MOCK BOARD EXAM

May 2022
Subject: ADVANCED FINANCIAL ACCOUNTING AND REPORTING (AFAR)

Instructions: (MCQ) Select only the letters of the best answers.

1. JJ and KK are partners who share profits and losses in the ratio of 60%: 40% respectively JJ salary
is P60,000 and P30,000 for KK. The partners are also paid interest on their average capital
balances.In 20x5, JJ received P30,000 of interest and KK,P12,000.The profit and loss allocation is
determined after the duction for the salary and interest payments.If KK's share in the residual
income (income after the ducting salary and interest) was P60,000 in 20x5, what was the total
partnership income?
a. 345,000
b. P282,000
c. P192,000
d. 387,000
2. The partnership has the following accounting amount:
(1) Sales = P70,000
(2) Cost of Goods Sold = P40,000
(3) Operating Expenses = P10,000
(4) Salary allocation to partners = P13,000
(5) Interest paid to banks = P2,000
(6) Partners withdrawals = P8,000

The partnership net income (loss) is:

a. 5,000
b. P20,000
c. 18,000
d. (3,000)
3. Lancelot is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a
bonus of 10% of net income after salary and bonus as a means of allocating profit among the
partners.Salaries traceable to the other partners are estimated to be P100,000. What amount of
income would be necessary so that Lancelot would consider the choices to be equal
a. 290,000
b. P165,000
c. P265,000
d. 305,000
4. Net assets that are restricted by the governing board of a non-government, not-for-profit
organization are reported as a part of:
a. Permanently restricted net asset
b. Temporarily restricted net asset
c. Unrestricted net asset
d. Either permanently restricted or temporarily restricted net asset, depending on the
term of the restriction

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5. Which of the following is not a characteristic of a conditional promise to give
a. Depends on the occurrence of a specified future and uncertain event to bind the
promisor
b. Gift may have to be returned to donor if condition is not met
c. Recognized as contribution revenue when the conditions are substantially met
d. Depends on demand by the promise for performance
6. Unconditional promises to give that are collectible within one year of the financial statement
date:
a. Should be reported at their gross amount
b. Should be reported at the gross amount less an allowance for uncollectible accounts
c. Should be reported at the present value of the amount expected to be collected, using
the donors incremental borrowing rate
d. Should not be reported until collected
7. When a temporary restriction on resources of a non-government not-for-profit entity is met by
the incurrence of an expense for the restricted purpose:
a. amounts reported in the temporarily restricted net assets are reclassified as
unrestricted net assets
b. The expense is reported in the statement of activity as an increase in unrestricted net
asset
c. the entry is a debit to expense and a credit to the program services
d. the expense is reported in restricted net asset
8. Peter and Ronald are partners they have shared profits and losses 65/35 for a number of years.
Peter has indicated that he is going to reduce his involvement in the partnership so that profit
and loss ratio is being modified to 45/55. At the date of the change in the profit and loss ratio,
the partnership ownvacant land with a market value of P300,000 and a book value of P100,000.
Peter and Ronald compile a list of assets with market and book value differences.Two years
after the change in the profit and loss ratio, the land is sold for P450,000. how much of the gain
is allocated to Peter?
a. P157,500
b. P197,500
c. P227,500
d. P287,500
9. Merlin, a partner in the Camelot Partnership has a 30% participation in partnership profits and
losses. Merlin's capital account has a net decrease of P1,200,000 during the calendar year 20x5.
During 20x5 Merlin withdrew P2,600,000 (charge against his capital account) and contributed
property valued at P500,000 to the partnership.What was the net income of the Camelot
Partnership for the year 20x5?
a. P3,000,000
b. 4,666,667
c. P7,000,000
d. 11,000,000
10. CC, PP, and AA, accountants, agree to form a partnership and to share profits in the ratio of
5:3:2.They also agreed that AA is to be allowed a salary of P28,000, and that PP is to be
guaranteed 21,000 as his share of the profits.During the first year of operation, income from

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 fees areP180,000 while expenses total P96,000.Whatamount of net income should be credited
to each partner’s capital account?
a. CC, P28,000, PP, P16,800, AA, P11,200
b. CC, P25,000, PP, P21,000, AA, P38,000
c. CC, P24,000, PP, P22,000, AA, P38,000
d. CC, P25,000, PP, P21,000, AA, P39,000
11. Jenna it's about to purchase some of Cynthia’s partnership interest. Cynthia currently has
partnership equity of P84,500. If Jenna pays Cynthia P30,000 for 30 percent of her capital, what
amount will be recorded in the partnership accounting records?
Jenna Cynthia
a. P30,000 credit P25,350 debit
b. P25,350 credit P25,350 debit
c. P30,000 credit P30,000 debit
d. P25,350 debit P25,350 credit
12. The capital accounts of the partnership of NN, VV, and JJ on June 1, 20x50 are presented below
with their respective profit and loss ratios:
NN ………………………….. P139,200 1/2
VV …………………………... 208,800 1/3
JJ …………………………….. 96,000 1/6
On June 1, 20x5, LL is admitted to the partnership when LL purchased. for P132,000, a
proportionate interest from NN and JJ in the net assets and profits of the partnership. As a result
of a transaction LL acquired a one-fifth interest in the net assets and profits of the firm. What is
the combined gain realized by NN and JJ upon the sale of if portion of their interest in
thepartnership to LL?
a. 43, 200
b. P62,400
c. 82,000
d. P 0
13. Sam and Ray are partners with capital accounts of P150,000 and P225,000 respectively, They are
considering allowing Richard to purchased 30 percent of Ray’s equity.At the date of the
proposed transaction, Sam and Ray want to revalue the partnerships assets and allocate any
differences based on their 40/60 profit sharing agreement. Assume that the net market versus
book value differences is P100,000. What amount would Richard pay for the 30 percent
interest?
a. P67,500
b. P76,500
c. P97,500
d. The amount cannot be determined from the information provided
14. Jesse Joseph and Leslie are partners with capital accounts of P70,000,P120,000 and P90,000,
respectively.The partnership share profits and losses 45%, 30%, and25%, respectively.They are
considering allowing Hans to join the partnership by investing directly into the partnership.The
partners intend to revalue the assets before Hans’ admission.Neither bonus nor goodwill are
required.If the assets market value exceeds book value P150,000, how much will Hans invest to
acquire a 20% equity interest in the partnership?

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 a. P86,000
b. P70,000
c. P107,500
d. P100,000
15. Sandra and Joshua are partners. They have capital account balance of P250,000 and P200,000,
respectively, and they share profits and losses 70/30. The partners are considering admitting
Judy as a new partner with a 25 percent equity interest for an investment in the partnership of
180,000. Before admission, Sandra and Joshua will revalue the partnership's assets if the net
increase in the partnership's assets is P125,000, what will be the balance in Sandra's capital
account immediately before Judy’s admission?
a. P262,500
b. P337, 500
c. P528,500
d. P575, 000

16. Erica Fredric and Gustav our partners in a manufacturing concern. Relevant data regarding
income-sharing relationships and capital balances are as follow:

Partner Capital Balance Income Share

Erica P150,000 35%

Fredric 100,000 30%

Gustav 200,000 35%

Fredric decides to retire and receives P145,000 in cash from the partnership.

If the bonus method is used to account for the retirement, Erica's capital balance subsequent to
Fredric’s retirement will be:
a. P105,000
b. P127,500
c. P134,250
d. P150,000

17. Erica, Fredric and Gustav are partners in a manufacturing concern. Relevant data regarding
income-sharing relationships and capital balances are as follow:

Partner Capital Balance Income Share

Erica P150,000 35%

Fredric 100,000 30%

Gustav 200,000 35%

Fredric decides to retire and receives P145,000 in cash from the partnership.

If the excess payment is attributed entirely to goodwilland the partial goodwill approach is used,
goodwill will be recognized at:
a. P45,000

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 b. P55,000
c. P100, 000
d. P150,000
18. Asset of P50,000 exited at the beginning of period. During the period, carried at P20,000 were
sold for P28,000, and new asset of 10,000 were acquired. A statement of realization and
liquidation would show "asset not realized" of:
a. P22,000
b. P30,000
c. P32,000
d. P40,000
19. Liabilities of P90,000 exited at the beginning of a period. During the period liability is recorded at
P44,000 were settled for 38,000, and new liabilities of P12,000 were incurred. A statement of
realization and liquidation would show "liabilities not liquidated" of:
a. P46,000
b. P58,000
c. P64,000
d. P102,000
20. The financial reports for a corporate bankruptcy liquidation are:
a. Balance sheet and statement of affairs
b. Statement of affairs and statement of realization and liquidation
c. Balance sheet and income statement
d. Statement of affair and income statement
21. In the statement of affairs, the expected recovery percentage of a company's unsecured
creditors is calculated as
a. net free asset divided by unsecured liabilities
b. net free assets divided by unsecured liabilities plus liabilities with priority
c. total free assets divided by unsecured liabilities other than unsecured liabilities with
priority
d. total free asset divided by unsecured liabilities plus liabilities with priority
22. In the accounting statement of affairs, the gain or losses upon liquidation would equal
a. Total estimated realizable value of assets minus the amount remaining for Class 7
unsecured creditors.
b. Net book value of assets minus book value of liabilities.
c. the book value of assets minus the realizable value.
d. total estimated realizable value of asset minus the amount assigned to secured creditor.
23. Which of the following would appear on the statement of realization and liquidation?
a. net realizable value of assets pledge to partially secured creditors
b. estimated deficiency to unsecured creditors
c. net realizable value of assets to be realized
d. gain or loss on realization
24. If a statement of realization shows assets to be realized of P500,000, assets not realized of
P320,000, assets acquired of zero, and again on realization of P22,000, the amount that would
be reported for assets realized is:
a. P158,000

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 b. P180,000
c. P202,000
d. cannot be determined from the information given
25. The second step in the process for revenue recognition is to
a. allocate transaction price to the separate performance obligations.
b. determined the transaction price.
c. identify the contract with customers.
d. identify the separate performance obligation in the contract.
26. The third step in the process for revenue recognition is to
a. determine the transaction price.
b. identify the separate performance obligation in the contract.
c. allocate transaction price to the separate performance obligation.
d. recognize revenue when each performance obligation is satisfied.

27. Erica, Fredric and Gustav are partners in a manufacturing concern. Relevant data regarding
income-sharing relationships and capital balances are as follow:

Partner Capital Balance Income Share

Erica P150,000 35%

Fredric 100,000 30%

Gustav 200,000 35%

Fredric decides to retire and receives P145,000 in cash from the partnership.

If the excess payment is attributed entirely to goodwill, and the total goodwill approach is used
Gustav’s capital balance after Fredric’s departure will be:
a. P200,000
b. P252,500
c. P263,000
d. P275,000

28. Erica, Fredric and Gustav are partners in a manufacturing concern. Relevant data regarding
income-sharing relationships and capital balances are as follow:

Partner Capital Balance Income Share

Erica P150,000 35%

Fredric 100,000 30%

Gustav 200,000 35%

Fredric decides to retire and receives P145,000 in cash from the partnership.
Using the partial goodwill approach,Erica's capital balance, after Fredric's departure will be:
a. P127,500
b. P134,250

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 c. P150,000
d. P165,750
29. Zamora and Co, Inc purchase a Cadillac automobile with little cash down and signed a note,
secured by the Cadillac, for 48 easy monthly payment. When the company files for bankruptcy
the balance due on the Cadillac amount to 6,000,000. The car has a book value of 8,000,000 and
a net realizable value of 4,000,000. The unsecured creditors of Zamora and Co. can expect to
receive 50 percent of their claims. In liquidation, the bank that holds the note on the Cadillac
should receive:
a. P4,000,000
b. P3,000,000
c. P6,000,000
d. P5,000,000
30. A contract
a. must be in writing to be an enforceable contract.
b. is an agreement that creates enforceable rights and obligation.
c. is enforceable if each party can unilaterally terminate the contract.
d. does not need to have commercial substance
31. Revenue from a contract with a customer
a. is a recognized when the customer received the rights to receive consideration.
b. is the recognize even if the contract is still wholly unperformed.
c. can be recognized even when a contract is still pending.
d. cannot be recognized until a contract exists.
32. Which of the following is not an indicator that the customer is likely to have control over a
good?
a. Legal title to the asset
b. Asset warehouse by seller affiliated third party
c. Accepted the asset
d. Physical possession of the asset
33. The core revenue principles states that -Companies recognize revenue when the earnings
process is virtually complete and it is probable that payments will be received
a. Companies recognize revenue when the earnings process is virtually complete and it is
probable that payments will be received.
b. Companies recognize revenue when goods or services are transferred to customers for
the amount the company expects to be entitled to receive in exchange for those goods
or services
c. Companies recognize revenue when goods or services are transferred to the customer
and payments are received
d. Companies recognize revenue when the goods or services are transferred to the
customers in an arm's length transaction.
34. Consider the following three scenarios:

I. ABC Lawncare performed lawn maintenance services for Drake Inc. on June 1st and received
payment of $500 for those services.

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 II. On June 1st Melly Corp received payment for 100 pounds of raw material to be delivered to
Drake Inc. in 6 months

III. Lodo,LLC collected cash on June 1st for services rendered on May 1st

Given these scenarios, revenue cannot be recognized on June 1st for

a. I, II
b. I only
c. II, III only
d. III only

35. Seasons construction is constructing an office building under contract for Canon Company. The
contract calls for progress billings and payments of 1, 240,000 each quarter. The total contract
price is 14, 880,000 and seasons estimates total cost of P14,200, 000. Seasons estimates that the
building will take 3 years to complete and commences construction on January 2, 20x5.

At December 31, 20x5, Season estimates that it is 30% complete with the construction, based on
cost incurred. What is the total amount of revenue from Long-Term Contracts recognized for
20x5 and what is the balance in the Accounts Receivable account assuming Canon Company has
not yet made its last quarterly payment?
Revenue Accounts Receivable
a. P4,960,000 P4,960,000
b. P4,260,000 P1,240,000
c. P4,464,000 P1,240,000
d. P4,260,000 P4,960,000

36. Seasons construction is constructing an office building under contract for Canon Company. The
contract calls for progress billings and payments of 1, 240,000 each quarter. The total contract
price is 14, 880,000 and seasons estimates total cost of P14,200, 000. Seasons estimates that the
building will take 3 years to complete and commences construction on January 2, 20x5.

At December 31, 20x5, Season Construction estimates that it is 75% complete with the building;
however the estimate of total cost to be incurred has risen P14,400,000 due to unanticipated
price increases. At December 31, 20x40, Seasons estimated it was 30% complete. What is the
total amount of Construction Expenses that Season will recognize for the year ended December
31, 20x5?
a. P10,800,000
b. P6,540,000
c. P6,390,000
d. P6,300,00
37. On the Home Office’s books, the earning of a branch are recorded in an account called?
a. Income Summary
b. Retained Earnings
c. Branch Income Summary
d. Liability Account

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38. In 20x5 Fargo Corporation began construction work under a three-year contract. The contract
price is P4,800,000. Fargo uses the percentage-of-completion (overtime) method for financial
accounting purposes. The income to be recognized each year is based on the proportion of cost
incurred to total estimated cost for completing the contract. The financial statement
presentation relating to this contract at December 31, 20x5, follow:

Statement of financial position

Accounts receivable construction contract billings P200,000

Construction in progress P600, 000

Less Contract billings 480,000

Cost and recognize profit in excess of billings P120, 000

Income statement

Income (before tax)on the contract recognized in 20x5 P120,000

How much cash was collected in 20 x 5 on this contract?

a. P40,000
b. P200,000
c. P280,000
d. P480,000

39. In 20x5 Fargo Corporation began construction work under a three-year contract. The contract
price is P4,800,000. Fargo uses the percentage-of-completion (overtime) method for financial
accounting purposes. The income to be recognized each year is based on the proportion of cost
incurred to total estimated cost for completing the contract. The financial statement
presentation relating to this contract at December 31, 20x5, follow:

Statement of financial position

Accounts receivable construction contract billings P200,000

Construction in progress P600, 000

Less Contract billings 480,000

Cost and recognize profit in excess of billings P120, 000

Income statement

Income (before tax)on the contract recognized in 20x5 P120,000

What was the initial estimated total income before tax on this contract?

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 a. P600,000
b. P960,000
c. P640,000
d. P800,000

40. The Tigridia company has entered into a 5 year fix price construction contract to build a factory.
The contract value is P20.0 million and the estimated costs are 16.0 million.

At the end of the first year, Tigridia can estimate the outcome of the contract reliably. It has
received cash payments to the value of P8.6 million and incurred costs of P6.0 million.

At the end of the first year, what amount should be recognized as revenue in the financial
statement, according to PFRS 15?

a. P3.20 million
b. P7.50 million
c. P6.00 million
d. P8.60 million

41. Seasons Construction is constructing an office building under contract for Canon Company. The
contract calls for progress billings and payments of 1, 240,000 each quarter. The total contract
price is 14, 880,000 and seasons estimates total cost of P14,200, 000. Seasons estimates that the
building will take 3 years to complete and commences construction on January 2, 20x5.

At December 31, 20 x 5, Season Construction estimates that it is 75% complete with the
building; however the estimate of total cost to be incurred has risen P14,400,000 due to
unanticipated price increases. What is reported in the balance sheet at December 31, 20 x 5 for
season as the difference between the Construction in Process and the Billings on Construction in
Process accounts, and is it a debit or a credit?
Difference between the accounts Debit/Credit
a. P3,380,000 Credit
b. P1,240,000 Debit
c. P880,000 Debit
d. P1,240,000 Credit

42. Seasons construction is constructing an office building under contract for Canon Company. The
contract calls for progress billings and payments of 1, 240,000 each quarter. The total contract
price is 14, 880,000 and seasons estimates total cost of P14,200, 000. Seasons estimates that the
building will take 3 years to complete and commences construction on January 2, 20x5.

Seasons Construction completes the remaining 25% of the building construction on December
31, 20 x 6, as scheduled. At that time the total cost of construction are P15,000,000. At
December 31, 20x5 the estimates were 75% complete and total cost of P14,400,000. What is the
total amount of revenue from Long-Term Contracts and Construction Expenses that Seasons will
recognize for the year ended December 31, 20x6?
Revenue Expenses

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 a. P14,880,000 P15,000,000
b. P3,720,000 P3,750,000
c. P3,720,000 P4,200,000
d. P3,750,000 P3,750,000
43. The Toucan Company has just completed a 4 year contract to which the following relate:
P’000
Labor material costs ………………………..1800
Machinery costs ……………………………… 600
Initial design costs …………………………..100
Disposal proceeds of machinery ……… 50
What are the total contracts costs, according to PFRS15?
a. P 2,350,000
b. P 1,900,000
c. P 2,450,000
d. P 2,500,000
44. Fisher Company opened its Tuguegarao Branch on January 1. Merchandise shipments from
Home Office during the month, build at 120% of cost, is P125,000. Branch returned damaged
merchandiseworthP15,620. On January 31, the branch reported a net loss of P2,270 and an
inventory of P84,000. What is the net income (loss) ofthe branch to be taken up in the books of
the Home Office?
a. (P1,690)
b. 6,500
c. (P2,270)
d. 1,960
45. The Robert Corporation establish its Bulacan branch in January 20x6. During its first year of
operation, Home Office shipped to its Bulacan branch merchandise worth P130,000which
included a markup of 15% on cost. Sales on account totaledP250,000 while cash sales amounted
to P80,000. Bulacan reported operating expenses of P38,000 and ending inventory of 15,000, at
billed price. Insofar as the Home Office is concerned, the real net income of Bulacan is:
a. P 82,000
b. 147,000
c. P 177,000
d. 192,000
46. The Gift Co. has a branch in Dipolog City. During 20x6, Home Office shipped to the branch
merchandise billed at P150,000 including a markup of 20% on cost. The branch reports opening
and closing inventories of P90,000 and P120,000, respectively, while the Home Office has a
closing inventoriesof P210,000 which includes merchandise which are held on consignment
valued at 10,000. Both location use the periodic inventory system. What closing inventory would
be reported in the combined statement of income for the year 20x6?
a. 330,000
b. P296,000
c. 300,000
d. P320,000

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47. Hope Corporation started operating a branch on May 1, 20x6, with a shipment ofmerchandise
billed at P250,000. Additional shipmentsduring the month were billed at P125,000. The branch
returned damaged merchandise worth 10,000.Inter-office shipments are billed uniformly at
125% of costs. On May 31, 20x6, the branch reported a net loss of P52,500 and an inventory of
P150,000. What is the branch net income (loss) reflected in the combined income statement for
May, 20x6?
a. P(9,500)
b. 43,000
c. P(52,500)
d. 95,000
48. A branch that maintains a general ledger is said to use a(n) accounting system?
a. Centralize
b. Decentralize
c. Authoritarian
d. None of the above.
49. The investment in branch accounting has a balance that equals the account of the branch?
a. Liability
b. Home Office Current
c. Asset
d. None of the above.
50. On the Home Office’s books, the earning of a branch are recorded in an account called?
e. Branch Income Summary
f. Income Summary
g. Retained Earnings
h. Liability Account
51. Income taxes pertaining to branch earnings are usually recorded on the book of the:
a. Home Office
b. Branch
c. Ignored
d. None of the above.
52. Statement 1 (S1): An expense item allocated by the Home Office to a branch is recorded by the
branch by a debit to an expense ledger account and a credit to the HomeOffice account.
Statement 2 (S2): A debit to the Home Office ledger account and a credit to the Trade Accounts
Receivableaccount in the accounting records of a branch indicate that the Home Office collected
accounts receivable of the branch.
a. S1 – TRUE; S2-TRUE
b. S1 – TRUE; S2-FALSE
c. S1 – FALSE; S2-TRUE
d. S1 – FALSE; S2-FALSE

53. On December 12, 20x7, Imp Co. entered into three forward exchange contract, each to purchase
100,000 foreign currencies (FC) is 90 days. The relevant exchange rates are as follows:

Spot Rate Forward Rate (for March 12)

November 30, 20x7 ………………………………. P.87 P.89

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 December 12, 20X7 ………………………………. .88 .90

December 31, 20X7 ………………………………. .92 .93

Imp entered into the first forward contract to hedge a purchase of inventory in November 20x7,
payable in March 20x8. At December 31, 20x7, what amount of foreign currency transaction
gain from his forward contract should Imp include or net income?
a. P0
b. 3,000
c. P5,000
d. 10,000

54. On December 12, 20x7, Imp Co. entered into three forward exchange contract, each to purchase
100,000 foreign currencies (FC) is 90 days. The relevant exchange rates are as follows:

Spot Rate Forward Rate (for March 12)

November 30, 20x7 ………………………………. P.87 P.89

December 12, 20X7 ………………………………. .88 .90

December 31, 20X7 ………………………………. .92 .93

At December 31, 20x7 what amount of foreign currency transaction loss should Imp include in
income from the revaluation of the accounts Payable of 100,000 foreign currency (FC’s) incurred
as a result of the purchase of inventory at November 30, 20x7, payable in 20x8?
a. P0
b. 3,000
c. P4,000
d. 5,000

55. On December 12, 20x7, Imp Co. entered into three forward exchange contract, each to purchase
100,000 foreign currencies (FC) is 90 days. The relevant exchange rates are as follows:

Spot Rate Forward Rate (for March 12)

November 30, 20x7 ………………………………. P.87 P.89

December 12, 20X7 ………………………………. .88 .90

December 31, 20X7 ………………………………. .92 .93

Imp entered into the second forward contract to hedge a commitment to purchase equipment
being manufactured to Imp’s specification. The expected delivery date is March 27x7 at which
time settlement is due to the manufacturer. The hedge qualifies as a fair value hedge.At
December 31, 20x7, what amount of foreign currency transaction gain from this forward
contract should Imp include in net income?
a. P0
b. 3,000

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 c. P5,000
d. 10,000

56. On December 12, 20x7, Imp Co. entered into three forward exchange contract, each to purchase
100,000 foreign currencies (FC) is 90 days. The relevant exchange rates are as follows:

Spot Rate Forward Rate (for March 12)

November 30, 20x7 ………………………………. P.87 P.89

December 12, 20X7 ………………………………. .88 .90

December 31, 20X7 ………………………………. .92 .93

Imp entered the third forward contract for speculation. At December 31, 20x7, what amount of
foreign currency transaction gain from this forward contract should Imp include in net income?
a. P0
b. 3,000
c. P5,000
d. 10,000

57. Noting that there was aP5,780,000 translation adjustment gain, Dora Inc. (the parent company)
secured a foreign bank loan denominated in the functional currency when the spot rate was 1
Taiwan Nt dollar =P1.022.The bank loan has a principal amount of P200,000,000Nt dollars.
Interest calculations are ignored. The bank loan is designated as a hedge of net investment and
is considered to have satisfied all necessary criteria

Selected exchange rates between the functional currency (Nt dollar) and the peso are as
follows:

Date Rate

January 1, 20x7………………………………….. P.98

October 1, 20x8 …………………………………. 1.00

December 31, 20x8 ……………………………. 1.05

20x8 average ……………………………………… 1.03

The December 31, 20x8 Loans payable account balance obtained to hedge the net investment
amounted to
a. P196,000,000
b. 200,000,000
c. P206,000,000
d. 210,000,000

58. Noting that there was aP5,780,000 translation adjustment gain, Dora Inc. (the parent company)
secured a foreign bank loan denominated in the functional currency when the spot rate was 1

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 Taiwan Nt dollar =P1.022.The bank loan has a principal amount of P200,000,000Nt dollars.
Interest calculations are ignored. The bank loan is designated as a hedge of net investment and
is considered to have satisfied all necessary criteria

Selected exchange rates between the functional currency (Nt dollar) and the peso are as
follows:

Date Rate

January 1, 20x7………………………………….. P.98

October 1, 20x8 …………………………………. 1.00

December 31, 20x8 ……………………………. 1.05

20x8 average ……………………………………… 1.03

The December 31, 20x8 the foreign exchange gain or loss due tohedge of its net investment:
a. P5,600,000 loss-OCI
b. 5,600,000 loss-earnings
c. P5,600,000 gain-OCI
d. 14,000,000 loss-OCI

59. Noting that there was aP5,780,000 translation adjustment gain, Dora Inc. (the parent company)
secured a foreign bank loan denominated in the functional currency when the spot rate was 1
Taiwan Nt dollar =P1.022.The bank loan has a principal amount of P200,000,000Nt dollars.
Interest calculations are ignored. The bank loan is designated as a hedge of net investment and
is considered to have satisfied all necessary criteria

Selected exchange rates between the functional currency (Nt dollar) and the peso are as
follows:

Date Rate

January 1, 20x7………………………………….. P.98

October 1, 20x8 …………………………………. 1.00

December 31, 20x8 ……………………………. 1.05

20x8 average ……………………………………… 1.03

The December 31, 20x8, translation reserve balance (cumulative translation adjustment)
amounted to:
a. P 180,000 credit balance
b. 180,000 debit balance
c. P5,600,000 debit balance
d. None

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60. Unconditional promises to give are recognized as contribution revenue when:
a. The future event that binds the promisor occurs
b. The promise is received
c. The related receivable is collected
d. The time or purpose restrictions is satisfied

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