Since 1977

AFAR DE LEON/DE LEON/ALENTON

Preweek MAY 2022

PARTNERSHIPS August 1, 2021 Partner Flor made a permanent withdrawal

Celso, Dario, and Ermo formed the CDE Partnership on of P54,000. On May 1, 2021, Partner Grace contributed
August 30, 2021, with the following assets, measured at machinery with a fair market value of P72,000 and a net
book values in their respective records, contributed by book value of P60,000 when contributed. On November 1,
each partner: 2021 Partner Grace contributed an additional P36,000 cash
Celso Dario Ermo to the partnership. Both partners withdrew one-fourth of
Cash P 259,200 P86,400 P103,680 their salary allowances in 2021.
Inventory 58,464 75,200
PPE 1,296,000 240,000 The partnership reported a net income of P205,920 in
2021 and the profit and loss agreement are as follows:
Totals P1,613,664 326,400 P 178,880 a. Interest at 6% is allowed on average capital
balances;
A part of Celso’s cash contribution, P172,800, comes from b. Salaries of P2,160 per month to each partner;
personal borrowings. Also, the PPE of Celso and Dario are c. Bonus to Flor of 10% of net income after interest,
mortgaged with the bank for P777,600 and P57,600, salaries, and bonus; and
respectively. The partnership is to assume responsibility d. Balance to be divided in the ratio of 6:4 to Flor and
for these PPE mortgages. The fair value of the inventories Grace, respectively.
contributed by Ermo is P73,440 while the PPE contributed
by Dario at this date is P272,160 The partners have 3. Determine how the net income will be allocated to the
agreed to share profits and losses on a 5:2:3 ratio, to partners:
Celso, Dario, and Ermo, respectively. a. Flor, P160,000 and Grace, P126,000
b. Flor, P 180,000 and Grace, P106,000
1. What is the capital balance for each partner at the c. Flor, P170,000 and Grace, P116,000
opening of business on August 30, 2021? d. Flor, P122,400 and Grace, P83,520
a. Celso, P836,064; Dario, P300,960; & Ermo,
P177,120 Solution: D
b. Celso, P1,161,200; Dario, P418,000; & Ermo, • Average capitals and interests.
P246,000 F: P324,000 x 1/12 P27,000 G: P216,000 x 4/12 P72,000
c. Celso, P1,987,500; Dario, P189,000; & Ermo, 432,000 x 6/12 216,000 288,000 x 6/12 144,000
P217,500 378,000 x 5/12 157,500 324,000 x 2/12 54,000
Ave. cap. P400,500 Ave. cap. P270,000
d. Celso, P1,095,120; Dario, P547,560; & Ermo,
6% 6%
P182,520 Interest P24,030 Interest P16,200

Net Income, 205,920 Flor Grace TOTAL

Solution: A Interest* P 30,038 P20,250 P 40,230
Celso Dario Ermo Total Salaries 32,400 25,920 51,840
Asset P1,613,664 P358,560 P177,120 P2,149,344 Bonus 10,350 10,350
Liabilities 777,600 57,600 - 835,200 Balance 62,100 41,400 103,500
Net Total P122,400 P83,520 P205,920
assets 836,064 P300,960 P177,120 P1,314,144
(capital) Bonus = 10% * (P205,920 – P40,230 – P51,840 -
Bonus) = P 10,350
2. What is the capital balance for each partner at August
30, 2021, instead, if the interest ratio is given at 5:2:3
to Celso, Dario, and Ermo, respectively? 4. Determine the capital balances of the partners at
a. Celso, P657,072; Dario, P262,829; & Ermo, December 31, 2021:
P394,243 a. Flor, P493,920 and Grace, P401,040
b. Celso,P985,608; Dario, P492,804; & rmoa, b. Flor, P551,000 and Grace, P686,000
P164,268 c. Flor, P688,000 and Grace, P449,000
c. Celso,P1,987,500; Dario,P189,000; & Ermo, d. Flor, P683,000 and Gracei, P554,000
P217,500
d. Celso,P821,340; Dahrio, P492,804; & Ermo, Solution: A
P328,536 Flor Grace TOTAL
Initial capital P324,000 P216,000 P 540,000
Addl investment 108,000 108,000 219,000
Solution: A Capital
Celso (P1,314,144 x 50%) P657,072 withdrawal ( 54,000) (54,000)
Dario (P1,314,144 x 20%) 262,829 Drawings ( 6,480) (6,480) (12,960)
Ermo (P1,314,144 x 30% 394,243 Sub-totals P371,520 P371,520 P 689,040
Total P1,314,144 Share in net
income 122,400 83,520 205,920
On January 1, 2021, Flor and Grace formed a partnership Capitals,
by contributing cash of P324,000 and P216,000, 12/31/18 P493,920 P401,040 P894,960
respectively. On February 1, 2021, Partner Flor contributed
an additional P108,000 cash to the partnership and on

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EXCEL PROFESSIONAL SERVICES, INC.

Haidee and Irma are partners sharing profits and losses in 7. What will be the balance of Leila’s capital account after
the ratio of 60% and 40%, respectively. The partnership the retirement of Kiks. before deducting loan
balance sheet at August 30, 2021 follows: a. P 129,444 c. P 144,429
b. P 159,429 d. P 149,424
Cash P 9,720 Accounts payable P 10,800
Other assets 95,760 Haidee, Loan 4,680 Solution: B
Irma, Loan 7,200 Haidee, capital 64,800 Kiks Leila Mimi Total
Irma, capital 32,400 Capitals P105,000 P 97,500 P225,000 P427,500
Total P 112,680 Total P112,680 Loans 22,500 (15,000) - 7,500
Adjustments
(P90,000 +
Haidee and Irma are partners sharing profits and losses in P100,000) 57,000 57,000 76,000 190,000
the ratio of 60% and 40%, respectively. The partnership Adjusted
balance sheet at August 30, 2021 follows: interests P184,500 P139,500 P301,000 P625,000
Total cash paid
Cash P 9,720 Accounts payable P 10,800 to Kiks (173,000) - - (173,000)
Other assets 95,760 Haidee, Loan 4,680 Bonus ( 11,500) 4,929 6,571 -
Irma, Loan 7,200 Haidee, capital 64,800 Ending capitals - P144,429* P307,571 P452,000
Irma, capital 32,400
Total P 112,680 Total P112,680

At this date, Jessa was admitted as a partner for a The accounts of the partnership of BDO at December 31,
consideration of P35,100 cash for a 30% interest in capital 2021 are as follows:
and in profits. Cash P 59,400 Liabilities P 45,000
5. Assume Jessa is admitted by purchase of 30% each of Non-cash Loan from D 14,400
the original partners’ interest, determine how the assets 524,700
P35,100 will be apportioned to Haidee and Irma, Loan to B 10,800 B, capital 148,500
respectively. D, capital 263,700
a. Haidee, P32,850 and Irma, P15,900 O, capital 123,300
b. Haidee, P32,450 and Irma, P16,300 Total P594,900 Total P594,900
c. Haidee, P23,004 and Irma, P12,096
d. Haidee, P32,950 and Irma, P15,800 They divide profits and losses 3:5:2 to B, D, and O
respectively. They have decided to liquidate the
Solution: C partnership at this date.
Haidee: (P64,800 x 30%) 19,440 3,564 23,004 8. Determine the amount Partner B and Partner D would
Irma: (P32,400 x 30%) 9,720 2,376 12,096 have received by the time Partner O would have
P29,160 P5,940 P35,100 received a cumulative amount of P32,400.
a. B, P1,785 and D, P72,650
b. B, P1,578 and D, P70,265
6. Assume Jessa is admitted by investing the P35,100 to c. B, P1,875 and D, P70,625
the partnership, determine the effects of any bonus d. B, P1,350 and D, P50,850
over the capital balances of the original partners:
a. Haidee, P( 9,900) and Irma, P(14,850) Solution: D
Using the B D O TOTAL
b. Haidee, P 9,000 and Irma, p 14,850
Short-
c. Haidee, P (14,850) and Irma, P( 9,900) cut:
d. Haidee, P (2,754) and Irma P (1,836)
BBL P137,700 P278,100 P123,300 P 539,100
Cum (136,350) (227,250) (90,900) P(454,500)
Solution: D loss
I/R PARTNERS TAC CNA DIFF Cum P 1,350 P 50,850 P 32,400 P 84,600
Haidee 62,046 94,800 (2,754) cash
Irma 30,564 32,400 (1,836) paid
30% Jose 39,690 35,100 4,590
Total 132,300 132,300 0 Using the B D O Total
CDP
P# 1 P 12,060 P 12,060
P# 2 P 48,600 19,440 68,040
P# 3 P 1,350 P 2,250 900 4,500
The following balances as at October 31, 2021 for the Totals P 1,350 P 50,850 P 32,400 P 84,600
Partnership of Kiks, Leila, and Mimi were as follows:
Cash P 50,000 Liabilities P 15,000
Leila, Loan 15,000 Kiks, loan 22,500
Non-cash 400,000 Kiks, capital 105,000 VENUS and WILMA partnership’s balance sheet at
assets December 31, 2020, reported the following:
Leila, capital 97,500 Total assets P 100,000
Mimi, cap 225,000 Total liabilities 20,000
Totals P465,000 Totals P465,000 Venus, capital 40,000
Wilma, capital 40,000
Kiks has decided to retire from the partnership on October
31. Partners agreed to adjust the non-cash assets to their On January 2, 2021, VENUS and WILMA dissolved their
fair market value of P490,000. The estimated profit to partnership and transferred all assets and liabilities to a
October 31 is P100,000. Kiks will be paid P173,000 for her newly formed corporation. At the date of incorporation, the
partnership interest inclusive of her loan which is repaid in fair value of the net assets was P12,000 more than the
full. Their profit and loss ratio is 3:3:4 to Kiks, Leila, and carrying amount on the partnership’s books. Of which
Mimi, respectively. P7,000 was assigned to tangible assets and P5,000 was

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EXCEL PROFESSIONAL SERVICES, INC.

assigned to patent. VENUS and WILMA were each issued Solution: A

5,000 shares of the corporation’s P1 par common stock. Estimated gross loss (P1,356,000 +
9. Immediately following incorporation, additional paid-in P180,000) P1,536,000
capital in excess of par should be credited for Less estimated net gain (P756,000 +
a. P68,000 c. P77,000 P600,000) 1,356,000
b. P70,000 d. P82,000 Estimated net loss P 180,000
Less book value of stockholders’
Solution: D equity (P1,200,000 – P480,000) 720,000
Fair Value of net assets (P80,000 + Amount paid to stockholders P 540,000
P12,000) P 92,000 Estimated pro-rata payment to P0.75 to a Peso
Par value of shares issued (10,000 stockholders (P540,000/P720,000) :
shares * P1) 10,000
Amount credited to APIC P 82,000
JOINT ARRANGEMENTS
On January 1, 2021, HHH, III, and JJJ (all are
corporations) establish a joint operation to manufacture a
CORPORATE LIQUIDATION product they agree to share equally. Each will contribute
The following were taken from the statement of affairs of P200,000 into the operation; HHH and III are to contribute
NOWAYOUT COMPANY. cash while JJJ is to contribute equipment with a cost of
Assets pledged with fully secured P185,000. The equipment has a remaining life of 10 years
creditors P56,800 when contributed.
Assets pledged with partially secured
creditors 10,000 12. Determine the net amount JJJ will show the Equipment
Free assets 8,960 in JO account in its balance sheet at December 31,
Preferred creditors 2,400 2021.
Fully secured creditors 55,200 a. P45,000 c. P60,000
Partially secured creditors 16,000 b. P55,500 d. P58,500
Unsecured creditors without priority 14,400
10. The estimated amount recoverable by Partially-secured
creditors is Solution: B
a. P11,160 c. P12,400 Equipment per books of Joint Operation,
b. P12,240 d. P11,600 1/1/21 P200,000
Accumulated depreciation 20,000
Solution: C Equipment per books of Joint Operation,
Estimated cash available (56,800 12/31/21 P180,000
+ 10,000 + 8,960) P75,760 Multiply by 1/3
Less: Prioritized claims: Each joint operator’s equal share P 60,000
Fully-secured liabilities 55,200 Less JJJ’s unrealized gain as of 12/31/21
Partially-secured liab. (secured (P5,000 * 90%) 4,500
portion) 10,000 Same amount (if P185,000 * 90%) * P 55,500
Unsecured w/priority 2,400 67,600 1/3
Est. amt. avail. To unsecured liab.
w/o priority 8,160 13. Determine the net amount HHH (or III) will show the
Less: Unsecured amts. Equipment in JO account in its balance sheet at
Partially-secured liabilities December 31, 2021.
(unsecured portion) 6,000 a. P45,000 c. P60,000
Unsecured w/o priority 14,400 20,400 b. P55,500 d. P58,500
Estimated deficiency to unsecured
creditors w/o priority P(12,240) Solution: C
Estimated recovery rate (ERR): (P 180,000 * 1/3) P 60,000
8,160 / 20,400 40%

The statement of affairs of Bailout Company shows the Now assume the book carrying value of the equipment
following summarized balances: contributed by JJJ is P215,000 and the fair value
Estimated gains on realization of assets P 756,000 P200,000.
Estimated losses on realization of 14. At what amount will each of the operators show the
assets 1,356,000 Equipment in JO in its (1) January 1, 2021 and in its
Contingent assets 600,000 (2) December 31, 2021 balance sheets?
Current assets 80,000 a. (1) P61,667 and (2) P55,500
Other assets 960,000 b. (1) P66,667 and (2)P62,167
Liabilities 320,000 c. (1) P66,667 and (2) P60,000
Contingent liabilities 180,000 d. (1) P65,000 and (2) P55,500
Capital stock 1,200,000
Retained earnings (deficit) 480,000 Solution: C
Equipment per books of Joint Operation,
11. Determine the estimated pro-rata payment on the 1/1/21 (FV) P200,000
peso to stockholders in the event of corporate Multiply by 1/3
liquidation. Equipment in JO in balance sheet of each
a. P0.75 c. P0.43 operator, 1/1/21 P 66,667
b. P0.30 d. P0.70
Equipment, net per books of Joint
Operation, 12/31/21 P 180,000
Multiply by 1/3

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EXCEL PROFESSIONAL SERVICES, INC.

Equipment in JO in balance sheet of each EXCEL CONSTRUCTIONS was recently awarded a

operator, 12/31/21 P 60,000
Trisha and Bella in a joint venture, contributed P30,000
each in order to purchase merchandise which were sold in
lots at a closing-out sale. They agreed to divide their
profits equally and each shall record her purchases, sales,
and expenses in her own books. After almost all
merchandise had been sold, they wind up their venture.
P8,400,000 contract to construct a trade center for Alaya
Lending, Inc.
EXCEL CONSTRUCTIONS estimates it will take 50 months
to complete the contract. The company uses the
percentage of completion method to report profits. (Use
two decimal places for the percentage of completion, i.e.
64.28%).

The following are the venture Trisha Bella The following information details the actual and estimated
transactions: costs from 2018 to 2021.
Purchases of merchandise P30,000 P30,000 Year Actual cost each Estimated cost to
Expenses paid from Jt Venture year complete
Cash 3,000 3,900 2018 P3,900,000 P4,080,000
Jt venture credit balances ( 24,000) ( 21,000) 2019 1,980,000 2,250,000
Undisposed merchandise upon 2020 (60K) 1,440,000 1,140,000
termination of JV 900 1,400 2021 (240K) 1,350,000 -
17. Determine the realized gross profit (loss) in 2021.
All transactions for the joint venture are in cash. The a. P(210,000) c. P 60,000
venturers are to take over the unsold merchandise at cost. b. P 158,750 d. P(P60,000)
15. Determine the amount of cash Bella would
receive/(pay) from/ to Trisha upon final cash Solution: A
settlement by the venturers. Actual loss-to-date, 12/31/21
a. P(1,250) c. P(2,150) (P8,400,,000 – P8,670,000) P (270,000)
b. P 2,150 d. P 1,250 Est. loss-to-date, 12/31/20
(P8,400,000 – P8,460,000) ( 60,000)
Solution: D Loss recognized in 2021 P (210,000)
Trisha Bella
Cash Settlement 18. Using zero-profit-method, how much is the realized
Share in NI (47,300/2) 23,650 23,650 gross profit (loss) in 2020?
Investment 30,000 30,000 a. P(210,000) c. P 60,000
Unsold Merchandise (900) (1,400) b. P 158,750 d. P (60,000)
52,750 52,250
Cash on Hand Solution: D
57,000 – 3,000 54,000 The project was profitable thru the end of 2019, hence no
54,900 – 3,900 51,000 profit was recognized in 2018 and in 2019 under the zero-
Cash (paid) / Received (1,250) 1,250 profit-method. The estimated loss-to-date of P60,000 will
be the recognized loss for 2020.

FRANCHISE ACCOUNTING
LONG-TERM CONSTRUCTION CONTRACTS 19. On Jan. 1, 20x1, MAWET Co. entered into a franchise
On July 1, 20x1, RRR Construction Co. enters a contract agreement with NONOY Co. The franchise contract
with a customer for the construction of a building. At gives NONOY Co. the right to use MAWET’s trademark
contract inception, RRR Contractor Co. assesses the and proprietary processes for a period of 4 years. The
contract in accordance with the principles of PFRS 15 and franchise requires payment of an upfront fee of
concludes that it has a single performance obligation that ₱1,000,000, payable at contract inception, and 5%
is satisfied over time. RRR Contractor Co. then determines monthly royalty based on sales. Aside from the
that the appropriate measure of its progress on the granting of the license, the franchise agreement also
contract is input method based on costs incurred. requires MAWET Co. to undertake pre-opening
Information on the contract is shown below: activities to setup the contract and post-
commencement activities, such as research and
Contract price 600,000 development and marketing campaigns, to support the
Contract costs incurred during 20x1 120,000 intellectual property. Although the activities do not
Estimated remaining costs as of Dec. 31, 20x1 240,000 result in the direct transfer of a good or service to
Billings to the customer during 20x1 180,000 NONOY Co. as the activities occur, it is expected that
Collections on billings during 20x1 60,000 NONOY Co. will benefit from them. All the necessary
preparations were completed and NONOY Co. started
16. What amounts are presented in RRR Contractor Co’s. business operations on January 31, 20x1. NONOY had
statement of financial position under PFRS 15? total sales of ₱9,000,000 in 20x1.
Contract asset(liability)
a. 20,000 How much revenue would MAWET Co. recognize in
b. (20,000) 20x1?
c. 40,000 a. 1,450,000
d. (40,000) b. 700,000
c. 679,167
Solution : A d. 489,310
➢
CIP (600,000 x 1/3) 200,000 Solution:
PB 180,000 [(1M ÷ 4 yrs.) x 11/12] + (9M x 5%) = 679,167
Contract Asset 20,000

%age of Comp+ 120/360= 1/3

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EXCEL PROFESSIONAL SERVICES, INC.

20. On December 31, 20x1, Entity Roman enters into a 21. How much net income will HOH Corporation report for
contract with Customer Elly to transfer a license for a year-ended 2021?
fixed fee of ₱100,000 payable as follows:
• 20% payable upon signing of contract. a. P260,000 c. P220,000
• 80% due in four equal annual installments starting b. P122,000 d. P595,000
December 31, 20x2. The appropriate discount rate
is 12%. Solution: D
Sales (P1,000,000 + P500,000 +
The license provides Customer Elly rights over Entity P400,000) P1,900,000
Roman’s patented processes. The agreement requires Less Cost of sales
Customer Elly to discontinue using its trade name and MI, beg P 240,000
instead use Entity Roman’s trade name. Customer Elly Purchases 900,000
is bound by the terms of the contract to abide with MI, end: 120,000 +
Entity Roman’s policies on the use of the processes but [(P72,000 +
is given the right to any subsequent modifications to P96,000)/120%] (260,000) 880,000
the processes. Gross profit P1,020,000

How much revenue from the franchise contract will Less Operating expenses (P300,000 +
Entity Roman recognize in 20x1? P75,000 + P50,000) 425,000
a. 80,747 Combined net income P 595,000
b. 20,187
CDO ENTERPRISES operates a branch in ILIGAN CITY. At
c. 20,000 the close of business on December 31, 2021, the ILIGAN
d. 0 CITY branch account in the home office books showed a
debit balance of P200,000. The inter-office accounts were
Solution: in agreement at the beginning of the year. For purposes of
The license provides the customer the “right to access” reconciling the inter-office accounts, the following facts
the entity’s intellectual property as it exists throughout the were ascertained:
license period. Accordingly, the performance obligation is a. A machinery costing the home office P17,500 was
satisfied over time. picked up by the branch as P1,750.+ P15,750
Entity Roman starts recognizing revenue in 20x2 b. The branch did not take up insurance premium of
when Customer Elly starts receiving the benefits of Entity P2,000 charged by the home office.+
Roman’s performance of providing access to the patented c. Freight charge on merchandise made by the home
processes. office for P9,800 was recorded in the branch books as
P8,900. + P900
d. Home office credit memo representing a discount on
HOME OFFICE, BRANCHES & AGENCIES merchandise for P1,500 was taken up twice by the
Comparative trial balances of the home office of HOH branch. +
Corporation and its two branches at December 31, 2021 e. The branch failed to take up a P2,000 debit memo
were as follows: from the home office representing the share of the
Home CHI MIN branch in advertising. +
Office Branch Branch f. A remittance of P15,000 from the BUKIDNON branch
Cash P 5,000 P 15,000 P 22,000 was inadvertently taken up in the ILIGAN CITY branch
Accounts receivable 80,000 30,000 40,000 account but was corrected before yearend. *
Inventories 150,000 60,000 48,000 g. + The home office inadvertently recorded a remittance
CHI Branch 170,000 for P13,500 from its BUTUAN CITY branch as a
MIN Branch 165,000 remittance from it’s ILIGAN CITY branch.
Plant assets 730,000 250,000 200,000
Purchases 900,000 22. Determine the balance in the branch books of the
Shipments from Home Office account (before adjustment) as of
home office 300,000 240,000 December 31, 2021.
Expenses 300,000 75,000 50,000 a. P191,350 c. P198,350
Totals P2,500,000 P 730,000 P 600,000 b. P164,350 d. P209,350

Accounts payable P 100,000 P 45,000 P 30,000 Solution: A

Other liabilities 80,000 15,000 5,000 HO Books Branch Books
Loading in branch Branch A/C HO Accounts
inventories 108,000 UBs 200,000 191,350
Share capital, P10 500,000 Adjustments: (a) 15,750
par (b) 2,000
Retained earnings 262,000 (c) 900
Home office 170,000 165,000 (d) 1,500
Sales 1,000,000 500,000 400,000 (e) 2,000
Shipments to 450,000 ________ ________ (f)
branches (g) 13,500
Totals P2,500,000 P 730,000 P 600,000 Abs 213,500 213,500

Additional information:
Home Office and branch inventories at December 31, 2021 On May 1, 2021, the Home Office in BACOLOD CITY
were: establishes a sales agency in SILAY CITY. The following
Home Office P 120,000 assets are sent to the sales agency on that date:
CHI Branch (at billed prices) P 72,000 Cash (for the working fund to be
MIN Branch (at billed prices) 96,000 operated under the imprest system) P100,000

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EXCEL PROFESSIONAL SERVICES, INC.

Merchandise samples 240,000 five years. On January 1, 2021, GLOBALPORT sold the
truck to TERRAIN COMPANY and recorded the following
During the month, the sales agency submits sales on journal entry:
account of P1,500,000 which was duly approved by the
home office. Cost of merchandise shipped to fill the orders Cash 40,000
from customers obtained by the sales agency is P800,000. Accumulated depreciation 14,400
Home office disbursements chargeable to the agency are Truck 42,400
as follows: Furniture and fixtures, P150,000; manager’s Gain on Sale of Truck 12,000
and salesmen’s salaries, P88,000;and rent, P35,000. On
May 31, the sales agency working fund is replenished: paid TERRAIN holds 60% of GLOBALPORT’s outstanding
vouchers submitted by the sales agency amounted to common shares.. GLOBALPORT reported net income of
P42,000. Sales agency samples are useful until December P44,000 in 2021 and TERRAIN's separate net income
31, 2021, which at that time, are believed to have a (excludes interest in GLOBALPORT) for 2021 was P78,400.
salvage value of 15% of cost. Furniture are depreciated at 25. Consolidated net income for 2021 was
30% per annum. a. P 96,800 c. P104,800
23. What is the net profit of the SILAY CITY AGENCY for b. P100,000 d. P114,400
the month of May, 2021?
a. P327,250 c. P463,750 Solution: D
b. P315,250 d. P505,750 CNI = P78,400 + P44,000 – P12,000 + P4,000)
P114,400
Solution: D
Sales PARENT CORPORATION regularly sells merchandise to its
Less: cost of sales 1,500,000 80%-owned subsidiary, DIANCIN ENTERPRISES. In 2019,
Gross profit 800,000 Parent sold merchandise that cost P64,000 to DIANCIN for
Less: OPEX 700,000 P80,000. Half of this merchandise remained in Diancin’s
Salaries 88,000 December 31, 2019 inventory. During 2020, Parent sold
Rent expense 35,000 merchandise that cost P100,000 to Diancin for P125,000.
Other expenses 42,000 Forty percent of this merchandise inventory remained in
Supplies expense (240,000 * Diancin’s December 31, 2020 inventory. Selected income
.85) / 8 25,500 statement information for the two affiliates for the year
Dep exp. (150,000 * 30%) / 12 3,750 194,250 2020 is as follows:
Net profit P505,750
Parent Company Diancin Enterprises
COMBINATIONS AND CONSOLIDATIONS Sales revenue P 600,000 P 300,000
On January 1, 2021, BLACKWATER CORPORATION Cost of goods sold 480,000 250,000
purchased 75% of the ordinary shares of HIGH TIDE Gross profit 120,000 50,000
ENTERPRISES. Separate balance sheet for the two OPEX 40,000 20,000
companies at the combination date are given below: Net Income P 80,000 P 30,000
BLACKWATER HIGH TIDE 26. Consolidated sales revenue and cost of good sold for
Current assets P 96,000 P 86,400 2020 are:
Land 24,960 10,240 a. P775,000, P607,000
Plant assets 224,000 96,000
b. P855,000, P603,000
Accumulated ( 76,800)
depreciation (19,200) c. P800,000, P607,000
Inv. in High Tide Ent. 125,440 _________ d. P900,000, P603,000
Totals P 393,600 P 173,440
Solution: A
Accounts payable P 65,920 P 45,440 GP COGS
Inv, beg RGP (80,000 – 64,000) 8,000 (8,000)
Ordinary shares 256,000 96,000
16,000 * 1/2
Retained earnings 71,680 32,000 Inv, end DGP (125,000 – 100,000 ) (10,000) 10,000
Totals P 393,600 P 173,440 25,000 * 40%
Sales 60,000 + 300,000 – 125,000 = 775,000
At the date of combination, the net assets of HIGH TIDE COGS 480,000 + 250,000 -8,000 + 10,000 – 125,000 =
are fairly valued, except for its inventory which is 607,000
understated by P7,040. The amount of non-controlling
27. Consolidated Net Income attributable to the Parent and
interests assigned at the said date is their proportionate
share on the fair value of identifiable net assets the NCI for 2020 are:
24. Determine the amount of goodwill to be recognized in a. P102,400, P5,600
the consolidated balance sheet at January 1, 2021. b. P102,000, P6,000
a. P32,214 c. P33,654 c. P104,000, P6,000
b. P24,160 d. P36,966 d. P102,000, P5,600

Solution: B Solution: B
Investment in High Tide shares P 125,440 CNI: 80,000 + 30,000 + 8,000 – 10,000 = 108,000
Add: NCI (173,440 – 45,440) + 7,040 Att. To parent 80,000 + 24,000 + 8,000
P135,040 * 25% 33,760 – 10,000 = 102,000
Total 159,200 (30,000 * 80%)
Less: FMV of NA 135,040 Att. To NCI 30,000 * 20% = 6,000
Goodwill P 24,160
Note: Goodwill not GROSSED-UP. FOREIGN CURRENCY
On November 1, 2021, MAGPIE CORPORATION, a
On January 1, 2019, GLOBALPORT CORPORATION Philippine company, sold merchandise to WILLIAM TELL
purchased a delivery truck with an expected useful life of COMPANY, a foreign firm. MAGPIE measured and recorded
the account receivable from the sale at P78,000. WILLIAM

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EXCEL PROFESSIONAL SERVICES, INC.

TELL paid for this account on November 30, 2021. Spot FC 400,000. The option’s purpose is to hedge an exposed
rates for the foreign currency (FC) on November 1 and accounts receivable of FC 400,000 from a sale of
November 30, respectively, were P0.80 and P0.78. merchandise. The merchandise is to be shipped on
28. If the sale of the merchandise was denominated in the December 1, 2020, payment for which is due on March 1,
foreign currency (FC) , the November 30 entry to 2021.
record the receipt of payment from WILLIAM TELL
included a Relevant rates and market values at different dates are as
a. credit to Accounts Receivable for P76,050 follows:
b. credit to Exchange Gain for P1,950 12/01/20 12/31/20 03/01/21
c. debit to Cash for P78,000 Spot rate (market
d. debit to Exchange Loss for P1,950 price) P1.20 P1.12 P1.13
Strike price (exercise
Solution: D price) 1.20 1.20 1.20
Date of transaction (2018) P 78,000 Fair Value of Put
Date of settlement (2018) (FC 97,500 x Option P 6,000 P36,000 P28,000
P0.78) 76,050 31. How much total /net gain (loss) is recognized in the
Forex loss P 1,950 option contract at March 1, 2021?
FC * P0.80 = P78,000 a. P4,000 c. P8,000
FC = 97,500 b. P(4,000) d. P(8,000)

Cash P76,050 Solution: D

Forex loss 1,950 Loss on time value (P6,000 x 2/3) P 4,000
Accounts receivable P78,000 Loss on intrinsic value:
BSD (1.2 -1.12) * 400,000 32,000
DOS (1.2 – 1.13) * 400,000 28,000 4,000
Total loss on put option P 8,000
On November 2, 2021, SUITIC CORPORATION, a Philippine
company, entered into a 90-day contract to sell FC OR FV on BSD 36,000
220,000 in a transaction accounted for as speculation. The Less: FV on DOS 28,000
spot rate for the FC on November 2 was P0.74 and the Loss in 2018 8,000
current quotation for 90-day forwards was P0.68. On
December 31, 2021, the spot rate was P0.78 and the On December 1, 2020, a Philippine Company entered into
quotation for 30-day forwards was P0.65, a contract to purchase FC1,000,000 on March 1, 2021.
29. SUITIC’s entry to record the transaction on November Relevant exchange rates at various dates are as follows:
2, 2021 included a Forward Rate
a. debit to Contract Receivable denominated in FC for Spot Rate (to 3/1/18)
P149,600 December 1, 2020 P0.44 P0.42
b. credit to Contract Payable denominated in FC December 31, 2020 0.39 0.38
for P149,600 March 1, 2021 0.38 -
c. debit to Contract Receivable denominated in FC for
P162,800 Discount rate is 12%. Use the present value factor of
d. credit to Contract Payable denominated in FC for 0.9803.
P154,000. 32. How will the Philippine Company report the fair value
of the forward contract on the balance sheet at
December 31, 2020?
Solution: B a. a liability of P39,212 c. an asset of P49,015
Contact receivable (Php) P 149,600 b. a liability of P50,000 d. an asset of P32,912
Contact payable (FC) P149,600
(FC 220,000 x P0.68) Solution: A
Agreed forward rate P0.42
On December 1, 2020, SYMBOLIC CORPORATION. a Current forward rate P0.38
Philippine company, entered into a 4-month forward Decrease in forward (P0.04 x = P40,000
contract to purchase $250,000 for speculative purposes. rate P1,000,000)
SYMBOLIC’s accounting year ends on December 31. Multiply by PV of = P39,212 liability
Relevant exchange rates are as follows: 0.9803
Date Spot Rate Forward Rate (to JOB ORDER COSTING
3/31/21) During March, RAIN OR SHINE MANUFACTURING
December 1, 2020 P 45.00 P45.50 COMPANY incurred the following costs on Job 007 for the
Dec. 31, 2020 46.00 46.10 manufacture of 200 cans of quick-dry, odorless paint..
January 31, 2021 45.60 45.70
February 28, 2021 45.40 45.55 Original cost accumulation:
March 31, 2021 45.10 Direct materials P 528,000
30. How much exchange difference will be reported from Direct labor 640,000
this forward contract in 2021? Factory overhead (150% of 960,000
a. P50,000 c. P100,000 direct labor cost)
b. P150,000 d. P250,000 Direct cost of reworking 10 units
Direct materials 80,000
Solution: D Direct labor 128,000
Forward rate (12/31/2020): P46.10 Total 208,000
Spot rate (03/31/2021): P45.10
Difference P1.00 * $250,000 P 250,000 The rework costs were attributable to the exacting
specifications of Job 007.
On December 1, 2020, CAMACHILE COMPANY, a Philippine 33. What is the cost per finished unit of Job 007?
firm, paid P6,000 to purchase a 90-day option contract for a. P12,640 c. P11,200

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EXCEL PROFESSIONAL SERVICES, INC.

b. P11,680 d. P10,640
Sales Sales Sales
Solution: A HR Janitorial #1 #2 #3
Original cost (P528,000 + P640,000 + Budgeted cost P45,000 P30,000
P960,000) P2,128,000 Space in sq. ft. 4,000 1,000 20,000 30,000 50,000
# of employees 5 10 15 45 30
Plus additional cost (P80,000 + P128,000
+ P192,000) 400,000 36. Using the step- method and assuming that Human
Total cost charged to Job 007 P2,528,000 Resources is allocated first, the amount of Human
Divide by units produced 200 Resources cost allocated to Sales Department no. 3 is:
Unit cost P 12,640 a. P12,000. c. P12,857.
b. P13,500. d. P15,000.
MAHINDRA CORPORATION uses job order costing system.
Factory overhead is applied to production at a SOLUTION: B
predetermined rate of 150% of direct labor cost. Any over- 45,000 * (30/100 emp) P13,500
or under-applied overhead is closed to the cost of goods
sold account at the end of each month. Additional PROCESS COSTING
information is available as follows: SAN MIGUEL COMPANY employs a process cost system. A
➢ Job 101 was the only job in process at January 31, unit of product passes through three departments –
2021 with accumulated costs as follows: molding, assembly, and finishing – before it is completed.
Direct materials P 3,200 The Finishing department information for May follows:
Direct labor 1,600 Units
Applied factory overhead 2,400 Work-in-process inventory, May 1 1,400
Total P 7,200 Units transferred in from the Assembly 14,000
➢ Jobs 102, 103, and 104 were started during February, department
2021. Units spoiled 700
➢ Direct materials requisitioned for February totaled Units transferred out to finished goods 11,200
P20,800. inventory
➢ Direct labor cost of P16,000 was incurred for February.
➢ Actual factory overhead was P25,600 for February. Raw material is added at the beginning of processing in the
➢ The only job still in process at February 28, 2021 was Finishing department. Work-in-process was 70% complete
Job 104 with costs of P2,240 for direct materials and as to conversion on May 1 and 40% complete as to
P1,440 for direct labor. conversion on May 31. All spoilages were discovered at
34. Over- or under -applied factory overhead should be final inspection before the units were transferred to
closed to the cost of goods sold account at February finished goods; 560 of the units spoiled were within the
28, 2021 in the amount of: expected range.
a. P 560 over-applied c. P1,360 under-applied
b. P 800 over-applied d. P1,600 under-applied The SAN MIGUEL COMPANY uses the weighted average
method. The equivalent units and the current month’s cost
per equivalent unit of production for each cost factor are
as follows:
Solution: D
EUP Cost per EUP
Actual factory overhead P 25,600 Transferred in 15,400 P5.00
Applied factory overhead (P20,000 x 150%) 24,000
Raw materials 15,400 1.00
Under-applied factory overhead P 1,200
Conversion costs 13,300 3.00
Total cost per EUP P9.00
The following cost data pertain to STAR COMPANY for the
month of June, 2021: 37. The cost of production transferred to the finished
Inventories 06/01/21 06/30/21 goods inventory is
Materials P 32,000 P 40,000 a. P100,800 c. P107,100
Work-in-process 20,000 28,000 b. P105,840 d. P102,060
Finished goods 48,000 56,000
Solution: B
Other information Completed & transferred 11,200 x P9 P 100,800
Direct labor cost P96,000 Cost of NLUs 560 x P9 5,040
Factory overhead 86,400 Total cost of completed units P 105,840
applied Department 1 of RIGHTWAY CORPORATION presents the
Cost of goods sold 302,400 following production data for the month of May, 2016.
Opening inventory, 3/8 completed 4,000 units
35. Determine the cost of goods manufactured for June, Started in process 13,000
2021. Transferred to next department 9,000
a. P378,000 c. P398,000 Closing inventory: ½ completed 4,000
b. P310,400 d. P423,000 ¾ completed 4,000
Solution: B
Cost of Goods Sold P 302,400 The cost elements are applied uniformly all throughout the
Finished goods, end 56,000 month.
Finished goods, beginning ( 48,000) 38. Using the first-in-first-out method, the equivalent unit
Cost of goods manufactured P 310,400 of production for Department 1 for the month is
a. 12,500 units c. 14,000 units
The Dollar Store has a Human Resources Department and
b. 15,500 units d. 19,000 units
a Janitorial Department that provide service to three sales
departments. The Human Resources Department cost is
Solution: A
allocated on the basis of employees, and the Janitorial
Opening inventory: 4,000 x 5/8 2,500 units
Department cost is allocated on the basis of space. The
Completed units 5,000 x 100% 5,000
following information is available:

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EXCEL PROFESSIONAL SERVICES, INC.

Closing inventory: 4,000 x ½ 2,000

4,000 x ¾ 3,000 SOLUTION: D
Total EUP for each cost element 12,500 units Total joint product cost P262,000
Less: revenue from by-products 10,000
39. Using the same data in Item 44, what is the EUP for Net joint cost allocated P252,000
Dept. 1 under weighted average? to main products
a. 12,500 units c. 14,000 units Allocated using the SV SV @ SOP
b. 15,500 units d. 19,000 units at split off point
X 300,000 * 0.56 168,000
Solution C Y 150,000 * 0.56 84,000
C&T 9,000 * 100% 9,000 Total SV 450,000 450,000
IP, E 4,000 * ½ 2,000 Rate = 252,000 / 450,000 = 0.56
4,000 * ¾ 3,000
EUP 14,000

JOINT PRODUCTS BY PRODUCTS NGAS

RAINBOW CORPORATION manufactures products W, X, Y, 43. Under the principles of the New Government
and Z from a joint process. Additional information is as Accounting system, which of the following statements
follows: is incorrect?
IF PROCESSED a. An obligation incurred for electricity expense
FURTHER is recognized by a journal entry debiting the
Units Sales Additional Sales expense and crediting the expense payable
Products Produced Value at Costs Value at b. Construction in Progress account is credited to r
Split-off Final
kecognize the Building account upon completion
Point Point
W 6,000 80,000 7,500 90,000 and turnover,
X 5,000 60,000 6,000 70,000 c. Cash – National Treasury-MDS is debited upon
Y 4,000 40,000 4,000 50,000 receipt of the Notice of Cash Allocation from DBM
Z 3,000 20,000 2,500 30,000 d. The remittance to the National Treasury of unused
18,000 200,000 20,000 240,000 cash advances will be debited to the Subsidy
Income from the National Government and
40. Assuming a joint production cost of P160,000 and the
use of the relative sales value at the split-off-point, credited to Cash-Collecting Officer.
what joint costs were allocated to each product?
W X Y Z Solution: A
a. P40,000 P40,000 P40,000 P40,000 Accounting for the incurred obligation requires only a
b. P53,333 P44,000 P35,556 P26,667 memo entry in the RAOMO, before the formal entry is
c. P60,000 P46,545 P33,455 P20,000 recorded upon receipt of the billing.
d. P64,000 P48,000 P32,000 P16,000
44. Which of the following would most likely comes first in
Solution: D the budget process?
Products Sales Value @SOP Percent Joint Cost a. Budget accountability report
W P 80,000 80 P 64,000 b. President’s enactment of the budget
X 60,000 80 48,000 c. Presentation to the Office of the President
Y 40,000 80 32,000 d. Budget Call from the DBM
Z 20,000 80 16,000
Totals P200,000 P160,000 45. Entity A, a government entity, receives authorization
to disburse funds not to exceed ₱1B in a specified
41. Assume the sales values at the SOP are not available, period. This event can be described as
what are the allocated costs under the approximated a. Notice of Cash Allocation
MV method using the same choices under Item 46? b. Allotment
c. Appropriation
Solution: C 46. Entity A, a government entity, receives notice that for
Products SV @ FP APC NRV Joint Cost the current year, the maximum amount it can spend
W P 90,000 P 7,500 P 82,500 P 60,000 on maintenance and other operating expenses is
X 70,000 6,000 64,000 46,545 ₱10B. This event can be described as
Y 50,000 4,000 46,000 33,455 a. Notice of Cash Allocation
Z 30,000 2,500 27,500 20,000 b. Allotment
P240,000 P20,000 P220,000 P160,000
c. Appropriation
d. Budgetication
Life Co. manufactures products X and Y from a joint
process that also yields a by-product, Z. Revenue from
sales of Z is treated as a reduction of joint costs.
NPO
Additional information is as follows:
The following information was available, from the Chris
PRODUCTS X Y Z TOTAL German Hospital in Angat, Bulacan, comprised by donor
Units produced 20,000 10,000 50,000 contributions, received during 2021, for its various hospital
Joint costs ? ? ? P 262,000 expenses. The hospital is a private not-for-profit entity
SV at split-off P300,000 P150,000 P 10,000 P 460,000 that serves the health needs of indigent patients.
Joint costs were allocated using the sales value at split-off A. Contributions not under the authority of the
method. hospital’s Board of Trustees
42. The joint costs allocated to product X were: Expended during 2021 P100,000
a. P 75,000 c. P 100,000 Not expended as at
b. P 150,000 d. P 168,000

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EXCEL PROFESSIONAL SERVICES, INC.

12/31/21 300,000 P 400,000 c. provision of a statement of functional

expenses that reports expenses by both
B. Contributions under the authority of the hospital’s functional and natural classifications.
Board of Trustees d. recognition criteria for assets, which allow the
Expended during 2021 P600,000 recognition of items with improbable inflows of
Not expended as at resources embodying economic benefits.
12/31/21 75,000 675,000
Total P1,075,000
47. How much total unrestricted revenues would be
recognized in the Statement of Activities of CG
Hospital?
a. P600,000 c. P700,000
b. P775,000 d. P675,000

Solution: B
Not under authority (reclassified as
unrestricted when expensed) P100,000
Under authority (initially recognized as
unrestricted) 675,000
Total unrestricted revenues for 2018 P775,000

48. On December 1, 20x1, Ashy Organization, a non-profit

entity, had the following transactions:
• Purchased a vehicle costing ₱150,000 using
unrestricted cash
• Received a vehicle with fair value of ₱120,000 from
donation

Ashy estimates that both of the vehicles have useful

lives of 5 years and no residual value. ABC has an
accounting policy implying a time restriction on gifts of
long-lived assets.

In Ashy’s 20x1 statement of activities, what amount of

depreciation expense should be included under
changes in unrestricted net assets?
a. 54,000
b. 4,500
c. 13,312
d. 0

Solution:
4,500 [(150,000 + 120,000) ÷ 5] x 1/12

49. SABLE Organization, a not-for-profit entity, received

the following donations during 20x1:
• Land with fair value of ₱10,000,000 to be sold to
acquire a bus.
• Shares of stocks with fair value of ₱3,000,000 to
be retained indefinitely. The dividends from the
shares will be used to support current operations. permanently restricted

As a result of the donations above, how much should

SABLE report as increase in temporarily restricted net
assets?
a. 10,000,000
b. 13,000,000
c. 3,000,000
d. 0

Solution: A
The shares of stocks are considered permanently
restricted (amount never to be spent).

50. According to US GAAP, the accounting requirement

unique to Voluntary Health and Welfare Organizations
(VHWO) is the
a. accounting for marketable securities which are
subsequently measured at the lower of cost and
market value.
b. non-depreciation of property, plant and equipment.

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