ADVANCED FINANCIAL ACCOUNTING AND REPORTING

FINAL PREBOARD EXAMINATION

On January 2, 2016, Domus Corporation purchased 80% of the outstanding shares of Caritate
Company for a consideration of PI Including in the price paid is control premium in the amount
of P500,000. Die acquisition-related cost amount to P45,000 At that date, Caritate had P
16,000,000 of ordinary shares outstanding and retained earnings ofP6,400,000.
Caritate's equipment with a remaining life of 5 years had a book value of and a fair value of PI
Caritate's remaining assets had book values equal to their fair values. All intangibles except
goodwill are expected to have remaining jives of 8 years. The income and dividend figures for
both Domus and Caritate are as follows: Net income of Domus in 2016 is P3,600,000 ; 2017 is
P4,400,000. Net income of Caritate in 2016 is P 1,360,000 ; 2017 is P2,040,000. Dividends
declared by Domus in 2016 is P88,000 ; 2017 is Dividends declared by Caritate in 2016 is
P280,OOO ; 2017 is P 520,000. Domus' retained earnings balance at the date of acquisition was
PI 3,800,000.
a. What is the consolidated retained earnings attributable to controlling interest in 2017?
a. 20,953,600
b. 20,9291600
c. 21,089,000
d. 21,332,800

b. What is the consolidated profit in 2017?

a. 5720,000
b. 5,856,000
c. 5,372,800
d. 5,752,000

c. What is the non-controlling interest in net assets in 2017?

a. 5.000,000
b. 5,209,600
c. 5,158,000
d. 2,182,400

d. What is the non-controlling interest in net income in 2016?

a. 211,200
b. 238,400
c. 272,000
d. 347,200
Parco interest Slack Company acquired an 80% interest in Slack Company on January 2 for
P10,800,000. On this date , the share capital and retained earnings of the two companies follows:
Parco Corp Slack Co,
Share Capital P24,000,000 P9,000,000
Retained Earnings 12.000,000 P18,000,000
On January 2, 2016 the asset and liabilities of Slack Co were stated at their fair value except for
machinery which is undervalued by P900,000 (remaining life is 3 years). On September 2016.
sold merchandise to Parco an inter-company profit of P60,000; ¼ was still unsold at year end.
Likewise, on October J, 2017, Slack purchased merch2ndise from Parco for P'4.400.000„ The
selling affiliate included a mark-up on cost on this sale. Only 3/4 of these purchases had been
sold to unrelated parties as of December 31, 2017. As of December 31. 2017, goodwill was to be
The following is the summary of the 2017 transactions of affiliated companies
Parco Corp. Slack Co,
Net Income P6,000,000 P2,400,000
Dividends declared and paid 2.400,000 720,000
e. What is the net income attributable to parent shareholders' equity in the 2017
consolidated financial statements?
a. 6,432.000
b. 6,744,000
c. 6,552,000
d. 6,834,000
f. What is the non-controlling interest in net income in the 2017 consolidated financial
statements?
a. 330,000
b. 342,000
c. 282,000
d. 402,000
Numbers 7, 8, and 9
On January l, 2016, Rapids Company purchased 80% of the outstanding shares of Mock
Corporation at book value. The stockholders' equity of Mock Corporation on this date showed:
Ordinary shares — P4, 560,000 and Retained earnings — P3, 920,000. On April 30, 2016,
Rapids Company acquired used machinery for P672, 000 from Mock Corp. that was being
carried in the latter's books at P840, 000. The asset still has a remaining useful life of 5 years. On
the other hand, on August 31, 2016, Mock Corp purchased an equipment that was already 20?/o
depreciated from Rapids Co. for P2,760,000. The original cost of this equipment was P
3,000,000 and had a remaining life of 8 years. Net Income of Rapids Co. and Mock Corp. for
2016 amounted to and P 1,240,000. Dividends paid totalled to P920,000 and P420,0()0 for
Rapids Co. and Mock Corp., respectively.
g. What is the net income in the consolidated financial statements in 2016?
a. 3,920,600
b. 3,775,000
 c. 3,584,600
d. 3,307,480
h. What is the net income attributable to parent’s shareholders' equity in the consolidated
financial statements in 2016?
a. 336,600
b. 3,307,480
c. 3.643 480
d. 3,584,600
i. What is the non-controlling interest m net assets in the consolidated financial statements
in 2016?
a. 1,696,000
b. 1,860,000
c. 1.820,120
d. 1,889,12
Condensed Statements Of Financial Position of Love Corp, and You Corp as of December
31,2016 are as follows:

Love You
Current Assets P 175,000 P65,000
Non Current Assets 725,000 425,000
Total Assets 900,000 490,000

Liabilities 65,000 35,000

Ordinary Shares, P20 par 550,000 300,000
Share Premium 35,000 25,000
Retained Earnings 250,000 130,000

On January 1, 2017, Love Corp. issued 35,000 shares with a market value ofP25/5hare for the
assets and liabilities of You Corp. The book value reflects the fair value of the assets and
liabilities, except that the noncurrent assets of You have fair value of P630,000 and
the noncurrent assets of Love are overstated by P30,000. Contingent consideration, which is
determinable, is equal to P 15,000, Love also paid for the stock issuance costs worth P34,000
and other acquisition costs amounting to PI 9,000.

j. What is the combined total assets after the acquisition?

a. 1,742,000
b. 1,825,000
c. 1,772,000
d. 1,567,000

k. Which of the following consolidation items will affect only the Consolidated Net Income
Attributable to the Parent's Shareholder9 but not the Non controlling Interest in Net
Income?
a. Amortization of difference between fair value over book value of the assets or liabilities
of the subsidiary.
 b. Impairment loss of the total goodwill arising from business combination
c. Gain on bargain purchase arising from business combination
d. Unrealized or realized gain/loss on upstream transactions

l. Which of the following business combination transactions will affect the goodwill or gain
on bargain purchase arising from business combinations?
a. Payment for legal} audit and broker's fees directly connected with the business
combination.
b. Incurring costs related to the issuance of ordinary shares given as consideration for the
acquisition of the 51-100% of ordinary shares of Subsidiary Corporation.
c. Measurement adjustments during measurement period which shall not exceed 12
months from the date of acquisition d3te.
d. Payment of costs directly related to the issuance of bonds payable given as consideration
for the acquisition of the net assets of l:he acquired corporation,

m. Which of the following statements concerning preparation of consolidated financial

statements of a group or separate financial statements of a parent corporation is
incorrect?

a. LAS 27 does not mandate which entities are required to present separate financial
statements.
b. IFRS 10 requires an entity (parent) that controls one or more other entities
(subsidiaries) to present consolidated financial statements including all its
subsidiaries regardless of industries except when the parent is an (1) investment
entity or (2) non-public entity which is partially or wholly owned by another entity
which prepares consolidated financial statements.
c. In preparing consolidated financial statements, IFRS 10 provides that the parent
corporation shall recognize and measure at fair value al] the Identifiable assets and
liabilities of subsidiaries including contingent liability provided it
a present obligation and can be estimated reliably.
d. In preparing consolidated financial statements, IFRS 10 requires the parent to
present non controlling Interest (NCI) as part of consolidated shareholder’s equity
separately from the equity of the owners of toe parent and [FRS 3 requires non-
controlling Interest to be measured Initially as the higher between NCI's Fair Value
or NCI's Proportionate Share of the fair value of the net assets of the subsidiary.

Numbers 14, 15 and 16

On December 1, 2016, KLM Corporation acquired 4.600 shares of QRS Company at a cost of
P28 per share. KLM classifies them as available-for-sale securities. On this same date. KLM
decides to hedge against a possible decline in the value of the securities by purchasing, at a cost
of PI 1,900, an At-the-money put option to sell the 4.600 shares. The option expires on April l.
2017. The fair values of the investment and the options follow:
12/01/16 12/31/16 04/01/17
QRS Co. Cost per share 2800 26.50 23.50
Put Option (Fair Value) ? 15,400 ?
n. What is the net foreign exchange gain/(loss) in the hedging activity in 2016?
a. (6.900
b. 3.500
c. c. 5,300
d. (3,400)

o. What is the foreign exchange gain/(loss) on the option contract due to change in intrinsic
value in 2017 if split accounting is used in the assessment of hedge effectiveness?
a. (5,300)
b. 5,300
c. 13,800
d. (13,800)

p. What is the net foreign exchange gain/(loss) in the hedging activity in 2017?
a. (8,500)
b. (13,800)
c. 5,300
d. 13,800
Numbers 17 and 18
On December l, S company entered into a firm commitment to acquire a machinery from
United Arab Emirates Company. Delivery and passage of title would be on January 31, 2017 at
the price of 37,800 dirham’s, accounted for as fair value hedge. On the same date, to hedge
against unfavorable changes in the exchange rate, S entered into a 60-day forward contract with a
bank for 37,800 dirham’s. Exchange rate were as follows:
Spot Rate Forward Rate
Dec. 01, 2016 P96.50 P94.30
Dec. 31, 2016 97.25 96.50
Jan. 31, 2017 99.70 99.70
q. What is the foreign exchange gain/(loss) on the hedging instrument on December 31,
2016?
a. 83,160
b. (83,160)
c. (28,350)
d. 28,350
 r. Which of the following statements is correct?
a. The total amount of accounts payable to be recorded on December l , 2016 is P3,564,540.
b. The firm commitment account will be debited for P83,160 on December 31s 2016
c. The firm commitment account will be debited for P204,120 upon purchase of machinery
January 31, 2017
d. On January 31, 2017, the company will recognize F 120,960 forex IONS on the forward
contract.
Numbers 19, 20 and 21
R company acquired machine in Turkey lira was due on March for 31s 169,200 2017. On
lira from a vendor in Turkey on December 1, 2016. Payment in Turkey lira was due on
March 31, 2017. On the same date, to hedge this foreign currency exposure . R entered into
a futures contract to purchase 169, 2000 lira from a bank for delivery on March 31, 2017.
Exchange rates for pounds On different dates are as e follows:

12/01 12/31 13/31

Strike Price 41.50 41.50 41.50
Buying spot rate 41.60 42.50 43.40
Selling spot rate 41.40 42.30 43.70
30-day futures 42.30 41.80 43.20
60-day futures 41.80 42.20 42.60
90-day futures 40.60 42.50 43.40
120-day futures 42.20 42.80 42.90
s. What is the reported value of the receivable to the vendor at December 31, 2016?
a. 7,004,800
b. 7,021,800
c. 7,157,160
d. 0

20. What is the foreign exchange gain/(loss) due to the hedging instrument on December 31,
2016?
a. 50,760
b. (50,760)
c. 16,920
d. (16,920)
21. What is the net impact in R Co.'s income in 2016 as a result of this hedging activity?
a. 33,840
b. (33,840)
c. 101,520
d. (101,520)

Numbers 22 and 23

On January l, 2016 an entity purchased a tract of vacant land that is situated overseas for
Baht 90,000. The entity classified the land as an investment property. The fair value of the
land at December 31, 2016 is Baht 100,000
 The entity's functional currency IS the Php (Peso)
Spot currency exchange rates:
January l, 2016: I Baht = P2
Weighted average exchange rate in 20X0: I Baht = P2.04
December 31, 2016: I Baht = P2.1.
22. What is the carrying amount of the investment property at December 31, 2016 and what
amount/s would be presented in profit or loss for the year ended December 31, 2016?
a. Carrying amount of investment property = P210 000. Profit for the year includes P
increase the fair value of investment property.
b. Carrying amount of investment property = P21 Profit for the year includes
P20,400 increase in the fair value of investment property and P9,600 foreign
exchange gain,
c. Carrying amount of investment property = P180, 000. Profit for the year includes
no amount in respect of the Investment property,
d. Carrying amount of investment property = PI 89 000. Profit for the year includes
P9,000 foreign exchange gain.

23. Assuming the entity cannot, without undue cost or effort, determine the fair value of its
investment property reliably on an ongoing basis. What is the carrying amount of the investment
property at December 31, 2016 and what amount/s would be presented in profit or loss for the
year ended December 31, 2016?
a. Carrying amount of investment property = P210,000. Profit for the year includes
P30,000 increase in the fair value of investment property,
b. Carrying amount of investment property — Profit for the year includes P20.400
increase in the fair value of investment property and P9,600 foreign exchange
gain.
c. Carrying amount of investment property PI 80,000. Profit for the year includes
no amount in respect of the investment property.
d. Carrying amount of investment property = PI 89,000. Profit for the year includes
P9,000 foreign exchange gain.

24. Which of the following comprehensive income items are classified as part of "Other
Comprehensive Income" with reclassification adjustment in the Statement of Comprehensive
Income?
I. Unrealized gain or loss on changes of fair value of derivates designated as fair value
hedge.
Il. Unrealized gain or loss on changes of fair value of derivates considered as undesignated
hedge.
Ill. Gain or loss arising from foreign currency transaction.
Unrealized gain or loss on changes of fair value of derivates designated as cash flow hedge
when it refers to effective portion or the change in intrinsic value.
V. Translation adjustment gain or loss arising from translation of financial statements of
subsidiary in foreign operation.
VI. Unrealized gain or loss on changes in fair value of derivatives designated as cash flow
hedge when it refers to the ineffective portion or the change in time value.
A. III and VI
 B. IV and V
C. I and VI
D. II and V
25. Which of the following statements concerning measurement of items of financial
statements denominated in foreign currency is incorrect?
a. In foreign currency denominated transaction, non-monetary items shall be subsequently
measured al foreign currency exchange rate at the date of transaction.
b. In translation of financial statements of a subsidiary foreign corporation, income and
expense accounts shall be translated at foreign currency exchange rate at the end of
reporting period.
c. In translation of financial statements of a subsidiary foreign corporation, equity accounts
shall be translated ac foreign currency exchange rate at the date of the transaction.
d. In foreign currency denominated transaction, monetary items shall be subsequently
measured at foreign currency exchange rate at the end of reporting period.

On January 1, 2016. Gawad Kalinga Inc., a non-stock non-profit charitable organization,

received
P 1,000.000 cash donation from Mr. Pilantropo who imposed a condition that the fund shall be
used for the acquisition of several service vehicles for the use of the 01ganization. On December
31, 2016, Gawad Kalinga purchased motor vehicle using the donated fund at an amount of P
200,000.

26. Which of the following statements concerning the presentation of the transactions that
transpired for in 2016 in Gawad Kalinga's financial statements is correct?
a. Only the P200,000 spent for the acquisition of motor vehicle shall be presented as
revenue the Statement of Activities.
b. The transactions will increase the total of assets of the organization for the year ended
December 2016 by P1,200,000 in the Statement of Financial Position.
c. The 1,000,000 cash donation shall be presented as cash receipts from financing activities
while the P200,000 shall be prepared as cash disbursement for investing activities in the
Statement of Cash flows.
d. The statement of activities of the organization will show net because in the net assets of
the organization by P1 200,000.

27. Under the Government Accounting Manual issued by Commission on Audit , which of
the following transactions will require journal entry in the accounting book of a national
government agency or unit?
a. Receipts of national budget allotment from Department of Budget and Management.
b. Entering into a contract with a supplier for incurrence of obligation to acquire
government supplies or equipment.
c. Receipt or notice of a cash allocation from Department of Budget and Management
d. Receipts of appropriation from Department of Budget and Management bases on the
General Appropriation act.

SM Inc. and Rob Inc entered into an arrangement which provides that parties will have joint
control over a separate vehicle to be established called MOB inc. for the operation of Universal
Mall in Mindanao. The contractual arrangement provides that MOB inc. will have title over the
assets and liabilities of the Universal Mall and that the parties that have joint control the
arrangement shall have rights to the net asset of the arrangemen.,
28. How SM Inc. and Rob Inc. shall classify and accounts their investments in joint
arrangement in their consolidated financial statements?
a. The Investment in joint arrangement shall be classified Joint venture to be accounted for
using the equity method
b. The investment in joint arrangement shall be classified as joint venture 10 be
accounted for using proportionate consolidation.
c. The investment in joint arrangement shall be classified joint operation to be accounted for
using line by line method by recognizing their share in assets revenue expenses from the
joint operation,
d. The investment in joint. arrangement shall be classified as joint operation to be accounted
for using fair value model under IFRS 9.
Numbers 29, 30, 31, and
The following data were extracted in the second department of a three step process to complete
the company's product and opted to use the. FFFO
method accounting the process: Beginning inventory units were 8.000 (65% to complete as to
direct materials arid complete as to conversion). Ending inventory units 12,500 (55% complete
to materials and to complete as to conversion) Transferred-out units from the prior department -
were 79,000. Total normal and abnormal lost units were 1,500. Started and completed cost was
P2, 112,500. The current period cost for direct material was P855,525. The transferred-out cost
from the prior department was P977,500. Total cost to account for was
P2,723,750. Total cost per eup as to direct materials and conversion was P 20.

29. What is the equivalent units of production as to conversion?

a. 73,825
b. 75,325
c. 74,525
d. 77,375

30. What is the ending inventory cost?

a. 812,500
b. 282,500
c. 406,250
d. 293,750

31. What is the cost transferred-out goods to the next department?

a. 2.418,500
b. 2,273,750
c. 2,441,250
d. 2,198,500

32. What is the current period cost to conversion?

a. 677,925
b. 670,725
 c. 677,925
d. 696,375

Numbers 33, 34, 35, and 36

The following data were ascertained during the year
January 1 December 31
Work-in-process 130,000 352.000
Finished goods 89,000 231,250
Raw materials used was P 504,950 and the direct labor rate was PI 5. Actual overhead
was Pi 56,500 of which P76,550 was indirect labor and the rest were indirect materials.
Budgeted overhead cost and direct labor hours was P250,000 and 31,250 respectively. At
the end of the year the overhead control account has a credit balance Of Pi 8,500. It was
the company's policy to consider any difference from the actual and applied overhead
less than P50,000 immaterial.
33. What is the prime cost during the year?
a. 833,075
b. 973,700
c. 753,125
d. 893,750
34. What is the cost of goods manufactured at the end of the year?
a. 786,075
b. 687,625
c. 871,700
d. 706,125
35. What is the total goods available for sale?
a. 795,125
b. 875,075
c. 776,625
d. 960,700
36. What is the adjusted cost of sales at the end of the year?
a. 625,325
b. 526,875
c. 545,375
d. 710,950

Numbers 37 and 38
The company has two main products, Alpha and Beta. Charlie on the other hand was a by-
product of Beta. Alpha and Beta came from the same raw material. Charlie was manufactured
from the residue of the process from creating product Beta. The cost before separation was P
375,000. The company opted to us the NRV (approximated) in accounting its joint costs and the
NRV of product Charlie was a reducti01 from the cost where it came from. The following data
were ascertained during the year:
Alpha Beta Charlie
Units produced 25,000 20,000 1,200
Units sold 23,000 16,000 1,200
Cost after separation 16,200 49,300 3,500
Selling price P15 P12 P5

37. What is the cost of goods manufactured of Beta?

a. 179,441
b. 162,794
c. 178,050
d. 161,673
38. What is the gross profit of product Beta?
a. 48,447
b. 62,662
c. 61,765
d. 49,560
39. When will the average process costing method produce same cost of goods manufactured
as the first in first out process costing method?
a. When materials are added 100% at the end of the process.
b. When materials are added 100% at the beginning of the process.
c. When the beginning work in process inventory and ending work in process inventory are
equal.
d. When there is not beginning work in process inventory.
40. Which of the following costs shall he considered as hoth prime costs and conversion
costs?
a. Supervisory salaries for a manufacturing plant
b. Property taxes on a manufacturing plant
c. Costs of direct materials used in the production.
d. Employee benefits earned by machine in producing the firm's product

Numbers 41, 42, and 43

Reality, Inc., works on a contract in March 2016 to construct a commercial building.
During 2016, Reality uses the cost to cost method. At December 31, 2016, the balances of
certain accounts were: Excess of Construction in Progress over billings — P 140,000
due from customer; and Progress Billings P 360,000 which is 1/5 of the contract price.
At December 31, 2016, the estimated future costs to complete the project total P1,350,000 Of
the amount billed 70% were paid in 2016 subject to retention provision of 15% , payable with
the final bill after the acceptance of entire completed project. A mobilization fee of 5% of
the contract price (deductible from the final bill) is payable in 10 days after the contract
signing.
41. What is the cost incurred to date in 2016?
a. 1,800,000
b. 1,350,000
c. 450,000
d. 700,000
42. What portion of the contract price is recognized income in 2016?
a. 700,000
b. 250,000
 c. 191 ,200
d. 526,800

43. What is the total collections in 2016?

a. 333,200
b. 392,000
c. 532,000
d. 473,200

On July l, 2016; PM Motors, which maintains a perpetual inventory records sold

new automobile to ANX for P 1,700,000. The car costs the seller P 1,301,250.

The following were the payment scheme in order:

1. 30% down payment
2. PI 60,000 allowance on an old car traded
3. the balance being payable in equal monthly installments
The monthly amortization amounts to P60, 000 inclusive of 12% interest on the unpaid amount
of the obligation. The car traded in has a wholesale value of P 240,000 after expending
reconditioning cost of P45, 000. After paying three installments, the buyer suffered major
financial setback incapacitating him to continue paying so the car was subsequently
repossessed. When reacquired, the car was appraised to have a fair value ofP600, 000.

44. What is the realized gross profit on installment sales during the year?
a. 212,500
b. 213,899
c. 221,250
d. 205,149
Cellphone, Inc. sells cellphones on an installment basis. For the year ended December 31,
2016, the following were reported:
Cost of installment sales

Loss on repossessions 27,000

Fair value of repossessed merchandise 225,000

Account defaulted 360,000

Deferred gross profit, December 31 Adjusted 216,000

45. What is the collections during the year?

 a. 780,000
b. 420,000
c. 720,000
d. 1,429,091

Nikita, Inc. sells automatic weapons costing P700, 000 at a price of P 1,200,000. Division Corp.
buys a dozen of automatic weapons on installment and trade in six of its old weapons at a trade-
in value of P300, 000 each. Nikita spends P25, 000 to recondition the old guns and sells them for
PM 5,000. Nikita expects a 10 percent gross profit from the sale of used guns.

46. What is the over-allowance granted by Nikita on the trade-in transaction?

a. 99,000
b. 234,000
c. 41,500
d. 249,000

Numbers 47 and 48
Mariano operates a branch in Laoag City. At close Of the business on December 31, 2016,
Laoag Branch account in the home office books showed a debit balance of P234,900. The
interoffice accounts were in agreement at the beginning of the year. For purposes of reconciling
the interoffice accounts, the following facts were ascertained:
a. Computer equipment costing the home office P27,000 was sent to Laoag branch. The
home office will maintain the records of the asset used by the branch. Meanwhile, back
at the branch no entry was made.
b. The branch acquired a machinery costing PI 8,000. The home office will maintain the
records of the asset used by the branch. The home office was not yet notified.
c. The home office charged the branch for freight amounting to P2.220. It should have
been charged to its customer,
d. The home office inadvertently recorded a Laoag branch remittance of P4,200, as
collection from its customers on account.
e. On December 24, 2016, the branch sent a check for P9,600 to its suppliers on account.
The branch erroneously recorded the transaction as a remittance to the home office and
sent a copy of the debit memo to the home office. The home office recorded this upon
receiving the debit memo on December 29, 2016.
f. On December 26, 2016 the branch returned P6,600 of excess merchandise to the home
office. The merchandise was received by the home office on December 30, 2016 and
credited Lanao Branch Current.
g. The home office allocated advertising and rent expense totaling P5,400 to Laoag
branch. The home office charged the said expense to Laguna branch by mistake, Laoag
branch had not entered the allocation at year-end.
h. A home office customer remitted P3,600 to the branch. The branch inadvertently
recorded this transaction on December 28, 2016 as a transfer of cash from the
home office. The home office made no entry during the year.
i. Inventory costing P36,000 was sent to the branch by the home office on December 14,
2016. The branch recorded the transaction as a purchase of merchandise on account
from outsiders by mistake.
47. What is the unadjusted balance of the home office current account as of December 31,
2016:
a. 222,480
b. 171,480
c. 188,880
d. 178,320

48. What is the adjusted balance of the reciprocal accounts as of December 31, 2016?
a. 200,280
b. 247,320
c. 222,480
d. 262,320
On December 31, 2016, ABC Corporation combined net income together with its Bacolod
branch amounted to P350, 000. On June 30, 2016, the home office purchased and recorded
fixed asset for the use of the branch amounting to Useful life is 5 years.
The following were ascertained in the Bacolod branch's books: During the year, shipments
of merchandise at cost to the branch amounted to PI 35,000. Remittance of P70, 000 was
made during the year to the home office. Purchases of merchandise from outside suppliers
amounted to P 25,000; Ending inventories amounted to P80, 000. Sales for the year was
reported at P400, 000. The branch paid selling and administrative expenses amounting to P
75,000.
49. What is the separate income of the home office?
a. 105,000
b. 225,000
c. 245,000
d. 125,000

On November 1, 2016, LG5 Inc. authorized Warren Buffet to operate as a franchisee for
an franchise fee of PI Of this amount, 40% was received upon contract signing and the
represented by a note, is due in three annual installments starting December 31, 2016. A 6S-day
period of refund was granted. According to the agreement, the down payment represents a fair
measure of the services initially performed; The collectability of the note is reasonably cenain.
(PV factor of 2.4)

50. What is the unearned franchise fee at December 31, 2016?

a. 1,320,000
b. 720,000
c. 600,000
d. 0
Under IFRS 15, revenue from contracts with customers shall be recognized as revenue when
the entity satisfied a performance obligation which can either be (1) satisfaction over time or
 (2) satisfaction at a point in time. Three of the circumstances enumerated below involve
satisfaction of performance obligation over time which will result to recognition of revenue
over time.
51. Which of the following will result to recognition of revenue at a point in time?
a. The customer simultaneously receives and consumes the benefits provided by the
entity's performance as the entity performs.
b. The customer obtains absolute control, legal right and possession of the promised
asset at a specific date.
c. The entity's performance enhances or creates an asset that the customer controls as
the asset is created or enhanced.
d. The entity's performance does not create an asset with an alternative use to the
entity and the entity has enforceable right to performance completed to date.
52. Under IAS 11 construction contracts, contract costs that shall be capitalized as part of
construction in progress will include the following, except
a. Depreciation of idle plant and equipment that is not used in a particular construction
contract.
b. Cost of moving plant, equipment and materials to and from the contract site.
c. Construction overhead such as preparation arid processing of construction personnel
payroll.
d. Site labor costs, including site preparation and costs of materials used in construction.
53. Under IAS18 revenue recognition, how shall revenue be generally measured by an
entity?
a. Fair value of the consideration received or receivable minus rebates and
volume discount.
b. Book value of the consideration received or receivable plus rebates and
volume discount.
c. Face value of the non-interest bearing note received or receivable minus
rebates and volume discount.
d. Cost of the consideration received or receivable minus rebates and volume
discount.
54. Which of the following recognition of income and expense accounts related to installment
sales is incorrect?
a. If the collection of the installment receivable is not reasonably assured, gross profit of
installment sales is recognized proportionately on the basis of collection.
b. If the long-term installment receivable is non-interest bearing, interest revenue shall be
recognized based on passage of time using the effective interest method.
c. The cost of installment sales shall he recognized proportionately throughout the term of
the installT1ent contract based on the proportion 01' collection.
d. Loss on repossession shall be recognized on the date of default of collection of
installment due and repossession of the item so\d computed as the difference between the
fair value of repossessed item and the unrecovered cost of the installment receivable.

REA and KIM are partners engaged in a manufacturing business. Transactions affecting
the partners’ capital accounts in 2016 are as follows:

REA KIM
 Debit Credit Debit Credit
Beginning Balance P250,000 P350,000
April 1 150,000 100,000
June 30 125,000 250,000
Sept. 1 225,000 300,000
Oct.1 150,000 200,000

The income summary has a debit balance of P225,000

Agreement between REA and KIM are as follows:
 Interest on average capital at 8%
 Salaries of P125,000 and P175,000 are given to REA and KIM respectively
 Bonus to KIM at 25% of net income after deducting interest and salaries but before
deducting bonus.
 Balance is to be divided equally
55. What is the net increase/decrease in KIM's capital account during 2016?
a. 518,000
b. 168,000
c. (82,000)
d. (32,000)

Numbers 56 and 57
PATRICK and DON are partners sharing profits and losses of 5:3:2, respectively. As of
31, 2015, their capital balances were P997,500, P840,000 P630,000 respectively. On January
l, 2016, the partners admitted YER as a new and according to their agreement YER will
contribute P840, 000 in cash to the and also pay P105, 000 for 15% of PATRICK's share.
YER will be given a 20% share in profits, while the original partners' share will be
proportionately the same as before. After admission of YER, the total capital be P3,465,000
and YER capital will be P735, 000.
56. What is the asset revaluation?
a. 231,000
b. 73,500
c. 157,500
d. 388,500
57. What is the bonus in the admission of YER?
a. 69,300 \
b. 115,500
c. 126,000
d. 231,000

PSALM. TRISH-A and GLENDA were partners with capital balances on January 2: 2016 of
P350,000, P 525,000 and P700,000, respectively. Their profit ratio is 5:3:2 while their capital
interest ratio is 4:4:2 On July 1, 2016 QUEENIE was admitted by the partnership for 20%
interest in capital and 25% in profits by contributing P 87,500 cash, and the old partners agree
to bring their interest to their old capital and profit interest sharing ratio. The partnership had
net income of P210, 000 before admission of QUEFNIE and the partners agree te revalue its
overvalued equipment by P35,000.
 58. What is the capital balance of PSALM After admission of QUEENIE"
a. 297,500
b. 588,000
c. 354,200
d. 470,400

Numbers 59 and 60

JCA Partnership is entering into liquidation and you are given the following account balances:

Cash 775,000 Liabilities 1,100,000

Noncash assets 6,750,000 Loan from A. 150,000
J. Capital (20%) 1,275,000
C. Capital (20%) 1,625,000
A. Capital (60%) 3,375,000
Total Asset 7,525,000 Total Liabilities and Capital 7,525,000

During June, noncash assets with a book value of P 1,875,000 were sold for P JCA paid P
175,000 for the liquidation expenses it incurred and it also paid its liabilities to outside creditors.
However, creditors whose account balances amount to P 150,000 decided to condone JCA's
liabilities. 3/4 of the cash received from the sale of noncash assets were distributed 10 the
partners.
59. What is J's share in the maximum possible loss?
a. 995,000
b. 985,000
c. 965,000
d. 975,000

60. What is A's interest after the first cash distribution?

a. 3,105,000
b. 2,905,000
c. 2,955,000
d. 2,805,000

Numbers 61, 62, 63, and 64

Hosea Corporation is undergoing liquidation. On January l, 2016 its Statement of Financial
Position showed the following accounts:
ASSETS
Cash P 150,000
Accounts Receivables-net 290,600
Inventory 50,000
Prepaid Expenses 10,400
Building 380,000
Goodwill 80 000
TOTAL P961,000

LIABILITIES AND EQUITY

Salaries Payable P85,000

Accounts Payable 120,700

Mortgages Payable 428,000

Loan Payable 130,000

Notes Payable 84,300

Ordinary Shares 170,000

Deficit (574000)

TOTAL P961,000

The mortgage payable is secured by the Building having a realizable value of P 400,000.
Accounts Payable amounting to P 75,000 is secured by receivables amounting 10 P 90,600 (P
9,900 of which is uncollectible).
The balance of receivables which has a realizable value of P 187,500 is used to secure the loan
payable. Inventory has a realizable value of P 41,200. In addition to recorded liabilities are:
accrued interest on mortgage payable amounting to P 4,280, liquidation expenses amounting
P 11,300 and taxes amounting to P 5,600.
(NOTE: Use 2 decimal places for estimated recovery percentage ex. 88.89%)

61. What are the net free assets?

a. 152,500
b. 237,500
c. 254,400
d. 163,800

62.What is the estimated payments to unsecured creditors without priority?

 a. 206,486
b. 124,852
c. 122,161
d. 202,036

63. What is the estimated payment to partially secured creditors?

a. 390,334
b. 430360
c. 430,334
d. 420,334
e.
64. What is the estimated deficiency percentage to fully secured creditors?
a. 93.97%
b. 95.50%
c. 90.350%
d. 100.00%

65. 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 purchase, the total capital of
the partnership after the admission of new partner will be higher than the total capital
before admission of new partner because of the cash or asset paid by the nevi partner. \
b. In case of retirement of a partner wherein the assets of the partnership are
properly valued, the receipt by the retiring partner of an amount lower than his capital
balance will decrease the capital balance of the remaining panniers,
c. In case of achms310n 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 capita) of new partner
will show that there is positive asset revaluation and bonus to either old or new partner.
d. In case of admission of new partner by investment, the positive asset revaluation
or impairment loss of assets shall be distributed to all the partners including the newly
admitted partner using the new profit or loss ratio agreement,

66. 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.
b. The liabilities of the partnership to third persons shall be settled first using the
partnership assets before the claims of the partners against the partnership shall be
satisfied.
c. The claims of the partners against the partnership other than capital and profit
shall be settled first before the partner's share in the capitalization of the partnership be
distributed to them.
d. The personal assets of the partners are reserved for the payment of the personal
debts of the partners arid may be used pay partnership’s creditors in case there will be
excess of partner': personal assets over partner's personal debts.
 67. During liquidation, which of the following types of creditors will always receive full
settlements of his claim ?
a. Unsecured creditors with priority
b. Unsecured creditors with priority
c. Partially secured creditors
d. Fully secured creditors
I
FR.S 4 provides that insurer shall perform liability adequacy test which involves
an assessment at the end of each reporting period whether its recognized
insurance liabilities adequate. Current estimates of cash flows under its insurance
contracts. If the end of the reporting period insurer’s assessment shows that
the carrying amount of its insurance liabilities is adequate m the light Of the
estimated future cash flows.
68. 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. It shall be treated as a change in accounting policy accounted for by
retrospective application
c. It shall be treated as a prior period error accounted for by retrospective restatement.
d. It shall be treated as a cumulative or retrospective adjustment m the beginning retained
earnings

Eng-Bee-Ten Inc. delivers boxes of Hopia and Tikoy to CPAR co be sold to

its reviewees. The arrangement between the parties provides that CPAR does not have
unconditional obligation to pay for the products but is required to pay a deposit
equivalent to 5% of the selling price of the products- The arrangement also states that
Eng-Bee-Ten has the right to require the return of products or to require CPAR to transfer
it to another store.
69. Under IFRS 15, when shall Eng-Bee-Ten recognize sales revenue from the Hopi.
and Tikoy delivered to CPAR?
a. Sales revenue shall be recognized by Eng-Bee-Ten upon delivery of the boxes tc
CPAR.
b. Sales revenue shall be recognized by Eng-Bee-Ten upon payment of
5% deposit by C PAP
c. Sales revenue shall be recognized by Eng-Bee-Ten upon sale by C.PAR of the
products te reviewees.
d. Sales revenue shall be recognized by Eng-Bee-Ten upon remittance by C PAR of
the net proceeds of the sales after deducting the sales commission and other items.

Sky Inc. entered into a concession agreement with the Philippine government to operate the
Skyway expressway connecting SLE X to NLEX. The contract provides that Sky 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.
70. How shall Sky Inc. account for its infrastructure asset in that service
concession agreement0
A. The infrastructure asset shall be capitalized as property, plant and equipment to be
depreciated over the contract life of 30 years.
B. The infrastructure asset shall be capitalized as financial asset to be re-measured
subsequently fair value.
C. The Infrastructure asset shall be capitalized as Intangible asset to be amortized over the
contract life of .30 years.
D. The infrastructure asset shall be capitalized as prepaid to be amortized over the contract
life of 30 years.
END