—T cc i"tc'cA

A
c&c ic
. CPA REVIEW SCHOOL OF THE PHILIPPINES
I
MANILA ' T
t' t.&
ADVANCED FINANCIAL ACCOUNTING AND REPORTING
JOB ORDER COSTING GU ERRERO/GERMAN/DE J ESU S/LIM/FERRER/LACO/VALIX

1. NBA Inc. is engaged in the business of manufacturing basket balls. The company employs
actual costing system. The company uses .a single account for direct and indirect materials.
The company provided the following data for the year ended December 31, 2016:
Gross sales V 9,500,000
\
Sales returns L 500 1 000
Gross purchases ç- 1 50003,000
Purchase returns, allowance and discount ' . . 200,000
Freight in . 400,000
Total costs of factory labor 1 ,000,000 <
Depreciation of factory assets [ 300,000 ' L

. Expired insurance on factory assets 0

\ 1 00,000
/(k-\'\
Utilities expense on factory ' 5005000
Total administrative expenses 2,000,000 .
Total marketing expenses . 3,000,000
Inventories are asfollows:
January 1 December 31 (T

Raw materials 100,000 300 5000

Work in process ? • 2005000 1
Finished goods 500,000 600,000 '
Thefollowing additional data are provided:
1 . The net profit ratio of the company before income tax for the year ended December
31, 2016 was 10% of net sales.
/2. The direct labor cost forthe year was four times the cost of indirect labor.
The cost of indirect materials used was P100,000. t

it\ 1. What is the total prime cost?

leo -
V /\cfv(i' I
1,700,000
B. 21000 9000 AfA L- i
C. 1,800,000 9 0V
D. 1,900,000 ! 6,\(

?4OO
1A 2. What is the total conversion cost? -
,K 250005000 1 ((-' • CC
:
B. 1,90000
C. 21100,000
r_ 3::1t.)
D. 2 5 200,000
Ci,LC
f\ 3. What is the cost of goods manufactured?
,Ai 3,200,000 cl
B. 3,100000
C. 31) 300,000
D. 3 1 000,000

\ 4. What are the cost of goods sold and the cost of work in process on January 1, 2016,
respectively?
,,A3,lOO,OOO and 500,000
B. 3,2OOOOO and 300,000
C. 3,000,000 and 400,000
D. 2,900,000 and 600,000
. 8011,
 . Page

2 MLB Inc is employing normal costing for its job orders The overhead is applied using a
predetermined overhead rate. The following information relates to the MLB Inc. for the year
ended December 31, 201 6:

Job No. 101 Job No. 102 Job No. 103

Job in Process, January 1, 2016:
Direct Materials 40,000 30,000 •0
Labor . 6000 tiL 409000 ;T27, 0
Factory Overhead 309000 20,000 0
L
Costs added during 2016 Ti t UI 1
Materials 2030 000 1 0,000 1 00,000
Labor 1005000 200,000 400,000
Factory Overhead 9 L CL 9 OtL 9, VU u i t

r t C
Additional information < 1 1tL t\ i
/
. *
1. kctu4)overhead for the year 2016 amounted to P350,000.
2. h6b No. 101 and 102 were completed and transferred to finished goods during year
2016.
3, Job No. 101 was sold during year 2016. to - .T cic o& ..

4. The gross profit rate is 20% based on cost.

)
1 What is the total manufacturing cost for 2016?
C 2oLocO
A 1,400,000 (
/B 1 5 180000 -
,
C 480 3000
D. 1 1 200 9000 .

\) 2 What is the cost of goods manufactured for 201.69

A 680,000
700,000
C. 580,000
D. 780,000

\2 .3. What is the cost of goods sold for 2016?

A. 1,180,000
300,000 .
C. 700,000
D. 1,200 5 000

4. What is the gross profit for 2O16

A. 236,000
,B. 60,000
C. 140 5000 •
D 240,000

?) 5. What are the cost of work in process on December 31, 2016 and the cost of finished
goods on December 31, 2016, respectively?
A
800,000 and 500,000 ,
yl 700,000 and 400,000
C 600 000 and 300,000
D. 900,000 and 200,000 .

END
8011
 CPA REVIEW SCHOOL OF THE PHILIPPINES
MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING

JOB ORDER COSTING GU ERRERO/GERMAN/DE J ESU S/LI M/FERRER/LACO/VAL1X

I. NFL Inc. produces sport's equipment made to customer's specifications The following data
pertain to Job 101.
6month ending June 30, 2016 6-month ending 12/31/2016
Materials - Dept I P100,000 P200,000
Direct labor rate - Dept 1 P1 0/hour MQ P1 5/hour
Labor hours used - Dept I 4,000 hours 2,000. hours
-- D­ir6:cf labor rate - Dept 2 P20/hour
"i, (ctu
C
Labor hours used Dept 2 1,000 hours a 3,000 pours t oo ]
Machine hours used - Dept 2 2 000 hours 1 000 hours ((
3LL
M -
Additional data:J
a. NFL Inc. determined that the amount of operating expenses is 10% of full production
cost of job. -
---

b. The company has provided a profit mark up of 20% based on sales. coc
C Applied factory overhead:(
Department 1 P5 00 per diiect labor hour i9 C C 0
Department 2 P2.00 per machine hour

What is the net profit if Job 101 was completed and sold in year 2016
\
A 141900
B. 193,500 S1tt;
C. 129,000
D 113520

2 UFC Inc applies factory overhead as follows

Department Per Machine Hour
Fabricating PlO
Spreading P20 .
Packaging P30
Actual machine hours are:
Fabricating - 2,000 hours o' c
Spreading— l5OOhours Y,u
Packaging - 3,000 hours 9C('
. NtJt:cv
The following additional data are pi ovideci '
a The actual factory overhead expense for the period is P 100,000.
b. The ending balances of the inventories and cost of goods sold after the application of
overhead are as follows:
Raw Materials 200,000
Work in Process 100 5000 cc
Finished Goods 4005000 co
Cost of goods sold 5009000 ttc(, --
C The over/(under) applied overhead during the period is c6iidered material if at least
30% of actual factory overhead,

J 1 What is the adjusted cost of goods sold after closing the under/over application of
factory overhead?

A. 460,000
,$480,O00
C 540,000
D. 483 5 333 . .
,
8012
 Page 2

.3, MMA Inc. manufactures furniture sets for export and uses the job order costing system in
accounting for its costs. The following information is obtained from the accounting books
and records for the year ended December 31, 2016:
. The 200/ less than the work in process on December
31.work in process on January 1 was
. The total manufacturing costs added during 2016 was P1,800,000 based on actual direct
materials and direct labor but with manufacturing overhead applied on actual direct labor
pesos. .
0 The manufacturing overhead applied to process was 72% of the direct labor pesos, and it
was equal to 25% of the total manufacturing costs.
. The cost of goods manufactured, also based on actual direct materials, actual direct labor
and applied manufacturing overhead, was P1,700,'000. •

r i What is the cost of direct materials used?

A. 1,0265000 . •
B ),350,000
z e 725 000
1A '
I

' 1
L,L

I__I 1 ,1.)J,UJJ

C 2 What is the work in process on December 31, 2016

A. 400,000 . L

B. 600.000
C500,000
D. 300 5000 - I /
V ;ci
4 NIKE Inc has completed the Job 1 01 containing 1 ,1 00 shoes, during 2016 at the following
unit costs:
Direct materials 2 5 000
. ,Direct labor 1,000
Factory overhead (including an allowance of P300 for spoiled work) 1 5 ,300
L 1 Lt
Final inspection of Job 101 dlscloseQ I 00 spoiled shoes which were sold to a department for
P2001000.
)\ ) 1. What is the unit cost of the good shoes produced on Job 101 if spoilage loss is
charged to all production?
/1

A 4,000 &
:
B 41,100
C 4,400 Ut
D 4300
\

I I 2 What is the unit cost of the good. shoes produced on Job 101 if spoilage loss is
charged to specific Job 101? ( ti
A 4300
B 400
C. 4,500 Y
D. 4,200

1 END
. . .
. 801.2
 CPA REVIEW SCHOOL OF THE PHILIPPINES
MANILA

: ADVANCED FINANCIAL ACCOUNTING AND REPORTING

JOB ORDER COSTING GUERRERO/GERMAN/DE JESUS/LIM/FERRER/LACO/VALIX

1 . For the year ended December J , 2016, UA Inc. incurred the following costs on Job Order 201
for manufacturing of 500 units:

Original cost accumulation:

Direct materials . 500,000
Direct labor . 400 000
Factory overhead 1W10-0.01-J,
1t.

Direct costs of reworking 100 units;

Direct materials I 00,000
Direct labor • 200,000 t tX(
. t1

C -,
i What is the cost per unit of Job Order 201 if the Eework cos were attributable to
the exacting specification of Job Order 201"
A 23600 1 C (C (H
B 2500 t(
C. 2,700
D. 2,200 •

r
"—
2 What is the cost per unit of Job Order 201 if the rework cost. s were attributable to
internal failure?
A 2500
B 2 1 400
C. 2 000
D. 2,300
 Page

2. Adidas Inc. is exploring ways to allocate the cost of service departments such as Quality
Control and Maintenance to the production departments such as Machining and Assembly.
The controller of the company has provided the following information:
- -

Quality
Maintenance Machining Assembly Total
Control
Budgeted
overhead costs
P350,000 P200,000 P400,000 P300,000 P1,250,000
before .

allocation
Budgeted
50,000 hrs - 50,000 hrs
machine hours
Budgeted
direct labor - - - 25,000hrs 25,000 hrs
hours
Budgeted .

hours of -
21 5 000hrs 7,000hrs 35,000 hrs
7,000hrs
service of
quality control
Budgeted .

hours of 18000hrs 12,000hrs 40,000 hrs

10 1 000hrs -

service of •

maintenance

J
\
\
1. Under directmethOd of allocating service department costs, what are the total
service costs allocated to the machining and assembly departments, respectively?

382,500 and 167,500

B. 300,000 and 130,000
C. 412,500 and 137,500
D. 3301000 and 220,000 ,

tr'\ 2 Under the step-down m'thod ot allocating service department costs from quality
control to inainteipce, what are the total service costs allocated to the machining
and assembly departments.,, respectively?

A 372,000 and 178,000

B. 412,500 and 1500
C. 330,000 and 220,000
D. 405,000 and 145,000

3. Under the reciprocal method of al1ocaiig seice department costs, what are the
\ total amount of quality control costs and total amount of maintenance costs,
respectively, to be allocated to the other departments?

A. 421053 and 284,211

B. 453,201 and 290,640
C. 410,250 and 202,050
D 435,800 and 27,60

END

8013
 CPA REVIEW SCHOOL OFTHE PHILIPPINES
. . MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING .

JUST-I N-TIM E AND BACKFLUSH COSTING GUERRERO/GERMAN/DE JESUS/LLM/FERRER/LACO/VALIX

1. NESTLE Inc. is employing a sophisticated just-in-time manufacturing system. The company

uses backflush costing for recording its production. The following transactions occurred for
the year ended December 31, 201 6:

a. Purchased P170,000 of raw materials on account.

b. All materials purchased were requisitioned for production.
C. Incurred direct labor costs of P80,000.
d. Actual factory overhead costs amounted to P122,000.
e. Applied conversion costs totaled P202,000 including direct labor cost of P80,000.
f. All telephones were completed and sold.,

What is the cost of goods sold for the year ended December 31, 2016

A 372,000
B 202,000
C. 2501,000 C
D 292.000

2 HONDA Inc is using Just-in-Time Production System and Backflush Cost Accounting
System for the year ended December 31, 2016 The following information was provided for
the year 20l6: . .

a. Raw materials purchased for year 2016 totaled P1,000,000.

b. Direct labor for the year 2016 totaled P500,000.
C, Actual overhead for the year 2016. totaled P300,000 and the standard overhead rate is
50% of direct labor cost.
d. The production report for year 2016 showed that the Finished Goods Inventory at
December 31 was P200,000 consisting of:
Direct Materials . 110,000
. Direct Labor . 6000
Factory Overhead 301,000
f
What is the Cost of Goods Sold for the year ended December 31, 2016

A I,600 000
: B. 1 55501,000 L F
C. 1,800,000
D. 1,7501,000 - I
\ I

t(1 '
( t '

8014
 Page 2

3 . SMC Inc. employs Just-in-Time and Backflush Costing Systems for the production of goods
for the year ended December 31, 2016. The following transactions summarize the major
steps in SMC ' s production during the year of 2016:.

a. Raw materials received from suppliers amounted to P4,000. •

b. Direct labor costs of P10,400 and overhead costs of P7,800 were incurred and
applied, respectively, during the year of 2016.
C. The cost of work-in-process at December 31, 201 6 was P3,600. This cost was
determined through the production report and is composed of the follow' ing elements
.
of cost: .
Direct materials 1,500
. Direct labor 1,200
Overhead 900
d. In addition, the finished goods inventory at December 3 1, 2016 was P6,500
consisting of:
Direct materials 1,500
Direct labor 2 9 850
Overhead 2,150

r I. What is the amount of direct materials backflushed from raw and in process account to
L finished goods?
(
(

A 1,500 S

B 4000 % (
C 2,500
D I 000

C 2. What is the amount of direct materials backflushed from finished goods to cost of goods
sold?

A. 1,500 ,
B. 4,000
C.1,000
D. 2,500

I What is the amount of cost of goods sold, for the year ended December 31, 2016
:
A. 22,200 . I!

B 18,600 U

C 12,100
D 15,700
e
\t:t

c
END
. 8014
 CPA
. REVIEW SCHOOL OF THE PHILIPPINES
MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING

JOINT AND BY-PRODUCT COSTING GUERRERO/GERMAN/DE JESUS/LIMIFERRER/LACO/VAL!X

L MIX Inc is conducting a joint process which results to three products The following
production data were provided by MIX Inc.for the current period:
Product Name Units Produced Selling price per unit at split off point
Ace 10,000 P40
Bat I5,000 . . P20
Can ' 25,000 P12
Additional data for the period were provided.'
. All the ace items were sold for a gross profit of P100,000.
joint costs were allocated using physical method.

121 1 What is the gross profit/(loss) if all the Bat items are sold in current year'

A.-,. 200,000 ( t c °/ C

7B. (150,000)

' , C. (100,000) '

D. 50,000 '

' 2 Assuming the joint costs are fixed, what is the joint cost allocated to Can Items using
the relative sales value method?

A. 250,000
,B 450 ,000
/c 750000
DV 300,000

2 COMBI Inc manufactures three joint products The following production data were provided
by COMBI Inc. for the current period: '
Product Name Units Produced Additional Processing Final Selling Price
' Cost after Split Off
. Xen . I ,000 P20,000 ' 9 ' . P50
Yen •
Zen
2,000
3,000
'
109000
305000 --'
10
. 30

Jointproduct costsfor the current period were asjbilows:

Raw materials p10,000
Direct labor • "I500O
Factory overhead 25 3100()

The company uses the nercahzablejluernethod for allocating joint costs

C I. What is the Gross profit./(loss) on the sale of all Xeri products?,

A. C
B 21,667 (
vt 1Io +
155000 (7 JrcJJ
D. 5,000

c 2. What is the total gross profit/(loss) on the sale of all the joint products?

A 40,000
B 60,000
50,000
. D. 30,000 •
' '
8015
 . Page 2:

I BLEND Inc. manufactures three joint products and allocates joint costs at its relative sales
value at split-off point. The following joint product costs were in-curred for the current
period:
Raw materials . 1803000
Direct labor 120,000
Factory. overhead 200,000
Thefollowingproduction data were provided by BLEND Inc. for the current period:

Product Name Units Produced Selling price Additional Final Selling

. at split off point Processing Cost Price
Uno 10 1,000 P2000 P50 5000 P24
Dos 209000 1500 60 5000 18
Tres 405000 12.50 1005000 • 16
\1:2,CCL
r
!j What is the total gross profit/(loss) for the current period if BLEND Inc. will correctly
process further the proper items?
A. 540,000
B. 530,000
C. 500,000
D. 510,000

4. CONSO Inc. manufactures joint products ALT and TAB, and a by-product DEL. Costs are
assigned to the joint products by the net realizable value or final market value method which
considers further processing costs in subsequent operations. It is the policy of CONSO Inc. to
account for its by-product by market value or reversal cost method or deduction of net
realizable value of by-product from the joint manufacturing costs of main products. The total
manufacturing costs for 100,000 units were P1 ,520,000 during the year. Production and costs
data follow:
ALT TAB DEL
Units produced 601,000 301,000 10,000
Sales price per unit P70 P25 plo
Further processing cost per unit 20 5 3
Selling and admin expense per unit 5

F ) i What is the value of DEL to be deducted from the joint manufacturing costs"
A. P100,000
B. P7015 000 .
C. P50,000
D. P20 1,000 .

1) 2. What is the gross profit of ALT for the year?

. A. 1,500,000
B. 1,600,000
C. 1 5 400,000
D. 1 1 750,000 .

'F 3. What is the gross profit of TAB for the year?

A. 600,000
B. 500,000
C. 700,000
D. 350,000
. END
8015
 CPAREVIEW SCHOOL OF THE PHILIPPINES
MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING

JOINT AND BYPRODUCT COSTING GUERRERO/GERMAN/DE JESUS/LIM/FERRER/LACO/VALIX

1. MERGE Inc. manufactures ZEN product from a process that yields a by-product called
YAN. The by-product requires additional processing cost of P30,000. The by-product will
require selling and administrative expenses totaling P20,000. It is MERGE's accounting
policy to charge the joint costs to the main product only. Information concerning a batch
produced during the year ended December 31, 201 6 follows:

Product Units Produced Market Value at Split Off Units Sold •

ZEN 100,000 P50 60,000
YAN 8,000 PlO 8 1 000

Thejoint costs incurred up to split-offpoint are:

Direct materials P2,000,000
Direct labor 80000
Factory overhead 200,000

The selling and administrative expense of MERGE Inc. for the year ended December
3 1 ,20 I 6 is P 1,000',,000 exclusive of that for the by-product.

1 What is the gross profit for the year it the net revenue from by-product is presented
I as other income?
A. 1 1 200,000
B. 1,230,000
C. 1,218,000
. D. 1,118,000

2 What is the gross profit for the year if the net revenue from by-product is presented
!
I' as additional sales revenue? .
A. 1,230,000
'B. 11)2003000
C. 1 5 218 1,000
D. 1,118,000 :
ir-
3 What is the net income for the year if the net revenue from by-product is presented
\--
(I

as deduction from the cost of goods sold?

A. 200,000
B. 218,000
C. 230,000
D. 118,000 ..

4 What is the net income for the year if the net revenue from by-product is presented
I as deduction from the total manufacturing cost of the main product?
A. 218,000
B. 200,000
C. 230,000
D. 118,000

END • V
V

8016
 CPA REVIEW SCHOOL OF THE PHILIPPINES
ADVANCED FINANCIAL ACCOUNTING AND REPORTING
PROCESS COSTING WITHOUT SPOILAGE Cuererro/German/De Jesus/Lim/Ferrer/Laco/Valix

Problem I. RJ Inc. is a company manufacturing a product known as "COLOREE" which undergoes a

un iform process prior to its completion. RJ Inc. employs weighted average process costing system for this
product For the year ended December 31, 2016, the following data are provided by the company
a The work-in-process inventory on January 1 2016 is 10,000 units which are 80% incomplete as
regards to conversion cost while the work-in-process inventory on December 31, 20 16 is 60%
. complete as regards to conversion cost.
b The total units started during the year amounted to 90,000 units while the total units manufactured
during the year amounted to 70,000 units. .
C. There is no spoilage during the period.
d. It is the company's policy to apply direct labor and factory overhead evenly throughout the period
while 2/5 of direct materials are added at the start of the piocess while the remaining direct
materials are added at the end of the process
e The cost of ,January I 2016 work-in-process inventory consists of P100 000-direct material
P200000-direct labor and P3)001,000 , overhead. 0

f The total manufacturing cost for the year consisted of P2M-direct material P5M-direct labor and
MM-factory head.
What is the cost per equivalent unit of production of Direct Material and Conversion Cost,
respectively"
A. 25.6 and 96.59 . ..
B. 24.39 and 90.91
C . '21 and 85 . . . . .
D. 23.86 and 103.66

Problem 2. GANDA Inc. employs First-In-First-Out process costing system in • accounting for its product.
For the year ended, December 31, 2016, the following data are provided
a. The 30,000 work-in-process inventory on January 1, 2016 is 40% complete as regards to
conversion cost while the 20,000 work-in-process inventory on December 31 2016 is 90%
incomplete as regards to conversion cost
b The total units started during the year amounted to 60,000 units There is no spoilage during the
period
C. At. is the company's policy to apply direct labor and factory overhead uniformly throughout the
period while % of direct materials are added at the start of the process while the remaining direct
materials are added at the end of the process.
d. The cost of January 1, 2016 work- in-process inventory consists of 200,000-direct material,
300,000-direct labor and 500,000-factory overhead
e. The total manufacturing cost for the year consisted of P I M-direct material, P3M-direct labor and
P4M-factory overhead.
What is the cost per equivalent unit of production of Direct . Material and Conversion Cost,
f respectively"
A. 19.2 and 130
B. 16 and 116.67
C. 14.81and89.74
D. 11.76 and 100

Problem 3. Ronda Company employs weighted average process costing system concerning its sole
product The following data were provided by the cost accountant tor the year ended December 3 12016
a. There are 15,000 units on January 1, 2016 with following costs: 500,000-direct material,-
1,200 1 000-direct. labor and 300,000 factory overhead. The beginning inventory is 30% complete as
to conversion cost. .
b There are 35,,000 units started during 2016 and the total manufacturing cost added during 2016
consists of P4M-direct material, P3M-direct labor and P1 M-factory overhead. S•
C. There are 20,000 units on December 3 1 , 2016 which are 20% incomplete as to conversion cost.
d. There is no spoilage during the year. . .
e. It is the company's policy to add direct labor and factory overhead evenly throughout the period
while all direct materials are added at the beginning of the process.
8017
 Page 2
1 What is the cost assigned to units completed or the cost of goods manufactured for theear
( ended December 3l,2016? . .
V • V

A. 7,151,200 . . V

B. 6 9812,800
C. 6,287,100 V

D 6,534 900

2 What is the cost assigned to December 31, 2016 work-in-process inventory"

A 2,848,800 V

V B. 3,187,200
V
V V

C. 3,713120
D. 3,465,- 100

Problem 4. Cena company employs FIFO process costing system concerning its only product w iich
V
undergoes production in assembly department and finishing department. The following data for the year
ended December 31, 201 6 are provided
ASSEMBLY DEPARTMENT
Units _ii Cost
January 1, 2016 100,000 units - 40/o completed as to Cost of Direct material - P3M
V
V
conversion cost Cost-of Direct labor _ P5M
Cost of Factory Overhead - P2M
December 31, 2016 1 50, 000 units - 80G o completed as to
conversion cost VV
V V V
V

Units started during the year 400,000 units V DM cost added during 2016 - P IM
V • DL cost added during 2016 - PI5M
- •V VV=_ _ _ 2 = 9st added during 2Ol6 - PM
FINISHING DEPARTMENT
Units I[Cost
January 1, 2016 V 50,000 units 0% incomplete Cost of Transferred in - PVIOM
V conversion COSt Cost of Direct material - P6M
V Cost of Direct labor - P 1 M
Cost of Factory Overhead— P3M
December 31, 2016 30,000 units - 10% incomplete as to ? V
V
conversioncost
Units started during the year DM cost added during 20 16 P30M
V
V

DL cost added during 20 16 - P40M

FOH cost added during 2O16—POM

Additional information for_ the yeçp V V

a.- It is the company's policy to add conversion cost evenly throughout the period in the two
departments. V
b It is the company's policy to add all direct materials in the assembly department at the start of he
process while all direct materials in the finishing department are added at the end of the process
c There is no spoilage in both depaitments I

1 In the assembly department, what is the cost of goods manufactured or cost assigned to uni4
completed for the year ended December 31, 2016"
V D.35,523,800
A. 37,6871 5 200 B. 38,7631,400 C.36,451,200 V
20 In the assembly department, what is the cost assigned to December 31, 2016 work-in-process
inventory? V
A 12314,4Q0 B 11,236600 C 13,548800 D 14476200

3 In the finishing department, what is the cost of goods manufactured or cost assigned to unite
completed for the year ended December 31, 2016?
A 130 5923,150 B 129235,750 C 13 1,285,400 D 128452 1,100
VV\

4 In the finishing department, what is the cost assigned to December 31, 2016 work-in-proces
inventory"
A 6,764430 B 8541450 C. 6401800 D 9,235100
END V
8017
 CPA REVIEW SCHOOL OF THE PHILIPPINES

ADVANCED FINANCIAL ACCOUNTING AND REPORTING

PROCESS COSTING WITH SPOILAGE Guererro/German/De Jesus/Lim/Ferrer/Laco/Vatix

Problem 1 CAVS Inc employs weighted average process costing system regarding its cross-over
protector product The following data are provided for the year ended December 31, 2W6

a The January 1, 2016 work-in-process inventory consists of 4 000 units which have the following
costs P 1 00,000-direct material 250 ,000-direct labor and P 1 50,000-factory overhead The
beginning inventory is 60% incomplete a$ to conversion cost
b The units started during the year totaled 6,000 units while the units completed during the period
totaled 5,000 units
c The December 31,2016 work-in-process inventor' consists of 3,000 units which is 90% complete
as to conversion cost
d The normal spoilage for the company is 20% of units started
e The total manufacturing costs added during the year consist of P2M-direct material P1 5M-direct
labor and P 1 M-factory overhead.
f The company inspects the products when the percentage of completion in conversion cost is 70%
g. The company adds direct labor and factory overhead evenly throughout the period while '/ of
direct materials are added at the start of the process while the remaining direct materials are added
at the end of the process...
;I1 What is the cost per equivalent unit for direct material and conversion cost, respectively"
A. 336 and 318.68 . . .
. B. 154.85 and 274.73 .
C. 320 and 331.84 ,
D. 254 and 294.82 .

Problem 2 DUB Nation Company employs FIFO process costing system regarding its 3-point enhancer
product. The following data are provided for the year ended December 3 1 , 20 16:

a It is the company's policy to add conversion cost evenly throughout the period while 4/5 of the
direct materials are added at the start of the process while the remaining direct materials are added
at the end of the process.
b 10% of units started are normally spoiled which all come from the units started
C The January 1, 2016 work-in-process inventory consists of 20,000 units with the following costs
. 400,000-direct material, 500,000-direct labor and 100,000-factory overhead. The beginning
inventory is 72% complete as to conversion cast
d The total manufacturing costs added during the year consists of P 1 M-direct material 1.1,200,000-
direct labor and 300,000-factory overhead
e The units started during the year totaled 80,000 units while the units,.completed totaled 60 000
units
f. The December _'31', 2016 work-in-process inventory consists of 10,000 units which is 20%
incomplete as to conversion cost
g. The inspection point occurs when the percentage of co- is 75% as to conversion cost.

What is the cost per equivalent unit for direct material and conversion cost, respectively"
; A. 13.16and19.71
B. 18.42 and 26.92
C. 12.20 and 17.54
D 1427 and 2135

. . ' . . . . . . 8018
 Page 2

Problem 3 Glenda Manufacturing Company applies process costing in the manufacture of its sole
product, "Pharmanex".
0
Manufacturing starts in Department 1 where materials are all added at the start of processing. The
good units are then transferred to Department 2 where all the incremental materials neededjbr its
completion are added qflerflnal inspection.

0 In Department I units are inspected at the end of processing while in Department 2 inspection
takes place when the units are 90% completed

0 Department I uses FIFO costing while Department 2 uses the weighted average costing

The production data for the month of August show the following

Dpçirtment I Department 2
UNITS
Beginning work in process August 1 20,000 10,000
Work tobedone 80% 20%
Ending work in process, August 3 1 30,000 17,500
Work completed 2/3 5/7
Started in process during August I 50 000
Normal spoilage (4%of units started in process) 2,500
Abnormal spoilage (1/4 of normal spoilage) I 1250

COST

Work in Process, August 1

Transferred in . . 285,450
Materials 135,000 214,875
Conversion costs 97 500 280 725

Current costs
Transferred in - ' ?
Materials I ,980 000 8401,000
Conversion costs 3,088,800 • 11282,500

1 What is the total costs transferred to Department 2 and the amount of work in-process, end in
Department 1, respectively? .
A 4 5 227,300, 792,000
B 4,459,800, 792,000
C. 4,261,800; 396,000
D 4,459,800 549,300

2 What is the total .costs transferred to the Storeroom and the amount of work in-process, end in
Depiirtment 2, respectively?'
A 6,5 8 3 650, 725,250
B. 6,474 5 750; 582,750 :
C 6474750 725,250
D. 6,583,650; 582,750

8018
 Page 3

Problem 4. The cost data and production data for Beth Company for the month of August were as
follows

Cost Data:

Work in process August 1 Materials 52 ,000

.
Conversion costs 69,000

Cost added this month Materials 600 000

Conversion costs 1,602 000

Production Data:

Work in process August 1 (60% incomplete) 9, 375 units

Started in production this August I 00,000 units
. Transferred out . 90,625 units
Work in process. August .3 1 (30% to be done) 1 6,250 units •

Normal lost units 1,, ,.). 75 units

Abnormal lost units

All materials are added at the start of the process and I st units are detected at the inspection point of 75%
completion. . . .

r i Using the FIFO method, what are the cost 'assigned to units transferred out and units in ending
work in process?

Transferred out Ending WIP

A Z 04 9 125
, 283,625
B 2 023,250 279,500
C 2,019,125 279,500
D 2,0231250 283 625

1' 2 Using the average method, what are the cost assigned to units transferred out and units in
\
ending work in process?

Transferred out Ending WIP

A 2019,095 283 5 625
B. 1,998,072.5 283 5 625
C 2,022,875.5 2795 852.5
Dr 1,998.030 96,870

3 What is the amount that shall be expensed as incurred?

FIFO Average
A 20 ,250 20,250
B4 24 750 2400
C 13.575 13 1,500
D 20,250 20280

8018
 . Page 4

Problem 5. Rudy Company employs process cost system. A unit of product passes through two
departments: Assembly and Finishing before it is complete. Information regarding Assembly
Department follow:
Work in- s, Aug 1 10,000 units
. Spoiled units . 7,500
Started in Production 65,000
Transferred out 60,000
Raw materials are added at the beginning of processing in the Assembly department without changing the
number of units be-ing processed. Work in Process on August 1 was 90% complete as to conversion while
. 80% converted on August 3 1. In the Assembly Department, inspection takes place when the units are
75% converted The company usually experienced a 5% loss based on the completed units. Cost data for
the month of August follow:
Materials Labor overhead
Work in-process beginning 81 5000 66 5000 71 1 250
Currenteost 279,000 220,500 286 11875
Using Weighted Average Costing compute
What is the total cost of units transferred-out and total cost of work in process, end?
A 828,000, 93,441
B 859209 93,441
C 828 1,000 90,060
D. 859,209; 90,000 .

Problem 6. The production data for Department I for August 2015 are as follows:
Actual Units
WIP, August 1 (1 /4 done as to conversion costs) 100,000
Started in August 740 000
Transferred out during August 610 1 000
Spoiled units 80 000
Cost of Beginning work-in process: .

Materials . S ,250,000
Conversion Costs 1505000
Current Costs
Materials . 7,400,000
Conversion Costs 4,7105000
Unit costs:
Materials ?

Conversion Costs 6
0 Materials are added at the start of the process.
0 Conversion costs are added evenly during the process
0 The company uses the FIFO method of costing
0 Inspection occurs, when production is 100% complete.
0 Normal spoilage is I I% of good units transferred out during August
What are the cost allocated to?
Next Department In-process, end in Dept I Period cost
A 81 160,000 3 1,426400 1 28000
B 11 5 140000 2220000 206400
C. 95860,000 3.293,600 205,000
D 1 L0831 ! 600
, 2,220 000 206 400
.
END
 CPA REVIEW SCHOOL OF THE PHILIPPINES
MANILA

ADVANCED FINANCIAL ACCOUNTING & REPORTING

ACQUISITION OF NET ASSETS AND ACQUISITION OF STOCKS GUERRERO/GERMAN/DE JESUS /LJM/FERRER/LACOIVALIX

PROBLEM 1. IDEAL Corporation is a company involved in manufacturing mining equip ment. At

the beginning of the year, the board of directors of the said company has decided to enter into a
business combination with SUPERIOR Corporation and BRIGHT Corporation, top suppliers of
materials in the mining industry which they use in production The said acquisition is expected to
result in producing higher quality mining equipment With lower total cost. The deal was closed on
February 28, 2016 and the following information was gathered from the books of the entities:

IDEAL SUPERIOR BRIGHT

Current assets P8,250,000 P21 340,000 w P1,560,000
Noncurrent assets 18,750,000 14 2,Llvc 15300,000 nc0-10,200,000
Total assets P27,000 7000 P17,640,000 P1 1 3 760,000

Liabilities P1,950,000 P1,260,000 P840,000

Ordinary shares, P100 par 16,41,000 10,681,200 7,120 5 800
Share premium 9_000 - - - 1,018,800 6791,200
Retained earnings 7,500000 4,68000 3,120,000
Total equities • P27,000,000 P17,640 ;000 P11.3 760,0 0
f INC
cOo
IDEAL, who has the legal and economic entity, will issue I 35,Q00 of its ordinary shares in exchange
forthe acquisition of SUPERIOR and 67,200 of its ordinary shares in exchange for the acquisition of
BRIGHT. The fair value of IDEAL's shares is P1 50. 'In addition; the following adjustments should be
made to the current assets of Superior and Bright which has a fair value of P2,700,000 and P1,380,000,
respectively; The noncurrent assets has a fair valueofP'12,900,000 and P1 1,850,000 for Superior and
Bright, respectively.

Compute for the following balances in the books of the surviving companyon the date of acquisition:

1 Stockholders' equity
A. 255050,000
'1k 55,380,000 •3Ci
-
C. 531070,000
57,690,000 .
., • ' ':_ \ 3 1 z%O

F
'\2. Assets •
A". 61,740,000
' .'

U -°D
.

\ B. 55440000
:

, , ;1çc
55,830000 r C
s
z \ 56400000
(i:M(
 Page 2

PROBLEM 2. The Statement of Financial Position of LUMINA Corporation on June 30, 2016 is
presented below:

Current assets P195 5000

Land _ 1 1,3205000 -'
Building 6605000
Equipment . 5253,000
Total Assets P29700,000

Liabilities - - - -- - 5255000
Ordinary shares, PS par . 900,000
Share premium 825 5000
Retained earnings 450,000
F Total equities P2,700,000

All the assets and liabilities of Lumina assumed to approximate their fair values except for land and
building. It is estimated that the land have a fair value of P2,100,000 and the fair value of the building •

increased by P480,000. Enigma Corporation acquired 80% of Lumina's outstanding shares for
P3,000,000 The non-controlling interest is measured at fair value
\\ /1
\
1 Assuming the consideration paid includes control premium of P852,000, how much is the
.
goodwill/(gain on acquisition) on the consolidated financial statement?
A 315,000 t J
H
-#

102,000
252,5 000

i I
2 Assuming the consideration paid excludes control premium of P 13 8,000 and the fair value of the
non controlling interest is P736,500, how much is the goodwill/(gain on acquisition) on the
consolidated financial statement?
A 469 5500
., BC. 439500
3015500 9V 'M I
D. 448,500

-\ 3 Assuming the consideration paid includes control premium of P222 , 000, how much is the
goodwill/(gain on acquisition) on the consolidated financial statement?
/dk 259 500
Bs 439,500
C. 340,500 ki! 1'4 4 tl i~ 4,
D. 410,100 '
(6
_L--
zc;

8019
 Page 3

PROBLEM 3. Great Company has gained control over the operations of Superb Corporation by
acquiring 85% of its outstanding capital stock for P15,480,000. This amount includes a control
premium of P 180,000. Acquisition expenses, direct and indirect, amounted to P498,000 and P252,000
respectively. VA

Great Superb
Book Value Book Value
Icash - P21 249,000 P768 5000
Accounts' receivable 1 58005000 1,950,000
Inventories 3 300,000 2,160,000 4c(c
Prepaid expenses 891,000 750000
Land . - 5,274,000
Building 9,360,000 3,348,000 k
Equipment 1,800 1,000 1,110 11000
. Goodwill - 1,800,000.
Total assets P52,500,000 P17,160,000 *3'0o -: \cLtSD

Accounts payable 4,05000 1 5 518,000 4 :K? f !

8,400,000 4,380 1,000 . L44t J

Notes payable
Ordinary shares, 50 par 20,400,000 4,800,000
Share premium --- ' 9,450,000 3 56003000
Retained earnings 10,200,000 2 1 862,000
Total equities P52,500,000 P17,1 60,000

The following were ascertained on the date of acquisition for the Acquired Corporation:

. The value of receivables and equipment has decreased by P1 50,000 and P84,000 respectively.
. The fair value of inventories are now P2,616,000 whereas the value of land and building have
increased by P2.,826,000 and P642,006 respectively
. There was an unrecorded accounts payable amounting to P 162,000 and the fair value of notes is
.. P4,428 1000. .

Compute for the following balances to he presented in the consolidated statement of financial position
on the date of business combination: .
521;UU\ 3(c:L:iD
23(- -
(J • l!cO S29L-J 19 tl
1 Total assets
A,,/73 500 000
/: 60,558,000
/ C. 61 1,308,000
D. 76,788,000

:\ 2. Total shareholder's equity

I 42 000 000 ,u I&
ZZ B( 45,000000 Cl LA S­C'11 -
i( It
p jj,jv;j,'j'jv
a •
I
D 40050000
L J
39,C)C
-' 2 1 4t(
-- 7; . 8019-
 Page 4

PROBLEM 4. On January 2, 2016, the Statement of Financial Position of Arden Company and
Wonder Company immediately before the combination are:
Arden Co. Wonder Co.
Cash P 2,700 5000 P 90,000
Inventories I ,800,000 180,000
Property and equipment (net) 4500,000 6305000
Total Assets _9 00040 00
. , P 90 0. 000 4 Y'

Current Liabilities . P 540,000 P 90,000

Ordinary shares, P1 00 par 900,000 90 5000
Share premium 21700,000 180,000 .

Retained Earnings 4,860,000 540,000

Total Liabilities and Stockholder's Equity P9,Q0000 P9OQ,000
The fair value of Wonder Company's equipment is P9181,000.
Assume the following independent cases:
I. Assuming Arden Company acquired 80% of the outstanding shares of Wonder Company for
/ P820,800 and non-controlling interest is measured at the proportionate share of Wonder
Company's identifiable net assets, how much is the consolidated stockholder's equity on the date
of acquisition? ,

A 8,460,000 \1tj\ tr
B 835171,600 C1 I
C 8,679 600 Cr4 '' ô ,1

)8,7 37 ,200
1\ 7 Co , 1c, o à,3ThL
2 Assuming Arden Company acquired 90% of the outstanding snares of Wonder Company Tor
I \ P1,458,000 and non-controlling interest is measured at fair value, how much is the total
consolidated assets on the date of acquisition?
// A. 9,252,000 cic
B. 10 710 00rIuA
5 5 oc1 22 ( 4e 'ZW

C 10,422 5000
D 8 1,964 000 A c .

- (?

PROBLEM 5 Clark Company's stockholders' equity as of December 31, 2015 is P7,308,000 On

January 1, 2016 Clark acquires 30% of Rome Company's ordinary shares for P540,000 cash and by
issuing its own shares with a fair value of P1 53 50,000 Clark acquired significant influence over Rome
as a result of the stock acquisition After four months, Clark purchases another 60% of Rome's
ordinary shares for a cash payment of P3,942,000 On this date, Rome reports identifiable assets with
carrying value of P6,480,000 and fair value of P11,520000 and it has liabilities with a book value and
a fair value of P3,24,000
At the acquisition date, net loss reported by Rome for the fourmonth ended amounted to P00,000
The fair value oXhe tOti-controlhng interest is P1,296,000. Non-controlling . inter(pt_ii7 ._v~&de_&
using the ijortionate basis"Clark also paid the following: Kd000 ,i'or legal fees, tP72,0O for
finder's fee, F71,4OO for accountant's fee, P64,800 for audit fee foFSEC registration of ~i661~ issued
and P19,800 for printing of stock certificates.
. . '-.
\Aj sctc p

hi Immediately after the business combination, how much is the consolidated total equity?
A 9,954,000 -

CC
105782000
C, 10 411 000 ñ c 'i) '

D. 9,243,000
8019
Not,
c
I rTh -

' ra,
 Page 5

PROBLEM 6. On January 1, 2016, VECTOR acquired 90% of the equity share capital of FERN in a
share exchange in which Vector issued two new shares for every, three shares it acquired in Fern
Additionally, on December 31, 2016, Vector will pay the shareholders of Fern P1 3. 2 per share
acquired. Vector's cost of capital is 10% per annum. At the date of acquisition, shares in Vector and
Fern had a stock market value of P48.75 and P18.75 each, respectively.Income statements for the year
ended September 30, 2016 .

Vector Fern
Revenue P4 5 845000 2850,000
Cost of sales (3,840,000) (1,950,000)
Gross profit 1,005,000 900 5000
Distribution costs (102 000),5 (130,500)
Administrative expenses (285,000) (180,000)
Investment income 37,500 ----1
Finance costs (31,500)
Profit before tax 624,000 589 5500
Income tax expense (210,000) (120,000)
Profitfor the year 414,000 469,500

Equity as at October 1 ,201 5

Equity shares ofP7 50 each 1,800,000 562 50QJ S :: 3ç,vcD
L
Retained earnings 4,050,000 2,625,000
s:hc -t 13,cLL :: )1I1r t

At the date of acquisition, the fair values of Fern S assets were equal to their carrying amounts with the
Y4 exception of La dwhich had a fair value of n P135,000 above its carrying amount. Also, Fern had a -
I j (c\JL contingent liability which Vector estimated to have a fair value of P337,500 This has not changed as
at 30 September 2016. Fern has not incorporated these fair value changes into its financial
/ statements Vector's policy is to value the non-controlling interest a fair value at the date of
v u
acquisition. For this purpose, Fern's share price at that date can be deemed to be representative of the
fair value of the shares held by the non-controlling interest. .

Compute the goodwill (gain on acquisition)resulting on the date of acquisition

A (160j00)
.

i'
,

I3 Ms 21 1 q

B. 6;tLc; \% (,
/ C. 159,375 2fl,c'3 T,Db3fl;b
D. 42000

-end of handouts-

7
L:c3::t;U
 CPA RE4EW SCHOOL OF THE PHILIPPINES
MANILA

' ADVANCED FINANCIAL ACCOUNTING & REPORTING

CONSOLIDATED FINANCIAL 1ATFMLNFS SUBLQUIN1 TO A(QUI'!11ON & IN1LR(()MPANY IR\NSA( LIONS
' GUERRERO/GERMAN/DE JESUS ,/LLM/FERRER/LACO/VALIX

PRORLEM I Galaxy Corporation acquired 80% of the outstanding shares of United Company on
Jun5 l,'2O16 for P3 17 500 United ( ompan s stockholder's equity _____~ nd- of thisl
1 ,~, e a r _,-ere as t()I1OWS Ordinary shares, P100pai P1 500 000 Share premium P675 , 000 and Retained
Earnings P1 35 000 Non-contiolling intere s t is measurd at fair Value and the fair value is P705.000 .
The assets of United were fairly valued ,except for inventories which are oerstated by P66,0001 and
equipmentwhich as undeistated h P90,000, Remaining useful life of equipment is 4 years Al JL
Stockholder s equity of Galaxy on Janual) I 2016 is composed of Ordinary shares P4 500 000 Share
premium P1, 050, 000., Retained Earnings P3,150,000.Goodwill it any, should be written down by
P 8 5, 350 at \eai-end Net Income for the fir st vear of parent is P450,000 and the net income of
subsidiary tiOlTi the date of acquisition is P251000 Di\ idends declared at the end of the year '

amounted to 13 120 000 and P90 ()OO During the 'ear there sas no issuance of ne ordinary shares
) ( .
St
( 1 Ho\ ITIUCh is the non-controlling interest in net assets on Oecembei 3 1 20 16 ?.

A. 871,005
B 7 63455
r 74'
73 L`05
. '•
(2)
.
What is the amount or consolidated shareholders eqUitN ," .
/ 2. A N, çç •

9 122 070
B 9 85 575 w (o ( (
C 8.7 73 75 Ik ( U C ' ( >)ce r (\J

9 8 67
,
I c _ q24u t 1
!O
/
I
t'c içt

PROBLEM 2 On January 2 2016 Fetr Company acquired. 60% of the outstanding shares & Benz
Inc resulting to an i ncome from - acquisition in the amount of P_3'0,000. During 2016 and 2017
intercoMpany sales amounted to P6 800,000 and P9 400 000 iespectJe1\ Fe v er ( ompan
,

consistently ieLognlzed a 30% - gross profit on sales while Benz Inc had a 40% gross profit on sales .
The in v entories of the ouying affiliate were . as follows: 3/4of the beginning inventory came from inter-
company transactions and 1/3 of the ending invnto1 )' came from outsiders. The DeLrnhei 31 2016
inventory ofFeverand Benz amount to 1 3 840000 and P3501)00. respectively. The December 31. 2017
in v entory of Feei and Benz an1ount to P570,000 and P150 000 respectively ,

On September I 14 2016 Benz Inc purchased a piece of land costing P3.500 000 from Fever Company
for P5 250 000 On November 2 2017 the buying affiliate sold this land to Jam Co foi P7 500 000
On the other hand on May I 20 1L Benz Inc sold a machine r y with a cair ing value of P430 000 and
'

remaining life of years to Fever Company for P190000. Be& Inc. declared dividends in 2017 in the
amount of P600 000 Separate Statement of Comprehensie Incorne for the two oiipanies for the
year 2017 f011ow: .

292 ev er Company Benz Inc.

( t\i (t) F
Sales P21 00 000 3i Cl J ~ Vi Pl0,o0000o 2i ;

Cost of Sales ic t(
( (iyb (. 6 -)00 5 000 .) ±±2J
Gross Piofit ' •
' b'
8,000,000 ' P3800M00 (i

Operating Epens \ k ( (jJQQ000)

Operating Pit - 760 000 i le+
~
P 2300000
I
Gain on sali e 2250000
Loss on Sale o f MachIlle' ( 240000)
Dividend RL\Lnue_ 2) I
00(J 4 110,000 ZO-U(
Net income
k
t'( (t
1
'
t ' Qlp-
0 ( -

i -
8020
 Page 2
Compute the following amounts for/as of De cember' .31 2017

C i Consolidated Gross - Profit

A 116S1250
B S148750
11 948 750
, .

D 335250

2 Consolidated Net Income attributable to Parent

2
A 11 768 750
, ,

Iw 9720750
/ c 10018750
D 11 118750

3. Consolidated Operating Expense

A 4340000
B 4140000
I 4380000
4300,000

PROBLEM 3 A summary of the sepae income statement of Techno Corporation and its 75%
owned subsidiaay Duo Company, forjeie as follows

Techno Duo
Sales P9 000 000 P5,400,000
Gain on sale of equipment 180,000
Cost of goods sold 0.600 000) (2 340 000)
Depreciation expense (900,000) (340 000)
Other expenses ( I 440 000) (720,000)
Income from operations P3 240,000 P1,800,000

There was an upstieam sale of equipment with a book value of P720,000 for P1 170,000 on January 2
2015 At the time of the intercompany sale the equipment had a remaining useful life of five years
Techno uses straight-line depieciation the buying affiliate used the equipment until December 31
2017 at which time it was sold to Genex for P648,000 .

I\ What is the amount of net profit attributable to non -controlling interests for 2017
I ' Cot Pe ry
A P51 7, 500
/% çi) '-1W ffUI)

"B P4742,500 22 c
C P450,000 J 1 1' cj c scA
D P562.500 Ll\97s -fl 5,7ft '
c'c J2o
.
A ( [2
7 \ /
PROBI(SEM 4 0 n July I 2016 Density Company puichased\&Q&of the outstanding shares of
Evolve Cm5iiy at a cost of P4,,000,000. On that date Evolve had P2,500 000 of ordinary shares- and
1' p3 500 000 of ietained eaininF&iTh0l6 Density had income of P1,400,000 from its separate
operations and paid dividends of P750 000 For 2016 Evolve ieported income of P325 000 iuidãi
dividends of P1150Z1Q0 All the assets and liabilities of E v olve ha v e book valu es to their
respective fair market values On October i 2016 there was an upstream sale of machinery for
P500 000 The book value of the machinery on that date was P600.000. The machinery is expected to
have a useful life of S years from' the date of sale °
1,7b (c cCL, ,
°° Q -e
OO1/!i(;1% - Ott()
In the .December 31 2016 consolidated statement of-4ñih,rtt- how much is the consolidated
o~
I( net income attributable to thelcontrolling -

c;112 CLL
O(i
A 1.,606,000
B 2326000 1 \ J
,X2366000
7
D 2406000 MCi J i,2u,vz 2,1b4
8020
 . , . Page 3

PROBLEM S Arkin Corporation acqwied 75% of th outstanding shares of Sharp Company on

January 2 2016 for a consideration transferred of P4,320,000. The price paid includes'a control
premium amounting to P 1 20,000t'On the date of acquisition the related cost of business combination
amount to P80,,000, On January 2 2016 Sharp Company's' stockholders equity accounts were
Ordinary Shares-P5,700,000 and Retained Earnings-Pl 860 000 An examination of the acquiied
company's assets and liabilities on the date of acquittion revealed that theie were assets with book
values different from their fair values j7he nieichandisc inventory of Sharp is overstated by P1 80,000:
land, which was undervalued by P900000. equipinent, which was overvalued by P720000 and
copyright was undervalued by P540,000.
Inventories were all sold in 2016 The tquipmeit had a remaining uk of 8 ais while copyright had a
remaining 1itt of 5 years. During 2016 intercompany sales of merchandise on account amount to
p 1 980 000 ol hich P126,000 is from upt tan1 scales. LIkL\\ iSt. the I)eccmbei 1 2_016 inventor'
includLs P144.000 from downstream sales, [be Aikii (orpotation s mark -LIP vas 20 0 o of sales while-
Sharp Company "s. selling puce is at l20° of cost
On the first day of the second month of the second quarter of 207 there vas an upstream sale of land
for P2700000. On this date the land was carried on the selling companys hooks at P2.340M00. an
amount which is equal to fair value on the date of acquisition On the fist day of the last month of the
third quarter of 207 there was a downstream sale of furniture for P300 000 On this date the fuinitulL
was carried on selling company s books net of accumulated depreciation at P210 000 The furniture
was estimated to have a remaining uk of S tais on the date of sale On the lust day at the last month
of the year 2017 there was an upstream sale o hutichng for P6 720 000 On this date the building was
earned on selling company's books net of accumulated depieciat on at P8 160 000 The building as
estimated to have a remaining life of S years on the date of sale \\ \
During 2017 intercompany sJes of meichandisc on ac(.ount amount to P3 240 000 of Which
P360 000 i horn upstream salc Likcvie ti e Decemher I 20 1 7 i ventoi y includes P270 000 from
downstream sales The acquiiei corporation accouPts for it investment account in Subsidiary using the
cost method nconsolidated stateirtnt
V f F oinancial Position as of Decembei 3 1 201 7 sho\
c

ARKIJV Corporation SHARP Company

Cash p 3,24U00 000 p 1,800,000
Trade Receivable I 020 000 960 000
Merchandise In v entory -.640..000 1 740 000
Furniture, iwt , 20 000 540. 000
Equipment net \ " 1 140,000 660 000
Building net \ 9,060,000 6 540 000
Machinery,"net 480,000 -)60, 000
Land / 5!M0,000 3 000 000
Copyright. net • 660,000 240.,000
Investment in.Sharp Co. 2,1 0- 000
'1

Cost of Goods Sold 6 900 000 -) 400.000

Loss on sale of machineiv 60,000 180 000
Loss on sale ofbuildirig 360000 1.440,000
Expenses 3 840 000 1,620,000
Dividends Declared . 2$000 1,3920,000
P425JXhQ0Q P23 400000
Liabilities P 930 000 P 2 700 000
Ordinary Shares I I A00000 5,700000
Retained Earnings., 01101 1 17 7200000 4,200,000
Sales 16,800,000 9.,600,000
Gain on sale of furniture 90,000 120 000
Gain on sale of land I ?00.,000 360 000
Dividend Revenue 198J00O 720.,000
L42:QQQQQ i234OQQQQ
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. For 2017 compute for the following items in the consolidated financial statements: •

i jc
1. ,Gross Profit t. I 1 au
A. 17,164,4200
B. 20275,800
1
c, 17035800
?
D. 17100,000 ci
' \
,
q (i
2. Expenses
A .- .. .
\
C (it;
B. 5A8 / 000 ,
:

'c.
_ 5433.000
D. 5.469,000 ' '
c \
j
3. Non-qontrolling Interest in Profit ( !
9~
( ( ±
,A'. 1,542,000 Gol
1 B 158'O
, -, I --

C. 1,546500 .

D. 1.536.750 .''

4. Netlncome , .
4L
A. 11,986,800 (
B. 141968,800
C. 12988,8OO ( f
1-) 528 800
, , d&

5. Non-controlling Interest on Net Assets 4 LI 0"

A 62630 t 1 . ' (
/B 3707250
C. -) 7 V2,500 , • . ,Iie
D. 3 5 716,250 -
( .c. ;ti

6. Retained Earnings Attributable to Parnts Shakholders Equity . (1r

A. 16906800
ui CV L
B. 18.767.550 o
J2
20.493.750
/. 2 i
t[(bl(lJ '

-D. 18338.750 ç q
Tv
c\ sy 2 !

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0
PROBLEM 6. Superior Company owns 60% of Uptown Corpoition, which in turn owis 80% of C
Newton Conpàny. Uptown exercises control over Newton and Superior exercises cntrol over
UptowmThè following infbrmation is available:
Superior Uptown Newton
. Company Company
. .
Company
Income from Continuing Operations (e P3.900,000 P26OO,OOO P 1 500,000
Cash dividends declared by: rcvr t cr tct &U 25OOOO 180,00 0 .
110,000
4 f14 •

Cash dividends from:

Associate(s) 75,000 50,000 nil-
. Other investments at fair value -nil- 90000 40 . 000

Net unrealized inter-company gains/(loss) within current P360,000 (22 -0.000) 160,000
year income downstream downstream Upstream
Amortization relating to excess of fair value over book
value /(book value over fair value) of investment ( 1 90,000) 140000 .nil-

What is the consolidated net income attributable to Superior Company stockholders?

(1C;
(u
A. 5 939%400
, qi21co •(o) 2Cj
B. 8,893 600 ,

5834400 ccfl ) ( -

, I__f . .),7Ui
fl(1 íñ[\
,U'JU

L2f4D -end of handouts- I

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