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Problem 1. The ELI Corporation is undergoing liquidation and its statement of financial position as of
January 2, 2013 is as follows:
ELI Corporation
Statement of Financial Position
As of January 2, 2013
Assets Liabilities and Equity
Cash P 124,200 Accounts Payable P 118,500
Receivables, net 340,800 Salaries Payable 50,000
Inventory 70,000 Bank Loan Payable 222,000
Prepaid Expenses 22,500 Note Payable 80,000
Building, net 360,000 Bonds Payable 450,000
Goodwill 82,000 Ordinary Shares 120,000
Capital Deficit (41,000)
Total Assets P 999,500 Total Liabilities and Equity P 999,500

The inventory has a realizable value of P53,000. Of the accounts payable, P60,000 is secured by 1/4 of the
receivable which is 30% not collectible. The balance in the book value of the receivables which has a
realizable value of P235,000 is used to secure the bank loan payable. The bonds payable is secured by the
building having a book value of P360,000 and a realizable value of P375,000.
Unrecognized liabilities as of Jan. 2, 2013 are as follows: accrued interest on bonds payable and taxes
amounting to P4,000 each, and trustees salary amounting to P9,500. (Use two decimal places for the
recovery percentage)
How much will be paid to the partially secured creditors of ELI corporation?
A. P477,595
B. P479,102
C. P478,349
D. P480,669

Problem 2. On November 1, 2013, Goodbye To You (GTY) Inc.s trustee prepares a Statement of Affairs
with the following information:

P340,000 cash will be received by the unsecured creditors whose claims totaled P1360000

A received a 12% note of P124,000 from GTY on March 1, 2013, secured with machinery with a
market value of P115,000

GTY issued to B a 12%, 1-year note of P136,000 on January 1, 2013. Nothing has been pledged to
this note.

C holds a note of P137,500 on which interest of P7,452 is accrued, secured with equipment with a
book value of P153,000. The fair value of the equipment is determined to be P173,250

GTY still owes D, its cashier, with her salary worth P12,220

Which of the following statements about the creditors of Goodbye To You is false?
A. The unsecured creditor without priority will receive P37,400
B. The unsecured creditor with priority will receive P3,055
C. The fully secured creditor will be paid an amount of P144,952
D. The partially secured creditor will be paid an amount of P119,730
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Problem 3. Agency AAs allotment and Notice of Cash Allocation (NCA) for the year were P5,000,000 and
P3,000,000, respectively. Checks issued amounted to P1,500,000. What closing entry should be made for
the unused NCA as of year-end?
A. Cash National Treasury, MDS P (1,000,000)
Subsidy income from National Government P (1,000,000)
B. Subsidy income from National Government P 1,500,000
Cash National Treasury, MDS P 1,500,000
C. Subsidy income from National Government P 3,500,000
Cash National Treasury, MDS P 3,500,000
D. Memorandum entry

Problem 4. CC Corp. owns a subsidiary in Japan whose balance sheet in Japanese Yen for the last years
December 31, 2012 December 31, 2013
Cash and Cash equivalents 30,000 25,000
Receivables 122,500 147,500
Inventory 160,000 170,000
Property and Equipment, net 255,000 230,000
Total Assets 567,500 572,500
Liabilities and Equity
Accounts Payable 55,000 75,000
Long-term debt 322,500 285,000
Common stock 115,000 115,000
Retained earnings 75,000 97,500
Total Liabilities and Equity 567,500 572,500

Relevant exchange rates are:

January 1, 2012 1 = P 45
December 31, 2012 1 = P 42.50
December 31, 2013 1 = P 47.50
September 12, 2012 1 = P 40

CC formed the subsidiary on January 1, 2012. Income of the subsidiary was earned evenly throughout the
years and the subsidiary declared dividends worth 15,000 on September 12, 2012 and none were
declared during 2011. How much is the cumulative translation adjustment for 2013?
A. P568,750
B. P875,000
C. P625,000
D. P1,006,250
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Problem 5. On October 31, 2013, Pyramid Philippines took delivery from a British firm of inventory costing
725,000. Payment is due on January 31, 2014. At the same time, Pyramid paid P8,250 cash to acquire a
90-day call option for 725,000.
October 31, 2013 December 31, 2013 January 31, 2014
Strike Price P 3.60 P 3.60 P 3.60
Spot Rate 3.61 3.62 3.64
Forward Rate 3.72 3.77 3.78
Fair Value of Call Option P 8,250 P 17,000 ?

Given the information above, compute for the following:

Foreign exchange gain or loss on option contract due to change in time value on December 31, 2013 if
changes in the time value will be excluded from the assessment of hedge effectiveness, and foreign
exchange gain or loss due to change in intrinsic value on January 31, 2014 if changes in the time value will
be excluded from the assessment of hedge effectiveness.
A. P1,500 gain ; P7,250 gain
B. P1,500 gain ; P14,500 gain
C. P5,250 loss ; P7,250 gain
D. P5,250 loss ; P14,500 gain

Problem 6. On May 1, 2013, PERFECT Co. anticipated the purchase of 85,000 units of merchandise from
a foreign vendor. The purchase would probably occur on October 28, 2013 and require the payment of
1,250,000 foreign currencies (FC). On May 1, 2013, the company purchased a call option to buy
1,250,000FC at a strike price of 1FC = P0.27. An option premium of P14000 was paid. Changes in the
value of the option will be excluded from the assessment of hedge effectiveness. For the year 2013, the
following rates are as follows:
May 1 May 31 June 30 October 28
Spot Rate P 0.25 P 0.28 P 0.30 P 0.32
Strike Price 0.27 0.27 0.27 0.27
FV of call option P14,000 P17,500 P39,000 ?

The foreign exchange gain (loss) on option contract to be recognized in (1) equity and (2) earnings on June
A. P(25,000) ; P3,500
B. P(37,500) ; P21,500
C. P25,000 ; P(21,500)
D. P37,500 ; P(3,500)

Problem 7. USX Company bought merchandise for 125,000 from a French company on December 1,
2013. Payment in Euros was due on February 28, 2014. On the same date, USX entered into a 90-day
futures contract to buy 125,000 from a bank. Exchange rates for Euros on different dates are as follows:
December 1, 2013 December 31, 2013 February 28, 2014
Spot Rate P 91.40 P 92.70 P 91.90
30-day futures 92.30 92.50 93.20
60-day futures 91.80 92.20 92.60
90-day futures 90.60 92.60 93.40

How much is the forex gain/loss on the forward contract on February 28, 2014?
A. P1,000,000 loss
B. P100,000 gain
C. P37,500 gain
D. P37,500 loss
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Problem 8. Given the following information (For 1):
Bid Rate Offer Rate
Transaction Date P 43 P 45
Balance Sheet Date 48 49
Settlement Date 49 55

120-day futures 90-day futures 60-day futures 30-day futures
Transaction Date P 43 P 45 P 44 P 46
Balance Sheet Date 42 46 47 49
Settlement Date 45 48 49 52

On October 1, 2013, KEL Co. sold merchandise worth 2,750 to a Japanese company, payable on January
31, 2014. To hedge this foreign currency exposure, KEL contracted to sell 2,750 on October 1, 2013 to be
delivered on January 31, 2014. On balance sheet date, how much is the net forex gain/loss from this
hedging activity?
A. P2,750 loss
B. P2,750 gain
C. P30,250 loss
D. P30,250 gain

Problem 9. Condensed statements of financial position of Love Corp. and You Corp. as of December 31,
2013 are as follows:

Love You
Current assets P 175,000 P 65,000
Noncurrent assets 725,000 425,000
Total assets P 900,000 P 490,000

Liabilities P 65,000 P 35,000

Common stocks, P20 par 550,000 300,000
Additional Paid-in capital 35,000 25,000
Retained earnings 250,000 130,000

On January 1, 2014, Love Corp. issued 35,000 stocks with a market value of P25/share for the assets and
liabilities of You Corp. The book value reflects the fair value of the assets and liabilities, except that the
noncurrent assets of You have fair value of P630,000 and the noncurrent assets of Love are overstated by
P30,000. Contingent consideration, which is determinable, is equal to P15,000. Love also paid for the stock
issuance costs worth P34,000 and other acquisition costs amounting to P19,000. How much is the
combined total assets after the merger?
A. P1,825,000
B. P1,742,000
C. P1,772,000
D. P1,567,000
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Problem 10. The following are the condensed statement of financial position of Ayiziel and Vianney on
January 1, 2013:
Ayiziel Vianney
Total Assets P4,100,000 P 1,223,000

Liabilities 1,110,000 320,000

Common Stocks 1,240,000 518,000
Additional Paid-in Capital 500,000 40,000
Retained Earnings 1,250,000 345,000
Cido Corp. acquired the net assets of both Ayiziel and Vianney by issuing 81,250 shares to Ayiziel and
22,550 shares to Vianney. The par value of these shares is P35/share and market value as of January 1,
2013 is P40/share. Cido also paid for the following expenses:
Ayiziel Vianney
Indirect costs P37,500 P 40,500
Finders fee 26,500 14,000
Acctg. And legal fees for SEC registration 137,500 145,000
Printing costs of stock certificates 50,000 37,500

If Cidos retained earnings has a balance of P4,300,000 on January 1, 2013, how much is the (1) goodwill
and (2) adjusted retained earnings to be presented in the statement of financial position of Cido?
A. P259,000 ; P4,118,500
B. P260,000 ; P4,112,750
C. P 0 ; P4,112,750
D. P260,000 ; P4,182,500

Problem 11. Agency X have an obligation for equipment per purchase order amounting to P800,000.
Subsequently, the agency liquidates the equipment acquired in full. The entry to record this transaction
would be (ignore tax implication)
A. Memorandum entry in RAOCO
B. Accounts Payable 800,000
Cash National Treasury, MDS 800,000
C. Subsidy Income from National Government 800,000
Cash National Treasury, MDS 800,000
D. Obligation Liquidated 800,000
Cash National Treasury, MDS 800,000

Problem 12. Gion Corporation has identified activity centers to which overhead costs are assigned. The
cost pool amounts for these centers and their selected activity drivers for 2013 follow:
Activity Centers Costs Activity Drivers
Set-ups P620,000 24,800 set-ups
Utilities P950,000 125,000 machine hours
No. of parts P320,000 16,000 parts
Direct costs of producing product GG amounted to P75,000. The said product took 17,000 direct labor
hours and 15,000 machine hours to finish. Also, the product needed 7,500 set-ups and 550 parts to
complete. 25,000 units of product GG were produced during 2013. How much was the full cost per unit of
product GG using ABC?
A. P19.07
B. P16.07
C. P15.50
D. P12.50
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Problem 13. During April 2013, Faithfully Inc. incurred the following costs for Job 522 (450 drum sets):

Direct materials P42,500

Direct labor P65,250
Factory overhead P78,300

45 units of drum sets were found to be defective and Faithfully Inc. had to incur the following to remedy the
said defects:

Direct materials P13,550

Direct Labor P15,250

If the rework cost is normal but specific to Job 522, the cost per finished unit is:
A. P575.68
B. P497.75
C. P484.22
D. P518.11

Problem 14. Superhuman Co. provided the following data:

Direct materials P450,000
Direct labor P520,000
Overhead rate without spoilage P5.50 per unit
Overhead rate with spoilage P7.50 per unit
Units produced 120,000

Superhuman do not typically expect spoilage in its production process. On Job 912, the cost of the spoiled
units is P52,200, but the disposal value of these units were determined to be P24,000 and P17,000 were
found to be abnormal costs of spoilage. How much is the total cost of good units?
A. P1,577,800
B. P1,817,800
C. P1,606,000
D. P1,846,000

Problem 15. Analog Heart Inc. makes three products from mangoes it harvests:
Units of output Selling price at Incremental Final selling price
split-off processing costs
Mango shake 5,250 P3 P2 P7.50
Dried mangoes 2,000 P1.50 P2.50 P3
Ice candy 750 P2.50 P0.50 P3

Which of the following is false regarding processing the three products beyond split-off point?
A. The company can either sell the ice candy at split-off or process it further and sell it at P3 because
the incremental profit is zero
B. If the dried mangoes are processed beyond split-off, the company will have an incremental profit of
C. The company should process the mango shake further because an incremental profit of P2.50
would be realized
D. None of the statements is false
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Problem 16. GBX Inc.s capacity for a month is 40,000 machine hours. Overhead is 40% variable and
60% fixed. During June 2011, GBX produced 3,500 units of its product and incurred 38,000 machine hours.
Each unit of a product requires 12 machine hours. Unfavorable non-controllable variance for the month of
June is P28,500. What is the companys variable overhead rate?
A. P23.75
B. P19.75
C. P14.25
D. P 9.50

Problem 17. The following data were taken from the records of Sweet Serendipity Co. before the accounts
are closed for the year ended December 31, 2013. The company uses the installment method of
recognizing revenue and it sells goods exclusively on installment basis.
For the year ended:
December 31, 2011 December 31, 2012 December 31, 2013
Installment Sales ? P500,000 P600,000
Cost of Goods Sold 300000 ? ?
Balances as of:
December 31, 2011 December 31, 2012 December 31, 2013
Installment AR, 2011 P350,000 P125,000 P35,000
Installment AR, 2012 P307,500 P140,000
Installment AR, 2013 P490,000
DGP, 2011 P122,500 P43,750 P43,750
DGP, 2012 P123,000 P120,000
DGP, 2013 P210,000

On January 2013, a customer defaulted and Sweet Serendipity repossessed the merchandise. The
merchandise was assessed to have a cost of P4,200 after costs of reconditioning amounting to P800. The
repossessed merchandise was purchased by the customer in 2012 and the said customer still owed the
company a certain amount at the date of repossession.
How much was the realized gross profit and loss on repossession in 2013?
A. P134,000 ; P 300
B. P134,000 ; P1,100
C. P137,000 ; P3,300
D. P137,000 ; P4,100

Problem 18. Mabi Corp. was contracted by Mr. Tristan P. to construct 35 condominium units. The
estimated total cost of construction was P28,000,000. Mabi bills its clients at 120% of total costs estimated
to complete a project. Details regarding the contract are given below:
Units finished Costs incurred to date Estimated cost at completion
2011 10 P8,412,500 P33,650,000
2012 18 P20,735,000 P31,900,000
2013 7 P31,500,000 ?

What is the RGP during 2012 using the output measures?

A. P1,105,000
B. P1,700,000
C. P1,360,000
D. P1,410,000
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Problem 19. On December 1, 2013, Dewyze Inc. authorized Cook to operate as a franchise for an initial
franchise fee of P3,400,000. P900,000 was received upon signing the contract, and the balance is to be
paid by a non-interest bearing note, due in five equal annual installments beginning December 31, 2014.
Prevailing market rate is 12%. PV factor is 3.60478. The down payment is nonrefundable and it represents
a fair measure of the services already performed by Dewyze, however, with regards to the balance,
substantial future services are still required. How much is the deferred franchise revenue to be recognized
as of December 31, 2013?
A. P1,802,390
B. P2,702,390
C. P2,500,000
D. P1,518,677

Problem 20. Artemus Co. operates a branch in Manila City. On December 31, 2013, the Manila branch in
the home office books showed a debit balance of P522,110. The interoffice accounts were in agreement at
the beginning of the year. For purposes of reconciling the interoffice accounts, the following facts were

Shipments from home office to Manila branch costing P72,500 were in transit as of year-end.
Manila recorded the said transfer twice at cost: one on December 31, 2013 and the other on
January 1, 2014.
The home office allocated to the Manila branch of the rent expenses it paid for the year ended
2013. The rent expense was P24,000. The home office sent a debit memo to Manila for the
allocated amount, but the branch recorded the said debit memo by debiting the home office
current account and crediting rent payable.
The branch wrote-off uncollectible accounts amounting to P10,120. The allowance for doubtful
accounts is maintained in the books of the home office. The home office recorded the write-off as a
write-off of its own accounts receivable.
The branch collected accounts receivable from home offices customers amounting to P52,920, net
of 2% cash discount. The branch treated the said transaction as if it was a collection from its own
customers. The home office was not yet notified of the said collection.
It is the policy of the home office to bill its branches at 20% above cost. What is the unadjusted balance of
the home office-current account in the books of Manila branch on December 31, 2013?
A. P475,990
B. P461,490
C. P459,070
D. P463,650

-end of examination-