Professional Documents
Culture Documents
AFAR Preweek (B44) - HIGHLIGHTED
AFAR Preweek (B44) - HIGHLIGHTED
6. At December 31, 20x5, Seasons Construction estimates that it is 75% complete with the building;
however, the estimate of total costs to be incurred has risen to P7,200,000 due to unanticipated
price increases. At December 31, 20x4, Seasons estimated it was 30% complete. What is the total
amount of Construction Expenses that Seasons will recognize for the year ended December 31,
20x5?
a. P5,400,000 c. P3,195,000
b. P3,150,000 d. P3,270,000
7. At December 31, 20x5, Seasons Construction estimates that it is 75% complete with the building;
however, the estimate of total costs to be incurred has risen to P7,200,000 due to unanticipated
price increases. What is reported in the balance sheet at December 31, 20x5 for Seasons as the
difference between the Construction in Process and the Billings on Construction in Process
accounts, and is it a debit or a credit?
Difference between the accounts Debit/Credit
a. P1,690,000 Credit
b. P 620,000 Debit
c. P 440,000 Debit
d. P 620,000 Credit
8. Seasons Construction completes the remaining 25% of the building construction on December 31,
20x6, as scheduled. At that time the total costs of construction are P7,500,000. At December 31,
20x5, the estimates were 75% complete and total costs of P7,200,000. What is the total amount of
Revenue from Long-Term Contracts and Construction Expenses that Seasons will recognize for the
year ended December 31, 20x6?
Revenue Expenses Revenue Expenses
a. P7,440,000 P7,500,000 c. P1,860,000 P2,100,000
b. P1,860,000 P1,875,000 d. P1,875,000 P1,875,000
Revenue Recognition – (IFRS 15)
9. Ronella Ocampo sells hairstyling franchises. Ronella Ocampo receives P50,000 from a new franchisee
for providing initial training, equipment and furnishings that have a stand-alone selling price of
P50,000. Ronella Ocampo also receives P30,000 per year for use of the Ronella Ocampo name and
for ongoing consulting services (starting on the date the franchise is purchased). Carlos became a
Ronella Ocampo franchisee on July 1, 20x6, and on August 1, 20x6, had completed training and
was open for business. How much revenue in 20x6 will Ronella Ocampo recognize for its
arrangement with Carlos?
a. Zero c. P65,000
b. P10,000 d. P70,000
10. AA Computers licenses customer-relationship software to ABS Company. In addition to providing
the software itself, AA Computers promises to provide consulting services by extensively customizing
the software to ABS’s information technology environment, for a total consideration of P3,456,000.
In this case, AA Computers is providing a significant service by integrating the goods and services
(the license and the consulting service) into one combined item for which ABS has contracted. In
addition, the software is significantly customized by AA Computers in accordance with
specifications negotiated by ABS. How many performance obligations exist in the contract?
a. 0 c. 2
b. 1 d. 3
11. Fonesell Co enters into a contract on September 1, 20x5 to conduct telephone marketing activities
on behalf of a customer. The contract has a price of P8,000 and requires Fonesell Co to contact
10,000 households over a period of six months in order to enquire about buying habits and promote
its customer. The customer is invoiced equal amounts three months and six months after the
commencement of the contract. By Fonesell Co’s year-end of December 31, 20x5, it has contacted
3,500 of the 10,000 customers. What amounts does Fonesell Co recognise in its financial statements
in the year ended December 31, 20x5?
a. revenue of P4,000 and a receivable of P4,000
b. revenue of P4,000 and a contract liability of P4,000
c. revenue of P2,800, a receivable of P4,000 and a contract asset of P1,200
d. revenue of P2,800, a receivable of P4,000 and a contract liability of P1,200
Gift Cards
• Seller records a deferred revenue liability when the card is sold.
• Seller recognizes revenue when the card is used and at the point when it concludes there is only a
“remote likelihood” that customer will use the card.
On December 31, 20x2 the Sta. Clara, Inc. bought all of the outstanding stock of San Jacinto
Company for P1,800,000 cash. On the date of purchase, the fair market value of San Jacinto’s
inventories was P675,000, while the fair value of San Jacinto’s property, plant and equipment was
P1,100,000. The fair values of all other assets and liabilities of San Jacinto Company were equal to
their book values.
The consolidated balance sheet of Sta. Clara and San Jacinto, after the acquisition of San Jacinto
should reflect goodwill in the amount of –
a. P300,000 c. P500,000
b. P400,000 d. Zero
37. Using the same information in No. 36, the amount of goodwill recorded in the books of Sta. Clara
amounted to:
a. P300,000 c. P500,000
b. P400,000 d. Zero
The consolidated amounts for Buildings and Accumulated Depreciation - Buildings that appeared,
respectively, on the balance sheet at December 31, 20x5, were
a. P620,000 and P192,000. c. P650,000 and P192,000.
b. P620,000 and P195,000. d. P650,000 and P195,000.
Items 70 through 73 are based on the following information:
Silver Corporation is a 90% owned subsidiary to Proto Corporation acquired several years ago at book
value equal to fair value. For the years 20x5 and 20x6, Proto and Silver report the following:
20x5 20x6
Proto’s separate income . . . . . . . P300,000 P400,000
Silver’s net income. . . . . . . . . . . . . 80,000 60,000
76. What is the reportable sales amount in the 20x8 income statement?
a. P73,000 c. P77,000
b. 75,000 d. 78,000
77. What is the reportable foreign exchange gain or loss amount in the 20x8 income statement?
a. P2,000 gain c. P5,000 loss
b. 4,000 loss d. 5,000 gain
78. What is the reported value of the receivable from the customers at December 31, 20x8?
a. P73,000 c. P77,000
b. 75,000 d. 78,000
Solution/Answer:
76. (d) – Exposed Asset
Spot Rates
Date of Commitment: 9/9/x8 P.75
Date of Transaction (invoice): 12/11/x8 P.78 Asset – Accounts Receivable
Partnership
Use the following information for question 86 to 88:
OO and PP are partners sharing profits in this proportion – 60:40. A balance sheet prepared for the
partners on April 1, 20x4 shows the following:
Cash . . . . . . . . . . . . . . . . . . . . P48,000 Accounts payable . . . . . . . . . P 89,000
Accounts Receivable . . . . . . . 92,000 OO, capital . . . . . . . . . . . . . . 133,000
Inventories . . . . . . . . . . . . . . . . 165,000 PP, capital. . . . . . . . . . . . . . . 108,000
Equipment . . . . . . . . . . . . 70,000
Less: Accumulated
Depreciation . . . . . . . 45,000 25,000
Total Assets . . . . . . . . . . . . . . . . P330,000 Total Liabilities & Capital . . . . P 330,000
On this date, the partners agree to admit RR as a partner. The terms of the agreement are
summarized below.Assets and liabilities are to be restated as follows:
• An allowance for possible uncollectible of P4,500 is to be established.
• Inventories are to be restated at their present replacement value of P170,000.
• Accrued expenses of P4,000 are to be Recognized.
OO, PP and RR will divide profits in the ratio of 5:3:2. Capital balances of the partners after the formation
of the new partnership are to be in the aforementioned ratio, with OO and PP making cash settlement
between them outside of the partnership to adjust their capitals, and RR investing cash in the
partnership for his interest.
Solutions/Answers:
86. d
Total capital of the new partnership (see no. 20) P 296,875
Multiply by RR’s interest 20%
Cash to be invested by RR P 59,375
87. a OO PP Total
(60%) (40%)
Unadjusted capital balances P133,000 P108,000 P241,000
Adjustments:
Allowance for bad debts ( 2,700) ( 1,800) ( 4,500)
Inventories 3,000 2,000 5,000
Accrued expenses ( 2,400) ( 1,600) ( 4,000)
Adjusted capital balances P130,900 P106,600 P237,500
Total capital before the formation of the new partnership (see above) P 237,500
Divide by the total percentage share of OO and PP (50% + 30%) 80%
Total capital of the partnership after the admission of RR P 296,875
88. a
Agreed Capital Contributed Capital Settlement
OO P148,437.50 (50% x P296,875) P 130,900 P 17,537.50
PP 89,062.50 (30% x P296,875) 106,600 (17,537.50)
Therefore, OO will pay PP P17,537.50
Use the following information for questions 89 to 92:
A partnership began its first year of operations with the following capital balances:
Young, Capital . . . . . . . . . . . . . . . . . . . . . . . P 143,000
Eaton, Capital . . . . . . . . . . . . . . . . . . . . . . . 104,000
Thurman, Capital . . . . . . . . . . . . . . . . . . . . . 143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young
was to be awarded an annual salary of P26,000 with P13,000 salary assigned to Thurman. Each partner
was to be attributed with interest equal to 10% of the capital balance as of the first day of the year. The
remainder was to be assigned on a 5:2:3 basis, respectively. Each partner was allowed to withdraw up
to P13,000 per year. Assume that the net loss for the first year of operations was P26,000 with net income
of P52,000 in the second year. Assume further that each partner withdrew the maximum amount from
the business each year.
89. What was Young’s share of loss for the first year?
a. P 3,900 loss d. P24,700 loss
b. P11,700 loss e. P111,500 loss
c. P10,400 loss
90. What was the balance in Eaton's Capital account at the end of the first year?
a. P120,900 d. P80,600
b. P118,300 e. P111,500
c. P126,100
91. What was Thurman's share of income or loss for the second year?
a. P17,160 income d. P17,290 income
b. P4,160 income e. P28,080 income
c. P19,760 income
92. What was the balance in Young's Capital account at the end of the second year?
a. P133,380 d. P132,860
b. P84,760 e. P71,760
c. P105,690
Solutions/Answers:
89. b
Y E T Total
Capital, 1/1/Year I 143,000 104,000 143,000 390,000
Net income (loss) (11,700) (10,400) (3,900) (26,000)
Withdrawals – personal (13,000) (13,000) (13,000) (39,000)
Capital, 12/31/ Year I 118,300 80,600 126,100 325,000
Solutions/Answers:
94. a - Admission by purchase. The implied value of the company is P900,000 (P270,000/30%). Since the
money is going to the partners rather than into the business, the capital total is P490,000 before
realigning the balances. Hence, goodwill of P410,000 must be recognized based on the implied
value (P900,000 – P490,000). This goodwill is assumed to represent unrealized business gains and is
attributed to the original partners according to their profit and loss ratio. They will then each convey
30 percent ownership of the P900,000 partnership to Darrow for a capital balance of P270,000.
Formal presentation:
Amount paid ………………………….………….. P 270,000 / 30% P900,000 (100%)
Less: BV of interest acquired –
(P220,000 + P160,000 + P110,000) x 30%….... 147,000 490,000 (100%)
Excess……………………………………………….. P123,000
Divided by: Interest acquired………………….. 20%
Goodwill or revaluation of Asset …………….. P410,000 P410,000 (100%)
Solutions/Answers:
113. c
125% 100% 25%
Billed Price Cost Allowance
Merchandise inventory, 1/1/x4 40,000
Shipments 250,000
Cost of goods available for sale 290,000
Less: MI, 12/31/x4 (P60,000 x 80%) 60,000
Overvaluation of CGS(230,000x 25/125) 230,000 46,000*
114. The combined net income of the home office and the branch after adjustment is:
a. P226,000 c. P496,000
b. P326,000 d. P500,000
Solutions/Answers:
114. b – P326,000
Sales (P600,000 + P300,000) ……………………………………… P 900,000
Less: Cost of goods sold
Merchandise inventory, beg.
[P100,000 + (P40,000/1.25)] ……………………….…… P 132,000
Add: Purchases…………………………………………… 350,000
Cost of goods available for sale……………………… P 482,000
Less: MI, ending [P30,000 + (P60,000/1.25)] ………… 78,000 404,000
Gross profit……………………………………………………… P 496,000
Less: Expenses (P120,000 + P50,000)………………………. _ 170,000
Net Income …………………………………………………. P 326,000
115. The Brooke Corporation has two branches, Branch P and Branch Q. The home office shipped
P80,000 in merchandise to Branch P and prepaid the freight charges of P500. A short time thereafter,
Branch P was instructed to ship this merchandise to Branch Q at a prepaid freight cost of P700.
Freight charges for this merchandise normally cost P800 when shipped from the home office directly
to Branch Q. Compute the excess freight on transfers of merchandise:
a. P700 c. P500
b. P800 d. P400
Solutions/Answers:
115. d
Freight actually paid by:
Home Office……………………………………………………………………..P 500
Branch P………………………………………………………………………….. 700
Total………………………………………………………………………………..P 1,200
Less: Freight that should be recorded…………………………………………….. 800
Excess freight……………………………………………………………………………P 400
116. The Home Office ledger account in the accounting records of a branch is best described as:
a. A revenue account
b. An equity account
c. A deferred revenue account
d. None of the foregoing
117. Which of the following statements correctly describes the relationship between the accounting
systems used for a sales agency when compared to the accounting systems used for a branchoffice:
a. The sales agency accounting system cannot be set up to measure the profitability of the
sales agency but the branch accounting system can be set up to measure the profitability
of the branch
b. The sales agency accounting system can be set up to measure the profitability of the sales
agency but the branch accounting system cannot be set up to measure the profitability of
the branch
c. The accounting system of the sales agency is not usually considered a separate segment of
the company’s entire accounting system but the accounting system of the branch office is
usually considered a separate segment of the company’s entire accounting system
d. None of the above
142. In a normal cost system, a debit to Work in Process Inventory would not be made for
a. actual overhead.
b. applied overhead.
c. actual direct material.
d. actual direct labor.
143. A company producing which of the following would be most likely to use a price standard
formaterial?
a. Furniture
b. Philippine Basketball-logo jackets
c. custom-made picture frames
d. none of the above
144. Knowing specific job costs enables managers to effectively perform which of the following tasks?
a. estimate costs of future jobs.
b. establish realistic job selling prices.
c. evaluate job performance.
d. all answers are correct.
Joint Products
155. Helen Corporation manufactures products W, X, Y, and Z from a joint process.
Sales Value at If Process Add’l Further Sales
Product Units Produced Split-off Costs Value
W 6,000 P 80,000 P 7,500 P 90,000
X 5,000 60,000 6,000 70,000
Y 4,000 40,000 4,000 50,000
Z 3,000 20,000 2,500 30,000
18,000 P200,000 P 20,000 P240,000
Assuming the total joint costs of P160,000 were allocated using the relative-sales-value at split-off
approach, what were the joint costs allocated to its product?
W X Y Z
a. P40,000 P 40,000 P 40,000 P 40,000
b. 53,333 44,444 35,556 26,667
c. 60,000 46,667 33,333 20,000
d. 64,000 48,000 32,000 16,000
156. Teresa Company manufactures products S and T from a joint process. The sales value at split-off was
P50,000 for 6,000 units of Product S and P25,000 for 2,000 units of product T. Assuming that the portion of
the total joint costs properly allocated to Product S using the relative-sales-value at split-off
approach was P 30,000, what were the total joint costs?
a. P 40,000 c. P 45,000
b. 42,000 d. 60,000
Inventory of Moy was recorded at net realizable value when produced in 20x2. No units of Moy
were produced in 20x3. What amount should be recognized as profit on Moy’s 20x3 sales?
a. P 0 c. P 20,000
b. 10,000 d. 30,000
158. Joint costs are used for
a. Setting the selling price of a product
b. Determining whether to continue producing an item
c. Controlling costs
d. Determining inventory cost for accounting purposes
159. Which of the following components of production are allocable as joint costs when a single
manufacturing process produces several salable products?
a. Materials, labor, and overhead
b. Materials and labor only
c. Labor and overhead only
d. Overhead and materials only
160. At the split-off point, products may be immediately salable or may require further processing.
Which of the following products have both of these characteristic?
By-products Joint Products
a. No No
b. No Yes
c. Yes No
d. Yes Yes
161. Which of the following is often subject to further processing in order to be salable?
By-products Scrap
a. No No
b. No Yes
c. Yes Yes
d. Yes No
162. For purposes of allocating joint costs to joint products, the relative sales value at split-off
method could beused in which of the following situation?
No Costs Beyond Costs Beyond
Split-off Split-off
a. Yes Yes
b. Yes No
c. No Yes
d. No No
163. The characteristic which is most often used to distinguish a product as either a joint
product or a by-product is the
a. Amount of labor used in processing the product
b. Amount of separate product costs that are incurred in processing
c. Amount (i.e., weight, inches, etc.) of the product produced in a the
manufacturing
process.
d. Relative sales value of the products produced in the process.
164. When should process costing techniques be used in assigning costs to products?
a. If the product is manufactured on the basis of each order received.
b. When production is only partially completed during the accounting
period.
c. If the products is composed of mass-produced homogenous units.
d. Whenever standard costing techniques should not be used.
165. Which of the following is a characteristic of a process costing system?
a. Work-in-process inventory is restated in terms of completed units.
b. Costs are accumulated by order.
c. It is used by a company manufacturing custom machinery.
d. Standard costs are not applicable.
“The will to persevere is often the difference between failure and success.” - David Sarnoff
The most essential factor is persistence – the determination never to allow your energy or enthusiasm to be dampened
by the discouragement that must inevitably come.”
– James Whitcomb Riley
If your determination is fixed, I do not counsel you to despair. Few things are impossible to diligence and skill. Great
works are performed not by strength, but perseverance.
- Samuel Johnson
The difference between the impossible and the possible lies in a person’s determination.
– Tommy Lasorda
***Wisdom is the quality that keeps you from getting into situations where you need it.***
***Every man is the architect of his own character.***
***Patience is bitter but its fruit is sweet.***
***Great passions, can elevate us to the things that we want to deliver.***
***Nothing great was ever achieved without determination.***
***Don’t be discouraged; everyone who got where he is, started where he was.***
***Impossibilities vanish when a man and his GOD confront a mountain.***
**The smallest deed is better than the grandest intention**
**You cannot discover new heights in life unless you have the courage to forego other things.**
**Great works are made not by strength but by perseverance.**
**Dignity and humility are the cornerstones of compassion.**
**Mistakes should be reason for us to grow further and strive harder, not as an excuse for discouragement.**
**Faith makes all things possible, love makes things easy and hope makes all things work.**
GOD BLESS as ALWAYS!!!