ADVANCED FINANCIAL ACCOUNTING AND REPORTING

INSTRUCTIONS: Select the best answer for each of I. Intra-group transactions must be eliminated on
the following questions. Mark only one answer for each consolidation
item on the answer sheet provided. II. A holding of 10% of ordinary voting shares in another
company is accounted for in accordance with PAS 27
Archway Co has an overseas subsidiary in a foreign country.
consolidated and separate financial statements
This subsidiary is 75% owned and operates independently of
III. Where a subsidiary does not adopt the same accounting
its parent. The exchange gain arising from the translation of
policies as its parent company, adjustments must be
the subsidiary’s accounts of the year ended June 30 2018 was
made to bring its accounting policies into line prior to
P20, 000. On June 1 2019 Archway Co purchased raw
consolidation.
materials from a foreign supplier for FC250, 000. It paid for
IV. Where a group comprises a parent company and an
the materials on 31 July 2019. Relevant exchange rates were:
investee over which the parent has significant
FC=P1 influence, consolidated accounts must be prepared.
01/June/201 1.60 a. I and III only c. II and III only
9 b. I and IV only d. I, II, III, and IV
30/June/201 1.61
9 Comparative trial balances of the Home Office and the two
31/July/2019 1.63 branches of Aggregate Corporation at December 31 2019 were
as follows:
1. In respect of these items, what is the exchange gain that
should be included in the consolidated income statement Debits Home Office Branch ONE Branch TWO
for the year ended 30 June 2019? Cash P 5,000 P P
15,000 22,000
a. P 970 c. P 22,876
Accounts 80,000 30,000 40,000
b. P 2,876 d. P 20,970
Receivable
2. When a parent has a foreign subsidiary whose functional Inventories 150,000 60,000 40,000
currency is the national currency of the country where it Branch ONE 170,000
operates, which rates of exchange should be used to Branch TWO 117,000
translate the items below into the parents functional and Plant Assets 730,000 250,000 200,000
presentation currency? Purchases 900,000
Shipments 300,000 200,000
Non-Current Receivables Non-Current from Home
Assets Liabilities Office
a. Closing Closing rate Closing rate Expenses 300,000 75,000 50,000
rate P 2,452,000 P 730,000 P 552,000
b Historic rate Closing rate Closing rate
. Credits
c. Historic rate Historic rate Closing rate Accounts P 100,000 P 45,000 P 30,000
d Historic rate Historic rate Historic rate Payable
. Other liabilities 80,000 15,000 5,000
Rain Org is a subsidiary of the Weather Group. Its functional Loading in 60,000
currency is the Zyco, and the presentation currency of the branch
group is the Peso (P). The abbreviated statement of the Inventories
position of Rain Org at 31 December 2019 is as follows: Share capital, 500,000
P10 par
ZYCO Retained 262,000
Non-Current Assets 420, 000 earnings
Current Assets 210, 000 Home Office 170,000 117,000
Total Assets 630, 000 equity
Sales 1,000,000 500,000 400,000
Share Capital 360, 000 Shipments to 450,000
Retained earnings 100, 000 Branches
Current Liabilities 170, 000 P 2,452,000 P 730,000 P 552,000
Equity and liabilities 630, 000
Relevant exchange rates are as follows:
The home office bills Branch ONE at 120% of cost. Since
2 Zyco: P1 On 31 December 2019 branch TWO is relatively new, to deal with competition, it is
2.1 Zyco: On date of acquisition of non-current assets billed by the home office at cost. These billing policies had
P1
been in effect over the last two years. Home office and branch
3 Zyco: P1 On date Rain Org acquired by Weather Group
inventories at December 31, 2019 were:
3. What cumulative exchange difference is shown in Rain Home Office, at cost P120,000
Org’s balance sheet at 31 December 2019, assuming Branch ONE, at billed prices 72,000
retained earnings computed by its components is P82, Branch TWO, at billed prices 80,000
500. 6. Compute Aggregate’s ending inventory at December 31,
a. P27,500 credit c. P25,700 debit 2019
b. 0 d. P20,750 debit a. P 240,000 c. P 272,000
4. Which of the following provide evidence of a parent- b. P 258,667 d. P 260,000
subsidiary relationship? 7. Compute the amount of the inter-office profit realized from
I. The parent has power over more than 50% of the voting branch sales to outsiders in 2019.
rights through agreement with other investors. a. P 62,700 c. P 44,667
II. The parent has power to govern the financial and b. P 26,667 d. 48, 000
operating policies of the entity by statute.
III. The parent has the power to remove a majority of the For the quarter ended September 30 2019, Victory company
members of the board of directors consigned 80 units of 3SM truck batteries costing P6,250 each
IV. The parent has representation on the board of directors to Florida Enterprises. The freight cost incurred by Victory for
a. I only c. I, II, and III only the merchandise shipments was P10,500, 60% of which was
b. I and IV only d. I, II, III and IV paid by Victory and the balance by Florida. On September 30,
5. Which of the following statements are true? an account sale was received from the consignee reporting
that 45 batteries had been sold for P2,500, installation costs of

1
ADVANCED FINANCIAL ACCOUNTING AND REPORTING

P4,000 on units sold, and the amount advanced for the freight IF PROCESSED
on Victory’s shipments. FURTHER
Products Units Sales Additional Sales
8. The inventory value of the units unsold in the hands of the Produced Value at Costs Value at
consignee is Split-off Final
a. P 69,437.50 c. P116,725.00 point Point
b. P223,343.75 d. P110,312.50 W 6,000 80,000 7,500 90,000
9. The profit for the consignor for the units sold is X 5,000 60,000 6,000 70,000
a. P102,906.25 c. P104,031.25 Y 4,000 40,000 4,000 50,000
b. P102,793.75 d. P106,540.00 Z 3,000 20,000 2,500 30,000
18,000 200,000 20,000 240,000
10. The amount of cash that will be remitted by the consignee
17. Assuming A joint production cost of P160,000 and the
is:
use of the relative sales value at the split-off-point,
a. P395,987.50 c. P389,575.00
what joint cost were allocated to each product?
b. P283, 937.50 d. P385,862.50
W X Y Z
Liberty Sportswear manufactures a specialty line of T-shirts
a. P40,000 P40,000 P40,000 P40,000
using a job order costing system. During March, the following b P53,333 P44,000 P35,556 P26,667
costs were incurred in completing Job 007: direct materials, .
P13,700; direct labor, P4,800; administrative, P1,400; and c. P60,000 P46,667 P33,333 P20,000
selling, P5,600. Factory overhead was applied at the rate of d P64,00 P48,00 P32,00 P16,00
P25 per machine hour and Job 007 required 800 machine . 0 0 0 0
hours. The San Lorenzo Association, a private non-profit organization,
received a contribution of P50,000 in 2018 restricted for
11. If Job 007 resulted in 7,000 good shirts, the cost of goods membership training in providing emergency aid during
sold per unit would be: calamity situations. None of the contribution was spent in
a. P6.50 c. P5.70 2018. In 2019, P35,000 of the contribution was used to
b. P6.30 d. 5.50 finance a training seminar as to the role its members may take
RENDOR Contractors was recently awarded a P6,720,000 in helping people in flood disaster situations.
contract to construct a trade center for RICAFORT Lending, 18. Unrestricted net assets are typically the assets in the
Inc. RENDOR Contractors estimates it will take about 4 years a. General fund
to complete the contract. The company uses the percentage of b. Restricted fund
completion method to report the profits. (Use two decimal c. Permanent endowment fund
places for the percentage of completion, i.e. 64.28%) d. Loan fund, term endowment fund, annuity fund,
The following information details the actual and estimated life income fund, and plant fund.
costs from 2016 to 2019 19. In the cash distribution plan, which partner gets the
first cash distribution?
Year Actual cost Estimated cost a. The partner with the largest loan balance
12. Determine
each year to complete
the b. The partner with the largest loss
2016 P3,120,000 P3,264,000
realized absorption potential
2017 1,584,000 1,800,000
2018 1,152,000 912,000 gross c. The partner with the largest capital balance
2019 1,080,000 profit(loss) d. The partner with the largest profit or loss ratio
in 2019 20. Determine the true statement under PFRS 11
a. (P168,000) c. P48,000 a. Joint arrangement is either joint venture or
b. P127,000 d. (P48,000) joint operation
13. Using zero profit method instead how much is the realized b. Joint arrangement is either joint arrangement or
gross profit(loss) in 2018? joint venture
a. (P168,000) c. P48,000 c. Joint arrangement is either joint arrangement or
b. P127,000 d. (P48,000) joint operation
d. Joint arrangement, joint venture and joint
GREATWITZ Company began operations on January 1, 2019 operation are one and the same.
and appropriately uses the installment method of accounting.
The following information pertains to the operation of the PANDI COMPANY manufactures job order at the specifications
company for 2019. of its customers. A job order with exacting specifications for
P20,000 units has been received and was immediately placed
Cost of installment sales, P252,000; Gross profit based on cost, in process. The original cost amounted to a total of P360,000.
25%; collection on installment sales (including interest of Upon final inspection it was discovered that 500 units were
P11,000), P297,500. defective and 300 units were spoiled. The defective units were
reworked at a total cost of P3,500 and the spoiled units were
14. Determine the realized gross profit for 2019
sold as seconds at P10 each.
a. P37,500 c. P35,750
b. P37,950 d. P57,300 The customer has agreed to accept only the good units
15. Determine the deferred gross profit at December 31 2019. although they were less than the number ordered.
a. P73,950 c. P53,750
b. P37,950 d. P93,750 21. Calculate the increase in original unit cost of the good
16. Under the installment method realized gross profit is units produced as a result of the customer’s strict and
computed at the end of year by: exacting specifications:
a. Multiplying the total collections by the gross profit a. P0.2950 c. P0.3073
rate based on cost b. P0.1795 d. P0.2995
b. Multiplying the total collections by the gross
profit rate based on sales On January 2 2019, TAGUM Company signed an agreement to
c. Multiplying the selling price by the gross profit rate operate as a franchisee to BALIWAG Enterprises for an initial
d. Multiplying the cost of sales by the gross profit rate franchise fee of P2,812,500 for 10 years. Of this amount,
P525,000 was paid when the agreement was signed and the
SOLID Corporation manufactures products W, X, Y, and Z from balance payable in four annual payments beginning on
a joint process. Additional information is as follows: December 31 2019. TAGUM issued a promissory note for the
balance, the relevamt interest rate being 24%. Assume that

2
ADVANCED FINANCIAL ACCOUNTING AND REPORTING

substantial services amounting to P417,450 had already been
rendered by BALIWAG Enterprises and that additional indirect
franchise cost of P70,500 was also incurred. The franchise
started operations during 2019 with a total sales of P450,000.
The agreement further provides that the franchisee must pay a
continuing franchise fee equal to 5% of its gross sales. If
needed, the PV factor is 2.40.
22. Assuming note is a non-interest-bearing and its collection
is reasonably assured, calculate the net income reported
by BALIWAG for the year ended December 31 2019.
a. P598,630.50 c. P1,920,000
b. P1,761,450 d. P2,835,000
employees. The agreement also includes the payment monthly
by the franchisee of continuing franchise fees calculated at 3%
of the franchisee’s monthly gross sales revenues.
On July 1, 2019, PURONG KILATIS FOODS entered into a
franchising agreement with a known retailer, SHELLY’S
SPECIALTIES. PURONG KILATIS FOODS had completed all of
the initial services required at a cost of P800,000. Indirect
expenses were P18,000 in 2019. HELLY’s SPECIALTIES had
started operations November 2, 2019 with a total sales
revenue of P450,400 from its 2019 operation. It was
ascertained that collection of the notes provided by SHELLY’s
SPECIALTIES is reasonably assured.

In 2019, QUICK Builders agreed to construct a commercial 27. Compute the net income reported by PURONG KILATIS
building at a price of P3,000,000. QUICK Builders uses the FOODS from the SHELLY’s franchise in 2019
percentage of completion method. The information relating to a. P1,875,215 c. P1,758,512
the costs and billings for the contract were as follows: b. P1,785,512 d. P1,578512
28. A private non-profit organization (NPO) should recognize
2017 2018 2019 contributed services which would be purchased if not
Cost 840,000 1,800,000 2.355,000 donated as an increase in both expenses and
incurred to
contributions, if the following requirement(s) for such
date
recognition is/are met.
Estimated 1,560,000 600,000
cost yet to I. The contributed service creates or enhances a non-
be incurred financial asset
Customer 450,000 1,200,000 3,000,000 II. It must be performed by a professional or by a specialist
billings to a. Both I and II c. Neither I or II
date b. I only d. II only
Collection of 360,000 960,000 2,820,000
billings to BIGLANG-SIGAW MANUFACTURERS uses process costing in its
date manufacacturlng operations and adopts the FIFO method in its
23. How much is the excess of construction in progress over production. In Department 2, conversion costs are incurred
progress billings or progress billings over construction in uniformly throughout the process. Materials are added
progress in QUICK Builders December 31, 2018 balance following inspection, which occurs at the 90% stage of
sheet completion. In view of the simplicity of the production process,
a. P1,050,000 c. P600,000 losses are not expected, thus any spoiled units are deemed
b. P1,650,000 d. P2,355,000 abnormal and their costs charged to Factory Overhead Control
24. Over the same data in the item above, but using zero- account.
profiti-method instead, how much is the construction in
progress, net of progress billings or progress billings net of The following information relates to the department 2 for April
construction in progress in QUICK Builders December 31, 2019.
2018 balance sheet? Units
a. P1,050,000 c. P600,000 Pesos
b. P1,650,000 d. P2,355,000 In process, April 1 (40% converted) 2000 P 16000
25. Under PFRS 11, joint arrangements that are joint ventures Received from Department 1 12000 84000
are accounted for under Transferred to finished product 8000
a. cost method in accordance with PAS 39 In process April 30 (70% converted) 5000
b. equity method in accordance with PAS 28 Lost units 1000
c. fair value method in accordance with PFRS 9
d. proportionate consolidation method in Cost incurred in Department 2 during the current month are
accordance with PAS given below

BIGLANG-AYAW CORPORATION is finally distressed and the Materials 24000

court has ordered its liquidation. It has the following liabilities: Labor and Overhead 45240
Income taxes, P16,000; Notes payable (secured by land),
P240,000; Accounts payable, P54,000; Salaries payable, In answering Questions XX through XX that follows, assume
P12,000; Bonds payable (secured by plant and equipment), the following unit costs for April were determined from the
abovementioned information.
P120,000; and administrative expenses for liquidation,
P20,000. The distressed company has the following assets with
Preceding department P 7.00
their respective book value and fair value: Current assets,
Materials 3.00
P160,000 and P67,000; Land, P200,000 and P220,000; and the Labor and Overhead 3.90
plant and Equipment, P140,000 and P130,000, respectively. Cumulative P 13.90
26. Compute the estimated amount the holders of the note
29. Compute the cost of units completed from the In-Process,
payable would collect following liquidation. April 1
a. P220,800 c. P282,000 a. P 25,364 c. P 26,880
b. P280,800 d. P228,000 b. P 25, 436 d. P 25, 463
PURONG-KILATIS FOODS, INC charges new franchisees an 30. Compute the cost of units completed from those received
initial fee of P2,500,000. Of this amount, P1,000,000 is payable during April
in cash when the agreement is signed, and the remainder is to a. P 83, 400 c. P
be paid in four equal annual installments through the issuance 87,490
of 12% interest-bearing-notes. In consideration thereof, b. P 89,470 d. P 84,970
PURONG KILATIS FOODS promises to assist the franchisees in
locating the business site; in conducting market study to 31. Compute the cost of production charged to Factory
estimate earnings potential; in supervising the construction of Overhead Control
a building; and in the initial training of management and a. P 9,549 c. P 9,954

3
ADVANCED FINANCIAL ACCOUNTING AND REPORTING

b. P 9,945 d. P 10,510 Average for 2019 FC 1 = P 0.8250

Date when inventory
32. Compute the cost of units still in process at April 30, 2019 on hand was purchased FC 1 = P 0.8300
a. P 46,850 c. P 45,680 Date dividends were declared FC 1 = P 0.8125
b. P 48,650 d. P 48,650
EG’s financial results for 2019 were as follows:

The FOREVERMORE INDUSTRIES manufactures products X, A, EG Financial Statements

and K from a joint production process at a cost of P 58, 800. December 31, 2019
Additional information for the current period follows:
INCOME STATEMENT
Sales
Units Estimated Cost units
Value Sales FC 5,000,000
Products after Cost of sales FC 3,500,000
To Depreciation expense 150,000
Produced Further To sell Sold
complete
Processing Other Expense 850,000
X 800 P 40,000 P 5,000 P 4,000 700 Net Income FC 500,000
A 600 4,00 4,000 4,200 382
K 400 32,000 3,000 2,000 350
1,800 P 106,000 P 12,000 P10,20 1,600 STATEMENT OF RETAINED EARNINGS
0
January 1, 2019 FC 400,000
33. Compute the unit cost for Product A under the NRV Net Income 500,000
method of joint cost allocation. Dividends (100,000)
December 31, 2019 FC 800,000
a. P 33.38 c. P 54.75
b. P 37.00 d. P 38.33 BALANCE SHEETS
Cash FC 1,200,000
Selected accounts from the trial balance of PAIYAKAN SALES, Accounts Receivable 500,000
INC. as of December 21, 2019 follow: Inventory
Installment Receivable – Repossessions 4,500 (FC 500,000 at January 1) 700,000
2018 Sales P 22,500 Plant and Equipment, net 400,000
Installment Receivable – Installment Sales FC 4,200,000
2019 Sales 300,000 637,500 Accounts payable FC 400,000
Inventory 102,500 Regular Sales 577,500 Long-term-debt 2,000,000
Purchases 832,500 Deferred Gross Profit- 2018 Share Capital 1,000,000
58,800 Retained Earnings 800,000
FC 4,200,000
Additional Information:
Assumed that EG is considered to be an independent self-
Installments Receivable – 2018, 1/1/2019 P sustaining subsidiary and Liza-S will consolidate in its peso
180,000 functional currency.
Inventory of new and repossessed 142,500
merchandise, 12/31/2019 37. How much will be EG’s net income for 2019 translated in
Gross Profit Rates based on sales: Regular Sales, 30%; pesos?
Installment Sales – 2018, 35%; and Installment Sales – 2019, a. P 412,500 c. P 606,060
38%. b. P 408,750 d. P 611,621

Repossession recorded during the year was from a 2018 38. What is the amount of gain or loss arising from translation?
installment sale with an uncollected balance at the time of a. P 750 loss c. P 3,750 gain
repossession of P 12,000. b. P 5,000 loss d. P 307 loss

34. Compute for the total realized gross profit for 2019 BAHAY-PARE CORPORATION purchases all the outstanding
a. P 325,245 c. P 325,425 shares of SINAG-TALA COMPANY on January 2, 2019 for P
b. P 352,245 d. P 352,425 385,000 cash. On this date the stockholders equity of SINAG-
TALA is as follows:
35. Compute for the total deferred gross profit at December
31, 2019 Share capital, P10par P 175,000
a. P 121,587 c. P 112,785 Paid-in-capital in excess of par 87,500
b. P 121,875 d. P 121,785 Retained Earnings 175,000

36. Which of the following is a major restructuring objective of Any of excess of the fair value of net assets over the fair value
the IASB? *BONUS of the investment is attributable to SINAG-TALA’s building
a. To ensure compliance to a single set of accounting which is currently overstated in its books. All other net assets
standards. items of the acquired company are fairly valued at the
b. To progressively phase out divergent accounting acquisition date. The building has an estimated life of 10 years
practices. from January 2, 2019 without salvage value.
c. To promote a greater understanding of the accounting The considered trial balance of the affiliated companies on
practices of different nations. December 31, 2019 appears as follows:
d. To lessen the understanding of different accounting p
practices in one country. BAHAY-PARE SINAG-TALA
Current Assets P 420,000 P 302,750
Liza-S Company has a wholly-owned subsidiary in a foreign Land 210,000 210,000
country called EG which was acquired on January 1, 2019. The Building (net) 1,050,000 283,500
foreign subsidiary submitted its financial statements for 2019 Investment in
to Liza-S. Selected exchange rates in effect throughout 2019 SINAG-TALA 385,000 -
are shown below. Current Liabilities (708,750) (367,500)
Ordinary shares, P3 par (525,000) -
January 1, 2019 FC 1 = P 0.8150 Share Capital, P10 par - (175,000)
December 31, 2019 FC 1 = P 0.8175 Paid-in-capital in
excess of par (315,000) ( 87,500)
4
ADVANCED FINANCIAL ACCOUNTING AND REPORTING

Retained Earnings, a. P 2,050,335 c. P 2,500,553

1/2/2019 (446,250) (175,000) b. P 2,069,619 d. P 2,056,381
Sales (367,500) ( 70,000)
Cost of goods sold 210,000 61,250 43. Compute the consolidated net income for 2020.
Operating Expenses 78,750 17,500 a. P 195,125 c. P 215,915
Dividends declared 8,750 - b. P 161,043 d. P 157,631
Totals --- ---
44. Compute the amount of the consolidated net income for
39. Compute the consolidated net income for 2019. 2020 attributable to the parent’s shareholders.
a. P 75,520 c. P 72,550 a. P 175,500.50 c. P145,249
b. P 70,525 d. P 75,250 b. P 141,575 d. P143,482.50

40. Compute the consolidated Retained earnings at December 45. Compute the amount of consolidated net Income
31, 2019. attributable to the non-controlling interest.
a. P 517,250 c. P 515,270 a. P 19,624.50 c. P 15,794
b. P 525,170 d. P 512,750 b. P 16,056.00 d. P 15,732.50
41. Company Y purchases an 80% controlling interest in
Company Z on January 1, 2019. Which of the following would 46. Any negative goodwill arising on the date of the business
appear as the stockholders equity amount on Company Y’s combination
consolidated balance sheet on the date of acquisition? a. Is recognized as a gain on the date of acquisition
b. Is prorated among the parent Company’s Identifiable net
a. Company Y’s shareholders’ equity assets
b. The sum of the Shareholders Equity of the both c. Should be amortized over a predetermined period
companies. d. Is recognized as a loss on the date of acquisition.
c. Company Y’s shareholders equity as well as Company
Y’s proportional share of Company Z’s net assets at fair 47. A company owning a majority (but less than 100%) of
value. another’s voting shares on the date of acquisition should
d. The sum of Company Y’s Shareholders Equity account for its subsidiary
and the proportional share of Company Z’s non- a. By including only its share of the fair market values of the
controlling interest from the full fair value of Company subsidiary’s net assets
Z’s outstanding shares at the acquisition date. b. By including only its share of the book values or the
subsidiary’s net assets
On January 1, 2019, GININTUANG PUSO CORPORATION c. By including 100% of the fair values of the subsidiary’s
acquired 80% of the outstanding shares of BAGAL SULONG net assets
COMPANY for P743, 750. At this date, the stockholders’ equity d. By including 100% of the fair market values of the
of BAGAL SULONG follows: subsidiary’s net assets and accounting for any un-
owned portion of the voting shares using the non-
Ordinary shares, P5 par P 350,000 controlling interest account.
APIC 175,000
Retained earnings 175,000 On January 1, 2019, companies AA, BB, and CC established a
P 700,000 “joint operation” to manufacture a product they each need in
their respective operations. They will contribute equal amounts
The net assets of BAGAL SULONG on January 1, 2019 were and agreed to share on the production output equally. AA
fairly valued. GININTUANG PUSO assigned the full fair value to contributed cash of P200,000; BB contributed equipment
the non-controlling interest at the date of acquisition in carrying cost of P215,000; and CC contributed machinery with
analyzing the fair value of its investment. Selected information carrying cost of P185,000. Both non-monetary contribution had
over the first two (2) years of affiliated operations follows: a fair value of P200,000 each. The equipment will be
depreciated over 5 years and the machinery over 10 years.
 Intercompany merchandise sales are summarized as
follows: 48. Compute the net amount of plant assets (equipment and
machinery) CC will show in its own balance sheet at December
Date Transaction Sales Amount GPR Purchaser’s Remaining 31, 2019.
Ending Inventory a. P108,833 c. P 160,333
In 2019 Upstream 35,000 25% 6,125 b. P 55,500 d. P 58,500
In 2020 Downstream 56,000 30% 10,500
Pal Boba III is City Administrator of the city of LA PRESA in the
 Condensed trial balances of the two (2) companies on Bontoc Peninsula. Returning from a national seminar in Manila
December 31,2020 follows: for city administrators, Boba III presented receipts for valid
disbursements of P23,500 and refunded the City Treasurer’s
GINUNTUANG PUSO BAGAL SULONG Office unspent amount of P6,500 to liquidate his cash advance
CORPORATION COMPANY in relation to the seminar.
Current asset P 1,428,000 P 387,275
Investment in 49. The entry to record the liquidation of the cash advance
BAGAL SULONG 743,500 ---- would
Equipment, net 1,891,750 262,500 a. Training and Seminar expense P23,500
Buildings, net 1,592,500 332,500 Cash — Collecting Officer 6,500
Goodwill 105,000 ---- Due from Officers and Employees P30,000
Liabilities (1,123,500) (186,025) b. Cash - Collecting Officer P 6,500
Common Stocks, P1 par (437,500) ---- Training and Seminar expenses P 6,500
Ordinary shares, P5 par ---- (350,000) c. Cash - NT-MDS P 6,500
APIC (2,187,500) (175,000) Training and Seminar expenses P 6,500
Retained earnings, d. Training and Seminar expenses P 23,500
January 1, 2020 (1,933,750) (245,000) Cash - NT - MDS 6,500
Sales (1,540,000) (1,102,000) Due from Officers and Employees P30, 000
Dividend Income (42,000) ----
Cost of goods sold 1,232,000 880,000 50. The entry to record the remittance to the National
Other expenses 227,500 141,750 Treasury of the unspent amount would be
Dividends declared 43,750 52,500 a. Due to National Treasury P 6,500
Totals P 0 P 0 Cash- NT - MDS P 6,500
b. Due to National Treasury P 6,500
42. Compute the consolidated cost of goods sold for 2020. Cash — Collecting Officer P 6,500
5
ADVANCED FINANCIAL ACCOUNTING AND REPORTING

c. Memo Entry only in RAOMO --- --- b. The parent company’s accounting records only
d. Subsidy Income from the NG P 6,500 c. Neither the parent company’s nor the
Cash - Colleting Officer P 6,500 subsidiary’s accounting records
d. The subsidiary’s accounting records only
On December 31, 2019 a foreign subsidiary of ARTS.PRTC
COMPANY, a Philippine corporation, submitted the following Agency LLL, a national government agency, Incurs an
balance sheet measured ¡n its local currency. obligation on April 20, 2019 for the purchase of IT Software lot
P120,000 for delivery on April 24, 2019 and to be paid on May
Monetary Asset FC Monetary FC 25, 2019.
Liabilities
200,000 180,000 57. The entry to be recorded by LLL for the incurred obligation
Non-monetary 800,000 Non-monetary 20,000 would correctly include a
Asset Liabilities a. Debit to Equipment and Software
Share Capital 400,000 b. Credit to Accounts Payable
Share Premium 100,000 c. Credit to Cash-NT-MDS
Retained 300,000 d. Memo entry n RAOCO
Earnings
Total FC Total FC 58. It is a system of prescribing the procedures for recording
1,000,000 1,000,000 appropriations, allotments and obligations
a. Fund accounting
b. Budgetary accounting
The relevant exchange rates for one (1) unit of the FC are as
c. Obligation accounting
follows: Current rate - P0.34 Historical rate — P0.31 Average
d. Treasury disbursement coding system
rate - P0.30
59. Allotments are recorded in the registries
51. Assuming the Retained Earnings of the subsidiary on
a. At the beginning of the year
December 31, 2019 translated to Philippine pesos is P91,525,
b. At the end of the year
what amount of cumulative translation adjustment must be
c. Semiannually
reported in the consolidated balance sheet presented in
d. Quarterly
Philippine pesos on December 31, 2019?
a. P25,000 c. P24,525
Amounts related to the statement of affairs of Distressed
b. P24,255 d. P25,475
Company as of April 30, 2019 follow:
52. How much will be the Philippine peso retained earnings of
Assets pledged for fully secured liabilities P 80,000
the foreign subsidiary on December 31, 2019 if the functional
Assets pledged for partially secured liabilities 50,000
currency of the foreign subsidiary is also the Philippine peso
Free assets 272,000
rather than the local currency?
Fully secured liabilities 60,000
a. P 92,000 c. P 94,100
Partially secured liabilities 80,000
b. P 93,600 d. P 91,525
Unsecured liabilities with priority 40,000
Unsecured liabilities without priority 330,000
53. In a job order costing system, indirect labor used should
be debited to
60. Calculate the expected amount recoverable by partially
a. Payroll Liability
secured creditors in the event of liquidation
b. Work in process control
a. P 71,000 c. P 69,500
c. Finished goods control
b. P 50,000 d. P 80,000
d. Factory overhead control
61. In a statement of affairs, assets pledged for partially
On July 1, 2019 Pyramid Company paid P755,000 cash for the
secured creditors are
net assets of Stir Company. The recorded assets and liabilities
a. Included with assets pledged for fully secured creditors
of Stir are: Cash, P74,000; Inventory P215,000; Land,
b. Offset against partially secured creditors
P200,000;
c. Included with free assets
Building (net), P208,000, and liabilities of P220,000. At the
d. Disregarded
same date Stir’s inventories had a fair value of P184,000; the
land, P271,500; and the building (net) , P187,500.
During 2019, there was no change in either the raw material or
the work in process beginning and ending inventories.
54. Determine the amount of goodwill resulting from the
However, finished goods, which had a beginning balance of
business combination
P25,000, Increased by P 15,000.
a. P285,000 c. P258,000
b. P280,500 d.P250,800
62. If the manufacturing costs incurred totaled P 600,000
during 2019, the goods available for sale must have been:
On January 1, 2019. Multiple Company, an SME, acquired
a. P 585,000 c. P 610,000
Unilateral Company, another SME, by issuing 600,000 of its
b. P 600,000 d. P 625,000
own P10 par value ordinary shares. Subsequently, Unilateral
was liquidated and its net assets and liabilities merged into
On January 1, 2019, Robert Red and William White have
Multiple Company Multiple’s stock was selling at P50 per share
formed a Partnership that has the following contributed assets
of January 1, 2019. The amount of goodwill recorded by
that are fairly valued.
Multiple in connection with the combination was P6,120,000.
Contributed by Partners
Multiple incurred P300,000 of professional fees associated with
R. Red W. White
the combination and P30,000 of indirect costs.
Cash P 16,000 P 24,000
Inventory 14,400 12,000
55. Determine (1) the fair value of Unilateral’s net assets and
Building 480,000
(2) amount of increase in Multiple’s stockholders’ equity at the
Furniture and fixtures 200,000
date of acquisition.
a. (1) P 23,880,000 and (2) P 29,670,000
The building is subject to a mortgage of P96,000 that will be
b. (1) P 24,180,000 and (2) P 29,670,000
assumed by the partnership. The partners also agree that
c. (1) P 23,880,000 and (2) P 29,970,000
profits and losses shall be divided on a 4:6 ratio to Red and
d. (1) P 24,180,000 and (2) P 29,970,000
White, respectively.
56. Working paper eliminations are entered in
63. What amount of capital should be recorded for Red and
a. Both the parent company’s and the subsidiary’s
White at the formation of the Partnership?
accounting records
a. P 230,400 & P 516,000 c. P 226,000 & P 420,000
6
ADVANCED FINANCIAL ACCOUNTING AND REPORTING

b. P 226,000 & P 516,000 d. P 230,400 & P 420,000 70. Which of the subsidiaries are likely to have a different
functional currency from Parent Co?
In continuation with the item above, assume: (1) partnership
net profit for the 1’ half of year 2019 was P20,000; and (2) a. A Co and B Co
Baby Blue was admitted as a partner on July 1, 2019; b. A Co and C Co
Investing P201,120 for a 30% interest In capital and profits. c. B Co and C Co
d. All three subsidiaries
A. If the admission of Blue comprises the purchase of 30%
each of the old partners’ existing capital at July 1, 2019:

64. Blue’s capital credit will be

a. P 201,120 c. P 211,200
b. P 202,110 d. P 221,100
65. The amount of Red’s capital after the admission of Blue will
be
a. P 166,880 c. P 160,680
b. P 168,600 d. P 186,600

B. If Blue’s investment of P2011120 is contributed into the

partnership, instead of using it to purchase existing interest:

66. Blue’s capital credit will be

a. P 261,456 c. P 214,266
b. P 395,798 d. P 201,120
67. The amount of White’s capital after the admission of Blue
will be
a. P 261,456 c. P 214,266
b. P 395,798 d. P 201,120

68. Which of the following statements, in respect of foreign

currency translation, are correct according to PAS 21 The
effects of changes in foreign exchange rate.

I. The functional currency of an entity is selected by

management
II. The presentation currency of an entity is selected by
management
III. The functional currency of an entity is identified by
reference to circumstances of the business
IV. The presentation currency of an entity is identified by
reference to circumstances of the business.

a. I and II only c. I and IV only

b. II and III only d. III and IV only

Street Co purchased goods for FC450,00O from an overseas

supplier on 30 November 2019. Street Co paid for the goods
on 31 January 2020. They were not sold to third parties until
February 2020. Exchange rates were:
FC=P1
30 November, 2019 1.50
31 December, 2019 1.45
31 January 2020 1.55

69. What is the exchange difference that should be reported in

profit or loss for the year ended 31 December 2019 and at
what amount should the goods be included in inventory in the
statement of financial position at that date?

Exchange Inventory Exchange Inventory

Difference Difference
a. P9,677 gain P 290,323 c. P 10,345 loss P 300,000
b. P9,677 gain P 300,000 d. P 10,345 loss P 310,345

Parent Co has three overseas subsidiaries:

A Co is 80% owned. A Co does not normally enter into

transactions with Parent Co, other than to pay dividends. It
operates as a fairly autonomous entity on a day to day basis
although Parent Co controls its long term strategy.

B Co is 100% owned and has been set up in order to

assemble machines from materials provided by Parent Co.
These are then transferred to Parent Co, which sells them to
third parties.

C Co is 75% owned and is located in France. It manufactures

and sells its own range of products. It negotiates its own day
to day financing needs with French Fries.