Page 2 Number 5 At the time of retirement, a retiring partner receives more than the amount of his capital contribution while remaining partners capital increase after the retirement. Which of the following is most valid reason? ‘A. Goodwill during retizement is recognized. B. Asset revaluation is recognized, C. Bonus is given by retiring partner to remaining partners. D. Bonus is given by the remaining partners to retiring partner. Number 6 ‘At the time of partnership liquidation, which credits shall be settled first? ‘A. Those amount owing to third persons. B, Those amount owing to pariners other than capital contribution and share in profit. C. Those amount owing to partners with respect to capital contribution. D. Those arnount owing to partners with respect to share in profi. ‘Numbers 7 and 8 Surigao Company is bankrupt and has undergone corporate liquidation. Presented below is its statement ‘of financial postion before the stazt of liquidation: Cash 300,000 ‘Accounts Payable 100,000 Machinery 500,000 * Salaries Payable 200,000 Building 1,200,000 + Income tax Payable 300,000 Loan Payable 400,000 Mortgage payable 500,000 Contributed capital 800,000 Deficit (300,000) Liquidation expenses amounting to P600,000 were paid. ‘The loan payable is secured by the machinery with fair value of P300,000. ‘The mortgage payable is secured by the fair value of the building. At the end of liquicaticu, the bolder of loan payable received P340,000. 7. What is the amount received by the holdet of aecounts payable a the end of liquidation? A. 85,000 B. 15,000 ©. 40,000 D. 60,000 8. Whatis the ae cf net fee assets available nt the end of liquidation? A. 80,000] B. 40,000! . 120,000 . 200,000Page 4 Numbers 13 and 14 (On January 1, 2018, an entity granted a franchise agreement to a franchisee. The contract provided that the franc. ‘see shall pay an initial franchise fee of P500,000 and on-going payment of royalties equivalent to 8% ofthe sales of the franchisee. ‘On January 1, 2018, the franchisee paid downpayment of P200,000 and issued a 3-year noninterest bearing note for the balance payable in three equal annual installments starting December 31, 2018. The note has present value of P240,183 with effective interest rate of 12%. On June 30, 2018, the entity completed the performance obligation of the franchise ata cost of P352,146. Aside from that, the entity incurred indirect cost of P22,009. ‘The franchisee started operation on July 1, 2018 and reported sales revenue amounting to P50,000 for the year ended December 31, 2018, The franchisee paid the first installment on its due date. 13. Ifthe coliection of the note receivable is reasonably ussured, what is the gross profit to be recognized by the entity for the year ended December 31, 2018 in relation to the initial franchise fee? A. 66,028 = B. 44,014 C. 22,009 D, 88,037 14. 1f the collection of the note receivable is reasonably assured, what is the net income to be reported by the entity for the year ended December 31, 2018? A. 98,850 8. 94,850 ©, 70,028 D. 92,037 Number 15 Under IFRS 15, in which of she following instances shall an entity recognize revenue through satisfaction of performance obligation sta point in time instead of satisfaction of performance obligation over time? A. The customer simuitaneously receives and consumes the benefits provided by the entity's performance as the entity performs. B. The entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced . The entity's performance does not create an asset with en alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. c D. The entity has transferred the legal ttle, contrcl and physicat possession of the asset at a specific date. |Page 6 ‘Number 20 ‘When the outcome of a construction contract cannot be estimated reliably, what accounting method shall be used v the long-term constructor for the recognition of construction revenue and construction cost? A. Percentage of completion method B. Cost recovery method C. Installment method D.. Accrual basis ‘Numbers 21, 22 and 23 Siargao Company set up a branch in a province. The entity and its branch provided the following data for the second year of branch operation: Home Office Branch Sales revenue to outside customer 1,000,000 500,000 Beginning inventory 50,000 30,000 Purchases from outside supplier 400,000 100,000 Shipment to branch 200,000 Shipment from home office 250,000 Ending inventory 80,000 50,000 Operating expenses 150,000 40,000 > ‘+ The home office to branch markup based on cost is 25% this year and last year. + 20% of the beginning inventory ofthe branch came from outside supplier. * 24% of the ending inventory of the branch came fromthe last year’s shipment from the home office hile $0% of the ending inventory of the branch came from current year’s shipment from the home office. 21-What is the net income reported by the branch in its separate income statement for the current year? ‘A. 130,000 B. 124,000 C. 114,000 D. 95,000 22, What is the ending inventory to be reported by the entity in its combined statement of financial position? ‘A. 128,000 B. 115,000 C. 130,000 B. 122,600) 23, What is the overstatement in the cost of goods sold reported by the branch in its separate ineome statement fof the current year? 7 A. $4,000 B. 50,000 | c. 52,000 | D. 47,400Page 8 Numbers 28 and 29 ‘Tacloban Company is employing process costing regarding its production cycle. Conversion costs are added uniformly during the production process while direct materials are added 10% at the start of production process, 50% at the middle of the production process and the remainder at the end of production process, ‘The production data of the entity during the year are: Beginning Work in Process Inventory _10,000 units (0% incomplete as to conversion costs) Units started during the year 30,000 units Ending Work in Process Inventory 5,000 units (75% incomplete as to conversion costs) ‘* There is no spoilage during the period. ‘© The costs of beginning inventory consist of P103,000 costs of direct materials and P107,500 conversion costs, * The total manufacturing costs consist of P236,000 costs of direct materials and P146,250 conversion, costs, 28, What is the cost per unit of direct material under FIFO process costing? A. 10 B 9 po 29. What isthe cost per unit of conversion cost under FIFO process costing? Number 30 Tf the under or over applied factory overhead is significant, it shall be closed to ‘A. Cost of goods sold only B. Finished goods and cost of goods sold proportionately C. Work in process, finished goods and cost of goocis proportionately D. Raw materials, work in process, finished goods, and cost of goods sold proportionately | Number 31. | : In job order cost{ng, normal rework cost which is attributable to specific job shall be ‘A. Expensed as incurred B. Charged or capitaized to that particular job. . Closed to factory overhead account. 1. Debited to work in process account. | t‘Numpers $9 ang se On January 1, 2018, Entity A acquired 30,000 out of 100,000 outstanding ordinary shares of Entity B for P90,000 or 30% interest. For the six months ended June 30, 2018, Entity B reported net income of 40,000. On July 1, 2018, Entity A acquired additional 60,000 ordinary shares of Entity B or 60% interest at a price of P4 per share or total cost of P240,000. Entity A paid P20,000 acquisition related costs and 10,000 indirect costs of business combination, ‘The acquisition price per share of the additional shares clearly reflected the fair value of the existing interest of Entity A in Entity B. [tis the policy of Entity A to initially measure the noncontrolling interest in net assets ofthe acquiree at fair value. The far value ofthe noncontrolling interest in net assets ofthe sacquiree is reliably measured at 50,000. ‘At the acquisition date, the net assets of Entity B were reported at P400,000. An asset of Entity B was overvalued by P50,000 while one liability wass overvalued by P30,000, 35. What is the gain on remeasurement of the existing Investment in Entity B as a result of step acquisition? A. 18,000 B. 30,000 ©. 24,000 D. 12,000 36. What is the goodwill or gain on bargain purchase asa result of the business combination? A. 18,000 goodwill B. 20,000 gain on bargain purchase C. 24,000 goodwill é D. 30,000 goodwill : Numbers 37 and 38 On January 1, 2018, Entity A acquired 70% of outstanding ordinary shares of Entity B at a price of 210,000. On the same date, the net assets of Entity B were reported at P260,000. On January 1, 2018 Entity A reported retained earnings of P2,000,000 while Entity B reported retained earnings of P200,000. Al the assets and fiabilities of Entity B are fairly valued except machinery which is undervalued by 80,000 and inventory which is overvalued by P10,000. The said machinery has remaining useful life of four years while 40% of the said inventory remained unsold at the end of 2018. For the year ended December 31, 2018, Entity A reported net income of P1,000,000 and declared dividends of P200,000 in the separate financial statements while Entity B reported net income of 150,000 and declared dividends of P20,000 in the separate financial statements. Entity A accounted the investment in Entity B using cost method in the separate financial statements. 37. What is the ngacontrolling intezest in net assets on December 31, 2018? A. 124,800 B. 130,200 | . 126,000 | . D. 133,800 38, What is the amount of corsolidated retained earnings on December 31, 2018? ‘A. 3,012,200 B. 2,991,200! *C. 2,902,200 D. 2,945,200,Page 12 ‘Numbers 43 and 44 On January 1, 2019, Entity A acquired 80% of outstanding ordinary shares of Entity B at a gain on bargain purchase of P180,000. The following intercompany transactions occurred for between the two entities: © On January 1, 2019, Entity B sold a land to Entity A with a cost of P1,000,000 at a selling price of 1,100,000. The land was eventually sold by Entity A to third persons during 2020. © On January 1, 2019, Entity A sold a white machinery to Entity B with a cost of P200,000 and accumulated depreciation of P40,000 at a selling price of P180,000. The machinery is already 4 years, old atthe date of sale, The residual value of white machinery is immaterial. © On July 1, 2020, Entity B sold a black machinery to Entity A at with a cost of P270,000 and accumulated depreciation of P180,000 ate selling price of P60,000. The machinery is already 6 years ‘old at the date of sale. The residual value of black machinery is immaterial. FFor the year ended December 31, 2020, Entity A reported net income of P800,000 while Entity B reported net income of P500,000 and distributed dividends of P150,000. Entity A accounted for its inventory in Entity B using cost method in its separate financial statements. 43. What is the consolidated depreciation expense of machinery for 2020? ~ ‘A. 40,000 B. 55,000 C. 61,667 D. 423333 44, What is the consolidated carrying amount of machinery on December 31, 20207 A. 225,000 B. 215,000 . 200,000 D. 210,000 Number 45 ‘Under IFRS 3, ina business combination achieved in stages, if the acquisition date fair value of the net of the aoquisition-date amounts of the identifieble assets acquired and the liabilities of the acquiree is lower than the aggregate of the (1) acquisition date fair value of the consideration transferred by the equirer; (2) amount of noncontrolling interest measured at fair value or proportionate share; and (3) acquisition date fair value of acquirer's previously held equity interest in the acquire, the difference shall be accounted for by the acquirer in its consolidated financial statement as ‘A. Goodurlelabsifed as noncurrent asset not subject to amortization but subject to annual impainment test Gain on bargin purchase to be recognized as part of profit or toss Expense as: Deduction digectly to retained earnings popPage 14 Numbers 50 and SI Entity A and Entity B incorporated Entity C to manufacture a microchip to be used by the incorporating, ‘entities ~s component for their final products of cellular phones and tablets. ‘The contractual agreement of the incorporating entities provided that the decisions on relevant activities ‘of Entity C will require the unanimous consent of both entities. Entity A and Entity B have rights to the assets, and obligations for the liabilities, relating to the ‘arrangement, The ordinary shares of Entity C will be owned by Entity A and Entity B in the ratio of (60:40. At the end of first operation of Entity C, the financial statements provided the following data: Inventory 1,000,000 Accounts payable 2,000,000 Land 3,000,000 Note payable 1,000,000, Building. 5,000,000 Loan payable 4,000,000. Share capital 1,000,000 Retained eamings 1,000,000 Sales revenue 5,000,000 ‘The contractual agreement of Entity A and Entity B also provided for the following concerning the assets and liabilities of Entity C: * Entity A owns the land and incurs the loan payable of Entity C ~ ‘Entity B owns the building and incurs the note poyable of Ent © The other assets and liabilities are owned or owed by Entity A and Entity B on the basis of their capital interest in Entity C. + The sales revenue of Fntity C includes sales to Entity, A and Entity B in the amount of P1,000,000 and P2,000,000, respectively. As ofthe end ofthe frst year, Entity A and Entity B were able to resell 30% and 60% of the inventory coming from Entity C to third persons. 50, What is the amount of total assets to be reported by Entity A concerning its interest in Entity C? A. 5,400,000 B. 3,000,000 . 3,600,000 D. 5,000,000 51. What is the dmount of sales revenue to be reported by Entity A concerning its interest in Entity C? A. 2,300, B. 2,100, C. 3,000, D. 2,500.94 | |sage a Numer 56 Ayala Corporation and SM Holdings established MRT7 business. The contractual agreement provides that the relevant activites of the business will require unanimous consent of the two parties. MRT7 business is not incorporated before SEC. Ayala Corporation and SM Holdings equally own interest in the said Imsiness. How shall Ayala Corporation account for its investment in MRT7? ‘A. It shall be accounted for using proportionate consolidation. B. It shall be accounted for as joint arrangement clasified as joint operation. . It shall be accounted for as joint arrangement classified as joint venture. D. It shall be accounted for as business combination. Number $7 ‘Fone and Blakbery structure a joint arrangement in an incorporated entity, Cell. They each have a 50%, ‘ownership interest. The purpose of the arrangement is for Cell to manufacture parts for iFone and Blakbery's own manufacturing processes. The arrangement ensures thatthe 2 parties operate the facility that produces the parts to their specifications. The parties agreed to purchase all the output produced by Cell in the ratio oftheir ownership percentage. Cell may not sell its output to third parties, unless this is approved by iFone and Blakbery. The arrangement is intended to operate at a break-even level. That is, ‘the selling price is set by both parties and is designed to cover the costs of production and administrative expenses incurred by Cell. How shall Blakbery account for its investment in Cell? ‘A. It shall be accounted for using proportionate consolidation. BB. It shall be accounted for as joint venture. C. It shall be accounted for as joint operation. > D. It shall be accounted for investment in trading securities. ‘Number 58 Entity A owns majority ofthe outsanding ordinary shares of Entity B which is operating ia United States of America wherdin the functional currency is the USA $. However, the presentation currency of Entity B is the Philippine Peso because that is the presentation currency of Entity A. For the year ended December 31, 2020, Entity B presented its Statement of Financial Position in its functional currency of USA $: Curent aseis $10,000 Current liabilities $10,000 Noncurrent assets _40,000 _Noncurrent liabiities 20,000 Ordinary stare capital 5,000 Preference share capital 8,000 Retained earnings 7,000 Total Assets $80000 Total Liabilities and shareholders $$0,000 * The ordinary shares are issued on January 1, 2019 while the preference shares are issued on July 1, 2019. * B reported $1,000 net income during 2020 and declared dividends in the amount of $200 on December 1, 2020. ‘+ The translated amount of retained earnings on December 31, 2019 is P300,000. ‘The following digect exchange rates are provided: January 1, 2019] P40 July 1, 2019 a2 December 31, B December i, 2020 4 December 31, 220 45 Average rate 2020 44 ‘What amount of translation gain as component of other comprehensive income should be presented in the of statement df comprehensive income for the year ended December 31, 2020? A. 38,6004 B. 28200 | I |Page 18 ‘Numbers 62 and 63 On November 1, 2020, Entity A anticipated the purchase of inventory on January 31, 2021 ata price of $1,000. In order to hedge this highly probable forecasted importation, Entity A acquired a call option ‘from a be~& giving it the right to purchase $1,000 at an option price of P40 by paying an option premium ‘of P300. Entity A is operating in Philippine economy where the functional currency is Philippine peso. ‘The following data are provided: November 1,2020 December 31,2020 January 31, 2021 Spot rate Pao P44 Pas Fair value of call option 2 4,500 ? Entity A imported the goods on the date anticipated. Afterwards, Entity A was able to resell 30% of the goods imported during 2021, 62, What is the unrealized holding gain to be recognized in the profit or loss*in the statement comprehensive income for the year ended December 31, 2020? A. 300 B. 200 . 500 D. 100 63. What is the unrealized holding loss to be recognized as component of other comprehensive income in the statement of comprehensive income for the year ended December 31, 2021? A. 3,000 B. 2,000 | © 1000 | D. 4,000 | | Number 64 Under IAS 21, foreign exchange differences arising from translating foreign currency denominated transaction o fungtional currency shall be recognized in A. Profit or loss B. Other comprehensive income with reclassification adjustment . €. Retained earnings D. Other comprehensive income without reclassification adjustment Namber 65 | Unrealized holding gain or loss on intrinsic value (cffective portion) of derivatives designated as cash value hedge shall be recognized in A. Profit or loss # B. Other comprehensive income with reclassification adjustment ©. Retained s D. Other ive income without reclassification adjustmentPage 20 ‘Number 69 ‘On December 31, 2018, the Department of Finance billed its lessee on one ofits buildings in the amount ‘of P10,000. On January 31, 2019, the Department of Finance collected all ofthe accounts receivable. On February 78, 2019, the Department of Finance remitted the entire collected amount to the Bureau of ‘Treasury. What is the journal entry to record the remittance by the Department of Finance to the Bureau of Treasury? A. Debit ~ Accounts Receivable P10,000 and Credit ~ Rent Income P10,000 B. Debit ~ Accounts Receivable P10,000 and Credit - Retained Eamings P10,000 C. Debit—Cash Collecting Officers P10,000 and Credit — Accounts Receivable P10,000 D. Debit ~ Cash ~ Treasury/Agency Deposit, Regular — P10,000 and Credit Cash — Collecting Officer ~ P10,000 Number 70 ‘The Bureau of Treasury received P20,000 cash remittance from Department of Agrarian Reform (DAR) from its miscellaneous income. What is the journal entry of the Bureau of Treasury in its aecounting books to record the receipt of cash remittance from the income of a national government agency? ‘A. Debit Cash in Bank, Local Bank P20,000 and Credit Cash-Treasury/Agency Deposit, Regular 20,000. B. Debit Cash in Bank, Local Bank P20,000 and Credit Miscellaneous Income of DA P20,000. . Debit Cash in Bank, Local Bank P20,000 and Credit Savings of DA, Regular P20,000. D, Debit Cash in Bank, Local Bank P20,000 and Credit Cash-Collecting Officer, DA P20,000. END .