KINGFISHER SCHOOL OF BUSINESS AND FINANCE

ADVANCED ACCOUNTING AND REPORTING PART I

1. In a Statement of Affairs, assets pledged for partially secured creditors are:

A. Included with assets pledged for fully secured creditors

B. Offset against partially secured liabilities

C. Included with free assets

D. Disregarded

2. The following data were taken from the statement of realization and liquidation of CRASHED
CO.

Assets to be realized 1,375,000 Assets acquired 750,000

Supplementary credits 2,800,000 Assets realized 1,200,000
Liabilities to be liquidated 2,250,000 Liabilities assumed 1,625,000
Supplementary charges 3,125,000 Assets not realized 1,375,000
Liabilities liquidated 1,875,000 Liabilities not liquidated 1,700,000

The ending balances of capital stock and retained earnings are P1,500,000 and P238,000,
respectively. A net loss of P738,000 was reported for the period.

What is the net gain/(loss) for the three-month period?

A. (325,000)

B. 250,000

C. 425,000

D.750,000

3. A company that was to be liquidated had the following liabilities:

Income taxes                                                   10,000

Notes payable secured by land                    100,000

Accounts payable                                           251,050

Salaries payable                                              12,950

Administrative expenses for liquidation    20,000

The company had the following assets:   

                                                                           Book value                         Fair value

Current assets                                                 100,000                              95,000

Land                                                                  50,000                                 75,000

Building                                                           150,000                              200,000

Net free assets:

A. 226,000

B. 251,000

C. 247,050

D. 252,050

3. A company that was to be liquidated had the following liabilities:

Income taxes                                                   10,000
Notes payable secured by land                    100,000
Accounts payable                                           251,050
Salaries payable                                              12,950
Administrative expenses for liquidation    20,000
The company had the following assets:   
                                                                           Book value                         Fair value
Current assets                                                 100,000                              95,000
Land                                                                  50,000                                 75,000
Building                                                           150,000                              200,000
Total liabilities with priority:
A. 19,000
B. 42,950
C. 37,950
D. 44,000

5. It is a construction contract in which the contractor agrees to a fixed contract price, or a fixed rate per unit of
output, which in some cases is subject to cost escalation clauses.

A. Fixed price contract

B. Cost plus contract

C. Variable contract

D. Mixed contract

6. On July 1, 2025, Ellsbury Inc. entered into a contract to deliver one of its specialty machines
to Kickapoo Landscaping Co. the contract requires Kickapoo to pay the contract price of P2,500
in advance on July 15,2025. Kickapoo pays Ellsbury on July 15, 2025 and Ellsbury delivers the
machine with a cost of P1,600 on July 31, 2025. The contract exists on?

A. July 1, 2025
B. July 15, 2025

C. July 31, 2025

D. No contract exists

7. JOLLY, Inc. consigned 10 dozen of fine men's suits, costing P1,000 each suit, to BEE Corp.
JOLLY paid freight cost of P120 per dozen. One month later, BEE reported sales of 7 dozens at
P2,000 each suit plus expenses of P3,000. BEE remitted the proceeds, net of the agreed 15%
commission on sales. The amount remitted to JOLLY by BEE was:

A. P139,500

B. P139,800

C. P142,500

D. P142,800

8. Which freight is capitalizable or inventoriable cost by the consignor on the consigned goods
under consignment sales?

A. Freight from consignor to consignee

B. Freight from consignee to consignor

C. Freight from consignee to final consumers

D. All of the above

9. Under IFRS 15, what is the specific point in time when the consignor satisfies its performance obligation under
consignment contract?

A. Upon delivery of consigned goods by consignor to consignee

B. Upon remittance of cash by consignee to consignor

C. Upon sale of consigned goods by consignee to final consumers

D. Upon signing of contract of consignment by consignor and consignee

10. Philip Construction Company started a project with a contract price of P80 million.
The cost incurred to date is P12 million and the estimated cost to complete is still P48
million. Under the cost to cost basis, how much is the income from construction?

A. P4 million

B. P8 million

C. P20 million

D. P32 million

11. MINA CONSTRUCTION has used the cost-to-cost percentage of completion method to
recognize revenue. Recently, their office was struck by fire. In trying to reconstruct all records of
the company, the accountant was able to find the following information regarding a recently
completed building project for which the total contract was P4,000,000.

2020 2021 2022

Gross profit (loss) each
80,000 280,000 (40,000)
year
Cost incurred each year 720,000 ? 1,640,000

MINA, the owner of the company, would like to find out the answers to the following questions
in relation to the above data:

How much cost was incurred in 2021?

A. 3,680,000

B. 1,640,000

C. 2,360,000

D. 1,320,000

BAYARAN Co., which began operations on January 1, 2021, appropriately uses the installment
method of accounting.  The following information pertains to BAYARAN's operations for the
year 2021:

Installment sales                                             P 2,000,000

Regular sales                                                       1,200,000

Cost of installment sales                                      1,000,000

Cost of regular sales                                              600,000

General and administrative expenses                   200,000

Collections on installment sales                             400,000

12. The balance in the deferred gross profit account should be

A. P 400,000

B. P 640,000

C. P 800,000

D. P1,000,000

13. The realized Gross profit on Installments sales for the year 2021 amounted to

 
A. P800,000

B. P160,000

C. P200,000

D. P150,000

14. The realized Gross profit for the year 2021 amounted to

A. P800,000

B. P160,000

C. P200,000

D. P150,000

15. According to the installment method of accounting, gross profit on an installment sale is
recognized in income:

A. On the date of sale

B. On the date the final cash collection is received.

C. In proportion to the cash collections

D. After cash collections equal to the cost of sales have been received

16. What is the core principle of IFRS 15 Revenue from contracts with customers?

A. Revenue should be recognized when an entity transfers control of goods or services to a

customer.

B. Revenue should be recognized when an entity transfers control of goods or services to a

customer at an amount to which the entity expects to be entitled. 

C. Revenue should be recognized over time in a manner that depicts an entity’s performance.

D. Revenue should be recognized at a point in time when control of the goods or services is
transferred to the customer.

17. Inting Corporation constructs highly specialized communication satellites. A customer in

Hong Kong recently placed an order for a cable TV satellite at a price of P20 million. The order
was placed in April 20x6, and the satellite is to be delivered in one year. The customer has
guaranteed to pay in full at the end of 20x6, regardless of progress or cancellation. Inting uses
"proportion of time" as its measure of progress toward completion. When should Inting
recognize revenue at completion, or as the construction is performed? 

A. Over time

B. Point in time
C. No revenue recognized

D. No performance obligation

18. DJ Builders, Inc. has constantly used the percentage-of-completion method (over time) of
accounting for construction-type contracts. During 2020, DJ started work on a P9,000,000 fixed-
price construction contract that was completed in 2021. DJ’s accounting records disclosed the
following:

12/31/2020 12/31/2021
Cumulative contract costs incurred P3,900,000 P6,300,000
Estimated total costs at completion P7,800,000 P8,100,000

How much income would DJ have recognized on this contract for the year ended December 31,
2021?

A. 100,000

B. 300,000

C. 600,000

D. 700,000

19. Bon Construction Company has consistently used the percentage-of completion method of
recognizing income. During 2025, Bon started work on a P 3,000,000 construction contract
which was completed in 2026. The accounting records provided the following data:

2025 2026
Progress billings 1,100,000 1,900,000
Cost incurred each year 900,000 1,800,000
Collections 700,000 2,300,000
Estimated cost to complete 1,800,000

How much income should Bon have recognized in 2026?

A. 100,000

B. 110,000

C. 150,000

D. 200,000 

20. Pomelo Builders is in the business of constructing apartment buildings. Two buildings were
in progress at the beginning of 2025. The status of these buildings at the beginning of the year
were as follows:

Contract Costs incurred to Estimated costs to price to complete

Contract
Price 1/1/2025 1/1/2025
Apartment- Cubao P1,620,000 P600,000 P840,000
Apartment-
2,520,000 1,560,000 690,000
Marikina

 
During 2025, the following costs were incurred:

Apartment – Cubao P600,000 (estimated cost to complete as of 12/31/2025, P240,000)

Apartment – Marikina P750,000 (job completed)

How much is the gross profit in 2025 if Pomelo uses the percentage-of completion (over time)
method?

A. P 97,800 

B. P210,000

C. P262,200 

D. P360,000

21. The October 1, 2024, Oldies Corp. enters a contract to build a sports arena which it estimated
would cost P 3,120,000. Oldies bills its clients at cost plus 20% and recognized construction
revenue on a percentage-of-completion (over time) basis. Data on this project for 2024, 2025,
and 2026 follow:

Costs incurred Estimated cost to complete

2024 546,000 2,054,000
2025 998,400 1,315,600
2026 1,575,600 -----

Oldies Corps.' gross profit on the project for 20x6 is:

A. P146,640

B. P477,360

C. P237,160

D. P624,000

22. During 2026, Rizza started work on a P 3,000,000 fixed-price construction contract. Any
costs incurred are expected to be recoverable. The accounting records disclosed the following
data for the year ended December 31, 2026: 

Costs incurred                       P 930,000

Estimated cost to complete P 2,170,000

Progress billings                    P 1,100,000

Collections                                        -

How much loss should Rizza have recognized in 2026?

Percentage of Completion Cost Recovery Method

a. 100,000 0
b. 0 0
c. 100,000 100,000
d. 30,000 0

On September 30, 2024 Roxas, Silverio and Tan agreed on a joint operation to sell their common
stock shares of the Golden Copper Mines. Gains and losses are to be shared in proportion to the
contributed shares.

Roxas contributes 6,000 shares, which had cost him P42 a share: Silverlo gave 10,000 shares
which had cost P58 each and Tan 4,000 shares which had cost P62 per share.

The par value of the shares was P50 and when the operation began market value was P40 a
share. Tan was to manage the operation for a flat fee of 3,000 plus expenses.

On October 20 he sold 4,500 shares for P44 a share. On November 1, Golden Copper distributed
stock dividend of 20%. Tan sold 5,000 shares, ex-stock dividend, on November 5 for P25 a
share. On November 15, Golden Copper paid a cash dividend of P1 per share. On November 22,
he sold 6,000 shares for P28. On December 20, the remainder of the shares was sold for P35 a
share. Tan's expenses were P4,700.

23. The 20,000 shares contributed to the joint operation should be valued at:

A. 800,000

B. 1,000,000

C. 1,080,000

D. Some other answer

Reyes and Santos formed a joint operation to acquire and sell a particular lot of merchandise
Reyes was to manage the operation and to furnish the capital, and the operators were to share
equal in any gain or loss. On June 10, 2024. Santos sent Reyes P10.000 cash, which was
immediately used to purchase merchandise which cost P10,000. Reyes paid freight of P240 on
the merchandise purchased. On June 24, one half merchandise was sold for P7,200 cash. Reves
paid the cost of delivering merchandise to customers, which amounted to P260. No further
transactions occurred on June 30, 2024.

24. The profit (loss) of the operation for the period June 10 - June 30, 2024 is:

A. 1,820

B. 1,950

C. (1,700)

D. 2,080

Reyes and Santos formed a joint operation to acquire and sell a particular lot of merchandise
Reyes was to manage the operation and to furnish the capital, and the operators were to share
equal in any gain or loss. On June 10, 2024. Santos sent Reyes P10.000 cash, which was
immediately used to purchase merchandise which cost P10,000. Reyes paid freight of P240 on
the merchandise purchased. On June 24, one half merchandise was sold for P7,200 cash. Reves
paid the cost of delivering merchandise to customers, which amounted to P260. No further
transactions occurred on June 30, 2024.

25. On June 30, 2024 after recognizing the profit (loss) on the uncompleted operation, the
account of Santos on the books of Reyes will show a debit (credit) balance of:

A. (10,910)

B. (10,975)

C. 10,850

D. 11,250

26. SON Corporation purchased 25 percent of FATHER Company's stock in January, 2025 for
P400,000. At the acquisition date, FATHER has equipment with a market value P90,000 greater
than book value. The equipment has an estimated remaining life of 10 years. In 2025, FATHER
has net income of P160,000 and pays P50,000 of dividends. What is the balance in the
investment account on Richardson's financial records at the end of 2025?

A. P400,000 

B. P425,250

C. P427,500 

D. P437,750

27. A joint arrangement can be either a …

A. Joint venture or joint subsidiary

B. Joint operation or a joint venture

C. Joint operation or joint entity

D. Joint entity or joint subsidiary

28. What entities shall apply IFRS 11?

A. Only those entities that have joint control over a joint arrangement

B. Only those entities that have significant influence over a joint arrangement

C. Only those entities that are a party to a joint arrangement

D. NONE of the above

29. The Felix Contracting Co. uses the percentage of completion method of recognizing profit. Data
for a recently awarded project is given below:
Contract Price - P80,000,000

2019 2020 2021

Estimated costs per year P20,100,000 P30,150,000 P16,750,000

Progress billings per year 10,000,000 25,000,000 45,000,000

Cash collections 8,000,000 23,000,000 49,000,000

Using the data provided above, calculate Felix's gross profit for 2020, Assume that the estimated
costs were actually incurred during the year 
A. P5,850,000 
B. P3,900,000
C. P3,250,000 
D. P9,750,000

30. CRC has two construction jobs which commenced during 2021:
Project 1 Project 2

Contract Price P 2,100,000 P750,000

Cost incurred during 2021 600,000 700,000

Estimated cost to complete 300,000 175,000

Contract billings during 2021 625,000 725,000

Collections 600,000 700,000

Expenses 50,000 25,000

Compute the net income (loss) that CRC would report in its 2021 Statement of Comprehensive
Income.

                  Zero-Profit Percentage of Completion

A P (100,000) P (675,000)

B P (150,000) P (600,000)

C P (150,000) P (750,000)

D P (200,000) P (600,000)

31. Savory charges an initial franchise fee of P75,000 for the right to operate as a franchise of ALL’s
Restaurant. Of this amount, P 25,000 is collected immediately. The remainder is collected in four 
equal annual installment payments of P 12,500 each. These installments have a present value 
P39,623 There is reasonable expectation that the down payment may be refunded and future
services are yet to be performed by Savory.

The journal entry to record the franchise would be:

A. Dr. Cash-25,000, Dr. Notes Receivable-50,000, Cr. Unearned Interest Income-10,377, Cr.
Franchise-64,623
B. Dr. Cash-25,000, Dr. Notes Receivable-50,000, Cr. Unearned Interest Income-10,377,
Cr. Unearned Franchise Revenue-64,623
 C. Dr. Cash-25,000, Dr. Notes Receivable-50,000, Cr. Unearned Interest Income-10,377, Cr.
Unearned Franchise Revenue-39,623, Cr. Franchise Revenue-39,623
D. Dr. Cash-25,000, Dr. Notes Receivable-50,000, Cr. Unearned Interest Income-10,377, Cr.
Unearned Franchise Revenue-39,623, Cr. Franchise Revenue-25,000

32. On December 31, 2019, the statement of affairs of BANKRUPT COMPANY, which is in
bankruptcy liquidation, included the following:
Assets pledged for fully secured liabilities 100,000
Assets pledged for partially secured liabilities 40,000
Free assets 120,000
Fully secured liabilities 80,000
Partially secured liabilities 50,000
Unsecured liabilities with priority 60,000
Unsecured liabilities without priority 90,000

Compute the amount paid to:

Fully secured Unsecured liabilities Partially secured Unsecured

liabilities with priority liabilities liabilities
without priority
A 80,000 60,000 50,000 70,000
B 64,000 60,000 48,000 88,000
C 80,000 48,000 60,000 72,000
D 80,000 60,000 48,000 72,000

33. The estimated amount available for Free Assets in a Statement of Affairs for a business enterprise
undergoing bankruptcy liquidation is equal to the assets:
a. Carrying amounts less current fair values
b. Carrying amounts plus gain or less loss on realization
c. Carrying amounts plus loss or less gain on realization
d. Current fair values less carrying amount

34. When Spencer Company filed for liquidation with the Securities and Exchange Commission, it
prepared the following balance sheet.

Current assets, net realizable value, 80,000

50,000
Land and buildings, fair value, 240,000 200,000
Goodwill, fair value, 0 40,000
Total assets 320,000
Accounts payable 160,000
Mortgage payable, secured by land and 200,000
building
Common stock 100,000
Retained earnings, deficit (140,000)
Total equities 320,000
What is the estimated deficiency to unsecured creditors?
a. 70,000
b. 90,000
c. 120,000
d. 140,000

35. On November 1, 2026, the Western Appliance Center ships five (5) of its appliances to the ABC
Store on consignment. Each unit is to be sold at P25,000 payable P5,000 in the month of purchase
and P1,000 per month thereafter. The consignee is to be entitled to 20% of all amounts collected
 on consignment sales. ABC Store sells three (3) appliances in November and one (1) on
December. Regular monthly collections are made by the consignee, and appropriate cash
remittances are made to the consignor at the end of each month. The cost of the appliances
shipped by the consignor was P15,500 per unit. The consignor paid shipping costs to the
consignee totaling P5,000. The total amount remitted to consignor for the year 2026 is:
a. P23,000
b. P18,400
c. P12,000
d. P 6,400

36. General Company consigned five computer equipments, with cost of P8,000 each, to the Xaviery
Computers which was to sell these goods for the account and risk of the former for a commission
of 15% of selling price. The General Company paid trucking costs of P2,000 on the shipment.
Correspondingly, Xaviery Computers paid P3,200 on the freight of the shipment
On the last day of the year. Xaviery Computers reported that it sold three of the computers: two
for cash at P15,000 each and one on credit at P18,000 of which 25% was collected as
downpayment. Xaviery Computers remitted all the cash due. The consignment net income (loss)
is:
a. P10,400

b. P11,600

c. P12,400

d. P13,680

37. On May 10,2027, Marc Co, enters into a contract to deliver a product to Josh Inc. on June 15,
2027. Josh agrees to pay the full contract price of P4,000 on July 15,2027. The cost of the goods
is P2,600. Marc delivers the products to Josh on June 15, 2027 and receives payment on July 15,
2027. The contract exists on?
a. May 10, 2027
b. June 15, 2027
c. July 15, 2027
d. None of the above

38. On November 1, 2025, Green Valley Farm entered into a contract to buy a P75,000 harvester
from John Deere. The contract required Green Valley Farm to pay P75,000 in advance on
November 1, 2025. The harvester costing P55,000 was delivered on November 30, 2025. The
journal entry for John Deere to record the delivery of the equipment includes:
a. Debit to Unearned Sales Revenue of P75,000
b. Credit to Unearned Sales Revenue for P75,000
c. Credit to Cost of Goods Sold for P55,000
d. Debit to inventory for P55,000

39. On February 1st, H&B Bank originated loan for P50,000 at an interest rate of 7.2%. On March
15th, an interest payment of P300 was received. Which of the following best describes when
interest revenue should be recognized?
a. At a point in time (February 1st)
b. At a point in time (March 15th)
c. At a point in time (March 31st)
d. Over time
40. Johnson sells P100,000 of product to Robbins, and also purchases P10,000 of advertising services
from Robbins. The advertising services have a fair value of P8,000. Johnson should record
revenue on its sale of product to Robbins of:
a. P98,000
b. P92,000
c. P90,000
d. Zero

41. Which of the following is not true?

a. License fees are recognized over time for any license that is viewed as providing a right of
access.
b. Licensing fees are recognized as revenue over time for any licenses for which the seller
expects its ongoing activities to affect the benefits that the buyer receives from intellectual
property.
c. License fees are recognized as revenue at a point in time if the buyer expects that the seller’s
future activities will not affect the benefit the buyer receives from intellectual property.
d. Licensing fees always are recognized as revenue at the end of the license period when
the seller has completed its performance obligation to provide access to its intellectual
property.

42. Under IFRS 15, how shall revenue from contracts with customer such as revenue from initial
franchise fee be recognized by the franchisor?
a. Upon receipt of the initial franchise fee by the franchisor.
b. Upon signing of the franchise agreement.
c. When the franchisor satisfies the performance obligation under the franchise
agreement.
d. Applying the legality over the substance of the transaction.

On January 1, 2020, an entity granted a franchise to a franchisee. The franchise agreement

required the franchise to pay a nonrefundable upfront fee in the amount of P400,000 and on-
going payment of royalties equivalent to 5% of the sales of the franchise. The franchisee paid the
nonrefundable upfront fee on January 1, 2020.
In relation to the nonrefundable upfront fee, the franchise agreement required the entity to render
the following performance obligations:

 To contract the franchisee's stall with stand-alone selling price of P200,000

 To deliver 10,000 units of raw materials to the franchisee with stand-alone selling price of
P250,000.
 To allow the franchise to use the entity trade name for a period of 10 years starting January 1,
2020 with stand-alone selling price of P50,000
On June 30, 2020, the entity completed the construction of the franchisee's stall. On December
31, 2020, the entity was able to deliver 3,000 wits of raw materials to the franchisee. For the year
ended December 31, 2020, the franchisee reported sales revenue amounting to P100,000.
The entity had determined that the performance obligations we separate and distinct from one
another. Revenue from the right to use the trade name of the franchisor is recognized over time.
43. What is the anion of nonrefundable upfront fee to be allocated to the construction franchisee's
stall?
a. 200,000
b. 160,000
 c. 250,000
d. 120,000

44. What Is the amount of revenue to be recognized in relation to the use of delivery of raw materials
for the year ended December 31, 2020?
a. 100,000
b. 200,000
c. 60,000
d. 75,000

45. What is the amount of revenue to be recognized in relation to the use of entity's trade name for
the year ended December 31, 2020?
a. 5,000
b. 4,000
c. 50,000
d. 10,000

46. When the outcome of a construction contract cannot be estimated reliably, how shall contract
revenue and contacts costs associated with the construction contract be recognized?
a. They shall be recognized as revenue and expenses respectively by reference to the state of
completion of the contract activity at the end of the reporting period also known as by
percentage of completion method

b. They shall be recognized as revenue and expenses respectively by reference to the percentage
of collection of receivables from customers also known as by instalment method

c. They shall be recognized as revenue and expenses respectively by the date of earning of
revenue or incurring of expenses also known as accrual method.

d. Revenue shall be recognized only to the extent of contract cost incurred that it is
probable will be recoverable and the contract cost shall be recognized as an expense in
the period in which there are incurred also known as cost recovery or zero-profit
method.

47. When the company changes its percentage of completion of the construction project every year,
how shall the accounting change be treated?

a. It shall be accounted for as a change in accounting policy treated by retrospective application or

with cumulative effect in the beginning retained earnings at the date of change.
b. It shall be accounted for as a change in account estimate treated by prospective
application to the date of change and future date profit or loss.
c. It shall be accounted for as a prior period error treated by retrospective cumulative effect in the
beginning retained earnings at the date of discovery of error.
d. It shall be accounted for as an equity transaction to be adjusted in the share premium or other
comprehensive income as the case may be.
48. If the branch receives credit memo from the home office, the branch shall record it in its separate
statement of financial position by
a. Increasing the home office account
b. Crediting the home office account
c. Debiting the home office account
d. Disclosure

49. In the separate statement of financial position of the home office, the investment in branch
account shall be presented as
a. Liability
b. Equity
c. Asset
d. Income

50. Which of the following transactions will decrease the investment in branch's
account in home office's' separate statement of financial position?
A. Net income of the branch
B. Payment of branch's liability by the home office
C. Credit memo received from the branch
D. Return by branch to home office of merchandise shipped.

51. Which of the following statements regarding accounting for home office and
branch is CORRECT?
a. The required balance of the Allowance for Overvaluation account is the mark-
up in the total ending inventory of the branch.
b. The combined net income of the home office and its branches is
presented in the separate Statement of Comprehensive Income of the
Home office.
c. The income of the branch as far as the home office is concern is debited to
Investment in Branch account in the separate books of the home office.
d. The home office ships merchandise to the branch at a mark-up based on cost,
as a consequence the retained earnings of the branch in its separate books is
understated.

52. Which of the following does not indicate that a customer can benefit from a good
or service either on its own or together with other resources that are readily
available to customer?
a. The good or service could be used, consumed, sold for an amount
that is greater than scrap value or otherwise held in a way that
generates economic benefits.
b. The fact that the entity regularly sells a good or service separately.
c. The fact that the entity has no alternative use for the good or service.
d. All of these are indicators.
53. Handyman Company has a branch in San Carlos City. Shipments of
merchandise to the branch totaled P.297,000 for the year, which included a 25%
mark-up on cost.
The following data summarizing branch operations for the period ended
December 31, 2019:

Sales on account P407,000

Sales on cash basis 121,000
Collections of accounts 330,000
Expenses paid 149,000
Expenses unpaid 41,000
Purchase of merchandise for cash 143,000
Inventory on hand, January 1 (60% from outside purchases) 114,000
Inventory on hand, December 31 (70% from home office) 165,000
Remittances to home office 302,500

Allowance for overvaluation of branch inventory amounted to P 67,000 in the

home office books. In the home office books, the branch net income (loss) is:
A. P16,000 B. (P51,000) C. (7,100) D. (P5,580)

54. The Manila Branch of the Milestone Company is billed for merchandise by the
home office at 20% above cost. The branch in turn, prices merchandise for sales
purposes at 25% above billed price. On February 29, all of the branch
merchandise branch merchandise is destroyed by fire. No insurance was
maintained. Branch accounts show the following information:

Merchandise inventory, January 1 (at billed P26,400

price)
Shipments from home office (January 1 to 20,000
February 29)
Sales 15,000
Sales returns 2,000
Sales allowances 1,000

What was the cost merchandise destroyed by fire?

A. P36,000 B. P30,667 C. P36,800 D. P30,000

The Davao City branch of Octagon Enterprise, Davao was billed for merchandise
shipments from home office at cost plus 25% 2017 and cost plus 20 % in 2018.
Other pertinent data for 2018:
Davao branch Home office
Sales P630,000 P2,120,000
Inventory 89,000 (at billed price) 230,000 (at cost)
Purchases 1,640,000
Inventory transfers 504,400 (at billed price) 420,000 (at cost)
Inventory, end 117,000 (at billed price) 285,000 (at cost)
Expenses 203,000 764,000
 55. What will bet the combined cost of sales of Davao branch and Octagon’s home
office that must be shown in the combined income statement?
A. P224,300 B. P1,558,150 C. P1,558,700 D. P220,400

56. The following data were taken from the records of BMW Corporation of Baguio
and its Davao Branch for 2018:
Baguio Branch Davao Branch
Sales P530,000 P157,500
Inventory, January 1, 57,500 22,250
Purchases 410,000
Shipments to branch 410,000
Shipment from home 126,000
office
Inventory, December 31 71,250 29,250
Expenses 191,000 50,750

In 2018, Baguio Office billed the Davao Branch at 120% of cost which was lower
by 5% than last year’s. The combined net income of the home office and the
branch is:
A. P48,325 B. P48,575 C. P49,650 D. P56,075

57. Robinsons Land recognizes construction revenue and cost using the percentage of
completion method. During 2022, a single long-term project begun which continue
through 2022. Information on the project follows:

2022 2023
Collections 200,000 600,000
Construction in progress net of
44,000 (112,000)
billings
Contract billings 200,000 840,000
Current year gross profit 34,000 100,000

How much is the cost incurred each year?

A. 210,000; 684,000

B. 210,000; 384,000

C. 125,000; 356,000

D. 125,000; 796,000

58. Under IFRS 15, in which of the following instances shall an entity recognize revenue through
satisfaction of performance obligation at a point in time instead of satisfaction of performance
obligation over time?

A. The customer simultaneously receives and consumes the benefits provided by the entity's
performance as the entity performs.

B. The entity's performance creates or enhances an asset that the customer controls as the asset is
created or enhanced.
C. The entity's performance does not create an asset with an alternative use to the entity and the
entity has an enforceable right to payment for performance completed to date.

D. The entity has transferred the legal title, control and physical possession of the asset at a
specified date.

59. PFRS 11 Joint Arrangements, provides that joint control exists where:

A) no single party is in a position to control the activity unilaterally.

B) no one party may be appointed as the manager of the joint arrangement.

C) one party alone has power to control the strategic operating decisions of the joint
arrangement.

D) the decisions in areas essential to the goals of the joint arrangement do not require the consent
of the parties.

60. Vat Company acquired a 30 percent interest in the voting stock of Zel Company for
P331,000 on January 1, 2021, when Zel's stockholder’s equity consisted of capital stock of
P600,000 and retained earnings of P400,000. At the time of Vat's investment, Zel's assets and
liabilities were recorded at their fair values, except for inventories that were undervalued by
P30,000 and a building with a 10-year remaining useful life that was overvalued by P60,000. Zel
has income for 2021 of P100,000 and pays dividends of P50,000. Assume undervalued
inventories are sold in 2021. Using equity method.

Compute Vat's income from Zel for 2021.

A. Nil

B. 15,000

C. 22,800

D. 30,000

61. AYALA LAND, INC. began work on a P 70 million contract in 2019 to construct an office
building. During 2019, LPB uses the percentage of completion method. At 12/31/2019, the
balance in certain accounts were: construction in process P 24.5 million; accounts receivable P
2.4 million; and billings on construction in process, P 12 million. At 12/31/2019, the estimated
future costs to complete the project total P 31.85 million.

Prepare the entry to record the income from construction recognized in year 2019

A. Construction in Progress                             7,350,000

Construction Costs                                         24,500,000

               Construction Revenue                                                  31,850,000

B. Construction in Progress                               7,350,000

     Construction Costs                                        17,150,000

                   Construction Revenue                                                24,500,000

C. Construction Costs                                        24,500,000

                Construction in Progress                                                7,350,000

                Construction Revenue                                                  17,150,000

D. Construction Costs                                        31,850,000

                   Construction Revenue                                                  24,500,000

                    Construction in Progress                                                7,350,000

62. The Stonerich Construction had two projects for which it reported the following as of the end
of 2019.

Quezon city Mandaluyong

Contract price 4,800,000 960,000
2018: Costs incurred 3,500,000 -
Percent completed 75% -
2019: costs incurred 1,240,000 140,000
Percent complete 100% 15%

How much is income from construction for 2019?

A. P51,000 loss

B. P40,000 loss

C. P36,000 loss

D. P100,000 income

63. Under IFRS 15, what is the specific point in time when the consignor satisfies its
performance obligation under consignment contract?

A. Upon delivery of consigned goods by consignor to consignee

B. Upon remittance of cash by consignee to consignor

C. Upon sale of consigned goods by consignee to final consumers

D. Upon signing of contract of consignment by consignor and consignee

64. JOLLY, Inc. consigned 10 dozen of fine men's suits, costing P1,000 each suit, to BEE Corp.  JOLLY paid
freight cost of P120 per dozen. One month later, BEE reported sales of 7 dozens at P2,000 each suit plus expenses of
P3,000. BEE remitted the proceeds, net of the agreed 15% commission on sales. The amount remitted to JOLLY by
BEE was:

A. P139,500

B. P139,800

C. P142,500
D. P142,800

65. Which of the following is not true about contract liabilities?

A. Contract liabilities are only recognized when the seller has a conditional right to receive
payment.

B. Contract liabilities might be called deferred revenue.

C. Contract liabilities are recognized when the seller has been paid in advance of satisfying its
performance obligations.

D. Contract liabilities may be shown on a separate line of the balance sheet.

66. In corporate liquidation, creditors having priority are what type of creditors?

Secured creditors Unsecured creditors

A Yes Yes
B Yes No
C No Yes
D No No

67. When STILL LOVING YOU Company filed for liquidation with the Securities and
Exchange Commission, it prepared the following balance sheet.

                       

Current assets, net realizable value, 50,000 80,000

Land and buildings, fair value, 240,000 200,000
Goodwill, fair value, 0 40,000
Total assets 320,000
Accounts payable 160,000
Mortgage payable, secured by land and
200,000
building
Common stock 100,000
Retained earnings, deficit (140,000)
Total equities 320,000

What percentage of their claims are the unsecured creditors likely to get?

A. 43.75%

B. 50.00%

C. 56.25%

D. 100.00%

At the end of the year the Investment in Bacolod account of the home office is P300,500. However there
are transactions discovered to have errors.

 Bacolod branch bought equipment on June 1, 2020 costing P63,800 for the home office's use
and the policy is to record the asset in Bacolod's books. During that time the home office
recorded the equipment and credited its reciprocal account of its Bacolod branch.
 The policy of the company regarding the equipment's depreciation is that it has a life of 8 yrs
with no salvage value and the straight-line method should be used. No entry has been made
by the home office and branch.
 The home office ships merchandise to Bacolod amounting to P96,700. Bacolod recorded the
transaction as P97,600.
 Bacolod pays the home office's creditors in the amount of P32,400 and sends a debit memo
to the home office. Upon receipt of the debit memo, the home office debited its reciprocal
account in the amount of P23,400 twice.
68. What is the unadjusted balance of the home office current account in the books of
Bacolod at the end of the year?
a. 379,600
b. 252,000
c. 286,000
d. 315,800
69. What is the net adjustment of the investment in Bacolod account at the end of the
year?
a. 20,052 debit
b. 20,052 credit
c. 19,387.5 debit
d. 19,387.5 credit

70. What is the net adjustment of the home office current account in the books of Bacolod
branch at the end of the year?
a. 4,887.5 debit
b. 4,887.5 credit
c. 5,552 debit
d. 5,552 credit