CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING

Final Preboard Examination

SOLUTIONS

1. A

Unadjusted capital of B 320,000

Share of B in the excess of BV over FV (overstatement) of total assets
(152,000)
(1,748,000 - 2,128,000) x 40%
Share of B in the excess of BV over FV (overstatement) of other
4,800
current liabilities (140,000 - 152,000) x 40%
Adjusted capital of B 172,800
x 50%
50% of B's capital interest based on fair value 86,400

2. C

Share of B in the total net income 850,000

Salary of B (600,000)
B's share in the remainder 250,000
÷ 50%
Total remainder 500,000
Total salaries (750,000 + 600,000) 1,350,000
Total net income 1,850,000

3. C

4. C

5. A

Total contributed capital

13,125,000
(3,750,000 + 4,500,000 + 4,875,000)
Undervaluation of an asset 1,500,000
Total agreed capital (4,875,000 x 3) 14,625,000

Capital of B before admission 4,500,000

Share in the undervaluation (1,500,000 x 50%) 750,000
Capital of B after admission 5,250,000

6. A

Total interest of partners before liquidation

750,000
(12,500 + 312,500 + 312,500 + 112,500)
Loss on realization (472,500)
Total cash paid to partners 277,500

Proceeds from the sale of non-cash assets 290,000

BV of non-cash asset sold (762,500)
Loss on realization (472,500)
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7. C

Aggregate (64,980 x 102) 6,627,960

FMV Identifiable net asset of B (9,950,000 - 2,932,000) (7,018,000)
Gain on bargain purchase (390,040)

Issued shares at FMV (64,980 x 102) 6,627,960

Gain on bargain purchase 390,040
Increase in stockholders' equity after merger 7,018,000

8. D

CNI-P
Net income of P per books 105,000
Net income of S per books (31,500 x 80%) 25,200
Impairment loss (2,400)
Intercompany dividends (17,500 x 80%) (14,000)
113,800

Conso RE, beg (RE of Parent) 280,000

CNI-P 113,800
Dividends declared by Parent (63,000)
Conso RE, end 12/31/2024 330,800

9. C

NCI-NI
Net income of S per books (95,000 x 20%) 19,000
Amortization excess of FV over BV of plant assets
(1,000)
(50,000 ÷ 10 x 20%)
18,000

NCI, beginning (487,500 ÷ 80% x 20%) 121,875

NCI-NI 18,000
Share of Subsidiary in his dividends declared (50,000 ÷ 80% x 20%) (12,500)
NCI, ending 12/31/2024 127,375

NOTE: The initial measurement of the NCI is equal to the assumed amount because the fair
value of the assumed amount was greater than the proportionate share of 110,000 (550,000 x
20%).

10. A

NCI-NI
Net income of S per books (60,000 x 20%) 12,000
Upstream URG [(24,000 - 12,000) x 20%] (2,400)
Upstream RG from 4/1 to 12/31 (12,000 ÷ 5 x 9/12) x 20% 360
9,960
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11. A
CNI-P
Net income of P per books 945,000
Net income of S per books (165,000 x 70%) 115,500
Upstream RG in 2025 (01/01 to 12/31) [(337,500 - 270,000) ÷ 6] x 70% 7,875
Downstream URL (570,000 - 630,000) 60,000
Downstream RL in 2025 from 10/1 to 12/31 (60,000 ÷ 5 x 3/12) (3,000)
1,125,375

12. B
CNI-P
Net income of P per books 75,250
Net income of S per books (21,875 x 60%) 13,125
Intercompany dividends (17,500 x 60%) (10,500)
Upstream UPEI in 2025 [(21,000 x 30% x 25/125) x 60% (756)
Upstream RPBI in 2025 [(17,500 x 20% x 25/125) x 60% 420
77,539

13. D

Cost of goods sold per books (131,250 + 52,500) 183,750

Intercompany sale of inventory in 2025 (42,000)
UPEI in 2025 [(21,000 x 30% x 25/125) 1,260
RPBI in 2025 [(17,500 x 20% x 25/125) (700)
142,310

14. B

Total budgeted OH 14,240,000

Total budgeted machine hrs ÷ 1,600,000
Predetermined rate 8.9

Machine hrs used J1 68,000

x 8.9
OH applied J1 605,200

15. D

Budgeted OH materials related 3,840,000

Budgeted cost of materials ÷ 12,800,000
Predetermined rate .30

Budgeted OH machine related 10,400,000

Budgeted cost of materials ÷ 1,600,000
Predetermined rate 6.50

Direct materials J3 312,000

Direct labor J3 144,000
OH applied J3 244,400 [(312,000 x .30) + (23,200 x 6.50)]
Total cost J3 700,400
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16. D

17. B

NRV by-product [(1,200 x 5) – 3,500] 2,500

Allocation base: Alpha: (25,000 x 15) – 16,200 358,800 (60%)

Beta: (14,425 x 20) – 49,300 239,200 (40%)
598,000

Joint cost to be allocated (375,000 – 2,500) 372,500

Share in joint cost (372,500 x 60%) 223,500

Separable cost 16,200
CGM 239,700
÷ 25,000
Cost per unit 9.588

Gross profit (15 – 9.588) x 23,000 124,476

18. C

MIP ending inventory (5,250 - 5,000) x 75 18,750

19. B

20. D

21. D

EUP Schedule
Direct materials Conversion
Beginning 8,000 2,000
Started and completed 12,000 12,000
Ending 5,000 4,250
Normal lost units - 1,400
Abnormal lost units - 700
EUP 25,000 20,350

Alternative:
Direct materials Conversion
Completed 20,000 20,000
Ending 5,000 4,250
Beginning ( - ) (6,000)
Normal lost units - 1,400
Abnormal lost units - 700
EUP 25,000 20,350
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Cost per EUP:

Direct materials (375,000 ÷ 25,000) 15
Conversion (569,800 ÷ 20,350) 28
43
Normal spoilage:
Conversion (1,400 x 28) 39,200

Allocation base for normal spoilage:

CC
Started and completed 12,000
Ending 4,250
16,250

NOTE: Since the percent complete as to conversion of the materials was 75% then it did not
reach the policy for the placement of materials of 80% complete, therefore no materials were
added LAST YEAR. All of the materials were added THIS YEAR. No normal spoilage as to
direct materials because no normal lost units was accounted for in the EUP schedule as to direct
materials. Units were inspected first before placement, thus no lost units were accounted.

Beginning inventory cost 38,000

Beginning inventory cost to complete
this year: DM (8,000 x 100% x 15) 120,000
CC (8,000 x 25% x 28) 56,000
Beginning inventory completed cost 214,000
Started and completed (12,000 x 43) 516,000
Share in normal spoilage:
CC (39,200 x 12,000/16,250) 28,948
Transferred-out cost 758,948

NOTE: The normal spoilage was allocated only in the units started and in the ending units only
because those units passed the 70% inspection point. As to the beginning units, it also past the
inspection point, but it happened last year, thus no spoilage was allocated to it.

22. B

Direct materials (5,000 x 15) 75,000

Conversion (4,250 x 28) 119,000
Share in normal spoilage:
CC (39,200 x 4,250/16,250) 10,252
Ending inventory cost 204,252

23. A

Conversion (700 x 28) 19,600

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24. C

25. B

26. C

27. D

Initial measurement of investment (100,000 + 1,000) 101,000

Impairment loss (3,000)
Recoverable amount (102,000 - 4,000) / Investment in Entity Z 12/31/2024 98,000

NOTE: Since the recoverable amount is less than the carrying amount of the investment, then
there is an impairment loss to be recognized.

28. A

Dividend income (20,000 x 30%) 6,000

Impairment loss (3,000)
Net profit 3,000

29. D
NOTE: Since there is a quoted price, even if Entity A initially elected to use the cost model,
Entity A must use the Fair value model

30. D

31. A

32. A

33. C

34. D

35. D

36. C

37. C

Net Cash Operating Activities: [(4,500,000 + 240,000) - (900,000 + 350,000 + 320,000)] =

3,170,000

38. D

Net Cash Financing Activities: [(575,000 + 1,000,000 + 150,000) - (400,000)] = 1,325,000

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39. C

Supporting expenses: (350,000 + 320,000) = 670,000

40. C

41. B

42. D

1/1/24 3/31/24
FV of put option P19,600 P22,800
Intrinsic value 4,030 7,410
*Time value 15,570 15,390 decreased by P180

*Difference between FV of option and intrinsic value

1/1/24 (in the money)
Option price P4.965
Spot rate 4.934
.031 x $130,000 = 4,030

3/31/24 (in the money)

Option price P4.965
Spot rate 4.908
.057 x $130,000 = 7,410

43. A

3/31/24 6/30/24
FV of put option P22,800 P27,950
Intrinsic value 7,410 27,950 increased by P20,540
Time value 15,390 0

Intrinsic value on 6/30/2024 [130,000 x (4.965- 4.75)] 27,950

44. D

AUD35,000 x (34.30 - 36.70) 84,000 positive

NOTE: Since the balance of the Forward contract receivable of 1,284,500 (35,000 x 36.70) is
greater than the balance of the Forward contract payable of 1,200,500 (35,000 x 34.30) then the
difference of 84,000 is considered an asset (positive).

45. B

AUD35,000 x (36.70 - 39.50) 98,000 loss

NOTE: Since the forward rate increased from 36.70 to 39.50, then the underlying liability in the
hedge item also increased resulting to a forex loss.

46. A
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47. C

Total Assets $980,000 * 7.75 = P7,595,000

Total Liabilities $196,000 * 7.75 = P1,519,000

Ordinary shares 490,000 * 7.10 = P3,479,000
Retained Earnings 294,000 * 7.50 = P2,205,000
7,203,000
CTA 392,000
7,595,000

48. D

893,150 x (1.69 - 1.65) 35,726 loss

NOTE: Since the spot rate decreased from 1.69 to 1.65, then the exposed accounts receivable
also decreased resulting to a forex loss.

49. B

50. D

51. D

Trading Securities P1,280,000 – 1,120,000 = 160,000

Land & Bldg. P1,800,000 – 1,000,000 = 800,000
960,000

52. A

Trading Securities P1,280,000 – 1,120,000 = 160,000

Land & Bldg. P1,800,000 – 1,000,000 = 800,000
960,000
Inventories 120,000
1,080,000
Less: Unsecured priority claims (30,000)
1,050,000

53. C

Sales 400,000
CGS (288,000)
GP 112,000
Trustee Expense (24,000)
Depreciation (96,000)
Loss in MS (20,000)
(28,000)
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54. D

AR 228,000 ( P88,000; old + P140,000; new)

PA 384,000 (P480,000 – P96,000)
612,000

55. D

56. A

Home Office Current 1,950,000 + 21,600 – 5,400 = 1,966,200

57. D

SFHO 266,400
F-in 24,800
Cash 11,200
HOC 280,000

58. C

Allowance for Overvaluation, beg (P2,160,000/225% *125%) 1,200,000

Allowance for Overvaluation, during the year (P10,800,000 * 125%) 13,500,000
Allowance for Overvaluation Before Adjustment 14,700,000
Less: Allowance for Overvaluation After Adjustment (1,710,000)
12,990,000

59. C

2,600,000/ 130% = * 30% = 600,000; 980,000 – 600,000 = 380,000 mark-up, beg

Inventory, beg P1,900,000 + 380,000 + 432,000 + 1,160,000 + 2,600,000 = 6,472,000

60. C

Sales 3,215,625
Sales Discount ( 53,103.75)
CGS ( 2,411,718.75)
Expenses
Samples (257,250) P490,000 * 90% * 7/12
Paid Vouchers (214,375)
279,177.50
61. A

62. D
2024 2025
CP 56M 56M * 80% = 44.8M
TEC (84) (52.5)
EGP/Loss (28) 3.5
POC 100% 80%
To date (28) 2.8
PY - 28
CY (28) 30.8
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63. A

64. C

(8,400 + 2,100 + 5,460 + 3,500 + .10x + 914,200 = x) 933,660/.90x

x = 1,037,400/ 13.30 = 78,000 units sold

Sales 1,037,400
CGS ( 554,190) (700,000 + 7,000 + 3,500 = 710,500 * 78/100)
GP 483,210
AE (8,400)
DE (2,100)
Ins (5,460)
CE (103,740)
363,510

Inventory 710,500 * 22/100 = 156,310

65. C

66. B

Access 400,000 300,000/5 60,000

Construction 1,600,000 1,200,000* 100% 1,200,000
Delivery 2,000,000 1,500,000*15/20 1,125,000
4,000,000 3,000,000 2,385,000 + 400,000 (4M x 10%)

Unearned revenue (raw materials): (1,500,000 - 1,125,000) 375,000

67. B

68. C

69. B

70. B

END