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The following data were taken from the records of sobrangbagal Company:
Raw Materials Work in Process Finished Goods
May 1, 2018 ? P160,000 P120,000
May 31, 2018 P100,000 190,000 156,000
Raw materials purchases, P92,000
Factory overhead,75% of direct labor cost, P126,000
Selling and administrative expenses, 12.5% of sales, P50,000
Net income for May, P50,000
The inventory of raw materials at May 1, 2018 was:
A. P60,000 B. P80,000 C. P92,000 D. P100,000
6. GENERIC manufactures products A, B, & C, from joint process. Additional information is as follows:
Units produced 4,000 2,000 1,000 7,000 ,
Joint Costs 36,000 ? ? 60,000
Sales Value at split-off ? ? 15,000 100,000
Addt’l costs if further 7,000 5,000 3,000 15,000
Sales Value if further 70,000 30,000 20,000 120,000

Assuming that joint costs are allocated using the relative sales value at split-off approach, what were
the joint costs allocated to product B and C?
A. 12,000 for B and 12,000 for C.
B. 14,400 for B and 9,600 for C.
C. 15,000 for B and 9,000 for C.
D. 16,000 for B and 8,000 for C.
7. Dani Carabarrubias, a careless employee, left some combustible materials near an open flame in
CAPISTRANO company’s plant. The resulting explosion and fire destroyed the entire plant and
administrative offices. James Ribs the company’s controller, and Janice Espina, the operations
manager, were able to save only a few bits of information as they escaped from roaring blaze.
“What a disaster,” cried James. “And the worst part is that we have no records to use in filling an
insurance claim.”
“I know, replied Janice. “I was in the plant when the explosion occurred, and I managed to grab only
this brief summary sheet that contains information on one or two of our costs. It says that our direct
labor cost this year has totaled P180,000 and we have purchased P290,000 in raw materials. But I’m
afraid that doesn’t help much; the rest of our records are just ashes.”
“Well, not completely.” Said James. “I was working on the year-to-date income statement when the
explosion knocked me out of my chair. I instinctively held onto the page I was working on, and from
what I can make out, our sales to date this year have totaled P1,200,000 and our gross margin rate
has been 40% of sales. Also, I can see that our goods available for sale to customers has totaled
P810,000 at cost.
“Maybe we’re not so bad off after all,” exclaimed Janice. “My sheet says that prime costs has totaled
P410,000 so far this year and that manufacturing overhead is 70% of conversion cost. Now if we just
had some information on our beginning inventories.”
“Hey, look at this, “ cried James. “ It’s a copy of last year’s annual report, and it shows what our
inventories were when this year started. Let’s see, raw materials was P18,000, work in process was
P65,000, and finished goods was P45,000.
“Super.” Yelled Janice. “Let’s go to work”
To file an insurance claim, the company must determine the amount of cost in its inventories as of the
date of fire.
Determine the amount of cost in the raw materials, Work in Process, and Finished goods inventory
account as of the date of fire. You may assume that all materials used in production during the year
were direct materials.
A. 78,000
B. 130,000
C. 90,000
D. 298,000
13. DMCI Corporation, a capital goods manufacturing business that started on January 4, 2018, and
operates on a calendar-year basis. The following data were taken from the records of 2018 and 2019:
2018 2019
Installment Sales P960,000 P1,240,000
Gross Profit as percent of costs 25% 28%
Cash collections on Sales of 2018 P280,000 P480,000
Cash collections on sales of 2019 P 0 P360,000

Compute the realized gross profits to be reported in the 2019 income statement:
Installment Sales Method Cost recovery method
A. P174,750 P0
B. 174,750 360,000
C. 78,750 0
D. 96,000 480,000
14. CDE sells a new car for P560,000. Cash down payment of P100,000 was received together with
an old car with a trade in Value of P80,000. Cost of the new car is P322,800. It is estimated that the
reconditioning of the old car will cost P40,000 and may be sold at P140,000 which includes 30% gross
profit. CDE was able to collect 50% of the balance and the customer defaulted. The car was
repossessed and can still be sold at 90% of the uncollected balance after reconditioning cost of 20%.
How much is the gain or loss from repossession?
A. 22,800 gain
B. 27,280 gain
C. 31,015 gain
D. 28,860 gain
15. On January 1, 2017, LUISITA sells 20 acres of farmland for P120,000,000 taking in exchange a
12% interest bearing note. Luisita purchased the farmland in 1988 at a cost of P80,000,000. The note
will be paid in three (3) equal annual payments inclusive of 12% interest each December 31, 2017,
2018 and 2019.
How much must be the realized gross profit for the year 2017 under the installment method of
recognizing revenue?
A. 35,562,528
B. 11,854,175
C. 13,333,333
D. 28,145,826
16. MDC Corporation contracted to build for UNILAB Company. The contract price was P2,500,000
and MDC estimated that construction costs would total P2,100,000. The construction period lasted until
September 1,2019. Costs during each period, estimated total cost of the product at the end of the year,
billings and cash collected during the year were as follows:
2017 2018 2019
Cost during period P525,000 P975,000 P625,000
Estimated or Actual total costs 2,100,000 2,125,000 2,125,000
Billings during the period 500,000 750,000 1,250,000
Cash collected during the period 400,000 700,000 1,400,000
The amount of gross profit recognized in 2018 using the percentage of completion method must be:
A. 400,000
B. 100,000
C. 182,500
D. 164,706
17. SMDC Construction company has used the cost to cost percentage of completion method of
recognizing profits. HENRY SY assumed leadership of the business after the recent death of his father,
TOMAS SY. In reviewing the records, HENRY SY finds the following information regarding a recently
completed building project for which the total contract price was P2,500,000.
Construction in progress account balance 2018 500,000
Construction cost incurred during 2010 1,025,000
Gross profit (loss) recognized in 2018 50,000
Gross profit (loss) recognized in 2019 175,000
Gross profit (loss) recognized in 2020 (25,000)
How much cost was incurred in 2019?
A. P450,000
B. P825,000
C. P1,275,000
D. P2,300,000
23. On January 1,2018, BMW Corporation issued 60,000 shares of its P10 par value common stock to
acquire the assets and liabilities of Ford Company. BMW Corporation shares were selling at P90 on
that date. Historical cost and fair value balance sheet data for FORD company at the time of acquisition
were as follows”
Balance sheet item Historical cost Fair Value
Cash and Receivables P50,000 P50,000
Inventory 120,000 200,000
Building and Equipment 400,000 300,000
Less: Accu. Dep (150,000) -
Total assets 420,000 550,000
Accounts payable 50,000 50,000
Common stock(P20 par value) 200,000
Retained earnings 170,000
Total liabilities and equities 420,000
BMW Corporation incurred listing fees of P10,000 and audit fees of P5,000 in issuing its new shares
and paid a finder’s fee of P25,000 in locating the merger candidate . Under the purchase of interest
combination, and assuming the companies are SME’s how much goodwill must be recognized in the
A. 40,000
B. 55,000
C. 65,000
D. 80,000
24. On January 1,2018, Papaya Corp., issued 200,000 additional shares of its voting common stock in
exchange for 100,000 shares of Sampalok Company’s outstanding voting stock in a business
combination appropriately accounted for by the acquisition of interests method wherein Sampalok
company will be dissolved. The market value of Papaya’ voting common stock was P40 per share on
the date of the business combination. The balance sheets of Papaya and Sampalok immediately before
the business combination contained the ff information:
Papaya Corp:
Common stock, par value P5 per share, authorized P3,000,000
1,000,000 shares; issued and outstanding, 600,000 shares
APIC 6,000,000
Retained earnings 11,000,000
Total Shareholder’s equity 20,000,000
Sampalok Company
Common stock, par value P10 per share, authorized P1,000,000
250,000 shares; issued and outstanding, 100,000 shares
APIC 2,000,000
Retained earnings 4,000,000
Total Shareholder’s equity 7,000,000
Additional information is as follows:
1. The full amount of any differential at acquisition relates to land
2. Sampalok owed P4,000 to Papaya on account at the date of acquisition.
How much is the total shareholder’s equity of Papaya corp., immediately after the business
A. 27,000,000
B. 20,000,000
C. 26,996,000
D. 28,000,000
25. Philip Corporation owns 70 percent of Sony Company’s common stock, acquired January 1,2017,
Goodwill from the investment is impaired for P40,000 during the current year (minority is measured as
a direct percentage of the fair value of Sony’s net assets). Sony regularly sells merchandise to Philip
at 150 percent of Sony’s cost. Philip’s December 31,2017 and 2018 inventories include goods
purchased intercompany of P225,000 and P66,000, respectively. The separate incomes (do not include
investment income) of Philip and Sony for 2018 are summarized as follows:
Philip Sony
Sales P2,400,000 P1,600,000
Cost of Sales (1,200,000) (1,000,000)
Other expenses (800,000) (200,000)
Separate income 400,000 400,000
Short Corp. owed Pantalon Corp. P10,000 (notes payable) due to cash on the date of acquisition.
The acquisition resulted in a cost-book-value differential of:
A. 53,500
B. 40,000
C. 4,000
D. 50,00
Items 29 and 30 are based on the following information:
Pakwan Company acquired 60 percent of Santol Company for P300,000,000 when Santol’s book value
was P400,000,000. The newly comprised 40 percent non controlling interest had an assessed value
fair value of P180,000,000. Also, at the date of acquisition, Santol had a trademark (with a 10-year life)
that was undervalued in the financial records by P60,000,000. Also, patented technology (with a 5-yr
life) was undervalued by P40,000,000. Two years later, the following figures are reported by these two
companies (stockholder’s equity accounts have been omitted).
Pakwan Company Santol Company Santol Company
Current Assets P620,000,000 P300,000,000 P320,000,000
Trademarks 260,000,000 200,000,000 280,000,000
Patented technology 410,000,000 150,000,000 150,000,000
Liabilities (390,000,000) (120,000,000) (120,000,000)
Revenues (900,000,000) (400,000,000)
Expenses 500,000,000 300,000,000
Investment Income Not given
29. What is the consolidated net income prior to the reduction for the noncontrolling interest’s share of
the subsidiary’s income.
A. 500,000,000
B. 400,000,000
C. 491,600,000
D. 486,000,000
30. Assuming that Santol Company has no dividends, what is the noncontrolling interest’s share of the
subsidiary’s income?
A. 34,400,000
B. 28,800,000
C. 26,000,000
D. 40,000,000
31. Himpapawid Company, a local company, bought merchandise from Bulalakao Corporation, a US
Company, for 70,000 US dollars in the latter part of 2018 to be settled in 2019. Pertinent exchange
rates relating to this transaction are as follows:
Buying Rate Selling Rate
Receipt of order P47.10 P47.20
Date of Shipment 47.25 47.45
Balance sheet date 49.50 49.60
Settlement date 49.45 49.50
What is the foreign exchange gain or loss of Himpapawid Company for 2018?
A. 157,500 loss
B. 150,500 loss
C. 157,500 gain
D. 150,500 gain
32. The accounts of Petron Corporation, a Filipino corporation, shows P81,300,000 accounts receivable
and P38,900,000 accounts payable at December, 31,2018, before adjusting entries are made. An
analysis of the balances reveals the ff:
Accounts receivable
Receivable denominated in Philippine Pesos P28,500,000
Receivable denominated in 34,700,000 Japanese Yen 11,800,000
Receivable denominated in 804,000 U.S dollars 41,000,000
Accounts Payable
Payable denominated in Philippine Pesos P6,850,000
Payable denominated in 200,000 Canadian Dollars 7,600,000
Payable denominated in 72,000,000 Japanese Yen 24,450,000
Current exchange rates for Japanese Yen, U.S dollars and Canadian Dollars at December 31,2018
Are P0.3456, P51.39, and P38.55, respectively.
Determine the foreign currency exchange gain or loss that must appear on the income statement of
Petron Corporation for the year ended December 31,2018
A. 509,880 gain
B. 543, 200 loss
C. 33,320 gain
D. 33,320 loss
38. Which of the following set of financial statements are required for a national government agency:
1. Balance Sheet 1. Balance Sheet
2. Statement of Financial Performance 2. Statement of Financial Performance
3. Cash flow statement 3. Cash flow statement
4. Statement of Changes in Government Equity 4. Statement of Changes in Government
5. Statement of Comparison of budget and actual 5. Statement of Comparison of budget
and actual
6. Notes to Financial Statements 6. Notes to Financial Statements

A. 1, 2, 3, 4, 5, 6 1, 2, 3, 4, 5, 6
B. 1, 2, 3, 4 1, 2, 3, 4, 5, 6
C. 1, 2, 3, 4, 6 1, 2, 3, 4, 5
D. 1, 2, 3, 4, 5, 6 1, 2, 3, 4
39. The threshold for capitalizing PPE under GAM is:
A. 30,000 B. 25,000 C. 20,000 D. 15,000
40. The unadjusted accounts of Heritage at December 31, 2018 that related to its forward exchange
contracts are summarized as follows:
Debit Balances
Accounts receivables from City of Dreams Company of Finland
(billing was 330,000 markka) P 2,200,110
Contract receivable from exchange broker in Phil. Pesos (to hedge
the receivable from City of Dreams for 60 days from December
1, 2018) 2,100,000
Contract receivable from exchange broker in yen (to hedge the payable
to Okada Company for 120 days from November 1, 2018) 1,300,000
Contract receivable from exchange broker in Canadian dollars (to hedge
a 27,000 Canadian dollar purchase commitment from Sterling Corp.
of Toronto for 60 days from December 1, 2018) 840,024
Credit Balances
Accounts payable to Okada Company of Japan (billing was for
3,000,000 Japanese yen) P 1,200,000
Contract payable to exchange broker in markka (for City of Dreams
hedge) 2,100,000
Contract payable to exchange broker in Phil. Pesos (for Okada hedge) 1,300,000
Contract payable to exchange broker in Phil. Pesos (for Sterling hedge) 840,000

Exchange rates at December 31, 2018 were as follows:

Finish markka Japanese yen Canadian dollars
Current rate 6.776 .428 31.038
Forward rates to sell markka
and purchase yen and
30-day futures 6.595 .436 31.125
60-day futures 6.425 .445 31.250
What is the foreign currency transaction gain or loss on the forward contracts?
A. P89,380 loss B. P40,975 loss C. P40,999 loss D. P76,350 loss
41. On November 1, 2018, BANKARUTE Corporation’s trustee prepares a Statement of Affairs with
the following information:
- P340,000 cash will be received by the unsecured creditors whose claims totaled P1,360,000.
- X received a 12% note of P124,000 from BANKARUTE on March 1, 2018, secured with
machinery with a market value of 115,000.
- BANKARUTE issued to Y a 12%, 1-year note of P136,000 on January 1, 2018. Nothing has
been pledge to this note.
- Z holds a note of 137,500 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.
-BANKARUTE stills owes W, its cashier, with her salary worth P12,220.
Which of the following statements about the creditors of BANKARUTE 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.
46. Pepper Lunch, Inc. charges an initial franchise fee of P75,000 for the right to operate as a
franchisee of Pepper Lunch. Of this amount, P25,000 is collected immediately. The remainder
is collected in four (4) equal annual payments installments of 12,500 each. These installments
have a present value of 39,623. There is reasonable expectation that the down payment will not
be refunded and no substantial future services will be performed by Pepper Lunch, Inc.
Collection of the notes is reasonably assured.
The journal entry to record the franchise fee would be:
A. Cash P25,000
Notes Receivable 50,000
Unearned Interest Income 10,377
Franchise Revenue 64,623

B. Cash P25,000
Notes Receivable 50,000
Unearned Interest Income 10,377
Unearned Franchise Revenue 64,623

C. Cash P25,000
Notes Receivable 50,000
Unearned Interest Income 10,377
Unearned Franchise Revenue 25,000
Franchise Revenue 39,623

D. Cash P25,000
Notes Receivable 50,000
Unearned Interest Income 10,377
Unearned Franchise Revenue 39,623
Franchise Revenue 25,000
47. McDonalds Inc. granted a franchise to Delicious for the Makati area. The franchisee was to pay
a franchise fee of P250,000 payable in five equal annual installments starting with the payment
upon signing of the agreement. The franchise was to pay monthly 3% of gross sales of the
preceding month. Should the operations of the outlet prove to be unprofitable, the franchise may
be cancelled with whatever obligations owing McDonalds, Inc. in connection with the P250,000
franchise fee waived. The prevailing interest rate is 14%. The first year generated a gross sales
of P1,250,000.
What is the amount of unearned franchisee fee after the first year of operations?
A. P287,500 B. P145,700 C. P195,700 D. P250,000
48. Greenwich Pizza, Inc. charges an initial franchise fee of P50,000 for the right to operate as a
franchisee of Greenwich Pizza. Of this amount, P10,000 is payable when the agreement was
signed and the balance is payable in five annual payments of P8,000 each. In return for the initial
franchise fee, the franchiser will help locate the site, negotiate with the lease or purchase of the
site, supervise the construction activity, and provide the bookkeeping services. The credit rating
of the franchisee indicates that money can be borrowed at 8% is P31,941.68
If the initial downpayment is refundable and future services are required by the franchisee, but
collection of the note is so uncertain that recognition of the note as an asset is unwarranted, the
entry should be:
A. Cash 10,000
Notes Receivable 40,000
Discount on Notes Receivable 8,058.32
Unearned Franchise Fees 41, 941.68
B. Cash 10,000
Notes Receivable 40,000
Discount on Notes Receivable 8,058.32
Revenue from Franchise Fees 10,000.00
Unearned Franchise Fees 31,941.68

C. Cash 10,000
Revenue from Franchise Fees 10,000

D. Cash 10,000
Unearned Franchise Fees 10,000
52. The SIOMAI Company was organized in 2018. Shortly after opening its doors to the public at
the main store, SIOMAI Company established a branch in another city. At the end of tje second
year of operations, the home office received the following condensed income statement from the
Sales P1,400,000
Cost of goods sold 1,100,000
Gross profit 300,000
Selling and administrative expenses 250,000
Net profit 50,000
The management at the home office questioned the accuracy of these figures and assigned you the
task of verifying the branch data. Your review of the records uncovered the following facts:
1. The beginning of year balance in Unrealized Profit to Branch was P60,000.
2. During the period, the home office shipped goods to the branch that had cost the main
store P750,000. However, your review of the branch receiving reports revealed that a
number of shipments from the home office had been recorded twice by the branch
3. The branch is billed a uniform 25% above cost and receives inventory only from the home
4. The branch ending inventory was correctly reported at a billed price of P217,500
5. When reconciling reciprocal accounts, you found that the branch had not recorded
P20,000 of services performed by the home office and billed to the branch. All other
selling and administrative expenses were correctly reported by the branch.
Compute the correct net income of the branch.
A. P110,000 B. P334,000 C. 254,000 D. 314,000
Items 53 and 54 are based on the following:
The BITCOIN Corporation operates a branch in a nearby city. The home office ships
merchandise to the branch at 125 percent of its cost. Selected information from the December
31, 2018, trial balances is as follows:
Home Office Branch
Dr. (Cr.) Dr. (Cr.)
Sales P100,000 P80,000
Shipments to branch 48,000
Purchases 70,000
Shipments from home office 60,000
Inventory, January 1, 2018 16,000 6,000
Unrealized profit in branch inventory 13,200
Expenses 32,000 12,000
Closing inventories at December 31, 2018 are:
Home office, P12,000 Branch, P10,000
53. Determine the adjustment to net income of the branch.
A. P12,000 B. P11,200 C. 23,200 D. 2,000
54. Determine the combined net income of the home office and branch.
A. 54,000 B. 42,000 C. 23,200 D. 65,200
55. Walangtibay provided the following information for the transaction occurred during August. The
production plant uses the JIT costing system.
- Raw materials costing P2,250,000 were purchased
- All direct materials costing P2,250,000 were requisitioned for production.
- Direct labor cost of P1,500,000 were incurred.
- Actual factory overhead costs amounted to P7,462,500
- Applied conversion cost totaled P9,750,000. This includes the direct labor cost.
- All units are completed and immediately sold.
The total RIP used to be backflushed to FG and the adjusted COGS, respectively.
A. 2,250,000; 12,787,500 C. 12,000,000; 12,787,500
B. 2,250,000; 11,212,500 D. 12,000,000; 11,212,500
Items 60 and 61 are based on the following:
HR Partnership was formed by Honey and Rodrigo several years ago. The partnership
agreement states that each partner is to receive a salary of P20,000 per month and 5% interest
on beginning-of-the-year capital balances; any remainder would be divided between Honey and
Rodrigo in the ratio 2:3, respectively. The unadjusted trial balance of HR Partnership as of
December 31, 2018, appears as follows:
Debits Credits
Cash P1,000,000 Accounts payable P700,000
Accounts Receivable 600,000 Notes payable 400,000
Inventory, January 1, 2018 800,000 Honey, capital 1,500,000
Furniture & fixtures, net 300,000 Rodrigo, capital 1,240,000
Building, net 600,000 Sales 1,600,000
Honey, drawing 200,000
Rodrigo, drawing 240,000
Purchases 1,200,000
Operating expenses 500,000
Total P5,440,000 Total P5,440,000

Additional information:
1. December 31, 2018, inventory was P1,100,000. 2018 purchases of 1,200,000 were
recorded using the periodic inventory method.
2. Depreciation for 2018 on furniture and fixtures and building is determined to be 10% and
20% respectively, of net valuation.
3. On July 1, 2018, the partnership recorded a P200,000 additional capital contribution by
Rodrigo. Honey made no additional capital contributions during the year.
60. Determine the share of partner Honey on the net income of 2018.
A. P92,200 B. (P42,200) C. (38,200) D. P88,200
61. Determine the ending capital balance of partner Rodrigo on December 31, 2018.
A. P960,200 B. P1,042,200 C. 957,800 D. 1,388,200
Items 62 and 63 are based on the following:
The balance sheet of the Johnson and Proctor Partnership at December 31, 2017 appears
Assets Liabilities and Capital:
Cash P1,500 Accounts Payable P3,500
Accounts Receivable (net) 4,500 Notes payable 2,500
Inventories 7,500 Accrued Liabilities 4,000
Property, Plant and Mortgage Payable 11,000
Equipment, (net) 22,500 Johnson, Capital 6,000
Proctor, Capital 9,000
Determine the capital balances of partners immediately after the admission of Uniliver under the
following independent situations:
62. Uniliver acquired a 25 percent interest in partnership capital directly from Johnson and Proctor
for P5,000. Uniliver paid P1,875 directly to Johnson and P3,125 directly to Proctor. Total assets
of the partnership after the admission of Uniliver were P36,000. How much must be the capital
credit to Uniliver?
A. P4,500 B. P6,750 C. P3,750 D. P6,000
63. Uniliver acquired a 25 percent interest in capital by investing P5,000 of cash into the partnership.
Total capital of the Johnson-Proctor-Uniliver Partnership on January 1, 2018, amounted to
P24,000. Determine the capital balance of Uniliver immediately after his admission.
A. P6,000 B. P9,000 C. P5,000 D. P3,750