ADVANCE ACCOUNTING II FINAL EXAM

Name: ______________________________________________ Score: _____________

Course & Year: ______________________________________ Date: ______________

1. Man Inc. purchased all of the net assets of Woman Company on January 2, 2011 by issuing 8,000 shares of
its P10 par common stock. At the time, the stock was selling for P30 per share. Direct costs associated with
consummating the combination totaled P4,000, Under IFRS 3 (2008), what total amount should the net
assets acquired be recorded by Man Inc. Assuming that contingent consideration of P5,000 is determined?

a. P249,000 b. P271,000 c. P244,000 d. P245,000

2. The net assets of Acquired Company have a book value of P150,000 and a fair value of P180,000.
Acquiring Company paid P250,000 cash for all the net assets of Acquired Company. Acquiring Company
also paid P50,000 to an investment house as finder’s fee. At what amount should goodwill be recorded on
Acquiring Company’s books?

a. P120,000 b. P 70,000 c. P120,000 d. P 70,000

3. On June 30,2011 White Corporation issued 100,000 shares of its P20 par value common stock for the net
assets of Black Company in a business combination accounted for by the acquisition method. The market
value of White’s common stock on June 30 was P36 per share. White paid a fee of P100,000 to the broker
who arranged this acquisition. Costs of SEC registration and issuance of the equity securities amounted to
P50,000.

Contingent consideration determined to be paid to Black Company after acquisition amounts to P120,000.

What amount should White capitalize as the cost of acquiring Black’s net assets.

a. P3,620,000 b. P3,650,000 c. P3,720,000 d. P3,750,000

4. On January 1, 2011, CJ Corporation acquired the net assets of Rex, Inc., by issuing 600,000 shares of its
P10 par value common stock, Subsequently, Rex was liquidated and its assets and liabilities merged into CJ
Corporation. CJ’s stock was selling for P50 per share on January 1, 2011. The amount of goodwill recorded
by CJ in connection with the combination was P6,120,000. CJ incurred P300,000 of legal and broker’s fees
associated with the combination and P30,000 of stock issuance costs.

What is the fair value of Rex’s net assets and the amount of the increase in CJ’s stockholders equity as a
result of the combination, respectively?
a. P23,880,000 and P30,000,000 c. P24,180,000 and P29,970,000
b. P24,180,000 and P30,000,000 d. P23,880,000 and P29,970,000

5. The net assets of BB Company have a book value of P300,000 and a fair market value of P420,000. Among
the undervalued assets are the plant and equipment which have a book value of P200,000 and a fair value
of P225,000. AA Company issues stock with a par value of P250,000 and a market value of P600,000 for
the net assets of BB Company. Shortly after the stock issue BB merges with AA Company. At what
amount should BB’s plant and equipment be recorded on AA Company books.

a. P250,000 b. P200,000 c. P225,000 d. P300,000

Consider the following information for the questions below:

Statement of financial position for Puro Corporation and Sato Company on December 31, 2011, are given below:
_______________________________________________________________________________
Puro Sato
Corporation Company
Cash and cash equivalents P 70,000 P 90,000
Inventory 100,000 60,000
Property and equipment (net) 500,000 250,000
Investment in Sato Company 260,000 _______
Total assets P930,000 P400,000

Current Liabilities P180,000 P 60,000

Long-Term Liabilities 200,000 90,000
Common stock 300,000 100,000
Retained earnings 250,000 150,000
Total liabilities and stockholder’s equity P930,000 P400,000
________________________________________________________________________________
Puro Corporation purchased 80 percent ownership of Sato Company on December 31, 2011, for P260,000. On that
date, Sato Company’s property and equipment had a fair value of P50,000 more than the book value shown. All
other book values approximated fair value. In the consolidated statement of financial position on December 31,
2011.
6. What amount of total property and equipment will be reported?

a. P500,000 b. P750,000 c. P790,000 d. P800,000

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ADVANCE ACCOUNTING II FINAL EXAM

7. What amount of goodwill will be reported?

a. P 0 b. P20,000 c. P25,000 d. P60,000

8. What amount of consolidated retained earnings will be reported?

a. P250,000 b. P280,000 c. P370,000 d. P400,000

9. What amount of total stockholders’ equity will be reported?

a. P550,000 b. P615,000 c. P750,000 d. P800,000

10. What amount of non-controlling interest will be reported?

a. P 65,000 b. P 60,000 c. P110,000 d. P160,000

11. What amount of total liabilities will be reported?

a. P240,000 b. P290,000 c. P380,000 d. P530,000

12. What amount of total assets will be reported?

a. P 930,000 b. P1,070,000 c. P1,145,000 d. P1,140,000

13. Puzon Inc., purchased 80 % of Santos Company’s outstanding common stock for P260,000, P60,000 above
the underlying book value on January 2, 2011. The fair value of Santo’s net assets approximated book
value. On the December 31, 2011 consolidated statement of financial position, non-controlling interest
(NCI) should be reported at:

a. P75,000 b. P42,000 c. P65,000 d. P60,000

14. Pecson, Inc., purchased 80 percent of Sison’s Company voting common stock for P260,000, P60,000 above
the underlying book value on January 2, 2009. Any excess is amortized over 10 years. What is the effect of
the excess on the 2011 consolidated net income?
a. A decrease of P18,000 c. An increase of P6,000
b. An increase of P12,000 d. A decrease of P6,000

15. If a wholly owned subsidiary’s net income was P150,00, the subsidiary declared dividends of P80,000, and
the depreciation and amortization of current fair values excess was P20,000, the NCI in net income of
subsidiary under the cost method of accounting is:

a. P -0- b. P 70,000 c. P100,000 d. P130,000

16. On January 2, 2011, Pat Corporation acquired 75% of the outstanding common stock of Sol Company for
P270,000 cash. The investment was accounted for by the cost method. On January 2, 2011, Sol’s
identifiable net assets (book value and fair value) were P300,000. Sol’s net income for the year ended
December 31, 2011, was P160,000. During year 2011, Pat received P60,000 cash dividends from Sol.
There were no other inter-company transactions. The balance of the non-controlling interest (NCI) account
on December 31, 2011 is:

a. P114,000 b. P106,250 c. P 55,000 d. P 20,000

17. For the year ended February 28, 2011,Sy Company, the 90% owned purchased subsidiary of Pe
Corporation, declared a dividend of P100,000 and had a net of income of P300,000. Also for that year,
amortization of the current fair value differences if Sy’s identifiable net assets was P60,000. The balance of
NCI in Net Inco me of Subsidiary account on February 28, 2011, is:

a. P24,000 b. P21,000 c. P24,900 d. P20,000

18. On April 1, 2010, Palawan, Inc., paid P1,700,000 for all the issued and outstanding common stock of
Samar Corporation. On that date, the total cost and the total fair value of Samar’s net assets are P1,260,000
and P1,300,000 respectively. In Palawan’s March 31, 2011, consolidated statement of financial position,
what is the amount of goodwill that should be reported as a result of this business combination?
a. P380,000 b. P390,000 c. P400,000 d. P429,000

19. Patton Corporation acquired a 60% interest in Solis Company on January 1, 2011 for P360,000, when Solis
net assets had a book value and fair value of P600,000, During 2011 Patton sold inventory items that cost
P600,000 to Solis for P800,000, and Solis’ inventory at December 31, 2011 included one-fourth of this
merchandise. Patton reported separate income from its own operations (excluding investment income) of
P300,000, and Solis reported a net loss of P150,000 for 2011. Consolidated net income for Patton
Corporation and Subsidiary for 2011 is:
a. P180,000 b. P100,000 c. P160,000 d. P260,000

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ADVANCE ACCOUNTING II FINAL EXAM

20. Santos Company, a 75%-owned subsidiary of Pardo Corporation, sells inventory items to its parent at
125% of cost. Inventories of the two affiliated companies for 2011 are as follows:
_______________________________________________________________________
Pardo Santos

Beginning Inventory P400,000 P250,000

Ending inventory 500,000 200,000

Pardo’s beginning and ending inventories include merchandise acquired from Santos of P150,000 and
P200,000, respectively. If Santos reports net income of P300,000 for 2011, Pardo’s investment income
under the equity method will be:

a. P195,000 b. P255,000 c. P215,000 d. P217,500

21. On January 1, 2011, Puzon Company purchased 75% of the outstanding stock of Suazon Company at book
value. During 2011 Suazon sold inventory items costing P50,000 to Puzon for P75,000. Puzon resold 60%
of this inventory to outsider’s during the year for P100,000.For the year 2011 Puzon had net income from
its own operations of P200,000 and paid dividends of P120,000. Suazon’s net income for the year was
P110,000; it paid P40,000 in dividends. What is the consolidated net income attributable to parent for
2011?

a. P273,000 b. P276,000 c. P300,000 d. P275,000

22. On January 1, 2011, Pete Company sold equipments to Sison Company, its wholly owned subsidiary, for
P400, 000. The equipment had cost Pete P500,000; the accumulated depreciation at the time of the sale was
P250,000. Pete used a 10-year, no salvage value, and straight-line depreciation. Sison will continue this
practice. On the consolidated balance sheet at December 31, 2011, the cost and accumulated depreciation
of the equipment should be stated at:

a. P500,000 and P300,000 c. P400,000 and P 80,000

b. P400,000 and P 50,000 d. P250,000 and P 50,000

23. On January 1, 2011 Pro Company acquired 70% of Sol, Inc., at book value. On December 31, 2011, Sol,
sold a computer to Pro for P90,000. Sol acquired the computer at a cost of P60,000. Pro will use a 10-year
life, no salvage value, and straight-line depreciation. For 2011 Sol reports net income of P100,000. What is
the NCI in net income of subsidiary?

a. P38,100 b. P21,000 c. P49.000 d. P30,000

24. Paw Inc., owns 75% of Saw Company, purchased several years ago at book value.

On July 1, 2011, Saw sell to Paw a used computer at a loss of P12,000. The computer has a 5-year life from
the date of the intercompany sale, straight-line depreciation will be used, and it has no salvage value. In
year 2011, Saw had net income of P100,000 and paid dividends of P60,000. The NCI in net income of
subsidiary for 2011 is:

a. P21,700 b. P22.300 c. P27,700 d. P28,300

25. On December 1, 2011, Import Computers, Inc. purchased 10 personal computers from a Japanese firm for
200,000 Japanese yen. The exchange rate for the Japanese yen is P1=¥2.22 on December 1 and P1=¥2.70
on December 31. On its December statement of comprehensive income Import Computers should report a
foreign exchange gain (loss) of:

a. P(96,000) b. P 96,000 c. P(16,000) d. P 16,000

26. Sulu Company, a Philippine company, purchased merchandise from a foreign supplier on November 5.
2010, for 50,000 foreign currency, when the selling spot rate was a foreign currency = P0.4295. On Sulu’s
December 31, 2010, year-end the selling spot rate was P0.4245. On January 15, 2011, Sulu acquired 50,000
foreign currency at the selling spot rate of P0.4345 and paid the invoice. What amounts does Sulu report in
its income statements for years 2010 and 2011 as foreign exchange gains or (losses)?

2010 2011 2010 2011

a. P 250 P(500) c. P -0- P(250)
b. P(250) P -0- d. P -0- P -0-

27. On May 1, 2011, Durian Export Corporation sold a quality of durian fruit to a foreign customer for 100,000
foreign currency, payable in 30 days. On May 1, the spot rate is 1 FC=P.85 and the 30-day forward rate is 1
FC – P.8415. On May 30, when the bill is paid, the spot rate is 1 FC=P.856. the sale of durian fruits should
be recorded at:

a. P 85,000 b. P 84,150 c. P 85,600 d. P117,000

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ADVANCE ACCOUNTING II FINAL EXAM

28. On June 30, 2011, Sweet Tooth Company purchases chocolate candies from a foreign supplier for 50,000
foreign currency, payable in 60 days. On June 30, 1 FC is worth P.6498; by August 30, the day of
settlement, 1 FC is worth P.6256. The 60-day forward rate on June 30 is 1 FC=P.6612. Sweet Tooth should
record the cost of the chocolate candies at:

a. P31,280 b. P31,885 c. P32,490 d. P33,060

29. The Sulu Corporation translates foreign currency amounts at December 31, 2011. At that time, Sulu had
foreign subsidiaries with P1,500,000 local currency units in long-term receivables and 2,400,00 LCU in
long-term debt. The rate of exchange in effect when the specific transactions occurred involving those
foreign currency amounts was 2 LCU to P1. The rate of exchange in effect at December 31, 2011 was 1.5
LCU to P1. The translation of the above foreign currency amounts into Philippine pesos would result in
long-term receivables and long-term debt, respectively of:

a. P750,000 and P1,200,000 c. P1,000,000 and P1,200,000

b. P750,000 and P1,600,000 d. P1,000,000 and P1,600,000

30. For the current year in Sri Lankan subsidiary reported a beginning FIFO inventory of P40,000 Rupee,
purchases of 300,000 Rupee, and an ending FIFO inventory of P30,000 Rupee. The exchange rate for the
Sri Lankan Rupee was .5325 on January 1, and .5854 on December 31. The average rate for the year was
.5745. What is the cost of goods sold in Philippine peso?

a. P176,088 b. P178,095 c. P178,095 d. P181,474

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