ADVANCED FINANCIAL ACCOUNTING & REPORTING MAJOR EXAMINATION

INSTRUCTION: Select the correct answer for each of the following questions.
Mark only one answer for each item by shading the box corresponding to the
letter of your choice on the answer sheet provided. STRICTLY NO ERASURES
ALLOWED. Use pencil no. 2 only.

The business assets of LL and MM appear below:

LL MM
Cash P 11,000 P 22,354
Accounts receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000 -
Building - 428,267
Furniture and fixture 50,345 34,789
Other assets 2,000 3,600
Total P 1,020,916 P 1,317,002

Accounts payable P 178,940 P 243,650

Notes payable 200,000 345,000
LL, capital 641,976 -
MM, capital - 728,352
Total P 1,020,916 P 1,317,002

LL and MM agreed to form a partnership by contributing their respective

assets and equities subject to the following adjustments:
a. Accounts receivable of P 20,000 in LL’s books and P 35,000 in MM’s are
uncollectible
b. Inventories of P 5,500 and P 6,700 are worthless in LL’s and MM’s
respective books
c. Other assets of P 2,000 and P 3,600 in LL’s and MM’s respective books are
to be written off.

1. The capital account of the partners after the adjustments will be:

a. LL, P 614,476; MM, P 683,052

LL MM
Capital 641,976 728,352
Accounts Receivable (20,000) (35,000)
Inventories ( 5,500) ( 6,700)
Other Assets ( 2,000) ( 3,600)
Adjusted Capital 614,476 683,052

2. The same information above, how much total assets does the partnership
have after formation?

a. P 2,265,118

Cash (P 11,000 + 22,354) 33,354

Accounts Receivable (P 214,536 + P 532,890) 747,426
Inventories (P 114,535 + 253,402) 367,937
Land 603,000
Building 428,267
Furniture and Fixture (P 50,345 + 34,789) 85,134
Total Assets 2,265,118

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On January 1, 2019, DD and EE decided to form a partnership. At the end of
the year, the partnership made a net income of P 120,000. The capital accounts
of the partnership show the following transactions
DD, Capital EE, Capital
Dr. Cr. Dr. Cr.
January 1 - P 40,000 - P 25,000
April 1 P 5,000 - - -
June 1 - - - P 10,000
August 1 - P 10,000 - -
September 1 - - P 3,000 -
October 1 - P 5,000 P 1,000 -
December 1 - P 4,000 - P 5,000

3. Assuming that an interest of 20% per annum is given on average capital

and the balance of the profits is allocated equally, the allocation of
profits should be:

a. DD, P 61,200; EE, P 58,800

Average capital of DD

40,000 x 12/12 40,000

5,000 x 9/12 (3,750)
10,000 x 5/12 4,167
5,000 x 3/12 1,250
4,000 x 1/12 333
Average capital 42,000

Interest of DD (P 42,000 x 20%) 8,400

Average capital of EE

25,000 x 12/12 25,000

10,000 x 7/12 5,833
3,000 x 4/12 (1,000)
1,000 x 3/12 (250)
5,000 x 1/12 417
Average Capital 30,000

Interest of EE (P 30,000 x 20%) 6,000

Net Income of the Partnership 120,000

Interest on Capital (P 8,400 + 6,000) (14,400)
Remainder to be allocated to partners 105,600

Allocated to DD (P 105,600 / 2) 52,800

Interest share of DD 8,400
Total Allocated to DD 61,200

Allocated to EE (P 105,600 / 2) 52,800

Interest share of EE 6,000
Total Allocated to EE 58,800

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HH, MM, and AA formed a partnership on January 1, 2019, and contributed P
150,000, P 200,000, and P 250,000, respectively. Their articles of co-
partnership provide that the operating income be shared among the partners
as follows: as salary, P 24,000 for HH, P 18,000 for MM, and P 12,000 for
AA; interest of 12% on the average capital during 2019 of the three partners;
and the remainder in the ratio of 2:4:4, respectively.

The operating income for the year ending December 31, 2019 amounted to P
176,000. HH contributed additional capital of P 30,000 on July 1 and made
a drawing of P 10,000 on October 1; MM contributed additional capital of P
20,000 on August 1 and made a drawing of P 10,000 on October 1; and, AA
made a drawing of P 30,000 on November 1.

4. The partner’s capital balances on December 31, 2019 are:

a. HH, P 223,180; MM, P 272,060; and, AA, P 280,760

Average capital of HH

150,000 x 12/12 150,000

30,000 x 6/12 15,000
10,000 x 3/12 (2,500)
Average capital 162,500

Interest of HH (P 162,500 x 12%) 19,500

Average capital of MM

200,000 x 12/12 200,000

20,000 x 5/12 8,333
10,000 x 3/12 (2,500)
Average capital 205,833

Interest of MM (P 205,833 x 12%) 24,700

Average capital of AA

250,000 x 12/12 250,000

30,000 x 2/12 (5,000)
Average capital 245,000

Interest of AA (P 245,000 x 12%) 29,400

HH MM AA
Net Income 176,000
Less: Interest 19,500 24,700 29,400 (73,600)
Less: Salaries 24,000 18,000 12,000 (54,000)
Remainder 9,680 19,360 19,360 (48,400)
Total Share 53,180 62,060 60,760
Capital 170,000 210,000 220,000
Ending Capital 223,180 272,060 280,760

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On January 2, 2019, BB and PP formed a partnership. BB contributed capital
of P 175,000 and PP, P 25,000. They agreed to share profits and losses 80%
and 20% respectively. PP is the general manager and works in the partnership
full time and is given a salary of P 5,000.00 a month; and interest of 5% of
the beginning capital (of both partner) and a bonus of 15% of net income
before the salary, interest and the bonus.

The profit and loss statement of the partnership for the year ended
December 31, 2019 is as follows:
Net Sales P 875,000
Cost of Goods Sold 700,000
Gross Profit P 175,000
Expenses (including the salary, interest and bonus 143,000
Net Income P 32,000

5. The amount of bonus to PP in 2019 amounted to:

a. P 18,000

Salaries to partners (P 5,000 x 12 months) 60,000

Interest – BB (P 175,000 x 5%) 8,750
Interest – PP (P 25,000 x 5%) 1,250
Total 70,000

Net Income After Salaries, Interest & Bonus (32,000 + 70,000) 102,000
Net Income Before S, I, & B (P 102,000 / 85%) 120,000
Bonus to PP 18,000

On January 1, 2012, A, B, C, and D formed Bakya Trading Co., a partnership,

with capital contributions as follows: A, P 50,000; B, P 25,000; C, P 25,000;
and D, P 20,000. The partnership contract provided that each partner shall
receive a 5% interest on contributed capital, and that A and B shall receive
salaries of P 5,000 and P 3,000, respectively.

The contract also provided that C shall receive a minimum of P 2,500 per
annum, and D a minimum of P 6,000 per annum, which is inclusive of amounts
representing interest and share of remaining profits. The balance of the
profits shall be distributed to A, B, C, and D in a 3:3:2:2 ratio.

6. What amount must be earned by the partnership, before any charge for
interest and salaries, so that A may receive an aggregate of P 12,500
including interest, salary, and share of profits?
a. P 32,333

A B C D Total
Interest 2,500 1,250 1,250 1,000 6,000
Salaries 5,000 3,000 8,000
Share 5,000 5,000 3,333 3,333 16,667
Minimum 12,500 9,250 4,583 4,333 30,667
1,667 1,667
6,000 32,333

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7. In case of partnership dissolution through admission of new partner or
retirement of partner, which of the following statements is correct?
a. In case of admission of new partner by investment, the presence of
excess of total agreed capitalization over the total contributed
capital of all partners and the presence of difference between the
contributed capital and agreed capital of new partner will show that
there is positive asset revaluation and bonus to either old or new
partner
8. In case of liquidation of the partnership, which of the following
statements is inaccurate?
a. If the partnership’s assets are not sufficient to cover the
partnership’s liabilities to third person, the general partners are
liable solidarily up to the extent of their separate assets
9. Which of the following best illustrates the insolvency of a firm?
a. The firm has more liabilities than assets

Components of the December 31, 2014, statement of affairs of Neoleen, which

was undergoing liquidation, included the following:

Assets pledged to fully secured creditors, at fair value P 150,000

Assets pledged to partially secured creditors, at fair value 104,000
Free assets, at current fair value 80,000
Fully secured liabilities 60,000
Partially secured liabilities 120,000
Unsecured liabilities – with priority 14,000
Unsecured liabilities – without priority 224,000

10. Determine the estimated payment to partially secured liabilities.

a. P 114,400

Fully Pledged Assets 150,000

Less: Fully Secured Creditors 60,000

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 Excess 90,000

Total Free Assets (P 90,000 + 80,000) P 170,000

Less: UL with priority 14,000
Net Free Assets 156,000

Partially Pledged Assets 104,000

Less: Partialy Secured Creditors 120,000
Excess of Unsecured Creditors 16,000

Total Unsecured Creditors W/O Prio (P 224,000 + 16,000) 240,000

Estimated recovery percentage (P 156,000 / 240,000) 65%

Secured portion 104,000

Unsecured Portion (P 16,000 x 65%) 10,400
Total payment to PSL 114,400

The following data were presented in the statement of affairs for BW Company:

Unsecured liabilities without priority 900,000

Stockholders’ equity 360,000
Loss on realization of assets 450,000
Estimated administrative expenses that have not been recorded 45,000
Unsecured liabilities with priority 100,000

11. Based on the foregoing data, what percentage of their claims should
unsecured without priority creditors expect to receive on the
liquidation of BW Company?
a. 85 %

USL without priority 900,000

USL with priority 100,000
SHE 360,000
Total Assets 1,360,000
Less: Loss on realization 450,000
Fair Value of Assets 910,000
Less: Estimated Adm. Exp. 45,000
Less: USL w/ priority 100,000
Net Free Assets 765,000

Estimated recovery percentage (P 765,000 / 900,000) 85%

The First Family Bank loaned P 5,000,000 to Belle Corporation. The loan is
secured by a land with a book value and fair market value of P 4,000,000 and
P 3,000,000, respectively.

12. What amount will the bank receive if unsecured creditors received
25%of their claims?

a. P 3,500,000

Loan amount 5,000,000

Less: Secured portion 3,000,000
Unsecured portion 2,000,000
Estimated recovery (2,000,000 x 25%). 500,000

Page 6 of 20
 Total amount to be received (P 3,000,000 + 500,000) 3,500,000

13. Which of the following is a characteristic of a joint arrangement?

I – The parties are bound by a contractual arrangement.
II – The contractual arrangement gives two or more parties joint control
over the arrangement.
a. c.
b. Both I and II

LJ, AD, and KL formed a joint operation. They agreed to make initial
contributions of P 50,000 each. Profit or loss shall be divided equally. The
following data relate to the joint operation’s transactions:
Joint Operation Expenses paid from JO Cash Merch. Inventory Taken
LJ 40,000 credit 25,000 25,000
AD 50,000 credit 10,000 30,000
KL 60,000 credit 15,000 20,000

14. How much is the balance of joint operations account before distribution
of profit or loss?

a. P 150,000

Joint Operation (P 40,000 + 50,000 + 60,000) P 150,000

15. How much is the joint operation’s sales during the period?

a. P 350,000

Joint Operation 150,000

Initial Contributions (P 50,000 x 3) 150,000
Expenses (P 25,000 + 10,000 + 15,000) 50,000
Total Sales 350,000

16. How much is the joint operation’s profit or loss during the period?
a. P 225,000

Sales 350,000
COGS (P 150,000 – 25,000 – 30,000 – 20,000) 75,000
Gross Profit 275,000
Less: Expenses 50,000
Net Profit of the Joint Operation 225,000

17. Under the installment sales method

a. Gross profit is deferred proportionately to cash uncollected from

sale of the product, but total revenue and costs are recognized at
the point of sale

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 d. Revenues and costs are recognized proportionately to the cash
received from the sale of the product, but gross profit is deferred
until all the cash is received

Wood Corp. has a normal gross profit on installment sales of 30%. A 2015
sale resulted in a default early in 2017. At the date of default, the balance
of the installment receivable was P 8,000, and the repossessed merchandise
had a fair value of P 4,500.

18. Assuming the repossessed merchandise is to be recorded at fair value,

the gain or loss on repossession should be

a. P 1,100 loss

Fair value of repossessed merchandise 4,500

Less: Unrecovered cost (P 8,000 x 70%) 5,600
Loss on repossession 1,100

Gentry Co. uses the installment sales method. When an account had a balance
of P 3,500, no further collections could be made and the dining room set was
repossessed. At that time, it was estimated that the dining room set could
be sold for P 1,000 as repossessed, or for P 1,300 if the company spent P
125 reconditioning it.

19. The gross profit rate on this sale was 70%. What is the gain or loss on
repossession?

a. P 125 gain

Fair value of repo merchandise (P 1,300 – 125) 1,175

Less: Unrecovered Cost (P 3,500 x 30%) 1,050
Gain on repossession 125

On October 20, 2016, Grimm Co. consigned 40 freezers to Holden Co. for sale
at P 1,000 each and paid P 800 in transportation costs. On December 30, 2016,
Holden reported the sale of 10 freezers and remitted P 8,500. The remittance
was net of the agreed 15% commission.

20. What amount should Grimm recognize as consignment sales revenue for
2016?

P 10,000

10 freezers sold x P 1,000 each 10,000

VG DEVELOPMENT COMPANY started work on a construction contract in 2015. The

contract rice is P 10,000,000. However, if the cumulative inflation reaches
or exceeds 25%, the contract price shall be adjusted upward by 10%. Cost
escalations on the contract are probable as to recovery. Additional
information on the contract is shown below:
2015 2016
Costs incurred to date P 2,400,000 P 4,500,000
Estimated cost at completion 6,000,000 6,000,000
Cumulative inflation rate 18% 27%

Page 8 of 20
21. Compute the percentage of completion during the year 2015
40%

Cost incurred to date 2,400,000

Estimated cost at completion 6,000,000
Percentage of completion (P 2,400,000 / 6,000,000) 40%

22. Compute for the percentage of completion during the year 2016
35%

Cost incurred to date 4,500,000

Estimated cost at completion 6,000,000
Percentage of completion (P 4,500,000 / 6,000,000) 75%
POC, 2016 (75 percent less 40 percent) 35%

23. What is the contract price in 2015?

P 10,000,000

24. Northern Airline purchased airline gate rights at Newark International

Airport for P 2,000,000 with a legal life of five years. However, Northern
has the ability and right to extend the rights every ten years for an
indefinite period of time. Over what period of time should Northern
amortize the gate rights?

No amortization

On November 1, 2016, a franchisee bought a franchise from Max Turkey for a

sales price of P 5,000,000 to sell Max Turkey’s products for a period of
20 years. Their agreement provides that P 500,000 will be paid in advance
and the balance in 5 equal annual installments, evidenced by a 9%
promissory note; and Max Turkey will be responsible in making the
feasibility study of the project and siex months training of the
franchisee’s staff and employees. The present value factors for the 9%
rate follow:

Present value of P 1 for 5 periods 0.650

Present value of annuity of P 1 for 5 periods 3.890
Present value of annuity of P 1 for 5 periods (in advance) 4.240

25. Assuming collection of the note is reasonably assured, what is the

amount of franchise revenue should Max Turkey recognize for the year ended
December 31, 2016?

Zero

Page 9 of 20
Each of Potter Pie Co.’s 21 new franchisee contracted to pay an initial
franchise fee of P 30,000. By December 31, 2016, each franchisee had paid a
non-refundable P 10,000 fee and signed a note to pay P 10,000 principal plus
the market rate of interest on December 31, 2017 and December 31, 2018.
Experience indicates that one franchise will default on the additional
payments. Services for the initial franchise fee will be performed in 2017.

26. What amount of net unearned franchise fees would Potter report at
December 31, 2016?

P 610,000

21 franchises x P 30,000 each 630,000

Less: Default (P 30,000 – 10,000) 20,000
Net Unearned franchise fees 610,000

27. Which of the following is the only reason why a home office cannot
report inventory shipments to a branch as sales?

a. Only inventory transaction between the company and outside third

parties can be considered sales

Selected balances from the Amorsolo Company’s Branches A and B are as

follows:

Branch A Branch B
Inventory, January 1, 2016 P 21,000 P 19,000
Imprest branch fund 2,000 1,500
Inventory, December 31, 2016 19,000 12,000
Accounts Receivable, January 1, 2016 55,000 43,500
Accounts Receivable, December 31, 2016 70,000 53,500
Merchandise from Home Office 61,000 47,000
Cash Collections 85,000 70,000
Sales 100,000 80,000
Cash Expenses 21,000 14,300

All sales, collections, and expenses are handled at the branch. All cash
received from sales and collections are sent directly to the home office.
Expenses are paid by the branch from the imprest fund and immediately
reimbursed by the home office and credited to the Home Office account. All
expenses paid by the branch are recorded in the branch books.

28. The net profit of branch A is:

a. P 16,000
b.

Sales 100,000
COGS (P 21,000 + 61,000 – 19,000) 63,000
Gross Profit 37,000
Less: Cash Expenses 21,000
Net Income 16,000

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29. The balances of the Home Office account of Branch A on January 1, 2016
is:
a. P 78,000

Imprest fund 2,000

Inventory, January 1 21,000
Accounts Receivable, Jan. 1 55,000
Total 78,000

30. The balance of the Home Office account of Branch B on January 1, 2016
is:
a. P 64,000
b.

Imprest fund 1,500

Inventory, January 1 19,000
Accounts Receivable, Jan. 1 43,500
Total 64,000

31. At the acquisition date, which of the following is NOT required to be

recognized by the acquirer?
a. Retained earnings of the acquiree

32. With respect to the allocation of the cost of a business acquisition,

PFRS 3 requires
a. Cost to be allocated based on fair value
33. Which one of the following is not necessarily a post-combination
characteristic of a legal acquisition?
a. The acquiring firm owns 100% of the voting stock of the acquired firm
34. Pert Co. acquired controlling interest in Sydney Co. is a legal
acquisition. Which one of the following could not be part of the entry to
record the acquisition?

b. Debit: Goodwill

The Chief Execute Officer (CEO) of Buy-It Company is contemplating selling

the business to new interests. The cumulative earnings for the past 5 years
amounted to P 800,000. The annual earnings, based on an average rate of
return on investment for this industry, would have been P 145,000.

35. If excess earnings are to be capitalized at 8%, what would be the

implied goodwill in this transaction?
a. P 187,500

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 d. P 52,400

Average earnings per year (P 800,000 / 5 years) 160,000

Normal earnings based on this investment 145,000
Excess of earnings 15,000
Goodwill (P 15,000 / 8%) 187,500

In a business combination accounted as purchase, Major Corp. issued non-

voting, non-convertible preferred stock with a fair value of P 8,000,000 in
exchange for all of the outstanding common stock of Minor Co. On the
acquisition date, Minor had tangible net assets with a carrying amount of P
4,000,000 and a fair value of P 5,000,000. In addition, Major issued
preferred stock valued at P 800,000 to an individual as a finder’s fee in
arranging the transaction.

36. As a result of this transaction, Major should record an increase in net

assets of
a. P 8,000,000

Investment in Subsidiary 8,000,000

Capital Stock 8,000,000

Finders Fee 800,000

Capital Stock 800,000

The Dub Co. had these accounts at the time it was acquired by Bush Co.:
Cash 36,000
Accounts receivable 457,000
Inventories 120,000
Property, plant and equipment 696,400
Liabilities 350,800

Bush paid P 1,400,000 for 100% of the stock of Dub Co. It was determined
that fair market values of inventories and property, plant and equipment
were P 133,000 and P 900,000, respectively.

37. In the books of Bush Co., this transaction resulted to:

a. Goodwill recorded at P 224,800
b.

Total consideration 1,400,000

Less: FVNA
Cash 36,000
AR 457,000
Inventories 133,000
PPE 900,000
Liabilities (350,800) 1,175,200
Goodwill 224,800

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On July 1, 2016, the balance sheet of Com Co. and Pol Co. are as follows:

Com Co. Pol Co.

Assets P 4,000,000 P 2,500,000
Liabilities 1,500,000 800,000
Capital stock, no par 2,000,000
Capital stock, P 100 par 1,000,000
Additional paid in capital 700,000 300,000
Retained Earnings (200,000) 400,000

Com Co. on this date, agreed to acquire all the assets, and assume all the
liabilities of Pol Co. in exchange for shares of stock that it will issue.
The stock of Com Co. is selling in the market at P 50 per share. The assets
of Pol Co. are to be appraised, and Com Co is to issue shares of its stock
with a market value equal to that of the net assets transferred by Pol Co.
The value of the assets of Pol Co., per appraisal, increased by P 300,000.

38. On the assumption that the acquisition method is applied, the total
liabilities and stockholders’ equity of Com Co. reflecting the combination
is:
a. P 6,800,000
b.

Total Liabilities (P 1,500,000 + 800,000) 2,300,000

Capital Stock (P 2,000,000 + 2,000,000) 4,000,000
APIC 700,000
RE (200,000)
Total Liabilities and SHE 6,800,000

39. The capital stock reflecting the combination under acquisition method
is:
a. P 4,000,000

40. Redford Corp. has a 90% interest in White Co., while the latter has an
80% interest in Sol Corp. For the year ended December 31, 2016, the net
income from own operations of these three companies were: Redford Corp.,
P 1,000,000; White Corp., P 500,000, Sol Corp., P 250,000. What is the
amount of minority interest in net income?
a. P 70,000

Net Income of White Company 500,000

Share of White in NI of Sol (P 250,000 x 80%) 200,000
Total Net Income of White Company 700,000
NCI share in the NI of White (P 700,000 x 10%) 70,000

41. The Knight Co. acquired an 80% interest in the Pot Co. when Pot’s equity
comprised share capital of P 100,000 and retained earnings of P 500,000.
Pot’s current statement of financial position shows share capital of P
100,000, a revaluation reserve of P 400,000 and retained earnings of P
1,400,000. Under IFRS 10, Consolidated Financial Statements, what figure
in respect of Pot’s retained earnings should be included in the
consolidated statement of financial position?

Page 13 of 20
 a. P 720,000
b.

RE, Current 1,400,000

Less: RE, Acquisition 500,000
Increase in RE 900,000
Attributable to the CI (P 900,000 x 80%). 720,000

42. The Elf Co. acquired a 60% interest in the Pea Co. when Pea’s equity
comprised share capital of P 100,000 and retained earnings of P 150,000.
Pea’s current statement of financial position shows share capital of P
100,000, a revaluation reserve of P 75,000 and retained earnings of P
300,000. Under IFRS 10, Consolidated Financial Statements, what amount in
respect of the non-controlling interest should be included in Elf Co.’s
consolidated statement of financial position?
a. P

d. P 190,000

NCI at acquisition (P 250,000 x 40%) 100,000

Share of NCI in net income (P 150,000 x 40%) 60,000
Share of NCI in RR (P 75,000 x 40%) 30,000
Total NCI 190,000

43. A sale of goods denominated in a currency other than the entity’s

functional currency resulted in a receivable that was fixed in terms of
the amount of foreign currency that would be received. Exchange rates
between the functional currency and the currency in which the transaction
was denominated changed. The resulting gain should be included as a:
a. Transaction gain reported as a component of income from continuing
operations.

44. Which of the following is not considered when directly computing the
translation adjustment for foreign financial statements?
a. Beginning amount of net assets held by the domestic investor
b. Increase or decrease in net assets for the period excluding capital
transactions
c. Increase or decrease in net asset as a result of capital transactions
d. All are considered when directly computing the translation adjustment

45. Which of the following suggests that the foreign entity’s functional
currency is the parent’s currency?
a. Sale prices are influenced by international factors

Day Corp. purchased merchandise from an unaffiliated foreign company for

10,000 units of foreign company’s local currency. Day paid the bill in full
on March 1, 2017 when the spot rate was P 0.45. The spot rate was P 0.60 on
April 8, 2016 and was P 0.55 on December 31, 2016.

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46. For the year ended December 31, 2017, Day should report a transaction
gain of
a. P 1,000
b.

10,000 FCU x P 0.55 5,500

10,000 FCU x P 0.45 4,500
ForEx Gain 1,000

Phil-Export Corp. sold to American customer merchandise worth 10,000 USD. As

of Phil-Export’s balance sheet cut-off date on June 30, 2016, the exchange
rate was P 26.60. On August 15, 2016, payment was received in the form of a
bank transfer whereby Phil-Export’s account was credited the amount of P
265,400 before any charges. At the time of acceptance of the merchandise in
San Francisco, the exchange rate was P 26.75.

47. The appropriate exchange rate for the recognition of the sale was:
a. P 26.75

Local Corp. imported a heavy machine from the US for 50,000 USD on October
10, 2016. A letter of credit was opened with a Makati branch based on the
commercial invoice for 50,000 USD, on which Local Corp. made a 100% deposit
cover based on the exchange rate of 1 USD to P 27.50. Shipment of the heavy
machine was effected on December 30, 2016, at which time the exporter
collected the proceeds of the letter of credit when the prevailing exchange
rate was 1 USD to P 28.000.

48. From the exchange rate fluctuation, Local Corp. realized:

a. No gain, no loss
b.

A Meisner Co. ordered parts costing 100,000 baht for a foreign supplier on
May 12 when the spot rate was P 0.24 per baht. A one-month forward contract
was signed on that date to purchase 100,000 baht at a forward rate of P 0.25
per baht. On June 12, when the parts were received and payment was made, the
spot rate was P 0.28 per baht.

49. At what amount should inventory be reported?

a. P 28,000
50. On January 1, 2016, NBA Cares, Inc. a non-stock, non-profit charitable
organization, received P 1,000,000 cash donation from Rajon Rondo
who imposed a condition that the fund shall be used for the
acquisition of several service vehicles for the use of the
organization. On December 31, 2016, NBA Cares purchased a motor
vehicle using the donated fund at an amount of P 200,000. Which of
the following statements concerning the presentation of the
transactions that transpired for in 2016 in NBA Cares’ financial is
correct?
a.

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 b. The 1,000,000 cash donation shall be presented as cash receipts from
financing activities while the P 200,000 shall be presented as cash
disbursements for investing activities in the Statement of Cash Flows
c.

DAWLEMS is a voluntary welfare organization funded by contributions from the

general public. During 2016, unrestricted pledges of P 300,000 were received,
of which it was estimated that P 36,000 would be uncollectible. By the end
of 2016, P 240,000 of the pledges had been collected, and it was expected
that an additional P 24,000 of these pledges would be collected in 2017,
with the balance to be written off as uncollectible. Donors did not specify
any periods during which the donations were to be used. Also, during 2016,
DAWLEMS sold a computer for P 9,000. Its cost was P 10,500, and its book
value was P 7,500. DAWLEMS made the correct entry to record the gain on the
sale.

51. What amount should DAWLEMS include as unrestricted support in 2016 for
contributions?
a. P 268,000

52. Under the Government Accounting Manual issued by the Commission on

Audit, which of the following transactions will require journal entry in
the accounting book of a national government agency or unit?
a. Receipt of notice of cash allocation from Department of Budget and
Management

53. The term “fund” as used in government or fund accounting usually denotes
(an)
a. Fiscal and accounting entity having a set of self-balancing accounts
54. IFRS 4 provides that an insurer shall perform liability adequacy test
which involves at assessment at the end of each reporting period whether
its recognized insurance liabilities are adequate, using current estimates
of future cash flows under its insurance contracts. If at the end of the
reporting period, the insurer’s assessment shows that the carrying amount
of its insurance liabilities is inadequate in the light of the estimated
future cash flows. How shall the insurer treat or account the entire
deficiency?
a. It shall be treated as a change in accounting estimate accounted for
prospectively and recognized in profit or loss
b.

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 d.

55. OKC entered into a concession agreement with the Philippine government
to operate the Skyway 3 expressway connecting SLEX to NLEX. The contract
provides that OKC Inc. has received a right, not a license, to charge
motorist for the public service and the revenue receivable is not agreed
upon in advance. The contract will last for 30 years. How shall OKC account
for its infrastructure asset in that service concession agreement?
a. The infrastructure asset shall be capitalized as intangible asset to
be amortized over the contract life of 30 years
b.

Precise, Inc. manufactures specialized precision electronics kits. In late

March, Job orders #0311 and #0322 were started. Estimated materials cost
were P 90,000 for both orders (60% for #0311) while direct labor hours were
estimated at 700 for #0311 and 400 for #0322. Labor rate is P 18 per hour
while variable overhead rate is P 10 per hour. By the end of April, 75% of
the required materials have been issued to production in the amount of P
90,000 and both job orders have been 50% converted with 360 hours charged to
#0311 and 180 hours charged to #0322 at the hourly rates given.

56. The total cost charged to Job Order #0311 was:

a. P 64,080
b. Direct materials (P 90,000 x 60%)
Labor (360 hours x P 18 per hour)
Overhead (360 hours x P 10 per hour
Work-in-Process 54,000
6,480
3,600
64,080

Avery Co. uses a predetermined factory overhead rate based on direct labor
hours. For the month of October, Avery’s budgeted overhead was P 300,000
based on a budgeted volume of 100,000 direct labor hours. Actual overhead
amounted to P 325,000 with actual direct labor hours totaling 110,000.

57. How much was the overapplied or underapplied overhead?

a. P 5,000 overapplied
b.

Actual Overhead 325,000

Budgeted Overhead (110,000 hours x 300,000/100,000) 330,000
Overapplied Overhead 5,000

CHOWKING Company adds material at the start of production. The following

production information is available for June:
Units
Beg. Work-in-Process Inventory (45% complete as to conversion) 10,000
Started this period 120,000
Ending Work-in-Process Inventory (80% complete as to conversion) 8,200

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Beginning Work In Process Inventory Costs:
Material P 24,500
Conversion 68,905

Current Period Costs:

Material P 75,600
Conversion 130,053

58. What are the equivalent units for conversion using the FIFO method?
a. 123,860
b.

Units completed (10,000 + 120,000 – 8,200) 121,800

Add: EWIP (8,200 x 80%) 6,560
Less: BWIP (10,000 x 45%) 4,500
EUP, FIFO 123,860

59. What is the material cost per equivalent unit using the weighted average
method?
a. P 0.77
b.

BWIP 10,000
Started 120,000
EUP, WA 130,000

Materials (P 24,500 + 75,600) 100,100

Cost per EUP, Materials (P 100,100 / 130,000) 0.77

KYLO REN’s standard production cost per unit for direct material and
conversion cost amounted to P 20.25 and P 46.00, respectively. There is a
long-term contract with supplier of the said material fixing the price. The
beginning inventory for June is assumed to be zero. the following are
transactions for the month:
• Purchased direct material amounting to P 311,250
• Incurred wages payable for direct and indirect labor amounting to P 350,000
and P 150,000, while accumulated depreciation and other overhead costs
totaled P 121,750
• 15,000 units were completed during the period
• Sold 14,800 units for P 100 each on account
• Incurred selling and administration cost amounting to P 199,500

60. How much is the ending raw and in process inventory?

a. P 7,500
b.

Materials 311,250
Standard Materials (15,000 x 20.25) 303,750
Ending RIP 7,500

61. How much is the ending finished goods inventory?

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 b. P 13,250

15,000 units x 66.25 993,750

14,800 units x 66.25 980,500
Ending FG 13,250

62. A company produces three main products and one by-product. The by-
product’s relative market value is quite low compared to that of the main
products. The preferable accounting for the by-product’s net realizable
value is as
a. A reduction in the joint cost to be allocated to the three main
products
b.

Sheltex Corp. processes materials and recovers Product Shell and Caltex. The
cost of buying 600,000 gallons of direct materials, and processing these up
to split-off point will yield 300,000 gallons of Shell and 270,000 gallons,
net of 30,000 gallons evaporation, at a total production costs of P
17,100,000. The selling price of Shell is P 500 per gallon and P 400 per
gallon for Caltex. Records show that on May 1, there were 24,000 gallons of
Shell and 15,000 gallons of Caltex; and at the end of May, there were 36,000
gallons of Shell and 39,000 gallons of Caltex.

63. Using the quantitative unit method of allocating joint product costs,
what would be the allocated cost for Product Caltex?
a. P 8,100,000

64. Which of the following statements about activity-based costing is not

true?
a. Activity-based costing is more likely to result in major differences
from traditional costing systems if the firm manufactures only one
product rather than multiple products

SHAW Savings and Loan had the following activities, traceable costs, and
physical flow of driver units:

Activities Traceable Cost Driver Physical Flow of Units

Open new accounts P 50,000 1,000 units
Process deposits 36,000 400,000 deposits
Process withdrawals 15,000 200,000 withdrawals
Process loan applications 27,000 900 applications

The above activities are used by DECKARD and OWEN branches.

DECKARD OWEN
New accounts 200 400
Deposits 40,000 20,000

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 Withdrawals 15,000 18,000
Loan applications 100 160

65. How much of the loan application cost will be assigned to the DECKARD
branch?
a. P 3,000
b.

27,000 / 900 applications 30 each application

100 loan applications x 30 each application 3,000

66. It is the process of interaction and integration among people,

companies, and governments worldwide
a. Globalization

67. A growing list of records around the world that are linked using
cryptography
c. Blockchain

68. The ability of machines, devices, sensors, and people to connect and
communicate with each other via the Internet of Things (IoT) or the
Internet of People (IoP)
c. Interconnection

69. A period in which one or more technologies is replaced by another

technology in a short amount of time
a. Technological Revolution c.

70. What phase are we currently in terms of Industrialization?

c. Fourth

END OF EXAMINATION

NOTHING FOLLOWS.

SUBMIT THIS TEST QUESTION SET TOGETHER WITH THE ANSWER SHEET TO YOUR
PROCTORS. BRINGING THE TEST QUESTION SET OUT OF THE ROOM WILL BE A GROUND
FOR DISCIPLINARY ACTION

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