1. 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 Estimated cost at

to date completion
2016 10 P8,412,500 P33,650,000
2017 18 P20,735,000 P31,900,000
2018 7 P31,500,000 ?

What is the RGP during 2017 using the output measures?

A. P1,105,000
B. P1,700,000
C. P1,360,000
D. P1,410,000

2. On December 1, 2018, 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, 2018?

A. P1,802,390
B. P2,702,390
C. P2,500,000
D. P1,518,677

3. Artemus Co. operates a branch in Manila City. On December 31, 2018, 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 given:

 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, 2018 and the other on January 1, 2019.
 The home office allocated to the Manila branch ¾ of the rent expenses it paid
for the year ended 2018. 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 office’s 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, 2018?

A. P475,990
B. P461,490
C. P459,070
D. P463,650

4. On June 30, 2018, Mr. BINAY entered into a franchise agreement with PNOY to
market their products. The agreement provides for an initial fee of
P1,782,500 payable as follows: P532,500 to be paid upon signing of the
contract and the balance in five equal annual payment every end of the year
starting December 31, 2018. Mr. BINAY signs a non-interest bearing note for
the balance. His credit rating indicates that he can borrow money at 12%
interest for the loan of this type. The present value of an annuity of P1 at
15% for 5 periods is 3.605. The agreement further provides that the franchise
must pay a continuing franchise fee equal to 5% of the monthly gross sales.
On September 30, the franchiser completed initial services required in the
contract at a cost of P573,500 and incurred indirect cost of P25,455. The
franchisee commences business operations on October 30, 2018. The gross
sales reported to the franchiser were P210,000 for November and P270,000
for December 2018. The first installment payment was made in due date.

Assume the collectability of the note is not reasonably assured, what is the
net income for the year ended, December 31, 2018?

5. Trillanes Company opened its branch in Makati on July 1. Shipments of

merchandise to the branch with a cost of P320,000 was made during the
month. The home office bills at 125% of cost. The branch recorded a return of
P42,750 of defective merchandise to the home office. On June 30, the branch
reported a net loss from its operations of P10,200 and an inventory of
P225,000. What should be the adjustment for the allowance for overvaluation
of branch inventory?

6. GCC Company has started construction work on a project with a fixed

contract price of P4,000,000. Nadir expects to incur total costs of P3,000,000
on this project. During the first year of the project, the following transactions
occurred:

 Incurred cost of materials, labor and overhead used in the work,

P2,400,000.
  Paid costs of materials purchased but set aside for use in a future date
for this project, P200,000. These materials do not have any alternative
use and cannot be sold to other parties.
 Paid and incurred rectification work no expected to be recovered,
P260,000.
 Incurred general and administrative costs that are not reimbursable,
P100,000.
 Incurred selling costs, P60,000.
 Incidental income from the sale of certain materials, P40,000. These
specific materials were sold since it was considered surplus from the
early phase of the construction.
 The engineers determined that the original estimate of costs did not
include any expected warranty costs of P200,000.

Applying principles of PAS 11– Construction Contracts, determine the profit

for the first year.

7. The Del Pilar Manufacturing Corporation has branches in the biggest cities in
the Philippines. The fixed assets of these branches are carried in the home
office books. Each branch has an imprest fund of P2000 and is reimbursed
periodically for its expenses. All merchandise are billed to the branches at
25% over cost and are inventoried at the branch at billing price. The home
office uses a periodic inventory method. All branch collections are deposited
in a local bank account against which only the home office can draw. Certain
expenses are paid by the home office against the branch.

A summary of the Branch Office- Davao account follows:

Brach Office- Davao

Debit Credit
20x7 20x7
January 1- balance..... P31,410 Remittance P90,320
Shipments to branch.... P64,000
Advertising P33,200
Depreciation P1,200
Reimbursement of Expenses P18,300
Net Profit P4,630

The opening inventory at this branch was P15,750 and the branch reported
sales of P96,345 but of this amount P640 is uncollectible. The branch
inventory at the end of the year is P11,375

A. What is the true branch net income

B. Compute the total assets

8. Comparison between the interoffice account the Wal Wholesaler Company

with its sub-urban branch and the corresponding account carried on the
 latter's book shows the following discrepancies at the close of business on
September 30, 20x7:

a. A charge of P870 (Office Furniture) on the home office books is taken up by

the branch as P780.

b. A credit by the home office for P300 (Merchandise Allowances) is taken up

by the branch as P350.

c. The home office charges the branch P325 for interest on open account,
which the branch fails to take up in full; instead, the branch sends to the
home office an incorrect adjusting memo, reducing the charge by P75 and
sets up a liability for the net amount.

d. A charge for labor by the home office P433 is taken up twice by the
branch.

e. A charge of P785 is made by the home office for freight on merchandise,

but the amount is entered by the branch as P78.5

f. The branch incorrectly sends the home office a debit note for P293,
representing its proportion of a bill for truck repairs; the home office does not
record it.

g. The home office receives P475 from the sale of a truck, which it
erroneously credit to the branch; the branch does not charge the home office
therewith.

h. The branch accidentally receives a copy of the home office entry dated
October 10,2018, correcting item (g.) and enters a credit in favor of the home
office as of September 30, 2018.

The balance of the account with the branch on the home office books shows
P131,690 receivable from the branch at September 30, 2018. The interoffice
account were in balance at the beginning of the year.

Give the balance on the branch books before adjustments.

Give the correct amount of the interoffice balance.

9. AAB Construction Company uses the percentage-of-completion method of

accounting. In 2018 AAB began work under contract #1348, which provided
for a contract price of P20,000,000. Other details follow:

2018 2019
Cost incurred during the year P3,000,000 P15,750,000
Estimated costs to complete, as of December 12,000,000 -0-
31
Billing during the year 3,600,000 15,400,000
 Collections during the year 2,500,000 15,500,000

The portion of the total contract price to be recognized as revenue in 2018 is

10. Summary adjusted trial balance for the home office and branch of TJ
Corporation at December 31, 2018 are as follows:

Home office Branch

Debits:
Other assets P530,000 P165,000
Inventories, January 1, 2018 50,000 45,000
Branch 200,000 -
Purchases 500,000 -
Shipments from home office - 240,000
Expenses 120,000 50,000
Dividends 100,000 -
Total debits P1,500,00 P 500,000
0

Credits:
Other liabilities P 90,000 P 25,000
Capital stock 500,000 -
Retained earnings 100,000 -
Home office - 175,000
Unrealized profit in branch inventory /
loading 10,000 -
Sales 537,500 300,000
Shipments to branch 200,000 -
Branch profit 62,500 _______
Total credits P1,500,00 P 500,000
0

Additional information:
1. The home office ships merchandise to its branch at 120% of home office
cost.
2. Inventories at December 31, 2018 are P70,000 for the home office and
P60,000 for the branch. The branch inventory is at transfer prices.

How much is the net income of the home office and the branch (own books
and in the home office’s books) for the year ended December 31, 2018?