ADVANCED FINANCIAL ACCOUNTING AND REPORTING

INSTRUCTIONS: Select the best answer for each of the following questions. ALL questions are compulsory and
MUST be attempted. Mark only one answer for each item on the answer sheet provided. Strictly NO ERASURES
ALLOWED. Erasures will render your examination answer sheet INVALID. Use PENCIL NO. 2 only. GOODLUCK!

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1. The partnership agreement between Ken and Avery
stipulates that Ken is to receive a 20% bonus on
profits, with residual profit and loss to be apportioned
in the ratio 3:2, respectively. Which partner has a
greater advantage when the partnership has a profit
and hen it incurred a loss?
a. Profit – Ken; Loss – Avery
b. Profit – Avery; Loss – Avery
c. Profit – Ken; Loss – Ken
d. Profit – Avery; Loss – Ken
2. 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. Current fair value less carrying amounts
b. Carrying amounts less current fair values
c. Carrying amounts plus gain or less loss on
realization
d. Carrying amounts plus loss or less gain on
realization
3. As suggested by Article 1787 of the Philippine Civil
Code and relevant PFRSs, the net contributions (assets
and related liabilities assumed by the partnership) of
the partners to the partnership are measured at
a. fair value
b. cost
c. discretionary amount determined by partners
d. any of these
4. On November 1, 2014, Klaus Co. obtained franchise
rights from “The Originals” Co. The initial franchise fee
included consideration for inventory and equipment to
be delivered to Klaus. All of the necessary preparations
were completed, and Klaus Co. started operations, on
January 31, 2015. The inventory and equipment were
delivered to Klaus on December 1, 2014. How would
“The originals” Co. recognize revenue for the supply of
inventory and equipment?
a. recognize in full on November 1, 2014
b. recognize in full on December 1, 2014
c. recognize in full on January 31, 2015
d. deferred and amortize over the franchise term
starting January 31, 2015
5. An advance cash distribution plan is prepared
a. Each time cash is distributed to partners in an
installment liquidation
b. Each time a partnership asset is sold in an
installment liquidation
c. To determine the order and amount of cash each
partner will receive as it becomes available for
distribution
d. None of these
6. The interest of the withdrawing, retiring, or deceased
partner shall be adjusted for which of the following?
I. His share of any profit or loss up to the date of his
withdrawal, retirement or death, if he withdraws,
retires or dies during the year
II. His share of any revaluation gains or losses as at
the date of his withdrawal, retirement, or death
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a. I only c. I or II
b. II only d. I and II
7. State the proper order of partnership liquidation.
I. Outside creditors
II. Owners’ interests
III. Inside creditors
a. I, II, III c. II, I, III
b. III, I, II d. I, III, II
8. Under cash priority program, when all of the priorities
are paid, any remaining cash distribution is
a. allocated to the partners based on their respective
profit or loss ratios.
b. allocated to the partners based on the balances in
their capital accounts after allocation of losses.
c. allocated to the partners based on their pre-
computed priorities.
d. allocated to the partners based on the relative
values of their capital balances.
9. Under the cost recovery method,
a. the initial collections on the sale are treated as
recovery of the inventory sold. Thus, no gross
profit or interest income is recognized until total
collections from the sale equals the cost of
inventory sold.
b. the initial collections on the sale are treated as
recovery of the inventory sold. Thus, no gross
profit is recognized until total collections from the
sale equals the cost of inventory sold.
c. A or B
d. None of the above.
10. Under PAS 11 – Construction Contracts, the primary
issue in accounting for construction contracts is
a. the allocation of contract revenue to the
accounting periods in which construction work is
performed.
b. the allocation of contract costs to the accounting
periods in which construction work is performed.
c. the determination of percentage of completion.
d. A and B.
e. All of the choices.
11. PAS 11 – Construction Contracts provides that any
expected loss on the construction contract is
a. recognized as an expense immediately.
b. recognized as an expense immediately as an
adjustment to the revenue already recognized.
c. recognized as an expense immediately adjunct to
the costs of construction already recognized.
d. deferred and amortized over the remaining
construction period.
12. Which of the following appears on the statement of
financial position of a contractor who is applying PAS
11 – Construction Contracts?
a. Construction in progress as current asset.
b. Progress billings as current liability.
c. Amount of due from (due to) customers for
contract work.
d. Any of the choices.
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13. The realization of income on installment sales III. no other material conditions or obligations exist.
transactions involves
a. Recognition of the difference between the cash a. I, II and III c. I and II only
collected on installment sales and the cash b. II and III only d. I and III only
expenses incurred
b. Deferring the net income related to installment 20. If franchise rights are repossessed and the franchisor
sales and recognizing the income as cash is refunds the consideration received,
collected I. the original franchise sale is canceled. “Gain or
c. Deferring gross profit while recognizing operating loss” from cancellation may arise after
or financial expenses in the period incurred derecognition of account balances associated with
d. Deferring gross profit and all additional expenses the franchise cancelled.
related to installment sales until cash is collected II. the transaction shall not be regarded as a sale
cancellation. However, impairment loss may arise
14. In selecting an accounting method for a newly from forfeiture of collectibles.
contracted long-term construction project, the principal a. I only c. I or II
factor to be considered should be b. II only d. I and II
a. The terms of payment
b. The nature of the contractor’s technical facilities 21. Which of the following is an inventory account of a
used in construction manufacturer but not of a merchandiser?
c. The method commonly used by the contractor for a. Cost of goods manufactured
other long-term construction contracts b. Merchandise Inventory
d. The degree to which a reliable estimate of the c. Work in process inventory
costs to complete and extent of progress toward d. Direct labor
completion is practicable
22. Cost of goods manufactured is used to compute
15. SMDC Construction Company’s project extend over a. Cost of goods sold
several years and collection of receivables is 23. b. Manufacturing overhead applied
reasonably certain. Each project has a contract that c. Direct materials used
specifies a price and the rights and obligations of all d. Finished goods inventory
parties. Both the contractor and the customer are
expected to fulfill their contractual obligations on each Which of the following is a period cost?
project. Reliable estimates can be made of the extent
of progress and costs to complete each project. The 24. a. Materials inventory
method that SMDC must use to account for b. Direct labor
construction revenue is c. Manufacturing overhead
a. Installment sales method d. Selling expenses
b. Percentage- of- completion method
c. Completed –contract method Job order costing would be an appropriate system to
d. Cost recovery method account for the manufacture of

16. One of the more popular input measures used to 25. a. Aircraft A
determine the progress toward completion in the b. Matches
percentage- of-completion method is c. Zippers
a. Revenue-percentage basis d. Cardboard boxes
b. Cost-percentage basis
c. Progress completion basis written order sent to inform the purchasing
d. Cost –to- cost basis department of a need for materials is called a

17. The theoretical support for using the percentage- of- 26. a. U
Purchase order
completion method of accounting for long-term n
b. Purchase requisition
construction projects is that it d
c. Receiving report
a. Is more conservative than the cost recovery e
d. Materials requisition form
method r
b. Reports a lower net income figure than the cost
recovery method a periodic inventory system, the purchase of materials
c. More closely conforms to the cost principle is recorded in an account entitled
d. Produces a realistic matching of expenses with
revenues 27. a. Cost of Goods Sold
b. Purchases
18. It is the one-off payment made by the franchisee to c. Materials inventory
the franchisor to obtain the franchise right. d. Work in Process Inventory
a. Initial franchise fee
The total of the materials subsidiary ledger inventory cards
b. Continuing franchise fee
must be equal to the amount in the following account
c. Fixer’s fee
d. Any of the choices

19. There is substantial performance when: a. Cost of Goods Sold

I. the franchisor has no remaining obligation or intent b. Purchases
to refund any cash received or forgive any unpaid c. Materials Inventory
notes or receivables. d. Work in Process Inventory
II. initial services required by the franchise agreement
are substantially performed.

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28. Which of the following is usually prepared daily by A part of CLAIRE’s cash contribution, P216,000, comes
employees for each job worked on? from personal borrowings. Also, the PPE of CLAIRE and
29. a. Job time tickets DAISY are mortgaged with the bank for P972,000 and
b. Time card P72,000, respectively. The partnership is to assume
c. Punch card responsibility for these PPE mortgages. The partners have
d. Cost control card agreed to share profits and losses on a 5:2:3 ratio, to
CLAIRE, DAISY, and ELSIE, respectively.
33. What is the capital balance for each partner at the
Under a perpetual inventory system, the purchase of
opening of business on August 1, 2015?
materials is recorded in an account entitled
a. CLAIRE, P1,045,080; DAISY, P376,200; & ELSIE,
P221,400
b. CLAIRE, P1,161,200; DAISY, P418,000; & ELSIE,
30. a. Cost of Goods Sold
b. Purchases P246,000
c. Materials inventory c. CLAIRE, P1,987,500; DAISY, P189,000; & ELSIE,
d. Work in process inventory P217,500
d. CLAIRE, P1,095,120; DAISY, P547,560; & ELSIE,
Factory worker fringe benefit costs are usually charged to P182,520
a. Work in process Inventory
b. Direct labor
c. Administrative expenses On January 1, 2015, FRIDA and GLACE formed a
d. Factory overhead partnership by contributing cash of P405,000 and
P270,000, respectively. On February 1 2015, Partner
The following condensed balance sheet is prepared for FRIDA contributed an additional P135,000 cash to the
QUIEL and ROGER, who share profits and losses in the partnership and on August 1, 2014 Partner FRIDA made a
ratio of 60:40, respectively: permanent withdrawal of P67,500. On May 1, 2015,
Other assets P 405,000 Accounts P108,000 Partner GLACE contributed machinery with a fair market
payable value of P90,000 and a net book value of P75,000 when
Quiel, loan 18,000 Quiel, capital 175,500 contributed. On November 1, 2015 Partner GLACE
Roger, capital 139,500 contributed an additional P45,000 cash to the partnership.
Total P 423,000 Total P 423,000 Both partners withdrew one-fourth of their salary
allowances in 2015.
31. The partners have decided to liquidate the partnership.
If the other assets are sold for P346,500, what amount The partnership reported a net income of P257,400 in
of the available cash should be distributed to QUIEL? 2014 and the profit and loss agreement are as follows:
a. P136,000 c. P122,400 a. Interest at 6% is allowed on average capital
b. P156,000 d. P195,000 balances;
b. Salaries of P2,700 per month to each partner;
c. Bonus to FRIDA of 10% of net income after interest,
On January 1, 2014, the partners SELYA, TESSA, and salaries, and bonus; and
URSULA, who share profits and losses in the ratio of 5:3:2, d. Balance to be divided in the ratio of 6:4 to FRIDA
respectively, decided to liquidate their partnership. On this and GLACE, respectively.
date the partnership condensed balance sheet was as
follows: 34. Determine how the net income will be allocated to the
partners:
Cash P 45,000 Liabilities P 54,000 a. FRIDA, P160,000 and GLACE, P126,000
Other assets 225,000 Selya, capital 72,000 b. FRIDA, P 180,000 and GLACE, P106,000
Tess, capital 81,000 c. FRIDA, P170,000 and GLACE, P116,000
Ursula, capital 63,000 d. FRIDA, P153,000 and GLACE, P104,400
Total P 270,000 Total P270,000

HAIDEE and ISABEL are partners sharing profits and losses

On January 15, 2014, the first cash sale of other assets in the ratio of 60% and 40%, respectively. The partnership
with a carrying amount of P135,000 realized P108,000. balance sheet at August 30, 2014 follows:
Safe installment payments were made on the same date.
32. How much cash should be distributed to each partner? Cash P 12,150 Accounts payable P 13,500
SELYA TESSA URSULA Other assets 119,700 Haidee, Loan 5,850
a. P15,000 P51,000 P44,000 Isabel, Loan 9,000 Haidee, capital 81,000
b. P40,000 P45,000 P35,000 Isabel, capital 40,500
c. P55,000 P33,000 P22,000 Total P 140,850 Total P140,850
d. P13,500 P45,900 P39,600

CLAIRE, DAISY, and ELSIE formed the CDE Partnership on

August 1, 2015, with the following assets, measured at fair
market values, contributed by each partner:
CLAIRE DAISY ELSIE
Cash P 324,000 P108,000 P129,600
Accounts
receivable 73,080 - 91,800
Plant, Property, &
Equipment (PPE) 1,620,000 340,200 -

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PRINCESS COMPANY filed a voluntary bankruptcy petition accounts receivable is P2,520,000; Accounts receivable is
on August 15, 2013 and the statement of affairs reflect the P1,176,000. Operating expenses (includes losses on
repossession) total to 75% of the realized gross profit.
following amounts: 38. What is the net income for the year ended December
BOOK ESTIMATED 31, 2015?
CARRYING CURRENT a. P329,142 c. P 543,984
VALUE VALUE b. P546,000 d. P 279,918

Pledged with fully secured

P 150,000
creditors P 185,000 BEIGE STALKS CORPORATION, which began operations on
Pledged with partially January 1, 2014, appropriately uses the installment
90,000
secured creditors 60,000 method of accounting for revenues. The following
210,000
Free Assets 160,000 information is available for the years ended December 31,
P 450,000
P 405,000 2014 and 2015:
Liabilities
P 35,000 2014 2015
Liabilities with priority Cost of installment sales P 960,000 P1,920,000
130,000
Fully secured creditors GP realized on sales made in
100,000
Partially secured creditors 2014 144,000 86,400
270,000
Unsecured creditors 2015 - 192,000
P 535,000
GPR based on cost 30% 40%
35. How much cash will be available to pay the unsecured 39. What is the ending balance of installments receivable
non-priority claims? at December 31, 2015?
a. P240,000 c. P160,000 a. P2,265,600 c. P1,632,000
b. P180,000 d. P125,000 b. P1,704,000 d. P1,176,000

The following data were taken from the statement of On January 1, 2014, MAXX SERVICES, INC. signed an
affairs of MARACLARA CORPORATION: agreement authorizing LALLA COMPANY to operate as a
Assets pledged for fully secured liabilities franchisee over a 20-year period for an initial franchise fee
(current fair value, P75,000) P 90,000 of P137,500 received when the agreement was signed.
Assets pledged for partially secured LALLA commenced operations on July 1, 2014, at which
liabilities (current fair value P52,000) 74,000 date all of the initial services required of MAXX SERVICES
Free assets (current fair value , P40,000) 70,000 had been performed. The agreement also provides that
Unsecured liabilities with priority 7,000 LALLA must pay annually to MAXX a continuing franchise
Fully secured liabilities 30,000 fee equal to 5% of the revenue from the franchise. LALLA
Partially secured liabilities 60,000 COMPANY’s franchise revenue for 2014 was P1,100,000.
Unsecured liabilities without priority 112,000 40. For th e year ended December 31, 2014, how much
should MAXX SERVICES record as revenue from
36. The amount that will be paid to creditors with priority franchise fees with respect to the LALLA account?
is: a. P192,500 c. P123,750
a. P7,000 c. P7,500 b. P137,500 d. P 60,500
b. P6,000 d. P6,200

GREAT DANE, INC., franchisor, entered into a franchise

SILVER PLATTER COMPANY which began operations on agreement with PITBULL COMPANY, franchisee, on July 1,
January 2, 2014, appropriately uses the installment 2015. The total franchise fees agreed upon is P550,000, of
method of revenue recognition. The following information which P50,000 is payable upon signing and the balance is
pertains to the company’s operations for 2014 and 2015 to be covered by a note payable in four equal annual
2014 2015 installments. The direct franchise cost incurred was
Sales P 307,200 P460,800 P325,000. Indirect franchise expenses of P31,250 was also
Collections from paid. The relevant interest rate is 12% and the note is
2014 sales 102,400 51,200 reasonably assured of collection. The agreement also
2015 sales 0 153,600 provides for the payment of continuing franchise fees at
Accounts written off from 4% of the franchisee’s gross sales. The franchise outlet
2014 sales 25,600 76,800 commences its operations on December 1, 2015 and had a
2015 sales 0 153,600 gross sales of P250,000 for the month.
Gross profit rates 40% 30% 41. Assuming the notes are interest-bearing, how much
net income will be reported for 2015?
37. What amount should SILVER PLATTER COMPANY report a. P198,750 c. P 233,750
as deferred gross profit in its December 31, 2015 b. P 77,550 d. P 73,750
balance sheet?
a. P 76,800 c. P 114,688 On January 2, 2015, QUICKBUILD ERECTORS
b. P102,400 d. P 66,560 entered into contract to construct two projects. The
following data relate to the construction activities.
Project A Project B
BROWN DERBY COMPANY began operations on June 1,
2015. The following information are extracted from its Contract price P945,000 P675,000
records at year-end. Cost of installment sales, P2,991,424; Cost incurred during 2015 540,000 630,000
Cost of Regular Sales, P1,680,000. Mark-up on installment Estimated costs to complete 270,000 157,500
sales is 40% of cost while regular sales is 33-1/3% based Billings to customer 337,500 607,500
on sales. At the end of 2015, the balance of Installment

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42. What amount of gross profit should QUICKBUILD

ERECTORS report in its 2015 income statement under 45. What is the net income (loss) of the branch insofar as
the home office is concerned?
the following methods? a. P534,000 c. P315,000
Percentage of Zero Profit b. P681,750 d. (P147,750)
Completion Method Method
a. P 0 P (90,000)
b. P (112,500) P (22,500) Teardrops Commercial Corp. maintains a branch in Iloilo
c. P ( 22,500) P 0 City. Selected balances taken from the books of Teardrops
d. P ( 22,500) P(112,500) and its Bacolod City branch as of December 31, 2015 are
as follows:
Home Office Branch
43. BEST - EVER CONSTRUCTION, INC . recognizes Office
construction revenue and costs using the percentage of Merchandise Inventory,
completion method. During 2014, a single long-term Jan 1 P 12,000 P 8,000
project was begun which continued through 2015. Purchases 150,000 30,000
Information on the project follows: Shipments from Home
2014 2015 Office 93,750
Accounts receivable P350,000 P1,050,000 Shipments to Branch 75,000
Incurred costs during year 367,500 672,000 Branch Inventory
Construction in progress 427,000 1,274,000 Allowance 19,750
Billings on contract 350,000 1,470,000 Sales 115,000 176,500
The construction accounts are at amounts t0-date. Merchandise Inventory,
Dec 31 14,000 10,350
What is the gross profit recognized from this long-term
contract? P4,350 of the branch's ending inventory came from
2014 2015 purchases from suppliers other than the home office.
a. P 77,000 P 798,000
b. 77,000 350,000 46. As far as the home office is concerned, the cost of
c. 59,500 448,000 sales of the branch was:
d. 59,500 175,000 a. P 97,120 c. P121,400
b. P102,850 d. P131,850

CIGNAL ERECTORS began operations on January 2,

2015. During the year, the company entered into a During the year 2015 the Bacolod Corporation bills its Iloilo
contract with TEAM Company to construct a branch at 140% of cost. Goods billed at P346,500 were
manufacturing facility. At that time CIGNAL estimated shipped to the branch. The account Allowance for
that it would take five years to complete the facility at overvaluation has a balance of P122,400 before
a cost of P3,937,500. The total contract price for the adjustment. The beginning inventory of the branch from
construction of the facility is P5,468,750. During the the home office at cost is P93,600; the beginning
year, the company incurred P962,500 in construction inventory of the branch from outsiders is P15,200,
costs related to the construction project. The purchases from outsiders is P130,500.
estimated cost to complete the contract is P2,730.000 47. Cost of goods available for sale of the Iloilo Branch in
TEAM was billed and paid 30% of the contract price 2015 is
subject to a 10% retention. a. P486,800 c. P609,200
b. P623,240 d. P463,500
44. Using the percentage of completion method, how much
is the excess of Construction in Progress over Contract
Billings or Contract Billings over Construction in GHI Company bills its Bulacan Branch for merchandise
Progress? shipments at 125% of cost. As of cut-off date, December
a. P273,437 (current liability) 31, 2015, the following data were available:
b. P273,437 (current asset) Mdse. Fr Home Mdse.
c. P437,500 (current asset) Office(at billed Purchased
d. P437,500 (current liability) prices) from Outsiders
Total
Merchandise,
Presented below are items taken from the unadjusted trial December 1 P300,000 P120,000 P420,000
balances of NCR Company and its Manila Branch on Additions to
December 31, 2015: stock during
Home Office Branch December 450,000 360,000 810,000
Books Books Merchandise,
Shipment to branch P2,250,000 December 31 420,000 150,000 570,000
AFOVOBI 749,250
Shipment from HO P2,925,000 The branch returned P15,000 worth of merchandise to the
Purchases (from OV) 1,084,500 Home Office acquired at billed price.
MI, January 1 921,375 48. The amount of the allowance for overvaluation account
MI, December 31 365,625 that was realized as income in view of branch sales for
Sales 4,800,000 the month of December was:
Expenses 382,500 a. P63,000 c. P87,500
b. b. P66,000 d. P84,000
Assuming that the branch ending inventory acquired from
other vendors (OV) is P73,125

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Liabilities 320,000
The Batangas Corporation operates a branch in Lipa City. Common stock 64,000
The Home Office ships merchandise to the branch at 125% Additional paid-in capital 256,000
of its cost. Selected information from the December 31, Retained earnings 320,000
2015 trial balance are as follows:
Home Office Branch Office 52. To have a goodwill of P 120,000, the number of shares
Books Books to be issued by Carl Company should be
Sales P600,000 P300,000 a. 30,000 shares c. 29,000 shares
Shipments to branch 200,000 b. 30,400 shares d. 35,000 shares
Purchases 350,000
Shipments from Home
Office 250,000 On August 1, 2014, Blite Company paid P850,000 for all
Inventory, January 1 100.000 40,000 the net assets of Ong Enterprises in a transaction properly
Allowance for Overvaluation recorded as a purchase. The recorded assets and liabilities
of branch Inventory 58,000 of Ong Enterprises on August 1, 2014, follow:
Expenses 120,000 50,000 Cash P 80,000
Inventory 240,000
Inventory at December 31, 2015: Property and equipment, net 480,000
Home Office P30,000 Liabilities (180,000)
Branch Office 60,000
On August 1, 2014 it was determined that the inventory of
49. The combined net income of the home office and the Ong had a fair market value of P190,000, and the property
branch after adjustment is: and equipment (net) had a fair market value of P560,000.
a. P326,000 c. P500,000 53. What is the amount of goodwill resulting from the
b. P496,000 d. P280,000 business combination?
a. P 0 c. P200,000
b. P 20,000 d. P230,000
Quad Corporation purchases all of the net assets of
Chrome, Inc., for P320,000. Immediately prior to the
combination, Chrome’s net assets were carried on the 54. Stain Corporation is an 80%-owned subsidiary of Paint
books at P180,000, and Chrome had retained earnings of Corporation. During 2014 Stain sold merchandise that
P24,000. The fair value of Chrome’s net assets at the date cost P96,000 to Paint for P128,000. Paint's ending
of combination is P248,000. Quad Corporation had inventory at December 31, 2014 contained unrealized
retained earnings of P40,000 and no goodwill immediately profit of P6,400 from the intercompany sales. During
prior to the combination 2015 Stain sold merchandise that cost P112,000 to
50. Immediately after the combination, the combined Paint for P152,000. One-half of this remained unsold
company reports goodwill and retained earnings of: by Paint at December 31, 2015 For 2015 Paint's
Goodwill Retained Earnings separate income was P200,000 and Stain's reported
a. P 0 P 40,000 net income was P152,000.
b. P 0 P 64,000
c. P 72,000 P 40,000 The consolidated net income for 2015 will be:
d. P 72,000 P 64,000 a. P302,000 c. P310,720
b. P338,400 d. P274,500

The Carl Company will issue P10 par value common stock
for the net assets of PBA Company. The fair market value 55. P Company acquired a 90% interest in S Company in
per share of Carl’s common stock is P40. The following is 2013 at a time when S Company's book values and fair
the list of accounts of PBA Company on the date of the values were equal to one another. On January 1, 2015,
acquisition. S sold a machine with a P24,000 book value to P
Book Value Fair Market Value Company for P48,000. P depreciates the machine over
Current assets P280,000 P 320,000 10 years using the straight line method. Separate
Plant assets (net) 680,000 incomes for P and S for 2015 are as follows:
1,280,000 P Co. S. Co.
Liabilities 320,000 Sales P960,000 P560,000
Common stock 64,000 Gain on sale of 24,000
Additional paid-in capital machinery
256,000 Cost of goods sold (400,000) (152,000)
Retained earnings 320,000 Depreciation expense (240, 000) (72,000)
51. To have an income from acquisition of P120,000, the Other expenses (96,000) (240,000)
number of shares to be issued by Carl Company should Separate incomes P224,000 P120,000
be”
a. 30,000 shares c. 29,000 shares The consolidated net income for 2015 is:
b. 30,400 shares d. 35,000 shares a. P344,000 c. P310,400
b. P322,400 d. P312,560
The Carl Company will issue P10 par value common stock
for the net assets of PBA Company. The fair market value
per share of Carl’s common stock is P40. The following is RICH Corporation paid P1,125,000 for an 80% interest in
the list of accounts of PBA Company on the date of the HARD Corporation on January 1, 2015 at a price P37,500
acquisition. in excess of underlying book value. The excess was
Book Value Fair Market Value allocated P15,000 to undervalued equipment with a ten-
Current assets P280,000 P 320,000 year remaining useful life and P22,500 to goodwill which
Plant assets (net) 680,000 1,280,000 was not impaired during the year. During 2015, HARD

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Corporation paid dividend of P60,000 to RICH Corporation. 59. In Aleck’s income statement, the amount that should
The income statements of RICH and HARD for 2015 are be included as a foreign exchange loss
given below: a. P 0 c. P 6,000
RICH HARD b. P21,000 d. P27,000
Sales P2,500,000 P1,000,000
Cost of sales (1,250,000) (500,000) On April 8, 2013, CALAMBA CORPORATION purchased
Depreciation merchandise from an unaffiliated foreign company for
expense (250,000) (150,000) 10,000 units of the foreign company’s local currency.
Other expense (500,000) (225,000) CALAMBA paid the bill in full on March 1, 2015 when the
Net income P500,000 P125,000 spot rate was P0.45. The spot rate was P0.60 on April 8,
2013 and was P0.55 on December 31, 2014.
60. For the year ended December 31, 2014, CALAMBA
56. Consolidated net income for 2015 is
should report a transaction gain of
a. P632,125 c. P623,125
a. P1,500 c. P1,000
b. P263,125 d. P632,215 b. P 500 d. P 0

P Corporation acquired 70% of the voting common On December 1, 2014, a Philippine firm purchased a
stock of S Company at a time when S Company’s book speculative hedge to buy 30,000 foreign currency when
values and fair values were equal. Separate incomes the spot rate was P1.10 and a 60 day forward rate was
of P Corporation and S Company for 2015 are as P1.12. The spot rate at December 31 (the company’s year-
follows: end was P1.25 and a 30-day forward rate was P1.13.
P Corporation S Company When the speculative hedge was exercised on January 31,
Sales 633,600 350,400 2015 the spot rate was P1.11 and a 30 day forward rate,
Cost of Goods Sold 384,000 192,000 P1.12.
Operating expenses 115,200 96,000 61. The journal entry to record this hedge would include a
Separate income from debit to Contract Receivable in the amount of
own operations 134,400 62,400 a. P33,600 c. P33,000
b. P 600 d. P 0
Intercompany sales from P to S for 2014 and 2015 are
summarized as follows: 62. The amount of foreign exchange gain/loss that would
Cost Selling Unsold appear on the income statements of the Philippine
Price at year- company resulting from this speculative hedge for the
end years ended 2014 and 2015 are
Intercompany sales a. 2014 = P300 loss; 2015 = 600 loss
– 2014 240,000 374,400 30% b. 2014 = P300 gain; 2015 = 600 gain
Intercompany sales c. 2014 = P300 loss; 2015 = 600 gain
– 2015 168,000 264,000 40% d. 2014 = P300 gain; 2015= 600 loss

57. The 2015 consolidated income statement will show

cost of goods sold of From the following data, question 16 to 18 should be
a. P 310,080 c. P 384,000 answered.
b. P 576,000 d. P 192,000 Opening inventory 4,000 units
Percentage of Value
Completion
On September 1, 2015 Junjun Company received an order Materials 100% P1,992
for equipment form a foreign customer for FC 300,000 Labor 50% 1,074
when the Philippine peso equivalent was P96,000. Junjun Overhead 50% 846
shipped the equipment on October 15, 2015, and billed the Put in process 20,000 units
customer for FC 300,000 when the Phil. Peso equivalent Materials value P12,000
was P100,000. Junjun received the customer’s remittance Labor 9,984
in full on November 16, 2015, and sold the FC 300,000 for Overhead is 100% of labor cost
P105,000. Units completed and transferred 21,000 units
58. In its income statement for the year ended December Units in process at the end 3,000 units
31, 2015, Junjun should report a foreign exchange Materials 100%
gain of Labor and overhead 60%
a. P5,000 c. P9,000 63. The equivalent production for material is
b. P4,000 d. No gain no loss Under Average Under FIFO
a. 24,000 20,000
Alecks Corporation had the following foreign currency b. 20,000 21,000
transactions during 2015 c. 20,000 24,000
a. Merchandise was purchased from foreign supplier on d. 21,000 20,000
January 20, 2015 for the Peso equivalent of P90,000.
The invoice was paid on March 20, 2015 at the Phil.
Peso equivalent of P96,000.
b. On July 1, 2015, Alecks borrowed the Philippine peso
Sangley, Inc. manufactures a product which goes
equivalent of P500,000 evidenced by a note that was through three consecutive processes, Process 1, Process
payable in the lender’s local currency on July 1, 2015. 2, and Process 3. Data for the month of September,
On December 31, 2015, the Phil. Peso equivalent of 2006 are as follows:
the principal amount and accrued interest were PROCESS1 PROCESS2 PROCESS3
P520,000 and P26,000 respectively. Interest on the
note is 10% per annum. Work in
Process, beg. P8,000 P13,000 P2,000
Materials added 20,000 4,000 5,000

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TeamPRTC

Conversion 10,000 10,000 16,000 b. P1,290,000 d. P1,380,000

costs
Closing work in The following information relates to Job No. 2468, which is
process 6,000 9,000 4,000 being carried out by Flexy Co. to meet a customer’s order.
Dept. A Dept. B
64. What was the value of the output transferred from Direct materials used P5,000 P3,000
Process 3 to the finished goods warehouse for the Direct labor hours 400 200
month of September? employed
a. P63,000 c. P67,000 Direct labor rate per hour P4.00 P5.00
b. P65,000 d. P69,000 Overhead rate per DL hour P4.00 P4.00
Adm. and other overhead 20% of full production
Lego Plastics, Inc. has two joint products, ABBA and ADDA, cost
and uses the net realizable value method of allocating joint Profit markup 25% of selling price
costs. The total joint costs for the year 2000 amounted to
P300,000. During the year, additional processing costs 68. The selling price to the customer of Job 2468 is:
after split-off were P160,000 for ABBA and P240,000 for a. P16,250 c. P17,333
ADDA. Lego produced 16,000 units of ABBA and 8,000 b. P20,800 d. P19,500
units of ADDA during the year. The selling price for ABBA
is P20.00 and for ADDA is P50.00. Rumors Company applied factory overhead as follows:
65. The portion of joint costs allocated to ADDA during the Department Factory Overhead Rate
year is Fabricating P7.75 per Machine hour
a. P175,000 c. P180,000 Spreading 15.10 per Machine hour
b. P225,000 d. P150,000 Gossiping 2.125 per Machine hour

Lee Company produces two products in a single operation, Actual machine hours are: 19,000 hours for fabricating;
Bex and Rom. Joint production cost for June, 2014 were 27,500 hours for spreading and 5,500 hours for gossiping.
P30,000. During the month, further processing costs
beyond the split-off point needed to convert the products 69. If the actual factory overhead cost for the period is
into salable form were P25,000 and P35,000 for 1,600 P574,375, how much is over (under) applied factory
units of Bex and 800 units of Rom, respectively. Bex sells overhead?
for P50 per unit and Rom sells for P100 per unit. Lee uses a. (P11,875.00) c. (P 187.50)
the net realizable method for allocating joint product costs. b. (P23,562.50) d. (P76,125.00)
66. For June, 2014, the joint cost allocated to product Bex
were
a. P20,000 c. P13,500
b. P16,500 d. P10,000

The accounting records for 2014 of Wagner Music Co.

showed the following:
Decrease in raw materials inventory P 45,000
Decrease in finished goods inventory 150,000
Raw materials purchased 1,290,000
Direct labor payroll 600,000
Factory overhead 900,000
Freight-out 135,000
67. The cost of raw materials used for the period
amounted to  - end - 
a. P1,245,000 c. P1,335,000

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