On January 1, 2018 SME A and SME B each acquired 30 per cent of

the ordinary shares that carry voting rights at a general meeting of

shareholders of entity Z for P 300,000. Entities A and B immediately
agreed to share control over entity Z.Entity Z incurred a loss of P
100,000 for the year ended December 31, 2018 and it did not declare a
dividend. Furthermore, on December 31, 2018, the recoverable amount
of each venturer’s investment in entity Z is P 265,000 (calculation: P
275,000 fair value less P 10,000 estimated costs to sell). Using cost
model, each venture recognizes impairment loss for 2018 amounted
to:
10,000
NIL or Zero
25,000
35,000
10,000

The Dwarf Corporation is maintaining a branch in Cebu. During the

year, the home office shipped goods to the branch at a cost of
120,000. The branch submitted to the home office the following report
summarizing its operations for the period ended December 31,
2016.Sales (30% on account), 196,000; Expenses (50% of which is still
unpaid), 50,000; Purchases, 25,000; Shipments from Home Office,
150,000; Inventory beg (30% from outsiders), 30,000; Inventory end
(40% from Home Office), 90,000; remittance to Home Office, 60,000.
What is the required balance of the allowance for overvaluation
account on December 31, 2016?
28,000
34,200
27,000
7,200
34,200
On January 1, 2019, FIRST Company enters into a contract to transfer
Product A and Product B to SECOND Company for P200,000. The
contract specifies that payment of product A will not occur until
Product B is also delivered. FIRST Company determines that the stand
alone prices are P60,000 for product A and P140,000 for product B.
FIRST Company delivers Product A to SECOND Company on February
1, 2019. Product B is delivered on March 1, 2019. On March 1, 2019,
how much is the amount of revenue to be recorded?
P200,000
P140,000
P60,000
None
P200,000

ABC, a franchisor, whose fiscal year ends on July 31, entered into
franchise agreement with DEF, a franchisee, on July 1, 2017. The total
franchise fee agreed upon is 550,000; 50,000 is payable when the
contract is signed and a non-interest bearing note requiring four equal
annual installments for the balance. It was agreed that the down
payment is not refundable notwithstanding lack of substantial
performance of services by the franchisor. The direct franchise cost
incurred was 325,000 while indirect franchise expense of 31,250 was
also incurred. The management of DEF has estimated that they can
borrow a loan of this type at the rate of 12%. The franchise
commenced its operations on July 31, 2017. How much is the net
income (loss) to be reported by ABC? (use PV factor of 3.04)
(15,240)
73,750
119,750
77,550
119,750

The Dwarf Corporation is maintaining a branch in Cebu. During the

year, the home office shipped goods to the branch at a cost of
120,000. The branch submitted to the home office the following report
summarizing its operations for the period ended December 31,
2016.Sales (30% on account), 196,000; Expenses (50% of which is still
unpaid), 50,000; Purchases, 25,000; Shipments from Home Office,
150,000; Inventory beg (30% from outsiders), 30,000; Inventory end
(40% from Home Office), 90,000; remittance to Home Office, 60,000.
What is the cost of sales in so far as the home office is concerned?
83,000
92,000
115,000
88,000
83,000

Coffee Co has a branch in Iloilo. On February 1, 2020, the home office

accounting records show unrealized profit account with a credit
balance of 10,000. During February, merchandise costing 150,000 was
shipped to the Bacolod branch and billed at a price representing a 25%
mark-up of the billed price. On February 28, the branch prepared an
income statement indicating a net income of 51,000 for February and
ending inventories at billed prices of 80,000. What is the true net
income of the branch?
82,500
91,000
67,000
71,000
91,000

Sheldon sold a restaurant franchise to Penny. The sale agreement

signed on January 2, 2015 called for a 30,000 down payment plus an
interest-bearing note of 20,000 payable in two annual payments
representing the value of initial franchise services rendered by
Sheldon. In addition, the agreement required the franchisee to pay 5%
of its gross revenues to the franchisor; this was deemed sufficient to
cover the cost and provide a reasonable profit margin on continuing
franchise services to be performed by the franchisee. The restaurant
opened early in 2015, and its sales for the year amounted to 500,000.
The management of Penny has estimated that they can borrow a loan
of this type at the rate of 10%. The present value factor of an ordinary
annuity at 10% for 2 periods is 1.7335. How much should Penny
recognize as total revenue from the franchise?
72,335
77,000
75,000
74,069
72,335

In 2020, MYIESHA Construction began work on a 3-year contract. The

contract price was P6,000,000. MYIESHA uses the percentage-of-
completion method/over time for financial accounting purposes. The
financial statement presentation relating to this contract at December
31, 2020 was as follows:
28%
6.5%
13%
100%
6.5%

The home office transfers inventory to its branch at 20% of billed

price. During the year, inventory costing the home office 320,000 was
transferred to the branch. At the year end, the home office adjusted its
deferred gross profit account by 82,800. The branch year-end
Statement of Financial Position shows 19,200 of inventory acquired
from the home office. What is the branch’s beginning inventory at its
actual cost?
88,000
26,560
33,200
16,000
88,000

In 2020, MYIESHA Construction began work on a 3-year contract. The

contract price was P6,000,000. MYIESHA uses the percentage-of-
completion method/over time for financial accounting purposes. The
financial statement presentation relating to this contract at December
31, 2020 was as follows:
21,000
369,000
240,000
129,000
240,000