the license period.
d. Franchisor Co. shall recognize revenue equal to 5% of Franchisee’s sales as and when those
sales occur.

47. ABC Co. produces a wide variety of frozen foods. Due to the faltering economy, ABC closed its
provincial sales outlets. Instead, ABC outsourced various distributors to sell its products. Each
distributor accepting delivery shall pay ABC 10% of the factory selling price of the goods
delivered and accepted. However, if the distributor fails to sell all of the goods accepted before
their expiration dates, ABC is obligated to repurchase the unsold goods. In June 20x1, ABC
delivered goods with total factory selling price of ₱10,000,000 to its distributors. ABC received
10% of the total factory selling price of the goods delivered. When should ABC recognize
revenue from the goods delivered?
a. When the goods are shipped to the distributor.
b. When the goods are sold to the ultimate customers.
c. When the distributor pays ABC Co.
d. When ABC received the 10% of the total factory selling price of the goods delivered.

48. Goods on consignment should be included in the inventory of

a. The consignee but not the consignor.
b. The consignor but not the consignee.
c. Both the consignor and consignee.
d. Neither the consignor nor the consignee.

49. Consignor Co. paid the in-transit insurance premium for consignment goods shipped to
Consignee Co. In addition, Consignor advanced part of the commission that will be due when
Consignee sells the goods. Should Consignor include the in-transit insurance premium and the
advanced commissions in inventory costs?
Insurance premium Advanced commission
a. Yes Yes
b. No No
c. Yes No
d. No Yes

50. Black Co., a consignee, paid the freight costs for goods shipped from White Co., a consignor.
These freight costs are to be deducted from Black’s payment to White when the consignment
goods are sold. Until Black sells the goods, the freight costs should be included in Black’s
a. Cost of goods sold c. Selling expenses
b. Freight-out costs d. Receivable
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51. X Ltd., a large manufacturer of cosmetics, sells merchandise to Y Ltd., a retailer, which in turn
sells the goods to the public at large through its chain of retail outlets. Y Ltd. purchases
merchandise from X Ltd. under a consignment contract. When should revenue from the sale of
merchandise to Y Ltd. Be recognized by X Ltd.?
a. When goods are delivered to Y Ltd.
b. When goods are sold by Y Ltd.
c. It will depend on the terms of delivery of the merchandise by X Ltd. to Y Ltd. (i.e., CIF [cost,
insurance, and freight] or FOB).
d. It will depend on the terms of payment between Y Ltd. and X Ltd. (i.e., cash or credit).

Use the following information for the next three questions:

Trumpet Co. consigned eight heavy machineries to Cold Breeze Co. Each machine costs ₱1,000,000
and has a suggested retail price of ₱2,100,000. Trumpet paid ₱200,000 in transporting the machines
to the consignee’s place of business. At the end of the period, Cold Breeze reported three unsold
machines and remitted the collections on sales during the period, after deducting the following:
Commission (based on sales net of commission) 20%
Finder’s fee (based on commission) 5%
Delivery, installation and testing (on each unit sold) ₱50,000

Materials generated from the testing were sold for ₱5,000 and included in the remittance to Trumpet
Co.

52. How much profit is earned by the consignor from the sale?
a. 3,292,500
b. 5,375,000
c. 1,025,000
d. 3,412,500

53. How much was the net remittance to the consignor?

a. 9,182,500
b. 8,417,500
c. 8,850,500
d. 7,891,500

54. How much is the cost of the unsold machineries?

a. 3,075,000
b. 2,987,000
c. 1,025,000
d. 1,000,000

55. HEARTY WARM & SINCERE Co. uses the “installment sales method.” Information on
HEARTY’s transactions during 20x1 and 20x2 is shown below:
20x1 20x2
Installment sales 4,000,000 4,800,000
Cost of sales 2,400,000 2,640,000
Gross profit 1,600,000 2,160,000
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Cash collections from:

20x1 sales 1,600,000 800,000
20x2 sales 1,920,000

How much is the realized gross profit in 20x2?

a. 1,484,000
b. 1,284,000
c. 1,184,000
d. 984,000

56. RIBALD OFFENSIVE Co. uses the installment method. On December 31, 20x3, RIBALD Co.’s
records show the following balances:
Deferred gross profit (before year-end adjustments) 2,252,000
Installment receivable - 20x2 960,000
Installment receivable - 20x3 2,400,000

Gross profit rate in 20x2 is 24% based on sales while gross profit rate in 20x3 is 33 1/3% based on cost.

How much is the realized gross profit in 20x3?

a. 982,600
b. 1,014,200
c. 1,291,600
d. 1,421,600

57. VISAGE APPEARANCE Co. uses the installment method. The following information was taken
from VISAGE’s records:
20x1 20x2
Installment sales ? ?
Cost of sales 1,200,000 1,320,000
Installment receivable - 20x1 1,200,000 800,000
Installment receivable - 20x2 1,440,000
Gross profit rates based on sales 40% 45%

How much is the total realized gross profit in 20x2?

a. 492,000
b. 506,000
c. 582,000
d. 592,000

Use the following information for the next two questions:

DECORTICATE PEEL Co. uses the installment method. The following information was taken from
DECORTICATE’s records:
20x1 20x2
Deferred gross profit (adjusted ending balances):
from 20x1 sale 480,000 320,000
from 20x2 sale 648,000
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Gross profit rates based on sales 40% 45%

Cash collections from:
20x1 sales 800,000 400,000
20x2 sales 960,000

58. How much are the balances of installment receivables on December 31, 20x2?
From 20x1 From 20x2
a. 800,000 1,440,000
b. 2,000,000 2,400,000
c. 1,440,000 800,000
d. 2,400,000 2,000,000

59. Compute for the installment sales in 20x1 and 20x2.

20x1 20x2
a. 800,000 1,440,000
b. 2,000,000 2,400,000
c. 1,440,000 800,000
d. 2,400,000 2,000,000

60. PERAMBULATE STROLL Co. uses the installment method. The following information was
taken from PERAMBULATE’s records:

20x1 20x2
Installment sales 2,000,000 2,400,000
Cost of sales 1,200,000 1,320,000
Cash collections from:
20x1 sales 800,000 400,000
20x2 sales 960,000

How much is the total deferred gross profit on December 31, 20x2?
a. 320,000
b. 1,440,000
c. 648,000
d. 968,000

61. PHILANDERING FLIRTING Co. uses the installment method. PHILANDERING Co. has the
following collection policy on its installment sales:
 20% down payment
 Balance collectible as follows: 50% in the year of sale, 30% in the second year, and 20% in the
third year.
 Installment sales during 20x1, 20x2 and 20x3 were ₱2,400,000, ₱3,000,000 and ₱3,600,000,
respectively.
 Gross profit rate throughout the three years was 40% based on sales.

How much is the total realized gross profit in 20x3?

a. 1,440,000
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b. 3,264,000
c. 1,305,000
d. 950,400

62. ABASE HUMILIATE Co. is currently preparing its combined financial statements for the year
ended December 31, 20x1. As of this date, the “Investment in branch” account has a balance of
₱380,000 while the “Home office” account has a balance of ₱528,000. The following information
has been gathered:
a. The home office allocated unpaid utilities expenses amounting to ₱40,000 to the branch which
the branch did not record in full. Instead, the branch sent a wrong adjusting memo to the home
office reducing the charge by ₱10,000 and setting up a liability for the remaining amount.
b. The home office erroneously credited the branch for a return of shipment of merchandise worth
₱100,000. The branch did not make any return of merchandise.
c. The branch mistakenly received a copy of the home office correcting entry for item (b) above
dated January 3, 20x2 and entered a credit in favor of the home office on December 31, 20x1.
d. The branch mistakenly sent the home office a debit memo amounting to ₱12,000 for an apparent
remittance of collections which did not happen. The home office did not record the debit memo.

How much is the net adjustment to the “Investment in branch” account? increase (decrease)
a. 100,000
b. 48,000
c. (48,000)
d. (52,000)

Use the following information for the next eleven questions:

The following information was taken from the records of a branch:
Sales by branch 2,800,000
Billings to branch by home office 2,500,000
Operating expenses 400,000
Ending inventory at billed price 1,000,000

The following information was taken from the records of the home office:
Branch current account 2,600,000
Shipments to branch 2,000,000
Allowance for markup - Unadjusted 500,000

63. What is the billing rate based on cost?

a. 20% b. 25% c. 120% d. 125%

64. What is markup percentage based on cost?

a. 20% b. 25% c. 120% d. 125%

65. How much is the sales of branch to be included in the combined financial statements?
a. 2,800,000 b. 2,240,000 c. 2,333,333 d. 0
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66. How much is the realized markup of the branch?

a. 300,000 b. 240,000 c. 380,000 d. 270,000

67. How much is the cost of goods sold of the branch to be included in the combined financial
statements?
a. 1,500,000 b. 1,800,000 c. 1,200,000 d. 900,000

68. How much is the ending inventory of the branch to be included in the combined financial
statements?
a. 1,000,000 b. 8333,333 c. 1,250,000 d. 800,000

69. How much is the unrealized markup in ending inventory?

a. 200,000 b. 166,667 c. 230,000 d. 266,667

70. How much is the ending balance of the “allowance for markup” account before combining the
financial statements?
a. 200,000 b. 166,667 c. 230,000 d. 266,667

71. How much is the individual profit of the branch?

a. 880,000 b. 900,000 c. 920,000 d. 1,020,000

72. How much is the true profit of the branch?

a. 1,200,000 b. 1,400,000 c. 1,250,000 d. 1,266,667

73. How much is the adjusted balance of the branch current account immediately prior to
combining the financial statements?
a. 3,200,000 b. 3,400,000 c. 3,500,000 d. 3,666,667

74. The home office transfers inventory worth P600,000 to Branch #1. Freight paid by the home office
is ₱40,000. Later on, the home office instructs Branch #1 to transfer the merchandise to Branch #2.
Branch #1 pays freight of ₱12,000. If the merchandise had been shipped directly from the home
office to Branch #2, the freight cost would have been ₱56,000. The entries to record the
transactions described includes
a. a credit to savings on freight of ₱4,000 in the books of Branch #1.
b. a credit to savings on freight of ₱4,000 in the books of Branch #2.
c. a credit to savings on freight of ₱4,000 in the books of the home office.
d. none of these

75. Insurance risk includes which of the following?

a. lapse or persistency risk c. expense risk
b. financial risk d. pure risk

Use the following information for the next two questions:

Entity A obtains insurance life insurance for its key employee from Entity B (an insurance company).
Entity B cedes the insurance contract with Entity A to Entity C, another insurance company.
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76. The contract between Entity B and Entity C is

a. direct insurance contract. c. reinsurance contract.
b. indirect insurance contract. d. retrocession.

77. How should Entity C account for the insurance contract with Entity B?
a. using the general model or the premium allocation approach
b. using the modified version of the general model applicable for reinsurance contracts held
c. using the modified version of the general model applicable for onerous insurance contracts
d. a or b, as an accounting policy choice

78. PFRS 17 requires an entity to combine its insurance contracts into portfolios and further
subdivide the insurance contracts comprising each portfolio into groups. Which of the following
is not one of the groups of insurance contracts within a portfolio?
a. those that are onerous at initial recognition
b. those that, at initial recognition, have no significant possibility of becoming onerous in
subsequent periods
c. those that are neither onerous at initial recognition nor expected to become onerous in
subsequent periods
d. those that pay premiums at initial recognition which are to be measured using the simplified
approach

79. The significant risk that is transferred from the policyholder to the issuer of an insurance
contract is
a. lapse or persistency risk. c. expense risk.
b. financial risk. d. insurance risk.

80. According to PFRS 17, insurance service result is recognized in

a. profit or loss.
b. other comprehensive income.
c. a or b
d. partly a and partly b

81. Which of the following is not one of the characteristics of an insurance contract?
a. transfer of significant insurance risk from the policyholder to the issuer
b. policyholder pays the issuer for the transfer of risk
c. issuer indemnifies the policyholder for losses when the insured event occurs
d. transfer of significant insurance risk from the issuer to the policyholder

82. Under the general model of PFRS 17, a group of insurance contracts is initially measured at
a. the fulfillment cash flows.
b. the contractual service margin.
c. a or b, as an accounting policy choice
d. sum of a and b
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Use the following information for the next two questions:

Entity A obtains life insurance for its key employee from Entity B (an insurance company). Entity B
cedes the insurance contract with Entity A to Entity C, another insurance company.

83. The contract between Entity A and Entity B is

a. direct insurance contract c. reinsurance contract
b. indirect insurance contract d. retrocession

84. How should Entity B account for the insurance contract with Entity C?
a. using the general model
b. using the modified version of the general model applicable for reinsurance contracts held
c. using the modified version of the general model applicable for onerous insurance contracts
d. using the model applicable for onerous insurance contracts
e. any of these as a matter of accounting policy choice

85. According to PFRS 17, an insurance contract is not derecognized when

a. it is extinguished.
b. it has expired.
c. its terms have been modified and the modification is substantive.
d. its terms have been modified and the modification is not substantive.

86. Under a BOT arrangement that is within the scope of IFRIC 12, the operator (choose the incorrect
statement)
a. is a private entity.
b. receives a right and incurs an obligation to provide public services
c. acts as a service provider.
d. is a public sector entity.

87. Which of the following contracts is within the scope of IFRIC 12 Service Concession Arrangements?
a. ABC Co., a private entity, wins a government bid to provide computer equipment to be used
in the upcoming elections.
b. DEF Co., a private entity, wins a government bid to operate a canteen in a government
agency office.
c. XYZ, Inc., a private entity, wins a government bid to provide internet access to all
government offices and cellular phones and plans to all government employees.
d. GHI Co., a private entity, wins a government bid to construct, operate and maintain for 25
years an expressway. At the end of the contract, GHI Co. shall handover the express way to
the government.

88. How should the operator in a BOT contract subsequently measure the consideration from the
contract that is in the form of a financial asset?
a. at amortized cost
b. at fair value through other comprehensive income
c. at fair value through profit or loss
d. any of these
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89. An operator under a service concession arrangement may capitalize borrowing costs during the
construction phase of the contract in accordance with PAS 23 if
a. the consideration in the contract is in the form of a financial asset
b. the consideration in the contract is in the form of an intangible asset
c. a or b
d. neither a nor b

90. You are an accountant. Your client, a franchisor, asked you for an advice regarding the
accounting for revenues from a franchise contract. Your advice to your client would most
certainly be based on which of the following standards?
a. FAS No. 45 (US GAAP)
b. PFRS 15
c. PAS 15
d. PFRS 18

“You will eat the fruit of your labor; blessings and prosperity will be yours.”
(Psalm 128:2)
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